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 December 31, 1996 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 December 31, 1996, 18,660,536 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 4. Submission of Matters to a Vote of Security Holders18
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)
<TABLE>
December 31, September 30,
1996 1996
------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Cash ($1,470 and $1,863, respectively, which was required to
be segregated under federal and other regulations) .......... $ 28,374 $ 23,406
Receivable from other brokers and dealers ..................... 79,540 99,686
Receivable from customers ..................................... 536,152 520,489
Trading securities owned, at market ........................... 140,310 105,540
Securities purchased under agreements to resell ............... 27,441 --
Investments pursuant to mortgage-backed bonds ................. 43,923 44,064
Office equipment and leasehold improvements, at cost less
accumulated depreciation of $55,095 and $52,546, respectively 30,263 30,185
Deferred income tax asset ..................................... 21,546 21,215
Other assets .................................................. 80,986 79,155
========= =========
$ 988,535 $ 923,740
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings ......................................... 218,841 183,320
Checks and drafts payable ..................................... 70,788 70,628
Payable to other brokers and dealers .......................... 127,599 109,776
Payable to customers .......................................... 130,468 160,930
Securities sold under agreements to repurchase ................ 21,137 --
Trading securities sold, but not yet purchased, at market ..... 48,643 27,472
Mortgage-backed bonds payable ................................. 44,855 45,333
Employee compensation and related taxes ....................... 57,048 81,740
Federal and state income taxes ................................ 4,615 --
Other accounts payable and accrued expenses ................... 89,508 77,716
--------- ---------
813,502 756,915
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;
18,661,387 and 18,197,725 issued, respectively ............ 18,661 18,198
Additional paid-in capital .................................... 26,729 19,432
Retained earnings ............................................. 129,656 129,201
Less treasury stock, at cost; 851 and 467 shares, respectively (13) (6)
--------- ---------
175,033 166,825
========= =========
$ 988,535 $ 923,740
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
=========================================================================
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
Three Months Ended
----------- -----------
December 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
REVENUES:
Commissions .............................. $ 46,415 $ 42,646
Profits on principal transactions ........ 43,994 40,915
Investment banking ....................... 20,937 25,023
Interest ................................. 12,290 9,480
Asset management fees .................... 8,905 9,574
Other .................................... 6,288 4,888
-------- --------
Total revenues ....................... 138,829 132,526
EXPENSES:
Employee compensation .................... 86,036 81,486
Floor brokerage and clearance ............ 2,260 2,104
Interest ................................. 6,155 3,043
Occupancy and equipment .................. 9,417 8,140
Communications ........................... 5,546 4,798
Travel and promotional ................... 4,251 3,618
Other operating expense .................. 22,181 18,429
-------- --------
Total expenses ....................... 135,846 121,618
-------- --------
Income before income taxes ................. 2,983 10,908
Income taxes ............................... 1,163 4,254
======== ========
Net income ................................. $ 1,820 $ 6,654
======== ========
Net income per common and common equivalent
share (primary and fully diluted) ........ $ .10 $ .37
Weighted average number of common and common
equivalent shares outstanding ............ 18,846 18,037
Dividends per share ........................ $ .075 $ .075
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
Three months ended
--------------------
December 31, December 31,
1996 1995
------------------------
<S> <C> <C>
Operating activities:
Net income .............................................. $ 1,820 $ 6,654
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation amortization ............................. 2,556 1,773
Deferred income taxes ................................. (331) 8,151
(Increase) decrease in:
Net receivable from customer ........................ (46,125) (39,454)
Net trading securities .............................. (13,599) (23,619)
Net repurchase agreements ........................... (6,304) --
Other ............................................... 9,968 3,835
Increase (decrease) in:
Net payable to other brokers and dealers ............ 37,969 (74,054)
Checks and drafts payable ........................... 160 18,074
Employee compensation ............................... (24,692) (917)
Federal and state income taxes payable .............. 4,615 (19,136)
--------- ---------
Net cash used in operating activities ............ (33,963) (118,693)
Financing activities:
Net change in:
Short-term borrowings ................................. 35,521 130,301
Mortgage-backed bonds payable ......................... (478) (1,188)
Investments and funds pursuant to mortgage-backed bonds 141 1,138
Payments made on capitalized lease obligations .......... -- (358)
Net common stock issued ................................. 9,102 1,153
Treasury shares repurchased ............................. (1,349) (99)
Dividends paid .......................................... (1,365) (1,316)
--------- ---------
Net cash provided by financing activities: ....... 41,572 129,631
Net cash used for purchase of office equipment and
leasehold improvements ............................... (2,641) (2,618)
--------- ---------
Net increase in cash .................................... 4,968 8,320
Cash at beginning of period ............................. 23,406 17,345
========= =========
Cash at end of period ................................... $ 28,374 $ 25,665
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the three months ended for:
Interest $ 5,442 $ 2,904
Income taxes $ 16,833 $ 18,346
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
============================================================================
PIPER JAFFRAY COMPANIES INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
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 three months ended December 31, 1996, 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 December 31, 1996 and
the other consolidated financial information for the period ended December 31,
1996 and 1995, 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.
Net income per common and common equivalent share is calculated by dividing net
income by the weighted average number of common shares and common share
equivalents outstanding, which includes the dilutive effect of all outstanding
stock options.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company has elected to continue following the guidance of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, for measurement and recognition of stock-based transactions with
employees. The Company will adopt the disclosure provision of SFAS No. 123 in
fiscal 1997 as required.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. In December 1996, SFAS No. 127 was issued, which defers for one
year the effective date of SFAS No.125 for secured borrowing, repurchase
agreements, dollar-roll, securities lending, and certain similar transactions.
The Company will evaluate adoption of SFAS No. 125 as required.
2. NET CAPITAL REQUIREMENTS
At December 31, 1996, Piper Jaffray Inc. (Piper Jaffray), the Company's
broker-dealer subsidiary, had net capital under applicable regulations of $121.7
million or 22% of aggregate debit balances and $110.8 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. The Company is also a defendant in a case involving
an underwriting for Bonneville Pacific Corporation by Piper Jaffray. 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 three months ended December 31, 1996, 105,000 shares of the Company's
common stock were repurchased by the Company, leaving a total of 647,500 shares
available for repurchase pursuant to the Board of Directors' authorizations to
repurchase common stock to satisfy employee benefit plan obligations. As of
December 31, 1996, 851 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 January 21, 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 March 11, 1997, to shareholders of record on February 25,
1997.
<PAGE>
<TABLE>
( in thousands, except share and per share amounts)
Additional Total
Common Stock 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-$.30 per share (5,401) (5,401)
Treasury stock acquired ..... (282,500) (3,635) (3,635)
----------- ----------- ----------- ----------- ----------- -----------
Balance at Sept. 30, 1996 ..... 18,197,258 18,198 19,432 129,201 (6) 166,825
Net income .................. 1,820 1,820
Net stock issued pursuant to
employee benefit plans .... 568,278 463 7,297 1,343 9,103
Cash dividend-$.075 per share (1,365) (1,365)
Treasury stock acquired ..... (105,000) (1,350) (1,350)
=========== =========== =========== =========== =========== ===========
Balance at Dec. 31, 1996 ...... 18,660,536 $ 18,661 $ 26,729 $ 129,656 $ (13) $ 175,033
=========== =========== =========== =========== =========== ===========
</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
Revenues for the quarter ended December 31, 1996 were $138.8 million, a 5%
increase over the same period of the prior year. The Company recorded net income
of $1.8 million or $.10 per share for the quarter ended December 31, 1996 versus
net income of $6.7 million and $.37 per share a year earlier.
Commissions and profits on principal transactions increased 9% and 8%,
respectively, over the prior year's first quarter results, but were partially
offset by a decrease in equity underwriting revenues. Asset management
revenue decreased 7% for the quarter ended December 31, 1996 compared to the
same period in fiscal 1996 as a result of lower average assets under management
by Piper Capital. Interest income was up 30% to $12.3 million for the quarter
ended December 31, 1996. The increase was due to a 38% increase in average
customer margin debits, partially offset by a 50 basis point decrease in average
interest rates. Other income increased 29% to $6.3 million due to growth in
managed accounts and increased non-product revenues.
Employee compensation, including broker compensation and employee incentives,
increased by $4.6 million, or 6% as compared to the same three months of fiscal
1996, in line with increases in revenue. Interest expense doubled to $6.2
million due to increased borrowing required to fund higher customer margin
debits and firm inventories as well as interest accruals for litigation
settlement notes payable. Occupancy and equipment expenses increased $1.3
million or 16% over the prior year due to investment in the technology
infrastructure of the branches and headquarters along with the addition or
expansion of several retail offices. Other operating expenses increased over the
first quarter of the prior fiscal year due to costs resulting from lawsuits and
arbitrations related to various funds or assets managed by Piper Capital.
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
payable 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. The Company is also a defendant in a case involving
an underwriting for Bonneville Pacific Corporation by Piper Jaffray. 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.
