<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-14082
MERRILL CORPORATION
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-0946258
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Merrill Circle
St. Paul, Minnesota 55108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-646-4501
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 filing requirements
for the past 90 days.
Yes X No
-------- --------
The number of shares outstanding of Registrant's Common Stock, par value $.01,
on December 9, 1996 was 7,924,056.
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<PAGE>
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Included herein is the following financial information:
Consolidated Balance Sheets as of October 31, 1996 and January 31,
1996.
Consolidated Statements of Operations for the three-month and
nine-month periods ended October 31, 1996 and 1995.
Consolidated Statements of Cash Flows for the nine-month periods
ended October 31, 1996 and 1995.
Notes to Consolidated Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
2
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MERRILL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets
Cash and cash equivalents........................................... $ 2,659 $ 12,074
Trade receivables, less allowance for doubtful accounts of $5,457
and $3,545, respectively........................................... 80,498 48,566
Work in process inventories......................................... 33,034 10,898
Other inventories................................................... 5,955 5,235
Other current assets................................................ 8,040 2,463
----------- -----------
Total current assets.............................................. 130,186 79,236
Property, plant and equipment, net.................................... 35,358 31,681
Goodwill, net......................................................... 34,556 10,528
Other assets, net..................................................... 5,225 4,076
----------- -----------
Total assets...................................................... $205,325 $ 125,521
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable, bank.................................................. $ 17,750 $ 6,000
Current maturities of long-term debt................................ 645 770
Current maturities of capital lease obligations..................... 492 538
Accounts payable.................................................... 21,809 17,598
Accrued expenses.................................................... 24,354 14,951
----------- -----------
Total current liabilities......................................... 65,050 39,857
Long-term debt, net of current maturities............................. 41,380 4,525
Capital lease obligations, net of current maturities.................. 1,921 1,929
Other liabilities..................................................... 5,428 1,476
----------- -----------
Total liabilities................................................. 113,779 47,787
----------- -----------
Shareholders' equity
Common stock, $.01 par value: 25,000,000 shares authorized;
7,920,033 shares and 7,855,783 shares, respectively, issued and
outstanding........................................................ 79 78
Undesignated stock: 500,000 shares authorized; no shares issued.....
Additional paid-in capital.......................................... 17,552 16,324
Retained earnings................................................... 73,915 61,332
----------- -----------
Total shareholders' equity........................................ 91,546 77,734
----------- -----------
Total liabilities and shareholders' equity........................ $205,325 $ 125,521
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
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MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31 OCTOBER 31
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.............................................................. $ 93,776 $ 62,475 $ 252,545 $ 182,610
Cost of revenues...................................................... 61,503 41,489 162,411 124,120
--------- --------- --------- ---------
Gross profit........................................................ 32,273 20,986 90,134 58,490
Selling, general and administrative expenses.......................... 23,296 15,339 63,904 44,310
--------- --------- --------- ---------
Operating income.................................................... 8,977 5,647 26,230 14,180
Interest expense...................................................... (1,402) (315) (2,807) (761)
Other income (expense), net........................................... 304 (7) 529 309
--------- --------- --------- ---------
Income before provision for income taxes............................ 7,879 5,325 23,952 13,728
Provision for income taxes............................................ 3,502 2,290 10,659 5,903
--------- --------- --------- ---------
Net income.......................................................... $ 4,377 $ 3,035 $ 13,293 $ 7,825
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per common and common equivalent share:
Primary............................................................. $ .53 $ .38 $1.64 $ .98
--------- --------- --------- ---------
--------- --------- --------- ---------
Fully diluted....................................................... $ .53 $ .38 $1.62 $ .98
--------- --------- --------- ---------
--------- --------- --------- ---------
Dividends per common share............................................ $ .03 $ .03 $ .09 $ .09
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of common and common equivalent shares
outstanding:
Primary............................................................. 8,182,500 7,972,414 8,108,463 7,947,833
--------- --------- --------- ---------
--------- --------- --------- ---------
Fully diluted....................................................... 8,227,714 7,972,305 8,183,428 7,953,570
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
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MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE-MONTHS ENDED
OCTOBER 31
-------------------
1996 1995
--------- --------
<S> <C> <C>
Operating activities:
Net income.......................................................... $ 13,293 $ 7,825
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization..................................... 7,611 7,240
Amortization of intangibles assets................................ 1,719 821
Provision for losses on trade receivables......................... 2,611 1,158
Change in deferred compensation................................... (354) 490
Changes in operating assets and liabilities:
Trade receivables............................................... (16,021) (14,517)
Work in process inventories..................................... (18,091) (4,326)
Other inventories............................................... 814 (1,207)
Other current assets............................................ 731 249
Accounts payable................................................ (2,297) 394
Accrued expenses................................................ 5,473 756
Accrued and deferred income taxes............................... (3,784) (2,040)
--------- --------
Net cash used in operating activities......................... (8,295) (3,157)
--------- --------
Investing activities:
Business acquisitions, net of cash acquired......................... (26,896)
Purchase of property, plant and equipment........................... (6,149) (11,329)
Other, net.......................................................... (937) (943)
--------- --------
Net cash used in investing activities......................... (33,982) (12,272)
--------- --------
Financing activities:
Borrowings on note payable, bank.................................... 120,200 36,300
Repayments on note payable, bank.................................... (108,450) (28,000)
Proceeds from issuance of long-term debt............................ 35,000
Principal payments on long-term debt and capital lease
obligations........................................................ (14,407) (882)
Dividends paid...................................................... (710) (696)
Tax benefit realized upon exercise of stock options................. 240 1,241
Other equity transactions, net...................................... 989 359
--------- --------
Net cash provided by financing activities..................... 32,862 8,322
--------- --------
Decrease in cash and cash equivalents................................. (9,415) (7,107)
Cash and cash equivalents, beginning of period........................ 12,074 9,967
--------- --------
Cash and cash equivalents, end of period.............................. $ 2,659 $ 2,860
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
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MERRILL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
The consolidated financial statements as of October 31, 1996 and for the
periods ended October 31, 1996 and 1995 have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results for the indicated
periods. Certain information and accounting policies and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report on Form 10-K.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the reported amounts of
revenue and expenses during the reported periods. Actual results could differ
from those estimates. The most significant areas which require the use of
management's estimates relate to the determination of the allowance for
uncollectible trade accounts receivable, sales credits and reserves for
unbillable inventory.
2. BUSINESS ACQUISITIONS
On April 15, 1996, the Company purchased substantially all of the operating
assets and assumed certain liabilities of The Corporate Printing Company, Inc.
and Affiliated Group (CPC) for approximately $22.6 million in cash. The purchase
price is subject to reductions equal to the amount that certain liabilities, as
determined in the agreement, of CPC as of January 31, 1996, exceed $10 million,
and by the amount that CPC's book value of assets as of January 31, 1996, less
liabilities assumed by the Company is less than $13.2 million. The purchase
price is also subject to reductions for the collection of certain accounts
receivable balances, net losses of CPC for the period January 1, 1996 through
April 15, 1996 and expenses incurred with closing certain foreign offices of
CPC. The purchase price is subject to increase by 11% of CPC's affiliated
Subchapter S corporations' net income for the period February 1, 1996 through
April 15, 1996. The Company did not purchase any assets relating to CPC's
pressroom and shipping businesses. The agreement calls for additional contingent
consideration, not to exceed $12 million, based on increases in the average
stock price, as defined in the agreement, of the Company's common stock through
April 15, 2001. The Company also entered into a five-year non-compete agreement
with CPC's principal shareholder that requires payments totalling $3.4 million
through April 15, 2001. The principal shareholder is also entitled to an
additional $500,000 annually, through March 31, 2001, if the Company maintains
certain business of a specified customer. The acquisition has been accounted for
as a purchase. The excess of the purchase price over the estimated fair values
of the net tangible and intangible identifiable assets acquired, which is
preliminary as of October 31, 1996, approximated $19.3 million and is being
amortized using the straight-line method over 15 years.
On March 29, 1996, the Company purchased all of the outstanding common stock
of FMC Resource Management Corporation for $5.4 million in cash and a promissory
note for $2.0 million. The agreement calls for additional contingent
consideration, not to exceed $4 million, based on annual gross profits through
January 31, 2001, as defined in the agreement. The acquisition has been
accounted for as a purchase. The excess of the purchase price over the estimated
fair values of the net tangible and intangible identifiable assets acquired,
which is preliminary as of October 31, 1996, approximated $6.0 million and is
being amortized using the straight-line method over 15 years.
6
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MERRILL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
2. BUSINESS ACQUISITIONS (CONTINUED)
Pro forma (unaudited) results for the three-month and nine-month periods
ended October 31, 1995 as though the acquisitions had been effective at February
1, 1995 are as follows:
<TABLE>
<CAPTION>
THREE-MONTHS NINE-MONTHS
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1995
------------------ ----------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues................................ $79,044 $237,901
-------- ----------------
-------- ----------------
Net income.............................. $ 2,510 $ 6,242
-------- ----------------
-------- ----------------
Net income per common and common
equivalent share....................... $ 0.31 $ 0.78
-------- ----------------
-------- ----------------
</TABLE>
3. FINANCIAL AGREEMENT
On October 25, 1996, the Company privately placed $35 million of Senior
Notes (the Notes). The Notes, which bear interest at 7.463%, require semi-annual
interest payments through October 25, 1999, at which time, semi-annual principal
and interest payments are required through October 25, 2006. The Notes include
various covenants, including the maintenance of certain financial ratios and
limitations on the amount of certain transactions including the payment of
dividends.
In conjunction with the closing of the Notes, the amount available under the
Company's revolving credit agreement was reduced from $60 million to $25
million. On November 25, 1996, the Company replaced its existing revolving
credit agreement with a $40 million revolving credit agreement with a group of
banks which expires on November 29, 1999. Under the terms of the new agreement,
the Company has the option to borrow at one of the bank's reference rate, at
1.0% above the London Interbank Offered Rate or at 1.0% above a certificate of
deposit based rate. The Company is required to pay a commitment fee of 0.25% per
annum on the unused portion of the line. The new agreement includes various
covenants, including the maintenance of minimum tangible net worth and
limitations on the amounts of certain transactions including the payments of
dividends.
4. SHAREHOLDERS' EQUITY
In May 1996, shareholders of the Company ratified the Company's 1996
Non-Employee Director Plan (the Plan) whereby 200,000 shares of common stock are
reserved for granting of nonstatutory options and awarding common shares as
partial payment to non-employee directors who serve on the the Company's Board
of Directors. Nonstatutory stock options issued under the Plan are granted at an
exercise price not less than 100% of the fair market value of the Company's
common stock on the date of grant. Compensation expense is recorded when common
stock is awarded as partial payment for the director's annual retainer in an
amount approximately equal to the fair market value of the Company's common
stock on the date of grant. As of October 31, 1996, nonstatutory options for
18,000 shares and 1,750 shares of common stock were granted.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations, constitute 'forward-looking' statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
'forward-looking' statements involve known and unknown risks, uncertainties, or
achievements of the Company which may cause actual results to be materially
different from any future results, performance, or achievements expressed or
implied by such 'forward-looking' statements. These risks and uncertainties
include, but are not limited to, the effect of economic and financial market
conditions, government security reporting regulations, paper costs and the
integration and performance of recent acquisitions.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to revenues of
certain items in the Company's consolidated statements of operations for the
three-month and nine-month periods ended October 31, 1996 and 1995, and the
percentage change in the dollar value of such items between the periods.
<TABLE>
<CAPTION>
THREE-MONTHS ENDED OCTOBER 31, NINE-MONTHS ENDED OCTOBER 31,
-------------------------------- --------------------------------
PERCENTAGE PERCENTAGE
INCREASE INCREASE
PERCENTAGE (DECREASE) PERCENTAGE (DECREASE)
OF REVENUES ---------- OF REVENUES ----------
----------------- 1996 VS. ----------------- 1996 VS.
1996 1995 1995 1996 1995 1995
------ ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Financial.................................. 40.4% 42.3% 43% 37.7% 33.9% 54%
Corporate.................................. 25.1 24.1 57 28.9 31.3 28
Commercial and Other....................... 23.3 21.9 60 21.9 22.0 37
Document Management Services............... 11.2 11.7 43 11.5 12.8 24
------ ------ ------ ------
Total revenues........................... 100.0 100.0 50 100.0 100.0 38
Cost of revenues............................. 65.6 66.4 48 64.3 68.0 31
------ ------ ------ ------
Gross profit............................. 34.4 33.6 54 35.7 32.0 54
Selling, general and administrative
expenses.................................... 24.8 24.6 52 25.3 24.3 44
------ ------ ------ ------
Operating income......................... 9.6 9.0 59 10.4 7.7 25
Interest expense............................. (1.5) (0.5) 345 (1.1) (0.4) 269
Other income................................. .3 -- -- .2 .2 71
------ ------ ------ ------
Income before income taxes............... 8.4 8.5 48 9.5 7.5 74
Provision for income taxes................... 3.7 3.7 53 4.2 3.2 81
------ ------ ------ ------
Net income............................... 4.7% 4.8% 44 5.3% 4.3% 70
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
REVENUES. Revenues for the third quarter of fiscal year 1997 and the
nine-month period ended October 31, 1996 increased 50% and 38% respectively,
when compared to the corresponding periods during fiscal year 1996. These
increases reflect general growth in all of the Company's revenue categories and
revenues generated from the fiscal year 1997 acquisitions of The Corporate
Printing Company (CPC) and FMC Resource Management Corporation (FMC) operations.
Financial revenue increased 43% for the current quarter and 54% for the current
nine-month period when compared to the same periods a year ago. The increase in
Financial revenue was driven by the fourth consecutive quarter of strong
financial market activity and additional revenues generated by CPC operations.
The increase in Corporate revenue of 57% for the current quarter and 28% for the
nine-month period ended October 31, 1996, when compared to the same periods
during fiscal year 1996, reflect strong Fund activity and continued demand for
EDGAR services. Commercial and Other revenue increased 60% and 37% for the
current quarter and nine-month period respectively, when compared to
corresponding periods during fiscal year 1996. This grow is attributed to
increased revenues from election-
8
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related printing activities and the inclusion of seven months of revenues
generated by FMC. Document Management Services revenue increased 43% and 24% for
the current quarter and nine-month period, respectively, when compared to the
same periods a year ago reflecting strong growth in revenues from document
management center services.
GROSS PROFIT. Gross profit margins for the current third quarter
approximated gross profit margins for the same period one year ago which
reflected a similar mix of business for both periods. Gross profit margins for
the current nine-month period exceeded gross profit margins for the same period
in fiscal year 1996 which is attributable to strong Financial category activity
during the entire current nine-month period which led to higher margin work mix
and increased utilization of the Company's operating resources.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percent of revenue remained relatively stable for
the current quarter when compared to the same period a year ago. Selling,
general and administrative expenses increased, as a percent of revenue, during
the current nine-month period compared to the nine-month period in fiscal year
1996. This increase is attributed to integration costs associated with the CPC
and FMC acquisitions, which occurred earlier in fiscal year 1997, and the
Company's continued focus on selling and marketing activities.
PROVISION FOR INCOME TAXES. The effective income tax rate was 44.5% during
the current quarter and nine-month periods. This compares to an effective income
tax rate of 43.0% for the same periods during fiscal year 1996. The increase in
the effective rate is a result of increased non-deductible business
entertainment expenses being incurred in conjunction with increased Financial
category revenues. The tax rate for the current nine-month period represents the
estimated effective tax rate for fiscal year 1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at October 31, 1996 increased to $65.1 million from $39.4
million at January 31, 1996 which reflects the strong operating results the
Company has experienced during the past nine months. Increased revenues during
the nine month period and continued demand for Company products and services
have resulted in increases in October 31, 1996 accounts receivable and work-in-
process inventory balances of $31.9 million and $26.5 million, respectively,
compared to corresponding balances at January 31, 1996. During the third
quarter, the Company completed its long-term financing through a private
placement of $35 million of unsecured senior notes. The notes mature in 2006 and
bear an annual interest rate of 7.463%. Proceeds from the private placement were
used to pay-down acquisition related borrowings under the Company's revolving
credit agreement. Subsequent to October 31, 1996, the Company replaced its
revolving credit agreement with a $40 million revolving credit agreement which
expires on November 29, 1999. Capital expenditures for the nine-month period
ended October 31, 1996 approximated $6.1 million and were primarily related to
reprographic and computer based production equipment. Cash and cash equivalents
decreased by approximately $9.4 million during the nine-month period ended
October 31, 1996.
NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 "Accounting for Stock-Based Compensation." This statement established
financial accounting and reporting standards for stock-based employee
compensation plans. The Company intends to follow the option that permits
companies to apply current accounting standards for stock-based employee
compensation. Effective with fiscal year-end 1997 reporting, the Company will
disclose pro forma net income and net income per share amounts as if Statement
No. 123 were applied.
9
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PART II. -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Note Purchase Agreement, dated October 25, 1996
10.2 Credit Agreement, dated November 25, 1996
11. Schedule of Computation of Per Share Earnings
(b) Reports on Form 8-K
None
10
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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.
