UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997 Commission file number 1-7421
PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified in its charter)
Delaware 41-1233380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Piper Jaffray Tower, 222 South 9th Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-342-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of June 30, 1997, 18,674,056 shares of the Registrant's common stock were
issued and outstanding.
<PAGE>
PIPER JAFFRAY COMPANIES INC.
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Index of Exhibits 21
Exhibits 22
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands, Except Share Amounts)
June 30, September 30,
1997 1996
------------ -------------
ASSETS (unaudited)
Cash ($1,463 and $1,863, respectively, which
was required to be segregated under federal and
other regulations) $ 29,165 $ 23,406
Receivable from other brokers and dealers 141,898 87,427
Receivable from customers 605,384 520,489
Trading securities owned, at market 189,935 105,540
Securities purchased under agreements to resell 43,327 12,259
Investments pursuant to mortgage-backed bonds 41,130 44,064
Office equipment and leasehold improvements,
at cost less accumulated depreciation of
$47,385 and $52,546, respectively 30,338 30,185
Deferred income tax asset 23,044 21,215
Other assets 77,561 79,155
------------ ------------
$ 1,181,782 $ 923,740
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings 223,950 183,320
Checks and drafts payable 56,984 70,628
Payable to other brokers and dealers 248,340 109,776
Payable to customers 154,206 160,930
Securities sold under agreements to repurchase 36,142 -
Trading securities sold, but not yet purchased,
at market 70,022 27,472
Mortgage-backed bonds payable 42,004 45,333
Employee compensation and related taxes 69,971 81,740
Federal and state income taxes 6,365 -
Other accounts payable and accrued expenses 86,894 77,716
------------ ------------
994,878 756,915
Shareholders' Equity
Preferred stock, $1 par value; authorized,
300,000 shares; none issued and outstanding - -
Common stock, $1 par value; authorized,
40,000,000 shares; 18,676,298 and 18,197,725
issued, respectively 18,676 18,198
Additional paid-in capital 27,355 19,432
Retained earnings 140,918 129,201
Less treasury stock, at cost; 2,242 and 467
shares, respectively (45) (6)
------------ ------------
186,904 166,825
------------ ------------
$ 1,181,782 $ 923,740
============ ============
See accompanying notes to consolidated financial statements.
<PAGE>
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------------------- ---------------------
REVENUES:
Commissions $ 54,603 $ 50,584 $ 154,632 $ 141,974
Profits on principal transactions 40,185 42,026 124,614 125,555
Investment banking 20,306 27,830 70,233 72,782
Interest 13,936 10,381 38,754 29,920
Asset management fees 9,179 9,287 27,130 28,422
Other 7,198 7,523 22,155 19,096
--------------------- ---------------------
Total revenues 145,407 147,631 437,518 417,749
EXPENSES:
Employee compensation 88,702 93,600 268,447 260,044
Floor brokerage and clearance 2,620 2,427 7,632 6,832
Interest 7,147 4,488 19,446 11,917
Occupancy and equipment 10,948 9,258 30,681 26,188
Communications 5,931 5,358 18,055 14,860
Travel and promotional 5,272 4,091 15,963 11,892
Other operating expense 14,321 30,665 52,084 81,351
--------------------- ---------------------
Total expenses 134,941 149,887 412,308 413,084
--------------------- ---------------------
Income (loss) before income taxes 10,466 (2,256) 25,210 4,665
Income taxes (benefit) 3,873 (742) 9,328 1,819
--------------------- ---------------------
Net income (loss) $ 6,593 $ (1,514) $ 15,882 $ 2,846
===================== =====================
Net income (loss) per common
and common equivalent share
(primary and fully diluted) $ .34 $ (.08) $ .82 $ .16
Weighted average number of
common and common equivalent
shares outstanding 19,470 18,140 19,359 18,327
Dividends per share $ .075 $ .075 $ .225 $ .225
See accompanying notes to consolidated financial statements
<PAGE>
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine months ended
June 30,
------------------------------
1997 1996
-------------- --------------
Operating activities:
Net income $ 15,882 $ 2,846
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,894 6,130
Loss (gain) on disposal of fixed assets 191 -
Deferred income taxes (1,829) 3,235
(Increase) decrease in:
Net receivable from customer (91,619) (105,405)
Net trading securities (41,845) (58,203)
Net repurchase agreements 5,074 -
Other 10,772 39,699
Increase (decrease) in:
Net payable to other brokers and dealers 84,093 (16,963)
Checks and drafts payable (13,644) (3,265)
Employee compensation (11,769) 5,980
Federal and state income taxes payable 6,365 (19,136)
------------- --------------
Net cash used in operating activities (30,435) (145,082)
Financing activities:
Net change in:
Short-term borrowings 40,630 160,294
Mortgage-backed bonds payable (3,329) (7,725)
Investments and funds pursuant to
mortgage-backed bonds 2,934 7,897
Payments made on capitalized lease obligations - (483)
Net common stock issued 12,722 10,909
Treasury shares repurchased (4,360) (2,367)
Dividends paid (4,165) (4,036)
------------- --------------
Net cash provided by financing activities 44,432 164,489
Net cash used for purchase of office equipment
and leasehold improvements (8,238) (9,343)
------------- --------------
Net increase in cash 5,759 10,064
Cash at beginning of period 23,406 17,345
------------- --------------
Cash at end of period $ 29,165 $ 27,409
============= ==============
Supplemental disclosure of cash flow information: Cash paid (refunded) during
the nine months ended for:
Interest $ 18,581 $ 12,009
Income taxes $ (8,921) $ 19,313
See accompanying notes to consolidated financial statements.
<PAGE>
PIPER JAFFRAY COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of Piper Jaffray Companies
Inc. and its subsidiaries (the "Company") have been prepared in conformity with
generally accepted accounting principles and should be read in conjunction with
the Company's Annual Report for the year ended September 30, 1996. The results
of operations for the nine months ended June 30, 1997, are not necessarily
indicative of the results to be expected for the year ending September 30, 1997.
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 at the date of the
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The consolidated statement of financial condition as of June 30, 1997 and the
other consolidated financial information for the periods ended June 30, 1997 and
1996, is unaudited, but management of the Company believes that all adjustments
(consisting of normal recurring accruals) necessary for a fair statement of the
results of operations for the periods have been included.
Certain reclassifications have been made to the September 30, 1996 balance sheet
to conform to the classifications used in the current period. These
reclassifications had no effect on shareholders' equity as previously reported.
Net income (loss) per common and common equivalent share is calculated by
dividing net income (loss) by the weighted average number of common shares and
common share equivalents outstanding, which includes the dilutive effect of all
outstanding stock options. For periods in which a net loss is reported, the
effect of common share equivalents is excluded from the calculation of per share
amounts as they are anti-dilutive.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share which is effective for
financial statements for both interim and reporting periods ending after
December 15, 1997. Early adoption of the statement is not permitted. The Company
has determined that the adoption of the statement will not have a material
impact on earnings per share calculations.
2. NET CAPITAL REQUIREMENTS
At June 30, 1997, Piper Jaffray Inc. (Piper Jaffray), the Company's
broker-dealer subsidiary, had net capital under applicable regulations of $131.8
million or 20% of aggregate debit balances and $118.3 million in excess of the
minimum required net capital.
3. LITIGATION AND CONTINGENCIES
The Company is currently a defendant in lawsuits and arbitrations and is subject
to regulatory inquiries related to various funds or assets managed by Piper
Capital Management Incorporated (Piper Capital), the Company's asset management
subsidiary. In addition, management is aware of unasserted claims which may
contain similar allegations and the Institutional Government Income Portfolio,
managed by Piper Capital, remains the subject of an investigation being
conducted by the Securities and Exchange Commission. The Company is also a
defendant in a case involving an underwriting for Bonneville Pacific Corporation
by Piper Jaffray and the NASDAQ Market-Maker Anti-Trust Securities Litigation.
The Company intends to defend or, in some cases, negotiate to settle these
actions. It is impossible to predict the outcome of these actions, and, at the
present time, the effect of these actions on the consolidated financial
statements cannot be determined. Accordingly, no provision for losses that may
result has been recorded in the consolidated financial statements. However, the
aggregate cost of litigation and any judgments, settlements or regulatory action
relating to these cases could have a material adverse effect on the consolidated
financial statements.
The Company is involved in various other lawsuits or arbitrations or threatened
lawsuits or arbitrations incidental to its securities business. Management of
the Company, after consultation with counsel, believes the resolution of these
various lawsuits, arbitrations and claims will have no material adverse effect
on the consolidated financial statements.
4. SHAREHOLDERS' EQUITY
During the nine months ended June 30, 1997, 270,200 shares of the Company's
common stock were repurchased by the Company, leaving a total of 482,300 shares
available for repurchase pursuant to the Board of Directors' authorizations to
repurchase common stock to satisfy employee benefit plan obligations. As of June
30, 1997, 2,242 shares of common stock were held in the treasury.
On November 5, 1996, the Board of Directors authorized the contribution of $15.4
million to the Piper Jaffray Companies ESOP for fiscal year 1996. The
contribution was made 50 percent in cash and 50 percent in the Company's newly
issued common stock, thus adding $7.7 million in additional shareholders' equity
during the first quarter of fiscal 1997.
On July 24, 1997, the Board of Directors of the Company, at its regularly
scheduled meeting, declared a quarterly dividend of 7.5 cents per share of
common stock, payable September 9, 1997, to shareholders of record on August 26,
1997.
<TABLE>
(in thousands, except share and per share amounts)
<CAPTION>
Common Stock Additional Total
--------------------------- Paid-In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
-------------- ------------ --------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balances at Sept. 30, 1995 17,500,254 $ 17,566 $ 11,901 $ 127,306 $ (1,049) $ 155,724
Net income 7,296 7,296
Net stock issued pursuant to
employee benefit plans 979,504 632 7,531 4,678 12,841
Cash dividends-$.30 per share (5,401) (5,401)
Treasury stock acquired (282,500) (3,635) (3,635)
-------------- ------------ --------------- ------------- ------------- ----------------
Balances at Sept. 30, 1996 18,197,258 18,198 19,432 129,201 (6) 166,825
Net income 15,882 15,882
Net stock issued pursuant to
employee benefit plans 746,998 478 7,923 4,321 12,722
Cash dividend-$.225 per share (4,165) (4,165)
Treasury stock acquired (270,200) (4,360) (4,360)
-------------- ------------ --------------- ------------- ------------- ----------------
Balances at June 30, 1997 18,674,056 $ 18,676 $ 27,355 $ 140,918 $ (45) $ 186,904
============== ============ =============== ============= ============= ================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion should be read in conjunction with Management's Financial
Discussion contained in the Company's Annual Report for the year ended September
30, 1996.
OPERATIONS
The Company recorded revenue of $145.4 million for the quarter ended June 30,
1997, a decrease of 1% over the prior year. Net income increased to $6.6 million
or $.34 per share for the quarter ended June 30, 1997 versus a net loss of $1.5
million or $.08 per share a year earlier. Third quarter fiscal 1996 results
included a pre-tax accrual of $15.5 million for proposed settlement of class
action litigation related to several closed-end funds managed by Piper Capital.
Revenues of $437.5 million for the nine months ended June 30, 1997 increased 5%
over the same period of the prior year, led by growth in commissions which
increased 9%. Investment banking revenue decreased 4% over the prior year
primarily due to the slowdown in equity underwriting activity. Asset management
revenue decreased 5% for the nine months ended June 30, 1997 compared to the
same period in fiscal 1996 due to a change in Piper Capital's mix of assets
under management toward money market funds, which have a slightly lower fee
realization. Interest income was up 30% to $38.8 million for the nine months
ended June 30, 1997 due to a 26% increase in average customer margin debits and
a increased growth in average fixed income inventories. Other income increased
16% to $22.0 million due primarily to growth in managed accounts.
At June 30, 1997 Piper Capital had $9.5 billion in assets under management;
subsequent to June 30, 1997, Piper Capital has agreed in principal to purchase
certain customer assets of Washington Square Advisers (WSA), a unit of ReliaStar
Financial Corp. Piper Capital will manage the assets transferred from WSA, which
currently has $2.7 billion in assets under management. This acquisition is not
expected to have a material impact on the consolidated financial statements of
the Company.
Excluding the impact of litigation related costs, expenses for the nine months
increased at a slightly higher rate than revenues. The prior years' nine month
results included two mutual fund litigation settlement charges totaling $29.5
million pre-tax related to funds or assets managed by Piper Capital.
Employee compensation, including broker compensation and employee incentives,
increased by $8.4 million, or 3% as compared to the same nine months of fiscal
1996, in line with increases in revenue. Interest expense increased $7.5 million
or 63% primarily due to increased borrowing required to fund higher average
customer margin debits and firm inventories. Also impacting interest expense
were interest accruals for litigation settlement notes payable. Occupancy and
equipment and communications expenses increased $4.5 million (17%) and $3.2
million (22%), respectively, over the prior year due primarily to significant
investment in technology infrastructure of the branches and headquarters, along
with the addition or expansion of sales offices. Travel and promotional expenses
increased $4.1 million or 34% resulting primarily from an increase in
institutional client-related conferences and meetings and sales incentive trips.
Through nine months, fiscal 1997 net income was $15.9 million or $.82 per share,
as compared to net income of $2.8 million or $.16 per share one year earlier.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a liquid balance sheet. Most of the Company's assets consist of
cash and assets readily convertible into cash. The fluctuations in cash flows
from financing activities are directly related to operating activities due to
the liquid nature of the Company's balance sheet.
Management believes that existing capital, funds from operations and current
credit lines will be sufficient to finance the Company's business.
During fiscal 1995 and 1996 the Company entered into certain structured
settlement agreements for class-action litigation relating to various funds or
assets managed by Piper Capital. Payments for these agreements, which are due
over one to five years, are expected to be financed through cash from operations
and available credit facilities.
The Company is currently a defendant in other lawsuits and arbitrations and is
subject to regulatory inquiries related to various funds or assets managed by
Piper Capital. In addition, management is aware of unasserted claims which may
contain similar allegations and the Institutional Government Income Portfolio,
managed by Piper Capital, remains the subject of an investigation being
conducted by the Securities and Exchange Commission. The Company is also a
defendant in a case involving an underwriting for Bonneville Pacific Corporation
by Piper Jaffray and the NASDAQ Market-Maker Anti-Trust Securities Litigation.
The Company intends to defend, or in some cases negotiate to settle these
actions. It is impossible to predict the outcome of these actions, and, at the
present time, the effect of these actions on the consolidated financial
statements cannot be determined. Accordingly, no provision for losses that may
result has been recorded in the consolidated financial statements. However, the
aggregate cost of litigation and any judgments, settlements or regulatory action
relating to these cases could have a material adverse effect on the consolidated
financial statements.
The Company is involved in various other lawsuits or arbitrations or threatened
lawsuits or arbitrations incidental to its securities business. Management of
the Company, after consultation with counsel, believes the resolution of these
various lawsuits, arbitrations and claims will not have a material adverse
effect on the consolidated financial statements.
In the normal course of business, the Company's customer, trading and
correspondent clearance activities involve the execution, settlement and
financing of various securities transactions including repurchase agreements.
These activities may expose the Company to off-balance sheet risk in the event
the other party to the transaction is unable to fulfill its contractual
obligations.