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 a limited extent 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. The Company is also a defendant in a case involving an
underwriting for Bonneville Pacific Corporation by Piper Jaffray. 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:
Lawsuits and Arbitrations Related to Various Funds or Assets Managed by
Piper Capital:
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.
b. Arbitrations Brought by Investors in Institutional Government Income Port-
folio.
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.
Eric Wade Compton Russell v. Piper Funds Inc. Institutional Governmen
Income Portfolio, Piper Capital Management Incorporated, Piper Jaffray
Inc., Piper Jaffray Companies Inc. and Edwin Johnson (New York Stock
Exchange Arbitration).
Claim filed June 13, 1995. Claimant seeks to recover in excess of $37,500.
Hart v. Piper Jaffray Inc. (National Association of Securities Dealers
Arbitration).
Claim filed December 28, 1995. Claimant seeks to recover in excess of
$804,629.
North Dakota State College of Science Foundation v. Piper Capital Manage-
ment Incorporated, Piper Jaffray Inc. and Piper Jaffray Companies Inc.
(National Association of Securities Dealers Arbitration).
Claim filed January 8, 1996. Claimant seeks to recover compensatory
damages, attorneys' fees, costs and punitive damages in an unspecified
amount.
Catholic Charities of the Diocese of Winona v. Piper Jaffray Inc.(National
Association of Securities Dealers Arbitration).
Claim filed January 15, 1996. Claimant seeks to recover in excess of
$377,271.
Lummi Indian Business Council v. Piper Jaffray Inc. and Piper Capital
Management Incorporated (National Association of Securities Dealers
Arbitration).
Claim filed June 13, 1996. Claimant seeks to recover in excess of $1.7
million.
City of Eden Prairie v. Piper Capital Management, Piper Jaffray Inc.,
Piper Jaffray Companies Inc. and Worth Bruntjen (National Association
of Securities Dealers Arbitration).
Claim filed June 12, 1996. Claimant seeks to recover in excess of $1
million.
2. Adjustable Rate Term Trusts
a. Arbitration Claims Brought by Investors in Adjustable Rate Term Trusts and
Other Funds
The following arbitrations have been brought by investors in the
Adjustable Rate Term Trusts and other funds. Claimants in these
arbitrations requested exclusion from the previously settled consolidated
class action, Gordon, et al. v. American Adjustable Rate Term Trust 1996,
et al. ("Term Trusts" action). The Term Trusts action had included claims
based on allegations of violation of Sections 11, 12 (2) and 15 of the
Securities Act of 1933 ("Securities Act"), violations of Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 ("Securities Exchange
Act"), and Rule 10b-5 promulgated thereunder, claims of negligent
misrepresentation and breach of fiduciary duty.
William C. Schwenck v. Piper Jaffray Inc. (National Association of Secur-
ities Dealers Arbitration).
Claim filed July 17, 1996. Claimant seeks to recover in excess of
$100,000.
David L. G. Willats and Dixie Lea Willats v. Piper Jaffray Inc.(National
Association of Securities Dealers Arbitration).
Claim filed July 25, 1996. Claimant seeks to recover in excess of $62,000.
Robert M. Matthews, Sue B. Matthews, Trustee, and Jean Myers v. Piper
Jaffray and Stephen Driever (National Association of Securities Dealers
Arbitration).
Claim filed November 18, 1996. Claimant seeks to recover in excess of
$31,645.
3. 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. The following actions have been
brought by investors in one or more of the above-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, Rose-
ville 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 the BSP, filed a putative class action
lawsuit on June 28, 1995. Nelson also was an investor in the 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 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. ss. 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 reached an agreement-in-principle on a
proposed settlement July 30th, 1996. If approved by the Court, a
settlement agreement consistent with the terms of the
agreement-in-principle would provide $15.5 million to class members in
payments by the Company and Piper Capital 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.
The Ewing Company Profit Sharing Plan v. Piper Jaffray Inc. (United States
District Court, District of Idaho).
Plaintiff, an investor in the American Adjustable Rate Term Trusts, Inc.,
1995, 1996, 1997, 1998, 1999, ASP, and BSP, filed this action on November
1, 1995. Plaintiff alleges violation of Section 10(b) of the Securities
Exchange Act and Rule 10b-5 promulgated thereunder; violation of the Idaho
Securities Act and the Idaho Consumer Protection Act; and common law
fraud. Plaintiff seeks to recover principal in excess of $90,000, interest
in excess of $32,000, attorneys' fees and costs and has reserved the right
to seek punitive damages. Upon Stipulation of the parties, the court
issued an Order, dated December 12, 1996, dismissing all claims relating
to the American Adjustable Rate Term Trusts, Inc., 1996, 1997, 1998, and
1999.
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 alleges claims of breach of contract, breach of the
covenant of good faith and fair dealing, fraud and misrepresentation. The
Complaint seeks compensatory damages in an unspecified amount, damages for
mental and emotional distress and pain and suffering, punitive damages,
and costs and attorneys' fees.
Kenneth Schneider v. Piper Jaffray Inc. and Richard Tallent (Montana Sec-
ond Judicial District Court, Silver Bow County).
Plaintiff filed this action on April 11, 1996 based on his investment in
ASP. 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
ASP. 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.
Daniel K. Nordby and Barbara L. Rawley v. Piper Jaffray Inc. and Gary
M. Petrucci (National Association of Securities Dealers Arbitration).
Claim filed in February, 1995. Claimants seek to recover approximately
$31,500.
Penny DiRocco v. Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).
Claim filed March 27, 1995. Claimant seeks damages in excess of $500,000.
Kelly E. Andrews v. Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).
Claim filed May 10, 1996. Claimant seeks to recover approximately $24,979.
Mabel I. Hines v. Piper Jaffray Inc. and Robert Bliss (National Assoc-
iation of Securities Dealers Arbitration).
Claim filed May 16, 1996. Claimant seeks to recover approximately $25,000.
Henry G. and Barbara S. Kohler Trustees FBO Calneva Development Company
Inc., Combined Retirement Trust Dated 3/1/81 v. M.L. Stern & Company and
Piper Jaffray Inc.(National Association of Securities Dealers Arbitration)
Claim filed August 5, 1996. Claimant seeks to recover in excess of
$19,984.
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.
A. J. Low, Jr. v. Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).
Claim filed September 12, 1996. Claimant seeks to recover $10,000.
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.
4. Managers Intermediate Mortgage Fund
Florence R. Hosea, Bobby W. Hosea, Getrud B. D ale 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. The defendants have filed a motion to dismiss the
consolidated action in its entirety. The motion is currently pending.
5. 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 ordered that
plaintiff may file an amended Complaint on or before December 20, 1995.
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
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 named plaintiff and defendants reached an agreement-in-principle on a
proposed settlement on October 1, 1996. If approved by the Court and a
sufficiently large percentage of the putative class members, a settlement
agreement consistent with the terms of the agreement-in-principle would
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.
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 Mort-
gage Fund, Managers Short and Intermediate Bond Fund, The Managers Funds,
L.P., EAIMC Holdings Corporation, Evaluation Associates Holding Corpora-
tion, 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 the Company , Piper Capital and Worth Bruntjen,
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 Company, Piper Capital
and Worth Bruntjen 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.
6. Privately Managed Accounts
The following arbitration claim seeks recovery for accounts managed by
Piper Capital:
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.
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were approved by shareholders at the Company's Annual
Meeting of Shareholders held on January 22, 1997:
1. Election of Directors
Authority
Director For Withheld
------------------------- --------------- ---------------------
Ralph W. Burnet 15,615,543 1,538,643
Andrew S. Duff 15,659,586 1,494,600
William H. Ellis 15,369,858 1,784,328
Kathy Halbreich 14,952,456 2,201,730
Addison L. Piper 15,533,071 1,621,115
Robert S. Slifka 15,622,025 1,532,161
David Stanley 15,013,597 2,140,589
2. Proposal to approve the amendments to the Piper Jaffray Companies Inc. Stock
Investment Plan.
For 13,462,005
Against 885,360
Abstain 820,747
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 - Material Contracts: Loan Agreement between Piper Jaffray
Companies Inc. and First Bank National Association, dated
August 27, 1996.
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 December
31, 1996.
<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: February 13, 1997 /s/ Deborah K. Roesler
DEBORAH K. ROESLER
Chief Financial Officer and
Managing Director
Dated: February 13, 1997 /s/ William H. Ellis
WILLIAM H. ELLIS
President
<PAGE>
PIPER JAFFRAY COMPANIES INC.
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
Exhibit Description of Exhibit Form of Filing
10 Material Contract: Loan agreement between Piper Jaffray Electronic
Companies Inc. and First Bank National Association, transmission
dated August 27, 1996.
11 Statement Regarding Computation of Per Share Earnings. Electronic
transmission
27 Financial Data Schedule (EDGAR version only). Electronic
transmission
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of August 27, 1996, is by and between
PIPER JAFFRAY COMPANIES INC., a Delaware corporation (the "Borrower"), and FIRST
BANK NATIONAL ASSOCIATION, a national banking association (the "Bank").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):
"Adjusted Eurodollar Rate": With respect to each Interest
Period applicable to a Eurodollar Rate Advance, the rate (rounded upward, if
necessary, to the next one hundredth of one percent) determined by dividing the
Eurodollar Rate for such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage.