<TABLE>
<S> <C>
(REGISTRANT) MERRILL CORPORATION
BY (SIGNATURE) /s/ John W. Castro
(NAME AND TITLE) John W. Castro, President and Chief Executive Officer
(DATE) December 12, 1996
BY (SIGNATURE) /s/ Kay A. Barber
(NAME AND TITLE) Kay A. Barber, Chief Financial Officer
(DATE) December 12, 1996
</TABLE>
11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- --------- ---------------------------------
<C> <S> <C>
10.1 Note Purchase Agreement, dated October 25, 1996...................... Filed herewith electronically
10.2 Credit Agreement, dated November 25, 1996............................ Filed herewith electronically
11. Schedule of Computation of Per Share Earnings........................ Filed herewith electronically
27. Financial Data Schedules............................................. Filed herewith electronically
</TABLE>
<PAGE>
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MERRILL CORPORATION
$35,000,000
7.463% Senior Notes due October 31, 2006
____________
NOTE PURCHASE AGREEMENT
____________
Dated as of October 25, 1996
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<PAGE>
TABLE OF CONTENTS
1. AUTHORIZATION OF NOTES ................................................. 1
2. SALE AND PURCHASE OF NOTES ............................................. 1
3. CLOSING ................................................................ 1
4. CONDITIONS TO CLOSING .................................................. 2
4.1 Representations and Warranties .................................... 2
4.2 Performance; No Default ........................................... 2
4.3 Compliance Certificates ........................................... 2
4.4 Opinions of Counsel ............................................... 3
4.5 Purchase Permitted By Applicable Law, etc. ........................ 3
4.6 Payment of Special Counsel Fees ................................... 3
4.7 Private Placement Number .......................................... 3
4.8 Changes in Corporate Structure .................................... 3
4.9 Searches .......................................................... 4
4.10 Proceedings and Documents ......................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .......................... 4
5.1 Organization; Power and Authority ................................. 4
5.2 Authorization, etc. ............................................... 4
5.3 Disclosure ........................................................ 5
5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates... 5
5.5 Financial Statements .............................................. 6
5.6 Compliance with Laws, Other Instruments, etc. ..................... 6
5.7 Governmental Authorizations, etc. ................................. 6
i
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5.8 Litigation; Observance of Agreements, Statutes and Orders ......... 6
5.9 Taxes ............................................................. 7
5.10 Title to Property; Leases ......................................... 7
5.11 Licenses, Permits, etc. ........................................... 7
5.12 Compliance with ERISA ............................................. 8
5.13 Private Offering by the Company ................................... 9
5.14 Use of Proceeds; Margin Regulations ............................... 9
5.15 Existing Indebtedness; Future Liens ............................... 9
5.16 Foreign Assets Control Regulations, etc. .......................... 9
5.17 Status under Certain Statutes .....................................10
5.18 Environmental Matters .............................................10
6. REPRESENTATIONS OF THE PURCHASER .......................................10
6.1 Purchase for Investment ...........................................10
6.2 Source of Funds ...................................................11
7. INFORMATION AS TO COMPANY ..............................................12
7.1 Financial and Business Information ................................12
7.2 Officer's Certificate .............................................15
7.3 Inspection ........................................................15
8. PREPAYMENT OF THE NOTES ................................................16
8.1 Required Prepayments ..............................................16
8.2 Optional Prepayments with Make-Whole Amount .......................16
8.3 Allocation of Partial Prepayments .................................16
8.4 Maturity; Surrender, etc. .........................................17
8.5 Purchase of Notes .................................................17
ii
<PAGE>
8.6 Make-Whole Amount .................................................17
9. AFFIRMATIVE COVENANTS ..................................................18
9.1 Compliance with Law ...............................................18
9.2 Insurance .........................................................19
9.3 Maintenance of Properties .........................................19
9.4 Payment of Taxes and Claims .......................................19
9.5 Corporate Existence, etc. .........................................19
10. NEGATIVE COVENANTS ....................................................20
10.1 Transactions with Affiliates ......................................20
10.2 Merger, Consolidation, etc. .......................................20
10.3 Liens .............................................................21
10.4 Limitations on Funded Indebtedness ................................22
10.5 Minimum Fixed Charge Coverage .....................................23
10.6 Restricted Payments ...............................................23
11. EVENTS OF DEFAULT .....................................................24
12. REMEDIES ON DEFAULT, ETC. .............................................26
12.1 Acceleration ......................................................26
12.2 Other Remedies ....................................................26
12.3 Rescission ........................................................26
12.4 No Waivers or Election of Remedies, Expenses, etc. ................27
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES .........................27
13.1 Registration of Notes .............................................27
13.2 Transfer and Exchange of Notes ....................................27
13.3 Replacement of Notes ..............................................28
iii
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14. PAYMENTS ON NOTES .....................................................28
14.1 Place of Payment ..................................................28
14.2 Home Office Payment ...............................................29
15. EXPENSES, ETC. ........................................................29
15.1 Transaction Expenses ..............................................29
15.2 Survival ..........................................................30
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT ..........30
17. AMENDMENT AND WAIVER ...............................................30
17.1 Requirements ......................................................30
17.2 Solicitation of Holders of Notes ..................................30
17.3 Binding Effect, etc. ..............................................31
17.4 Notes held by Company, etc. .......................................31
18. NOTICES ...............................................................31
19. REPRODUCTION OF DOCUMENTS .............................................32
20. CONFIDENTIAL INFORMATION ..............................................32
21. SUBSTITUTION OF PURCHASER .............................................33
22. MISCELLANEOUS .........................................................34
22.1 Successors and Assigns ............................................34
22.2 Payments Due on Non-Business Days .................................34
22.3 Severability ......................................................34
22.4 Construction ......................................................34
22.5 Counterparts ......................................................34
22.6 Governing Law .....................................................34
iv
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SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 5.1 -- Organization; Power and Authority
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.7 -- Governmental Authorizations
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 5.18 -- Environmental Matters
EXHIBIT 1 -- Form of 7.463% Senior Note due October 31, 2006
EXHIBIT 4.4 -- Form of Opinion of Special Counsel for the Company
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MERRILL CORPORATION
One Merrill Circle, Energy Park
Saint Paul, Minnesota 55108
7.463% Senior Notes due October 31, 2006
Dated as of October 25, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
Merrill Corporation, a Minnesota corporation (the "COMPANY"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $35,000,000 aggregate
principal amount of its 7.463% Senior Notes due October 31, 2006 (the
"NOTES", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement). The Notes shall be substantially
in the form set out in Exhibit 1, with such changes therefrom, if any, as may
be approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each of you, and each of you will purchase from the
Company, at the Closing provided for in Section 3, Notes in the principal
amount specified opposite your respective names in Schedule A at the purchase
price of 100% of the principal amount thereof. The obligations of each of
you hereunder are several and not joint obligations and each of you shall
have no obligation or liability to any Person for the performance or
nonperformance by any other purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you shall occur at
the offices of Faegre & Benson LLP, 2200 Norwest Center, Minneapolis,
Minnesota 55402, at 10:00 a.m., Minneapolis time, at a closing (the
"CLOSING") on October 25, 1996 or on such other Business Day thereafter on or
prior to October 31, 1996 as may be agreed upon by the Company and you.
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At the Closing the Company will deliver to each of you the Notes to be
purchased by each of you in the form of a single Note (or such greater number
of Notes in denominations of at least $100,000 as you may request) dated the
date of the Closing and registered in your respective names (or in the names
of your nominees), against delivery by each of you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of
the Company to account number 970225026310 at First Bank N.A., Minneapolis,
Minnesota, Bank ABA No. 991000022. If at the Closing the Company shall fail
to tender such Notes to you as provided above in this Section 3, or any of
the conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or
at the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue
and sale of the Notes (and the application of the proceeds thereof as
contemplated by Schedule 5.14) no Default or Event of Default shall have
occurred and be continuing. Neither the Company nor any Subsidiary shall
have entered into any transaction since the date of the Memorandum that would
have been prohibited by Sections 10.1, 10.3, 10.4 or 10.6 hereof had such
Sections applied since such date.
4.3 COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.8 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered to you
a certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery
of the Notes and the Agreements.
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4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Oppenheimer Wolff & Donnelly,
counsel for the Company, covering the matters set forth in Exhibit 4.4 and
covering such other matters incident to the transactions contemplated hereby
as you or your counsel may reasonably request (and the Company hereby
instructs its counsel to deliver such opinion to you) and (b) from Faegre &
Benson LLP, your special counsel in connection with such transactions
covering such matters incident to such transactions as you may reasonably
request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be permitted
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant
to any applicable law or regulation, which law or regulation was not in
effect on the date hereof. If requested by you, you shall have received an
Officer's Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such purchase is so
permitted.
4.6 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.7 PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the
Notes.
4.8 CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of incorporation or
been a party to any merger or consolidation and shall not have succeeded to
all or any substantial part of the liabilities of any other entity, at any
time following the date of the most recent financial statements referred to
in Schedule 5.5.
4.9 SEARCHES.
The Company shall have provided to you Uniform Commercial Code and State
and Federal tax lien searches from the State of Minnesota, as of a date no
more than fifteen days prior
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to the Closing, certified by a reporting service satisfactory to you, and
disclosing no Liens other than Liens permitted by Section 10.3.
4.10 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and
you and your special counsel shall have received all such counterpart
originals or certified or other copies of such documents as you or they may
reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and
(except as set forth on Schedule 5.1) is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which
the failure to be so qualified or in good standing could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has the corporate power and authority to own or hold under lease
the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and the Notes and to perform the provisions hereof and thereof.
5.2 AUTHORIZATION, ETC.
This Agreement and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement constitutes,
and upon execution and delivery thereof each Note will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, Norwest Bank Minnesota, National
Association, has delivered to you a copy of a Private Placement Memorandum,
dated September 1996 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material
respects, the general nature of the business and principal properties of the
Company and its Subsidiaries. This Agreement, the Memorandum, the documents,
certificates or other writings delivered to you by or on behalf of the
Company in connection with
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the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which
they were made. Except as disclosed in the Memorandum or in one of the
documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since January 31, 1996, there
has been no change in the financial condition, operations, business,
properties or prospects of the Company or any Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the Memorandum or in the other documents, certificates
or other writings identified therein, or in the financial statements listed
in Schedule 5.5.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary, and (ii) of the Company's Affiliates, other than
Subsidiaries.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being owned
by the Company and its Subsidiaries have been validly issued, are fully
paid and nonassessable and are owned by the Company or another
Subsidiary free and clear of any Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good
standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Each such Subsidiary has the corporate or other power and authority to
own or hold under lease the properties it purports to own or hold under
lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate
law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of
profits to the Company or any of its Subsidiaries that owns outstanding
shares of capital stock or similar equity interests of such Subsidiary.
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5.5 FINANCIAL STATEMENTS.
The Company has delivered to each of you copies of the consolidated
financial statements of the Company and its Subsidiaries listed on Schedule
5.5. All of said consolidated financial statements (including in each case
the related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout
the periods involved except as set forth in the notes thereto (subject, in
the case of any interim financial statements, to normal year-end adjustments).
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this Agreement
and the Notes will not (i) contravene, result in any breach of, or constitute
a default under, or result in the creation of any Lien in respect of any
property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter
or by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result
in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
Except as set forth in Schedule 5.7, no consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery
or performance by the Company of this Agreement or the Notes.
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any
property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
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5.9 TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (i) the amount of which is not individually or in the aggregate
Material or (ii) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which the Company or a Subsidiary, as the case may be, has established
adequate reserves in accordance with GAAP. The Company knows of no basis for
any other tax or assessment that could reasonably be expected to have a
Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes
for all fiscal periods are adequate. The Federal income tax liabilities of
the Company and its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the fiscal year
ended January 31, 1996.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Section 5.5 or purported to have been acquired by the
Company or any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case free and clear
of Liens prohibited by this Agreement. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11 LICENSES, PERMITS, ETC.
(a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually
or in the aggregate are Material, without known conflict with the
rights of others;
(b) To the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person; and
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.
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5.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as were not, are not, or would not be, as the case
may be, individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans that is subject to Title IV of ERISA (other than
Multiemployer Plans), determined as of the end of such Plan's most
recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities. The term
"BENEFIT LIABILITIES" has the meaning specified in section 4001 of
ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the
meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
(d) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that
is subject to the prohibitions of section 406 of ERISA or in connection
with which a tax could be imposed pursuant to section 4975(c)(l)(A)-(D)
of the Code. The representation by the Company in the first sentence
of this Section 5.12(e) is made in reliance upon and subject to (i) the
accuracy of your representation in Section 6.2 as to the sources of the
funds used to pay the purchase price of the Notes to be purchased by
you and (ii) the assumption, made solely for the purpose of making such
representation, that Department of Labor Interpretive Bulletin 75-2
with respect to prohibited transactions remains valid in the
circumstances of the transactions contemplated herein.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect
thereof with, any person other than you and not more than 12 other
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Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as
to involve the Company in a violation of Regulation X of said Board (12 CFR
224) or to involve any broker or dealer in a violation of Regulation T of
said Board (12 CFR 220). As used in this Section, the terms "MARGIN STOCK"
and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them
in said Regulation G.
5.15 EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the
Company and its Subsidiaries as of October 25, 1996, since which date
there has been no Material change in the amounts, interest rates,
sinking funds, installment payments or maturities of the Indebtedness
of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any Indebtedness
of the Company or such Subsidiary and no event or condition exists with
respect to any Indebtedness of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would
permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 10.3.
5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.
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5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or
the Federal Power Act, as amended.
5.18 ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of
their respective real properties now or formerly owned, leased or operated by
any of them or other assets, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials
in a manner contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASERS.
6.1 PURCHASE FOR INVESTMENT.
Each of you represents, solely as to yourself, that (i) you are
purchasing a Note for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds
and not with a view to the distribution thereof within the meaning of the
Securities Act, PROVIDED that the disposition of your or their property shall
at all times be within your or their control and (ii) you are an "accredited
investor" as defined in Rule 501(a) under the Securities Act and a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act. You
understand that the Notes have not been registered under the Securities Act
and may be resold only if registered pursuant to the provisions of the
Securities Act or if an
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exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes.
6.2 SOURCE OF FUNDS.
Each of you represents separately and severally, solely as to yourself,
that at least one of the following statements is an accurate representation
as to each source of funds (a "Source") to be used by you to pay the purchase
price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined
in Section V(e) of Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and, except as you have disclosed to the Company
in writing pursuant to this section (a), the amount of reserves and
liabilities for the general account contract(s) held by or on behalf of
any employee benefit plan or group of plans maintained by the same
employer or employee organization do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual
Statement filed with the state of domicile of the insurer; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-l (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of the PTE
91-38 (issued July 12, 1991) and, except as you have disclosed to the
Company in writing pursuant to this paragraph (b), no employee benefit
plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
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(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (e); or
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN",
"GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have
the respective meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than
the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, PROVIDED that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) ANNUAL STATEMENTS -- within 120 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
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(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis
for such opinion in the circumstances, and
(B) a certificate of such accountants stating that they
have reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event that
then constitutes a Default or an Event of Default, and, if they are
aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood
that such accountants shall not be liable, directly or indirectly,
for any failure to obtain knowledge of any Default or Event of
Default unless such accountants should have obtained knowledge
thereof in making an audit in accordance with generally accepted
auditing standards or did not make such an audit),
PROVIDED that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant
to Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
clause (B) above, shall be deemed to satisfy the requirements of this
Section 7.1(b);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly
requested by such holder and other than registration statements on Form
S-8 filed in respect of employee stock option plans), and each
prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or
any Subsidiary to the public concerning developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or
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Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person
has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 11(f), a written notice
specifying the nature and period of existence thereof and what action
the Company is taking or proposes to take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as defined
in Section 4043(b) of ERISA and the regulations thereunder, for
which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect;
(g) RULE 144A -- upon the request of the holder of any Note, the
Company will provide such holder such financial and other information as
such holder may reasonably determine to be necessary to be delivered to
a qualified institutional buyer in order to permit compliance with the
information requirements of Rule 144A(d)(4) under the Securities Act in
connection with the resale of the Notes; and
(h) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the
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Company to perform its obligations hereunder and under the Notes as from
time to time amy be reasonably requested by any such holder of Notes.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.3 through Section 10.6
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date
of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes
a Default or an Event of Default or, if any such condition or event
existed or exists (including, without limitation, any such event or
condition resulting from the failure of the Company or any Subsidiary to
comply with any Environmental Law), specifying the nature and period of
existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing;
and
(b) DEFAULT -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or
properties of the Company or any
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Subsidiary, to examine all their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their
respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all
at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1 REQUIRED PREPAYMENTS.
On October 31, 2000 and on each October 31 thereafter to and including
October 31, 2005, the Company will prepay $5,000,000 principal amount (or
such lesser principal amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole Amount or any premium, PROVIDED
that upon any partial prepayment of the Notes pursuant to Section 8.2 or
purchase of the Notes permitted by Section 8.5 the principal amount of each
required prepayment of the Notes becoming due under this Section 8.1 on and
after the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Notes is reduced
as a result of such prepayment or purchase.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay on
any interest payment date on or after October 31, 1997 all, or from time to
time any part of, the Notes, in an amount not less than $100,000 in the case
of a partial prepayment, at 100% of the principal amount so prepaid, plus the
Make-Whole Amount determined for the prepayment date with respect to such
principal amount. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and
not more than 60 days prior to the date fixed for such prepayment. Each such
notice shall specify such date, the aggregate principal amount of the Notes
to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal
amount being prepaid, and shall be accompanied by a certificate of a Senior
Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice were the date
of the prepayment), setting forth the details of such computation. Two
Business Days prior to such prepayment, the Company shall deliver to each
holder of Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
8.3 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes
at the time outstanding, pro rata, in
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proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.
8.4 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount,
if any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered
to the Company and canceled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
8.5 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.6 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, PROVIDED that the Make-Whole Amount may in
no event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (applied
on the same periodic basis as that on which interest on the Notes is payable)
equal to the Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of any
Note, .50% over the yield to maturity implied by (i) the yields reported, as
of 10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, by Bloomberg Financial
Markets for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such Settlement
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Date, or (ii) if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields
have been so reported as of the second Business Day preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the duration closest to and less than the Remaining
Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained
by multiplying (a) the principal component of each Remaining Scheduled
Payment with respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due
date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, PROVIDED that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in
each
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case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to
their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and
similarly situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly
conducted at all times, PROVIDED that this Section shall not prevent the
Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that
have or might become a Lien on properties or assets of the Company or any
Subsidiary, PROVIDED that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in
good faith and in appropriate proceedings, and the Company or a Subsidiary
has established adequate reserves therefor in accordance with GAAP on the
books of the Company or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and effect
its corporate existence. Subject to Section 10.2, the Company will at all
times preserve and keep in full force and effect the corporate existence of
each of its Subsidiaries (unless merged into the Company or
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a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
10.2 MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the
case may be, shall be a solvent corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Company is not such corporation, (i)
such corporation shall have executed and delivered to each holder of any
Notes its assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement, the Other Agreements
and the Notes and (ii) shall have caused to be delivered to each holder
of any Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply
with the terms hereof; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing, and the
Company would be able to incur at least $1.00 of additional Funded
Indebtedness.
No such conveyance, transfer or lease of substantially all of the assets
of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.2 from its liability under this Agreement or
the Notes.
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10.3 LIENS.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property or asset (including, without limitation, any document or instrument
in respect of goods or accounts receivable) of the Company or any such
Subsidiary, whether now owned or held or hereafter acquired, or any income or
profits therefrom, or assign or otherwise convey any right to receive income
or profits, except:
(a) Liens for property taxes and assessments or governmental
charges or Liens securing claims of mechanics and materialmen, provided
that payment thereof is not at the time required by Section 9.4 hereof;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or
in respect of which the Company or a Subsidiary shall at any time in
good faith be prosecuting an appeal or a proceeding for a review shall
have been secured, provided that payment thereof is not at the time
required by Section 9.4 hereof;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorney's liens and statutory landlord's liens) and Liens to secure
the performance of bids, tenders or trade contracts or to secure
statutory obligations, or other Liens of like general nature incurred in
the ordinary course of business and not in connection with the borrowing
of money; provided in each case, the obligation secured is not overdue,
or if overdue, is being contested in good faith by appropriate actions
or proceedings;
(d) pledges or deposits for the purpose of securing a stay or
discharge in the course of any legal proceedings, provided that the
aggregate amount of said deposits does not at any time exceed $1,000,000;
(e) Liens in the nature of zoning restrictions, easements, rights
and restrictions of record on the use of real property, and landlord's
and lessor's liens arising in the ordinary course of business, none of
which materially impairs use by the Company or a Subsidiary of the
property subject to such Lien;
(f) leases of property not constituting a Capital Lease;
(g) Liens created to secure all or any part of the purchase price,
or to secure Indebtedness incurred or assumed to pay all or any part of
the purchase price or cost of construction, of tangible property (or any
improvement thereon) acquired or constructed by the Company or a
Subsidiary after the date of the Closing; PROVIDED that
(i) any such Lien shall extend solely to the item or items of
such property (or improvement thereon) so acquired or constructed
and, if required by the terms of the instrument originally creating
such Lien, other property (or
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improvement thereon) which is an improvement to or is acquired for
specific use in connection with such acquired or constructed property (or
improvement thereon) or which is real property being improved by such
acquired or constructed property (or improvement thereon);
(ii) the principal amount of the Indebtedness secured by any
such Lien shall at no time exceed an amount equal to the lesser of
(A) the cost to the Company or such Subsidiary of the property (or
improvement thereon) so acquired or constructed or (B) the fair
market value of the property (or improvement thereon) so acquired
or constructed;
(iii) any such Lien shall be created contemporaneously with,
or within 30 days after, the acquisition or construction of such
property;
(iv) the Indebtedness secured by such Lien is payable in equal
monthly, quarterly, semi-annual or annual installments and is not
callable prior to maturity by the lender for reasons unrelated to
the creditworthiness of the obligor or destruction of the
collateral; and
(v) the incurrence of the Indebtedness secured by such Lien is
permitted by Section 10.4;
(h) any Lien renewing, extending or refunding any Lien permitted by
paragraph (g) of this Section 10.3, PROVIDED that (i) the principal
amount of Indebtedness secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the maturity thereof
reduced, (ii) such Lien is not extended to any other property, and (iii)
immediately after such extension, renewal or refunding no Default or
Event of Default would exist; and
(i) other Liens not otherwise permitted by paragraphs (a) through
(h) PROVIDED that the aggregate outstanding principal amount of all
Indebtedness secured by such other Liens shall at no time exceed 25% of
Total Capitalization.