The Company utilizes financial futures contracts to hedge fixed income
inventories against market interest rate fluctuations. Such transactions are
subject to the same controls as all trading for the Company's own account. The
Company also enters into government reverse repurchase agreements to facilitate
hedging. The Company does not, and has no plans to enter into, for either
hedging or speculative purposes, the following types of transactions: interest
rate swaps, foreign currency contracts or significant amounts of futures,
options, forwards, mortgage-backed derivatives, or other securities whose value
is derived from other investment products (derivatives). The Company's
investment management subsidiary, Piper Capital, manages mutual funds and other
investment portfolios which do contain such derivatives.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently a defendant in lawsuits and arbitrations and is subject
to regulatory inquiries related to various funds or assets managed by Piper
Capital. In addition, management is aware of unasserted claims which may contain
similar allegations and the Institutional Government Income Portfolio, managed
by Piper Capital, remains the subject of an investigation being conducted by the
United States Securities and Exchange Commission. The Company is also a
defendant in a case involving an underwriting of Bonneville Pacific Corporation
by Piper Jaffray and the NASDAQ Market-Maker Anti-Trust Securities Litigation.
The Company intends to defend or, in some cases, negotiate to settle these
actions. It is impossible to predict the outcome of these actions, and, at the
present time, the effect of these actions on the consolidated financial
statements cannot be determined. Accordingly, no provision for losses that may
result has been recorded in the consolidated financial statements. However, the
aggregate cost of litigation and any judgments, settlements or regulatory action
relating to these cases could have a material adverse effect on the consolidated
financial statements.
The Company is involved in various other lawsuits or arbitrations or threatened
lawsuits or arbitrations incidental to its securities business. Management of
the Company, after consultation with counsel, believes the resolution of these
various lawsuits, arbitrations and claims will have no material adverse effect
on the consolidated financial statements.
Actions which individually, or when aggregated with similar actions, make claims
for a material amount are described in more detail below:
A. Lawsuits and Arbitrations Related to Various Funds or Assets Managed by Piper
Capital Management Incorporated
1. Institutional Government Income Portfolio
a. Lawsuits Brought by Investors in the Institutional Government Income
Portfolio.
The following actions have been brought by investors in the Institutional
Government Income Portfolio. Plaintiffs in these actions requested
exclusion from a previously settled consolidated class action, In re Piper
Funds Inc. Institutional Government Income Portfolio (United States
District Court, District of Minnesota) (PJIGX Action). The PJIGX Action had
included claims based on allegations of misrepresentation and improper
management. The claims alleged in the following actions are similar to the
claims which had been alleged in the PJIGX Action.
Frank R. Berman, Trustee of Frank R. Berman Professional CP Pension Plan
Trust v. Piper Jaffray Inc., Piper Fund, Inc., Morton Silverman and Worth
Bruntjen (Minnesota State District Court, Hennepin County).
Action commenced on April 11, 1995 in Minnesota State District Court,
Hennepin County. This action was removed to United States District Court,
District of Minnesota. Plaintiff seeks monetary damages, plus interest, and
attorneys' fees and costs. The Complaint does not specify an amount of
damages sought.
Beverly Muth vs. Piper Jaffray Inc. and Teresa L. Darnielle (Montana
Thirteenth Judicial District Court, Yellowstone County).
Action commenced on June 22, 1995. Plaintiff seeks monetary damages of over
$12,000, a sum to be determined at trial for extreme emotional distress and
an award of punitive damages.
Leon J. Savoie; Savoie Wealthbuilding Account; Earl Hovey; Hovey
Wealthbuilder Account; Ronald G. Ferris; Ronald G. Ferris Wealthbuilder
Account; Donna L. Ferris; Donna L. Ferris Wealthbuilder Account; Herman H.
Holmes; Lucille Holmes; Holmes Wealthbuilder Account; on behalf of
themselves and all others similarly situated, Appellants, v. Richard J.
Rodney, Jr., Plaintiff Appellee, and Piper Funds, Inc. Institutional
Government Income Portfolio; Piper Capital Management, Incorporated; Piper
Jaffray, Inc.; Piper Jaffray Companies, Inc.; William H. Ellis, Edward J.
Kohler, Defendant Appellees. (United States Court of Appeals, Eighth
Circuit).
On February 18, 1997, the United States District Court presiding over the
PJIGX Action entered an order for final judgment concerning a dispute
previously severed from the remainder of the PJIGX Action. The dispute
involves Merchants Trust Company and certain of its customers whose funds
were used to purchase shares of the Institutional Government Income
Portfolio. The February 18, 1997 order for final judgment has been appealed
to the United States Court of Appeals for the Eighth Circuit. This appeal
does not affect the settlement reached with other class members.
b. Arbitrations Brought by Investors in Institutional Government Income
Portfolio.
The following arbitrations, commenced by investors in the Institutional
Government Income Portfolio, are based on claims similar to the claims
which had been alleged in the PJIGX Action. Claimants in these arbitrations
requested exclusion from the settlement class in the PJIGX Action.
Fredrikson & Byron, P.A., Bertin A. Bisbee, William J. Brody, John P.
Byron, and Richard R. Hansen, as Trustees of the Fredrikson & Byron, P.A.
Money Purchase Pension Plan, Fredrikson & Byron, P.A. Money Purchase
Pension Trust, Fredrikson & Byron, P.A. Profit Sharing Plan and Fredrikson
& Byron, P.A. Profit Sharing Trust v. Piper Jaffray Incorporated, Piper
Capital Management Incorporated, Worth Bruntjen, and John Gibas (National
Association of Securities Dealers Arbitration).
Claim filed November 11, 1994. Claimants seek to recover in excess of $1
million.
Alan C. Friedberg and Jean A. Friedberg v. Piper Jaffray Inc., Piper Funds,
Inc., Piper Capital Management Incorporated and Piper Jaffray Companies
Inc. (National Association of Securities Dealers Arbitration).
Claim filed June 17, 1997. Claimants seek to recover $29,624 plus interest,
fees and costs.
2. American Strategic Income Portfolio Inc. I, II, and III (ASP, BSP, and CSP,
respectively), American Select Portfolio Inc. (SLA), American Opportunity
Income Fund (OIF), American Government Income Fund Inc. (AGF), American
Government Income Portfolio Inc. (AAF), Americas Income Trust Inc. (XUS)
and Other Named Funds
a. The following actions have been brought by investors in one or more of the
afore-mentioned funds.
Gary E. Nelson, et al. v. American Strategic Income Portfolio Inc.-II,
Piper Jaffray Companies Inc., Piper Capital Management Incorporated, Piper
Jaffray Inc., Worth Bruntjen, Charles Hayssen, Michael Jansen, William
Ellis and Edward Kohler (United States District Court, Western District of
Washington).
Christian Fellowship Foundation Peace United Church of Christ, Roseville
Firefighter's Relief Association, William J. and Florence B. Cohen, John
and Shirley Breitner, Gary E. Nelson and Lloyd Schmidt, et al. v. American
Government Income Portfolio, Inc., American Government Income Fund Inc.,
American Government Term Trust Inc., American Strategic Income Portfolio
Inc., American Strategic Income Portfolio Inc.-II, American Strategic
Income Portfolio Inc.-III, American Opportunity Income Fund Inc., American
Select Portfolio Inc., Piper Jaffray Companies Inc., Piper Capital
Management Inc., Piper Jaffray Inc., Worth Bruntjen, Charles Hayssen,
Michael Jansen, William H. Ellis and Edward J. Kohler (United States
District Court, Western District of Washington).
Plaintiff Nelson, an investor in BSP, filed a putative class action lawsuit
on June 28, 1995. Nelson also was an investor in OIF, and filed a second
putative class action lawsuit on July 12, 1995. On September 7, 1995,
Plaintiffs Nelson, et al. filed an Amended Complaint alleging claims
against eight closed-end funds and various individuals and entities, which
included many of the allegations contained in the previous two putative
class action lawsuits, as well as new allegations. By Order filed October
5, 1995, the Court consolidated the two putative class action lawsuits.
Plaintiffs filed a Second Amended Complaint on February 5, 1996, and a
Third Amended Complaint on June 4, 1996. Plaintiffs seek to represent a
global class of persons who purchased shares in the eight funds during the
period May 25, 1988 through May 1, 1995, as well as certain subclasses.
With respect to some or all of the subclasses, Plaintiffs allege violations
of Sections 11, 12(2) and 15 of the Securities Act; Sections 10(b) and
20(a) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder;
Sections 13(a), 34(b), and 36(b) of the Investment Company Act; certain
subsections of the Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18 U.S.C. S 1962 based on alleged predicate acts of mail fraud,
wire fraud, interstate transportation of money obtained through fraud, and
fraud in the sale of securities; the Washington State Securities Act; and
the Washington Consumer Protection Act. Plaintiffs may also purport to
allege claims under the common law of negligent misrepresentation and
breach of fiduciary duty. Under some or all of the claims, plaintiffs seek
rescission or monetary damages, treble damages, attorney's fees,
prejudgment interest and costs. The Third Amended Complaint does not
specify a particular amount of damages sought. The defendants filed a
motion to dismiss the consolidated action and a motion for summary
judgment.
The named plaintiffs and defendants have executed a settlement agreement,
which the Court has preliminarily approved. If granted final approval by
the Court, the settlement agreement would provide to class members $15.5
million in payments by Piper Jaffray Companies Inc. and Piper Capital
Management Incorporated over the next four years. The settlement also
includes an agreement that each of AGF, AAF and OIF would offer to
repurchase up to 25 percent of their outstanding shares from current
shareholders at net asset value. If the discounts between net asset value
and market price of these funds do not decrease to 5 percent or less within
approximately two years after the effective date of the settlement, the
fund boards may submit shareholder proposals to convert these funds to an
open-end format, unless they determine that it is not in the shareholders'
best interest to do so. Finally, the agreement stipulates that each of ASP,
BSP, CSP and SLA would offer to repurchase up to 10 percent of their
outstanding shares from current shareholders at net asset value.
A hearing for final approval of the settlement was held on July 11, 1997,
and the final order for judgment is now under advisement.
John Darlington and Ann Darlington v. Piper Jaffray Inc. and Dick Tallent
(Montana Second Judicial District Court, Silver Bow County).
Plaintiff filed this action on November 1, 1995 based on his investment in
CSP and XUS. Plaintiff alleged claims of breach of contract, breach of the
covenant of good faith and fair dealing, fraud and misrepresentation. The
Court ordered the plaintiffs to arbitrate this dispute and stayed the
lawsuit pending arbitration. No arbitration claim has been filed.
Kenneth Schneider v. Piper Jaffray Inc. and Richard Tallent (Montana Second
Judicial District Court, Silver Bow County).
Plaintiff filed this action on April 11, 1996 based on his investment in
SLA. Plaintiff alleges claims of misrepresentation and negligent
misrepresentation. The Complaint seeks compensatory damages in an
unspecified amount, punitive damages, and costs and attorneys' fees.
Margaret Nagel v. Piper Jaffray Inc. and Richard Tallent (Montana Second
Judicial District Court, Silver Bow County).
Plaintiff filed this action on April 11, 1996 based on her investment in
SLA. Plaintiff alleges claims of misrepresentation and negligent
misrepresentation. The Complaint seeks compensatory damages in an
unspecified amount, punitive damages, and costs and attorneys' fees.
Kenneth Gennerman as Trustee of The Nicole Bowlin Trust v. Piper Jaffray
Inc. (Wisconsin Circuit Court, Waukesha County)
Plaintiff filed this action on August 7, 1996, based on his investment in
OIF. Plaintiff alleges claims of negligent misrepresentation, intentional
misrepresentation and strict responsibility. The Complaint seeks rescission
or compensatory damages for investment of $10,000, interest, punitive
damages and attorneys' fees and costs.
b. The following arbitration claims seek recovery by investors in one or more
of the afore-mentioned closed-end funds:
Frederick Poole and Jane Poole; George Chapman; Dolores Patterson; Craig
Carter; Elliott J. Ashford and Linda K. Ashford; Elliott J. Ashford as the
Custodian for the accounts of Katie Stoltz and Zachary Stoltz; Linda K.
Ashford, as custodian for the account of Shelby Ashford; Kenneth Powers and
Marlene Powers; Robert Ferris and William Ferris, Custodians for the
account of Eva Ferris; Jim Toomey and Linda Toomey; Jeffrey Erwin and Lynda
Erwin; Alan Citron and Kathy Citron; Mishelle Barr as the custodian for the
account of Maria Barr; J. Kerry Wilcox and Sally E. Wilcox; Willard R.
Helton and Lenora J. Helton; Richard Austin and Joan Austin; Sydney
Bannister; F. Alan Boyd and Viola Boyd; Joseph Brown and Wanda Brown; Peter
Crane and Jody Gebbers; Robert Fately and Regna Fately; Millard Fowler and
Frankie Fowler; Marilyn Gearing; Edward Godsey and Nancy Godsey; James
Keaton; R. L. McDonald; Nora Rappe and Elmer Rappe;; Doris Riggs; Larry
Simms and Bonnie Simms; Kenneth Willig and Noreen Willig, as trustees for
the Kenneth A. Willig 1976 Trust; Talleta Wibmer and Helmut Wibmer; Susan
Van Masdam; George Willot; Teresa Smith; Betty Wick; Susan Wick; Velma
Donelly v. Piper Jaffray & Hopwood Incorporated; Piper Capital Management
Inc; American Strategic Income Portfolio, Inc., I; American Strategic
Income Portfolio, Inc., II; American Strategic Income Portfolio, III;
American Select, Inc.; Piper Jaffray Companies Inc.; Piper Jaffray Inc.;
and Mike Jansen (National Association of Securities Dealers Arbitration).
Claim filed December 6, 1995. Claimants seek rescission or damages,
interest and costs in an unspecified amount.
Janet Hayden v. Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).
Claim filed September 3, 1996. Claimant seeks to recover in excess of
$256,550.
Kenneth W. Nagel, Trustee, and Rachel J. Nagel, Trustee v. Piper Jaffray
Inc. (National Association of Securities Dealers Arbitration).
Claim filed November 18, 1996. Claimants seek to recover $10,000.
Gary N. Cohn, GNC Enterprises Pension Plan, GNC Enterprises Profit Sharing
Plan, Cohn Family Irrevocable Family Trust and Gary N. Cohn IRA v. Piper
Jaffray Inc., Piper Capital Management Incorporated, Worth Bruntjen, Paul
A. Dow, William H. Ellis, Marijo Goldstein, Jeffrey B. Griffin, Charles N.
Hayssen, David B. Holden, Kevin A. Jansen, Michael P. Jansen, Susan J. Moen
Klaseus, Edward J. Kohler, Addison L. Piper, Nancy Olsen, Benjamin Rinkey,
David E. Rosedahl, Eric L. Siedband, John G. Wenker and Beverly J. Zimmer
(National Association of Securities Dealers Arbitration).
Claim filed December 19, 1996. Claimants seek to recover in excess of
$169,786 and/or rescission.
Curtis G. Weakly and Jean Weakly v. Piper Capital Management Incorporated
and Piper Jaffray Companies Inc. (National Association of Securities
Dealers Arbitration).
Claim filed February 3, 1997. Claimants seek to recover $26,625. Theodore
F. Foster, D.O., P.C. Profit Sharing Plan, Theodore F. Foster, Trustee and
Theodore F. Foster, D.O., P.C. v. Piper Jaffray Companies Inc., Piper
Jaffray Inc., American Strategic Income Portfolio Inc. III and Thomas P.
O'Sullivan. (National Association of Securities Dealers Arbitration).
Claim filed May 9, 1997. Claimants seek to recover in excess of $129,000.
Mary Hughes v. Prudential Securities, Inc. and Piper Jaffray Inc. (National
Association of Securities Dealers Arbitration).