"Advance": Any portion of the Term Loan as to which the
Borrower elected one of the available interest rate options and, if applicable,
an Interest Period. An Advance may be a Eurodollar Rate Advance or a Reference
Rate Advance.
"Affiliate": When used with reference to any Person, (a) each
Person that, directly or indirectly, controls, is controlled by or is under
common control with, the Person referred to, (b) each Person which beneficially
owns or holds, directly or indirectly, five percent or more of any class of
voting stock of the Person referred to (or if the Person referred to is not a
corporation, five percent or more of the equity interest), (c) each Person, five
percent or more of the voting stock (or if such Person is not a corporation,
five percent or more of the equity interest) of which is beneficially owned or
held, directly or indirectly, by the Person referred to, and (d) each of such
Person's officers, directors, joint venturers and partners. The term control
(including the terms "controlled by" and "under common control with") means the
possession, directly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"Aggregate Debit Items": At any time, the aggregate debit
items of PJI at such time as computed in accordance with the Formula for
Determination of Reserve Requirements for Brokers and Dealers, Exhibit A to Rule
15c3-3.
<PAGE>
"Applicable Margin": With respect to:
(a) Reference Rate Advances -- 0%.
(b) Eurodollar Rate Advances for the periods:
(i) from and including the Closing Date
through March 31, 1997 -- 1.25%;
(ii) from and including April 1, 1997
through June 30, 1997 -- 1.50%; and
(iii) from and including July 1, 1997
until all Obligations are paid in full -- 1.75%.
"Bank": As defined in the opening paragraph hereof.
"Board": The Board of Governors of the Federal Reserve System
or any successor thereto.
"Borrower": As defined in the opening paragraph hereof.
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which national banks are permitted
to be open in Minneapolis, Minnesota.
"Capitalized Lease": A lease of (or other agreement conveying
the right to use) real or personal property with respect to which at least a
portion of the rent or other amounts thereon constitute Capitalized Lease
Obligations.
"Capitalized Lease Obligations": As to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"Closing Date": Any Business Day between the date of this
Agreement and September 30, 1996 selected by the Borrower for the making of the
Term Loan hereunder; provided, that all the conditions precedent to the
obligation of the Bank to make the Term Loan, as set forth in Article III, have
been, or, on such Closing Date, will be satisfied. The Borrower shall give the
Bank not less than three Business Days prior notice of the day selected as the
Closing Date.
"Code": The Internal Revenue Code of 1986, as amended.
"Commission": The Securities and Exchange Commission, or any
regulatory body that succeeds to the functions thereof.
"Commitment Fee": As defined in Section 2.17.
"Collateral Agreement": The Pledge and Collateral
Administration Agreement dated as of November 23, 1994 among PJI, the Bank,
various other lenders, and the Northern Trust Company, as administrator.
"Contingent Obligation": With respect to any Person at the
time of any determination, without duplication, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or otherwise: (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any direct or indirect
security therefor, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness, (c) to maintain working capital, equity capital or other financial
statement condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or otherwise to protect the owner thereof against loss
in respect thereof, or (d) entered into for the purpose of assuring in any
manner the owner of such Indebtedness of the payment of such Indebtedness or to
protect the owner against loss in respect thereof; provided, that the term
"Contingent Obligation" shall not include endorsements for collection or
deposit, in each case in the ordinary course of business.
"Current Liabilities": As of any date, the consolidated
current liabilities of the Borrower, determined in accordance with GAAP.
"Default": Any event which, with the giving of notice (whether
such notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurodollar Business Day": A Business Day which is also a day
for trading by and between banks in United States dollar deposits in the
interbank Eurodollar market and a day on which banks are open for business in
New York City.
"Eurodollar Rate": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the average offered rate for deposits
in United States dollars (rounded upward, if necessary, to the nearest 1/16 of
1%) for delivery of such deposits on the first day of such Interest Period, for
the number of days in such Interest Period, which appears on the Reuters Screen
LIBO page as of 10:00 a.m., London time (or such other time as of which such
rate appears) two Eurodollar Business Days prior to the first day of such
Interest Period, or the rate for such deposits determined by the 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
the first day of such Interest Period 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 purpose of
displaying London interbank offered rates of major banks for United States
dollar deposits).
"Eurodollar Rate Advance": An Advance with respect to which
the interest rate is determined by reference to the Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board for determining the maximum reserve requirement
(including any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System, with deposits comparable in amount to those held by
the Bank, in respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Board. The rate of interest applicable to any outstanding
Eurodollar Rate Advances shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Event of Default": Any event described in Section 7.1.
"Focus Report": The Financial and Operational Combined Uniform
Single Report required to be filed on a monthly or quarterly basis, as the case
may be, with the Commission or the NYSE, or any report that is required in lieu
of such report.
"GAAP": Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of any
date of determination.
"Governmental Authority": Any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislation, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, the Commission.
"Immediately Available Funds": Funds with good value on the
day and in the city in which payment is received.
"Indebtedness": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in accordance with GAAP should be classified upon the balance
sheet of such Person as liabilities, but in any event including: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Contingent Obligations of such
Person.
"Interest Period": With respect to each Eurodollar Rate
Advance, the period commencing on the date of such Advance or on the last day of
the immediately preceding Interest Period, if any, applicable to an outstanding
Advance and ending thirty (30) or sixty (60) days 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. No Interest Period can end after the maturity of the
Term Note.
"Investment": The acquisition, purchase, making or holding of
any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real or
personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of or any interest in another
Person or any integral part of any business or the assets comprising such
business or part thereof. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Knowledge": With respect to any occurrence or event, when
such occurrence or event is brought to the attention of a responsible officer of
the Borrower or should have been brought to such officer's attention if the
Borrower had exercised due diligence.
"Leverage Ratio": At the time of any determination, the ratio
of (a) Total Liabilities to (b) Tangible Net Worth.
"Lien": With respect to any Person, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"Loan Documents": This Agreement, the Term Note and, if
required to be delivered to the Bank pursuant to Section 2.18, the Security
Documents.
"Material Subsidiary": A Subsidiary having Tangible Net Worth
in excess of $1,000,000.
"Maturity": September 30, 1997.
"Multiemployer Plan": A multiemployer plan, as such term is
defined in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing
Date, within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"NYSE": The New York Stock Exchange.
"Net Capital": As determined in accordance with the capital
requirements, rules and regulations of the NYSE that are applicable to PJI at
any time of determination.
"Obligations": The Borrower's obligations in respect of the
due and punctual payment of principal and interest on the Term 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.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PJI": Piper Jaffray Inc., a Delaware corporation, and a
wholly owned subsidiary of the Borrower.
"PJI Credit Agreement": That certain Credit Agreement dated
as of November 23, 1994 between the Bank and PJI.
"Person": Any natural person, corporation, partnership,
limited partnership, limited liability company, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.
"Plan": Each employee benefit plan (whether in existence on
the Closing Date or thereafter instituted), as such term is defined in Section 3
of ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate.
"Pledge Agreement": As defined in Section 2.18.
"Prohibited Transaction": The respective meanings assigned to
such term in Section 4975 of the Code and Section 406 of ERISA.
"Reference Rate": The rate of interest from time to time
publicly announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
"Reference Rate Advance": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.
"Regulatory Change": Any change after the Closing Date in
federal, state or foreign laws or regulations or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks including the Bank under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Reportable Event": A reportable event as defined in Section
4043 of ERISA and the regulations issued under such Section, with respect to a
Plan, excluding, however, such events as to which the PBGC by regulation has
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any waiver in
accordance with Section 412(d) of the Code.
"Security Documents": The Pledge Agreement and related
documents required to be delivered to the Bank pursuant to Section 2.18.
"Self-Regulatory Organization": As defined in Section 3(a)(26)
of the Securities Exchange Act of 1934, as amended.
"Subordinated Debt": Any Indebtedness of the Borrower, now
existing or hereafter created, incurred or arising, which is subordinated in
right of payment to the payment of the Obligations in a manner and to an extent
(a) that the Bank has approved in writing prior to the creation of such
Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the date
of this Agreement, that the Bank has approved as Subordinated Debt in a writing
delivered by the Bank to the Borrower on or prior to the Closing Date.
"Subsidiary": Any corporation or other entity of which
securities or other ownership interests having ordinary voting power for the
election of a majority of the board of directors or other Persons performing
similar functions are owned by the Borrower either directly or through one or
more Subsidiaries.
"Tangible Net Worth": With respect to any Person, at the date
of any determination, the sum of the amounts set forth on the consolidated, if
applicable, balance sheet of such Person, as the sum of the common stock,
preferred stock, additional paid-in capital and retained earnings of such Person
(excluding treasury stock), less the net book value of all assets of such Person
and its subsidiaries (to the extent reflected as an asset on such consolidated
balance sheet) that would be treated as intangibles under GAAP, including all
such items as goodwill, trademarks, trade names, service marks, copyrights,
patents, licenses, unamortized debt discount and expenses and the excess of the
purchase price of the assets of any business acquired by such Person or any
subsidiary over the book value of such assets, and less obligations owed to such
person by any Affiliate. Tangible Net Worth of the Borrower shall exclude loans
made by the Borrower to any of its officers, directors or employees.