10.4 LIMITATIONS ON FUNDED INDEBTEDNESS.
The Company will not, and will not permit any Subsidiary to, create,
assume, incur or suffer to exist, or in any manner be or become liable in
respect of any Funded Indebtedness, except:
(a) Funded Indebtedness evidenced by the Notes;
(b) Funded Indebtedness of the Company and its Subsidiaries
outstanding on October 25, 1996 and described in Schedule 5.15, provided
that such Funded Indebtedness is paid or prepaid in accordance with its
terms;
(c) Funded Indebtedness of the Company incurred after the date
hereof, which Indebtedness may be secured or unsecured; provided that at
the time of issuance thereof
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and after giving effect to the incurrence and application of the
proceeds thereof, the aggregate unpaid principal amount of all Funded
Indebtedness of the Company and its Subsidiaries then outstanding does
not exceed 50% of Total Capitalization;
(d) Funded Indebtedness of the Subsidiaries incurred after the date
hereof; provided that (i) such Indebtedness is secured by Liens
permitted by Section 10.3 hereof, and (ii) at the time of issuance
thereof and after giving effect to the incurrence and application of the
proceeds thereof, the aggregate unpaid principal amount of all Funded
Indebtedness of the Company and its Subsidiaries then outstanding does
not exceed 50% of Total Capitalization; and
(e) Funded Indebtedness of a Subsidiary to the Company or a
Wholly-Owned Subsidiary of the Company constituting general obligations
of such Subsidiary.
10.5 MINIMUM FIXED CHARGE COVERAGE.
The Company shall not permit, as of the end of each fiscal quarter,
Consolidated Net Income Available for Fixed Charges for the immediately
preceding period of four fiscal quarters to be less than 200% of Fixed
Charges for such period of four fiscal quarters.
10.6 RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Subsidiaries to, at
any time make, or incur any liability to make, any Restricted Payment, except
that:
(a) any Subsidiary may make Restricted Payments to the Company or a
Wholly-Owned Subsidiary; and
(b) the Company may make Restricted Payments, provided, immediately
after giving effect to such Restricted Payment, that the aggregate
amount of all Restricted Payments made during the period commencing on
July 31, 1996 and ending on the date such Restricted Payment is made,
inclusive, would not exceed the sum of (i) $15,000,000, PLUS (ii) 75% of
Cumulative Consolidated Net Income, MINUS (iii) 75% of Cumulative
Consolidated Net Loss PLUS (iv) the aggregate amount of net proceeds to
the Company from the issuance of capital stock during such period; and
provided further that at the time of making such Restricted Payment and
after giving effect thereto, no Default or Event of Default shall have
occurred and be continuing.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
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(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with
any term contained in Sections 7.1(d) or 10; or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs
(a), (b) and (c) of this Section 11) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note (any such written
notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or in
any writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect on
the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $15,000,000
beyond any period of grace provided with respect thereto, or (ii) the
Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness in an
aggregate outstanding principal amount of at least $15,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons
are entitled to declare such Indebtedness to be), due and payable before
its stated maturity or before its regularly scheduled dates of payment,
or (iii) as a consequence of the occurrence or continuation of any event
or condition (other than the passage of time or the right of the holder
of Indebtedness to convert such Indebtedness into equity interests), (x)
the Company or any Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount
of at least $15,000,000 or (y) one or more Persons have the right to
require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
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insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Subsidiaries, or
any such petition shall be filed against the Company or any of its
Subsidiaries and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money to the
extent not covered by insurance aggregating in excess of $5,000,000 are
rendered against one or more of the Company and its Subsidiaries and
which judgments are not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 60
days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of intent
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (iii) the
aggregate "amount of unfunded benefit liabilities" (within the meaning
of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $1,000,000, (vi) the
Company or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee
benefit plans, (v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment
welfare benefits in a manner that would increase the liability of the
Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be
expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned
to such terms in Section 3 of ERISA.
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12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default
described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause encompasses clause
(i) of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any holder or holders of more than 50% in principal amount of the Notes
at the time outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the Notes then outstanding
to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected by such Event of Default may at
any time, at its or their option, by notice or notices to the Company,
declare all the Notes held by it or them to be immediately due and
payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the
entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid
interest thereon and (y) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all
be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The
Company acknowledges, and the parties hereto agree, that each holder of a
Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and
that the provision for payment of a Make-Whole Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event
of Default, is intended to provide compensation for the deprivation of such
right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared
immediately due and payable under Section 12.1, the holder of any Note at the
time outstanding may proceed to protect and enforce the rights of such holder
by an action at law, suit in equity or other appropriate proceeding, whether
for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or (c) of Section 12.1, the holders of not less than 51% in
principal amount of the Notes then
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outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (c) no judgment or decree has been entered for
the payment of any monies due pursuant hereto or to the Notes. No rescission
and annulment under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section
15, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered
in such register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated
as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary. The
Company shall give to any holder of a Note that is an Institutional Investor
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
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for notices of each transferee of such Note or part thereof), the Company
shall, subject to the second sentence of Section 6.1 hereof, execute and
deliver, at the Company's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $100,000, PROVIDED
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name
(or the name of its nominee), shall be deemed to have made the representation
set forth in Section 6.2.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such
Note is, or is a nominee for, an original Purchaser or another holder
of a Note with a minimum net worth of at least $50,000,000, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall
have been paid on such lost, stolen, destroyed or mutilated Note or dated the
date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Minneapolis, Minnesota at the principal office of the Company. The Company
may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office
of a bank or trust company in such jurisdiction.
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14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly after any
such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by you or your
nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. The Company will afford the benefits of this
Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by you under this Agreement and that has
made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees
of a special counsel and, if reasonably required, local or other counsel,
rating fees payable to the NAIC, and expenses incurred in obtaining a private
placement number for the Notes) incurred by you and each holder of a Note in
connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of this Agreement or the Notes
(whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or the Notes or in responding to any subpoena
or other legal process or informal investigative demand issued in connection
with this Agreement or the Notes, or by reason of being a holder of any Note,
and (b) the costs and expenses, including financial advisors' fees, incurred
in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
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15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this
Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a
Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and the
Notes embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and
the Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as
it is used therein), will be effective as to you unless consented to by you
in writing, and (b) no such amendment or waiver may, without the written
consent of the holder of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of
principal of, or reduce the rate or change the time of payment or method of
computation of interest or of the Make-Whole Amount on, the Notes, (ii)
change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment,
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waiver or consent in respect of any of the provisions hereof or of the
Notes. The Company will deliver executed or true and correct copies of
each amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the entering
into by any holder of Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is concurrently
paid, or security is concurrently granted, on the same terms, ratably to
each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon
each future holder of any Note and upon the Company without regard to whether
such Note has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein, the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
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(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the President of
the Company, or at such other address as the Company shall have
specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually
received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and you may destroy any original document so
reproduced. The Company agrees and stipulates that, to the extent permitted
by applicable law, any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was
made by you in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence. This Section 19 shall not prohibit the Company or any other holder
of Notes from contesting any such reproduction to the same extent that it
could contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated by or otherwise pursuant to
this Agreement that is proprietary in nature and that was clearly marked or
labeled or otherwise adequately identified when received by you as being
confidential information of the Company or such Subsidiary, PROVIDED that
such term does not include information that (a) was publicly known or
otherwise known to you prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by you or any person acting
on your behalf, (c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary or (d) constitutes financial
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in
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good faith to protect confidential information of third parties delivered to
you, PROVIDED that you may deliver or disclose Confidential Information to
(i) your directors, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note, (iv) any Institutional Investor to which
you sell or offer to sell such Note or any part thereof or any participation
therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access
to information about your investment portfolio or (viii) any other Person to
which such delivery or disclosure may be necessary or appropriate (w) to
effect compliance with any law, rule, regulation or order applicable to you,
(x) in response to any subpoena or other legal process, (y) in connection
with any litigation to which you are a party or (z) if an Event of Default
has occurred and is continuing, to the extent you may reasonably determine
such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On reasonable
request by the Company in connection with the delivery to any holder of a
Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon
receipt of such notice, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall be deemed to refer to such
Affiliate in lieu of you. In the event that such Affiliate is so substituted
as a purchaser hereunder and such Affiliate thereafter transfers to you all
of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer
to such Affiliate, but shall refer to you, and you shall have all the rights
of an original holder of the Notes under this Agreement.
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22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-whole Amount or interest on any Note that
is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business Day.
22.3 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by
such Person.
22.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Minnesota excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
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* * * * *
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
MERRILL CORPORATION
By /s/ John Castro
----------------------------------
Its President
-------------------------------
The foregoing is hereby agreed
to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Michael P. Hemsen
-----------------------------------
Its Managing Director
--------------------------------
CM LIFE INSURANCE COMPANY
By /s/ Michael P. Hemsen
-----------------------------------
Its Managing Director
--------------------------------
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SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity
interests of the Company or any Subsidiary or any corporation of which the
Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity
interests. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of
the Company.
"BANK COMMITMENT" shall mean that certain Restated and Amended Revolving
Credit Agreement dated June 20, 1994, as amended by and between the Company
and First Bank National Association and Norwest Bank Minnesota, National
Association.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New
York City are required or authorized to be closed, and (b) for the purposes
of any other provision of this Agreement, any day other than a Saturday, a
Sunday or a day on which commercial banks in Minneapolis, Minnesota or
Springfield, Massachusetts are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Merrill Corporation, a Minnesota corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED NET INCOME (NET LOSS)" shall mean, for any period, the net
after-tax income (or net loss) of the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP.
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"CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES" shall mean, for
any period, Consolidated Net Income for such period, plus (i) all provisions
for income taxes in accordance with GAAP deducted in computing Consolidated
Net Income for such period, and (ii) Fixed Charges deducted in computing
Consolidated Net Income for such period.
"CONSOLIDATED NET WORTH" means, as of the date of any determination
thereof, the sum of the capital stock and capital in excess of par value,
plus retained earnings (or minus accumulated deficit), less treasury stock at
cost, of the Company and its Subsidiaries determined on a consolidated basis
in accordance with GAAP.
"CUMULATIVE CONSOLIDATED NET INCOME" shall mean the excess, if any, of:
(i) the sum of (A) Consolidated Net Income, if any, for each
completed fiscal quarter of the Company commencing on or after August 1,
1996 and ending on or before January 31, 1997, (B) Consolidated Net
Income, if any, for each completed fiscal year of the Company commencing
on or after February 1, 1997 and (C) Consolidated Net Income, if any,
for any completed fiscal quarter ending after the end of the most
recently completed fiscal year of the Company; OVER
(ii) the sum of (A) Consolidated Net Loss, if any, for each
completed fiscal quarter of the Company commencing on or after August 1,
1996 and ending on or before January 31, 1997, (B) Consolidated Net
Loss, if any, for each completed fiscal year of the Company commencing
on or after February 1, 1997 and (C) Consolidated Net Loss, if any, for
any completed fiscal quarter ending after the end of the most recently
completed fiscal year of the Company.
"CUMULATIVE CONSOLIDATED NET LOSS" shall mean the excess, if any, of:
(i) the sum of (A) Consolidated Net Loss, if any, for each
completed fiscal quarter of the Company commencing on or after August 1,
1996 and ending on or before January 31, 1997, (B) of Consolidated Net
Loss, if any, for each completed fiscal year of the Company commencing
on or after February 1, 1997 and (C) Consolidated Net Loss, if any, for
any completed fiscal quarter ending after the end of the most recently
completed fiscal year of the Company; OVER
(ii) the sum of (A) Consolidated Net Income, if any, for each
completed fiscal quarter of the Company commencing on or after August 1,
1996 and ending on or before January 31, 1997, (B) Consolidated Net
Income, if any, for each completed fiscal year of the Company commencing
on or after February 1, 1997 and (C) Consolidated Net Income, if any,
for any completed fiscal quarter ending after the end of the most
recently completed fiscal year of the Company.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become
an Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2% over the rate
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<PAGE>
of interest publicly announced by Norwest Bank Minnesota, National
Association in Minneapolis, Minnesota as its "base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
but not limited to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIXED CHARGES" shall mean, for any period, all interest expense on all
Indebtedness, and all rental expense on all operating leases deducted in
computing Consolidated Net Income for such period.
"FUNDED INDEBTEDNESS" shall mean all Indebtedness payable more than one
year from the date of its creation, or which may be renewed at the option of
the obligor for a period or periods aggregating more than one year from the
date of its creation, including the current portion thereof; provided that
any Indebtedness incurred or outstanding under any revolving credit or
similar agreement (including, without limitation, any revolving credit
facility provided under the Bank Commitment) in an amount up to an amount
equal to the lowest average balance during any period of 30 consecutive days
during the five fiscal quarters ending on or before the date of
determination, shall constitute Funded Indebtedness regardless of its term.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any
Subsidiary, or
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<PAGE>
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of
any other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that are
the subject of such Guaranty shall be assumed to be direct obligations of
such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos,
urea formaldehyde foam insulation and polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement
with respect to any such property);
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(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person
of the character described in clauses (a) through (g) to the extent such
Person remains legally liable in respect thereof notwithstanding that any
such obligation is deemed to be extinguished under GAAP.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 10% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and
loan association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of
any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease,
upon or with respect to any property or asset of such Person (including in
the case of stock, stockholder agreements, voting trust agreements and all
similar arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of
the Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Notes, or (c)
the validity or enforceability of this Agreement or the Notes.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
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<PAGE>
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend
to the subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may
have any liability.
"PREFERRED STOCK" means any class of capital stock of a corporation that
is preferred over any other class of capital stock of such corporation as to
the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least 66 2/3%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"RESTRICTED PAYMENTS" means, with respect to any corporation, (i)
dividends, whether in cash or property, on any shares of its capital stock of
any class (except dividends or other distributions payable solely in shares
of capital stock of the corporation making the distribution); (ii) any
purchase, redemption or retirement, directly or indirectly or through any
Subsidiary, of any shares of its capital stock, or any warrants, rights or
options to purchase or assign any shares of its capital stock; and (iii) any
other payment or distribution, either directly or indirectly, or through a
Subsidiary, in respect of its capital stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
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<PAGE>
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if
more than a 50% interest in the profits or capital thereof is owned by such
Person or one or more of its Subsidiaries or such Person and one or more of
its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount
of the obligation under any Swap shall be the amount determined in respect
thereof as of the end of the then most recently ended fiscal quarter of such
Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement
relating to such Swap provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount
of such obligation shall be the net amount so determined.
"TOTAL CAPITALIZATION" shall mean, as of the date of any determination
thereof, the sum of (i) the aggregate outstanding principal amount of all
Funded Indebtedness of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, plus (ii) Consolidated Net Worth.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one hundred
percent (100%) of all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Subsidiaries at such time.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of November 25, 1996
Among
MERRILL CORPORATION,
THE BANKS,
as defined herein,
and
FIRST BANK NATIONAL ASSOCIATION,
as a Bank and as Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT, dated as of November 25, 1996, is by and between MERRILL
CORPORATION, a Minnesota corporation (the "Borrower"), the banks or financial
institutions listed on the signature pages hereof or which hereafter become
parties hereto by means of assignment and assumption as hereinafter described
(individually referred to as a "Bank" or collectively as the "Banks"), and FIRST
BANK NATIONAL ASSOCIATION, a national banking association, as agent for the
Banks (in such capacity, the "Agent").
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. In addition to the terms defined elsewhere
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):
"ADVANCE": The portion of the outstanding Loans bearing interest at an
identical rate for an identical Interest Period, provided that all Reference
Rate Advances shall be deemed a single Advance. An Advance may be a "CD Rate
Advance", "Eurodollar Advance", or "Reference Rate Advance" (each, a "type" of
Advance).
"ADVERSE EVENT": The occurrence of any event that could have material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower and the Subsidiaries as a consolidated
enterprise or on the ability of the Borrower, any Guarantor, or any other party
obligated thereunder to perform its obligations under the Loan Documents.
"AFFILIATE": Any officer, director, independent contractor or employee of
the Borrower or any Guarantor or any other Person under the common control of
the Borrower or any other Affiliate.
"AGENT": First Bank National Association, as agent for the Banks hereunder
and each successor, as provided in SECTION 11.8, who shall act as Agent.
"AGREEMENT": This Credit Agreement, as it may be amended, modified,
supplemented, restated or replaced from time to time.
"ASSIGNMENT": Shall have the meaning set forth in SECTION 12.3.
"ASSIGNMENT AND ASSUMPTION AGREEMENT": Shall have the meaning set forth in
SECTION 12.3.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal holiday in
the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota and, with respect to Eurodollar Advances, a day on which
dealings in Dollars may be carried on by the Agent in the interbank eurodollar
market.
"CAPITAL EXPENDITURE": Any amount debited to the fixed asset account on
the consolidated balance sheet of the Borrower in respect of (a) the acquisition
(including, without limitation, acquisition by entry into a Capitalized Lease),
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or leaseholds,
<PAGE>
and (b) to the extent related to and not included in (a) above, materials,
contract labor and direct labor (excluding expenditures properly chargeable to
repairs or maintenance in accordance with GAAP).
"CAPITALIZED LEASE": Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
"CASH FLOW LEVERAGE": The ratio of (a) total interest bearing Debt,
including Capitalized Leases, at the end of each fiscal quarter, to (b) net
income of the Borrower before extraordinary gains PLUS depreciation and
amortization expense, MINUS Capital Expenditures, calculated over the four
consecutive quarters ending as of the date of the test; PROVIDED, HOWEVER, that
(i) for the fiscal quarter ended October 31, 1996, adjusted net income shall be
annualized by multiplying the result for the two consecutive quarters ending on
the date of the test by two, and (ii) for the fiscal quarter ending January 31,
1997, adjusted net income shall be annualized by multiplying the result for the
three consecutive quarters ending on the date of the test by four-thirds.
