<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended December 31, 1995
----------------------------------------------------
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 No.: 0-18114
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LASERMASTER TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Minnesota 41-1612861
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7156 Shady Oak Road, Eden Prairie, Minnesota 55344
- -------------------------------------------- -----
(Address of principal executive offices) (zip code)
(612) 941-8687
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at 12/31/95
- ----- -----------------------
Common Stock, $.01 par value 11,314,633
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
---------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
December 31, June 30,
------------ -----------
1995 1995
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 720,355 $ 607,223
Accounts receivable, less allowance for
doubtful accounts and sales returns of
$2,017,000 and $2,051,000, respectively 14,900,418 17,104,353
Inventory 20,918,345 21,609,487
Income tax receivable 67,232
Other current assets 3,054,421 2,452,766
Deferred tax asset 2,868,000 2,868,000
----------- -----------
TOTAL CURRENT ASSETS 42,528,771 44,641,829
PROPERTY AND EQUIPMENT, net 6,202,448 6,323,749
CAPITALIZED SOFTWARE, less accumulated
amortization of $4,798,267 and $3,465,724
respectively 5,145,364 4,991,084
ACQUIRED TECHNOLOGY, PATENTS
AND LICENSES, less accumulated amortization
of $1,246,480 and $967,765, respectively 3,611,902 3,204,610
----------- -----------
$57,488,485 $59,161,272
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 7,082,973 $ 6,462,901
Notes payable-related parties 1,765,000
Accounts payable 14,842,523 18,204,869
Accrued payroll and payroll taxes 2,238,981 2,642,947
Income taxes payable 201,768
Other current liabilities 3,025,337 2,410,949
Current maturities of long-term debt 1,126,842 1,009,917
----------- -----------
TOTAL CURRENT LIABILITIES 30,081,656 30,933,351
LONG-TERM DEBT, less current maturities 1,283,786 1,598,546
DEFERRED INCOME TAXES 1,336,000 1,336,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
30,000,000 shares; 11,314,633 and 11,176,382
shares issued and outstanding, respectively 113,146 111,764
Preferred stock, $.01 par value; authorized
5,000,000 shares; no shares issued or
outstanding
Additional paid-in capital 16,960,516 16,626,953
Retained earnings 7,713,381 8,554,658
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 24,787,043 25,293,375
----------- -----------
$57,488,485 $59,161,272
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
----------- ----------- ----------- -----------
NET SALES $25,340,000 $28,484,651 $46,605,871 $58,747,374
COST OF GOODS SOLD 15,441,860 16,633,223 28,169,017 33,718,264
----------- ----------- ----------- -----------
GROSS PROFIT 9,898,140 11,851,428 18,436,854 25,029,110
OPERATING EXPENSES:
Sales and Marketing 5,065,279 7,345,747 10,466,760 13,962,283
Research and Development 1,624,430 1,512,651 2,921,081 2,799,553
General and Administrative 2,610,273 2,596,538 5,484,334 5,534,581
----------- ----------- ----------- -----------
9,299,982 11,454,936 18,872,175 22,296,417
----------- ----------- ----------- -----------
OPERATING PROFIT (LOSS) 598,158 396,492 (435,321) 2,732,693
OTHER INCOME (EXPENSE):
Interest expense (445,103) (269,255) (785,552) (497,578)
Interest income 4,428 6,118 8,907 15,311
Other expense (45,225) (55,700) 9,689 (31,332)
----------- ----------- ----------- -----------
(485,900) (318,837) (766,956) (513,599)
----------- ----------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 112,258 77,655 (1,202,277) 2,219,094
INCOME TAX (PROVISION) BENEFIT (33,000) (24,000) 361,000 (666,000)
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ 79,258 $ 53,655 $ (841,277) $ 1,553,094
=========== =========== =========== ===========
PER COMMON SHARE:
Net Earnings (Loss) $ .01 $ .00 $ (.07) $ .12
Average common and common
equivalent shares outstanding 12,181,825 12,472,940 12,133,851 12,518,292
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Earnings $ (841,277) $ 1,553,094
Adjustments to reconcile net (loss) earnings to net
cash provided by operating activities:
Depreciation and amortization 2,860,056 2,996,664
Amortization of deferred financing costs 63,141 40,361
Loss on sale of property and equipment 46,915 11,935
Change in current assets and current liabilities:
(Increase) decrease in:
Accounts receivable 2,203,935 1,000,867
Inventory 691,142 (6,339,742)
Other current assets ( 664,797) (332,164)
Income tax receivable (67,232)
Increase (decrease) in:
Accounts payable (3,362,346) 1,671,754
Accrued payroll and payroll taxes (403,966) 89,031
Other current liabilities 614,386 377,225
Income taxes payable (201,768) 188,845
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 938,189 1,257,870
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ( 1,048,992) (1,380,346)
Additions to capitalized software costs (1,486,823) (1,882,618)
Proceeds from sale of property and equipment 26,988 3,083
Additions to patents and other assets (686,007) (1,215,265)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (3,194,834) (4,475,146)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 334,945 386,333
Net borrowing under revolving credit lines 620,072 3,229,649
Net borrowing from related parties 1,765,000
Proceeds from long-term debt 159,003 470,938
Payments on long-term debt (509,243) (383,302)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 2,369,777 3,703,618
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 113,132 486,342
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 607,223 2,193,673
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 720,355 $ 2,680,015
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
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LASERMASTER TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. Basis of presentation -
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. They do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to consolidated
financial statements included in the Annual Report on Form 10-K of
LaserMaster Technologies, Inc. and subsidiaries (the "Company") for the year
ended June 30, 1995. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month and
six-month periods ended December 31, 1995 are not necessarily indicative of
the results that may be expected for the year ending June 30, 1996.
2. Inventory -
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
----------- -----------
<S> <C> <C>
Raw materials
Purchased printer engines $ 1,606,353 $ 796,940
Completed subassemblies 5,982,970 5,419,774
Raw materials 7,344,206 9,397,341
Work in process 711,460 987,009
Finished goods 5,273,356 5,008,423
----------- -----------
$20,918,345 $21,609,487
=========== ===========
</TABLE>
3. Short-term financing -
On April 25, 1994 the Company's subsidiary, LaserMaster Corporation (LMC),
established an operating line of credit with a commercial bank which allowed
LMC to borrow up to $5,000,000 of eligible accounts receivable. On November
11, 1994 and December 16, 1994, the agreement was amended to increase the
line of credit from $5,000,000 to $9,250,000 of eligible accounts receivable
and inventory. The amended agreement allowed LMC to borrow up to 70% of the
net eligible accounts receivable and 40% of the net eligible inventory
subject to a sublimit of $3,000,000. Borrowing was secured by eligible
accounts receivable and inventory and carried interest at a defined bank
Reference Rate (prime) plus 1.75% (10.25% at December 31, 1995) with a 0.5%
unused line fee. At December 31, 1995 approximately $2,203,000 was unused
under this credit line. The term of the agreement was to expire April 25,
1996. The loan agreement required LMC to meet various covenants involving
capital expenditure limitations, cash flow leverage, quarterly pre-tax
profit and maintain a minimum net worth of $10,250,000. LMC was in violation
of the quarterly pre-tax profit covenant at December 31, 1995.
On January 17, 1996 LMC replaced the operating line of credit described
above with a new credit agreement with a commercial finance company. The new
agreement allows LMC to borrow up to $10,000,000 based on availability equal
to 60% of the net eligible accounts receivable and 25% of the net eligible
inventory. Borrowing is secured by inventory, accounts receivable, and
general intangibles and bears interest at a defined bank Reference Rate
(prime) plus 2.0% with a 0.5% unused line fee. The term of the agreement
expires January 17, 1999. The agreement requires the borrower to meet
various financial covenants involving capital expenditures, additions to
capitalized software and intellectual property, minimum debt
5
<PAGE>
service coverage ratio, and maintenance of a minimum net worth of
$13,000,000. The agreement also requires LMC to meet various non-financial
covenants.
LaserMaster Europe, Ltd. (LME), a subsidiary of LMC, maintains a receivables
financing arrangement with a Dutch commercial finance company whereby LME
may borrow up to 70% of its eligible accounts receivable, with a maximum
advance that was increased from $1,500,000 to $2,500,000 in July 1995. At
December 31, 1995 approximately $325,000 was unused under this credit line.
Borrowings are available in U.S. Dollars and Dutch Guilders. Borrowings in
Dutch Guilders are due on demand and bear interest at the Promissory Note
Discount Rate of the Dutch Central Bank plus 2.5% (5.75% at December 31,
1995). Borrowings in U.S. Dollars are due on demand and bear interest at a
rate that fluctuates with the market (no U.S. Dollars were borrowed at
December 31, 1995). Other fees include a cash advance commission of 0.1% per
month on the highest monthly loan balance and a commission equal to 0.1% of
all accounts financed, with an annual minimum charge of $10,000.
During September 1995, LaserMaster Corporation borrowed $1,565,000 under a
demand note from TimeMasters, Inc., a corporation controlled by the
Company's Chief Executive Officer. The note bears interest at a defined bank
Reference Rate (prime) plus 1.75% (10.25% at December 31, 1995). As of
October 11, 1995, an additional $200,000 was added to the existing note
bringing the total amount owed to TMI to $1,765,000 plus accrued interest.
Repayment of the note is restricted pursuant to the terms of a subordination
and forbearance agreement between LMC, TMI and LMC's senior lender. In
consideration for providing financing to LMC and executing the subordination
and forbearance agreement, TMI was issued a warrant for the purchase of
277,953 shares of the Company's common stock at an exercise price of $6.35
per share, TMI has the right to convert up to $1.0 million dollars of the
debt into shares of the Company's common stock at the lower of $5.875 per
share or market price at the time of the conversion, and TMI was granted a
second secured interest in receivables, inventory, and general intangibles
of LMC.
On November 29, 1995 LaserMaster Corporation converted $859,516 of accounts
payable into a promissory note. The note is payable to a trading partner
that supplies inventory to LMC and bears interest at 10%. Principal in the
amount of $429,758 shall be due on March 29, 1996 with the final payment of
the remaining principal and interest due on May 29, 1996. In addition, the
trading partner was granted a warrant for the purchase of 68,596 shares of
the Company's common stock at an exercise price of $5.875 per share.
4. Long-term debt -
LaserMaster Corporation maintains the following notes payable to a
commercial finance company, each of which is secured by certain domestic
fixed assets:
<TABLE>
<CAPTION>
December 31, 1995
---------------------------
Interest Rate Balance
-------------- -----------
<S> <C> <C>
Note with monthly payments through
August 1997 of $59,427. 8.53% $1,104,278
Note with monthly payments through
January 1998 of $8,342. (1) 9.81% $ 193,256
Note with monthly payments through
January 1998 of $6,404. (1) 9.81% $ 145,454
Note with monthly payments through
September 1998 of $5,121. (1) 9.81% $ 147,470
</TABLE>
(1) The interest rate is equal to the "One-Month" Commercial Paper rate
plus 4.0%.
6
<PAGE>
5. Supplemental disclosure of cash flow information and non-cash financing
activities -
The Company paid and received cash for the following items:
<TABLE>
<CAPTION>
Six months ended
December 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Interest paid $877,845 $477,217
Income tax (received) paid (92,000) 477,156
Interest received 8,665 17,415
</TABLE>
Capital lease obligations of $152,405 and $103,790 were incurred during the six
months ended December 31, 1995, and 1994, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUMMARY
Net sales for the three months ended December 31, 1995 were $25.3 million
compared to $28.5 million for the same period one year ago. Net income for the
three months ended December 31, 1995 was $79,000 or $0.01 per share compared to
$54,000 or $0.0 per share for the three months ended December 31, 1994. Net
sales for the six months ended December 31, 1995 were $46.6 million compared to
$58.7 million for the same period one year ago. Net loss for the six months
ended December 31, 1995 was $841,000 or $.07 per share compared to net income of
$1.6 million or $0.12 per share for the six months ended December 31, 1994.
The decrease in net sales for the three and six months was primarily
attributable to a decrease in sales of the Company's plain-paper typesetting and
WinPrint/OEM products which was partially offset by an increase in the sale of
PressMate products and the December 1995 introduction of a new product,
DisplayMaker Express (DME). DME, a 54-inch high-speed inkjet color printer, is
the Company's second print engine which it designed and manufactures on a
proprietary basis. DME uses a phase-change inkjet technology which can be
applied to a variety of media. DME has a suggested U.S. retail price of $74,000
($90,000 including the Company's ColorMark Pro 1600 print server). Decreases
in sales of the Company's plain-paper typesetting products are a result of
competitive pressure and market changes. During the three months ended
December 31, 1995 the Company sold $4.8 million in proprietary consumables
compared to $2.6 million for the same period one year ago.