"Term Loan": As defined in Section 2.1.
"Term Loan Commitment": The agreement of the Bank to make a
Term Loan to the Borrower in the amount specified in Section 2.1 upon the terms
and subject to the conditions of this Agreement.
"Term Note": A promissory note of the Borrower in the form of
Exhibit A hereto.
"Total Liabilities": With respect to any Person, at the time
of any determination, the amount, on a consolidated basis, of all items of
Indebtedness of such Person and its Subsidiaries that would constitute
"liabilities" for balance sheet purposes in accordance with GAAP.
Section 1.2 Accounting Terms and Calculations. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and the Bank agree in writing on an adjustment
to such computation or determination to account for such change in GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
Section 1.4 Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or".
ARTICLE II
TERMS OF THE LOAN
Section 2.1 Term Loan. Upon the terms and subject to the conditions
hereof, the Bank agrees to make a loan (the "Term Loan") to the Borrower of
$30,000,000 on the Closing Date. The Term Loan and any portion of the balance
thereof (in minimum amounts of $100,000, or, if more, in integral multiples
thereof) may be made, maintained, continued and converted to Reference Rate
Advances or Eurodollar Rate Advances as the Borrower may elect in its notice of
borrowing, continuation or conversion.
Notwithstanding any provision hereof, this Agreement shall
terminate and the Bank shall have no obligation hereunder if the Term Loan
hereunder has not been made by September 30, 1996, provided, however, that the
obligations of the Borrower under Section 8.2 shall survive any such
termination.
Section 2.2 Procedure for Term Loan. Not later than 12:00 noon
(Minneapolis time) two Eurodollar Business Days prior to the requested Closing
Date if the Term Loan is requested as a Eurodollar Rate Advance and not later
than 12:00 noon (Minneapolis time) one Business Day prior to the requested
Closing Date if the Term Loan is requested as a Reference Rate Advance, the
Borrower shall deliver to the Bank a written notice of borrowing. Such notice of
borrowing shall be irrevocable and shall be deemed a representation by the
Borrower that on the Closing Date and after giving effect to the Term Loan the
applicable conditions specified in Article III have been and will be satisfied.
Such notice of borrowing shall specify (a) the requested Closing Date, (b)
whether such Term Loan is to be funded as a Eurodollar Rate Advance or a
Reference Rate Advance, and (c) in the case of a Eurodollar Rate Advance, the
duration of the initial Interest Period applicable thereto. Unless the Bank
determines that any applicable condition specified in Article III has not been
satisfied, the Bank will make the proceeds of the Term Loan available to the
Borrower at the Bank's main office on the requested date.
Section 2.3 Note. The Term Loan shall be evidenced by a Term Note
payable to the order of the Bank in the principal amount of the Term Loan. The
Bank shall enter in its ledgers and records the amount of the Term 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 its
Term Note a record of such Term Loan, 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 Term Note, and, in all events, the principal amounts owing
by the Borrower in respect of the Term Note shall be the aggregate amount of the
Term Loan 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 or Eurodollar Rate Advances, or to continue a Eurodollar Rate Advance
as such; provided, however that a 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, Eurodollar Rate Advances and on the date of the requested
conversion to 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 Eurodollar Rate Advances, and (ii) a
Eurodollar Business Day in the case of continuations as or conversion to
Eurodollar Rate Advances and a Business Day in the case of conversions to
Reference Rate Advances), and (c) in the case of conversions to or continuations
as 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 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 Term Loan as follows:
(a) Subject to paragraph (c) below, each Eurodollar Rate
Advance shall bear interest on the unpaid principal amount thereof
during the Interest Period applicable thereto at a rate per annum equal
to the sum of (i) the Adjusted Eurodollar Rate for such Interest
Period, plus (ii) the Applicable Margin.
(b) Subject to paragraph (c) 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.
(c) Any Advance not paid when due, whether at the date
scheduled therefor or earlier upon acceleration, shall bear interest
until paid in full (i) during the balance of any Interest Period
applicable to such Advance, at a rate per annum equal to the sum of the
rate applicable to such Advance during such Interest Period plus 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%.
(d) Interest shall be payable (i) with respect to each
Eurodollar Rate Advance on the last day of the Interest Period
applicable thereto; (ii) with respect to any Reference Rate Advance, on
the last day of each month; (iii) with respect to all Advances, upon
any permitted prepayment (on the amount prepaid); and (iv) with respect
to all Advances, on the earlier of the date on which the unpaid
principal amount of the Term Loan is paid in full or Maturity; provided
that interest under Section 2.5 (c) shall be payable on demand.
Section 2.6 Repayment. The unpaid principal amount of the Term
Loan shall be due and payable no later than Maturity.
Section 2.7 Optional Prepayments. The Borrower may prepay Reference
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 an amount of $100,000 or an
integral multiple thereof. Except upon an acceleration following an Event of
Default, the Borrower may pay Eurodollar Rate Advances only on the last day of
the Interest Period applicable thereto. Amounts so prepaid cannot be reborrowed.
Section 2.8 Computation. Interest and the Commitment Fee on the
Term Loan shall be computed on the basis of actual days elapsed and a year of
360 days.
Section 2.9 Payments. Payments and prepayments of principal of, and
interest on, the Term 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 Term 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 Term 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 2.10 Use of Loan Proceeds. The proceeds of the Term Loan shall
be used for certain litigation settlement costs and general corporate purposes.
Section 2.11 Interest Rate Not Ascertainable, Etc. If, on or prior to
the date for determining the Adjusted Eurodollar Rate in respect of the Interest
Period 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 2.12 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 Term 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
such Bank's principal office is located); or
(b) shall impose, modify or deem applicable any reserve,
special deposit, capital requirement or similar requirement (including,
without limitation, any such requirement imposed by the Board, but
excluding with respect to any Eurodollar Rate 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 Term 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
Term 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 2.13 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 2.15.
Section 2.14 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 Term Loan Commitment and/or the Term Loan 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 five (5) 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. 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 2.15 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 2.13, 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 2.16 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 2.15) shall be made as if the Bank had actually
funded and maintained each 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 2.17 Commitment Fee. The Borrower shall pay to the Bank a fee
(the "Commitment Fee") in an amount determined by applying a rate of one-quarter
of one percent (.25%) per annum to the amount of the Term Loan Commitment for
the period from and including July 8, 1996 to the Closing Date. The Commitment
Fee is payable on the Closing Date.
Section 2.18 Pledge Agreement. In the event that the Term Loan is not
paid in full by March 31, 1997, the Bank may, at its option, require the
Borrower to execute and deliver to the Bank a pledge agreement substantially in
the form of Exhibit B hereto ("Pledge Agreement"), duly executed by the Borrower
in favor of the Bank pledging and granting a security interest in all of the
outstanding shares of stock of PJI owned by the Borrower as security for the
Obligations, together with the stock certificates or such other evidence of said
shares as is acceptable to the Bank and undated stock powers duly executed by
the Borrower in blank and authenticated, and such other agreements or documents
as the Bank may require to assure the validity, perfection and first priority of
its security interest under the Pledge Agreement.
ARTICLE III
CONDITIONS PRECEDENT
The making of the Term Loan shall be subject to the prior or
simultaneous fulfillment of the following conditions:
Section 3.1 Documents. The Bank shall have received the following:
3.1(a) The Term Note executed by a duly authorized officer (or
officers) of the Borrower and dated the Closing Date.
3.1(b) A copy of the corporate resolutions of the Borrower
authorizing the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Borrower.
3.1(c) An incumbency certificate showing the names and titles
and bearing the signatures of the officers of the Borrower authorized
to execute the Loan Documents and to request the Term Loan, certified
as of the Closing Date by the Secretary or an Assistant Secretary of
the Borrower.
3.1(d) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date not more
than ten (10) days prior to the Closing Date.
3.1(e) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation and in the State of Minnesota,
certified by the appropriate governmental officials as of a date not
more than ten (10) days prior to the Closing Date.
3.1(f) A copy of the bylaws of the Borrower, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
3.1(g) A certificate dated the Closing Date of the chief
executive officer or chief financial officer of the Borrower certifying
as to the matters set forth in Sections 3.6 (a) and 3.6 (b) below.
Section 3.2 Opinion. The Borrower shall have requested Faegre & Benson,
its counsel, to prepare a written opinion, addressed to the Bank and dated the
Closing Date, covering the matters set forth in Exhibit C hereto, and such
opinion shall have been delivered to the Bank; provided, that with respect to
certain matters the Bank may accept the opinion of general counsel to the
Borrower.
Section 3.3 Compliance. The Borrower shall have performed and complied
with all agreements, terms and conditions contained in this Agreement required
to be performed or complied with by the Borrower prior to or simultaneously with
the Closing Date, including payment of the Commitment Fee and all unpaid legal
fees and expenses incurred by the Bank through the Closing Date in connection
with this Agreement.