Claim filed July 17, 1997. Claimant seeks to recover approximately $9,800.
3. Managers Intermediate Mortgage Fund
Florence R. Hosea, Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew
Poffel and Diane Poffel as tenants by the Entireties, Myrone Barone, Donna
M. DiPalo, Bernard B. Geltner as IRA custodian, IRA and Bernard B. Geltner
and Gail Geltner and Paul Delman v. The Managers Funds, The Managers Funds,
L.P., Robert P. Watson, Piper Capital Management Incorporated, Piper
Jaffray Inc., Worth Bruntjen and Managers Intermediate Mortgage Fund
(United States District Court, District of Connecticut).
Karen E. Kopelman v. The Managers Fund, The Managers Funds, L.P., Robert P.
Watson, Piper Capital Management Incorporated, Piper Jaffray Inc., Worth
Bruntjen and Managers Intermediate Mortgage Fund (United States District
Court, District of Connecticut).
Plaintiff Hosea filed a putative class action lawsuit on September 26,
1994. Plaintiff Kopelman filed a putative class action lawsuit on November
4, 1994. By court order dated December 13, 1994, these two putative class
action lawsuits were consolidated. The plaintiffs purport to represent a
class of persons who purchased shares in the Managers Intermediate Mortgage
Fund ("Managers Intermediate") during the period from May 1, 1992, through
June 14, 1994. Managers Intermediate is a no-load, open-end mutual fund
that was generally managed by The Managers Funds, L.P. During the class
period, Piper Capital was the portfolio asset manager.
In their Amended and Restated Complaint, filed on July 19, 1995, plaintiffs
allege that defendants Piper Capital, Piper Jaffray and Worth Bruntjen (the
"Piper Defendants") violated Sections 11, 12(2) and 15 of the Securities
Act; Section 10(b) of the Securities Exchange Act, and Rule 10b-5
promulgated thereunder; Sections 34(b) and 36(b) of the Investment Company
Act; and engaged in negligent misrepresentation. Plaintiffs seek rescission
or monetary damages, plus prejudgment interest, punitive damages "where
appropriate," and attorneys' fees and costs. The Complaint does not specify
an amount of damages sought. Although the plaintiffs in this consolidated
action allege that it has been brought as a class action, the Court has not
yet determined whether a class will be certified.
4. Managers Short Government Income Fund
a. Robert Fleck, on behalf of himself and all others similarly situated v. The
Managers Funds, The Managers Funds, L.P., Piper Jaffray Inc., Piper Capital
Management Incorporated, Worth Bruntjen, Evaluation Associates, Inc.,
Robert P. Watson, John E. Rosati, William M. Graulty, Madeline H.
McWhinney, Steven J. Paggioli, Thomas R. Schneeweis and Managers Short
Government Fund, F/K/A Managers Short Government Income Fund (United States
District Court, District of Minnesota).
Plaintiff, a shareholder of the Managers Short Government Income Fund
("Managers Short"), filed this putative class action lawsuit on November
18, 1994. Plaintiff purports to represent a class of persons who purchased
shares of Managers Short during the period from May 1, 1993, through
September 12, 1994. Managers Short is a no-load, open-end mutual fund that
was generally managed by The Managers Funds, L.P. Piper Capital was the
portfolio asset manager until August 12, 1994.
By Order filed November 24, 1995, the Court dismissed all claims against
the Piper Defendants for failure to state a claim. The Court denied, in
part, a motion to dismiss claims asserted against defendants other than the
Piper Defendants, including claims for alleged violation of Sections 11,
12(2) and 15 of the Securities Act.
On December 14, 1995, plaintiff served an Amended Complaint alleging that
defendants Piper Jaffray Inc., Piper Capital and Worth Bruntjen (the "Piper
Defendants") violated Sections 11, 12(2) and 15 of the Securities Act;
Section 10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated
thereunder; Section 13(a)(3) of the Investment Company Act; and engaged in
common law fraud. Plaintiff seeks rescission and monetary damages, plus
prejudgment interest, punitive damages if appropriate, and attorneys' fees
and costs. The Amended Complaint does not specify an amount of damages
sought. The Piper Defendants filed a motion to dismiss the claims against
them in the Amended Complaint.
The court has granted final approval of a settlement agreement which will
provide to class members up to a total of $1.5 million collectively from
The Managers Funds, L.P. and Piper Capital on the Effective Date of the
settlement. A hearing for final approval of the settlement was held on July
22, 1997, and the final order for judgment was entered on July 30, 1997.
b. Other Lawsuit Brought by Investor in the Managers Short Government Fund and
the Managers Intermediate Mortgage Fund
First Commercial Trust Company, N.A. v. The Managers Funds, a Massachusetts
Business Trust, Managers Short Government Fund, Managers Intermediate
Mortgage Fund, Managers Short and Intermediate Bond Fund, The Managers
Funds, L.P., EAIMC Holdings Corporation, Evaluation Associates Holding
Corporation, EAI Partners, L.P., Evaluation Associates, Inc., Robert P.
Watson, William W. Graulty, Madeline H. McWhinney, Steven J. Paggioli,
Thomas R. Schneeweis, William J. Crerend, Piper Capital Management Inc.,
Piper Jaffray Companies Inc., Worth Bruntjen, Standish, Ayer & Wood, Inc.,
TCW Funds Management, Inc. and TCW Management Company (Connecticut Superior
Court, Stamford/Norwalk District).
According to the Complaint filed on October 26, 1995, plaintiff First
Commercial Trust Company ("FCTC") is an investor in the Managers Short
Government Fund, the Managers Intermediate Mortgage Fund, and the Managers
Short and Intermediate Bond Fund. Piper Capital was the portfolio asset
manager for the Managers Short Government Fund and the Managers
Intermediate Bond Fund, which are generally managed by The Managers Funds,
L.P. Based on the allegations in the Complaint, plaintiff appears to fall
within the definition of the proposed classes in both the Hosea/Kopelman
and Fleck actions described above.
Plaintiff alleges that Piper Jaffray Companies Inc., Piper Capital and
Bruntjen (the "Piper Defendants"), engaged in fraud, fraudulent
concealment, breach of contract, breach of fiduciary duty, breach of
implied covenant of good faith and fair dealing, negligent
misrepresentation, civil conspiracy, negligent interference with
contractual relations, violation of the Connecticut Unfair and Deceptive
Trade Practices Act, and violation of the Connecticut Securities Act.
Plaintiff seeks compensatory damages in an unspecified amount, punitive
damages, attorneys' fees, interest and costs. The Piper Defendants have
joined a motion brought by other defendants to dismiss the Complaint or
alternatively to stay the action.
In a declaratory action filed on October 26, 1995 in the United States
District Court, District of Connecticut, the Piper Defendants, along with
The Managers Funds, L.P., The Managers Funds and related persons and
entities seek a declaration that they bear no liability to FCTC. FCTC has
brought a motion to dismiss the declaratory action.
5. Privately Managed Accounts
The following arbitration claim seeks recovery for accounts managed by
Piper Capital Management Incorporated:
Regents of the University of Minnesota and Ruminco, Ltd. v. Piper Capital
Management Incorporated, Piper Jaffray Inc., Piper Jaffray Companies Inc.
and Worth Bruntjen (National Association of Securities Dealers
Arbitration).
Claim filed November 22, 1995. Claimants seek to recover over $15 million
and punitive damages. Claimants allege violation of federal and state
securities laws, breach of fiduciary duty, breach of contract, negligence
and violation of the Minnesota Consumer Fraud Act. Claimants' individually
managed accounts included investments in derivative products.
B. Bonneville Pacific Corporation
Piper Jaffray was named as one of several defendants in a lawsuit filed in
the United States District Court for the District of Utah resulting from
Piper Jaffray's dealings with Bonneville Pacific Corporation ("BPCO").
Other defendants include BPCO's attorneys, accountants, lenders and other
investment bankers. BPCO is currently in Chapter 11 reorganization
proceedings in Utah.
The plaintiffs in the first-filed lawsuit originally brought their
complaint as a purported class action relating to the $63.25 million
offering of convertible subordinated debentures of BPCO in August 1989, for
which Piper Jaffray was a co-managing underwriter in a syndicate led by
Kidder, Peabody & Co. and secondary trading in BPCO's Common Stock from
August 1989 through the inception of BPCO's bankruptcy proceeding in
December 1991. The plaintiffs in their complaint alleged violations of
federal and state securities laws, common law fraud and negligent
misrepresentation. On March 14, 1994, the plaintiffs filed a motion to
amend their complaint seeking leave to add additional parties and claims.
The proposed amended complaint seeks to add claims under RICO and to expand
the class period, under a common law fraud theory, to include the $22.5
million initial public offering of BPCO's Common Stock in August 1986, for
which Piper Jaffray acted as the sole underwriter, and the $31 million
secondary offering of BPCO's Common Stock in August 1987, for which Piper
Jaffray acted as co-managing underwriter. In addition to actual damages,
the proposed amended complaint also seeks treble damages under RICO,
punitive damages, interest, costs and attorneys' fees. On April 29, 1994,
motions to dismiss brought by Piper Jaffray and the other underwriter
defendants with respect to the plaintiffs' claims of violations of Section
10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder,
conspiracy, aiding and abetting, common-law fraud and negligent
misrepresentation were granted. The judge in the case certified to the Utah
Supreme Court issues related to the plaintiffs' claims under the Utah
Uniform Securities Act and further denied plaintiffs' March 14, 1994 motion
for leave to file an amended complaint as premature. The plaintiffs were
given leave to amend all dismissed claims except the conspiracy and aiding
and abetting claims under Section 10(b), which were dismissed with
prejudice. By date of June 14, 1994, plaintiffs served a second amended
complaint, realleging claims under Sections 11 and 15 of the Securities Act
and Section 10 of the Securities Exchange Act and Rule 10b-5 promulgated
thereunder. Plaintiffs also asserted RICO claims and claims under the Utah
Uniform Securities Act, among others. On August 2, 1994, Piper Jaffray and
the other defendants moved to dismiss the RICO, Securities Exchange Act and
Utah Uniform Securities Act claims and that motion is pending. In an
opinion filed July 5, 1996, the Utah Supreme Court held that reliance was
not an element of a claim under Utah's Uniform Securities Act, but that the
plaintiffs were required to establish privity with a particular defendant
seller of securities in order to recover from that defendant. On May 16,
1997, plaintiffs served and filed a motion seeking leave to file a Third
Amended Complaint. The proposed Third Amended Complaint contains additional
statements of alleged facts but does not add new parties or new causes of
action. The defendants have opposed plaintiffs' motion to amend, and the
court has not yet ruled on the motion. All deposition discovery in the case
remains stayed and no pretrial schedule or trial date has been established.
A second lawsuit was brought by the BPCO bankruptcy trustee. The lawsuit
alleged conspiracy, RICO, common law fraud, breach of fiduciary duty and
similar theories arising out of the activities of BPCO from 1984 through
the inception of its bankruptcy proceeding. The lawsuit sought actual
damages, treble damages under RICO, punitive damages, interest, costs and
attorney's fees. On August 12, 1996, Piper Jaffray entered into a
settlement agreement with the BPCO bankruptcy trustee providing for the
payment of $10.0 million in settlement of all claims against Piper Jaffray.
The settlement agreement was subsequently approved by the District Court
and the Bankruptcy Court. Under the terms of the settlement agreement,
Piper made a $7.0 million payment on September 9, 1996. Two additional
payments of $1.5 million each are payable in September 1997 and September
1998.
C. NASDAQ Market-Maker Anti-Trust Securities Litigation
Piper Jaffray has been named as a defendant in several purported class
action proceedings that allege anti-trust violations. Piper Jaffray was
joined as defendant in such actions during July 1994. All actions have been
consolidated under the title In re NASDAQ Market-Maker Anti-Trust and
Securities Litigation (United States District Court, Southern District of
New York ).
The plaintiffs allege that thirty-eight defendants, including Piper
Jaffray, that act as dealers on the NASDAQ computerized quotations system,
conspired to raise and fix the spreads between the bid and ask prices of
securities traded on NASDAQ. Plaintiffs further allege that as a result of
such conspiracy, NASDAQ spreads were larger than spreads for stocks traded
on the New York Stock Exchange and the American Stock Exchange. The
purported class consists of all persons in the United States who are
current customers and who bought or sold securities through NASDAQ within
four years prior to the filing of the complaints. Plaintiffs seek treble
damages of an unspecified amount.
D. Department of Justice NASDAQ Investigation
On July 17, 1996, while denying any wrongdoing, the Company joined in a
settlement agreement with twenty-three other NASDAQ dealers, resolving the
U.S. Department of Justice Investigation of the NASDAQ stock market. Piper
Jaffray cooperated fully with the Justice Department's investigation. Terms
of the settlement call for the defendants to implement certain policies and
procedures intended to address the concerns raised by the U.S. Department
of Justice. The settlement was approved by the United States District Court
for the Southern District of New York on April 22, 1997. On May 21, 1997,
the plaintiffs in the NASDAQ Market-Maker Anti-Trust Securities Litigation
filed a Notice of Appeal with respect to the Justice Department settlement.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 - Material Contracts - EDGAR version only (filed electronically).
10.25 - Fourth Amendment to Credit Agreement and First Amendment to
Pledge and Collateral Administration Agreement, dated May 9,
1997, between Piper Jaffray Inc. and Norwest Bank Minnesota, N.A.
10.26 - Fourth Amendment to Credit Agreement and First Amendment to
Pledge and Collateral Administration Agreement, dated May 9,
1997, between Piper Jaffray Inc. and Northern Trust Company.
10.27 - Fourth Amendment to Credit Agreement and Collateral Agreement,
dated May 9, 1997, between Piper Jaffray Inc. and First Bank
National Association.
10.28 - First Amendment to Loan Agreement, dated April 1, 1997,
between Piper Jaffray Companies Inc. and First Bank National
Association.
11 - Statement Regarding Computation of Per Share Earnings.
27 - Financial Data Schedule - EDGAR version only (filed electronically).
(b) Reports on Form 8-K
The Company was not required to file any reports on Form 8-K to the
Securities and Exchange Commission during the quarter ended June 30,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIPER JAFFRAY COMPANIES INC.
(Registrant)
Dated: August 14, 1997 /s/ Deborah K. Roesler
DEBORAH K. ROESLER
Chief Financial Officer and Managing Director
Dated: August 14, 1997 /s/ William H. Ellis
WILLIAM H. ELLIS
President
<PAGE>
<TABLE>
PIPER JAFFRAY COMPANIES INC.
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
<CAPTION>
Exhibit Description of Exhibit Form of Filing
<S> <C> <C>
10 Material Contracts (EDGAR version only).
10.25 Fourth Amendment to Credit Agreement and First Amendment to Pledge and Electronic
Collateral Administration Agreement, dated May 9, 1997, between Piper transmission
Jaffray Inc. and Norwest Bank Minnesota, N.A.
10.26 Fourth Amendment to Credit Agreement and First Amendment to Pledge and Electronic
Collateral Administration Agreement, dated May 9, 1997, between Piper transmission
Jaffray Inc. and Northern Trust Company.