"CD ASSESSMENT RATE": The annual assessment rate (rounded upward, if
necessary, to the nearest 1/100th of 1%) actually incurred by the Agent during a
given Interest Period to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation's insuring of time deposits at offices of the
Agent in the United States, as adjusted as hereinafter provided. If the annual
assessment rate for the Federal Deposit Insurance Corporation's (or any
successor's) insuring such time deposits is scheduled to change during such
Interest Period, the CD Assessment Rate for such Interest Period shall be the
weighted average (rounded upward, if necessary, to the nearest 1/100th of 1%) of
the annual assessment rates in effect at the beginning and as of such change.
"CD RATE": The rate of interest determined by the Agent for the relevant
Interest Period to be the average (rounded upward, if necessary, to the nearest
1/100th of 1%) of the rates quoted to the Agent at approximately 8:00 a.m.,
Minneapolis time (or as soon thereafter as practicable), or at the option of the
Agent at approximately the time of the request for a CD Rate Advance if such
request is made later than 8:00 a.m., Minneapolis time, in each case on the
first day of the applicable Interest Period by certificate of deposit dealers
selected by the Agent, in its sole discretion, for the purchase from the Agent,
at face value, of certificates of deposit issued by the Agent in an amount and
maturity comparable to the amount and maturity of the requested CD Rate Advance,
or at the option of the Agent determined for such amount and maturity based on
published composite quotations of certificate of deposit rates.
"CD RATE ADVANCE": An Advance designated as such in a notice of borrowing
under SECTION 2.3 or a notice of continuation or conversion under SECTION 2.4.
"CD RATE (RESERVE ADJUSTED)": A rate per annum (rounded upward, if
necessary, to the nearest 1/100th of 1%) calculated for the Interest Period of a
CD Rate Advance in accordance with the following formula:
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<PAGE>
CD RATE
CDRA = ------------- + CDAR
1.00 - CDRR
In such formula, "CDAR" means "CD Assessment Rate", "CDRA" means "CD Rate
(Reserve Adjusted)" and "CDRR" means "CD Reserve Rate", in each instance
determined by the Agent for the applicable Interest Period. The Bank's
determination of all such rates for any Interest Period shall be rebuttably
presumptive evidence of the subject matter thereof.
"CD RESERVE RATE": A percentage equal to the daily average during such
Interest Period of the aggregate maximum reserve requirements (including all
basic, supplemental, marginal and other reserves), as specified under Regulation
D of the Federal Reserve Board, or any other applicable regulation that
prescribes reserve requirements applicable to non-personal time deposits (as
presently defined in Regulation D) with the Agent or applicable to extensions of
credit by the Agent the rate of interest on which is determined with regard to
rates applicable to non-personal time deposits. Without limiting the generality
of the foregoing, the CD Reserve Requirement shall reflect any reserves required
to be maintained by the Agent against (i) any category of liabilities that
includes deposits by reference to which the CD Rate is to be determined, or (ii)
any category of extensions of credit or other assets that includes CD Advances.
"CODE": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
"COMMITMENT": (i) The maximum unpaid principal amount of the Loans of all
Banks which may from time to time be outstanding hereunder, being initially
$40,000,000 as the same may be reduced from time to time pursuant to SECTION
4.3, or (ii) if so indicated for an individual Bank, the maximum unpaid
principal amount of the Loans of such Bank which may from time to time be
outstanding hereunder, being initially the amounts set forth on the signature
pages hereof or in the relevant Assignment and Assumption Agreement for such
Bank, as the same may be reduced from time to time pursuant to SECTION 4.3, or
(iii) as the context may require, the agreement of each Bank to make Loans to
the Borrower subject to the terms and conditions of this Agreement up to its
Commitment.
"COMPLIANCE CERTIFICATE": A certificate in the form of EXHIBIT C, duly
completed and signed by an authorized officer of the Borrower.
"CONSOLIDATED": When used with reference to any financial information
pertaining to (or when used as a part of any defined term or statement
pertaining to the financial condition of) any Person, the accounts of such
Person and its Subsidiaries, determined on a consolidated basis, all determined
as to principles of consolidation and, except as otherwise specifically required
by the definition of such term or by such statement as to such accounts, in
accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH": As of any date of determination, the
sum of the retained earnings, capital stock and surplus of the Borrower on a
Consolidated basis, less loans or accounts (other than accounts incurred in the
ordinary course of business) due from Affiliates, treasury stock and goodwill.
"DEBT": Without duplication, the sum of: (i) all items of indebtedness or
liability which, in accordance with GAAP, would be included in determining total
liabilities as shown on the
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<PAGE>
liabilities side of a balance sheet as of the date as of which Debt is to be
determined, including any indebtedness owed to an Affiliate, and (ii)
indebtedness secured by any mortgage, pledge, lien or security interest existing
on property owned by the Person whose Debt is being determined, whether or not
the indebtedness secured thereby shall have been assumed, and (iii) guaranties,
endorsements (other than for purposes of collection in the ordinary course of
business) and other contingent obligations in respect of, or to purchase or
otherwise acquire indebtedness of others; provided, however, that for purposes
of calculating that Debt evidenced by Minnesota Agricultural and Economical
Development Authority Small business Revenue Bonds, Series 1985C and Series
1990B, Debt shall be calculated net of deposits and reserves maintained with the
trustee to secure these bonds.
"DEFAULT": Any event which, with the giving of notice to the Borrower or
lapse of time, or both, would constitute an Event of Default.
"DOCUMENTARY LETTERS OF CREDIT": The documentary letters of credit issued
for the account of the Borrower pursuant to the provisions of SECTION 2.7 hereof
and the Existing Documentary Letters of Credit.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with regulations thereunder.
"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 ADVANCE": An Advance designated as such in a notice of
borrowing under SECTION 2.3 or a notice of continuation or conversion under
SECTION 2.4.
"EURODOLLAR INTERBANK RATE": The average offered rate for deposits in
United States Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%)
for delivery of such deposits on the first day of an Interest Period of a
Eurodollar Advance, for the number of days comprised therein, which appears on
the Reuters Screen LIBO Page as of 11:00 a.m., London time (or such other time
as of which such rate appears) on the day that is two Business Days preceding
the first day of the Interest Period or the rate for such deposits determined by
the Agent at such time based on such other published service of general
application as shall be selected by the Agent for such purpose; PROVIDED, that
in lieu of determining the rate in the foregoing manner, the Agent may determine
the rate based on rates offered to the Agent for deposits in United States
Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%) in the
interbank eurodollar market at such time for delivery on the first day of the
Interest Period for the number of days comprised therein. "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuter Monitor Money
Rates Service (or such other page as may replace the LIBO Page on that service
for the purpose of displaying London interbank offered rates of major banks for
United States Dollar deposits).
"EURODOLLAR RATE (RESERVE ADJUSTED)": A rate per annum (rounded upward, if
necessary, to the nearest 1/16th of 1%) calculated for the Interest Period of a
Eurodollar Advance in accordance with the following formula:
Eurodollar Interbank Rate
ERRA = --------------------------
1.00 - ERR
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<PAGE>
In such formula, "ERR" means "Eurodollar Reserve Rate" and "ERRA" means
"Eurodollar Rate (Reserve Adjusted)", in each instance determined by the Agent
for the applicable Interest Period. The Agent's determination of all such rates
for any Interest Period shall be rebuttably presumptive evidence of the subject
matter thereof.
"EURODOLLAR RESERVE RATE": A percentage equal to the daily average during
such Interest Period of the aggregate maximum reserve requirements (including
all basic, supplemental, marginal and other reserves), as specified under
Regulation D of the Federal Reserve Board, or any other applicable regulation
that prescribes reserve requirements applicable to Eurocurrency liabilities (as
presently defined in Regulation D) or applicable to extensions of credit by the
Agent the rate of interest on which is determined with regard to rates
applicable to Eurocurrency liabilities. Without limiting the generality of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any reserves
required to be maintained by the Agent against (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Interbank Rate is to
be determined, or (ii) any category of extensions of credit or other assets that
includes Eurodollar Advances.
"EVENT OF DEFAULT": Any event described in SECTION 10.1.
"EXISTING DOCUMENTARY LETTERS OF CREDIT": Those documentary letters of
credit identified on Schedule 1.1, and previously issued by First Bank for the
account of the Borrower.
"EXISTING STANDBY LETTERS OF CREDIT": Those standby letters of credit
identified on Schedule 1.1, and previously issued by First Bank for the account
of the Borrower.
"FEDERAL FUNDS RATE": For any date, the weighted average of the rates on
overnight Federal Funds transactions, with members of the Federal Reserve System
only, arranged by Federal Funds brokers applicable to Federal Funds transactions
on that date. The Federal Funds rate shall be determined by the Agent on the
basis of reports by Federal Funds brokers to, and published daily by, the
Federal Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government securities. If such publication is unavailable or the Federal Funds
Rate is not set forth therein, the Federal Funds Rate shall be determined on the
basis of any other source reasonably selected by the Agent. In the case of a
Saturday, Sunday or legal holiday on which banking institutions in Minneapolis,
Minnesota are not required to be open, the Federal Funds Rate shall be the rate
applicable to Federal Funds transactions on the immediately preceding day for
which the Federal Funds Rate is reported.
"FEDERAL RESERVE BOARD": The Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP": Generally accepted accounting principles as applied in the
preparation of the audited financial statement of the Borrower referred to in
SECTION 7.5.
"GUARANTIES": Collectively, a Guaranty in the form of EXHIBIT B attached
hereto, as the same may be amended, modified, extended renewed or replaced from
time to time, together with each other or additional guaranty of the Borrower's
obligations to the Agent and the Banks executed by any Guarantor from time to
time hereafter.
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"GUARANTOR": Each Subsidiary of Borrower (except for 793473 Ontario
Limited, unless the guaranty of such entity is required under SECTION 8.14) and
any other Person(s) guaranteeing Borrower's obligations to the Agent and the
Banks, from time to time.
"INTEREST PERIOD"
(a) For any Eurodollar Advance, the period commencing on the borrowing
date of such Eurodollar Advance or the date a Reference Rate Advance is
converted into such Eurodollar Advance, or the last day of the preceding
Interest Period for such Eurodollar Advance, as the case may be, and ending
on the numerically corresponding day one, two, three or six months
thereafter, as selected by the Borrower pursuant to SECTION 2.3 or SECTION
2.4; PROVIDED, that:
(i) any Interest Period which would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day
unless such next succeeding Business Day falls in another calendar
month, in which case such Interest Period shall end on the next
preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Termination
Date.
(b) For any CD Rate Advance, the period commencing on the borrowing
date of such CD Rate Advance or the date a Reference Rate Advance is
converted into such CD Rate Advance, or the last day of the preceding
Interest Period for such CD Rate Advance, as the case may be, and ending
30, 60, 90 or 180 days thereafter, as selected by the Borrower pursuant to
SECTION 2.3 or SECTION 2.4; PROVIDED, that:
(i) any Interest Period which would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day;
and
(ii) no Interest Period shall extend beyond the Termination Date.
"LETTERS OF CREDIT": Collectively, the Documentary Letters of Credit and
the Standby Letters of Credit.
"LETTER OF CREDIT AGREEMENTS": Shall have the meaning set forth in Section
2.7.
"LETTER OF CREDIT OBLIGATIONS": The aggregate amount of all possible
drawings under all Letters of Credit plus all amounts drawn under any Letter of
Credit and not reimbursed by the Borrower under the applicable Letter of Credit
Agreement.
"LIEN": Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
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"LOAN DOCUMENTS": This Agreement, the Notes, all Letter of Credit
Agreements, the Guaranties, and each other instrument, document, guaranty,
security agreement, mortgage, or other agreement executed and delivered by the
Borrower or any guarantor or party granting security interests in connection
with this Agreement, the Loans, the Letters of Credit, or any collateral for the
Loans or Letters of Credit (whether delivered prior to, concurrently with or
subsequent to delivery of this Agreement).
"LOANS": The loan or loans referred to in SECTION 2.1 and any other loans
or advances made to the Borrower by the Banks under or pursuant to this
Agreement.
"MULTIEMPLOYER PLAN": Means a "multiemployer plan" as defined in
SECTION 4001(A)(3) of ERISA to which Borrower or any Subsidiary is making or
accruing an obligation to make contributions, or has within any of the preceding
three plan years made or accrued an obligation to make contributions.
"NOTES": Collectively, the revolving notes of the Borrower, substantially
in the form of EXHIBIT A hereto, made payable each to a Bank and any note which
renews a Note or extends the maturity date thereof and which specifically refers
to this Agreement; and individually, as to any Bank, a "Note".
"PAYMENT DATE": The Termination Date PLUS (a) with respect to CD Rate
Advances and Eurodollar Advances, the last day of each Interest Period and, if
such Interest Period is in excess of 90 days (in the case of a CD Rate Advance)
or three months (in the case of a Eurodollar Advance), the day, 90 days or three
months, as the case may be, after the first day of such Interest Period, and
thereafter each day, 90 days or three months after each succeeding Payment Date;
(b) with respect to Reference Rate Advances, the first day of each month; and
(c) with respect to Commitment Fees, in arrears on the first day of each
September, December, March and June commencing December 1, 1996.
"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.
"PERCENTAGE": As to any Bank the proportion, expressed as a percentage,
that such Bank's Commitment bears to the total Commitments of all Banks.
"PERSON": Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
"PLAN": An employee benefit plan or other plan, maintained for employees
of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Agent as its "reference rate." The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate which is based on the Reference Rate, such
interest rate shall change on the effective date of any change in the Reference
Rate.
"REFERENCE RATE ADVANCE": An Advance designated as such in a notice of
borrowing under SECTION 2.3 or a notice of continuation or conversion under
SECTION 2.4.
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"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 Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
"REQUIRED BANKS": Either (a) at any time that there are only two Banks,
both of such Banks, or (b) if there are three or more Banks, those Banks whose
total Percentage equals or exceeds 67%, or if no Commitments remain in effect,
whose share of principal of the Loans constitutes at least 67% of the aggregate
outstanding principal of all Loans.
"RESTRICTED PAYMENT": In respect of any corporation: (a) dividends,
whether in cash or property, on any shares of its capital stock of any class
(except dividends or other distributions payable solely in shares of capital
stock of the corporation making the distribution); (b) any purchase, redemption
or retirement, directly or indirectly or through any Subsidiary, of any shares
of its capital stock, or any warrants, rights or options to purchase or assign
any shares of its capital stock; and (c) any other payment or distribution,
either directly or indirectly, or through a Subsidiary, in respect of its
capital stock.
"STANDBY LETTERS OF CREDIT": The standby letters of credit issued for the
account of Borrower pursuant to the provisions of SECTION 2.7 hereof and the
Existing Standby Letters of Credit.
"STANDBY LETTER OF CREDIT SUBLIMIT": Shall be $4,000,000.
"SUBSIDIARY": Any Person of which or in which the Borrower, the Borrower
and one or more of its Subsidiaries or one or more other Subsidiaries own
directly or indirectly 50% or more of: (a) the combined voting power of all
classes of stock having general voting power under ordinary circumstances to
elect a majority of the board of directors of such Person, if it is a
corporation, (b) the capital interest or profit interest of such Person, if it
is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
"TERMINATION DATE": The earliest of (a) November 29, 1999, (b) the date on
which the Commitments are terminated pursuant to SECTION 10.2 hereof, (c) the
date on which the Commitments are reduced to zero pursuant to SECTION 4.3
hereof, or (d) such other date as may be mutually agreed upon by the Borrower,
Agent and all Banks.
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 (including,
without limitation, determination of compliance with financial ratios and
restrictions in ARTICLES VIII and IX hereof) shall be made in accordance with
GAAP consistently applied. Any reference to "consolidated" financial terms
shall be deemed to refer to those financial terms as applied to the Borrower and
its Subsidiaries in accordance with GAAP.
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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.
ARTICLE II TERMS OF LENDING
SECTION 2.1 THE COMMITMENTS. Subject to the terms and conditions hereof
and in reliance upon the warranties of the Borrower herein, each Bank agrees,
severally and not jointly, to make loans (each, a "Loan" and, collectively, the
"Loans") to the Borrower from time to time from the date hereof until the
Termination Date, during which period the Borrower may repay and reborrow in
accordance with the provisions hereof, provided, that the aggregate unpaid
principal amount of the Loans plus the Letter of Credit Obligations at any one
time outstanding shall not exceed the total Commitments of all Banks. The Loans
shall be made by the Banks on a pro rata basis, calculated for each Bank based
on its Percentage.
SECTION 2.2 ADVANCE OPTIONS. The Loans shall be constituted of CD Rate
Advances, Eurodollar Advances and Reference Rate Advances, as shall be selected
by the Borrower, except as otherwise provided herein. Any combination of types
of Advances may be outstanding at the same time, except that the total number of
outstanding CD Rate Advances and Eurodollar Advances shall not exceed four at
any one time. Each CD Rate Advance or Eurodollar Advance shall be in a minimum
amount of $100,000 or in an integral multiple of $100,000 above such amount.
Each Reference Rate Advance shall be in a minimum amount of $10,000 or in an
integral multiple of $10,000 above such amount.
SECTION 2.3 BORROWING PROCEDURES.
(a) REQUEST BY BORROWER. Any request by the Borrower for a Loan
shall be in writing or by telephone or by telecopy, and must be given so as
to be received by the Agent not later than:
(i) 12:01 p.m., Minneapolis time, on the date of the requested
Loan, if the Loan shall be comprised of CD Rate Advances or Reference
Rate Advances; or
(ii) 12:01 p.m., , Minneapolis time, two Business days prior to
the date of the requested Loan, if the Loan shall be, or shall
include, a Eurodollar Advance.
Each request for a Loan shall specify (1) the borrowing date (which shall
be a Business Day), (2) the amount of such Loan and the type or types of
Advances comprising such Loan, and (3) if such Loan shall include CD Rate
Advances or Eurodollar Advances, the initial Interest Periods for such
Advances. The failure of the Borrower to confirm a telephonic request in
writing or otherwise comply with the provisions of this SECTION 2.3 shall
not in any manner affect the obligation of the Borrower to repay such Loan
in accordance with the terms of this Agreement and the Notes.
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(b) FUNDING OF AGENT. The Agent shall promptly notify each other
Bank of the receipt of such request, the matters specified therein, and of
such Bank's Percentage of the requested Loans. On the date of the
requested Loans, provided that such Bank receives the request for the loan
by 1:30 p.m., Minneapolis time, each Bank shall provide its share of the
requested Loans to the Agent in immediately available funds not later than
4:00 p.m., Minneapolis time. Unless the Agent determines that any
applicable condition specified in ARTICLE VI has not been satisfied, the
Agent will make the requested Loans available to the Borrower at the
Agent's principal office in Minneapolis, Minnesota in immediately available
funds not later than 5:00 p.m. (Minneapolis time) on the lending date so
requested, PROVIDED, that without limiting the generality of the foregoing,
if the Agent has received notice that an Event of Default has occurred, the
Agent will not make any additional Loan available for any other Bank
without prior consent of such Bank. If the Agent has made a Loan to the
Borrower on behalf of a Bank but has not received the amount of such Loan
from such Bank by the time herein required, such Bank shall pay interest to
the Agent on the amount so advanced at the overnight Federal Funds rate
from the date of such Loan to the date funds are received by the Agent from
such Bank, such interest to be payable with such remittance from such Bank
of the principal amount of such Loan (provided, however, that the Agent
shall not make any Loan on behalf of a Bank if the Agent has received prior
notice from such Bank that it will not make such Loan). If the Agent does
not receive payment from such Bank by the next Business Day after the date
of any Loan, the Agent shall be entitled to recover such Loan, with
interest thereon at the rate then applicable to the such Loan, on demand,
from the Borrower, without prejudice to the Agent's and the Borrower's
rights against such Bank. If such Bank pays the Agent the amount herein
required with interest at the overnight Federal Funds Rate before the Agent
has recovered from the Borrower, such Bank shall be entitled to the
interest payable by the Borrower with respect to the Loan in question
accruing from the date the Agent made such Loan.