Section 3.4 Fees. The Borrower shall have paid to the Bank a facility
fee in the amount of $150,000 and reimbursed the Bank for all fees and expenses
of the type described in Section 8.2 incurred by the Bank prior to and through
the Closing Date.
Section 3.5 Other Matters. All corporate and legal proceedings relating
to the Borrower and all instruments and agreements in connection with the
transactions contemplated by this Agreement shall be satisfactory in scope, form
and substance to the Bank and its counsel, and the Bank shall have received all
information and copies of all documents, including records of corporate
proceedings, as the Bank or its counsel may reasonably have requested in
connection therewith, such documents where appropriate to be certified by proper
corporate or governmental authorities.
Section 3.6 Representations; Default; Request.
3.6(a) Representations and Warranties. The representations and
warranties contained in Article IV shall be true and correct on and as
of the Closing Date, with the same force and effect as if made on such
date.
3.6(b) No Default. No Default or Event of Default shall have
occurred and be continuing on the Closing Date or will exist after
giving effect to the Term Loan made on such date.
3.6(c) Loan Request. The Bank shall have received the Borrow-
er's request for the Term Loan as required under Section 2.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the Term
Loan hereunder, the Borrower represents and warrants to the Bank:
Section 4.1 Organization, Standing, Etc. The Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into this
Agreement and to issue the Term Note and to perform its obligations under the
Loan Documents. Each Material Subsidiary is a corporation duly incorporated and
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted. Each of the Borrower and the Material
Subsidiaries (a) holds all certificates of authority, licenses and permits
necessary to carry on its business as presently conducted in each jurisdiction
in which it is carrying on such business, except where the failure to hold such
certificates, licenses or permits would not have a material adverse effect on
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and the Material Subsidiaries taken as a whole, and (b) is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary and the failure so
to qualify would permanently preclude the Borrower or such Material Subsidiary
from enforcing its rights with respect to any assets or expose the Borrower or
such Material Subsidiary to any liability, which in either case would be
material to the Borrower and the Subsidiaries taken as a whole.
Section 4.2 Authorization and Validity. The execution, delivery and
performance by the Borrower of the Loan Documents have been duly authorized by
all necessary corporate action by the Borrower, and this Agreement constitutes,
and the Term Note and other Loan Documents when executed will constitute, the
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
Section 4.3 No Conflict. The execution, delivery and performance by the
Borrower of the Loan Documents will not (a) violate any provision of any law,
statute, rule or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator presently
in effect having applicability to the Borrower, (b) violate or contravene any
provision of the Articles of Incorporation or bylaws of the Borrower, or (c)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or any of its properties may be bound or
result in the creation of any Lien thereunder.
Section 4.4 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents, except for any necessary filing
or recordation of or with respect to any of the Security Documents.
Section 4.5 Financial Statements and Condition. The Borrower's audited
consolidated financial statements as at September 30, 1995 and its unaudited
financial statements as at June 30, 1996, as heretofore furnished to the Bank,
have been prepared in accordance with GAAP on a consistent basis (except for the
absence of footnotes and subject to year-end audit adjustments as to the interim
statements) and fairly present the financial condition of the Borrower and its
Subsidiaries as at such dates and the results of their operations and changes in
financial position for the respective periods then ended. As of the dates of
such financial statements, neither the Borrower nor any Subsidiary had any
material obligation, contingent liability, liability for taxes or long-term
lease obligation which is not reflected in such financial statements or in the
notes thereto. Since June 30, 1996, there has been no material adverse change in
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and its Subsidiaries taken as a whole.
Section 4.6 Litigation. Except as disclosed in financial statements and
in reports filed with the Commission or any national securities exchange, there
are no actions, suits or proceedings pending or, to the Knowledge of the
Borrower, threatened against or affecting the Borrower or any Material
Subsidiary or any of their properties before any court or arbitrator, or any
governmental department, board, agency or other instrumentality which, if
determined adversely to the Borrower or such Subsidiary, would have a material
adverse effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower to perform its obligations under the Loan Documents.
Section 4.7 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans' benefits guaranteed under Title IV of
ERISA does not exceed the current value of the Plans' assets allocable to such
benefits.
Section 4.8 Federal Reserve Regulations. The Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying margin stock (as defined in
Regulation U of the Board). The value of all margin stock owned by the Borrower
does not constitute more than 25% of the value of the assets of the Borrower.
Section 4.9 Title to Property; Leases; Liens; Subordination. Each of
the Borrower and the Material Subsidiaries has (a) good and marketable title to
its real properties and (b) good and sufficient title to, or valid, subsisting
and enforceable leasehold interest in, its other material properties, including
all real properties, other properties and assets, referred to as owned by the
Borrower and its Subsidiaries in the most recent financial statement referred to
in Section 4.5 (other than property disposed of since the date of such financial
statements in the ordinary course of business). None of the properties of the
Borrower is subject to a Lien, except as allowed under Section 6.9. The Borrower
has not subordinated any of its rights under any obligation owing to it to the
rights of any other person.
Section 4.10 Taxes. Each of the Borrower and the Material Subsidiaries
has filed all federal, state and local tax returns required to be filed and has
paid or made provision for the payment of all taxes due and payable pursuant to
such returns and pursuant to any assessments made against it or any of its
property and all other taxes, fees and other charges imposed on it or any of its
property by any governmental authority (other than taxes, fees or charges the
amount or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
GAAP have been provided on the books of the Borrower). No tax Liens have been
filed and no material claims are being asserted with respect to any such taxes,
fees or charges. The charges, accruals and reserves on the books of the Borrower
in respect of taxes and other governmental charges are adequate and the Borrower
knows of no proposed material tax assessment against it or any Material
Subsidiary or any basis therefor.
Section 4.11 Trademarks, Patents. Each of the Borrower and the Material
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.
Section 4.12 Burdensome Restrictions. Neither the Borrower nor any
Material Subsidiary is a party to or otherwise bound by any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Material Subsidiary
or on the ability of the Borrower or any Material Subsidiary to carry out its
obligations under any Loan Document.
Section 4.13 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 4.14 Public Utility Holding Company Act. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or of a subsidiary company of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 4.15 [Intentionally Omitted.]
Section 4.16 Full Disclosure. Subject to the following sentence,
neither the financial statements referred to in Section 4.5 nor any other
certificate, written statement, exhibit or report furnished by or on behalf of
the Borrower in connection with or pursuant to this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Borrower to the Bank
consisting of projections or forecasts of future results or events have been
prepared in good faith and based on good faith estimates and assumptions of the
management of the Borrower, and the Borrower has no reason to believe that such
projections or forecasts are not reasonable.
Section 4.17 Subsidiaries. Schedule 4.17 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.
Section 4.18 Compliance with Laws and Other Agreements. Neither the
Borrower nor any of its Material Subsidiaries is in default with respect to any
order, writ, injunction or decree of any Governmental Authority or
Self-Regulatory Organization or, to the knowledge of the Borrower, in violation
of any law, statute, rule or regulation to which the Borrower or such Material
Subsidiary or any Property of the Company or any such Material Subsidiary is or
are subject, which default or violation could reasonably be expected to have a
material adverse effect on the business, operations, property, assets or
condition, financial or otherwise, of the Borrower or such Material Subsidiary;
provided, that certain allegations have been made by the Commission with respect
to certain sales practices of a Material Subsidiary, as disclosed in the
Borrower's Form 10-Q as of March 31, 1996. Neither the Borrower nor any of its
Material Subsidiaries is in default in the payment or performance of any of its
obligations or in the performance of any mortgage, indenture, lease, contract or
other agreement to which it is a party or by which it or any of its property is
bound, which default could reasonably be expected to have a material adverse
effect on the business, operations, property, assets or condition, financial or
otherwise, of the Borrower.
Section 4.19 Ownership of PJI. The Borrower owns all (other than
directors' qualifying shares) of the voting shares of PJI.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Term Note and all of the other Obligations have been
paid in full and the Bank has no obligation to extend credit to the Borrower
hereunder, unless the Bank shall otherwise consent in writing:
Section 5.1 Financial Statements and Reports. The Borrower will
furnish to the Bank:
5.1(a) As soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, the
consolidated financial statements of the Borrower and the Subsidiaries
consisting of at least statements of income, cash flow and changes in
stockholders' equity, and a consolidated balance sheet as of the end of
such year, setting forth in each case in comparative form corresponding
figures from the previous annual audit, certified without qualification
by Deloitte & Touche or other independent certified public accountants
of recognized national standing selected by the Borrower and acceptable
to the Bank, together with letter from such accountants addressed to
the Bank (a) acknowledging that the Bank is extending credit in
reliance on such financial statements and authorizing such reliance and
(b) confirming that no management letter, management report or other
supplementary comments or reports to the Borrower or its board of
directors furnished by such accountants advised the recipients of the
same of any material weakness of the Borrower and its Subsidiaries.