10.27 Fourth Amendment to Credit Agreement and Collateral Agreement, dated May 9, Electronic
1997, between Piper Jaffray Inc. and First Bank National Association. transmission
10.28 First Amendment to Loan Agreement, dated April 1, 1997, between Piper Jaffray Electronic
Companies Inc. and First Bank National Association. transmission
11 Statement Regarding Computation of Per Share Earnings. Electronic
transmission
27 Financial Data Schedule (EDGAR version only). Electronic
transmission
</TABLE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
and
FIRST AMENDMENT TO PLEDGE AND COLLATERAL
ADMINISTRATION AGREEMENT
This Amendment is made as of this 9th day of May, 1997, by and between
Norwest Bank Minnesota, National Association (the "Bank") and Piper Jaffray Inc.
(the "Company").
The Bank and the Company have made and entered into a Credit Agreement
dated as of November 23, 1994, as amended by a First Amendment dated as of
December 28, 1994, extended by the Bank's letter dated October 13, 1995, amended
by a Second Amendment dated November 7, 1995, and amended by a Third Amendment
dated as of March 27, 1996 (the "Credit Agreement").
The Credit Agreement includes provisions setting loan pricing; the
Company's covenants concerning, among other things, maintenance of Tangible Net
Worth and delivery of certain financial reports; and a requirement that the
Company's parent, Piper Jaffray Companies Inc., maintain a specified Tangible
Net Worth.
The Bank, the Company and two other banks have also made and entered
into a Pledge and Collateral Administration Agreement dated as of November 23,
1994 (the "Pledge Agreement") which includes a provision requiring the Company
to maintain a Minimum Collateral Amount as a condition to certain borrowings.
The Bank and the Company have agreed to amend the foregoing provisions
of the Credit Agreement and the Pledge Agreement.
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.
2. Section 1.1 of the Credit Agreement is hereby amended by changing the
definition of "Applicable Margin" to provide that the Applicable Margin for
Committed Loans maintained as Federal Funds Rate Advances shall be .45% per
annum and the Applicable Margin for Discretionary Loans maintained as Federal
Funds Rate Advances shall be 1/2 of 1% per annum.
3. Section 2.14 of the Credit Agreement is hereby amended by changing
the Commitment Ending Date to May 31, 1998.
4. Section 5.1(h) of the Credit Agreement is hereby amended to be and
read as follows:
"(h) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Parent's shareholders; copies of all registration statements, periodic
reports and other documents filed by the Parent with the Commission or
any national securities exchange, provided, however, that so long as the
Company delivers to the Bank a copy of the Parent's press release
associated with each Form 8-K, the Company need not deliver the Form 8-K
unless requested by the Bank; and copies of all registration statements
relating to the Company's own securities and of all Financial and
Operational Combined Uniform Single Reports filed by the Company with
the Commission or any national securities exchange."
5. Section 6.8 of the Credit Agreement is hereby amended by changing the
required Tangible Net Worth of the Company from $100,000,000 to $125,000,000.
6. Section 7.1(s) of the Credit Agreement is hereby amended by changing
the required Tangible Net Worth of the Parent from $125,000,000 to $135,000,000.
7. Section 1.1 of the Pledge Agreement is hereby amended by changing
the figure "110%" to "100%".
8. Upon and following the date of this Amendment, references in the
Credit Agreement and the Pledge Agreement to "this Agreement" shall be deemed to
refer to the Credit Agreement or Pledge Agreement, as amended by this Amendment.
9. Except as amended hereby, all of the terms and conditions of the
Credit Agreement and the Pledge Agreement shall remain in full force and effect.
In witness whereof, the Bank and the Company have executed this
Amendment as of the day and year first above written.
PIPER JAFFRAY INC. NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Deborah K. Roesler By /s/ Edward J. Meyer, Jr.
Deborah K. Roesler Edward J. Meyer, Jr.
Chief Financial Officer Vice President
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
and
FIRST AMENDMENT TO PLEDGE AND COLLATERAL
ADMINISTRATION AGREEMENT
This Amendment is made as of this 9th day of May, 1997, by and between
The Northern Trust Company (the "Bank") and Piper Jaffray Inc. (the "Company").
The Bank and the Company have made and entered into a Credit Agreement
dated as of November 23, 1994, as amended by a First Amendment dated as of
December 23, 1994, extended by the Bank's letter dated October 20, 1995, amended
by a Second Amendment dated November 9, 1995, and amended by a Third Amendment
dated as of March 27, 1996 (the "Credit Agreement").
The Credit Agreement includes provisions setting loan pricing; the
Company's covenants concerning, among other things, maintenance of Tangible Net
Worth and delivery of certain financial reports; and a requirement that the
Company's parent, Piper Jaffray Companies Inc., maintain a specified Tangible
Net Worth.
The Bank, the Company and two other banks have also made and entered
into a Pledge and Collateral Administration Agreement dated as of November 23,
1994 (the "Pledge Agreement") which includes a provision requiring the Company
to maintain a Minimum Collateral Amount as a condition to certain borrowings.
The Bank and the Company have agreed to amend the foregoing provisions
of the Credit Agreement and the Pledge Agreement.
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.
2. Section 1.1 of the Credit Agreement is hereby amended by changing the
definition of "Applicable Margin" to provide that the Applicable Margin for
Committed Loans maintained as Federal Funds Rate Advances shall be .45% per
annum and the Applicable Margin for Discretionary Loans maintained as Federal
Funds Rate Advances shall be 1/2 of 1% per annum.
3. Section 2.14 of the Credit Agreement is hereby amended by changing
the Commitment Ending Date to May 31, 1998.
4. Section 5.1(h) of the Credit Agreement is hereby amended to be and
read as follows:
"(h) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Parent's shareholders; copies of all registration statements, periodic
reports and other documents filed by the Parent with the Commission or
any national securities exchange, provided, however, that so long as the
Company delivers to the Bank a copy of the Parent's press release
associated with each Form 8-K, the Company need not deliver the Form 8-K
unless requested by the Bank; and copies of all registration statements
relating to the Company's own securities and of all Financial and
Operational Combined Uniform Single Reports filed by the Company with
the Commission or any national securities exchange."
5. Section 6.8 of the Credit Agreement is hereby amended by changing the
required Tangible Net Worth of the Company from $100,000,000 to $125,000,000.
6. Section 7.1(s) of the Credit Agreement is hereby amended by changing
the required Tangible Net Worth of the Parent from $125,000,000 to $135,000,000.
7. Section 1.1 of the Pledge Agreement is hereby amended by changing
the figure "110%" to "100%".
8. Upon and following the date of this Amendment, references in the
Credit Agreement and the Pledge Agreement to "this Agreement" shall be deemed to
refer to the Credit Agreement or Pledge Agreement, as amended by this Amendment.
9. Except as amended hereby, all of the terms and conditions of the
Credit Agreement and the Pledge Agreement shall remain in full force and effect.
In witness whereof, the Bank and the Company have executed this
Amendment as of the day and year first above written.
PIPER JAFFRAY INC. THE NORTHERN TRUST COMPANY
By /s/ Deborah K. Roesler By /s/ Christina L. Jakuc
Deborah K. Roesler Christina L. Jakuc
Chief Financial Officer Officer
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Amendment is made as of this 9th day of May, 1997, by and between
First Bank National Association (the "Bank") and Piper Jaffray Inc. (the
"Company").
The Bank and the Company have made and entered into a Credit Agreement
dated as of November 23, 1994, as amended by a First Amendment dated as of
December 27, 1994, extended by the Bank's letter dated September 12, 1995,
amended by a Second Amendment dated November 7, 1995, and amended by a Third
Amendment dated as of March 27, 1996 (the "Credit Agreement").
The Credit Agreement includes provisions setting loan pricing;
procedures for obtaining Committed Loans; the Company's covenants concerning,
among other things, maintenance of Tangible Net Worth and delivery of certain
financial reports; and a requirement that the Company's parent, Piper Jaffray
Companies Inc., maintain a specified Tangible Net Worth.
The Bank, the Company and two other banks have also made and entered
into a Pledge and Collateral Administration Agreement dated as of November 23,
1994 (the "Pledge Agreement").
The Bank and the Company have agreed to amend the foregoing provisions
of the Credit Agreement and the Bank has agreed to cease to be a Lender under
the terms of the Pledge Agreement.
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.
2. Section 1.1 of the Credit Agreement is hereby amended as follows:
(a) The definition of "Agreement to Pledge" is amended to be and
read as follows: "`Agreement to Pledge': An agreement substantially in
the form of Exhibit A to the Fourth Amendment to this Agreement."
(b) The definition of "Applicable Margin" is amended to provide
that the Applicable Margin for Federal Funds Rate Advances shall be .45%
per annum.
(c) The definition of "Collateral Agreement" is amended to be
and read as follows: "`Collateral Agreement': The Collateral Agreement
between the Company and the Bank dated as of May 9, 1997."
(d) The definition of "Collateral Value" is amended to be and
read as follows: "`Collateral Value': At any time of determination, 80%
of the amount determined by the Bank to be the Market Value of a Firm
Security; provided, however, that the Collateral Value of any Firm
Security that is not an Eligible Security shall be zero."
(e) The definition of "Customer Securities Availability" is be
amended to be and read as follows: "`Customer Securities Availability'
has the meaning specified in Section 2.1(b)(i) or Section 2.1 (b)(ii),
as applicable."
(f) The definition of "Eligible Security" is amended to be and
read as follows: "`Eligible Security': A Security that (a) is legally
available to be pledged or hypothecated by the Company to the Bank, (b)
is subject to (i) a validly perfected first priority security interest
in favor of the Bank, (ii) no Lien, other than a Lien in favor of the
Bank, and (iii) no adverse claims known to the Company which would
impair the value of such Security as collateral, (c) is a DTC Debt
Security, GNMA Security, Government Security, or DTC Equity Security
with respect to which the Company is a qualified OTC market maker (as
such term is used in Regulation U), (d) has not matured or been called
prior to its stated maturity and is not in default, and (e) has not been
deemed by the Bank in its sole discretion to be illiquid."
(g) The definition of "GNMA Security" is amended to be and read
as follows: "`GNMA Security' means a mortgage-backed Security which is
(i) guaranteed by the Government National Mortgage Association, (ii)
shown on the books of PTC, (iii) subject to the control of PTC, and (iv)
registered in the name of PTC, another clearing corporation, or a
nominee of either of them."
(h) The definition of "Market Value" is amended to be and read as
follows: "`Market Value': means, with respect to any Security, the final
price bid for such Security on the Business Day immediately preceding
the date of valuation of such Security, as determined by reference (a)
in the case of DTC Equity Securities, DTC Debt Securities and Government
Securities at DTC, to the DTC `Participant Terminal Services' system,
(b) in the case of Government Securities (other than those held at DTC),
to any securities pricing services that are regularly recognized in
national financial markets, or, if no such pricing services are
available on any Business Day, to the Wall Street Journal, and (c) in
the case of GNMA Securities, to the pricing system provided by PTC."
(i) The definition of "Pledged Securities" is amended to be and
read as follows: "`Pledged Securities' means Securities subject to
Agreements to Pledge or Securities that have been delivered and pledged
to the Bank as provided by Section 3.2 of the Collateral Agreement."
(j) The definitions of "Administrator," "Cash Collateral,"
"Collateral Pool," "Firm Collateral Agreement," "Lenders," "Liquidation
Notice," "Pro Rata Share," and "Secured Obligations" are hereby deleted.
3. Section 2.1 of the Credit Agreement is hereby amended to be and read
as follows:
"Section 2.1 The Commitment.
2.1(a) Committed Loans. On the terms and subject to the
conditions hereof, the Bank agrees to make loans (each a "Committed
Loan" and, collectively, the "Committed Loans") to the Company on a
revolving basis at any time and from time to time from the Closing Date
to the Termination Date, during which period the Company may borrow,
repay and reborrow in accordance with the provisions hereof; provided,
that (a) the unpaid principal amount of outstanding Loans (inclusive of
outstanding Discretionary Loans) shall not at any time exceed the
Commitment Amount, and (b) the unpaid principal amount of outstanding
Committed Loans shall not at any time exceed the Customer Securities
Availability. Loans may be obtained and maintained, at the election of
the Company but subject to the limitations hereof, as Federal Funds Rate
Advances or Eurodollar Rate Advances or any combination thereof.
2.1(b) Committed Loan Borrowing Procedures.
(i) Procedures in the Absence of Hard Pledge Notice. The
procedures in this clause 2.1(b)(i) shall apply so long as no
notice pursuant to clause 2.1(b)(ii) (a "Hard Pledge Notice") has
been given and is in effect. In addition to the procedures
specified in Section 2.3 of this Agreement, on any day on which
the Company has made a request for a Committed Loan, the Company
will deliver to the Bank no later than 5:00 P.M. (Chicago time)
an Agreement to Pledge covering Customers' Securities that upon
delivery to the Bank must qualify as Eligible Securities with an
attached list of such Customers' Securities stating the Market
Value thereof. On any Business Day on which a Committed Loan
remains outstanding as of 3:30 P.M. (Chicago time), the Company
shall deliver to the Bank no later than 5:00 P.M. (Chicago time)
a list of the Customers' Securities subject to the Agreement to
Pledge that was delivered with the request for such Committed
Loan, stating the Market Value thereof. By delivering each such
list or Agreement to Pledge, the Company shall be deemed to grant
the Bank a security interest in the listed Customers' Securities
and to represent and covenant that: (i) the listed Securities are
Eligible Securities; (ii) the listed Securities will not be sold,
pledged or otherwise transferred to any person other than the
Bank prior to 9:00 A.M. on the Business Day after the day on
which the Company delivers the list to the Bank; (iii) the
Company will, upon demand by the Bank, deliver to the Bank all
Securities described in any such list then current, or (if such
demand is made after 9:00 A.M. on the Business Day after the
Bank's receipt of the most recent such list), other Customers'
Securities acceptable to the Bank that are Eligible Securities
with an aggregate Market Value at least equal to the aggregate
Market Value of the listed Securities, and pledge those
Securities to the Bank as security for all Committed Loans then
outstanding; and (iv) any Securities listed in Agreements to
Pledge in effect for fifteen consecutive calendar days will be
delivered and pledged to the Bank by the Company as security for
all Committed Loans then outstanding (as applicable on the first
Business Day following that fifteenth consecutive day). So long
as no Hard Pledge Notice is in effect, "Customer Securities
Availability" means the sum of 80% of the Market Value of DTC
Equity Securities, 90% of the Market Value of DTC Debt Securities
and 95% of the Market Value of GNMA Securities and Government
Securities subject to the then outstanding Agreements to Pledge.
(ii) Procedures when Hard Pledge Notice is in Effect. The
Bank may at any time in its sole discretion give notice (a "Hard
Pledge Notice") to the Company that henceforth, until the Bank
notifies the Company to the contrary, all outstanding Committed
Loans are to be secured by a pledge of Customers' Securities. The
procedures in this clause shall apply from the time a Hard Pledge
Notice is given until the Bank, in its sole discretion, notifies
the Company that it is again willing to make Committed Loans
pursuant to clause 2.1(b)(i), above. If a Hard Pledge Notice is
received at or before 11:00 o'clock A.M. on a Business Day, the
Company shall deliver Securities to the Bank that Business Day in
an amount (the "Required Amount") such that the Customer
Securities Availability is equal to or greater than the amount of
all outstanding Committed Loans, giving effect to any borrowings
and repayments that day. If a Hard Pledge Notice is received by
the Company after 11:00 o'clock A.M. on a Business Day, the
Company shall use best efforts to deliver the Required Amount of
Securities to the Bank that Business Day, and shall deliver the
Required Amount of Securities no later than the time when it
would have been required to deliver the Securities had the Hard
Pledge Notice been received prior to 11:00 A.M. the next Business
Day. If a Hard Pledge Notice is received at any time on a day
that is not a Business Day, the Hard Pledge Notice shall be
treated as having been received prior to 11:00 o'clock A.M. on
the next Business Day. Thereafter, so long as the Hard Pledge
Notice remains in effect, (i) the Company shall be obligated to
deliver Securities to the Bank each Business Day in an amount
sufficient so that the Customer Securities Availability at the
end of such Business Day is equal to or greater than the
then-outstanding Committed Loans, taking into account any new
borrowings and repayments; (ii) provided that no Default or Event
of Default then exists, the Bank shall be obligated to return
cash or specific Securities to the Company upon written request
delivered by the Company to the Bank on or before 3:30 o'clock
P.M. on any Business Day, provided, that following any such
return, the Customer Securities Availability is equal to or in
excess of the outstanding Committed Loans, taking into effect any
new borrowings and repayments; and (iii) the term "Customer
Securities Availability" shall mean the sum of 80% of the Market
Value of DTC Equity Securities, 90% of the Market Value of DTC
Debt Securities and 95% of the Market Value of GNMA Securities
and Government Securities that have been delivered or otherwise
transferred to the Bank by the Company and remain subject to the
Bank's security interest pursuant to this Section 2.1(b)(ii).