SECTION 2.4 CONTINUATION OR CONVERSION OF LOANS. The Borrower may elect
to (i) continue any outstanding CD Rate Advance or Eurodollar Advance from one
Interest Period into a subsequent Interest Period to begin on the last day of
the earlier Interest Period, or (ii) convert any outstanding Advance into
another type of Advance (on the last day of an Interest Period only, in the
instance of a CD Rate Advance or Eurodollar Advance), by giving the Agent notice
in writing or by telephone or by telecopy, given so as to be received by the
Agent not later than:
(a) 12:01 p.m., Minneapolis time, on the date of the requested
continuation or conversion, if the continuing or converted Advance shall be
a CD Rate Advance or Reference Rate Advance; or
(b) 12:01 p.m., Minneapolis time, two Business days prior to the date
of the requested continuation or conversion, if the continuing or converted
Advance shall be a Eurodollar Advance.
Each notice of continuation or conversion of an Advance shall specify (i) the
effective date of the continuation or conversion date (which shall be a Business
Day), (ii) the amount and the type or types of Advances following such
continuation or conversion (subject to the limitation on amount set forth in
SECTION 2.2), and (iii) for continuation as, or conversion into, CD Rate
Advances or Eurodollar Advances, the Interest Periods for such Advances. Absent
timely notice of continuation or conversion, each CD Rate Advance and Eurodollar
Advance shall
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automatically convert into a Reference Rate Advance on the last day of an
applicable Interest Period, unless paid in full on such last day. No Advance
shall be continued as, or converted into, a CD Rate Advance or Eurodollar
Advance if the shortest Interest Period for such Advance may not transpire prior
to the Termination Date or if a Default or Event of Default shall exist.
SECTION 2.5 THE NOTES. The Loans of each Bank shall be evidenced by a
Note in the amount of said Bank's Commitment originally in effect and dated as
of the date of this Agreement. The Banks shall enter in their respective
records the amount of each Loan and Advance, the rate of interest borne by each
Advance and the payments made on the Loans, and such records shall be rebuttably
presumptive evidence of the subject matter thereof.
SECTION 2.6 FUNDING LOSSES. The Borrower will indemnify each Bank upon
demand against any loss or expense which such Bank may sustain or incur
(including, without limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund, or maintain any Advance) as a consequence of (i) any failure of the
Borrower to make any payment when due of any amount due hereunder or under said
Bank's Note, (ii) any failure of the Borrower to borrow, continue or convert an
Advance on a date specified therefor in a notice thereof, or (iii) any payment
(including, without limitation, any payment pursuant to SECTION 4.2, 4.3, 5.3 or
10.2), prepayment or conversion of any CD Rate Advance or Eurodollar Advance on
a date other than the last day of the Interest Period for such Advance.
Determinations by each Bank for purposes of this SECTION 2.6 of the amount
required to indemnify such Bank shall be rebuttably presumptive evidence of the
subject matter thereof. At the request of the Borrower, the Bank requesting
payment hereunder shall furnish the Borrower with a written explanation, in
reasonable detail, showing how the amounts of such payment were calculated.
SECTION 2.7 LETTERS OF CREDIT.
(a) LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and on the condition that the sum of the aggregate Letter of
Credit Obligations plus the outstanding principal balance of all Loans
shall never exceed the total Commitments of all of the Banks, the Borrower
may, in addition to Loans, request that the Agent issue letters of credit
for the account of the Borrower (or any Subsidiary of the Borrower,
provided that the Borrower shall be co-applicant with any such Subsidiary
for such Letter of Credit, and unconditionally jointly and severally
obligated in respect of any such Letter of Credit and under the Letter of
Credit Agreement pertaining thereto), by making such request to the Agent
(such letters of credit as any of them may be amended, supplemented,
extended or confirmed from time to time, being herein collectively called
the 'Letters of Credit'). The Agent may, at its discretion, elect to issue
or decline to issue any requested Letter of Credit. Upon the date of the
issuance of a Letter of Credit, the Agent shall be deemed, without further
action by any party hereto, to have sold to each Bank, and each Bank shall
be deemed without further action by any party hereto, to have purchased
from the Agent, a participation, in its Percentage, in such Letter of
Credit and the related Letter of Credit Obligations.
(b) ADDITIONAL PROVISIONS. The following additional provisions shall
apply to each Letter of Credit:
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(i) Borrower may request a standby Letter of Credit (a
"Standby Letter of Credit") or a documentary Letter of Credit (a
"Documentary Letter of Credit").
(ii) Upon receipt of any request for a Letter of Credit, the
Agent shall notify each Bank of the contents of such request and of
such Bank's Percentage of the amount of such proposed Letter of
Credit.
(iii) No Letter of Credit may be issued if after giving effect
thereto (1) the sum of (A) the aggregate outstanding principal amount
of Loans PLUS (B) the aggregate Letter of Credit Obligations would
exceed the total Commitments of all Banks, or (2) with respect to
Standby Letters of Credit, the aggregate Letter of Credit Obligations
pertaining to Standby Letters of Credit exceeds the Standby Letter of
Credit Sublimit. The Commitment of each Bank shall be deemed to be
utilized for all purposes hereof in an amount equal to such Bank's
Percentage of the Letter of Credit Obligations.
(iv) All Letters of Credit shall expire on the earlier of (1)
the date set forth in the applicable Letter of Credit, which date
shall be no later than one (1) year after the date of issuance, or (2)
the Termination Date.
(v) Upon receipt from the beneficiary of any Letter of Credit
of any demand for payment thereunder, Agent shall promptly notify the
Borrower and each Bank as to the amount to be paid as a result of such
demand and the payment date. If requested by any Bank, the Agent will
provided to such Bank a photocopy of the Letter of Credit and the
drafts and certificates presented to draw under such Letter of Credit.
If at any time the Agent shall have made a payment to a beneficiary of
such Letter of Credit in respect of a drawing or in respect of an
acceptance created in connection with a drawing under such Letter of
Credit, each Bank will pay to Agent immediately upon demand by the
Agent at any time during the period commencing after such payment
until reimbursement thereof in full by the Borrower, an amount equal
to such Bank's Percentage of such payment, together with interest on
such amount for each day from the date of demand for such payment (or,
if such demand is made after 2:00 p.m., Minneapolis time on such date,
from the next succeeding Business Day) to the date of payment by such
Bank of such amount at a rate of interest per annum equal to the
Federal Funds Rate for such period.
(vi) The Borrower shall be irrevocably and unconditionally
obligated forthwith to reimburse the Agent for any amount paid by the
Agent upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind, all of
which are hereby waived. Such reimbursement may, subject to
satisfaction of the conditions in ARTICLE VI hereof and to the unused
Commitment (after adjustment in the same to reflect the elimination of
the corresponding Letter of Credit Obligation), be made by the
borrowing of Loans. The Borrower shall pay interest on any amount
paid by the Agent upon any drawing under any Letter of Credit from the
date of such payment by the Agent until the date such amount is fully
reimbursed by the Borrower, at the rate set forth in SECTION 3.1(c),
or if remaining unpaid (whether by the making of a Loan hereunder or
otherwise) for more than one Business Day at the rate set forth in
SECTION 3.1(d). The Agent will pay to each Bank such
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Bank's Percentage of all amounts received from the Borrower for
application in payment, in whole or in part, of a Letter of Credit
Obligation, but only to the extent such Bank has made payment to the
Agent in respect of such Letter of Credit pursuant to CLAUSE (v)
above.
(vii) The Borrower will pay to Agent for the account of each
Bank in accordance with its Percentage a letter of credit fee (the
"Letter of Credit Fee") with respect to each Letter of Credit equal to
an amount, calculated on the basis of face amount of each Letter of
Credit, in each case for the period from and including the date of
issuance of such Letter of Credit to and including the date of
expiration or termination thereof at a per annum rate equal to 0.75%
in the case of Standby Letters of Credit and 0.25% in the case of
Documentary Letters of Credit. The Letter of Credit Fee is due and
payable in advance on the date of the issuance thereof and on each
anniversary date of such issuance so long as such Letter of Credit
remains outstanding. The Agent will pay to each Bank, promptly after
receiving any payment in respect of Letter of Credit Fees referred to
in this CLAUSE (vii), an amount equal to the product of such Bank's
Percentage TIMES the amount of such fees.
(viii) The Borrower shall also pay to Agent on demand an up-front
issuance fee of $250.00 for each Letter of Credit and all of Agent's
standard administrative and operating fees and charges in effect from
time to time for issuing, administering and honoring draws under any
Letter of Credit.
(ix) All fees hereunder shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed.
(x) The issuance by the Agent of each Letter of Credit shall,
in addition to the discretionary nature of this Letter of Credit
facility, be subject to the conditions precedent set forth in ARTICLE
VI hereof and the condition precedent that the Borrower shall have
executed and delivered such applications and other instruments and
agreements relating to such Letter of Credit as the Agent shall have
reasonably requested and are not inconsistent with the terms of this
Agreement (the 'Letter of Credit Agreements'). In the event of a
conflict between the terms of this Agreement and the terms of any
Letter of Credit Agreement (including the charging of any fees other
than normal and customary reimbursable expenses), the terms hereof
shall control.
(c) INDEMNIFICATION. The Borrower will indemnify the Agent and each
Bank from and against (i) all loss and damage to the Agent or any Bank
arising out of issuance of, or any other action taken in connection with,
any Letter of Credit other than loss or damage resulting from such party's
gross negligence or willful misconduct, and (ii) all costs and expenses
(including reasonable attorneys' fees and legal expenses) of all claims or
legal proceedings arising out of issuance of any Letter of Credit,
including without limitation, legal proceedings relating to any court
order, injunction or other process or decree restraining or seeking to
restrain the Agent from paying any amount under any Letter of Credit.
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ARTICLE III INTEREST AND FEES
SECTION 3.1 INTEREST.
(a) CD RATE ADVANCES. The unpaid principal amount of each CD Rate
Advance shall bear interest prior to maturity at a rate per annum equal to
the CD Rate (Reserve Adjusted) in effect for each Interest Period for such
CD Rate Advance plus 1.0% per annum
(b) EURODOLLAR ADVANCES. The unpaid principal amount of each
Eurodollar Advance shall bear interest prior to maturity at a rate per
annum equal to the Eurodollar Rate (Reserve Adjusted) in effect for each
Interest Period for such Eurodollar Advance plus 1.0% per annum.
(c) REFERENCE RATE ADVANCES. The unpaid principal amount of each
Reference Rate Advance shall bear interest prior to maturity at a rate per
annum equal to the Reference Rate.
(d) INTEREST AFTER MATURITY. Any amount of the Loans not paid when
due, whether at the date scheduled therefor or earlier upon acceleration,
shall bear interest until paid in full at a rate per annum equal to the
greater of (i) 1.75% in excess of the rate applicable to the unpaid
principal amount immediately before it became due, or (ii) 1.75% in excess
of the Reference Rate in effect from time to time.
SECTION 3.2 COMMITMENT FEES. The Borrower shall pay fees (the
"Commitment Fees") to the Agent for the account of the Banks in an amount
determined by applying a rate of 0.25% per annum to the average daily unused
amount of the Commitments of the respective Banks for the period from the date
hereof to the Termination Date.
SECTION 3.3 COMPUTATION. Interest and Commitment Fees shall be computed
on the basis of actual days elapsed and a year of 360 days.
SECTION 3.4 PAYMENT DATES. Accrued interest under SECTION 3.1(a), (b)
and (c) and Commitment Fees shall be payable on the applicable Payment Dates.
Accrued interest under SECTION 3.1(d) shall be payable on demand.
ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF
SECTION 4.1 REPAYMENT. Principal of the Loans, together with all
accrued and unpaid interest thereon, shall be due and payable on the Termination
Date.
SECTION 4.2 OPTIONAL PREPAYMENTS. The Borrower may, upon notice to the
Agent (which shall promptly notify the Banks) not later than 12:00 noon,
Minneapolis time, prepay the Loans, in whole or in part, at any time subject to
the provisions of SECTION 2.6, without any other premium or penalty. Each
partial prepayment shall be in an amount of $100,000 or an integral multiple
thereof, or in the instance of prepayment of a Reference Rate Advance, in an
amount of $10,000 or an integral multiple thereof.
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SECTION 4.3 OPTIONAL REDUCTION OR TERMINATION OF COMMITMENT. The
Borrower may, at any time, upon no less than three Business Days prior written
or telephonic notice received by the Agent (which shall promptly notify the
Banks), reduce the total Commitments. Any such reduction shall be in a minimum
amount of $1,000,000 or an integral multiple thereof and shall be applied to
reduce each Bank's Commitment ratably in accordance with the Banks' respective
Percentage. Upon any reduction in the Commitments pursuant to this Section, the
Borrower shall pay to the Agent for the account of the Banks the amount, if any,
by which the aggregate unpaid principal amount of outstanding Loans plus the
Letter of Credit Obligations exceeds the Commitments as so reduced. Amounts so
paid cannot be reborrowed. The Borrower may, at any time, upon not less than
three Business Days prior written notice to the Agent, terminate the Commitments
in their entirety. Upon termination of the Commitments pursuant to this
Section, the Borrower shall pay to the Agent for the account of the Banks the
full amount of all outstanding Loans, all accrued and unpaid interest thereon,
all unpaid Commitment Fees accrued to the date of such termination and all other
unpaid obligations of the Borrower to the Banks hereunder, and shall deliver
cash collateral to be held in accordance with SECTION 10.4 in respect of all
outstanding Letters of Credit. All payments described in this Section are
subject to the provisions of SECTION 2.6.
SECTION 4.4 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes, payment of all reimbursement obligations under the
Letters of Credit and payment of all fees, expenses and other obligations under
the Loan Documents shall be made without set-off or counterclaim in immediately
available funds not later than 1:30 p.m., Minneapolis time, on the dates due at
the main office of the Agent in Minneapolis, Minnesota. Funds received on any
day after such time shall be deemed to have been received on the next Business
Day. The Agent shall notify the Banks of such payment not later than 3:00 p.m.,
Minneapolis time, and shall promptly distribute in like funds to each Bank its
Percentage share of each such payment of principal, interest and Commitment
Fees. Subject to the definition of the term "Interest Period", whenever any
payment to be made hereunder or on the Notes shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
any interest or fees.
SECTION 4.5 PRORATION OF PAYMENTS. If any Bank or other holder of a
Loan shall obtain any payment or other recovery (whether voluntary, involuntary,
by application of offset, pursuant to the guaranty hereunder, or otherwise) on
account of principal of, interest on, or fees with respect to any Loan, or
payment of any Letter of Credit Obligations, in any case in excess of the share
of payments and other recoveries of other Banks or holders, such Bank or other
holder shall purchase from the other Banks or holders, in a manner to be
specified by the Agent, such participations in the Loans or Letter of Credit
Obligations held by such other Banks or holders as shall be necessary to cause
such purchasing Bank or other holder to share the excess payment or other
recovery ratably with each of such other Banks or holders; PROVIDED, HOWEVER,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Bank or holder, the purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS
AND LETTERS OF CREDIT
SECTION 5.1 INCREASED COSTS. If, as a result of any law, rule,
regulation, treaty or directive, or any change therein or in the interpretation
or administration thereof, or compliance
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by the Banks with any request or directive (whether or not having the force of
law) from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any Loan, the
Notes, any Letter of Credit or the Commitments is imposed, modified or
deemed applicable, or the basis of taxation of payments to any Bank of
interest or principal of the Loans, Letters of Credit or of the Commitment
Fees (other than taxes imposed on the overall net income of such Bank by
the jurisdiction in which such Bank has its principal office) is changed;
(b) any reserve, special deposit, special assessment or similar
requirement against assets of, deposits with or for the account of, or
Letters of Credit issued by or credit extended by, any Bank is imposed,
modified or deemed applicable;
(c) any increase in the amount of capital required or expected to be
maintained by any Bank or any Person controlling such Bank is imposed,
modified or deemed applicable; or
(d) any other condition affecting this Agreement or the Commitments
is imposed on any Bank or the relevant funding markets;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining the Loans, issuing or participating in the Letters of
Credit or extending its Commitment is increased, or the amount of any sum
receivable by such Bank hereunder or under the Notes in respect of any Loan or
Letters of Credit is reduced;
THEN, the Borrower shall pay to such Bank upon demand such additional amount or
amounts as will compensate such Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that the Banks
have not been compensated for such additional cost or reduction in the
calculation of the CD Reserve Rate or Eurodollar Reserve Rate). Determinations
by each Bank for purposes of this SECTION 5.1 of the additional amounts required
to compensate such Bank shall be rebuttably presumptive evidence of the subject
matter thereof. In determining such amounts, the Banks may use any reasonable
averaging, attribution and allocation methods. At the request of the Borrower,
each Bank making a claim hereunder shall furnish the Borrower with a written
explanation showing in reasonable detail how the foregoing additional amounts
were calculated.
SECTION 5.2 DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE OR
INADEQUATE; IMPRACTICABILITY. If the Agent reasonably determines that:
(a) deposits of the necessary amount for the relevant Interest Period
for any CD Rate Advance or Eurodollar Advance are not available to the
Banks in the relevant markets or that, by reason of circumstances affecting
such market, adequate and reasonable means do not exist for ascertaining
the CD Rate or Eurodollar Interbank Rate, as the case may be, for such
Interest Period;
(b) the CD Rate (Reserve Adjusted) or the Eurodollar Rate (Reserve
Adjusted), as the case may be, will not adequately and fairly reflect the
cost to the Banks of making or funding the CD Rate Advance or Eurodollar
Advance for a relevant Interest Period; or
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(c) the making or funding of CD Rate Advances or Eurodollar Advances,
as the case may be, has become impracticable as a result of any event
occurring after the date of this Agreement which, in the reasonable opinion
of the Agent, materially and adversely affects such Advances or any Bank's
Commitment to make such Advance or the relevant market;
the Agent shall promptly give notice of such determination to the Borrower, and
(i) any notice of a new CD Rate Advance or Eurodollar Advance, as the case may
be, previously given by the Borrower and not yet borrowed or converted shall be
deemed to be a notice to make a Reference Rate Advance, and (ii) the Borrower
shall be obligated to either prepay in full any outstanding CD Rate Advances or
Eurodollar Advances, as the case may be, without premium or penalty on the last
day of the current Interest Period with respect thereto or convert any such
Advance to an Advance of another type, as selected by Borrower, on such last
day.