In January 1996, the Company's primary operating subsidiary, LaserMaster
Corporation (LMC), signed a new credit agreement with a commercial finance
company providing up to $10 million in revolving credit. Loan availability
under the facility is based upon the Company's receivables and inventory and is
secured by various assets of the Company. This agreement has a three-year term
and replaces an existing revolving line of credit with a commercial bank.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's Consolidated
Statements of Operations expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------- -----------------
December 31, December 31,
------------------- ------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................... 60.9 58.4 60.4 57.4
----- ----- ----- -----
Gross profit........................ 39.1 41.6 39.6 42.6
Operating expenses:
Sales and marketing................ 20.0 25.8 22.4 23.8
Research and development........... 6.4 5.3 6.3 4.8
General and administrative......... 10.3 9.1 11.8 9.4
----- ----- ----- -----
Total operating expenses........... 36.7 40.2 40.5 38.0
----- ----- ----- -----
Operating profit (loss).............. 2.4 1.4 (0.9) 4.6
Other income (expense):
Interest expense................... (1.8) (0.9) (1.7) (0.8)
Interest income.................... 0.0 0.0 0.0 0.0
Other.............................. (0.2) (0.2) (0.0) (0.1)
----- ----- ----- -----
Earnings (loss) before income taxes.. 0.4 0.3 (2.6) 3.7
Income tax (provision) benefit....... (0.1) (0.1) 0.8 (1.1)
----- ----- ----- -----
Net earnings (loss).................. 0.3% 0.2% (1.8)% 2.6%
===== ===== ===== =====
</TABLE>
Net Sales. The following table sets forth net sales by product line expressed
in thousands and as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended December 31, Six months ended December 31,
-------------------------------- ---------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Big Color...................... $12,749 50.3% $11,362 39.9% $24,105 51.7% $22,984 39.1%
DisplayMaker Express........... 1,030 4.1 0 0.0 1,030 2.2 0 0.0
Plain-paper typesetting........ 8,224 32.5 14,902 52.3 16,366 35.1 31,439 53.5
PressMate...................... 3,071 12.1 229 0.8 4,282 9.2 229 0.4
WinPrint/OEM/Imaging........... 266 1.0 1,992 7.0 823 1.8 4,095 7.0
------- ---- ------- ---- ------- ---- ------- ----
Total net sales................ $25,340 100.0% $28,485 100.0% $46,606 100.0% $58,747 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
The Company sold $4.2 million in Big Color consumable products and $8.5 million
in Big Color hardware for a total of $12.7 of Big Color products for the three
months ended December 31, 1995. Three hundred seventeen DisplayMaker
Professional, 36-inch wide color printers were sold during the second quarter of
fiscal 1996. In the same period one year ago, the Company sold 265 DisplayMaker
Professionals along with $2.6 million in related consumables for a total of
$11.4 million in Big Color sales.
The Company released a new wide-format color printer in December 1995,
DisplayMaker Express (DME), selling 17 units during the month of December
together with $52,000 in consumables for a total of $1.0 million in DME sales.
DME is a 54-inch wide, color inkjet printer and is the second proprietary
printer designed and manufactured by the Company. DME is capable of printing an
"E" size print in approximately six minutes by using a phase-change ink
technology which allows printing on a variety of media. The DME has a suggested
U.S. retail price of $74,000 ($90,000 including the Company's ColorMark Pro 1600
print server).
8
<PAGE>
Plain-paper typesetting sales for the three months ended December 31, 1995
decreased 45% from sales in the same period one year ago. The decrease in sales
is primarily a result of increased competition in the form of low-priced plain-
paper devices as well as the increasing performance of laser printers marketed
by major manufacturers for the office automation market. The Company expects
revenues from the sale of plain-paper typesetters to continue to decline.
During the three months ended December 31, 1995, the Company sold 200 PressMate
chemical-free filmsetters and accepted returns of 64 versions of earlier models
for net sales of 136 units. PressMate uses thermal technology to image film
directly, in contrast to imaging onto plain-paper which then must be
photographed to transfer an image to film. During the second quarter of fiscal
1995, $472,000 of PressMate-related consumables were sold. PressMate is the
first proprietary printer designed and manufactured by the Company. PressMate
was released late in the second quarter of fiscal 1995 with 14 units sold to
"technology partners" in that quarter.
International Sales. Revenues from foreign sources during the three months
ended December 31, 1995 were comparable to the same period one year ago. The
increases in revenues as a percent of net sales is a result of reductions in
overall revenues from U.S. sources. The following table sets forth
international sales by region expressed in thousands and as a percentage of net
sales:
<TABLE>
<CAPTION>
Three months ended December 31, Six months ended December 31,
------------------------------- -----------------------------
1995 1994 1995 1994
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Europe..................... $ 5,172 20.4% $ 5,381 18.9% $ 9,186 19.7% $10,401 17.7%
Japan, Asia, Pacific....... 3,093 12.2 3,067 10.8 5,724 12.3 6,878 11.7
Latin America.............. 1,287 5.1 1,007 3.5 2,203 4.7 2,089 3.6
Canada..................... 849 3.4 635 2.2 1,603 3.4 1,264 2.1
------- ---- ------- ---- ------- ---- ------- ----
Total international sales.. $10,401 41.1% $10,090 35.4% $18,716 40.1% $20,632 35.1%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
Gross Profit. The Company's gross profit margin for the three and six months
ended December 31, 1995 was 39.1% and 39.6%, respectively, compared to 41.6% and
42.6% for the same periods one year ago. Gross margins of plain-paper
typesetters, expressed as a percent of net sales, remained steady in the range
of 33% to 36% in the three months ended December 31, 1995. Gross margins of Big
Color products in the second quarter of fiscal 1996 were approximately 45%,
decreasing from 54% in the preceding quarter. The decrease in Big Color margins
is attributable to lower average selling prices experienced as a result of
increased competition. DisplayMaker Express gross margins were approximately
45% for initial shipments since early units were shipped to participants in the
technology partner program at significant discounts. Several of the units
replaced units which had been in the field for up to 6 months. PressMate gross
margins were approximately 18% and were lower than previous quarters as a result
of special promotional programs executed during the quarter. The Company's
consolidated gross margins for the quarter have been favorably impacted by sales
of high-margin Big Color and DisplayMaker Express products increasing as a
percent of overall net sales.
Expenses. Sales and marketing expenses for the three months ended December 31,
1995 decreased $2.2 million to $5.1 million, compared to $7.3 million for the
same period one year ago. Sales and marketing expense decreases included
reductions in sales related expenses of $1.0 million and marketing related
expenses of $1.2 million. Research and development expenditures, including
amounts expensed and capitalized, were $2.4 million in the three months ended
December 31, 1995, a decrease of $100,000 in expenditures compared to the same
period one year ago. Research and development expenditures capitalized for the
three months ended December 31, 1995 were $728,000 compared to $976,000 for the
three months ended December 31, 1994. General and administrative expenses were
$2.6 million for the three months ended December 31, 1995 and 1994,
respectively. Overall operating expenses for the three months ended December 31,
1995 decreased to $9.3 million compared to $11.5 million for the same period one
year ago.
9
<PAGE>
Interest expense was $445,000 and $786,000 for the three and six months ended
December 31, 1995, respectively, compared to $269,000 and $498,000 in the same
periods one year ago. The increase in interest expense is attributable to an
overall increase in average debt levels.
The Company's effective income tax rate for the three and six months ended
December 31, 1995, was 30% compared to a rate of 31% and 30%, respectively, for
the same periods one year ago.
Foreign Currency. The Company purchases certain raw materials, primarily from
Japan, which are subject to currency fluctuations. It also sells finished
goods, extends credit, and maintains accounts receivable and payable in five
major European denominations. The impact of currency fluctuations on these
activities to date is immaterial to the financial statements taken as a whole.
The Company has some contractual protection against currency fluctuations
(primarily the Japanese yen) with regard to purchases of raw printer engines
and memory. The Company does not consider its exposure with regard to European
currencies to be material and has not entered into any substantial currency
hedging transactions as they relate to these currencies.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $938,000 and $1.3 million for the
six months ended December 31, 1995 and 1994, respectively. The Company
decreased accounts receivable, providing cash of $2.2 million and $1.0 million
for the six months ended December 31, 1995 and 1994, respectively. During the
six months ended December 31, 1995 the Company decreased inventory providing
cash of $691,000 compared to increasing inventory and using cash of $6.3 million
in the same period one year ago. The increase in inventory in fiscal 1995 was
primarily a result of entering the business of manufacturing print engines which
requires higher levels of raw material. The Company decreased accounts payable,
using cash of $3.4 million in the six months ended December 31, 1995 compared to
increasing accounts payable, generating cash of $1.7 million, in the same period
one year ago.
Net cash used in investing activities was $3.2 million and $4.5 million for the
six months ended December 31, 1995 and 1994, respectively. The Company added
fixed assets of $1.0 million in fiscal 1996, a decrease of $331,000 from $1.4
million in fiscal 1995. During the six months ended December 31, 1995, the
Company invested $1.5 million in the development of software which was
capitalized, compared to $1.9 million for the same period one year ago. The
Company invested $686,000 in intellectual property in the six months ended
December 31, 1995, a decrease of $529,000 from $1.2 million in the same period
one year ago.
During the six months ended December 31, 1995, LaserMaster Corporation (LMC)
borrowed $1.765 million from TimeMasters, Inc. (TMI), a related party, which
amount remains outstanding at December 31, 1995. In January 1996, the amount
borrowed from TMI was converted from a demand note to a promissory note payable
on demand. Repayment of the note is restricted pursuant to the terms of a
subordination and forebearance agreement between LMC, TMI and LMC's senior
lender. In consideration for providing financing to LMC and executing the
subordination and forbearance agreement, TMI was issued a warrant for the
purchase of 277,953 shares of the Company's common stock at an exercise price of
$6.35 per share, TMI has the right to convert up to $1.0 million dollars of the
debt into shares of the Company's common stock at the lower of $5.875 per share
or market price at the time of conversion, and TMI was granted a second secured
interest in accounts receivable, inventory and general intangibles of LMC.
On January 17, 1996, LMC entered into a three-year agreement with a commercial
finance company providing up to $10 million of revolving credit replacing the
Company's existing credit facility with a commercial bank (see Note 3 to the
Financial Statements). The agreement allows LMC to borrow up to 60% of eligible
accounts receivable and 25% of eligible inventory at an interest rate equal to
the prime lending rate plus two percent. The agreement requires LMC to meet
various covenants.
On November 29, 1995, LMT signed a promissory note for $859,516 with a trading
partner who provided interim financing and logistical support to LMC in its
purchases of standard print engines used in the Company's plain-paper
typesetting product line. In addition to a promissory note, LMT gave the
trading partner a warrant
10
<PAGE>
for the purchase of 68,596 shares of LMT common stock at an exercise price of
$5.875 per share. The promissory note is due in two installments of $430,000 on
March 29, 1996 and $430,000 plus accrued interest on May 29, 1996.
In December 1995, LMC executed a 15-year commercial lease at market rates with
Grandchildren's Realty Alternative Management Program I ("GRAMPI"), a Minnesota
limited partnership controlled by the Company's Chief Executive Officer for
space it currently occupies in Shady View I & II. The Shady View space is
approximately 50% of all space leased by the Company. GRAMPI purchased the real
estate in April 1995, after the Company's Board of Directors declined to do so.
The Company's Board of Directors retained services of an outside commercial real
estate brokerage firm and outside legal counsel to negotiate the lease with the
landlord's outside legal counsel.
The Company's business plan is contingent on continuing to obtain reasonably
priced sources of capital and sales remaining uninterrupted. If sales are less
than expected or sources of financing are unavailable, the Company will be
required to revise its business plans. The Company does not believe that
inflation will have a material affect on the results from operations or its
financial condition in fiscal 1996.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Nothing to report.
ITEM 2: CHANGES IN SECURITIES
Nothing to report.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Nothing to report
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report.
ITEM 5: OTHER INFORMATION
Nothing to report.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
-------------------
10.01 Credit Agreement dated January 17, 1996 between LaserMaster
Corporation and General Electric Capital Corporation.
11
<PAGE>
10.02 Repayment, Subordination and Intercreditor Agreement dated
January 17, 1996 among TimeMasters, Inc., LaserMaster
Corporation and General Electric Capital Corporation.
10.03 Lease for property in Shady View I & II dated December, 1995
between LaserMaster Corporation and GRAMPI.
10.04 Promissory Note dated January 17, 1996 by LaserMaster
Corporation to TimeMasters, Inc.
10.05 Note dated November 29, 1996 by LaserMaster Corporation to
Marubeni International Electronics Corporation.
10.06 Warrants for the purchase of common stock of LaserMaster
Technologies, Inc. issued to TimeMasters, Inc. dated January
17, 1996.
(b) Reports on Form 8-K
-------------------
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LASERMASTER TECHNOLOGIES, INC.