(iii) Method of Collateral Delivery. The Company shall
deliver Securities to the Bank, when required pursuant to clause
2.1(b)(ii) in the following manner:
(A) In the case of DTC Debt Securities and DTC
Equity Securities, by causing DTC to make all appropriate
entries in its records identifying such Securities as
being pledged to the Bank;
(B) In the case of Government Securities, by
transfer of such Government Securities to one or more book
entry accounts of the Bank at the Federal Reserve Bank of
Minneapolis or, in the case of Government Securities at
DTC, by causing DTC to make appropriate entries in its
records identifying such Securities as being pledged to
the Bank; and
(C) In the case of GNMA Securities, by the transfer
of such GNMA Securities to one or more "pledgee accounts"
at PTC maintained by the Bank and specified by the Bank.
(iv) Method of Collateral Return. The Bank shall return
Securities to the Company, when required, pursuant to clause
2.1(b)(ii), in the following manner:
(A) In the case of DTC Equity Securities, DTC Debt
Securities and Government Securities maintained at DTC, by
implementing a release of such Securities on the DTC
system;
(B) In the case of Government Securities other than
Government Securities at DTC, by transfer of such
Securities to a book entry account designated in writing
to the Bank by the Company;
(C) In the case of GNMA Securities, by transfer of
such GNMA Securities to one or more PTC accounts
designated in writing from time to time to the Bank by the
Company; and
(D) In the case of cash, by wire transfer to the
Company's account, designated in writing from time to time
by the Company.
4. Section 2.3 of the Credit Agreement is hereby amended by adding a new
sentence as follows, immediately following the first sentence of such Section:
"Each request by the Company for a Loan shall be deemed to include a
representation that the Company has Eligible Securities available to pledge
whose Market Value is sufficient such that, giving effect to the requested Loan
and and the subsequent pledge of such Eligible Securities, the unpaid principal
amount of outstanding Committed Loans will not exceed the Customer Securities
Availability and the aggregate Collateral Value of pledged Firm Securities will
equal or exceed the unpaid principal amount of outstanding Discretionary Loans."
5. Section 2.10(a) of the Credit Agreement is hereby amended to be and
read as follows:
"2.10(a) At any time that the outstanding principal amount of the
Customers' Securities Note exceeds the Customer Securities Availability,
the Company shall immediately either (i) prepay the principal amount of
the Customers' Securities Note in the amount of such excess, or (ii) if
no Hard Pledge Notice is in effect, deliver a list of additional
Customers' Securities whose Market Value is at least equal to such
excess, or (iii) if a Hard Pledge Notice has been given and remains in
effect, deliver additional Customers' Securities to the Bank whose
Market Value is at least equal to such excess."
6. Section 2.14 of the Credit Agreement is hereby amended by changing
the Commitment Ending Date to May 8, 1998.
7. Section 3.2(d) of the Credit Agreement is hereby deleted.
8. Section 5.1(h) of the Credit Agreement is hereby amended to be and
read as follows:
"(h) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Parent's shareholders; copies of all registration statements, periodic
reports and other documents filed by the Parent with the Commission or
any national securities exchange, provided, however, that so long as the
Company delivers to the Bank a copy of the Parent's press release
associated with each Form 8-K, the Company need not deliver the Form 8-K
unless requested by the Bank; and copies of all registration statements
relating to the Company's own securities and each Focus Report filed by
the Company with the Commission or any national securities exchange."
9. Section 6.8 of the Credit Agreement is hereby amended by changing the
required Tangible Net Worth of the Company from $100,000,000 to $125,000,000.
10. Section 7.1(s) of the Credit Agreement is hereby amended by changing
the required Tangible Net Worth of the Parent from $125,000,000 to $135,000,000.
11. It shall be a condition precedent to the effectiveness of this
Fourth Amendment that the Company shall have executed and delivered the
Collateral Agreement to the Bank. Upon delivery of the Collateral Agreement, the
Collateral Agreement dated November 23, 1994, made by the Company for the
benefit of the Bank shall be of no further force or effect.
12. As soon as possible following the date of this Amendment, the Bank
shall notify The Northern Trust Company pursuant to Section 3.1(a) of the Pledge
Agreement that any credit extensions then outstanding which are secured by the
Pledge Agreement have been paid and shall in addition send the notice
contemplated by Section 12.1(c) of the Pledge Agreement to the effect that the
Bank shall cease to be a Lender under the terms of the Pledge Agreement as of
the date not more than 30 days following the effective date of this Amendment.
13. Upon and following the date of this Amendment, references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement, as amended by this Amendment.
14. Except as amended hereby, all of the terms and conditions of the
Credit Agreement shall remain in full force and effect.
In witness whereof, the Bank and the Company have executed this
Amendment as of the day and year first above written.
PIPER JAFFRAY INC. FIRST BANK NATIONAL ASSOCIATION
By /s/ Deborah K. Roesler By /s/ Jose A. Peris
Deborah K. Roesler Jose A. Peris
Chief Financial Officer Senior Vice President/Division Head
By /s/ Jennifer A. Olson-Goude
Jennifer A. Olson-Goude
Assistant Vice President /Assistant Treasurer
<PAGE>
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated May 9, 1997, made by PIPER JAFFRAY INC., a
Delaware corporation (the "Company"), in favor of FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
WHEREAS the Company has entered into a credit agreement with the Bank
(the "Credit Agreement") which provides, among other things, for credit
facilities made available to the Company by the Bank; and
WHEREAS it is a condition precedent to the Bank's making any Loans under
the Credit Agreement after the date hereof that the Company shall execute and
deliver to the Bank this Collateral Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter and in the Credit Agreement set forth, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Terms used in Credit Agreement. Capitalized terms used in this Collateral
Agreement and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.
1.2 Pledged Securities. The term "Pledged
Securities" means Customers' Securities and Firm Securities listed by theCompany
pursuant to Section 2.1 or Section 2.2 of the Credit Agreement (whetherattached
to an Agreement to Pledge or delivered on a day on which a Loan remains
outstanding) and all Customers' Securities and Firm Securities delivered
to,deposited with, transferred to or otherwise put in the possession or control
of the Bank. Securities that are so listed or delivered to the Bank shall remain
"Pledged Securities" thereafter until they are released or replaced pursuant to
a provision of the Credit Agreement or this Collateral Agreement.
ARTICLE II
REPRESENTATION OF THE COMPANY
The Company hereby represents that any Pledged Securities will be Eligible
Securities at the time they are listed by the Company pursuant to Section 2.1 or
Section 2.2 of the Credit Agreement and at all times that they remain Pledged
Securities. The Company will defend the Pledged Securities against all claims or
demands of all persons (other than the Bank) claiming the Pledged Securities or
any interest therein.
ARTICLE III
COLLATERAL
3.1 Pledge, assignment and grant of security interest. As security for its
collective obligations under the Note(s), the Credit Agreement and this
Collateral Agreement, now existing or hereafter arising, however evidenced, the
Company hereby grants, bargains, pledges, assigns, transfers, conveys and sets
over to the Bank a first priority security interest in all of the Company's
right, title and interest in, to and under (a) all Pledged Securities; (b) all
additions to and substitutions for the Pledged Securities; (c) all dividends,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all Pledged
Securities; (d) all proceeds and collections derived from or in connection with
such Pledged Securities; and (e) all powers and rights of the Company, including
rights of enforcement, under such Pledged Securities. The Bank shall have all of
the rights, remedies and recourses with respect to the Pledged Securities
afforded a secured party, in addition to, and not in limitation of, the other
rights, remedies and recourses afforded the Bank under this Agreement and the
Credit Agreement.
3.2 Delivery of Pledged Securities. The Company shall: (a) at
all times maintain Pledged Securities available for delivery and pledge to the
Bank as required by Section 2.1 and Section 2.2 of the Credit Agreement; and (b)
actually deliver and pledge Pledged Securities to the Bank immediately upon
demand, as required by Section 2.1(b)(ii) or Section 2.2(b)(iii) of the Credit
Agreement and, whether or not demand is made, as required by Section 2.2(b)(iv).
Upon such demand, or when otherwise required in accordance with the Credit
Agreement, the Company shall deliver to the Bank or its agent all Pledged
Securities in a manner permitted by the UCC. The Company shall also deliver to
the Bank, with respect to any Pledged Security other than a bearer instrument,
any necessary or appropriate stock powers, endorsements or assignments thereof,
in form and substance satisfactory to the Bank. The Company will at any time or
times hereafter execute and deliver such other documents and perform such other
acts as the Bank may reasonably request to establish, maintain, perfect and
enforce the Bank's security interest in the Pledged Securities and rights under
this Agreement, including, without limitation, financing statements executed by
the Company and naming the Company as debtor.
3.3 Hypothecation Rule. Notwithstanding any contrary provision of this
Collateral Agreement or of any of the Loan Documents, the Bank's security
interest in Customers' Securities shall secure only the Company's obligations
under the Customers' Securities Note and the Bank's security interest in Firm
Securities shall secure all the Company's obligations under the Firm Securities
Note, the Credit Agreement and this Collateral Agreement, but not the Customers'
Securities Note. The Bank will assure that Customers' Securities are not
commingled with Firm Securities in a manner that may violate SEC Rules 8c-1 or
15c-3; provided, however, that (i) when the Company delivers any list of
Securities or delivers any Securities pursuant to Section 2.1 or Section 2.2 of
the Credit Agreement, the Company shall represent whether the listed or
delivered Securities are Customers' Securities or Firm Securities, and (ii) the
Bank may rely without inquiry upon such representations and upon the terms of
any Agreements to Pledge delivered by the Company in determining whether Pledged
Securities are Firm Securities or Customers' Securities.
3.4 Covenants of the Company. The Company hereby agrees:
(a) not to perform or fail to perform any act, if such performance or failure to
perform would encumber, pledge or hypothecate any Pledged Securities or in any
manner impair the security intended to be afforded thereby;
(b) to pay all taxes and other impositions lawfully levied, assessed or imposed
against the Pledged Securities, or upon or against the creation, perfection or
continuance of the security interest created hereby;
(c) to conform to and comply with each and every requirement imposed by
governmental authority with respect to the Pledged Securities;
(d) to do all things required to preserve the security interest in the Pledged
Securities created by this Agreement as a perfected first and prior security
interest, and to preserve and protect its title to the Pledged Securities
against loss by foreclosure or other proceedings to enforce any security
interest prior to or on a parity with the security interest held by the Bank
hereunder; and
(e) at any time during the continuance of any Event of Default, upon request by
the Bank, to deliver to the Bank all notices, financial statements, reports or
other communications received by the Company as owner of any Pledged Securities.
3.5 Release and Substitution of Pledged Securities. Except as explicitly
provided herein and in the Credit Agreement, the Company shall have no right to
substitute other Securities for any Pledged Securities (unless the substitution
would cause the aggregate market value of all Pledged Securities to increase),
nor to withdraw such Pledged Securities.
3.6 Income from Pledged Securities; voting rights. Unless there shall have
occurred and be continuing an Event of Default (as defined in Section 4.1
hereof), the Company shall be entitled to exercise any voting rights or other
powers relating or pertaining to the Pledged Securities for any purpose not
inconsistent with this Agreement, the Company shall have the right to receive
and retain, for its own use and benefit, all income and receipts from the
Pledged Securities, and the Bank shall pay to the Company all such income and
receipts received or collected by the Bank. Upon the occurrence and during the
continuance of an Event of Default, the Bank shall have the sole and exclusive
right and authority to exercise such voting rights and other powers and to
receive and retain all income and receipts payable thereon or with respect
thereto, and the Company shall promptly pay over to the bank all income and
receipts from the Pledged Securities received or collected by the company from
and after the date of the Event of Default, and the same shall constitute a part
of the collateral subject to this Agreement (and may, in the case of cash
proceeds, be applied to the debts secured hereby).
ARTICLE IV
DEFAULTS AND REMEDIES
4.1 Events of Default. Either of the following occurrences shall constitute an
Event of Default hereunder:
(a) the occurrence of an Event of Default under
Section 7.1 of the Credit Agreement; or
(b) any failure by the Company to comply
with the terms of this Agreement.
4.2 Remedies. Upon the occurrence and during the continuance of any Event of
Default, the Bank may at its option take any one or more of the following steps:
(a) by mandamus or other suit, action or proceeding, at law or in equity, obtain
orders requiring the Company to perform its covenants and obligations under this
Agreement or enjoining any acts or things that may be unlawful or in violation
of the rights of the Bank;
(b) have access to and inspect, examine and make copies of all of the books and
records and any and all accounts and similar data of the Company relating to the
Pledged Securities;
(c) exercise any of the remedies available to a secured party under the UCC with
respect to the Pledged Securities, including any remedy referred to in Section
4.3 hereof; and
(d) take whatever other action at law or in equity may appear necessary or
desirable to collect the payments due hereunder or under the Notes or the Credit
Agreement and any other monetary obligation of the Company hereunder or
thereunder then due, or to enforce any obligation, covenant or agreement of the
Company under this Agreement, the Notes or the Credit Agreement.
4.3 Disposition of Pledged Securities. Upon the occurrence and continuation of
any Event of Default, the Bank may, without any demand of any kind,
advertisement, notice to or consent of the Company or any other person (all of
which are, to the extent permitted by law, hereby expressly waived), collect or
otherwise convert into money the whole or any portion of or interest in the
Pledged Securities, and sell, assign and deliver or otherwise dispose of or
liquidate the whole or any portion of or interest in the Pledged Securities in
such manner, at any exchange, brokers' board or elsewhere, at such prices and
upon such terms and conditions as the Bank may deem reasonable and proper;
provided, however, that all such dispositions must be made in a commercially
reasonable manner and in good faith, as required by UCC.
At any such sale, any Pledged Securities or any portion thereof or interest
therein may be sold as an entirety or in separate parcels, as the Bank may (in
its sole discretion) determine. The Bank shall not be obligated to make any sale
of the Pledged Securities if it shall determine not to do so, regardless of the
fact that notice of sale of the Pledged Securities may have been given. The Bank
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case sale of all or any portion
of the Pledged Securities is made on credit or for future delivery, the Pledged
Securities or such portion so sold may be retained by the Bank until the sale
price is paid by the purchaser or purchasers thereof, but the Bank shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Pledged Securities or such portion so sold and, in case of
any such failure, such Pledged Securities or such portion may be sold again upon
like notice.