5.1(b) Together with the audited financial statements required
under Section 5.1(a), a statement by the accounting firm performing
such audit to the effect that it has reviewed this Agreement and that
in the course of performing its examination nothing came to its
attention that caused it to believe that any Default or Event of
Default exists, or, if such Default or Event of Default exists,
describing its nature.
5.1(c) As soon as available and in any event within thirty
(30) days after the end of each fiscal month, unaudited consolidated
statements of income for the Borrower and the Subsidiaries for such
month and for the period from the beginning of such fiscal year to the
end of such month, and a consolidated balance sheet of the Borrower as
at the end of such month, setting forth in comparative form figures for
the corresponding period for the preceding fiscal year, accompanied by
a certificate signed by the chief financial officer of the Borrower
stating that such financial statements present fairly the financial
condition of the Borrower and the Subsidiaries and that the same have
been prepared in accordance with GAAP (except for the absence of
footnotes and subject to year-end audit adjustments as to the interim
statements).
5.1(d) As soon as practicable and in any event within thirty
(30) days after the end of each fiscal month, a Compliance Certificate
in the form attached hereto as Exhibit D signed by the chief financial
officer of the Borrower demonstrating in reasonable detail compliance
(or noncompliance, as the case may be) with these Sections: 5.12, 6.11
and 6.12, as at the end of such month and stating that as at the end of
such month there did not exist any Default or Event of Default or, if
such Default or Event of Default existed, specifying the nature and
period of existence thereof and what action the Borrower proposes to
take with respect thereto.
5.1(e) Promptly upon the filing thereof with NYSE or the
Commission, Part II of PJI's Focus Report, as filed for the most recent
quarterly period for which such report is required to be filed.
5.1(f) Immediately upon the Borrower obtaining Knowledge of
any Default or Event of Default, a notice describing the nature thereof
and what action the Borrower proposes to take with respect thereto.
5.1(g) Immediately upon the Borrower obtaining Knowledge of
the occurrence, with respect to any Plan, of any Reportable Event or
any Prohibited Transaction, a notice specifying the nature thereof and
what action the Borrower proposes to take with respect thereto, and,
when received, copies of any notice from PBGC of intention to terminate
or have a trustee appointed for any Plan.
5.1(h) Promptly upon the mailing or filing thereof, copies of
all financial statements, reports and proxy statements mailed to the
Borrower's shareholders and copies of all registration statements,
periodic reports and other documents filed by the Borrower with the
Commission or any national securities exchange; provided, that so long
as the Borrower delivers to the Bank a copy of the press release
associated with each Form 8-K, the Borrower need not deliver the Form
8-K unless requested by the Bank.
5.1(i) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
Section 5.2 Corporate Existence. The Borrower will maintain, and cause
each Material Subsidiary to maintain, its corporate existence in good standing
under the laws of its jurisdiction of incorporation and its qualification to
transact business in each jurisdiction where failure so to qualify would
permanently preclude the Borrower or such Material Subsidiary from enforcing its
rights with respect to any material asset or would expose the Borrower or such
Material Subsidiary to any material liability; provided, however, that nothing
herein shall prohibit the merger or liquidation of any Material Subsidiary
allowed under Section 6.1.
Section 5.3 Insurance. The Borrower shall maintain, and shall cause
each Material Subsidiary to maintain, with financially sound and reputable
insurance companies such insurance as may be required by law and such other
insurance in such amounts and against such hazards as is customary in the case
of reputable firms engaged in the same or similar business and similarly
situated.
Section 5.4 Payment of Taxes and Claims. The Borrower shall file, and
cause each Material Subsidiary to file, all tax returns and reports which are
required by law to be filed by it and will pay, and cause each Material
Subsidiary to pay, before they become delinquent all taxes, assessments and
governmental charges and levies imposed upon it or its property and all claims
or demands of any kind (including but not limited to those of suppliers,
mechanics, carriers, warehouses, landlords and other like Persons) which, if
unpaid, might result in the creation of a Lien upon its property; provided that
the foregoing items need not be paid if they are being contested in good faith
by appropriate proceedings, and as long as the Borrower's or such Subsidiary's
title to its property is not materially adversely affected, its use of such
property in the ordinary course of its business is not materially interfered
with and adequate reserves with respect thereto have been set aside on the
Borrower's or such Subsidiary's books in accordance with GAAP.
Section 5.5 Inspection. The Borrower shall permit any Person designated
by the Bank to visit and inspect any of the properties, corporate books and
financial records of the Borrower and the Material Subsidiaries, to examine and
to make copies of the books of accounts and other financial records of the
Borrower and the Material Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as the Bank may
designate. So long as no Event of Default exists, the expenses of the Bank for
such visits, inspections and examinations shall be at the expense of the Bank,
but any such visits, inspections and examinations made while any Event of
Default is continuing shall be at the expense of the Borrower.
Section 5.6 Maintenance of Properties. The Borrower will maintain, and
cause each Material Subsidiary to maintain its properties used or useful in the
conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 Books and Records. The Borrower will keep, and will cause
each Material Subsidiary to keep, adequate and proper records and books of
account in which full and correct entries will be made of its dealings, business
and affairs.
Section 5.8 Compliance. The Borrower will comply, and will cause each
Material Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a materially adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower or such Material
Subsidiary and the Borrower or such Material Subsidiary is acting in good faith
and with reasonable dispatch to cure such noncompliance.
Section 5.9 Notice of Litigation. The Borrower will give prompt written
notice to the Bank of the commencement of any action, suit or proceeding before
any court or arbitrator or any governmental department, board, agency or other
instrumentality affecting the Borrower or any Material Subsidiary or any
property of the Borrower or a Material Subsidiary or to which the Borrower or a
Material Subsidiary is a party in which an adverse determination or result could
have a material adverse effect (as determined by the Borrower in the exercise of
its reasonable judgment) on the business, operations, property or condition
(financial or otherwise) of the Borrower and the Subsidiaries taken as a whole
or on the ability of the Borrower or any Material Subsidiary to perform its
obligations under this Agreement and the other Loan Documents, stating the
nature and status of such action, suit or proceeding. The Borrower shall give
the Bank prompt written notice of any decision by the Borrower, PJI or an
Affiliate to settle any suit or proceeding, whether now pending or hereafter
commenced, for an amount of $2,000,000 or more; provided, however, that the
Borrower will provide the amount which it, PJI or any Affiliate has decided to
pay in settlement, but will not provide any further information concerning the
settlement, unless the Bank agrees to the terms of a written confidentiality
agreement on terms reasonably acceptable to the Borrower.
Section 5.10 ERISA. The Borrower will maintain, and cause each Material
Subsidiary to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $1,000,000, (b) fail to make full payment when due of all amounts
which, under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $1,000,000 or (c) fail to make any payments in an
aggregate amount exceeding $1,000,000 to any Multiemployer Plan that the
Borrower or any of the ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 Further Assurances. The Borrower shall promptly correct
any defect or error that may be discovered in any Loan Document or in the
execution, acknowledgment or recordation thereof. Promptly upon request by the
Bank, the Borrower also shall do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register, any and all financing
statements and continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as the Bank may reasonably
require from time to time in order: (a) to carry out more effectively the
purposes of the Loan Documents; (b) to perfect and maintain the validity,
effectiveness and priority of any security interests intended to be created by
the Loan Documents; and (c) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm unto the Bank the rights granted now or hereafter
intended to be granted to the Bank under any Loan Document or under any other
instrument executed in connection with any Loan Document or that the Borrower
may be or become bound to convey, pledge or assign to the Bank in order to carry
out the intention or facilitate the performance of the provisions of any Loan
Document. The Borrower shall furnish to the Bank evidence satisfactory to the
Bank of every such recording, filing or registration.
Section 5.12 Net Capital. The Borrower will cause PJI to maintain at
all times Net Capital of not less than 10% of Aggregate Debit Items as
determined as of the close of each Business Day.
ARTICLE VI
NEGATIVE COVENANTS
Until the Term Note and all of the other Obligations have been paid in
full and the Bank has no obligation to extend credit to the Borrower hereunder,
unless the Bank shall otherwise consent in writing:
Section 6.1 Merger. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution) or permit
any Material Subsidiary to do any of the foregoing; provided, however, any
Subsidiary may be merged with or liquidated into the Borrower or any
wholly-owned Subsidiary (if the Borrower or such wholly-owned Subsidiary is the
surviving corporation).
Section 6.2 Sale of Assets. The Borrower will not, and will not permit
any Material Subsidiary to, sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for sales in the ordinary course of
business and except for sales or other transfers by a Subsidiary to the Borrower
or a wholly-owned Subsidiary.
Section 6.3 Plans. The Borrower will not permit, and will not allow any
Material Subsidiary to permit, any event to occur or condition to exist which
would permit any Plan to terminate under any circumstances which would cause the
Lien provided for in Section 4068 of ERISA to attach to any assets of the
Borrower or any Material Subsidiary; and the Borrower will not permit the
underfunded amount of Plan benefits guaranteed under Title IV of ERISA to exceed
$1,000,000.