/s/Melvin L. Masters
- --------------------
Melvin L. Masters
Chief Executive Officer
/s/Randall L. Ruegg
- -------------------
Randall L. Ruegg
Chief Financial Officer
Dated: February 12, 1996
13
<PAGE>
Exhibit 10.01
================================================================================
CREDIT AGREEMENT
DATED AS OF JANUARY 17, 1996
AMONG
LASERMASTER CORPORATION
AS BORROWER,
THE LENDERS NAMED HEREIN
AS LENDERS,
AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT AND LENDER
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<C> <S> <C> <C>
1. AMOUNT AND TERMS OF CREDIT.......................................................................... 1
1.1 Revolving Credit Facility..................................................................... 1
1.2 Prepayment.................................................................................... 2
1.3 Use of Proceeds............................................................................... 3
1.4 Interest on Revolving Credit Loan............................................................. 3
1.5 Eligible Accounts............................................................................. 5
1.6 Eligible Inventory............................................................................ 5
1.7 Fees.......................................................................................... 5
1.8 Cash Management Systems....................................................................... 6
1.9 Receipt of Payments........................................................................... 6
1.10 Application and Allocation of Payments........................................................ 6
1.11 Loan Account and Accounting................................................................... 7
1.12 Indemnity..................................................................................... 7
1.13 Access........................................................................................ 8
1.14 Taxes......................................................................................... 8
1.15 Capital Adequacy; Increased Costs; Illegality................................................. 9
2. CONDITIONS PRECEDENT................................................................................10
2.1 Conditions to the Initial Loans...............................................................10
2.2 Further Conditions to Each Revolving Credit Advance...........................................12
3. REPRESENTATIONS AND WARRANTIES......................................................................13
3.1 Corporate Existence; Compliance with Law......................................................13
3.2 Executive Offices.............................................................................13
3.3 Corporate Power, Authorization, Enforceable Obligations.......................................13
3.4 Financial Statements and Projections..........................................................14
3.5 Collateral Reports............................................................................14
3.6 Material Adverse Effect.......................................................................15
3.7 Ownership of Property; Liens..................................................................15
3.8 Restrictions; No Default......................................................................15
3.9 Labor Matters.................................................................................16
3.10 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................16
3.11 Government Regulation.........................................................................17
3.12 Margin Regulations............................................................................17
3.13 Taxes.........................................................................................17
3.14 ERISA.........................................................................................18
3.15 No Litigation.................................................................................19
3.16 Brokers.......................................................................................19
3.17 Employment Matters............................................................................19
3.18 Patents, Trademarks, Copyrights and Licenses..................................................19
3.19 Full Disclosure...............................................................................20
</TABLE>
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<TABLE>
<C> <S> <C> <C>
3.20 Hazardous Materials..........................................................................20
3.21 Insurance Policies...........................................................................20
3.22 Deposit and Disbursement Accounts............................................................20
3.23 [Intentionally Omitted]......................................................................21
3.24 [Intentionally Omitted]......................................................................21
3.25 Agreements and Other Documents...............................................................21
3.26 FEIN.........................................................................................21
4. FINANCIAL STATEMENTS AND INFORMATION...............................................................21
4.1 Reports and Notices..........................................................................21
4.2 Communication with Accountants...............................................................21
5. AFFIRMATIVE COVENANTS..............................................................................22
5.1 Maintenance of Existence and Conduct of Business.............................................22
5.2 Payment of Obligations.......................................................................22
5.3 Books and Records............................................................................22
5.4 Litigation...................................................................................23
5.5 Insurance....................................................................................23
5.6 Compliance with Laws.........................................................................24
5.7 [Intentionally Omitted.].....................................................................24
5.8 Supplemental Disclosure......................................................................24
5.9 Employee Plans...............................................................................24
5.10 Environmental Matters........................................................................25
5.11 Landlords' Agreements, Bailee Letters and Mortgagee Agreements...............................25
5.12 Leased Locations of Collateral...............................................................25
6. NEGATIVE COVENANTS.................................................................................26
6.1 Mergers, Subsidiaries, Etc...................................................................26
6.2 Investments; Loans and Advances..............................................................26
6.3 Indebtedness.................................................................................27
6.4 Employee Loans and Affiliate Transactions....................................................27
6.5 Capital Structure and Business...............................................................28
6.6 Guaranteed Indebtedness......................................................................28
6.7 Liens........................................................................................28
6.8 Sale of Assets...............................................................................29
6.9 ERISA........................................................................................30
6.10 Financial Covenants..........................................................................30
6.11 Hazardous Materials..........................................................................30
6.12 Sale-Leasebacks..............................................................................30
6.13 Cancellation of Indebtedness.................................................................30
6.14 Restricted Payments..........................................................................30
6.15 Leases.......................................................................................31
6.16 Fiscal Year..................................................................................31
6.17 Change of Corporate Name or Location.........................................................31
</TABLE>
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<PAGE>
<TABLE>
<C> <S> <C> <C>
6.18 Sale of Stock................................................................................31
6.19 Cash Management..............................................................................31
6.20 No Impairment of Upstreaming.................................................................32
6.21 Changes Relating to Subordinated Debt........................................................32
6.22 LaserMaster Export Corporation...............................................................32
7. TERM...............................................................................................32
7.1 Termination..................................................................................32
7.2 Survival of Obligations Upon Termination of Financing Arrangements...........................32
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.............................................................33
8.1 Events of Default............................................................................33
8.2 Remedies.....................................................................................35
8.3 Waivers by Borrower..........................................................................36
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT................................................36
9.1 Assignment and Participations................................................................36
9.2 Appointment of Agent.........................................................................37
9.3 Agent's Reliance, Etc........................................................................38
9.4 GE Capital and Affiliates....................................................................39
9.5 Lender Credit Decision.......................................................................39
9.6 Indemnification..............................................................................39
9.7 Successor Agent..............................................................................40
9.8 Setoff and Sharing of Payments...............................................................40
9.9 Disbursement of Funds........................................................................40
9.10 Advances; Payments; Information; Non-Funding Lenders.........................................41
10. SUCCESSORS AND ASSIGNS.............................................................................44
10.1 Successors and Assigns.......................................................................44
11. MISCELLANEOUS......................................................................................44
11.1 Complete Agreement; Modification of Agreement................................................44
11.2 Amendments and Waivers.......................................................................44
11.3 Fees and Expenses............................................................................45
11.4 No Waiver....................................................................................46
11.5 Remedies.....................................................................................47
11.6 Severability.................................................................................47
11.7 Conflict of Terms............................................................................47
11.8 Authorized Signature.........................................................................47
11.9 GOVERNING LAW................................................................................47
11.10 Notices......................................................................................48
11.11 Section Titles...............................................................................48
11.12 Counterparts.................................................................................48
11.13 WAIVER OF JURY TRIAL.........................................................................48
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C> <C>
11.14 Press Releases...............................................................................49
11.15 Reinstatement................................................................................49
11.16 Release of Intellectual Property Lien........................................................49
</TABLE>
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<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
<TABLE>
<S> <C> <C>
Exhibit A - Notice of Revolving Credit Advance
Exhibit B - Borrowing Base Certificate
Exhibit C - Revolving Credit Note
Exhibit D - Borrower Security Agreement
Exhibit E - Subsidiary Security Agreement
Exhibit F - Holdings Guaranty
Exhibit G - Subsidiary Guaranty
Schedule 1.1(a) - Responsible Individual
Schedule 3.2 - Executive Offices
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.7 - Real Estate and Leases
Schedule 3.9 - Labor Matters
Schedule 3.10 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.13 - Tax Matters
Schedule 3.14 - ERISA Plans
Schedule 3.15 - Litigation
Schedule 3.17 - Employment Matters
Schedule 3.18 - Intellectual Property
Schedule 3.20 - Hazardous Materials
Schedule 3.21 - Insurance Policies
Schedule 3.22 - Deposit and Disbursement Accounts
Schedule 3.26 - FEIN Numbers
Schedule 5.1 - Trade Names
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.6 - Guaranteed Indebtedness
Schedule 6.7 - Existing Liens
Schedule 6.15 - Real Estate Leases
Schedule 11.8 - Authorized Signatures
Schedule A (Recitals) - Definitions
Schedule B (Section 1.5) - Eligible Accounts
Schedule C (Section 1.6) - Eligible Inventory
Schedule D (Section 1.8) - Cash Management Systems
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Schedule E (Section 2.1(b)) - Schedule of Closing Documents
Schedule F (Section 4.1(a)) - Financial Statements and Projections -- Reporting
Schedule G (Section 4.1(b)) - Collateral Reports
Schedule H (Section 6.11) - Financial Covenants
Schedule I (Section 11.10) - Notice Addresses
</TABLE>
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of January 17, 1996, is by and among
LASERMASTER CORPORATION, a Minnesota corporation ("Borrower"), GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation (in its individual capacity, "GE
Capital"), for itself, as Lender, and as Agent for Lenders, and the other
Lenders from time to time party hereto.
RECITALS:
WHEREAS, Borrower desires that Lenders extend a revolving credit
facility to Borrower for the purpose of refinancing certain indebtedness of
Borrower, to provide working capital financing for Borrower and to provide funds
for other general corporate purposes of Borrower; and Borrower desires to borrow
up to $10,000,000 from Lenders and Lenders are willing to make certain loans and
other extensions of credit to Borrower of up to such amount upon the terms and
conditions set forth herein;
WHEREAS, Borrower desires to secure all of its obligations under the
Loan Documents by granting to Agent, on behalf of Lenders, a security interest
in and lien upon certain of its property;
WHEREAS, Holdings is willing to guaranty all of the obligations of
Borrower to Lenders under the Loan Documents;
WHEREAS, Asia/Pacific and ColorMasters are willing to guaranty all of
the obligations of Borrower to Lenders under the Loan Documents and to grant to
Agent, on behalf of Lenders, a security interest in and lien upon certain of its
property; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Schedule A hereto; all Schedules, Exhibits and
other attachments hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together, shall constitute but a
single agreement; and these Recitals shall be construed as part of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Facility. (a) Upon and subject to the terms and
conditions hereof, each Lender, severally and not jointly, agrees to make
available, from time to time, until the Commitment Termination Date, for
Borrower's use and upon the request of Borrower therefor, its Pro Rata Share of
advances (each, a "Revolving Credit Advance") in an aggregate amount which shall
not at any given time exceed the lesser at such time of (A) the Maximum
Revolving Credit
<PAGE>
Loan and (B) an amount equal to the Borrowing Base at such time ("Borrowing
Availability"); provided, however, that in no event shall the Revolving Credit
Loan of any Lender exceed its Revolving Credit Loan Commitment. Until all
amounts outstanding in respect of the Revolving Credit Loan shall become due and
payable on the Commitment Termination Date, Borrower may from time to time
borrow, repay and reborrow under this Section 1.1(a). Each Revolving Credit
Advance shall be made on notice by Borrower to the individual at the Agent
identified on Schedule 1.1(a) at the address specified thereon, given no later
than 12:00 noon (Chicago time) on the Business Day of the proposed Revolving
Credit Advance. Each such notice (a "Notice of Revolving Credit Advance") shall
be substantially in the form of Exhibit A hereto, specifying therein the
requested date, the amount of such Revolving Credit Advance, and such other
information as may be required by Agent and shall be given in writing (by
telecopy or overnight courier) or by telephone confirmed immediately in writing.
Agent shall be entitled to rely upon, and shall be fully protected under this
Agreement in relying upon, any Notice of Revolving Credit Advance believed by
Agent to be genuine and to assume that each Person executing and delivering the
same was duly authorized unless the responsible individual acting thereon for
Agent shall have, at the time of reliance thereon, actual knowledge to the
contrary.
(b) Borrower shall execute and deliver to each Lender a note to
evidence the Revolving Credit Loan, such note to be in the principal amount of
the Revolving Credit Loan Commitment of such Lender, dated the Closing Date and
substantially in the form of Exhibit C hereto (each a "Revolving Credit Note"
and, collectively, the "Revolving Credit Notes"). The Revolving Credit Notes
shall represent the obligation of Borrower to pay the amount of the Revolving
Credit Loan Commitment or, if less, the aggregate unpaid principal amount of all
Revolving Credit Advances made by Lenders to Borrower and all other obligations
together with interest thereon as prescribed in Section 1.5. The date and
amount of each Revolving Credit Advance and each payment of principal with
respect thereto shall be recorded on the books and records of Agent, which books
and records shall constitute prima facie evidence of the accuracy of the
information therein recorded. The entire unpaid balance of the Revolving Credit
Loan shall be immediately due and payable on the Commitment Termination Date.
1.2 Prepayment. (a) In the event that the outstanding balance of the
Revolving Credit Loan shall, at any time, exceed the lesser at such time of (i)
the Maximum Revolving Credit Loan and (ii) the Borrowing Base, Borrower shall
immediately repay the Revolving Credit Loan in the amount of such excess.
(b) Immediately upon receipt by Borrower or any of its Subsidiaries
(other than LaserMaster Europe) of net proceeds (after deducting all expenses,
including commissions, taxes payable, and amounts payable to holders of prior
liens, if any, and an appropriate reserve for income taxes in connection
therewith) of any asset disposition permitted by Section 6.8(ii) or (iii),
Borrower shall prepay the Loans with such net proceeds in accordance with clause
(d) below; provided, however, that so long as (i) no Default or Event of Default
has occurred and is continuing, (ii) Excess Availability is equal to or greater
than $2,000,000 and (iii) the Average Payable Days is less than 60 days,
Borrower shall not be required to prepay the Loans with any net proceeds from
the sale or other disposition of any Intellectual Property ("IP Proceeds") of
the Borrower or any of its
-2-
<PAGE>
Subsidiaries (other than LaserMaster Europe); provided further, that in the
event either test set forth in clause (i), (ii) or (iii) above shall no longer
be met by Borrower after Borrower or any of its Subsidiaries (other than
LaserMaster Europe) has received any IP Proceeds, then Borrower shall
immediately prepay the Loans with any such IP Proceeds in accordance with clause
(d) below; and provided further, that so long as no Default or Event of Default
has occurred and is continuing, Borrower or any of its Subsidiaries (other than
LaserMaster Europe) may reinvest, within ninety (90) days after receipt thereof,
the net proceeds from any sale or disposition of assets which are obsolete or no
longer useful in Borrower's or any Subsidiary's (other than LaserMaster Europe)
business in productive assets of a kind then used or usable in the business of
Borrower and its Subsidiaries (other than LaserMaster Europe).