At any public sale, the Bank may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay and appraisal on the part
of the Company (all said rights being also hereby waived and released to the
extent permitted by law), any portion of or interest in or all the Pledged
Securities offered for sale and may make payment on account thereof by using any
portion of the obligations secured hereby, as a credit against the purchase
price, and the Bank may, upon compliance with the terms of the sale, hold,
retain and dispose of such property without further accountability to the
Company therefor. For purposes hereof, a written agreement to purchase all or
any portion of or interest in the Pledged Securities shall be treated as a sale
thereof and the Bank shall be free to carry out such sale pursuant to such
agreement and the Company shall not be entitled to the return of the Pledged
Securities or any portion thereof subject thereto, notwithstanding the fact that
after the Bank shall have entered into such agreement all obligations and
liabilities secured hereby may have been paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Bank may proceed by
suit or suits at law or in equity to foreclose its security interest and sell
the Pledged Securities or any portion thereof pursuant to judgment or decree of
a court or courts having competent jurisdiction.
In the event of sale, collection or conversion into money of any Pledged
Securities or any portion thereof or interest therein, the Bank, after first
deducting the ordinary and reasonable costs and expenses relating thereto, shall
apply the balance of such proceeds to the amounts owed to the Bank under the
Firm Securities Note, the Customers' Securities Note and the Credit Agreement.
If such application leaves any surplus, such surplus shall be paid to the
Company.
Upon consummation of any such sale, the Bank shall have the right to assign,
transfer, endorse and deliver to the purchaser or purchasers thereof such
Pledged Securities, or any portion thereof or any interest therein, so sold.
Each such purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of the Company, and the Company hereby
waives (to the extent permitted by law) all rights of redemption, stay and/or
appraisal which the Company now has or may at any time in the future have under
the rule of law or statute now existing or hereafter enacted. The Company
acknowledges that the Pledged Securities are of a type customarily sold on a
recognized market and that no notice of intended sale or disposition thereof
need be given to the Company under the UCC.
The Bank shall not incur any liability as a result of the sale of the
Pledged Securities or any portion thereof or interest therein at any private
sale in a manner which is commercially reasonable (within the meaning of the
UCC). The Company hereby waives any claims against the Bank arising by reason of
the fact that the price at which the Pledged Securities may have been sold at
such sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the obligations and liabilities
secured thereby, even if the Bank accepts the first offer received and does not
offer any portion of the Pledged Securities to more than one possible purchaser.
Without limiting the generality of the foregoing, the provisions of this
paragraph would apply if, for example, the Bank were to place all or any portion
of the Pledged Securities for private placement by an investment banking firm,
or if such investment banking firm purchased all or any portion of the Pledged
Securities for its own account or if the Bank placed all or any portion of the
Pledged Securities privately with a purchaser or purchasers.
Any duty of care imposed by law on the Bank with respect to Pledged
Securities shall be deemed fulfilled if the Bank exercises reasonable care in
physically safekeeping such Pledged Securities or, in the case of Pledged
Securities in the custody or possession of a bailee or third person, exercises
reasonable care in the selection of the bailee or third person, and the Bank
need not otherwise preserve, protect, insure or care for any Pledged Securities.
The Bank shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Securities in its possession if the Pledged Securities
are accorded treatment substantially equal to that which the Bank accords its
own property. The Bank shall not be obligated to preserve any rights the Company
may have against prior parties, nor to realize on the Pledged Securities at all
or in any particular manner or order. The Bank shall not be liable for any
failure to collect or realize upon the obligations secured hereby or any
collateral security therefor, or any part thereof, or for any delay in so doing,
nor shall it be under any obligation to take any action whatsoever with respect
thereto. Prior to the Bank's foreclosure of its security interest, the Company
and not the Bank shall have full responsibility for (a) ascertaining or taking
action with respect to calls, maturities, conversions, tenders or other matters
relative to the Pledged Securities or any portion thereof, whether or not the
Bank has or is deemed to have knowledge of such matters, or (b) taking any
necessary steps to preserve rights against any parties with respect to the
Pledged Securities or any portion thereof (provided, however, that the Bank
shall pass on to the Company any notices of any event described in this sentence
that are actually received by the Bank, and the Bank shall follow any
instructions received from the Company with respect to such events that do not
impose costs on the Bank or reduce the value of the Pledged Securities). If any
notification of intended disposition of any of the Pledged Securities is
required by law, such notification shall be deemed reasonably and properly given
if mailed at least ten (10) days before such disposition, postage prepaid,
addressed to the Company at the address shown below.
At any sale of the Pledged Securities, the Bank may restrict the prospective
bidders or purchasers to purchasers who agree to take the Pledged Securities for
investment and not with the view to distribution and who will agree to the
imposition of restrictive legends on any certificates or other documents
representing the Pledged Securities, and the Bank has the right to arrange for a
sale which would otherwise qualify as exempt from registration under the
Securities Act of 1933. The Company acknowledges that questions may arise under
the Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and any such
similar statute as may from time to time in effect being hereinafter called the
"Federal Securities Laws"), with respect to any disposition of the Pledged
Securities. The Company understands that compliance with the Federal Securities
Laws may strictly limit the course of conduct of the Bank if the Bank were to
attempt to dispose of all or any portion of the Pledged Securities, and may also
limit the extent to which or the manner in which any subsequent transferee of
the Pledged Securities or any portion thereof may dispose of the same. There may
be other legal restrictions or limitations affecting the Bank in any attempts to
dispose of all or any portion of the Pledged Securities under applicable blue
sky or other securities law or similar laws analogous in purpose or effect. The
Company agrees that private sales made in compliance with applicable federal and
state securities law shall be deemed to have been made in a commercially
reasonable manner.
4.4 Remedies not exclusive. No remedy conferred herein or reserved to the Bank
is intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute.
4.5 Restoration of rights and remedies. If the Bank has instituted any
proceeding to enforce any right or remedy under this Agreement, the Notes or the
Credit Agreement and such proceeding has been discontinued or abandoned for any
reason or has been determined adversely to the Bank, then and in every such case
the Company and the Bank shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Bank shall continue as though no such
proceeding had been instituted.
4.6 Delay or omission not waiver. The failure of the Bank either to exercise any
right or remedy provided hereunder, under the Notes or under the Credit
Agreement upon an Event of Default or to exercise any such right or remedy
promptly shall not impair any such right or remedy or constitute a waiver of any
such Event of Default. Every right and remedy given by this Article IV or by law
to the Bank may be exercised from time to time, and as often as may be deemed
expedient, by the Bank.
ARTICLE V
MISCELLANEOUS
5.1 Term of Agreement. This Agreement shall be valid and enforceable from the
date of execution and delivery hereof until the later of (a) the Commitment
Ending Date, or (b) the date on which all of the Company's obligations under the
Notes, the Credit Agreement and this Collateral Agreement have been paid in
full. On the later of such dates, the Bank shall deliver to the Company all of
the Pledged Securities then remaining in the possession of the Bank, together
with any instrument requested by the Company indicating that the Bank no longer
retains a lien on, security interest in or right to such Pledged Securities and
shall instruct the issuer or registrar for any Pledged Securities to register
the Pledged Securities in the name of the Company, all without recourse upon, or
warranty by the Bank and at the cost and expense of the Company.
5.2 Amendment. This Agreement may be amended only by an instrument in writing
executed by the duly authorized representatives of the Bank and the Company.
5.3 Notice. All notices, demands and requests to be given or made hereunder
shall be in writing and shall be mailed, telegraphed or hand-delivered to the
respective addresses set out on the signature page hereof or, as to each party,
at such other address as shall be designated by that party in a written notice
to the other party. Mailed notice shall be effective when deposited in the mail.
5.4 Governing law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
5.5 Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a party of this Agreement
for any other purpose.
IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to
be duly executed by their duly authorized officers as of the date first written
hereinabove.
ADDRESS: PIPER JAFFRAY INC.
Piper Jaffray Tower By /s/ Deborah K. Roesler
P.O. Box 28 Deborah K. Roesler
Minneapolis, MN 55440 Chief Financial Officer
By /s/ Jennifer A. Olson-Goude
Jennifer A. Olson-Goude
Assistant Vice President/Assistant Treasurer
FIRST BANK NATIONAL ASSOCIATION
By /s/ Jose A. Peris
Jose A. Peris
Senior Vice President/Division Head
<PAGE>
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into as of April 1, 1997, is by and between Piper Jaffray Companies
Inc., a corporation organized under the laws of the State of Delaware (the
"Borrower"), and First Bank National Association, a national banking association
(the "Bank").
RECITALS
1. The Bank and the Borrower entered into a Loan Agreement dated as of
August 27, 1996 (the "Loan Agreement") pursuant to which the Bank made a term
loan to the Borrower in the amount of $30,000,000 (the "Term Loan"); and
2. The outstanding principal balance of the Term Loan is $15,000,000;
and
3. The Borrower has requested that the Bank provide to the Borrower a
committed revolving credit facility in the amount of $15,000,000, with the
initial advance thereunder to be used to pay the Term Loan in full; and
4. The Bank has agreed to provide such revolving credit facility to the
Borrower and to make amendments to the Loan Agreement to provide for the same
and to make certain other amendments to the Loan Agreement requested by the
Borrower, upon the terms and subject to the conditions set forth in this
Amendment.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:
Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Loan
Agreement, unless the context shall otherwise require.
Section 2. Amendments. The Loan Agreement is hereby amended as follows:
2.1 Definitions. The definitions of "Adjusted Eurodollar
Rate," "Advance," "Applicable Margin," "Eurodollar Rate," "Eurodollar
Rate Advance," "Interest Period," "Loan Documents," "Obligations," "PJI
Credit Agreement," "Term Loan," and "Term Note" contained in Section1.1
of the Loan Agreement are amended to read in their entireties as
follows:
"Adjusted Eurodollar Rate": The Adjusted Fixed
Eurodollar Rate or the Adjusted Floating Eurodollar Rate.
"Advance": Any portion of the outstanding Revolving
Loans by the Bank as to which one of the available interest
rate options and, if pertinent, an Interest Period, is
applicable. An Advance may be a Eurodollar Rate Advance or a
Reference Rate Advance.
"Applicable Margin": With respect to:
(a) Reference Rate Advances -- 0%.
(b) Eurodollar Rate Advances -- 1.00%
"Eurodollar Rate": With respect to each Eurodollar
Rate Advance on any date of determination, the average offered
rate for deposits in United States dollars (rounded upward, if
necessary to the nearest 1/16th of 1%) for delivery of such
deposits on such date, for one month, in the case of a
Floating Eurodollar Advance or the number of days in the
Interest Period in the case of a Fixed Eurodollar Rate
Advance, which appears on the Reuters Screen LIBO page of
11:00a.m., London time (or such other time as of which such
rate appears) two Eurodollar Business Days prior to such date,
or the rate for such deposits determined by the Bank at such
time based on such other published service of general
application as shall be selected by the Bank for such purpose;
provided, that in lieu of determining the rate in the
foregoing manner, the Bank may determine the rate based on
rates at which United States dollar deposits are offered to
the Bank in the interbank Eurodollar market at such time for
delivery in Immediately Available Funds on such date in an
amount approximately equal to the Advance by the Bank to which
such Interest Period is to apply (rounded upward, if
necessary, to the nearest 1/16 of 1%). "Reuters Screen LIBO
page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rate Screen (or such other page as may
replace the LIBO page on such service for the purposes of
displaying London interbank offered rates of major banks for
United States dollar deposits).
"Eurodollar Rate Advance": A Fixed Eurodollar Rate
Advance or a Floating Eurodollar Rate Advance.
"Interest Period": With respect to each Fixed
Eurodollar Rate Advance, the period commencing on the date of
such Advance or on the last day of the immediately preceding
Interest Period, if any, applicable to an outstanding Advance
and ending one month or two months thereafter, as the Borrower
may elect in the applicable notice of borrowing, continuation
or conversion; provided, that
(a) Any Interest Period that would otherwise
end on a day which is not a Eurodollar Business Day
shall be extended to the next succeeding Eurodollar
Business Day unless such Eurodollar Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding
Eurodollar Business Day;
(b) Any Interest Period that begins on the
last Eurodollar Business Day of a calendar month (or
a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day
of a calendar month; and
(c) Any Interest Period applicable to a
Fixed Eurodollar Rate Advance that would otherwise
end after the Termination Date, shall end on the
Termination Date.
"Loan Documents": This Agreement and the Revolving
Note.
"Obligations": The Borrower's obligations in respect
of the due and punctual payment of principal and interest on
the Revolving Note, when and as due, whether by acceleration
or otherwise and all fees, expenses, indemnities,
reimbursements and other obligations of the Borrower under
this Agreement or any other Loan Document, in all cases
whether now existing or hereafter arising or incurred.
"PJI Credit Agreement": That certain Credit Agreement
dated as of November 23, 1994 between the Bank and PJI, as the
same may be amended from time to time.
"Term Loan": The term loan in the original principal
amount of $30,000,000 made to the Borrower by the Bank and
evidenced by the Term Note.
"Term Note": That certain promissory note dated
September 27, 1996 in the original principal amount of
$30,000,000 made by the Borrower payable to the order of the
Bank.
Section 1.1 of the Loan Agreement is further amended by
deleting the definitions "Maturity," "Security Documents," and "Term
Loan Commitment," in their entireties.
Section 1.1 of the Loan Agreement is further amended by adding
the definitions of "Adjusted Fixed Eurodollar Rate," "Adjusted Floating
Eurodollar Rate," "Facility Fee," "First Amendment," "Fixed Eurodollar
Rate Advance," "Floating Eurodollar Rate Advance," "Revolving
Commitment," "Revolving Commitment Amount," "Revolving Loan,"
"Revolving Loan Date," "Revolving Note," and "Termination Date" thereto
in correct alphabetical order:
"Adjusted Fixed Eurodollar Rate": With
respect to each Interest Period applicable to a Fixed
Eurodollar Rate Advance, the rate (rounded upward, if
necessary, to the next one hundredth of one percent)
determined by dividing the Eurodollar Rate as of the
first day of such Interest Period by 1.00 minus the
Eurodollar Reserve Percentage.
"Adjusted Floating Eurodollar Rate": On any
date of determination, the rate (rounded upward, if
necessary, to the next one-hundredth of one percent)
determined by dividing the Eurodollar Rate on such
date by 1.00 minus the Eurodollar Reserve Percentage.
"Facility Fee": As defined in Section2.9.
"First Amendment": That certain First
Amendment to Loan Agreement dated as of April 1, 1997
between the Borrower and the Bank.
"Fixed Eurodollar Rate Advance": An Advance
with respect to which the interest rate is determined
by reference to the Adjusted Fixed Eurodollar Rate.
"Floating Eurodollar Rate Advance": An
Advance with respect to which the interest rate is
determined by reference to the Adjusted Floating
Eurodollar Rate.
"Revolving Commitment": The obligation of
the Bank to make Revolving Loans to the Borrower in
an aggregate principal amount outstanding at any time
not to exceed the Revolving Commitment Amount upon
the terms and subject to the conditions and
limitations of this Agreement.
"Revolving Commitment Amount": Initially
$15,000,000 but as the same may be reduced from time
to time pursuant to Section 2.8.
"Revolving Loan": As defined in Section 2.1.
"Revolving Loan Date": The date of the
making of any Revolving Loan hereunder.
"Revolving Note": A promissory note of the
Borrower in the form of Exhibit A-1.
"Termination Date": The earliest of (a)
March31, 1998, (b) the date on which the Revolving
Commitment is terminated pursuant to Section 7.2
hereof or (c) the date on which the Revolving
Commitment Amount is reduced to zero pursuant to
Section 2.8 hereof.