SECTION 5.3 CHANGES IN LAW RENDERING CD RATE ADVANCES OR EURODOLLAR
ADVANCES UNLAWFUL. If at any time due to the adoption of any law, rule,
regulation, treaty or directive, or any change therein or in the interpretation
or administration thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with the interpretation
or administration thereof, or for any other reason arising subsequent to the
date of this Agreement, it shall become unlawful or impossible for any Bank to
make or fund any CD Rate Advance or Eurodollar Advance, the obligation of such
Bank to provide such Advance shall, upon the happening of such event, forthwith
be suspended for the duration of such illegality or impossibility. If any such
event shall make it unlawful or impossible for the Bank to continue any CD Rate
Advance or Eurodollar Advance previously made by it hereunder, such Bank shall,
upon the happening of such event, notify the Agent and the Borrower thereof in
writing, and the Borrower shall, at the time notified by such Bank, either
convert each such unlawful Advance to a Reference Rate Advance or repay such
Advance in full, together with accrued interest thereon, subject to the
provisions of SECTION 2.6.
SECTION 5.4 DISCRETION OF THE BANKS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall
be entitled to fund and maintain its funding of all or any part of the Loans in
any manner it elects; it being understood, however, that for purposes of this
Agreement, all determinations hereunder shall be made as if the Banks had
actually funded and maintained each CD Rate Advance and Eurodollar Advance
during the Interest Period for such Advance through the purchase of deposits
having a term corresponding to such Interest Period and bearing an interest rate
equal, in the case of CD Rate Advances, to the CD Rate for such Interest Period
or, in the case of Eurodollar Advances, to the Eurodollar Interbank Rate for
such Interest Period (whether or not any Bank shall have granted any
participations in such Advances).
ARTICLE VI CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS OF INITIAL LOAN. The obligation of the Banks to
make the initial Loan hereunder shall be subject to the satisfaction of the
conditions precedent, in addition to the applicable conditions precedent set
forth in SECTION 6.2 below, that the Agent shall have received all of the
following, in form and substance satisfactory to the Agent, each duly executed
and certified or dated the date of the initial Loan or such other date as is
satisfactory to the Agent:
(a) This Agreement executed by duly authorized officers of the
Borrower, Agent and each Bank.
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(b) The Notes executed by a duly authorized officer (or officers) of
the Borrower.
(c) The Guaranty executed by a duly authorized officer (or officers)
of each Guarantor.
(d) A copy of the corporate resolution of the Borrower and each
corporate Guarantor authorizing the execution, delivery and performance of
the Loan Documents to which it is a party, certified by the Secretary or an
Assistant Secretary of the applicable corporation.
(e) An incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of the Borrower and each corporate
Guarantor authorized to execute the Loan Documents and, in the case of the
Borrower, to request Loans hereunder, certified by the Secretary or an
Assistant Secretary of the applicable corporation.
(f) A copy of the Articles or Certificate of Incorporation and the
By-laws of the Borrower and each corporate Guarantor with all amendments
thereto, certified by the Secretary or an Assistant Secretary of the
applicable corporation, PROVIDED, that in lieu of submitting new copies of
such documents, the Borrower and each Guarantor may submit updating
certificates for copies of such documents that have been submitted to the
Agent within twelve months prior to the date hereof.
(g) A Certificate of Good Standing for the Borrower and each
corporate Guarantor in the jurisdiction of its incorporation, certified by
the appropriate governmental officials.
(h) A duly executed opinion of counsel to the Borrower and the
Guarantors, addressed to the Agent and the Banks, in substantially the form
of EXHIBIT D.
(i) A lien search on the Borrower showing no outstanding liens not
previously disclosed.
SECTION 6.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Banks to make any Loan hereunder (including the initial Loan) or issue any
Letter of Credit shall be subject to the satisfaction of the following
conditions precedent (and any request for a Loan or Letter of Credit shall be
deemed a representation and warranty by the Borrower that the following have
been satisfied):
(a) Before and after giving effect to such Loan or Letter of Credit,
the representation and warranties contained in ARTICLE VII shall be true
and correct, as though made on the date of such Loan, except to the extent
that such representations or warranties relate solely to an earlier date;
and
(b) Before and after giving effect to such Loan or issuance of such
Letter of Credit, no Default or Event of Default shall have occurred and be
continuing.
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ARTICLE VII REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this Agreement, to grant
the Commitments and to make Loans and issue Letters of Credit hereunder, the
Borrower represents and warrants to the Agent and the Banks:
SECTION 7.1 ORGANIZATION, STANDING, ETC. The Borrower, each corporate
Guarantor and each of its corporate Subsidiaries are corporations duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation and have all requisite corporate
power and authority to carry on their respective businesses as now conducted, to
enter into the Loan Documents and to perform its obligations under the Loan
Documents to which they are a party. With the exception of New Jersey (in which
the Borrower or the relevant Subsidiary shall become qualified as a foreign
corporation in due course), the Borrower and each of its Subsidiaries are 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.
SECTION 7.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower and each corporate Guarantor of the Loan Documents
to which it is a party have been duly authorized by all necessary corporate
action by the applicable corporation, and the Loan Documents constitute the
legal, valid and binding obligations of each such corporation, enforceable
against it 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 or might result from
general principles of equity.
SECTION 7.3 NO CONFLICT; NO DEFAULT; COMPLIANCE. The execution,
delivery and performance by the Borrower and each corporate Guarantor of the
Loan Documents to which it is a party 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 or such Guarantor, (b)
violate or contravene any provisions of the Articles (or Certificate) of
Incorporation or by-laws of the Borrower or any corporate Guarantor, 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 or any corporate Guarantor is a party or by which it or any of its
properties may be bound or result in the creation of any Lien on any asset of
the Borrower or any corporate Guarantor or other Subsidiary. Neither the
Borrower nor any corporate Guarantor or other Subsidiary is in default under or
in violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture, loan
or credit agreement or other agreement, lease or instrument in any case in which
the consequences of such default or violation could constitute an Adverse Event.
No Default or Event of Default has occurred and is continuing.
SECTION 7.4 CONSENT. No consent or approval of the shareholders of the
Borrower or any corporate Guarantor or any other Subsidiary and 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, corporate Guarantor or other
Subsidiary to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding effect or
enforceability of, the Loan Documents.
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SECTION 7.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's audited
consolidated financial statements as of January 31, 1996, and its unaudited
consolidated financial statements as of July 31, 1996, as heretofore furnished
to the Banks, have been prepared in accordance with GAAP on a consistent basis
and fairly present the financial condition of the Borrower and its Subsidiaries
as of such dates and the results of their operations and their statement of cash
flows 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 July
31, 1996, no Adverse Event has occurred.
SECTION 7.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described
in SCHEDULE 7.6, there are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary or any of their properties before any court or arbitrator, or any
governmental department, board, agency or other instrumentality which, if
determined adversely to the Borrower or such Subsidiary, could constitute an
Adverse Event. Except as described in SCHEDULE 7.6, neither the Borrower nor
any Subsidiary has any contingent liabilities which are material to the Borrower
and the Subsidiaries as a consolidated enterprise.
SECTION 7.7 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist
any violation by the Borrower or any Subsidiary of any applicable federal, state
or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which non-compliance or remedial action could
constitute an Adverse Event.
SECTION 7.8 ERISA. (a) Each Plan is in compliance in all material
respects with all applicable provisions of ERISA and the Code with respect to
which failure to comply would reasonably be expected to result in a material
liability to the Borrower or any Subsidiary (relative to the Borrower's
Consolidated Tangible New Worth or its ability to maintain compliance with the
covenants herein); (b) as of the date of the most recent valuation of each Plan
subject to Title IV of ERISA (other than a Multiemployer Plan), the aggregate
present value of all accrued vested benefits under such Plans (calculated on the
basis of the actuarial assumptions specified in the most recent actuarial
valuation for such Plans) did not exceed by a material amount (relative to the
Borrower's Consolidated Tangible Net Worth or its ability to maintain compliance
with the covenants herein) the fair market value of the assets of such Plans
allocable to such benefits; (c) the Borrower is not aware of any information
since the date of such valuations which would materially affect the information
contained therein: (d) no Plan which is subject to Part 3 of Subtitle B of Title
I of ERISA or Section 412 of the Code has incurred an accumulated funding
deficiency as that term is defined in Section 302 of ERISA or Section 412 of the
Code (whether or not waived); (e) no liability to the PBGC (other than required
premiums which have become due and payable, all of which have been paid) has
been incurred with respect to any Plan, and there has not been any Reportable
Event which presents a material risk of termination of any Plan by the PBGC; and
(f) to the best of its knowledge, the Borrower has not engaged in a transaction
which would subject it to any
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material tax, penalty or liability for prohibited transactions imposed by ERISA
or the Code. As of the effective date of this Agreement, neither the Borrower
nor any Subsidiary contributes to any Multiemployer Plan.
SECTION 7.9 REGULATION U. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan
will be used to purchase or carry margin stock or for any other purpose which
would violate any of the margin requirements of the Board of Governors of the
Federal Reserve System.
SECTION 7.10 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and the
Subsidiaries has good and marketable title to its real properties and good and
sufficient title to its other properties, including all properties and assets
referred to as owned by the Borrower and its Subsidiaries in the audited
financial statements referred to in SECTION 7.5 (other than property disposed of
since the date of such financial statement as permitted by SECTION 9.5). None
of the properties, revenues or assets of the Borrower or any of its Subsidiaries
is subject to a Lien, except for (a) Liens disclosed in the financial statements
referred to in SECTION 7.5, (b) Liens listed on SCHEDULE 7.11, or (c) Liens
allowed under SECTION 9.1.
SECTION 7.11 TAXES. Each of the Borrower and the Subsidiaries has filed
all federal, state and local tax returns which to the knowledge of the officers
of the Borrower and each Subsidiary are 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 or Subsidiary). 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 and the Subsidiaries in respect of taxes and other governmental charges
are adequate.
SECTION 7.12 TRADEMARKS, PATENTS. Each of the Borrower and the
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.
SECTION 7.13 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 7.14 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 7.15 SUBSIDIARIES. SCHEDULE 7.15 sets forth, as of the date of
this Agreement, a complete and correct list of all Subsidiaries of Borrower and
the present ownership of each, and the jurisdiction of incorporation of each.
Except as otherwise indicated on SCHEDULE 7.15, all
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shares of each Subsidiary owned by the Borrower or by any other Subsidiary are
fully paid and non-assessable.
SECTION 7.16 PARTNERSHIPS AND JOINT VENTURES. SCHEDULE 7.16 sets forth
as of the date of this Agreement a list of all partnerships or joint ventures in
which the Borrower or any Subsidiary is a partner (limited or general) or joint
venturer.
SECTION 7.17 ACCURACY OF INFORMATION. All factual information heretofore
or herewith furnished by the Borrower to the Banks for purposes of or in
connection with this Agreement or any of the transactions contemplated hereby
is, and all other such factual information hereafter furnished by the Borrower
to the Banks for purposes of or in connection with this Agreement or any of the
transactions will be, true and accurate in every material respect on the date as
of which such information is dated or certified and no such information contains
any material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading.
SECTION 7.18 SURVIVAL OF REPRESENTATIONS. All representations and
warranties contained in this ARTICLE VII shall survive the delivery of the Notes
and the making of the Loans and the issuance of any Letter of Credit evidenced
thereby and any investigation at any time made by or on behalf of the Banks
shall not diminish its rights to rely thereon.
ARTICLE VIII AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitments are
terminated or expire and the Loans and all other liabilities of the Borrower to
the Banks hereunder and under the Notes and any Letters of Credit have been paid
in full and all Letters of Credit have expired or been terminated, the Borrower
will do, and will cause each Subsidiary (except in the instance of SECTION 8.1)
to do, all of the following:
SECTION 8.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Banks:
(a) As soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, the annual audit report of the
Borrower and its Subsidiaries prepared on a consolidated basis and in
conformity with GAAP, consisting of at least statements of income, cash
flow, 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 Coopers and Lybrand, or other independent certified public
accountants of recognized standing selected by the Borrower and acceptable
to the Agent.
(b) As soon as available and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year, a copy of
the unaudited financial statement of the Borrower and its subsidiaries
prepared in the same manner as the audit report referred to in SECTION
8.1(a), signed by the Borrower's chief financial officer, consisting of at
least consolidated statements of income, and cash flow for the Borrower and
the Subsidiaries for such quarter and for the period from the beginning of
such fiscal year to the end of such quarter, and a consolidated balance
sheet of the Borrower as of the end of such quarter.
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(c) Together with the financial statements furnished by the Borrower
under SECTIONS 8.1(a) and 8.1(b), a Compliance Certificate.
(d) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent
to its stockholders.
(e) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which the Borrower shall file with
the Securities and Exchange Commission or any national securities exchange,
including the Borrower's quarterly 10-Q statements and annual 10-K
statements.
(f) immediately after the commencement thereof, notice in writing of
any and all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower or any Subsidiary of the type
described in SECTION 7.6 or which seek a monetary recovery against the
Borrower in excess of $250,000.
(g) as promptly as practicable (but in any event not later than five
(5) Business Days) after an officer of the Borrower obtains knowledge of
the occurrence of any event which constitutes an Event of Default, notice
of such occurrence, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken by the Borrower to cure
the effect of such event.
(h) as soon as possible and in any event within 30 days after the
Borrower knows that a Reportable Event with respect to any Plan has
occurred, the statement of the chief financial officer of the Borrower
setting forth details as to such Reportable Event and the action, if any,
which the Borrower proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the PBGC if such notice is
required to be furnished to the PBGC.
(i) as soon as possible, any notice of any default received by the
Borrower or any Subsidiary in the repayment of any indebtedness for
borrowed money owed by any of them the outstanding principal amount of
which exceeds $250,000.
(j) Immediately upon becoming aware of the occurrence thereof, notice
of the institution of any litigation, arbitration or governmental
proceeding which could result in an Adverse Event, or the rendering of a
judgment or decision in such litigation or proceeding, and the steps being
taken by the Person(s) affected by such proceeding.
(k) Immediately upon becoming aware of the occurrence thereof, notice
of any violation as to any environmental matter by the Borrower or any
Subsidiary and of the commencement of any judicial or administrative
proceeding relating to health, safety or environmental matters (i) in which
an adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other permits
held by the Borrower or any Subsidiary which are material to the operations
of the Borrower or such Subsidiary, or (ii) which will or threatens to
impose a material liability on the Borrower or such Subsidiary to any
Person or which will require a material expenditure by the Borrower or such
Subsidiary to cure any alleged problem or violation.
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(l) From time to time, such other information regarding the business,
operation and financial condition of the Borrower and the Subsidiaries as
any Bank may reasonably request.
SECTION 8.2 CORPORATE EXISTENCE. Subject to SECTION 9.6 in the instance
of a Subsidiary, maintain its corporate existence in good standing under the
laws of its jurisdiction of incorporation and (subject to the provision on
qualification in New Jersey in SECTION 7.1) its qualification to transact
business 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.
SECTION 8.3 INSURANCE. Maintain with insurance companies believed by
the Borrower to be financially sound and reputable, 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 corporations engaged in the
same or similar business and similarly situated.
SECTION 8.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and
reports which are required by law to be filed by it and 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,
without limitation, 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.
SECTION 8.5 INSPECTION. Permit any Person designated by any Bank to
visit and inspect any of its properties, corporate books and financial records,
to examine and to make copies of its books of accounts and other financial
records, 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 such Bank may designate. So long as no Event
of Default exists, the expenses of the Banks for such visits, inspections and
examinations shall be at the expense of the individual Bank making such visit,
inspection or examination, but any such visits, inspections, and examinations
made while any Event of Default is continuing shall be at the expense of the
Borrower.
SECTION 8.6 MAINTENANCE OF PROPERTIES. 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 8.7 BOOKS AND RECORDS. 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 8.8 COMPLIANCE. Comply with all laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which it may be
subject, to the extent that non-compliance could result in an Adverse Event.
SECTION 8.9 ERISA. Maintain each Plan in compliance with all material
applicable requirements of ERISA and of the Code and all material applicable
rulings and regulations issued under the provisions of ERISA and of the Code
with respect to which failure to comply would
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reasonably be expected to result in a material liability to the Borrower or any
Subsidiary (relative to the Borrower's Consolidated Tangible Net Worth).
SECTION 8.10 ENVIRONMENTAL MATTERS. Observe and comply with all laws,
rules, regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a material liability or otherwise
constitute or result in an Adverse Event.
SECTION 8.11 CONSOLIDATED TANGIBLE NET WORTH. The Borrower will
maintain, at the end of each fiscal quarter designated herein, its Consolidated
Tangible Net Worth at an amount not less than the sum of (a) $43,270,000 PLUS
(b) 70% of the cumulative positive net income in all fiscal quarters ending
after July 31, 1996; PROVIDED, HOWEVER, under no circumstances shall the minimum
Consolidated Tangible Net Worth ever decrease.
SECTION 8.12 MAXIMUM CASH FLOW LEVERAGE. The Borrower will ensure that
its Cash Flow Leverage does not exceed 4.50 to 1.00 at the end of each fiscal
quarter.
SECTION 8.13 MINIMUM INTEREST, LEASE AND DIVIDEND COVERAGE. The Borrower
will maintain at the end of each fiscal quarter, the ratio of (a) its net income
before extraordinary gains, interest expense, income tax expense, amortization
expense and operating lease expense, to (b) the sum of (i) total interest on
interest bearing Debt, including the interest component of Capitalized Leases,
(ii) the total payments on all operating leases, and (iii) the total dividends
declared and paid (which ratio shall be calculated over the periods of two, and
three consecutive fiscal quarters beginning, in each case, on August 1, 1996 and
November 1, 1996, and ending, respectively, on October 31, 1996, and January 31,
1997, and over the period of four consecutive fiscal quarters ending on
April 30, 1997, and the last day of each fiscal quarter thereafter) at not less
than 2.00 to 1.00.
SECTION 8.14 GUARANTORS. The Borrower will cause each Subsidiary that is
acquired, formed or incorporated, or otherwise comes into existence after the
date hereof to become a Guarantor by signing a Guaranty and submitting other
documents similar to those submitted by, or on behalf of, the Guarantors
existing as of the date of this Agreement. It is agreed and acknowledged that
793473 Ontario Limited, a corporation organized under the laws of Ontario,
Canada, is not a Guarantor, and shall not be required to become a Guarantor
unless either (a) such corporation shall have any material assets, or (b) such
corporation shall remain in existence later than April 30, 1997, and the Agent,
upon direction of the Required Banks shall request that the Guaranty of such
corporation shall be delivered.