(c) Borrower shall have the right at any time on thirty (30) days'
prior written notice to Agent to voluntarily prepay all or part of the Revolving
Credit Loan and permanently reduce or terminate the Revolving Credit Loan
Commitment, provided that any such voluntary prepayment shall be accompanied by
the payment of the fee required by Section 1.7(c), if any. Upon any such
prepayment and permanent reduction or termination of the Revolving Credit Loan
Commitment, Borrower's right to receive Revolving Credit Advances shall
simultaneously terminate or be permanently reduced, as the case may be.
(d) Any prepayments required under clause (b) above shall be applied
in satisfaction of the Obligations to the principal amount of the Revolving
Credit Loan outstanding and accrued interest with respect thereto until the same
shall have been paid in full.
1.3 Use of Proceeds. Borrower shall utilize the proceeds of
Revolving Credit Advances solely for the Refinancing (and to pay any related
transaction expenses) and for the financing of ordinary working capital and
general corporate needs (but excluding in any event any direct or indirect
redemption, purchase, repayment or defeasance of any Stock of Borrower or
Holdings).
1.4 Interest on Revolving Credit Loan. (a) Borrower shall pay
interest to Agent, for the ratable benefit of Lenders in accordance with the
Revolving Credit Loans being made by each Lender, in arrears on each applicable
Interest Payment Date, at a rate equal to the Index Rate plus the Applicable
Margin in effect from time to time.
(b) If any payment on the Revolving Credit Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
(c) All computations of interest shall be made by Agent on the basis
of a three hundred and sixty (360) day year, in each case for the actual number
of days occurring in the period for which such interest is payable. The Index
Rate and the Applicable Margin shall be determined each day based upon the Index
Rate and Applicable Margin, respectively, as in effect each day. Each
determination by Agent of an interest rate hereunder shall (absent manifest
error) be deemed
-3-
<PAGE>
final, binding and conclusive upon Borrower in all respects, unless Borrower,
within thirty (30) days after each determination by Agent of an interest rate
hereunder, shall notify Agent in writing of any objection which Borrower may
have to any such determination, describing in reasonable detail the basis for
such objection with specificity. In that event, only those determinations
expressly objected to in such notice shall be deemed to be disputed by Borrower.
Agent's determination, based upon the facts available, of any determination
objected to by Borrower in such notice shall (absent manifest error) be final,
binding and conclusive on Borrower.
(d) So long as any Event of Default shall have occurred and be
continuing, and after written notice from Agent to Borrower, the interest rates
applicable to the Revolving Credit Loan and any other Obligations shall be
increased by two percent (2%) per annum above the rate of interest otherwise
applicable hereunder ("Default Rate").
(e) Notwithstanding anything to the contrary set forth in this Section
1.4, if, at any time until payment in full of all of the Obligations, the rate
of interest payable hereunder exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such
event and so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable hereunder shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the rate of interest payable hereunder
is less than the Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total interest
received by Agent, on behalf of Lenders, from the making of such advances
hereunder is equal to the total interest which would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, the interest rate payable hereunder shall be the rate of
interest provided in Sections 1.4(b) through (d) of this Agreement, unless and
until the rate of interest again exceeds the Maximum Lawful Rate, in which event
this paragraph shall again apply. In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount which such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. In the event the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. In the event that
a court of competent jurisdiction, notwithstanding the provisions of this
Section 1.4 (e), shall make a final determination that a Lender has received
interest hereunder or under any of the other Loan Documents in excess of the
Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law,
promptly apply such excess first to any interest due and not yet paid hereunder
in respect of the Loans, then to the outstanding principal of the Loans, then to
Fees and any other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
1.5 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable discretion determine which Accounts shall
be deemed to be "Eligible Accounts" for purposes of determining the amounts, if
any, to be advanced to Borrower under the Revolving Credit
-4-
<PAGE>
Loan. In determining whether a particular Account constitutes an Eligible
Account, Agent shall not include any such Account which meets any of the
criteria set forth on Schedule B hereto.
1.6 Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available to
Agent, Agent shall in its reasonable discretion determine which Inventory shall
be deemed to be "Eligible Inventory" for purposes of determining the amounts, if
any, to be advanced to Borrower under the Revolving Credit Loan. In determining
whether any particular Inventory constitutes Eligible Inventory, Agent shall not
include Inventory which meets any of the criteria set forth in Schedule C
hereto.
1.7 Fees. (a) Borrower shall pay to GE Capital, individually, the
fees specified in that certain Fee Letter, dated of even date herewith (the "GE
Capital Fee Letter"), at the times specified for payment therein.
(b) As additional compensation for Lenders' costs and risks in making
the Revolving Credit Loan available to Borrower, Borrower agrees to pay to
Agent, for the ratable benefit of Lenders, in arrears, on the first Business Day
of each month prior to the Commitment Termination Date and on the Commitment
Termination Date, a fee for Borrower's non-use of available funds (the "Non-use
Fee") in an amount equal to one-half of one percent (.50%) per annum (calculated
on the basis of a 360 day year for actual days elapsed) of the difference
between the respective daily averages of (i) the Maximum Revolving Credit Loan
(as it may be adjusted from time to time hereunder) and (ii) the amount of the
Revolving Credit Loan outstanding during the period for which the Non-Use Fee is
due; provided, however, that solely for purposes of computing the Non-use Fee,
the Maximum Revolving Credit Loan shall be deemed to be $8,000,000 from and
after the Closing Date until the first day in which the amount of the Revolving
Credit Loan outstanding exceeds $8,000,000, from and after which day the Maximum
Revolving Credit Loan shall be deemed to be $10,000,000.
(c) If, prior to the Commitment Termination Date, Borrower shall
prepay the Revolving Credit Loan pursuant to Section 1.2(c), whether voluntarily
or involuntarily and whether before or after acceleration of the Obligations,
Borrower shall pay to the Agent, for the benefit of Lenders as liquidated
damages and compensation for the costs of being prepared to make funds available
to Borrower hereunder an amount determined by multiplying the Revolving Credit
Loan Commitment of all Lenders (or, in the case of a partial reduction, by the
amount of such reduction) by (i) two percent (2.0%) in the case of a permanent
prepayment of the Revolving Credit Loan and reduction of the Revolving Loan
Commitment prior to the first anniversary of the Closing Date, (ii) one percent
(1.0%) in the case of a permanent prepayment of the Revolving Credit Loan and
reduction of the Revolving Loan Commitment from and after the first anniversary
of the Closing Date and prior to the second anniversary of the Closing Date, and
(iii) one-half of one percent (.50%) in the case of a permanent prepayment of
the Revolving Credit Loan and reduction of the Revolving Loan Commitment from
and after the second anniversary of the Closing Date and prior to the Commitment
Termination Date.
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1.8 Cash Management Systems. On or prior to the Closing Date,
Borrower will establish and will maintain until the Termination Date, the cash
management systems described on Schedule D hereto.
1.9 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 1:00 p.m. (Chicago time) on the day when due in lawful
money of the United States of America in immediately available funds to the
Collection Account. For purposes of computing interest and fees and determining
the amount of funds available for borrowing by Borrower pursuant to Section
1.1(a), (a) all payments (including cash sweeps) consisting of cash, wire or
electronic transfers in immediately available funds shall be deemed received on
the date of deposit thereof in the Collection Account and notice to Agent of
such deposit before the time specified above, and (b) all payments consisting of
checks, drafts, or similar non-cash items shall be deemed received one (1)
Business Day after receipt of good funds following deposit of any such payment
in the Collection Account and notice to Agent of such deposit; provided,
however, that any such payments deposited in the Collection Account not later
than 1:00 p.m. (Chicago time) shall be deemed received on such Business Day
solely for purposes of determining the amount of funds available for borrowing
by Borrower pursuant to Section 1.1(a).
1.10 Application and Allocation of Payments. Borrower hereby
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received from or on behalf of Borrower, and
Borrower hereby irrevocably agrees that Agent shall have the continuing
exclusive right to apply any and all such payments against the then due and
payable Obligations of Borrower and in repayment of the Revolving Credit Loan as
Agent may deem advisable notwithstanding any previous entry by Agent upon the
Loan Account or any other books and records. In the absence of a specific
determination by Agent with respect thereto, the same shall be applied in the
following order: (i) to then due and payable Fees and expenses; (ii) to then due
and payable interest payments on the Revolving Credit Loan; (iii) to then due
and payable Obligations other than Fees, expenses and interest and principal
payments; and (iv) to principal payments on the Revolving Credit Loan; and (v)
to all other then due and payable Obligations. Agent is authorized to, and at
its option may, make or cause to be made Revolving Credit Advances on behalf of
Borrower for payment of all Fees, expenses, Charges, costs, principal, interest,
or other Obligations owing by Borrower under this Agreement or any of the other
Loan Documents if and to the extent Borrower fails to promptly pay any such
amounts as and when due, even if such Revolving Credit Advance would cause total
Revolving Credit Advances to exceed Borrowing Availability or the Maximum
Revolving Credit Loan amount; provided, however, that so long as no Default or
Event of Default shall have occurred and be continuing, Agent shall notify
Borrower at least two (2) days in advance of making any Revolving Credit Advance
on behalf of Borrower for payment of any such items other than principal or
interest. At Agent's option and to the extent permitted by law, any advances so
made shall be deemed Revolving Credit Advances constituting part of the
Revolving Credit Loan hereunder.
1.11 Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: (a) all Revolving Credit
Advances, (b) all payments made by Borrower, and (c) all other appropriate
debits and credits as provided in this Agreement with
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respect to the Revolving Credit Loan or any other Obligations. All entries in
the Loan Account shall be made in accordance with Agent's customary accounting
practices as in effect from time to time. Borrower shall pay all Obligations as
such amounts become due or are declared due pursuant to the terms of this
Agreement.
The balance in the Loan Account, as recorded on Agent's most recent
printout or other written statement, shall be presumptive evidence of the
amounts due and owing to Agent and Lenders by Borrower; provided, that, any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower's obligations to pay the Obligations. Agent shall render to
Borrower a monthly accounting of transactions under the Revolving Credit Loan
setting forth the balance of the Loan Account. Each and every such accounting
shall (absent manifest error) be deemed final, binding and conclusive upon
Borrower in all respects as to all matters reflected therein, unless Borrower,
within sixty (60) days after the date any such accounting is rendered, shall
notify Agent in writing of any objection which Borrower may have to any such
accounting, describing in reasonable detail the basis for such objection with
specificity. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed by Borrower. Agent's determination, based
upon the facts available, of any item objected to by Borrower in such notice
shall (absent manifest error) be final, binding and conclusive on Borrower.
1.12 Indemnity. Borrower shall jointly and severally indemnify and
hold each of Agent, Lenders, their respective Affiliates, and each such Person's
respective officers, directors, employees, attorneys, agents and representatives
(each, an "Indemnified Person"), harmless from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and expenses
(including attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended under this Agreement and the other Loan Documents or
in connection with or arising out of the transactions contemplated hereunder and
thereunder or any actions or failures to act in connection therewith, including
any and all Environmental Liabilities and Costs; provided, that Borrower shall
not be liable for any indemnification to such Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from such Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction after a
final adjudication on the merits. NEITHER AGENT, ANY LENDER, NOR ANY OTHER
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED OR TERMINATED UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
1.13 Access. (a) Borrower shall provide full access during normal
business hours, from time to time upon five (5) Business Day's prior notice, to
Agent and any of its officers, employees and agents, up to four times a year
(unless a Default or Event of Default shall have
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occurred and be continuing, in which event Agent and its officers, employees,
designees, agents and representatives shall have access at any and all times,
without limitation as to frequency per year, and without any advance notice), to
the properties, facilities, books, records, suppliers, customers, advisors and
employees (including officers) of Holdings, Borrower and its Subsidiaries, to
the Collateral, to the accountants (including Deloitte & Touche, LLP) of
Holdings, Borrower and the Subsidiaries thereof and to the work papers of such
accountants, with Borrower agreeing to use reasonable best efforts to provide
Agent access to the accountants and their work papers. Without limiting the
generality of the foregoing, Borrower shall (i) permit Agent, and any of its
officers, employees, agents and representatives, to inspect, audit and make
extracts from all of Holdings', Borrower's and its Subsidiaries' records, files
and books of account and (ii) permit Agent, and any of its officers, employees,
agents and representatives, to inspect, review and evaluate the Collateral at
Borrower's and its Subsidiaries' locations and at premises not owned by or
leased to Borrower or any Subsidiary of Borrower. Borrower shall make available
to Agent and its counsel, as quickly as is possible under the circumstances,
originals or copies of all books, records, board minutes, contracts, insurance
policies, environmental audits, business plans, files, financial statements
(actual and pro forma), filings with federal, state and local regulatory
agencies, and other instruments and documents which Agent may request. Borrower
shall deliver any document or instrument necessary for Agent, as it may from
time to time request, to obtain records from any service bureau or other Person
which maintains records for Borrower, and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
Borrower. Borrower shall instruct their certified public accountants to make
available to Agent such information and records as Agent may request.