2.2 Terms of Lending. Article II of the Loan Agreement is
amended to read in its entirety as follows:
ARTICLE II
TERMS OF LENDING
Section 2.1 The Revolving Commitment. On the terms
and subject to the conditions hereof, the Bank agrees to make
loans (each, a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower on a revolving basis at any
time and from time to time from April 1, 1997 to the
Termination Date, during which period the Borrower may borrow,
repay and reborrow in accordance with the provisions hereof,
provided, that the unpaid principal amount of outstanding
Revolving Loans shall not at any time exceed the Revolving
Commitment Amount. Revolving Loans may be obtained and
maintained, at the election of the Borrower but subject to the
limitations hereof, as Reference Rate Advances or Eurodollar
Rate Advances or any combination thereof.
Section 2.2 Procedure for Revolving Loans.
2.2(a) Any request by the Borrower for a Revolving
Loan hereunder shall be in writing or by telephone and must be
given so as to be received by the Bank not later than 12:00
Noon (Minneapolis time) two Eurodollar Business Days prior to
the requested Revolving Loan Date if the Revolving Loan (or
any portion thereof) is requested as a Fixed Eurodollar Rate
Advance and not later than 12:00 Noon (Minneapolis time) on
the requested Revolving Loan Date if the Revolving Loan is
requested as a Floating Eurodollar Rate Advance or a Reference
Rate Advance. Each request for a Revolving Loan hereunder
shall be irrevocable and shall be deemed a representation by
the Borrower that on the requested Revolving Loan Date and
after giving effect to the requested Revolving Loan the
applicable conditions specified in the First Amendment, with
respect to the initial Revolving Loan, and the conditions
specified in Section 2.2(b) in the case of all Advances, have
been and will be satisfied. The initial Revolving Loan shall
be deemed to have been made on April 1, 1997 in the amount of,
and applied in payment of, the outstanding principal balance
of and all accrued and unpaid interest on and fees relating to
the Term Loan as of such date and shall be deemed to have been
a Floating Eurodollar Rate Advance unless and until converted
to a Fixed Eurodollar Rate Advance or a Reference Rate Advance
subsequent to the effectiveness of the First Amendment. Each
request for a Revolving Loan hereunder shall specify (i) the
requested Revolving Loan Date, (ii) the amount of the
Revolving Loan to be made on such date which shall be in a
minimum amount of $100,000, provided that any Revolving Loan
requested as a Eurodollar Rate Advance must in a minimum
amount of $100,000 or, if more, an integral multiple thereof,
(iii)whether such Revolving Loan is to be funded as a
Reference Rate Advance, a Fixed Eurodollar Rate Advance or a
Floating Eurodollar Rate Advance (and, if such Revolving Loan
is to be made with more than one applicable interest rate
choice, specifying the amount to which each interest rate
choice is applicable) and (iv) in the case of a Fixed
Eurodollar Rate Advance, the duration of the initial Interest
Period applicable thereto. The Bank may rely on any telephone
request for a Revolving Loan hereunder which it believes in
good faith to be genuine; and the Borrower hereby waives the
right to dispute the Bank's record of the terms of such
telephone request. Unless the Bank determines that any
applicable condition specified in the First Amendment with
respect to the initial Revolving Loan, and the conditions
specified in Section 2.2(b) in the case of all Advances, has
not been satisfied, the Bank will make available to the
Borrower at the Bank's principal office in Minneapolis,
Minnesota in Immediately Available Funds not later than
5:00p.m. (Minneapolis time) on the requested Revolving Loan
Date the amount of the requested Revolving Loan.
2.2(b) Conditions Precedent to all Revolving Loans.
The obligation of the Bank to make any Revolving Loans
hereunder (including the initial Revolving Loan) shall be
subject to the fulfillment of the following conditions:
(i) Representations and Warranties. The
representations and warranties contained in Article
IV shall be true and correct on and as of the Closing
Date and on the date of each Revolving Loan, with the
same force and effect as if made on such date.
(ii) No Default. No Default or Event of
Default shall have occurred and be continuing on the
Closing Date and on the date of each Revolving Loan
or will exist after giving effect to the Revolving
Loan made on such date.
(iii)Notices and Requests. The Bank shall
have received the Borrower's request for such
Revolving Loan as required under Section 2.2(a).
Section 2.3 The Revolving Note. The Advances shall
be evidenced by a single Revolving Note payable to the order
of the Bank in a principal amount equal to the Revolving
Commitment Amount originally in effect. The Bank shall enter
in its ledgers and records the amount of each Revolving Loan,
the various Advances made, converted or continued and the
payments made thereon, and the Bank is authorized by the
Borrower to enter on a schedule attached to the Revolving Note
a record of such Revolving Loans, Advances and payments;
provided, however that the failure by the Bank to make any
such entry or any error in making such entry shall not limit
or otherwise affect the obligation of the Borrower hereunder
and on the Revolving Note, and, in all events, the principal
amounts owing by the Borrower in respect of the Revolving Note
shall be the aggregate amount of all Revolving Loans made by
the Bank less all payments of principal thereof made by the
Borrower.
Section 2.4 Conversions and Continuations. On the
terms and subject to the limitations hereof, the Borrower
shall have the option at any time and from time to time to
convert all or any portion of the Advances into Reference Rate
Advances, Fixed Eurodollar Rate Advances, or Floating
Eurodollar Rate Advances, or to continue a Fixed Eurodollar
Rate Advance as such; provided, however that a Fixed
Eurodollar Rate Advance may be converted or continued only on
the last day of the Interest Period applicable thereto and no
Advance may be converted to or continued as a Eurodollar Rate
Advance if a Default or Event of Default has occurred and is
continuing on the proposed date of continuation or conversion.
Advances may be converted to, or continued as, Eurodollar Rate
Advances only in integral multiples of $100,000. The Borrower
shall give the Bank written notice of any continuation or
conversion of any Advances and such notice must be given so as
to be received by the Bank not later than 12:00 Noon
(Minneapolis time) two Eurodollar Business Days prior to
requested date of conversion or continuation in the case of
the continuation of, or conversion to, Fixed Eurodollar Rate
Advances and on the date of the requested conversion to
Floating Eurodollar Rate Advances or Reference Rate Advances.
Each such notice shall specify (a) the amount to be continued
or converted, (b) the date for the continuation or conversion
(which must be (i) the last day of the preceding Interest
Period for any continuation or conversion of Fixed Eurodollar
Rate Advances, and (ii) a Eurodollar Business Day in the case
of continuations as or conversion to Fixed Eurodollar Rate
Advances and a Business Day in the case of conversions to
Floating Eurodollar Rate Advances or Reference Rate Advances),
and (c) in the case of conversions to or continuations as
Fixed Eurodollar Rate Advances, the Interest Period applicable
thereto. Any notice given by the Borrower under this Section
shall be irrevocable. If the Borrower shall fail to notify the
Bank of the continuation of any Fixed Eurodollar Rate Advances
within the time required by this Section, such Advances shall,
on the last day of the Interest Period applicable thereto,
automatically be converted into Reference Rate Advances of the
same principal amount.
Section 2.5 Interest Rates, Interest Payments and
Default Interest. Interest shall accrue and be payable on the
Revolving Loans as follows:
(a) Subject to paragraph (d) below, each
Fixed Eurodollar Rate Advance shall bear interest on
the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per
annum equal to the sum of (i) the Adjusted Fixed
Eurodollar Rate for such Interest Period, plus (ii)
the Applicable Margin.
(b) Subject to paragraph(d) below, each
Floating Eurodollar Rate Advance shall bear interest
on the unpaid principal amount thereof at a varying
rate per annum equal to the sum of (i)the Adjusted
Floating Eurodollar Rate plus (ii)the Applicable
Margin.
(c) Subject to paragraph (d) below, each
Reference Rate Advance shall bear interest on the
unpaid principal amount thereof at a varying rate per
annum equal to the sum of (i) the Reference Rate,
plus (ii) the Applicable Margin.
(d) Any Advance not paid when due (including
on acceleration) shall, at the option of the Bank,
bear interest until paid in full (i) during the
balance of any Interest Period applicable to such
Advance, at a rate per annum equal to the sum of the
rate applicable to such Advance during such Interest
Period plus 2.0%, and (ii) otherwise, at a rate per
annum equal to the sum of (1) the Reference Rate,
plus (2) the Applicable Margin for Reference Rate
Advances, plus (3) 2.0%.
(e) Interest shall be payable (i) with
respect to each Fixed Eurodollar Rate Advance having
an Interest Period of sixty days or less, on the last
day of the Interest Period applicable thereto; (ii)
with respect to each Reference Rate Advance and
Floating Eurodollar Rate Advance, monthly in arrears
on the last day of each such month; (iii) with
respect to all Advances, upon any permitted
prepayment (on the amount prepaid); and (iv)with
respect to all Advances, on the Termination Date;
provided that interest under Section2.5(d) shall be
payable on demand.
Section 2.6 Repayment and Mandatory Prepayment. The
unpaid principal amount of all Advances, together with all
accrued and unpaid interest thereon, shall be due and payable
on the Termination Date. If at any time the unpaid principal
balance of the Revolving Note exceeds the Revolving Commitment
Amount, the Borrower shall immediately repay to the Bank the
amount of such excess. Any such payments shall be applied
first against Reference Rate Advances and Floating Eurodollar
Rate Advances and then to Fixed Eurodollar Rate Advances in
order starting with the Fixed Eurodollar Rate Advances having
the shortest time to the end of the applicable Interest
Period.
Section 2.7 Optional Prepayments. The Borrower may
prepay Reference Rate Advances or Floating Eurodollar Rate
Advances, in whole or in part, at any time, without premium or
penalty. Any such prepayment must be accompanied by accrued
and unpaid interest on the amount prepaid. Each partial
prepayment shall be in a minimum amount of $100,000 or, if
more, an integral multiple thereof. Except upon an
acceleration following an Event of Default or upon termination
of the Revolving Commitment in whole, the Borrower may pay
Fixed Eurodollar Rate Advances only on the last day of the
Interest Period applicable thereto. Amounts paid (unless
following an acceleration or upon termination of the Revolving
Commitment in whole) or prepaid on Advances under this Section
2.7 may be reborrowed upon the terms and subject to the
conditions and limitations of this Agreement.
Section 2.8 Optional Reduction of Revolving
Commitment Amount or Termination of Revolving Commitment. The
Borrower may, at any time, upon not less than thirty Business
Days prior written notice to the Bank, reduce the Revolving
Commitment Amount, with any such reduction in a minimum amount
of $100,000, or, if more, in an integral multiple of $100,000;
provided, however, that the Borrower may not at any time
reduce the Revolving Commitment Amount below the then unpaid
balance of the Revolving Note. The Borrower may, at any time,
upon not less than thirty Business Days prior written notice
to the Bank, terminate the Revolving Commitment in its
entirety. Upon termination of the Revolving Commitment
pursuant to this Section, the Borrower shall pay to the Bank
the full amount of all outstanding Advances, all accrued and
unpaid interest thereon, all unpaid Facility Fees accrued to
the date of such termination, any indemnities payable with
respect to Advances pursuant to Section 2.17 and all other
unpaid Obligations of the Borrower to the Bank hereunder.
Section 2.9 Facility Fee. The Borrower shall pay to
the Bank a fee (the "Facility Fee") in an amount determined by
applying a rate of .20% per annum to the Revolving Commitment
Amount for the period from April 1, 1997 to the Termination
Date. Such Facility Fees are payable in arrears quarterly on
the last day of each quarter, commencing June 30, 1997, and on
the Termination Date.
Section 2.10 Computation. Facility Fees and interest
on Advances shall be computed on the basis of actual days
elapsed and a year of 360 days.
Section 2.11 Payments. Payments and prepayments of
principal of, and interest on, the Revolving Note and all
fees, expenses and other obligations under this Agreement
payable to the Bank shall be made without setoff or
counterclaim in Immediately Available Funds not later than
2:00 p.m. (Minneapolis time) on the dates called for under
this Agreement and the Revolving Note to the Bank at its main
office in Minneapolis, Minnesota. Funds received after such
time shall be deemed to have been received on the next
Business Day. Whenever any payment to be made hereunder or on
the Revolving Note shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time, in the
case of a payment of principal, shall be included in the
computation of any interest on such principal payment.
Section 2.12 Use of Loan Proceeds. The proceeds of
the initial Revolving Loan shall be used for payment in full
of the Term Loan and accrued and unpaid interest thereon and
all fees related thereto. The proceeds of any subsequent
Revolving Loan shall be used for the Borrower's general
business purposes in a manner not in conflict with any of the
Borrower's covenants in this Agreement.
Section 2.13 Interest Rate Not Ascertainable, Etc.
If, on or prior to the date for determining the Adjusted
Eurodollar Rate for any Eurodollar Rate Advance, the Bank
determines (which determination shall be conclusive and
binding, absent error) that:
(a) deposits in dollars (in the applicable
amount) are not being made available to the Bank in
the relevant market for such Interest Period, or
(b) the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to the Bank of
funding or maintaining Eurodollar Rate Advances for
such Interest Period,
the Bank shall forthwith give notice to the Borrower of such
determination, whereupon the obligation of the Bank to make or
continue, or to convert any Advances to, Eurodollar Rate
Advances shall be suspended until the Bank notifies the
Borrower that the circumstances giving rise to such suspension
no longer exist. While any such suspension continues, all
further Advances by the Bank shall be made as Reference Rate
Advances. No such suspension shall affect the interest rate
then in effect during the applicable Interest Period for any
Eurodollar Rate Advance outstanding at the time such
suspension is imposed.
Section 2.14 Increased Cost. If any Regulatory
Change:
(a) shall subject the Bank to any tax, duty
or other charge with respect to its Eurodollar Rate
Advances, the Revolving Note or its obligation to
make Eurodollar Rate Advances or shall change the
basis of taxation of payment to the Bank of the
principal of or interest on Eurodollar Rate Advances
or any other amounts due under this Agreement in
respect of Eurodollar Rate Advances or its obligation
to make Eurodollar Rate Advances (except for changes
in the rate of tax on the overall net income of the
Bank imposed by the jurisdiction in which the Bank's
principal office is located); or
(b) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement
(including, without limitation, any such requirement
imposed by the Board, but excluding with respect to
any Eurodollar Rate Advance any such requirement to
the extent included in calculating the applicable
Adjusted Eurodollar Rate) against assets of, deposits
with or for the account of, or credit extended by,
the Bank or shall impose on the Bank or the interbank
Eurodollar market any other condition affecting its
Eurodollar Rate Advances, the Revolving Note or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost
to the Bank of making or maintaining any Eurodollar Rate
Advance, or to reduce the amount of any sum received or
receivable by the Bank under this Agreement or under the
Revolving Note, then, within 30 days after demand by the Bank,
the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such increased cost or
reduction. The Bank will promptly notify the Borrower of any
event of which it has knowledge, occurring after the date
hereof, which will entitle the Bank to compensation pursuant
to this Section. If the Bank fails to give such notice within
45 days after it obtains knowledge of such an event, the Bank
shall, with respect to compensation payable pursuant to this
Section, only be entitled to payment under this Section for
costs incurred from and after the date 45 days prior to the
date that the Bank does give such notice. A certificate of the
Bank claiming compensation under this Section, setting forth
the additional amount or amounts to be paid to it hereunder
and stating in reasonable detail the basis for the charge and
the method of computation, shall be conclusive in the absence
of error. In determining such amount, the Bank may use any
reasonable averaging and attribution methods. Failure on the
part of the Bank to demand compensation for any increased
costs or reduction in amounts received or receivable with
respect to any Interest Period shall not constitute a waiver
of the Bank's rights to demand compensation for any increased
costs or reduction in amounts received or receivable in any
subsequent Interest Period.