ARTICLE IX NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitments are
terminated or expire and the Loans and all other liabilities of the Borrower to
the Banks hereunder and under the Notes and any Letters of Credit have been paid
in full and all Letters of Credit have expired or terminated, the Borrower will
not, and will not permit any Subsidiary to, do any of the following:
SECTION 9.1 LIENS. Create, incur or suffer to exist any mortgage, deed
of trust, pledge, lien, security interest, assignment or transfer upon or of any
of its assets, now owned or hereafter acquired, to secure any indebtedness for
borrowed money; EXCLUDING, HOWEVER, from the operation of the foregoing:
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(a) liens for taxes or assessments or other governmental charges to
the extent not required to be paid by SECTION 8.4;
(b) materialmen's, merchants', carriers', workmen's, repairmen's, or
other like liens arising in the ordinary course of business to the extent
not required to be paid by SECTION 8.4;
(c) pledges or deposits to secure obligations under workmen's
compensation laws, unemployment insurance and social security laws, or to
secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases or to secure statutory obligations
or surety or appeal bonds, or to secure indemnity, performance or other
similar bonds in the ordinary course of business;
(d) zoning restrictions, easements, licenses, restrictions on the use
of real property or minor irregularities in title thereto, which do not
materially impair the use of such property in the operation of the business
of the Borrower and any Subsidiary or the value of such property for the
purpose of such business;
(e) purchase money mortgages, liens, or security interests (which
term for purposes of this subsection shall include conditional sale
agreements or other title retention agreements and leases in the nature of
title retention agreements) upon or in property acquired after the date
hereof, or mortgages, liens or security interests existing in such property
at the time of acquisition thereof, or, in the case of any corporation
which thereafter becomes a Subsidiary, mortgages, liens or security
interests upon or in its property, existing at the time such corporation
becomes a Subsidiary, PROVIDED that:
(1) no such mortgage, lien or security interest extends or shall
extend to or cover any property of the Borrower or such Subsidiary, as
the case may be, other than the property then being acquired and fixed
improvements then or thereafter erected thereon;
(2) the aggregate principal amount of all Debt of the Borrower
and all Subsidiaries secured by all mortgages, liens or security
interests described in this subsection (e) shall not exceed $1,000,000
at any one time outstanding; and
(3) the aggregate principal amount of Debt secured by mortgages,
liens and security interests described in this subsection (e) at the
time of acquisition of the property subject thereto shall not exceed
the cost of such property or of the then fair market value of such
property as determined by the Board of Directors of the Borrower,
whichever shall be less, and the aggregate amount of payments made
thereunder will not result in a violation of the restriction contained
in SECTION 9.8;
(f) mortgages, liens, pledges and security interests on any property
of the Borrower or any Subsidiary (other than those described in subsection
(e)) securing any indebtedness for borrowed money in existence on the date
hereof and listed in SCHEDULE 7.11; and
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(g) liens arising out of a judgment against the Borrower or any
Subsidiary for the payment of money not exceeding $1,000,000 with respect
to which an appeal is being prosecuted and a stay of execution pending such
appeal has been secured.
SECTION 9.2 INDEBTEDNESS. The Borrower will not, and will not permit
any Subsidiary to, incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or advances or any indebtedness for borrowed
money, or any other indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, except:
(a) indebtedness evidenced by the Notes;
(b) indebtedness of the Borrower or any Subsidiary in existence on
the date hereof and listed in SCHEDULE 9.2;
(c) indebtedness of a Subsidiary to the Borrower or another
Subsidiary on account of borrowings from the Borrower or such other
Subsidiary, or indebtedness of the Borrower to a Subsidiary on account of
borrowings from that Subsidiary; and
(d) indebtedness of the Borrower or any Subsidiary incurred after the
date hereof which in the aggregate for the Borrower and all Subsidiaries
does not exceed $5,000,000 at any time outstanding.
SECTION 9.3 GUARANTIES. The Borrower will not, and will not permit any
Subsidiary to, assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) the endorsement of negotiable instruments by the Borrower or a
Subsidiary for deposit or collection or similar transactions in the
ordinary course of business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in SCHEDULE 9.3;
(c) guaranties given after the date hereof in the ordinary course of
business of the Borrower or a Subsidiary; and
(d) guaranties by the Borrower or any Subsidiary of the indebtedness
of any Subsidiary or of the Borrower, or guaranties by any Subsidiary of
the indebtedness of any other another Subsidiary if all such Subsidiaries
are Guarantors and if such indebtedness is permitted under SECTION 9.2(d).
SECTION 9.4 INVESTMENTS. The Borrower will not, and will not permit any
Subsidiary to, purchase or hold beneficially any stock or other securities or
evidences of indebtedness of, make or permit to exist any loans or advances to,
or make any investment or acquire any interest whatsoever in, any other Person,
except:
(a) investments in direct obligations of the United States of America
or any agency or instrumentality thereof whose obligations constitute full
faith and credit obligations of the United States of America having a
maturity of one year or less,
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commercial paper issued by U.S. corporations rated "A1" or "A2" by Standard
& Poor's Ratings Service or "P1" or "P2" by Moody's Investors Service or
certificates of deposit or bankers' acceptances having a maturity of one
year or less issued by members of the Federal Reserve System having
deposits in excess of $10,000,000;
(b) advances and loans to Affiliates;
(c) advances in the form of progress payments, prepaid rent or
security deposits;
(d) loans and advances by a Subsidiary to the Borrower or another
Subsidiary, PROVIDED, HOWEVER, that a Subsidiary that is a Guarantor may
make loans or advances only to Borrower or another Subsidiary that is also
a Guarantor;
(e) loans and advances by the Borrower to any Subsidiary;
(f) subject to the limitation contained in SECTION 9.6 hereof, stock
in any Subsidiaries acquired after the date hereof; and
(g) investments in stock or debt instruments of other Persons which
in the aggregate do not exceed $5,000,000 at any time outstanding.
SECTION 9.5 SALE OF ASSETS. The Borrower will not, nor shall it permit
any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of all or
a substantial part of its assets (whether in one transaction or in a series, of
transactions) to any other Person other than in the ordinary course of business;
provided, however, that the restrictions contained in this Section shall not
apply to or prevent:
(a) the conveyance, lease or transfer by a Subsidiary of all or a
part of its properties to the Borrower or to another wholly-owned
Subsidiary of the Borrower;
(b) sales or leases by the Borrower or a Subsidiary of its properties
in the ordinary course of business; and
(c) sales or lease by the Borrower or a Subsidiary of its surplus,
obsolete or worn-out properties.
SECTION 9.6 CONSOLIDATION AND MERGER; ACQUISITION OF ASSETS AND STOCK.
The Borrower will not, nor shall it permit any Subsidiary to, consolidate with
or merge into any Person, or permit any other Person to merge into it unless (i)
the Borrower immediately notifies each of the Banks following the merger or
consolidation, (ii) the Borrower or the Subsidiary is the surviving entity, and
(iii) the Borrower reaffirms its liability under the Loan Documents after the
merger or consolidation and represents and warrants to the Bank that there does
not then exist any Default or Event of Default hereunder; PROVIDED, HOWEVER,
that the foregoing restrictions shall not apply to or prevent the consolidation
or merger of a Subsidiary with the Borrower (if Borrower shall be the continuing
or surviving corporation) or another then existing wholly-owned Subsidiary of
the Borrower. The Borrower agrees that in each consecutive 12 month period, the
aggregate amount that is expended (whether in cash or in stock) by the Borrower
and its Subsidiaries to acquire all or substantially all of the assets or any
stock of
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another Person, and to merge or consolidate with another Person, shall not
exceed $5,000,000 in the aggregate.
SECTION 9.7 SALE AND LEASEBACK. The Borrower will not, nor shall it
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
with any other Person whereby the Borrower or any Subsidiary shall sell or
transfer any real or personal property, whether now owned or hereafter acquired,
and then or thereafter rent or lease as lessee such property or any part thereof
or any other property which the Borrower or any Subsidiary intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 9.8 EXPENDITURES FOR FIXED ASSETS. The Borrower will not, nor
shall it permit any Subsidiary to, make any future expenditure of money for the
purchase or construction of fixed assets if, after giving effect to such
expenditure, the aggregate amount of such expenditures made by the Borrower and
its Subsidiaries in any fiscal year will exceed $20,000,000.
SECTION 9.9 RESTRICTIONS ON ISSUANCE AND SALE OF SUBSIDIARY STOCK. The
Borrower will not:
(a) permit any Subsidiary to issue or sell any shares of stock of any
class of such Subsidiary to any other Person (other than the Borrower or a
wholly-owned Subsidiary of the Borrower), except for the purpose of
qualifying directors or of satisfying preemptive rights of paying a common
stock dividend on, or splitting, common stock of such Subsidiary; or
(b) sell, transfer or otherwise dispose of any shares of stock of any
class (except to a wholly-owned Subsidiary of the Borrower or to qualify
directors) of any Subsidiary or permit any Subsidiary to sell, transfer or
otherwise dispose of (except to the Borrower or a wholly-owned Subsidiary
of the Borrower or to qualified Directors) any shares of stock of any class
of any other Subsidiary.
SECTION 9.10 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not,
nor will it permit any Subsidiary to, engage in any line of business materially
different from that presently engaged in by the Borrower or its Subsidiaries.
SECTION 9.11 PLANS. Permit any condition to exist in connection with any
Plan which might constitute grounds for the PBGC to institute proceedings to
have such Plan terminated or a trustee appointed to administer such Plan, permit
any Plan to terminate under any circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to any property, revenue or
asset of the Borrower or any Subsidiary or permit the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $250,000.
SECTION 9.12 OTHER AGREEMENTS. Enter into any agreement, bond, note or
other instrument with or for the benefit of any Person other than the Bank which
would be violated or breached by the Borrower's performance of its obligations
under the Loan Documents.
SECTION 9.13 RESTRICTED PAYMENTS. Make, or incur any liability to make,
any Restricted Payment, except that:
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(a) any Subsidiary may make Restricted Payments to the Borrower or a
wholly-owned Subsidiary; and
(b) the Borrower may make Restricted Payments, PROVIDED, immediately after
giving effect to such Restricted Payments, that the aggregate amount of all
Restricted Payments made during the period commencing on July 31, 1996 and
ending on the date such Restricted Payment is made, inclusive, would not
exceed the sum of (i) $15,000,000, PLUS (ii) 75% of cumulative consolidated
net after-tax income of the Borrower and its Subsidiaries for the period
commencing on August 1, 1996, and ending on the most-recently ended fiscal
quarter of the Borrower, MINUS (iii) 75% of cumulative consolidated net
loss of the Borrower and its Subsidiaries for the same period, PLUS (iv)
the aggregate amount of net proceeds to the Borrower from the issuance of
capital stock during such period; PROVIDED, FURTHER, that (x) at the time
of making such Restricted Payment and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing, and (y)
Restricted Payments consisting of any purchase, redemption or retirement,
directly or indirectly or through any Subsidiary, of any shares of capital
stock, shall not exceed
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$25,000,000 in the aggregate for all such Restricted Payments under this
subsection (y) after July 31, 1996. For purposes of the foregoing,
cumulative consolidated net income and net loss shall be calculated on an
annual basis for fiscal years that have ended, and a quarterly basis for
fiscal years not ended.
SECTION 9.14 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a
party to any material contract for the purchase or lease of materials, supplies
or other property or services if such contract requires that payment be made by
it regardless of whether or not delivery is ever made of such materials,
supplies or other property or services.
SECTION 9.15 TRANSACTIONS WITH AFFILIATES. Enter into or be a party to
any transaction or arrangement, including, without limitation, the purchase,
sale lease or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or the applicable Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate, PROVIDED, that this Section shall not prohibit transfers of assets
(which may or may not be for arms-length consideration) from any Subsidiary to
another Subsidiary, provided that the transferee is also a Guarantor.
SECTION 9.16 USE OF PROCEEDS. Permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Federal Reserve Board, as amended from time to
time, and furnish to the Bank, upon its request, a statement in conformity with
the requirements of Federal Reserve Form U-1 referred to in Regulation U.
ARTICLE X EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due, whether by acceleration
or otherwise, any payment of principal of or interest on the Notes or any
Letter of Credit reimbursement obligation and such failure shall continue
for a period of five (5) calendar days;
(b) Any representation or warranty made or deemed to have been made
by or on behalf of the Borrower or any Guarantor or other Subsidiary in any
of the Loan Documents or by or on behalf of the Borrower or any Subsidiary
in any certificate, statement, report or other writing furnished by or on
behalf of the Borrower or any Guarantor to the Banks pursuant to the Loan
Documents 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
or deemed to have been stated or certified;
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(c) The Borrower shall fail to comply with SECTION 8.2, 8.11, 8.12 or
8.13 hereof or any Section of ARTICLE IX hereof;
(d) The Borrower shall fail to comply with any agreement, covenant,
condition, provision or term contained in this Agreement (and such failure
shall not constitute an Event of Default under any of the other provisions
of this SECTION 10.1) and such failure to comply shall continue for 30
calendar days after notice thereof to the Borrower by the Agent or any
Bank;
(e) The Borrower or any Guarantor or 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 Guarantor or
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 Guarantor or
Subsidiary or for a substantial part of the property thereof and shall not
be discharged within 60 days;
(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, any Guarantor or a Subsidiary, and, if instituted
against the Borrower, Guarantor or a Subsidiary, shall have been consented
to or acquiesced in by the Borrower or such Subsidiary, or shall remain
undismissed for 60 days, or an order for relief shall have been entered
against the Borrower, Guarantor or such Subsidiary, or the Borrower,
Guarantor or any Subsidiary shall take any corporate action to approve
institution of, or acquiescence in, such a proceeding;
(g) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower, any Guarantor or any Subsidiary and, if instituted
against the Borrower, Guarantor or Subsidiary, shall be consented to or
acquiesced in by the Borrower, Guarantor or such Subsidiary or shall remain
for 60 days undismissed, or the Borrower, any Guarantor or any Subsidiary
shall take any corporate action to approve institution of, or acquiescence
in, such a proceeding;
(h) The Borrower or any Guarantor shall fail to comply with any
agreement, covenant, condition, provision or term contained in any Loan
Document to which it is a party (other than, in Borrower's case, this
Agreement) (and such failure shall not constitute an Event of Default under
any of the other provisions of this SECTION 10.1) and the applicable grace
period, if any, shall have expired;
(i) Any writ, warranty of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of the
Borrower, a Guarantor or Subsidiary and such judgment, writ or similar
process shall not be released, vacated or fully bonded within 60 days after
its issue or levy;
(j) A judgment or judgments for the payment of money in excess of the
sum of $250,000 shall be rendered against the Borrower, a Guarantor or a
Subsidiary and the Borrower, Guarantor or such Subsidiary shall not
discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, prior to any execution on
such judgments by such judgment creditor, within 30 days from the date of
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entry thereof, and within said period of 30 days, or such longer period
during which execution of such judgment shall be stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal;
(k) To the extent that it would reasonably be expected to result in a
material liability to the Borrower or any Subsidiary (relative to the
Borrower's Consolidated Tangible Net Worth), (a) any Reportable Event,
which the Agent or the Required Banks shall reasonably determine in good
faith is likely to constitute grounds for the termination of any Plan or
for the appointment by the appropriate United States District Court of a
trustee to administer any such Plan shall have occurred and be continuing
30 days after written notice to such effect shall have been given to the
Borrower by the Bank; or (b) any Plan subject to Title IV of ERISA shall
have been terminated, or a trustee shall have been appointed by an
appropriate United States District Court to administer any Plan, or the
PBGC shall have instituted proceedings to terminate any Plan or to appoint
a trustee to administer any Plan;
(l) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower, any Guarantor or any Subsidiary which exceeds
$250,000, or under any indenture or other instrument under which any
evidence of indebtedness exceeding $250,000 has been issued or by which it
is governed and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness;
(m) Any governmental authority assesses the Borrower for violating
any environmental law, regulation, ordinance, or requirement regarding
hazardous waste that involves clean up costs which in the reasonable
opinion of the Required Banks may exceed $500,000.
SECTION 10.2 REMEDIES. If (a) any Event of Default described in SECTIONS
10.1(e), (f) or (g) shall occur with respect to the Borrower, the Commitments
shall automatically terminate and the outstanding unpaid principal balance of
the Notes, the accrued interest thereon and all other obligations of the
Borrower to the Banks and the Agent under the Loan Documents shall automatically
become immediately due and payable; or (b) any other Event of Default shall
occur and be continuing, then the Agent may take any or all of the following
actions (and shall promptly take any or all of the following actions on
direction of the Required Banks): (i) by notice to the Borrower declare the
Commitments terminated, whereupon the Commitments shall terminate, (ii) by
notice to the Borrower declare that the outstanding unpaid principal balance of
the Notes, the accrued and unpaid interest thereon and all other obligations of
the Borrower to the Banks and the Agent under the Loan Documents to be forthwith
due and payable, whereupon the Notes, all accrued and unpaid interest thereon
and all such obligations shall immediately become due and payable, in each case
without demand or further notice of any kind, all of which are hereby expressly
waived, (iii) exercise all rights and remedies under any other instrument,
document or agreement between the Borrower and the Agent or the Banks, and (iv)
enforce all rights and remedies under any applicable law. In exercising the
rights and duties under this SECTION 10.2: (x) the Agent shall take action
without consent and direction of the Required Banks only in instances in which
no direction has been received from the Required Banks within ten days after the
Required Banks have been informed of the issue or the need to act (provided that
the Agent may take actions that it shall reasonably determine are consistent
with any consent and direction of the Required Banks, once given), (y) the Agent
will notify the Banks if it shall act without consent and direction of the
Required Banks, and (z)
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the Agent, upon request of any Bank, will provide copies of any notice or
communication to the Borrower under this Section.
SECTION 10.3 OFFSET. In addition to the remedies set forth in SECTION
10.2, upon the occurrence of any Event of Default or at any time thereafter
while such Event of Default continues, each Bank or any other holder of any Note
may offset any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or monies of the Borrower then or
thereafter with such Bank or such other holder, or any obligations of such Bank
or such other holder of a Note, against the indebtedness then owed by the
Borrower to such Bank or other holder.
SECTION 10.4 LETTERS OF CREDIT. In addition to the foregoing remedies,
if any Event of Default described in SECTION 10.1(e), (f) or (g) shall have
occurred, or if any other Event of Default shall have occurred and the Agent
shall have declared that the principal balance of the Notes is due and payable,
the Borrower shall pay to the Agent an amount equal to the all Letter of Credit
Obligations. Such payment shall be in immediately available funds or in similar
cash collateral acceptable to the Agent and the Required Banks and shall be
pledged to the Agent for the ratable benefit of the Banks. Such amount shall be
held by the Agent in a cash collateral account until the outstanding Letters of
Credit are terminated without payment or are paid and Letter of Credit
Obligations with respect thereto are payable. Upon termination of all Letters
of Credit without payment or other payment of all Letter of Credit Obligations,
such amount shall be released to the Borrower, subject to any right of setoff.
In the event the Borrower defaults in the payment of any Letter of Credit
Obligations, the proceeds of the cash collateral account shall be applied to the
payment thereof. The Borrower acknowledges and agrees that the Banks would not
have an adequate remedy at law for failure by the Borrower to pay immediately to
the Agent the amount provided under this Section, and that the Agent shall, on
behalf of the Banks, have the right to require the Borrower to perform
specifically such undertaking whether or not any of the Letter of Credit
Obligations are due and payable. Upon the failure of the Borrower to make any
payment required under this Section, the Agent, on behalf of the Banks, may
proceed to use all remedies available at law or equity to enforce the obligation
of the Borrower to pay or reimburse the Agent. The balance of any payment due
under this Section shall bear interest payable on demand until paid in full at a
per annum rate equal to the Reference Rate plus 1.75%.
ARTICLE XI THE AGENT
SECTION 11.1 APPOINTMENT AND GRANT OF AUTHORITY. Each Bank hereby
appoints the Agent, and the Agent hereby agrees to act, as agent under this
Agreement. The Agent shall have and may exercise such powers under this
Agreement as are specifically delegated to the Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental thereto.
Each Bank hereby authorizes, consents to, and directs the Borrower to deal with
the Agent as the true and lawful agent of such Bank to the extent set forth
herein.