Notwithstanding the foregoing, Borrower shall not be required to provide access
to any of the foregoing information which in the reasonable written opinion of
counsel to Borrower, in form and substance reasonably satisfactory to Agent and
its counsel, is subject to an attorney-client privilege and which cannot be
disclosed (after giving effect to any possible disclosure method or protective
agreement which may be requested by Agent or its counsel) without waiver of such
privilege; provided, however, that in no event shall any information delivered
or requested to be delivered pursuant to Schedule F or G be deemed to be
protected by an attorney-client privilege.
(b) A fee of $500 per day per individual (plus all reasonable out-of-
pocket costs and expenses) in connection with Agent's field examinations
permitted under Section 1.13(a) above and Section 4(c) of the Security Agreement
shall be charged against the Revolving Credit Facility in connection with each
field audit conducted after the Closing Date.
1.14 Taxes. (a) Any and all payments by Borrower hereunder or under
the Revolving Credit Notes shall be made, in accordance with this Section 1.14,
free and clear of and without deduction for any and all present or future Taxes.
If Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under the Revolving Credit Notes, (i) the sum
payable shall be increased as much as shall be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 1.14) Agent or Lenders, as applicable, receive an
amount equal to the sum they would have received had no such deductions been
made, (ii) Borrower shall make such deductions, and
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(iii) Borrower shall pay the full amount deducted to the relevant taxing or
other authority in accordance with applicable law.
(b) Borrower shall indemnify and pay, within ten (10) days of demand
therefor, Agent and each Lender for the full amount of Taxes (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 1.14)
paid by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Agent and Lenders shall use reasonable efforts to return any refund with respect
to any Taxes for which Borrower has paid as provided in the foregoing sentence.
1.15 Capital Adequacy; Increased Costs; Illegality. (a) In the event
that any Lender shall have determined that the adoption after the date hereof of
any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) from any central bank or governmental agency or body having
jurisdiction does or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender and thereby
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within forty-five
(45) days after notice and demand on Borrower by such Lender (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the amount of
such cost and showing the basis of the computation of such cost submitted by
such Lender to Borrower and Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining of any
Loan, then Borrower shall from time to time, upon demand by such Lender (with a
copy of such demand to Agent), pay to Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost
which is attributable to Borrower. A certificate as to the amount of such
increased cost, submitted to Borrower and Agent by such Lender, shall be
conclusive and binding on Borrower for all purposes, absent manifest error. Each
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to in clause (i) or (ii) above which would result in any
such increased cost to such Lender, such Lender shall, to the extent not
inconsistent with such Lender's internal policies of general application, use
reasonable commercial efforts to minimize costs and expenses incurred by it and
payable to it by Borrower pursuant to this Section 1.15(b).
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans.
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Notwithstanding any other provision of this Agreement and without
affecting in any manner the rights of Agent and Lenders hereunder, Borrower
shall have no rights under this Agreement (but shall have all applicable
obligations hereunder), and no Lender shall be obligated to make any Loan on the
Closing Date, or to take, fulfill, or perform any other action hereunder, until
the following conditions have been satisfied, in Agent's reasonable discretion,
or waived in writing by Agent:
(a) Credit Agreement. This Agreement or counterparts hereof shall have
been duly executed by, and delivered to, Borrower, Agent and Lenders.
(b) Loan Documents. Agent shall have received such guaranties,
documents, instruments, agreements and legal opinions as Agent shall request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all guaranties, documents, instruments, agreements and
legal opinions listed in the Schedule of Documents attached hereto as Schedule
E, each in form and substance satisfactory to Agent.
(c) Repayment of Prior Loans. A pay-off letter satisfactory to Agent
confirming that all of the Prior Lender Obligations will be repaid in full from
the proceeds of the initial Revolving Credit Advance and all Liens upon any of
the property of Holdings, Borrower or any of its Subsidiaries in favor of Prior
Lender shall be terminated and released by Prior Lender immediately upon such
payment.
(d) Governmental Approvals. Evidence satisfactory to Agent that
Borrower has obtained consents and acknowledgments of all Persons whose consents
and acknowledgments may be required, including, but not limited to, all
requisite Governmental Authorities, to the terms, and to the execution and
delivery, of this Agreement, the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby.
(e) Insurance. Evidence satisfactory to Agent that the insurance
policies provided for in Section 3.21 and Schedule 3.21 are in full force and
effect, together with appropriate evidence showing loss payable and/or
additional insured clauses or endorsements, as requested by Agent, in favor of
Agent, on behalf of Lenders, and in form and substance satisfactory to Agent.
(f) Opening Availability. The Eligible Accounts and Eligible Inventory
supporting the initial Revolving Credit Advance and the amount of the reserves
to be established on the Closing Date shall be sufficient in value, as
determined by Agent, to provide Borrower with excess Borrowing Availability,
after giving effect to the initial Revolving Credit Advance and the consummation
of the transactions contemplated hereunder (on a pro forma basis and without any
deterioration in trade payables) of at least $1,000,000.
(g) Payment of Fees. Payment by Borrower to GE Capital of the fees
required to be paid on the Closing Date in the respective amounts specified in
GE Capital Fee Letter.
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(h) Officer's Certificate. Agent shall have received duly executed
originals of a certificate of the chief executive officer and chief financial
officer of Borrower, dated the Closing Date, stating that since June 30, 1995,
(i) there has been no material adverse change in the business, results of
operations, financial condition or prospects of Borrower or any of its
Subsidiaries or the industries in which Borrower or any Subsidiary operates; and
(ii) no litigation has been commenced which could reasonably be expected to have
a Material Adverse Effect or could challenge any of the transactions
contemplated by this Agreement and the other Loan Documents.
(i) Waivers. Agent, on behalf of Lenders, shall have received landlord
waivers and consents, bailee letters and mortgagee agreements in form and
substance satisfactory to Agent, in each case as required pursuant to Section
5.11. In the event Borrower is unable to obtain a landlord waiver and consent,
bailee letter and/or mortgage agreement acceptable to Agent as to any such
location on or before the Closing Date, Eligible Inventory at that location
shall be subject to a reserve established by Agent in accordance with Section
5.11.
(j) Other Indebtedness. The terms and conditions of all long-term debt
of Holdings, Borrower and any Subsidiaries thereof shall be acceptable to Agent,
in its sole discretion, and Agent and Lenders shall have received any and all
subordination and/or intercreditor agreements, all in form and substance
reasonably satisfactory to Agent, in its sole discretion, as Agent shall have
deemed necessary or appropriate with respect to such indebtedness, including,
without limitation, (i) the Holdings Subordination Agreement executed and
delivered by Holdings and (ii) the TimeMasters Subordination Agreement executed
and delivered by TimeMasters.
(k) Environmental Reports. Agent shall have received such
environmental review and audit reports with respect to the properties of
Borrower and any of its Subsidiaries as Agent shall have requested and Agent
shall be satisfied, in its sole discretion, with the contents of all such
environmental reports.
(l) Quarter Financials. Agent shall have received Holdings' Form 10-Q
for their Fiscal Quarter ended September 30, 1995 and any other reports filed
with the Securities and Exchange Commission from September 30, 1995 to the
Closing Date, and there shall be no material difference between such unaudited
financial statements and the draft financial statements for such period
previously provided to Agent.
(m) Financial Condition. Borrower shall have provided Agent with their
current operating statements, a consolidated and consolidating balance sheet and
statement of cash flows, and projections, and a Borrowing Base Certificate
certified by Borrower's Chief Financial Officer, in each case in form and
substance satisfactory to Agent, and Agent shall be satisfied, in its sole
discretion, with all of the foregoing, including:
(i) the Pro Forma as of the Closing Date in accordance with
Section 3.4 hereof;
(ii) Projections in accordance with Section 3.4 hereof; and
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(iii) a certificate of the Chief Executive Officer or Chief
Financial Officer of Borrower, based on such Pro Forma and Projections, to
the effect that (A) Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (B) the Pro Forma fairly presents the
financial condition of Borrower as of the date thereof after giving effect
to the transactions contemplated by the Loan Documents; (C) the Projections
are reasonable estimates of the future financial performance of Borrower
subsequent to the date thereof based upon the historical performance of
Borrower's predecessors; and (D) containing such other statements with
respect to the solvency of Borrower and matters related thereto as the
Agent shall request.
2.2 Further Conditions to Each Revolving Credit Advance. It shall be a
further condition to the initial and each subsequent Revolving Credit Advance
that the following statements shall be true on the date of each such advance or
funding, as the case may be:
(a) All of Borrower's representations and warranties (after giving
effect to the delivery and/or acceptance of any updated Schedules hereto which
is expressly permitted by Section 5.8) contained herein or in any of the other
Loan Documents shall be true and correct on and as of the Closing Date and the
date on which each such Revolving Credit Advance is made as though made on and
as of such date, except to the extent that any such representation or warranty
expressly relates to an earlier date and except for changes therein expressly
permitted or expressly contemplated by this Agreement.
(b) No Material Adverse Effect shall have occurred since the date
hereof.
(c) No event shall have occurred and be continuing, or would result
from the making of any Revolving Credit Advance, which constitutes or would
constitute a Default or an Event of Default.
(d) After giving effect to such Revolving Credit Advance the aggregate
principal amount of the Revolving Credit Loan shall not exceed the maximum
amount permitted by Section 1.2(a) without requiring that a payment be made to
Agent or any Lender.
The request and acceptance by Borrower of the proceeds of any Revolving Credit
Advance shall be deemed to constitute, as of the date of such request or
acceptance, (i) a representation and warranty by Borrower that the conditions in
this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrower of the
granting and continuance of Agent's Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make Revolving Credit Advances, Borrower makes
the following representations and warranties to Agent and each Lender, each and
all of which shall survive the execution and delivery of this Agreement:
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3.1 Corporate Existence; Compliance with Law. Borrower and each
Subsidiary thereof (i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has been
duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification; (ii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease and to
conduct its business as now, heretofore and proposed to be conducted; (iii) has
all material licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct; (iv) is in compliance with its certificate or articles of incorporation
and by-laws; and (v) is in material compliance with all applicable provisions of
law.
3.2 Executive Offices. The current location of each Loan Party's Chief
executive office and principal place of business is set forth in Schedule 3.2
(as may be updated from time to time) and, as of the Closing Date, except as
described on Schedule 3.2 (as may be updated from time to time), none of such
locations have changed within the past six (6) months.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by Holdings, each Borrower and each
Subsidiary thereof of the Loan Documents and all other instruments and documents
to be delivered by each such Person, and the creation of all Liens provided for
therein: (i) are within such Person's corporate power; (ii) have been duly
authorized by all necessary or proper corporate and shareholder action; (iii)
are not in contravention of any provision of such Person's certificate or
articles or incorporation or bylaws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(v) will not conflict with or result in the breach or termination of, constitute
a default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Person is a party or by which such Person or any of its property is bound; (vi)
will not result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on behalf of itself
and Lenders, all pursuant to the Loan Documents; and (vii) do not require the
consent or approval of any Governmental Authority or any other Person, except
those referred to in Section 2.1(d), all of which will have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the Closing
Date, each of the Loan Documents shall have been duly executed and delivered for
the benefit of or on behalf of Holdings, Borrower and each Subsidiary thereof
(as applicable) and each Loan Document shall then constitute a legal, valid and
binding obligation of Holdings, Borrower and such Subsidiary, to the extent it
is a party thereto, enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the rights of creditors generally or by application of general
principles of equity.
3.4 Financial Statements and Projections. All financial statements
(the "Financial Statements"), except for the Projections, concerning Holdings,
Borrower and its respective Subsidiaries which are referenced below have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein and except, with respect to
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unaudited financial statements, for the absence of footnotes and normal year-end
audit adjustments) and do present fairly in all material respects the financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended.
(a) The following financial statements attached hereto as Schedule
3.4(A) have been delivered on the date hereof:
(i) The audited balance sheet at June 30, 1995 and 1994 and the
related statements of income of Holdings and its Subsidiaries for the
Fiscal Years then ended, certified by Deloitte & Touche, LLP.
(ii) The unaudited balance sheet at September 30, 1995 and the
related statement of income of Holdings and its Subsidiaries for the Fiscal
Quarter then ended.
(b) Pro Forma. The Pro Forma balance sheet of Holdings and its
Subsidiaries and of Borrower, Asia/Pacific and ColorMasters delivered on the
date hereof and attached hereto as Schedule 3.4(B) were prepared by Borrower
assuming the consummation of the Related Transactions and based on the estimated
balance sheet of Holdings and Borrower and Asia/Pacific as of December 31, 1995
and were prepared in accordance with GAAP, with only such adjustments thereto as
would be required in accordance with GAAP.
(c) Projections. The Projections delivered on the date hereof and
attached hereto as Schedule 3.4(C) have been prepared by Borrower in light of
the past operations of the business of Borrower and its Subsidiaries, and
reflect projections for the three year period beginning on January 1, 1996 on a
month-by-month basis for the first year and on a year-by-year basis thereafter.
The Projections represent as of the date hereof the good faith and reasonable
estimates of the future financial performance of Borrower based on the
historical performance of Borrower and its Subsidiaries (it being understood
that such Projections are not warranties of future performance).