Section 2.15 Illegality. If any Regulatory Change
shall make it unlawful or impossible for the Bank to make,
maintain or fund any Eurodollar Rate Advances, the Bank shall
notify the Borrower, whereupon the obligation of the Bank to
make or continue, or to convert any Advances to, Eurodollar
Rate Advances shall be suspended until the Bank notifies the
Borrower that the circumstances giving rise to such suspension
no longer exist. If the Bank determines that it may not
lawfully continue to maintain any Eurodollar Rate Advances to
the end of the applicable Interest Periods, all of the
affected Advances shall be automatically converted to
Reference Rate Advances as of the date of the Bank's notice,
and upon such conversion the Borrower shall indemnify the Bank
in accordance with Section 2.17.
Section 2.16 Capital Adequacy. In the event that any
Regulatory Change reduces or shall have the effect of reducing
the rate of return on the Bank's capital or the capital of its
parent corporation (by an amount the Bank deems material) as a
consequence of the Revolving Commitment and/or Advances to a
level below that which the Bank or its parent corporation
could have achieved but for such Regulatory Change (taking
into account the Bank's policies and the policies of its
parent corporation with respect to capital adequacy), then the
Borrower shall, within 30 days after written notice and demand
from the Bank, pay to the Bank additional amounts sufficient
to compensate the Bank or its parent corporation for such
reduction. If the Bank fails to give such notice within 45
days after it obtains knowledge of such an event, the Bank
shall, with respect to compensation payable pursuant to this
Section, only be entitled to payment under this Section for
diminished returns as a result of such reduction for the
period from and after the date 45 days prior to the date that
the Bank does give such notice. Any determination by the Bank
under this Section and any certificate as to the amount of
such reduction given to the Borrower by the Bank shall be
final, conclusive and binding for all purposes, absent error.
Section 2.17 Funding Losses; Eurodollar Rate
Advances. The Borrower shall compensate the Bank, upon its
written request, for all losses, expenses and liabilities
(including any interest paid by the Bank to lenders of funds
borrowed by it to make or carry Eurodollar Rate Advances to
the extent not recovered by the Bank in connection with the
re-employment of such funds and including loss of anticipated
profits) which the Bank may sustain: (i) if for any reason,
other than a default by the Bank, a funding of a Eurodollar
Rate Advance does not occur on the date specified therefor in
the Borrower's request or notice as to such Advance under
Section 2.2 or 2.4, or (ii) if, for whatever reason
(including, but not limited to, acceleration of the maturity
of Advances following an Event of Default), any repayment of a
Eurodollar Rate Advance, or a conversion pursuant to Section
2.15, occurs on any day other than the last day of the
Interest Period applicable thereto. The Bank's request for
compensation shall set forth the basis for the amount
requested and shall be final, conclusive and binding, absent
error.
Section 2.18 Discretion of Bank as to Manner of
Funding. The Bank shall be entitled to fund and maintain its
funding of Eurodollar Rate Advances in any manner it may
elect, it being understood, however, that for the purposes of
this Agreement all determinations hereunder (including, but
not limited to, determinations under Section 2.17) shall be
made as if the Bank had actually funded and maintained each
Fixed Eurodollar Rate Advances during the Interest Period for
such Advance through the purchase of deposits having a
maturity corresponding to the last day of the Interest Period
and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
Section 2.19 Clean up Period. On or after April1,
1997 and prior to March 30, 1998, the Company shall prepay the
Revolving Loans in full from time to time such that there
shall be no fewer than 30 days (which may be non-consecutive)
during such period on which no Revolving Loans are
outstanding.
2.3 Negative Pledges; Subsidiary Restrictions. The first
sentence of Section6.5 of the Loan Agreement is amended to read as
follows:
The Borrower will not enter into any
agreement, bond, note or other instrument that would
prohibit or limit the ability of the Borrower to
grant a Lien on the outstanding shares of stock of
PJI owned by the Borrower, or require the Borrower to
grant Liens to any other Person on such shares if it
grants Liens thereon to the Bank.
2.4 Indebtedness. Section 6.8 of the Loan Agreement is
amended to add clause (h) as follows:
6.8(h) Contingent Obligations permitted pursuant to
Section 6.10.
2.5 Contingent Obligations. Section 6.10 of the Loan
Agreement is amended to read in its entirety as follows:
Section 6.10 Contingent Obligations. The
Borrower will not, and will not permit any Material
Subsidiary to, be or become liable on any Contingent
Obligations except:
6.10(a) Contingent Obligations
existing on the date of this Agreement and
described on Schedule 6.10.
6.10(b) Contingent Obligations
incurred in the ordinary course of business
of the Borrower or such Material Subsidiary.
6.10(c) Guarantees of Indebtedness
for borrowed money of Subsidiaries;
provided, that (i) such guaranteed
Indebtedness for borrowed money of the
Subsidiaries does not exceed at any time
$50,000,000 in the aggregate, (ii) the
Indebtedness of each Subsidiary that is the
subject of such guarantee is secured by the
Subsidiary's pledge of the underlying
secured loans made by the Subsidiary to its
customers, including the stock pledged by
customers as the security therefor, and
(iii) the loans made by any Subsidiary to
its customers are secured by stock that
meets the following minimum equity to
collateral requirement in the aggregate with
respect to such pledged stock: (A) with
respect to each loan at the time such loan
is made, the ratio of the pledged stock
value minus the loan amount to the pledged
stock value is at least 50% and (B) the
ratio of the aggregate pledged stock value
minus the aggregate loan amount to the
aggregate pledged stock value is at least
35%.
2.6 Tangible Net Worth. Section 6.11 of the Loan Agreement
is amended to read in its entirety as follows:
Section 6.11 Tangible Net Worth. The
Borrower will not permit its Tangible Net Worth at
any time to be less than $135,000,000 or the Tangible
Net Worth of PJI at any time to be less than
$125,000,000.
2.7 Remedies. Section 7.2 of the Loan Agreement is amended
in its entirety as follows:
Section 7.2 Remedies. If (a) any Event of
Default described in Sections 7.1(f), (g) or (h)
shall occur with respect to the Borrower, the
Revolving Commitment shall automatically terminate
and the Revolving Note and all other Obligations
shall automatically become immediately due and
payable; or (b) any other Event of Default shall
occur and be continuing, then the Bank may (i)
declare the Revolving Commitment terminated,
whereupon the Revolving Commitment shall terminate
and (ii) declare the outstanding unpaid principal
balance of the Revolving Note, the accrued and unpaid
interest thereon and all other Obligations to be
forthwith due and payable, whereupon the Revolving
Note, all accrued and unpaid interest thereon and all
such Obligations shall immediately become due and
payable, in each case without presentment, demand,
protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Agreement
or in the Revolving Note to the contrary
notwithstanding. Upon the occurrence of any of the
events described in clauses (a) or (b) of the
preceding sentence the Bank may exercise all rights
and remedies under any of the Loan Documents, and
enforce all rights and remedies under any applicable
law.
2.8 Revolving Note. The Loan Agreement is hereby amended to
attach thereto Exhibit A-1 in the form attached hereto.
2.9 Compliance Certificate, Exhibit D of the Loan Agreement
is hereby amended to be in the form attached hereto as Exhibit D-1.
2.10 Term Loan; Term Note. With the exception of references in
the definition of "Term Loan" and in Section 2.2(a) and Section 2.12 of
the Loan Agreement to the "Term Loan" and the "Term Note," all
references in the Loan Agreement to the "Term Loan" or "Term Note"
remaining after the effective date of this Amendment shall be to the
"Revolving Loans" and the "Revolving Note," unless the context
otherwise requires.
Section 3. Effectiveness of Amendments. The amendments contained in
this Amendment shall become effective as of April 1, 1997 upon delivery by the
Borrower of, and compliance by the Borrower with, the following:
3.1 This Amendment and the Revolving Note in the form of
Exhibit A-1 hereto (the "Note"), each duly executed by the Borrower.
3.2 A copy of the resolutions of the Board of Directors of
the Borrower authorizing the execution, delivery and performance of
this Amendment and the Note certified as true and accurate by its
Secretary or Assistant Secretary, along with a certification by such
Secretary or Assistant Secretary (i)certifying that there has been no
amendment to the Certificate of Incorporation or Bylaws of the
Borrower since trueand accurate copies of the same were delivered
to the Bank with a certificate of the Secretary of the Borrower dated
September 27, 1996, and (ii) identifying each officer of the Borrower
authorized to execute this Amendment, the Note and any other instrument
or agreement executed by the Borrower in connection with this
Amendment (collectively, the "Amendment Documents"), and certifying as
to specimens of such officer's signature and such officer's incumbency
in such offices as such officer holds.
3.3 Certified copies of all documents evidencing any
necessary corporate action, consent or governmental or regulatory
approval (if any) with respect to this Amendment.
3.4 Good standing certificates for the Borrower from the
State of Delaware and Minnesota issued as of a date or dates
satisfactory to the Bank.
3.5 The Borrower shall have satisfied such other conditions
as specified by the Bank, including payment of all unpaid legal fees
and expenses incurred by the Bank through the date of this Amendment
in connection with the Loan Agreement and the Amendment Documents.
Section 4. Representations, Warranties, Authority, No Adverse Claim.
4.1 Reassertion of Representations and Warranties, No Default.
The Borrower hereby represents that on and as of the date hereof and
after giving effect to this Amendment (a)all of the representations and
warranties contained in the Loan Agreement are true, correct and
complete in all respects as of the date hereof as though made on and as
of such date, except for changes permitted by the terms of the Loan
Agreement, and (b) there will exist no Default or Event of Default
under the Loan Agreement as amended by this Amendment on such date
which has not been waived by the Bank.
4.2 Authority, No Conflict, No Consent Required. The Borrower
represents and warrants that the Borrower has the power and legal right
and authority to enter into the Amendment Documents and has duly
authorized as appropriate the execution and delivery of the Amendment
Documents and other agreements and documents executed and delivered by
the Borrower in connection herewith or therewith by proper corporate,
and none of the Amendment Documents nor the agreements contained herein
or therein contravene or constitute a default under any agreement,
instrument or indenture to which the Borrower is a party or a signatory
or a provision of the Borrower's Certificate of Incorporation, Bylaws
or any other agreement or requirement of law, or result in the
imposition of any Lien on any of its property under any agreement
binding on or applicable to the Borrower or any of its property except,
if any, in favor of the Bank. The Borrower represents and warrants that
no consent, approval or authorization of or registration or declaration
with any Person, including but not limited to any governmental
authority, is required in connection with the execution and delivery by
the Borrower of the Amendment Documents or other agreements and
documents executed and delivered by the Borrower in connection
therewith or the performance of obligations of the Borrower therein
described, except for those which the Borrower has obtained or provided
and as to which the Borrower has delivered certified copies of
documents evidencing each such action to the Bank.
Section 5. Affirmation of Loan Agreement, Further References. The Bank
and the Borrower each acknowledge and affirm that the Loan Agreement, as hereby
amended, is hereby ratified and confirmed in all respects and all terms,
conditions and provisions of the Loan Agreement, except as amended by this
Amendment, shall remain unmodified and in full force and effect. All references
in any document or instrument to the Loan Agreement are hereby amended and shall
refer to the Loan Agreement as amended by this Amendment.
Section 6. Merger and Integration, Superseding Effect. This Amendment,
from and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into this Amendment all
prior oral and written agreements on the same subjects by and between the
parties hereto with the effect that this Amendment, shall control with respect
to the specific subjects hereof and thereof.
Section 7. Severability. Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any other jurisdiction.
Section 8. Successors. The Amendment Documents shall be binding upon
the Borrower and the Bank and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Bank and the successors and
assigns of the Bank.
Section 9. Legal Expenses. As provided in Section 8.2 of the Loan
Agreement, the Borrower agrees to reimburse the Bank, upon execution of this
Amendment, for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses of Dorsey & Whitney LLP, counsel for the Bank, not to exceed
$2,000) incurred in connection with the Loan Agreement, including in connection
with the negotiation, preparation and execution of the Amendment Documents and
all other documents negotiated, prepared and executed in connection with the
Amendment Documents, and in enforcing the obligations of the Borrower under the
Amendment Documents, and to pay and save the Bank harmless from all liability
for, any stamp or other taxes which may be payable with respect to the execution
or delivery of the Amendment Documents, which obligations of the Borrower shall
survive any termination of the Loan Agreement.
Section 10. Headings. The headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be a
part of this Amendment.
Section 11. Counterparts. The Amendment Documents may be executed in
several counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and either party to the Amendment
Documents may execute any such agreement by executing a counterpart of such
agreement.
Section 12. Governing Law. THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT
OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the date and year first above written.
BORROWER: PIPER JAFFRAY COMPANIES INC.
By: /s/ Deborah K. Roesler
Deborah K. Roesler
Chief Financial Officer
By: /s/ Jenniefer A. Olson-Goude
Jennifer A. Olson-Goude
Assistant Vice President and
Assistant Treasurer
BANK: FIRST BANK NATIONAL ASSOCIATION
By: /s/ Jose A. Peris
Jose A. Peris
Senior Vice President
Exhibit 11
PIPER JAFFRAY COMPANIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
PRIMARY NET INCOME PER SHARE:
Net income (loss) $ 6,593 $ (1,514) $ 15,882 $ 2,846
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 18,673 18,140 18,540 17,875
Dilutive effect of common stock
equivalents:
Book value plan options 142 - 154 184
Executive incentive stock options 557 - 431 268
--------- --------- --------- ---------
19,372 18,140 19,125 18,327
Primary net income (loss) per share $ .34 $ (.08) $ .83 $ .16
========= ========= ========= =========
NET INCOME PER SHARE ASSUMING
FULL DILUTION:
Net income (loss) $ 6,593 $ (1,514) $ 15,882 $ 2,846
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 18,673 18,140 18,540 17,875
Dilutive effect of common stock
equivalents:
Book value plan options 149 - 171 184
Executive incentive stock options 648 - 648 268
--------- --------- --------- ---------
19,470 18,140 19,359 18,327
Fully Diluted net income (loss)
per share $ .34 $ (.08) $ .82 $ .16
========= ========= ========= =========
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF PIPER JAFFRAY COMPANIES INC. AS OF
AND FOR THE PERIODS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,165
<RECEIVABLES> 747,282
<SECURITIES-RESALE> 43,327
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 189,935
<PP&E> 30,338
<TOTAL-ASSETS> 1,181,782
<SHORT-TERM> 223,950
<PAYABLES> 459,530
<REPOS-SOLD> 36,142
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 70,022
<LONG-TERM> 42,004
0
0
<COMMON> 18,676
<OTHER-SE> 168,228
<TOTAL-LIABILITY-AND-EQUITY> 1,181,782
<TRADING-REVENUE> 124,614
<INTEREST-DIVIDENDS> 38,754
<COMMISSIONS> 154,632
<INVESTMENT-BANKING-REVENUES> 70,233
<FEE-REVENUE> 27,130
<INTEREST-EXPENSE> 19,446
<COMPENSATION> 268,447
<INCOME-PRETAX> 25,210
<INCOME-PRE-EXTRAORDINARY> 25,210
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,882
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
</TABLE>