Section 6.4 Change in Nature of Business. The Borrower will not, and
will not permit any Material Subsidiary to, make any material change in the
nature of the business of the Borrower or such Material Subsidiary, as carried
on at the date hereof.
Section 6.5 Negative Pledges; Subsidiary Restrictions. The Borrower
will not enter into any agreement, bond, note or other instrument that would
prohibit or limit the ability of the Borrower to perform under Section 2.18 of
this Agreement. The Borrower will not permit any Material Subsidiary to place or
allow any restriction, directly or indirectly, on the ability of such Material
Subsidiary to (a) pay dividends or any distributions on or with respect to such
Material Subsidiary's capital stock or (b) make loans or other cash payments to
the Borrower.
Section 6.6 Accounting Changes. The Borrower will not, and will not
permit any Material Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change its
fiscal year or the fiscal year of any Material Subsidiary.
Section 6.7 [Intentionally Omitted.]
Section 6.8 Indebtedness. The Borrower will not incur, create,
issue, assume or suffer to exist any Indebtedness, except:
6.8(a) The Obligations.
6.8(b) Current Liabilities, other than for borrowed money,
incurred in the ordinary course of business.
6.8(c) Indebtedness existing on the date of this Agreement and
disclosed on Schedule 6.8 hereto, but not including any extension or
refinancing thereof.
6.8(d) Indebtedness secured by Liens permitted under Section
6.9 hereof.
6.8(e) Subordinated Debt.
6.8(f) Indebtedness of the type described in clauses (d),
(e), (f) or (g) of the definition of "Indebtedness."
6.8(g) Indebtedness arising out of agreements in settlement
of litigation.
Section 6.9 Liens. The Borrower will not create, incur, assume or
suffer to exist any Lien, or enter into, or make any commitment to enter into,
any arrangement for the acquisition of any property through conditional sale,
lease-purchase or other title retention agreements, with respect to any property
now owned or hereafter acquired by the Borrower, except:
6.9(a) Liens granted to the Bank under the Security Documents
to secure the Obligations.
6.9(b) Liens existing on the date of this Agreement and
disclosed on Schedule 6.9 hereto.
6.9(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of the
Borrower or a Subsidiary.
6.9(d) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payment therefor shall not
at the time be required to be made in accordance with the provisions of
Section 5.4.
6.9(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall
not at the time be required to be made in accordance with the
provisions of Section 5.4.
6.9(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or
other similar bonds.
6.9(g) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; provided that (i)
such deposit account is not a dedicated cash collateral account and is
not subject to restriction against access by the Borrower in excess of
those set forth by regulations promulgated by the Board, and (ii) such
deposit account is not intended by the Borrower to provide collateral
to the depository institution.
6.9(h) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real
property and landlord's Liens under leases on the premises rented,
which do not materially detract from the value of such property or
impair the use thereof in the business of the Borrower.
6.9(i) The interest of any lessor under any Capitalized Lease
entered into after the Closing Date or purchase money Liens on property
acquired after the Closing Date; provided, that, (i) the Indebtedness
secured thereby is otherwise permitted by this Agreement and (ii) such
Liens are limited to the property acquired and do not secure
Indebtedness other than the related Capitalized Lease Obligations or
the purchase price of such property.
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 Contingent Obligations existing on the date of this Agreement
and described on Schedule 6.10 and Contingent Obligations incurred in the
ordinary course of business of the Borrower or such Material Subsidiary.
Section 6.11 Tangible Net Worth. The Borrower will not permit its
Tangible Net Worth at any time to be less than $125,000,000 or the Tangible Net
Worth of PJI at any time to be less than $100,000,000.
Section 6.12 Leverage Ratio. The Borrower will not permit PJI's
Leverage Ratio to be more than 8.0 to 1.0 at any time.
Section 6.13 Loan Proceeds. The Borrower will not, and will not permit
any Material Subsidiary to, use any part of the proceeds of the Term Loan
directly or indirectly, and whether immediately, incidentally or ultimately, (a)
to purchase or carry margin stock (as defined in Regulation U of the Board) or
to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund Indebtedness originally incurred for such purpose or (b) for
any purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulations G, U, T or X of the Board.
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or more
of the following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on
the Term Note or any other Obligation required to be made to the Bank
pursuant to this Agreement.
7.1(b) Any representation or warranty made by or on behalf of
the Borrower or any Material Subsidiary in this Agreement or any other
Loan Document or by or on behalf of the Borrower or any Material
Subsidiary in any certificate, statement, report or document herewith
or hereafter furnished to the Bank pursuant to this Agreement or any
other Loan Document shall prove to have been false or misleading in any
material respect on the date as of which the facts set forth are stated
or certified.
7.1(c) The Borrower shall fail to comply with Sections 5.2,
5.3 or 5.12 hereof or any Section of Article VI hereof.
7.1(d) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement (other than those hereinabove set forth in this Section 7.1)
and such failure to comply shall continue for thirty (30) calendar days
after whichever of the following dates is the earliest: (i) the date
the Borrower gives notice of such failure to the Bank, (ii) the date
the Borrower should have given notice of such failure to the Bank
pursuant to Section 5.1, or (iii) the date the Bank gives notice of
such failure to the Borrower.
7.1(e) Any default (however denominated or defined) shall
occur under any Security Document.
7.1(f) The Borrower or any Material Subsidiary shall become
insolvent or shall generally not pay its debts as they mature or shall
apply for, shall consent to, or shall acquiesce in the appointment of a
custodian, trustee or receiver of the Borrower or such Material
Subsidiary or for a substantial part of the property thereof or, in the
absence of such application, consent or acquiescence, a custodian,
trustee or receiver shall be appointed for the Borrower or a Material
Subsidiary or for a substantial part of the property thereof and shall
not be discharged within 45 days, or the Borrower or any Material
Subsidiary shall make an assignment for the benefit of creditors.
7.1(g) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be
instituted by or against the Borrower or any Material Subsidiary, and,
if instituted against the Borrower or any Material Subsidiary, shall
have been consented to or acquiesced in by the Borrower or such
Material Subsidiary, or shall remain undismissed for 60 days, or an
order for relief shall have been entered against the Borrower or such
Material Subsidiary.
7.1(h) Any dissolution or liquidation proceeding not permitted
by Section 6.1 shall be instituted by or against the Borrower or a
Material Subsidiary, and, if instituted against the Borrower or any
Material Subsidiary, shall be consented to or acquiesced in by the
Borrower or such Material Subsidiary or shall remain for 45 days
undismissed.
7.1(i) A judgment or judgments for the payment of money in
excess of the sum of $10,000,000 in the aggregate shall be rendered
against the Borrower or a Material Subsidiary and either (i) the
judgment creditor executes on such judgment or (ii) such judgment
remains unpaid or undischarged for more than 60 days from the date of
entry thereof or such longer period during which execution of such
judgment shall be stayed during an appeal from such judgment.
7.1(j) The maturity of any material Indebtedness of the
Borrower (other than Indebtedness under this Agreement) or a Material
Subsidiary shall be accelerated, or the Borrower or a Material
Subsidiary shall fail to pay any such material Indebtedness when due
(after the lapse of any applicable grace period) or, in the case of
such Indebtedness payable on demand, when demanded (after the lapse of
any applicable grace period), or any event shall occur or condition
shall exist and shall continue for more than the period of grace, if
any, applicable thereto and shall have the effect of causing, or
permitting the holder of any such Indebtedness or any trustee or other
Person acting on behalf of such holder to cause, such material
Indebtedness to become due prior to its stated maturity or to realize
upon any collateral given as security therefor. For purposes of this
Section, Indebtedness of the Borrower or a Subsidiary shall be deemed
"material" if it exceeds $10,000,000 as to any item of Indebtedness or
in the aggregate for all items of Indebtedness with respect to which
any of the events described in this Section 7.1(j) has occurred.
7.1(k) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Material
Subsidiary shall be taken or attempted to be taken and the same shall
not have been vacated or stayed within 30 days after the issuance
thereof.
7.1(l) Any Security Document shall, at any time, cease to be
in full force and effect or shall be judicially declared null and void,
or the validity or enforceability thereof shall be contested by the
Borrower, or the Bank shall cease to have a valid and perfected
security interest having the priority contemplated thereunder in all of
the collateral described therein, other than by action or inaction of
the Bank.
7.1(m) Any "event of default" shall occur under the PJI Credit
Agreement.
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 Term 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
declare the outstanding unpaid principal balance of the Term Note, the accrued
and unpaid interest thereon and all other Obligations to be forthwith due and
payable, whereupon the Term 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 Term 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.