SECTION 11.2 NON RELIANCE ON AGENT. Each Bank agrees that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. The Agent shall not be required to keep informed as to the
performance or observance by the Borrower of this Agreement and the Loan
Documents or to inspect the properties or books of the Borrower.
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Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower (or any of its related companies) which may come into the Agent's
possession.
SECTION 11.3 RESPONSIBILITY OF THE AGENT AND OTHER MATTERS.
(a) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and those duties and liabilities
shall be subject to the limitations and qualifications set forth in this
Section. The duties of the Agent shall be mechanical and administrative in
nature.
(b) Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted (whether or not such action
taken or omitted is within or without the Agent's responsibilities and
duties expressly set forth in this Agreement) under or in connection with
this Agreement, or any other instrument or document in connection herewith,
except for gross negligence or willful misconduct. Without limiting the
foregoing, neither the Agent nor any of its directors, officers or
employees shall be responsible for, or have any duty to examine:
(i) the genuineness, execution, validity, effectiveness,
enforceability, value or sufficiency of (a) this Agreement, the
Notes, or Letter of Credit Agreements, or (b) any document or
instrument furnished pursuant to or in connection with this Agreement,
the Notes or any Letter of Credit,
(ii) the collectibility of any amounts owed by the Borrower,
(iii) any recitals or statements or representations or
warranties in connection with this Agreement, the Notes or other Loan
Documents,
(iv) any failure of any party to this Agreement to receive any
communication sent, or
(v) the assets, liabilities, financial condition, results of
operations, business or creditworthiness of the Borrower or any
Guarantor.
(c) The Agent shall be entitled to act, and shall be fully protected
in acting upon, any communication in whatever form believed by the Agent in
good faith to be genuine and correct and to have been signed or sent or
made by a proper person or persons or entity. The Agent may consult
counsel and shall be entitled to act, and shall be fully protected in-any
action taken in good faith, in accordance with advice given by counsel.
The Agent may employ agents and attorneys-in-fact and shall not be liable
for the default or misconduct of any such agents or attorneys-in-fact
selected by the Agent with reasonable care. The Agent shall not be bound
to ascertain or inquire as to the performance or observance of any of the
terms, provisions or conditions of this Agreement or the Notes on the
Borrower's part.
SECTION 11.4 ACTION ON INSTRUCTIONS. The Agent shall be entitled to
act or refrain from acting, and in all cases shall be fully protected in acting
or refraining from acting under this
35
<PAGE>
Agreement or the Notes or any other instrument or document in connection
herewith or therewith in accordance with instructions in writing from (i) the
Required Banks except for instructions which under the express provisions hereof
must be received by the Agent from all the Banks, and (ii) in the case of such
instructions, from all the Banks.
SECTION 11.5 INDEMNIFICATION. To the extent the Borrower does not
reimburse and save the Agent harmless according to the terms hereof for and from
all costs, expenses and disbursements in connection herewith or with the other
Loan Documents, such costs, expenses and disbursements to the extent reasonable
shall be borne by the Banks ratably in accordance with their Percentages and the
Banks hereby agree on such basis (a) to reimburse the Agent for all such
reasonable costs, expenses and disbursements on request and (b) to indemnify and
save harmless the Agent against and from any and all losses, obligations,
penalties, actions, judgments and suits and other reasonable costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent, other than as a consequence of actual gross
negligence or willful misconduct on the part of the Agent, arising out of or in
connection with this Agreement or the Notes or any instrument or document in
connection herewith or therewith, or any request of the Banks, including
without limitation the reasonable costs, expenses and disbursements in
connection with defending itself against any claim or liability, or answering
any subpoena, related to the exercise or performance of any of its powers or
duties under this Agreement or the other Loan Documents or the taking of any
action under or in connection with this Agreement or the Notes.
SECTION 11.6 FIRST BANK NATIONAL ASSOCIATION AND OTHER BANKS. With
respect to First Bank National Association's Commitment and any Loans by First
Bank National Association under this Agreement and any Note and any interest of
First Bank National Association in any Note, First Bank National Association
shall have the same rights, powers and duties under this Agreement and such Note
as any other Bank and may exercise the same as though it were not the Agent.
First Bank National Association and each other Bank and their respective
affiliates may accept deposits from, lend money to, and generally engage, and
continue to engage, in any kind of business with the Borrower as if First Bank
National Association were not the Agent, and as if such other Banks were not
party hereto.
SECTION 11.7 NOTICE TO HOLDER OF NOTES. The Agent may deem and treat the
payees of the Notes as the owners thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof has been filed with the
Agent. Any request, authority or consent of any holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note.
SECTION 11.8 SUCCESSOR AGENT. The Agent may resign at any time by giving
at least 30 days written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent with the consent of the Borrower, which shall not be unreasonably
withheld. If no successor Agent shall have been appointed by the Required Banks
or approved by the Borrower and shall have accepted such appointment within 30
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, but shall not be required to, on behalf of the Banks, appoint a
successor Agent.
ARTICLE XII MISCELLANEOUS
SECTION 12.1 NO WAIVER AND AMENDMENT. No failure on the part of the
Banks or the holder of the Notes to exercise and no delay in exercising any
power or right hereunder or
36
<PAGE>
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 any other instrument, document or agreement delivered or to be
delivered to the Banks hereunder or in connection herewith are cumulative and
not exclusive of any remedies provided by law. No notice to or demand on the
Borrower not required hereunder or under the Notes shall in any event entitle
the Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Banks or the holder of
the Notes to any other or further action in any circumstances without notice or
demand.
SECTION 12.2 AMENDMENTS, ETC. No amendment, waiver, consent,
modification, or consent to waive violations of any provision of, or to waive
any Event of Default under, this Agreement or any Loan Document shall in any
event be effective unless the same shall be in writing and signed by the
Borrower and the Agent (which shall so sign only upon the direction or consent
of the Required Banks) and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no amendment, waiver, consent, modification, or consent to waive
violations of any provision of, or to waive any Event of Default under, this
Agreement or any Loan Document shall, unless agreed to by the Agent and all of
the Banks:
(a) increase the amounts of or extend the terms of the Commitments or
subject the Banks to any additional obligations or extend the final
scheduled maturity date of the Loans or the latest permissible expiry date
of any Letter of Credit;
(b) reduce, forgive or compromise the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder;
(c) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder;
(d) release all or substantially all of any collateral for the Loans;
or
(e) change the definition of Required Banks or amend this SECTION
12.2.
PROVIDED, FURTHER that amendments, waivers or consents affecting the rights of
the Agent shall also require the consent of the Agent.
SECTION 12.3 ASSIGNMENTS AND PARTICIPATIONS.
(a) ASSIGNMENTS. Each Bank shall have the right, subject to the
further provisions of this SECTIONS 12.3, to sell or assign all or any part
of its Commitments, Loans, Notes, and other rights and obligations under
this Agreement and related documents (such transfer, and "Assignment") to
any commercial lender, other financial institution or other entity (an
"Assignee"). Upon such Assignment becoming effective as provided in
SECTION 12.3(b), the assigning Bank shall be relieved from the portion of
its Commitment, obligations to indemnify the Agent and other obligations
hereunder to the extent assumed and undertaken by the Assignee, and to such
extent the Assignee shall have the rights and obligations of a "Bank"
hereunder. Notwithstanding the foregoing,
37
<PAGE>
unless otherwise consented to by the Borrower and the Agent, each
Assignment shall be in the initial principal amount of not less than
$5,000,000 in the aggregate for all Loans and Commitments assigned, or an
integral multiple of $1,000,000 if above such amount. Each Assignment
shall be documented by an agreement between the assigning Bank and the
Assignee (an "Assignment and Assumption Agreement") in form and substance
satisfactory to the Agent.
(b) EFFECTIVENESS OF ASSIGNMENTS. An Assignment shall become
effective hereunder when all of the following shall have occurred: (i) the
Agent and the Borrower shall have been given notice of the Assignment and
shall have given prior written consent to such Assignment, unless the
Assignee is already a Bank under this Agreement, (ii) either the assigning
Bank or the Assignee shall have paid a processing fee of $2,500 to the
Agent for its own account, (iii) the Assignee shall have submitted the
assignment document in form satisfactory to the Agent, in which the
Assignee shall have agreed in writing to have irrevocably assumed and
undertaken the transferred portion of the assigning Bank's obligations
hereunder (including without limitation the obligations to indemnify the
Agent hereunder), to the Agent with a copy for the Borrower, and shall have
provided to the Agent information the Agent shall have reasonably requested
to make payments to the Assignee, and (iv) the assigning Bank and the Agent
shall have agreed upon a date upon which the Assignment shall become
effective. Upon the Assignment becoming effective, (x) if requested by the
assigning Bank, the Agent and the Borrower shall make appropriate
arrangements so that new Notes are issued to the assigning Bank and the
Assignee and so that the prior Notes are returned to the Borrower; (y) the
Agent shall forward all payments of interest, principal, fees and other
amounts that would have been made to the assigning Bank, in proportion to
the percentage of the assigning Bank's rights transferred, to the Assignee;
and (z) the Agent shall give notice to the Borrower of such Assignment
becoming effective.
(c) PARTICIPATIONS. Each Bank shall have the right, subject to the
further provisions of this SECTION 12.3, to grant or sell a participation
in all or any part of its Loans, Notes and Commitments (a "Participation")
to any commercial lender, other financial institution or other entity (a
"Participant") without the consent of the Borrower, the Agent or any other
party hereto. The Borrower agrees that if amounts outstanding under this
agreement and the Notes are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of setoff in
respect of its Participation in amounts owing under this Agreement and any
Note to the same extent as if the amount of its Participation were owing
directly to it as a Bank under this agreement or any note; provided, that
such right of setoff shall be subject to the obligation of such Participant
to share with the Banks, and the Banks agree to share with such
Participant, as provided in SECTION 4.5 hereof. The Borrower also agrees
that each Participant shall be entitled to the benefits of ARTICLE V with
respect to its Participation, provided, that no Participant shall be
entitled to receive any greater amount pursuant to such Sections than the
transferor Bank would have been entitled to receive in respect of the
amount of the Participation transferred by such transferor Bank to such
Participant had no such transfer occurred.
(d) LIMITATION OF RIGHTS OF ANY ASSIGNEE OR PARTICIPANT.
Notwithstanding anything in the foregoing to the contrary, except in the
instance of an Assignment that
38
<PAGE>
has become effective as provided in SECTION 12.3(b), (i) no Assignee or
Participant shall have any direct rights hereunder, (ii) the Borrower, the
Agent and the Banks other than the assigning or selling Bank shall deal
solely with the assigning or selling Bank and shall not be obligated to
extend any rights or make any payment to, or seek any consent of, the
Assignee or Participant, (iii) no Assignment or Participation shall relieve
the assigning or selling Bank from its Commitment to make Loans hereunder
or any of its other obligations hereunder and such Bank shall remain solely
responsible for the performance hereof, the (iv) no Assignee or
Participant, other than an affiliate of the assigning or selling Bank,
shall be entitled to require such Bank to take or omit to take any action
hereunder, except that such Bank may agree with such Assignee or
Participant that such Bank will not, without such Assignee's or
Participant's consent, take any action which would, in the case of any
principal, interest or fee in which the Assignee or Participant has an
ownership or beneficial interest: (w) extend the final maturity of any
Loans or extend the Termination Date, (x) reduce the interest rate on the
Loans or the rate of Commitment Fees, (y) forgive any principal of, or
interest on, the Loans or any fees, or (z) release all or substantially all
of the collateral for the Loans.
(e) TAX MATTERS. No Bank shall be permitted to enter into any
Assignment or Participation with any Assignee or Participant who is not a
United States Person unless such Assignee or Participant represents and
warrants to such Bank that, as of the date of such Assignment or
Participation, it is entitled to receive interest payments without
withholding or deduction of any taxes and such Assignee or Participant
executes and delivers to such Bank on or before the date of execution and
delivery of documentation of such Participation or Assignment, a United
States Internal Revenue Service Form 1001 or 4224, or any successor to
either of such forms, as appropriate, properly completed an claiming
complete exemption from withholding and deduction of all Federal Income
Taxes. A "United States Person" means any citizen, national or resident of
the United States, any corporation or other entity created or organized in
or under the laws of the United States or any political subdivision hereof
or any estate or trust, in each case that is not subject to withholding of
United States Federal income taxes or other taxes on payment of interest,
principal of fees hereunder.
(f) INFORMATION. Each Bank may furnish any information concerning
the Borrower in the possession of such Bank from time to time to Assignees
and Participants and potential Assignees and Participants.
(g) AGENT'S INTEREST. Subject to subsection (h) below, the Agent
agrees that it shall retain an economic interest (net of Assignments or
Participations) in the Loans and Commitment equal to or exceeding the
greatest economic interest of any of the other Banks. Upon the Agent's
request, each Bank shall inform the Agent of the amount of its retained
economic interest. Nothing herein shall prevent the Agent from resigning
as Agent hereunder as provided in ARTICLE XI in order for the Agent to be
able to reduce its economic interest in the Loans and Commitments.
(h) FEDERAL RESERVE BANK. Nothing herein stated shall limit the
right of any Bank to assign any interest herein and in any Note to a
Federal Reserve Bank.
SECTION 12.4 COSTS, EXPENSES AND TAXES. The Borrower agrees, whether or
not any Loan is made hereunder, to pay on demand all costs and expenses of the
following persons (including the reasonable fees and expenses of counsel and
paralegal for such persons who may
39
<PAGE>
be employees of such persons), incurred in connection with the following
matters: (i) the Agent and Norwest Bank Minnesota, National Association in
connection with the preparation, execution and delivery of the Loan Documents
and the preparation, negotiation and execution of any and all amendments to each
thereof and (ii) the Agent and the Banks in connection with the enforcement of
the Loan Documents. The Borrower agrees to pay, and save the Banks harmless
from all liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of the Loan Documents. The Borrower agrees
to indemnify and hold the Banks harmless from any loss or expense which may
arise or be created by the acceptance of telephonic or other instructions for
making Loans or disbursing the proceeds thereof. The obligations of the
Borrower under this SECTION 12.4 shall survive any termination of this
Agreement.
SECTION 12.5 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; PROVIDED, HOWEVER, that
any notice to the Agent under ARTICLE II and SECTION 12.2 hereof shall be deemed
to have been given only when received by the Agent.
SECTION 12.6 SUCCESSORS. This Agreement shall be binding upon the
Borrower, the Banks and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Borrower, the Banks and the Agent and the
successors and assigns of the Banks. The Borrower shall not assign its rights
or duties hereunder without the written consent of the Banks.
SECTION 12.7 SEVERABILITY. Any provision of the Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12.8 SUBSIDIARY REFERENCES. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Borrower has
one or more Subsidiaries.
SECTION 12.9 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 12.10 ENTIRE AGREEMENT. The Loan Documents embody the entire
agreement and understanding between the Borrower, the Banks and the Agent with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
40
<PAGE>
SECTION 12.12 EXISTING AGREEMENT. The Borrower, Norwest Bank Minnesota,
National Association ("Norwest") and First Bank hereby confirm and acknowledge
that that certain Restated and Amended Revolving Credit Agreement, dated as of
June 20, 1994, as thereafter amended (the "Existing Agreement"), is terminated.
All interest and fees due thereunder shall be paid upon effectiveness of this
Agreement, and the first Loan made hereunder shall repay the principal of the
Loans outstanding thereunder. Norwest and First Bank agree that that certain
Participation Agreement, dated as of August 9, 1996, pursuant to which Norwest
purchased a participation interest in loans, letters of credit and commitments
of First Bank under the Existing Agreement, is terminated, and any participation
that Norwest has funded thereunder may be converted, upon the making of the
first Loan hereunder, into a direct loan by Norwest to the Borrower under this
Agreement.
SECTION 12.13 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS.
SECTION 12.14 CONSENT TO JURISDICTION. AT THE OPTION OF THE BANKS, THIS
AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT.
41
<PAGE>
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 BANKS 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
MERRILL CORPORATION
By /s/ Kay A. Barber
-------------------------------------------
Kay A. Barber
Vice President - Finance, Chief Financial
Officer and Treasurer
By /s/ Steven J. Machov
-------------------------------------------
Steven J. Machov
Vice President, General Counsel
and Secretary
One Merrill Circle
St. Paul, Minnesota 55108
Attention: Mr. Dale Kepel
Director of Reporting
Telephone: (612) 649-1276
Fax: (612) 649-3857
Commitment:
- -----------
$26,666,666.67 FIRST BANK NATIONAL ASSOCIATION,
as Agent and as a Bank
By /s/ Kathleen A. Skow
-------------------------------------------
Kathleen A. Skow
Senior Vice President
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Ms Kathleen A. Skow
Telephone: (612) 973-0529
Fax: (612) 973-0823
42
<PAGE>
$13,333,333.33 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Lynn S. Hultstrand
-------------------------------------------
Lynn S. Hultrtrand
Vice President
Sixth & Marquette, 11th Floor
Minneapolis, MN 55479-0091
Attention: Mr. Jason S. Paulnock
Telephone: (612) 667-1602
Fax: (612) 667-4144
43
<PAGE>
EXHIBIT 11
MERRILL CORPORATION
SCHEDULE OF COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED OCTOBER 31, ENDED OCTOBER 31,
--------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Primary:
Net income................................................ $ 4,376,851 $ 3,035,377 $ 13,293,346 $ 7,825,211
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Weighted average number of common shares outstanding
during the period........................................ 7,908,075 7,789,228 7,885,992 7,724,885
Add common equivalent shares relating to outstanding
options to purchase common stock, using the treasury
stock method............................................. 274,425 183,186 222,471 222,948
------------ ------------ ------------- ------------
Weighted average number of common and common
equivalent
shares outstanding................................... 8,182,500 7,972,414 8,108,463 7,947,833
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Primary income per common share............................. $ .53 $ .38 $ 1.64 $ .98
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Fully diluted:
Net income................................................ $ 4,376,851 $ 3,035,377 $ 13,293,346 $ 7,825,211
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Weighted average number of common shares outstanding
during the period........................................ 7,908,075 7,789,228 7,885,992 7,724,885
Add common equivalent shares relating to outstanding
options to purchase common stock, using the treasury
stock method............................................. 319,639 183,077 297,436 228,685
------------ ------------ ------------- ------------
Weighted average number of common and common
equivalent
shares outstanding................................... 8,227,714 7,972,305 8,183,428 7,953,570
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Fully diluted income per common share....................... $ .53 $ .38 $ 1.62 $ .98
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 2,659
<SECURITIES> 0
<RECEIVABLES> 85,955
<ALLOWANCES> 5,457
<INVENTORY> 38,989
<CURRENT-ASSETS> 130,186
<PP&E> 77,137
<DEPRECIATION> 41,779
<TOTAL-ASSETS> 205,325
<CURRENT-LIABILITIES> 65,050
<BONDS> 0
0
0
<COMMON> 79
<OTHER-SE> 91,467
<TOTAL-LIABILITY-AND-EQUITY> 91,546
<SALES> 252,545
<TOTAL-REVENUES> 252,545
<CGS> 162,411
<TOTAL-COSTS> 162,411
<OTHER-EXPENSES> 63,904
<LOSS-PROVISION> 1,897
<INTEREST-EXPENSE> 2,807
<INCOME-PRETAX> 23,952
<INCOME-TAX> 10,659
<INCOME-CONTINUING> 13,293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,293
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.62
</TABLE>