3.5 Collateral Reports. Borrower has delivered the Collateral
Reports identified on Schedule G and each such Collateral Report complies with
the description thereof contained on Schedule G.
3.6 Material Adverse Effect. Since June 30, 1995 neither Borrower
nor any Subsidiary thereof has incurred any obligations, contingent liabilities,
or liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the pro forma balance sheet of Borrower
and its Subsidiaries and which could, alone or in the aggregate, have or result
in a Material Adverse Effect. No Material Adverse Effect has occurred between
June 30, 1995 and the Closing Date.
3.7 Ownership of Property; Liens. (a) Except as described on
Schedule 3.7 (as may be updated from time to time), the real estate ("Real
Estate") listed on Schedule 3.7 (as may be updated from time to time)
constitutes all of the real property owned, leased, or used in its business by
Borrower or any Subsidiaries (other than LaserMaster Europe) thereof. Borrower
and each
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Subsidiary (other than LaserMaster Europe) thereof (i) owns good and marketable
fee simple title to all of its owned real estate, and valid and marketable
leasehold interests in all of its Leases (both as lessor and lessee, sublessee
or assignee), all as described on Schedule 3.7 (as may be updated from time to
time), and (ii) good and marketable title to, or valid leasehold interests in,
all of its other properties and assets, and none of the properties and assets of
Borrower or any Subsidiaries (other than LaserMaster Europe) thereof are, to the
best of Borrower's knowledge solely with respect to any leased Real Estate,
subject to any Liens, except Permitted Liens; and Borrower or such Subsidiary
(other than LaserMaster Europe) has received all deeds, assignments, waivers,
consents, non-disturbance and recognition or similar agreements, bills of sale
and other documents, and duly effected all recordings, filings and other actions
necessary to establish, protect and perfect Borrower's or such Subsidiary's
(other than LaserMaster Europe), right, title and interest in and to all such
real estate and other assets or property. Except as described on Schedule 3.7
(provided that, solely with respect to this sentence, Schedule 3.7 may not be
updated unless expressly consented to in writing by Agent and Requisite
Lenders), (i) neither Borrower nor any Subsidiary (other than LaserMaster
Europe) thereof nor any other party to any such Lease described such Schedule
3.7 is in default in any material respect of its obligations thereunder or has
delivered or received any notice of default under any such Lease, and no event
has occurred which, with the giving of notice, the passage of time or both,
would constitute a default in any material respect under any such Lease; (ii)
neither Borrower nor any Subsidiary (other than LaserMaster Europe) thereof owns
or holds or is obligated under or a party to, any option, right of first refusal
or any other contractual right to purchase, acquire, sell, assign or dispose of
any real property owned or leased by Borrower or such Subsidiary (other than
LaserMaster Europe) except as set forth therein; and (iii) no portion of any
real property owned or leased by Borrower or any Subsidiary (other than
LaserMaster Europe) thereof has suffered any material damage by fire or other
casualty loss or a Release which has not heretofore been completely repaired and
restored to its original condition or is being remedied. All material permits
required to have been issued or appropriate to enable the real property owned or
leased by Borrower or such Subsidiary (other than LaserMaster Europe) to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used, have been lawfully issued and are, as of the date hereof, in
full force and effect.
3.8 Restrictions; No Default. No contract, lease, agreement or other
instrument to which Borrower or any Subsidiary thereof is a party or by which it
or any of its properties or assets is bound or affected and no provision of
applicable law or governmental regulation has or results in a Material Adverse
Effect, or could have or result in a Material Adverse Effect. Neither Borrower
nor any Subsidiary (other than LaserMaster Europe) thereof is in default, and to
Borrower's or Subsidiary's (other than LaserMaster Europe) knowledge no third
party is in default, under or with respect to any material contract, agreement,
lease or other instrument to which it is a party. LaserMaster Europe is not in
default, and to Borrower's knowledge no third party is in default, under or with
respect to any contract, agreement, lease or other instrument to which
LaserMaster Europe is a party which could reasonably be expected to have a
Material Adverse Effect.
3.9 Labor Matters. No strikes or other labor disputes against
Borrower or any Subsidiary (other than LaserMaster Europe) thereof are pending
or, to Borrower's knowledge,
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threatened. To the best of Borrower's knowledge, hours worked by and payment
made to employees of Borrower and any Subsidiaries (other than LaserMaster
Europe) thereof have not been in violation of the Fair Labor Standards Act or
any other applicable federal, state, local or foreign law dealing with such
matters. All payments due from Borrower or any Subsidiary (other than
LaserMaster Europe) thereof on account of employee health and welfare insurance
have been paid or accrued as a liability on the books of Borrower. Except as
set forth in Schedule 3.9 (as may be updated from time to time), neither
Borrower nor any Subsidiary (other than LaserMaster Europe) thereof has
obligations under any collective bargaining agreement, management agreement,
consulting agreement or any written employment agreement with any officer (other
than an employment at-will agreement). There is no organizing activity
involving Borrower or any Subsidiary (other than LaserMaster Europe) thereof
pending or, to Borrower's knowledge, threatened by any labor union or group of
employees. Except as set forth in Schedule 3.9 (as may be updated from time to
time), there are no representation proceedings pending or, to Borrower's
knowledge, threatened with the National Labor Relations Board, and no labor
organization or group of employees of Borrower or any Subsidiary (other than
LaserMaster Europe) thereof has made a pending demand for recognition. Except
as set forth in Schedule 3.9 (as may be updated from time to time), there are no
complaints or charges against Borrower or any Subsidiary (other than LaserMaster
Europe) thereof pending or threatened to be filed with any federal, state, local
or foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by Borrower or any Subsidiary (other than LaserMaster Europe) thereof
of any individual.
3.10 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Schedule 3.10, neither Holdings nor
Borrower has any Subsidiaries, is engaged in any joint venture or partnership
with any other Person, or is an Affiliate of any other Person. All of the
issued and outstanding Stock of Borrower and each Subsidiary thereof is owned by
each of the Stockholders named on Schedule 3.10. Except as set forth on
Schedule 3.10, there are no outstanding rights to purchase, options, warrants or
similar rights or agreements pursuant to which Borrower or any Subsidiary
thereof may be required to issue or sell any Stock or other equity security of
any Subsidiary. As of the Closing Date, all outstanding Indebtedness of
Borrower and any Subsidiaries thereof is described in Section 6.3 (including
Schedule 6.3).
3.11 Government Regulation. Neither Borrower nor any Subsidiary
thereof is an "investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940 as amended. Neither Borrower nor
any Subsidiary thereof is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Indebtedness or to perform
its obligations hereunder, and the making of the Revolving Credit Advances by
Lenders, the application of the proceeds thereof and repayment thereof by
Borrower or such Subsidiary and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
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3.12 Margin Regulations. Neither Borrowers nor any Subsidiary thereof
is engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin security" as such term is defined in Regulation U or G
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") as now and from time to time hereafter in effect (such securities being
referred to herein as "Margin Stock"). Neither Borrower nor any Subsidiary
thereof owns any Margin Stock, and the proceeds of the Revolving Credit Advances
will not be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might cause any of the loans or other extensions
of credit under this Agreement to be considered a "purpose credit" within the
meaning of Regulation G, T, U or X of the Federal Reserve Board.
3.13 Taxes. All federal, state, local and foreign tax returns, reports
and statements, including, but not limited to, information returns required to
be filed by Borrower or any Subsidiary thereof, have been filed with the
appropriate Governmental Authority and all material Charges and other
impositions shown thereon to be due and payable have been paid prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof (or any such fine, penalty, interest, late charge or loss has
been paid), and each Borrower and each Subsidiary thereof has paid when due and
payable all material Charges required to be paid by it excluding, in each case,
Charges or other amounts being contested in accordance with Section 5.2(b).
Proper and accurate amounts have been withheld by Borrower or each Subsidiary
thereof from its respective employees (based on withholding forms completed by
such employees) for all periods in compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 3.13 (as may be updated from time to time)
sets forth as of the Closing Date those taxable years for which Borrower's tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described on Schedule 3.13 (as may be updated from time to time), neither
Borrower nor any Subsidiary thereof has executed or filed with the IRS or any
other Governmental Authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Charges. Borrowers, their Subsidiaries and their respective predecessors are not
liable for any Charges or the documents delivered in connection therewith: (i)
under any agreement (including, without limitation, any tax sharing agreements
or (ii) to the best of Borrower's knowledge, as a transferee. As of the Closing
Date, neither Borrower nor any Subsidiary thereof has agreed or been requested
to make any adjustment under IRC Section 481(a) by reason of a change in
accounting method or otherwise which would have a Material Adverse Effect.
Solely for purposes of this Section 3.13, (i) "material Charges" shall mean any
Charges which are greater than $100,000 in amount and (ii) any representation
and warranty made with respect to LaserMaster Europe shall be made to the best
knowledge of Borrower.
3.14 ERISA. (a) Schedule 3.14 (as may be updated from time to time)
lists all Plans maintained or contributed to by Borrower or any Subsidiary
thereof and all Qualified Plans
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maintained or contributed to by any ERISA Affiliate, and separately identifies
the Title IV Plans, Multiemployer Plans, any multiple employer plans subject to
Section 4064 of ERISA, unfunded Pension Plans, Welfare Plans and Retiree Welfare
Plans. Each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and to the
best knowledge of Borrower nothing has occurred which would cause the loss of
such qualification or tax-exempt status. Each Plan is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA, and with respect to each
Plan, other than a Qualified Plan, all required contributions and benefits have
been paid in accordance with the provisions of each such Plan. Neither Borrower,
nor any Subsidiary or ERISA Affiliate thereof, with respect to any Qualified
Plan, has failed to make any contribution or pay any amount due as required by
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.
With respect to all Retiree Welfare Plans, the present value of future
anticipated expenses pursuant to the latest actuarial projections of liabilities
does not exceed $100,000, and copies of such latest projections have been
provided to Agent; with respect to Pension Plans, other than Qualified Plans,
the present value of the liabilities for current participants thereunder using
PBGC interest assumptions does not exceed $100,000. Neither Borrower nor any
Subsidiary or ERISA Affiliate thereof has engaged in a prohibited transaction,
as defined in Section 4975 of the IRC or Section 406 of ERISA, in connection
with any Plan, which would subject Borrower or any Subsidiary thereof (after
giving effect to any exemption) to a material tax on prohibited transactions
imposed by Section 4975 of the IRC or any other material liability.
(b) Except as set forth in Schedule 3.14 (as may be updated from time
to time): (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA
Event or event described in Section 4062(e) of ERISA with respect to any Title
IV Plan has occurred or is reasonably expected to occur; (iii) there are no
pending, or to the knowledge of Borrower or any Subsidiary thereof, threatened
claims, actions or lawsuits (other than claims for benefits in the normal
course), asserted or instituted against (x) any Plan or its assets, (y) any
fiduciary with respect to any Plan or (z) Borrower, any Subsidiary thereof or
any ERISA Affiliate with respect to any Plan; (iv) neither Borrower nor any
Subsidiary or ERISA Affiliate thereof has incurred or reasonably expects to
incur any withdrawal liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years neither Borrower nor any
Subsidiary or ERISA Affiliate thereof has engaged in a transaction which
resulted in a Title IV Plan with Unfunded Liabilities being transferred outside
of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA)
of any such entity; (vi) no Plan which is a Retiree Welfare Plan provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment (except as may be
required by Section 4980B of the IRC and at the sole expense of the participant
or the beneficiary of the participant); (vii) Borrower, each Subsidiary thereof
and each ERISA Affiliate have complied with the notice and continuation coverage
requirements of Section 4980B of the IRC and the regulations thereunder except
where the failure to comply could not have or result in any Material Adverse
Effect; and (viii) no liability under any Plan has been funded, nor has such
obligation been
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satisfied, with the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor's Corporation or the equivalent by another
nationally recognized rating agency.
3.15 No Litigation. Except as set forth in Schedule 3.15, no action,
claim or proceeding is now pending or, to the knowledge of Borrower, threatened
against Borrower or any Subsidiary thereof, before any court, board, commission,
agency or instrumentality of any federal, state, local or foreign government or
of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, (i) which challenges Borrower's or such Subsidiary's right or power
to enter into or perform any of its obligations under the Loan Documents, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (ii) which, if determined adversely, would have or result in a Material
Adverse Effect, nor to the best knowledge of Borrower does a state of facts
exist which is reasonably likely to give rise to such proceedings.
3.16 Brokers. No broker or finder acting on behalf of Borrower or any
Subsidiary thereof brought about the obtaining, making or closing of the loans
made pursuant to this Agreement or the transactions contemplated by the Loan
Documents and neither Borrower nor any Subsidiary thereof has obligations to any
Person in respect of any finder's or brokerage fees in connection therewith.
3.17 Employment Matters. Except as set forth in Schedule 3.17 (as may
be updated from time to time), there are no employment, consulting or management
agreements (other than an employment at-will agreement) covering any executive
management employee of Borrower or Asia/Pacific. A true and complete copy of
each such agreement has been furnished to Agent.