Section 7.3 Offset. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes the Bank to set off
any Obligations against all deposits and credits of the Borrower with, and any
and all claims of the Borrower against, the Bank. Such right shall exist whether
or not the Bank shall have made any demand hereunder or under any other Loan
Document, whether or not the Obligations, or any part thereof, or deposits and
credits held for the account of the Borrower is or are matured or unmatured, and
regardless of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to the Bank. The Bank agrees that, as
promptly as is reasonably possible after the exercise of any such setoff right,
it shall notify the Borrower of its exercise of such setoff right; provided,
however, that the failure of the Bank to provide such notice shall not affect
the validity of the exercise of such setoff rights. Nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on the Bank to all
rights of banker's Lien, setoff and counterclaim available pursuant to law.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
Section 8.2 Expenses. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Bank upon demand
for all reasonable out-of-pocket expenses paid or incurred by the Bank
(including filing and recording costs and fees and expenses of Dorsey & Whitney
LLP, counsel to the Bank) in connection with the negotiation, preparation,
approval, review, execution, delivery, administration, amendment, modification
and interpretation of this Agreement and the other Loan Documents and any
commitment letters relating thereto. The Borrower shall also reimburse the Bank
upon demand for all reasonable out-of-pocket expenses (including expenses of
legal counsel) paid or incurred by the Bank in connection with the collection
and enforcement of this Agreement and any other Loan Document. The obligations
of the Borrower under this Section shall survive any termination of this
Agreement.
Section 8.3 Waivers, etc. No failure on the part of the Bank or the
holder of the Term Note to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in the other Loan Documents provided are
cumulative and not exclusive of any remedies provided by law.
Section 8.4 Notices. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Bank under Article II hereof shall be deemed to have been
given only when received by the Bank.
Section 8.5 Taxes. The Borrower agrees 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 this Agreement or the issuance of
the Term Note, which obligation of the Borrower shall survive the termination of
this Agreement.
Section 8.6 Successors and Assigns; Disposition of Loans; Transferees.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower may
not assign its rights or delegate its obligations hereunder or under any other
Loan Document without the prior written consent of the Bank. The Bank may at any
time sell, assign, transfer, grant participations in, or otherwise dispose of
any portion of the Term Loan Commitment and/or Advances (each such interest so
disposed of being herein called a "Transferred Interest") to banks or other
financial institutions ("Transferees"). The Borrower agrees that each Transferee
shall be entitled to the benefits of Sections 2.12, 2.13, 2.14, 2.15 and 8.2
with respect to its Transferred Interest and that each Transferee may exercise
any and all rights of banker's Lien, setoff and counterclaim as if such
Transferee were a direct lender to the Borrower. If the Bank makes any
assignment to a Transferee, then upon notice to the Borrower such Transferee, to
the extent of such assignment (unless otherwise provided therein), shall become
a "Bank" hereunder and shall have all the rights and obligations of the Bank
hereunder and the Bank shall be released from its duties and obligations under
this Agreement to the extent of such assignment. Notwithstanding the sale by the
Bank of any participation hereunder, (a) no participant shall be deemed to be or
have the rights and obligations of the Bank hereunder except that any
participant shall have a right of setoff under Section 7.3 as if it were the
Bank and the amount of its participation were owing directly to such participant
by the Borrower and (b) the Bank shall not in connection with selling any such
participation condition the Bank's rights in connection with consenting to
amendments or granting waivers concerning any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating to
(i) any reduction in the amount of any principal of, or the amount of or rate of
interest on, the Term Note or Advance in which such participation is sold, (ii)
any postponement of the date fixed for any payment of principal of or interest
on the Term Note or Advance in which such participation is sold or (iii) the
release or subordination of any material portion of any collateral other than
pursuant to the terms of any Security Document.
Section 8.7 Confidentiality of Information. The Bank shall use
reasonable efforts to assure that information about the Borrower and its
operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Bank pursuant
to the provisions hereof is used only for the purposes of this Agreement and any
other relationship between the Bank and the Borrower and shall not be divulged
to any Person other than the Bank, its Affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants,
(b) in connection with the enforcement of the rights of the Bank hereunder and
under the Term Note and the Security Documents or otherwise in connection with
applicable litigation, (c) in connection with assignments and participations and
the solicitation of prospective assignees and participants referred to in the
immediately preceding Section, and (d) as may otherwise be required or requested
by any regulatory authority having jurisdiction over the Bank or by any
applicable law, rule, regulation or judicial process, the opinion of the Bank's
counsel concerning the making of such disclosure to be binding on the parties
hereto. The Bank shall not incur any liability to the Borrower by reason of any
disclosure permitted by this Section 8.7.
Section 8.8 Governing Law and Construction. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE TERM NOTE SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision of this
Agreement and the other Loan Documents and any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto.
Section 8.9 Consent to Jurisdiction. AT THE OPTION OF THE BANK, THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 8.10 Waiver of Jury Trial. EACH OF THE BORROWER AND THE BANK
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY
HERETO. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.
Section 8.11 Survival of Agreement. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Loan
Documents and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be deemed to have been relied upon by the Bank and shall survive the making of
the Term Loan by the Bank and the execution and delivery to the Bank by the
Borrower of the Term Note, regardless of any investigation made by or on behalf
of the Bank, and shall continue in full force and effect as long as any
Obligation is outstanding and unpaid; provided, however, that the obligations of
the Borrower under Sections 8.2, 8.5 and 8.12 shall survive payment in full of
the Obligations.
Section 8.12 Indemnification. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Bank and its Affiliates and the
directors, officers, employees, attorneys and agents of the Bank and its
Affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document,
any commitments relating thereto, or any transaction contemplated by
any Loan Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by
any Person relating to or in connection with any credit extended or
used under the Loan Documents, or the exercise of any rights or
remedies thereunder, including the acquisition of any collateral by the
Bank by way of foreclosure of the Lien thereon, deed or bill of sale in
lieu of such foreclosure or otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's gross negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the date of payment
in full of the Obligations, including specifically Obligations arising under
clause (b) of this Section. The indemnification provisions set forth above shall
be in addition to any liability the Borrower may otherwise have. Without
prejudice to the survival of any other obligation of the Borrower hereunder the
indemnities and obligations of the Borrower contained in this Section shall
survive the payment in full of the other Obligations.
Section 8.13 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 8.14 Entire Agreement. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower and
the Bank with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Nothing contained in this Agreement or in any other Loan
Document, expressed or implied, is intended to confer upon any Persons other
than the parties hereto any rights, remedies, obligations or liabilities
hereunder or thereunder.
Section 8.15 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 8.16 Borrower Acknowledgements. The Borrower hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b) the
Bank has no fiduciary relationship to the Borrower, the relationship being
solely that of debtor and creditor, (c) no joint venture exists between the
Borrower and the Bank, and (d) the Bank undertakes no responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the business or operations of the Borrower and the Borrower shall rely
entirely upon its own judgment with respect to its business, and any review,
inspection or supervision of, or information supplied to, the Borrower by the
Bank is for the protection of the Bank and neither the Borrower nor any third
party is entitled to rely thereon.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PIPER JAFFRAY COMPANIES INC.
By /s/Deborah K. Roesler
Deborah K. Roesler
Chief Financial Officer
By /s/ Jennifer A. Olson-Goude
Jennifer A. Olson-Goude
Assistant Vice President and
Assistant Treasurer
Piper Jaffray Tower, 16th Floor
222 South Ninth Street
Minneapolis, MN 55402
Fax: (612) 342-6085
FIRST BANK NATIONAL ASSOCIATION
By /s/ Jose A. Peris
Jose A. Peris
Vice President
Financial Services Division
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Fax: (612) 973-0825
PIPER JAFFRAY COMPANIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
Three Months Ended
------------------
December 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net income ....................................................... $ 1,820 $ 6,654
======= =======
Average number of common and common equivalent shares outstanding:
Average common shares outstanding .............................. 18,279 17,541
Dilutive effect of common stock equivalents:
Book value plan options ...................................... 157 198
Executive incentive stock options ............................ 247 263
------- -------
18,683 18,002
Primary net income per share ..................................... $ .10 $ .37
======= =======
NET INCOME PER SHARE ASSUMING FULL DILUTION:
Net income ....................................................... $ 1,820 $ 6,654
======= =======
Average number of common and common equivalent shares outstanding:
Average common shares outstanding .............................. 18,279 17,541
Dilutive effect of common stock equivalents:
Book value plan options ...................................... 176 205
Executive incentive stock options ............................ 391 291
------- -------
18,846 18,037
Fully Diluted net income per share ............................... $ .10 $ .37
======= =======
</TABLE>
<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 DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 28,374
<RECEIVABLES> 615,692
<SECURITIES-RESALE> 27,441
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 184,233
<PP&E> 30,263
<TOTAL-ASSETS> 988,535
<SHORT-TERM> 218,841
<PAYABLES> 328,855
<REPOS-SOLD> 21,137
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 48,643
<LONG-TERM> 44,855
0
0
<COMMON> 18,661
<OTHER-SE> 156,372
<TOTAL-LIABILITY-AND-EQUITY> 988,535
<TRADING-REVENUE> 43,994
<INTEREST-DIVIDENDS> 12,290
<COMMISSIONS> 46,415
<INVESTMENT-BANKING-REVENUES> 20,937
<FEE-REVENUE> 8,905
<INTEREST-EXPENSE> 6,155
<COMPENSATION> 86,036
<INCOME-PRETAX> 2,983
<INCOME-PRE-EXTRAORDINARY> 2,983
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,820
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