3.18 Patents, Trademarks, Copyrights and Licenses. Except as otherwise
set forth in Schedule 3.18 (provided that, solely with respect to this sentence,
Schedule 3.18 may not be updated unless expressly consented to in writing by
Agent and Requisite Lenders), Borrower and each Subsidiary (other than
LaserMaster Europe) thereof owns all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its business as heretofore
conducted by it or proposed to be conducted by it, each of which is listed,
together with Copyright Office or Patent and Trademark Office application or
registration numbers, where applicable, on Schedule 3.18 (as may be updated from
time to time). Schedule 3.18 (as may be updated from time to time) also lists
all tradenames or other names under which Borrower or any Subsidiary (other than
LaserMaster Europe) thereof conducts business. As of the Closing Date, to the
best of Borrower's knowledge, neither the conduct of its business nor the
conduct of any of its Subsidiaries' business infringes in any material respect
upon any intellectual property right of any other Person.
3.19 Full Disclosure. No information contained in this Agreement, any
of the other Loan Documents, the Projections, the Financials, the Collateral
Reports or any written statement furnished by or on behalf of Borrower or any
Subsidiary thereof pursuant to the terms of this Agreement, which has previously
been delivered to Agent, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made. The Liens granted
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to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents
will at the Closing Date, assuming that UCC financing statements have been
timely filed in the appropriate offices, be fully perfected first priority Liens
in and to the Collateral described therein, subject only to Liens set forth in
Schedule 6.7.
3.20 Hazardous Materials. Except as set forth on Schedule 3.20 (as may
be updated from time to time), the Real Property is free of known contamination
from any Hazardous Material. In addition, Schedule 3.20 (as may be updated from
time to time) discloses material environmental liabilities of Borrower or any
Subsidiary thereof of which any of them have knowledge (i) related to
noncompliance with the Environmental Laws, or (ii) associated with the Real
Estate. Neither Borrower nor any Subsidiary thereof has caused or suffered to
occur any Release with respect to any Hazardous Material at, under, above or
upon any real property which it owns or leases. Neither Borrower nor any
Subsidiary thereof is involved in operations that are likely to result in the
imposition of any Lien on its assets or any material liability on Borrower or
such Subsidiary, under any Environmental Law, and neither Borrower nor any
Subsidiary thereof has permitted any tenant or occupant of such premises to
engage in any such activity. Borrower has provided to Agent copies of all
existing environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities and Costs, in each
case relating to Borrower or any Subsidiary thereof.
3.21 Insurance Policies. Schedule 3.21 (as may be updated from time to
time) lists all insurance of any nature maintained for current occurrences by
Borrower or any Subsidiary (other than LaserMaster Europe) thereof.
3.22 Deposit and Disbursement Accounts. Except for any accounts
maintained by LaserMaster Europe in any financial institution or bank located in
Europe and in which deposits do not exceed $25,000 in the aggregate at any time,
Schedule 3.22 lists all banks and other financial institutions at which Borrower
or any Subsidiary thereof maintains deposits and/or other accounts, including
any disbursement accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in which the account
is held, a description of the purpose of the account, and the complete account
number.
3.23 [Intentionally Omitted].
3.24 [Intentionally Omitted].
3.25 Agreements and Other Documents. As of the Closing Date, Borrower
has provided to Agent or its counsel, on behalf of Lenders, accurate and
complete copies (or summaries) of all of the following agreements or documents
to which Borrower or any Subsidiary (other than LaserMaster Europe) thereof is
subject: (a) Plans; (b) supply agreements not terminable by Borrower or such
Subsidiary, as appropriate, within sixty (60) days following written notice
issued by Borrower or such Subsidiary; (c) purchase agreements not terminable by
Borrower or such Subsidiary, as appropriate, within 60 days following written
notice issued by Borrower or such Subsidiary; (d) Leases; (e) any lease of
equipment having a remaining term of one year or longer
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and requiring aggregate rental and other payments in excess of $100,000 per
annum; (f) licenses and permits necessary for the conduct of Borrower's or such
Subsidiary's businesses; (g) instruments or documents evidencing Indebtedness of
Borrower or such Subsidiary and any security interest granted by Borrower or
such Subsidiary with respect thereto; and (h) instruments and agreements
evidencing the issuance of any equity securities, warrants, rights or options to
purchase equity securities of Borrower or such Subsidiary.
3.26 FEIN. Schedule 3.26 lists the FEIN or the Federal Employer
Identification Number of Borrower, Asia/Pacific and ColorMasters.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Borrower hereby covenants and agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent and/or Lenders, as required, financial statements, notices and
Projections at the times, to the Persons and in the manner set forth in Schedule
F.
(b) Borrower hereby covenants and agrees that from and after the
Closing Date, it shall deliver to Agent and/or Lenders, as required, the various
Collateral Reports at the times, to the Persons and in the manner set forth in
Schedule G.
4.2 Communication with Accountants. Borrower authorizes Agent and each
Lender to communicate directly with its independent certified public accountants
including Deloitte & Touche, LLP, and authorizes those accountants and advisors
to disclose to Agent and each Lender any and all financial statements and other
supporting financial documents and schedules relating to Borrower and its
Subsidiaries (including, without limitation, copies of any issued management
letters) with respect to the business, financial condition and other affairs of
Borrower or any Subsidiary thereof.
5. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that, unless Agent shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Borrower shall,
and shall cause each Subsidiary thereof, to: (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its copyrights, patents, trademarks,
trade names and all other intellectual property and rights as licensee or
licensor thereof which are material to the business of Borrower and its
Subsidiaries and preserve all the remainder of its material assets and
properties, used or useful in the conduct of its business, and keep the same in
good repair, working
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order and condition (taking into consideration ordinary wear and tear) and from
time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
(d) transact business only in such corporate and trade names as are set forth in
Schedule 5.1.
5.2 Payment of Obligations. (a) Subject to Section 5.2(b), Borrower
shall pay and discharge or cause to be paid and discharged (A) promptly all
Charges which are not otherwise contested pursuant to Section 5.2(b), imposed
upon it, its income and profits, or any of its property (real, personal or
mixed), and (B) all lawful claims for labor, materials, supplies and services or
otherwise, before any thereof shall become past due unless contested by Borrower
in a good faith contest, by appropriate proceedings, provided adequate reserves
with respect thereto all maintained on the books of Borrower in accordance with
GAAP.
(b) Borrower may in good faith contest, by appropriate proceedings,
the validity or amount of any Charges, provided, that, at the time of
commencement of any such action or proceeding, and during the pendency thereof
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
adequate reserves with respect thereto are maintained on the books of Borrower
in accordance with GAAP, (iii) such contest is maintained in good faith, (iv)
none of the Collateral becomes subject to forfeiture or loss as a result of such
Charges or claims, (v) no Lien shall attach to secure payment of such Charges or
claims other than inchoate tax liens, and (vi) Borrower shall promptly pay or
discharge such contested Charges and all additional charges, interest, penalties
and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower or the conditions set forth in this Section
5.2(b) are no longer met.
5.3 Books and Records. Borrower shall keep adequate records and books
of account with respect to Borrower's and each Subsidiary's business activities,
in which proper entries, reflecting all financial transactions, are made in
accordance with GAAP and on a basis consistent with the Financial Statements
referred to in Schedule 3.4.
5.4 Litigation. Borrower shall notify Agent in writing, promptly upon
learning thereof, of any litigation commenced or threatened against Borrower or
any Subsidiary thereof, and of the institution against it of any suit or
administrative proceeding that (a) seeks damages in excess of $200,000 or (b)
seeks any material injunctive relief.
5.5 Insurance. (a) Borrower shall, at its sole cost and expense,
maintain the policies of insurance described on Schedule 3.21 in form and with
insurers rated A or better by Bests. Such policies shall be in such amounts as
are set forth in Schedule 3.21. Borrower shall notify Agent promptly of any
occurrence causing a material loss or decline in value of any Collateral and the
estimated (or actual, if available) amount of such loss or decline. So long as
any Default or Event of Default shall have occurred and be continuing or if the
casualty loss exceeds $100,000: Borrower hereby directs all present and future
insurers under its "All Risk" policies of insurance (and including any key man
life insurance policies obtained on behalf of Borrower or any of its
Subsidiaries (other than LaserMaster Europe)) to pay all proceeds payable
thereunder with respect
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to any Collateral directly to Agent, on behalf of itself and Lenders and
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent) as Borrower's true and lawful agent and attorney-
in-fact for the purpose of making, settling and adjusting claims under such
policies of insurance and endorsing the name of Borrower on any check or other
item of payment for the proceeds of such policies of insurance. In the event
Borrower at any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required above or to pay any premium in whole or in
part relating thereto, Agent, without waiving or releasing any Obligations or
Default or Event of Default hereunder, may (upon 30 days' prior written notice
to Borrower if no Default or Event of Default shall have occurred and be
continuing) at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which Agent deems advisable. All sums so
disbursed, including attorneys, fees, court costs and other charges related
thereto, shall be payable, on demand, by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral, provided, that, if
and to the extent Borrower fails to promptly pay any of such sums upon demand
therefor, Agent is authorized to, and at its option may, make or cause to be
made Revolving Credit Advances on behalf of Borrower for payment thereof.
(b) Agent reserves the right at any time, upon any change in
Borrower's risk profile (including, without limitation, any change in the
product mix maintained by Borrower or any laws affecting the potential liability
of Borrower), to require additional forms and limits of insurance to ensure that
Borrower and each Subsidiary thereof is protected by insurance in amounts and
with coverage customary for its industry. If requested by Agent, Borrower shall
deliver to Agent from time to time (but not more than once per year so long as
no Default or Event of Default shall have occurred and be continuing) a report
of a reputable insurance broker, satisfactory to Agent, with respect to its
insurance policies.
(c) Borrower shall deliver to Agent endorsements (i) to all "All Risk"
and business interruption insurance naming Agent, on behalf of itself and
Lenders, as loss payee, and (ii) to all general liability and other liability
policies naming Agent, on behalf of itself and Lenders, as additional insured.
(d) The loss, if any, under any property insurance required to be
carried by this Section 5.5 with respect to any Collateral shall be adjusted
with the insurance companies or otherwise collected, including the filing of
appropriate proceedings by Borrower or its Subsidiaries (other than LaserMaster
Europe), subject to the reasonable approval of the Agent in the case of claims
in excess of $100,000. If the proceeds payable under any policy of property
insurance with respect to any Collateral are $100,000 or less, Borrower or its
Subsidiaries shall have the right to use such proceeds to repair or replace the
damaged or destroyed property, provided that a Default or an Event of Default
shall not have occurred and be continuing at the time the proceeds are paid. If
a Default or an Event of Default shall have occurred and be continuing at the
time such insurance proceeds with respect to any Collateral are paid, or if such
insurance proceeds are more than $250,000, such insurance proceeds shall be
applied to the Obligations in accordance with Section 1.2(f) (and,
notwithstanding anything else to the contrary in this Agreement or otherwise, to
permanently reduce the Revolving Credit Loan Commitment by the amount of such
proceeds that
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are, or are available to be, applied against the Revolving Credit Loan) unless
the Requisite Lenders agree to permit part or all of such insurance proceeds to
be used to repair or replace the damaged or destroyed property.
5.6 Compliance with Laws. Borrower shall, and shall cause each
Subsidiary thereof to, comply in all material respects with all federal, state
and local laws and regulations applicable to it, including those relating to
licensing, ERISA and labor matters.
5.7 [Intentionally Omitted.]
5.8 Supplemental Disclosure. On the request of Agent (in the event
that such information is not otherwise delivered by Borrower to Agent pursuant
to this Agreement), so long as there are Obligations outstanding hereunder, but
not more frequently than annually absent the occurrence and continuance of a
Default or an Event of Default, Borrower will supplement each schedule or
representation herein with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such schedule or as an exception to such
representation or which is necessary to correct any information in such schedule
or representation which has been rendered inaccurate thereby; provided, however,
that such supplement to such schedule or representation shall not be deemed an
amendment thereof unless expressly consented to in writing by Agent and
Requisite Lenders, and no such amendments, except as the same may be consented
to in a writing which expressly includes a waiver, shall be or be deemed a
waiver of any Default or Event of Default disclosed therein; and provided,
further, that Borrower may update any Schedule hereto to the extent any
reference to any Schedule herein expressly permits such Schedule to be updated
from time to time, and any such updated Schedule shall be deemed to amend this
Agreement.
5.9 Employee Plans. Borrower shall notify Agent of (i) any and all
material claims, actions, or lawsuits asserted or instituted, and of any
threatened litigation or claims, against Borrower, any Subsidiary thereof, or
against any ERISA Affiliate in connection with any Plan maintained, at any time,
by Borrower, such Subsidiary or such ERISA Affiliate, or to which Borrower, such
Subsidiary or such ERISA Affiliate has or had at any time any obligation to
contribute, or/and against any such Plan itself, or against any fiduciary of or
service provider to any such Plan and (ii) the occurrence of any material
"Reportable Event" with respect to any Pension Plan of Borrower, such Subsidiary
or such ERISA Affiliate.
5.10 Environmental Matters. Borrower shall, and shall cause each of
its Subsidiaries to, (i) comply in all material respects with the Environmental
Laws applicable to it, (ii) notify Agent promptly after Borrower or such
Subsidiary becomes aware of any Release upon or at any premises owned or
occupied by it, and (iii) promptly forward to Agent a copy of any material
order, notice or report received by Borrower or such Subsidiary in connection
with any such material Release or any other material matter relating to the
Environmental Laws that may affect such premises or Borrower or such Subsidiary.
The provisions of this Section 5.10 shall apply whether or not the Environmental
Protection Agency, any other federal agency or any state, local or foreign
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environmental agency has taken or threatened any action in connection with any
Release or the presence of any Hazardous Materials.
5.11 Landlords' Agreements, Bailee Letters and Mortgagee Agreements.
Borrower shall use its best efforts to obtain a landlord's agreement in form and
substance acceptable to Agent from the lessor of each leased property currently
being used by Borrower or any Subsidiary (other than LaserMaster Europe) thereof
where Collateral is located. Borrower shall use its best efforts to obtain a
bailee letter in form and substance acceptable to Agent and with respect to any
warehouse where Collateral is located. Borrower shall use its best efforts to
obtain a mortgagee's agreement in form and substance satisfactory to Agent from
the mortgagee of each property owned by Borrower or any Subsidiary (other than
LaserMaster Europe) thereof where Collateral is located. With respect to
locations or warehouse space leased or owned on the Closing Date, if Borrower is
unable to obtain a landlord or mortgagee agreement or bailee letter within
ninety (90) days after the Closing Date, Eligible Inventory at that location
shall be subject to a reserve equal to two (2) month's lease, warehousing or
mortgage payments for purposes of calculating Borrowing Availability. No real
property or warehouse space shall be leased or acquired by Borrower or any
Subsidiary (other than LaserMaster Europe) thereof after the Closing Date,
unless and until a landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location.
5.12 Leased Locations of Collateral. Borrower shall timely perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located. Borrower
shall promptly deliver to Agent copies of any and all default notices received
under or with respect to any such leased location or public warehouse.
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the prior written consent
of Agent and the Requisite Lenders, from and after the date hereof until the
Termination Date:
6.1 Mergers, Subsidiaries, Etc. Borrower shall not, nor it shall cause
or permit any Subsidiary thereof to, directly or indirectly, by operation of law
or otherwise, (i) form or acquire any Subsidiary, provided that LaserMaster
Europe may form new Subsidiaries, or (ii) merge with, consolidate with, acquire
all or substantially all of the assets or capital stock of, or otherwise combine
with, any Person, provided that LaserMaster Europe may merge or consolidate with
or otherwise acquire the assets or capital stock of any Person with the prior
written consent of Agent (such consent not to be unreasonably withheld).
6.2 Investments; Loans and Advances. Except as otherwise permitted by
Section 6.3 or 6.4 below, Borrower shall not, nor shall it cause or permit any
Subsidiary (other than LaserMaster Europe) thereof to, make any investment in,
or make or accrue loans or advances of money to any Person, through the direct
or indirect lending of money, holding of securities or otherwise (collectively,
an "Investment") except for the following:
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(a) (i) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale of goods and services in the
ordinary course of business; (ii) shares of stock, obligations or other
securities received in settlement of claims arising in the ordinary course
of business; (iii) advances to contractors and suppliers in the ordinary
course of business (which the parties hereto agree do not include
capitalized expenditures) in an aggregate amount not to exceed at any time
outstanding (A) $350,000 plus (B) 100% of the amount of any cash proceeds
of sales of common stock and/or capital contributions received by Borrower
(net of any fees, costs and expenses incurred in connection with any such
sale or contribution, including, without limitation, underwriters'
discounts) from and after the Closing Date (but excluding any equity
proceeds (x) invested in or otherwise used to benefit LaserMaster Europe or
(y) used to repay the TimeMasters Debt pursuant to Section 5(d) of the
TimeMasters Subordination Agreement); (iv) prepaid expenses incurred in the
ordinary course of business; (v) Investments existing on the Closing Date
and described on Schedule 6.2 hereto; and (vi) advances made in the
ordinary course of business in connection with any purchases by Borrower
from its ink vendor;
(b) so long as (i) no Default or Event of Default has occurred and is
continuing, or would result therefrom, (ii) Excess Availability is equal to
or greater than $2,000,000 and (iii) the Average Payable Days is less than
60 days, (A) Investments in readily marketable direct obligations of the
United States of America having maturities of one year or less from the
date of acquisition; (B) certificates of deposit or bankers' acceptances,
each maturing within one year from the date of acquisition, issued by any
commercial bank organized under the laws of the United States or any State
thereof which has (x) combined capital, surplus and undivided profits of at
least $100,000,000 and (y) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service that is
satisfactory to Agent; and (C) commercial paper maturing within 270 days
from the date of issuance and given the highest rating by a nationally
recognized rating service; and
(c) loans or Investments by Borrower in or to Asia/Pacific and/or
ColorMasters in an aggregate amount that does not exceed (A) $800,000 per
fiscal year plus (B) 50% of the Cumulative Net Income Investment Basket, if
positive, from and after January 1, 1996 plus (C) 100% of the amount of any
cash proceeds of sales of common stock and/or capital contributions
received by Borrower (net of any fees, costs and expenses incurred in
connection with any such sale or contribution, including, without
limitation, underwriters' discounts) from and after the Closing Date (but
excluding any equity proceeds (x) invested in or otherwise used to benefit
LaserMaster Europe or (y) used to repay the TimeMasters Debt pursuant to
Section 5(d) of the TimeMasters Subordination Agreement).
6.3 Indebtedness. Borrower shall not, nor shall it cause or permit
any Subsidiary (other than LaserMaster Europe) thereof to, create, incur, assume
or permit to exist any Indebtedness, except (i) Indebtedness of Borrower secured
by Liens permitted under Section 6.7,
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(ii) the Revolving Credit Loan and the other Obligations, (iii) deferred taxes,
(iv) unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under applicable
law, (v) existing Indebtedness set forth in Schedule 6.3 and refinancings
thereof on terms and conditions acceptable to Agent, in its reasonable
discretion, which shall in any event be on terms no less favorable to Borrower,
Agent or any Lender than the terms of the Indebtedness being refinanced and (vi)
intercompany Indebtedness permitted under Section 6.2
6.4 Employee Loans and Affiliate Transactions. (a) Borrower shall
not, nor shall it cause or permit any Subsidiary thereof to, enter into or be a
party to any transaction with an Affiliate of Borrower (including, without
limitation, sales and transfers of Inventory between Borrower and LaserMaster
Europe as described on Schedule 6.4(a) but subject to the financial covenant set
forth in clause (h) on Schedule H hereto) except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or its Subsidiary's
business and upon fair and reasonable terms that are fully disclosed to Agent in
advance and are no less favorable to Borrower or such Subsidiary than would be
obtained in a comparable arm's length transaction with a Person not an Affiliate
of Borrower. All such transactions existing as of the Closing Date are described
on Schedule 6.4(a).
(b) Borrower shall not, nor shall it cause or permit any Subsidiary
(other than LaserMaster Europe) thereof to, enter into any lending or borrowing
transaction with any of its employees, except that Borrower and its Subsidiaries
(other than LaserMaster Europe) may make loans to officers and employees in the
ordinary course of business, provided that the aggregate amount outstanding at
any time shall not exceed $50,000 for any single employee and $250,000 in the
aggregate for all employees.
6.5 Capital Structure and Business. Borrower shall not, nor shall it
cause or permit any Subsidiary thereof to, (i) make any changes in any of its
business objectives, purposes or operations which could in any way adversely
affect the repayment of the Revolving Credit Loan or any of the other
Obligations or could have or result in a Material Adverse Effect, (ii) make any
change in its capital structure as described on Schedule 3.10 (including the
issuance of any shares of Stock, warrants or other securities convertible into
Stock or any revision of the terms of its outstanding Stock), except in
connection with a transaction permitted by Section 6.1, or (iii) amend its
certificate or articles of incorporation or bylaws in a manner which would
adversely affect the Lenders or its duty or ability to repay the Obligations.
Neither Borrower nor any Subsidiary thereof shall engage in any business other
than the businesses currently engaged in by Borrower or such Subsidiary or
businesses reasonably related thereto.
6.6 Guaranteed Indebtedness. Borrower shall not, nor shall it cause
or permit any Subsidiary thereof to, incur any Guaranteed Indebtedness except
(i) by endorsement of instruments or items of payment for deposit to the general
account of Borrower, (ii) for Guaranteed Indebtedness incurred for the benefit
of Borrower or any Subsidiary thereof if the primary obligation is expressly
permitted by this Agreement and (iii) existing Guaranteed Indebtedness set forth
on Schedule 6.6 hereto.
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6.7 Liens. Borrower shall not, nor shall it cause or permit any
Subsidiary (other than LaserMaster Europe) thereof to, create, incur, assume or
permit to exist any Lien on or with respect to any of its properties or assets
(including Accounts, instruments, or chattel paper) of Borrower or any of its
Subsidiaries (other than LaserMaster Europe), whether now owned or hereafter
acquired except for the following (collectively, "Permitted Liens") (i)
Permitted Encumbrances, (ii) presently existing or hereinafter created Liens in
favor of Agent, on behalf of Lenders, (iii) Liens created after the date hereof
by conditional sale or other title retention agreements (including, without
limitation, Capital Leases) or in connection with purchase money indebtedness
with respect to properties acquired by Borrower and such Subsidiaries in the
ordinary course of business, involving the incurrence of an aggregate amount of
purchase money indebtedness and Capital Lease Obligations of not more than
$3,500,000 (provided that the aggregate amount incurred by Asia/Pacific shall
not exceed $300,000 at any time) outstanding at any one time (including those
outstanding as of the Closing Date) for all such Liens (provided that such Liens
attach only to the assets subject to such purchase money debt and such
Indebtedness is incurred within one hundred twenty (120) days following such
purchase and does not exceed 100% of the purchase price of the subject assets),
(iv) Liens existing on the date hereof and described on Schedule 6.7 and (v)
subject to the terms and conditions of the TimeMasters Subordination Agreement,
Liens only with respect to all or any portion of the Collateral which are
subordinate to the Liens created under the Loan Documents securing the
Obligations, created after the date hereof solely to secure the TimeMasters
Debt.
In addition, Borrower shall not, nor shall it cause or permit any
Subsidiary thereof to, become a party to any agreement, note, indenture or
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or intellectual property licenses which
prohibit liens upon the assets that are subject thereto.
6.8 Sale of Assets. Borrower shall not, nor shall it cause or permit
any Subsidiary (other than LaserMaster Europe) thereof to, sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the capital stock of any such Subsidiary (other than LaserMaster
Europe) or Borrower or any of their Accounts, other than (i) the sale of
Inventory in the ordinary course of business, (ii) the sale, transfer,
conveyance or other disposition of assets (other than any Collateral) having a
value not exceeding $500,000 in the aggregate in any Fiscal Year, (iii) the
sale, transfer, conveyance or other disposition of obsolete or redundant assets,
(iv) the sale, transfer, conveyance or other disposition of any Intellectual
Property at any time prior to such Intellectual Property being released, if at
all, by the Agent pursuant to Section 11.16 having a value not exceeding
$300,000 in the aggregate in any Fiscal Year so long as (A) no default or Event
of Default has occurred and is continuing, (B) each such sale, transfer,
conveyance or other disposition shall be subject to an irrevocable (while the
Obligations remain outstanding and this Agreement has not been terminated),
royalty-free license or sublicense, in each case subject to any existing royalty
payable to the existing licensor, executed by the purchaser thereof in favor of
Agent and Lenders, in form and substance satisfactory to Agent, (C) such sale,
transfer, conveyance or other disposition is for consideration consisting solely
of cash and such consideration received is at least equal to the
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fair market value of such assets as determined by the board of directors of
Borrower and (D) such sale, transfer, conveyance or other disposition is to a
Person which is not, directly or indirectly, an Affiliate of Borrower or an
employee, officer or director of Borrower or any of its Affiliates and (v) the
sale, transfer, conveyance or other disposition of any Intellectual Property at
any time after such Intellectual Property being released, if at all, by the
Agent pursuant to Section 11.16 so long as (A) no Default or Event of Default
has occurred and is continuing, (B) each such sale, transfer, conveyance or
other disposition shall be subject to an irrevocable (while the Obligations
remain outstanding and this Agreement has not been terminated), royalty-free
license or sublicense, in each case subject to any existing royalty payable to
the existing licensor, executed by the purchaser thereof in favor of Agent and
Lenders, in form and substance satisfactory to Agent, (C) such consideration
received is at least equal to the fair market value of such assets as determined
by the board of directors of Borrower and (D) such sale, transfer, conveyance or
other disposition is to a Person which is not, directly or indirectly, an
Affiliate of Borrower or an employee, officer or director of Borrower or any of
its Affiliates. With respect to any disposition of assets or other properties
permitted pursuant to this Section 6.8, Agent agrees on reasonable prior written
notice to release its Lien on such assets or other properties in order to permit
Borrower to effect such disposition and shall execute and deliver to Borrower,
at Borrower's expense, appropriate UCC-3 termination statements and other
releases as reasonably requested by Borrower.
6.9 ERISA. Borrower shall not, nor shall it cause or permit any
Subsidiary or ERISA Affiliate thereof (without Agent's prior written consent)
to, (i) acquire any ERISA Affiliate that maintains or has an obligation to
contribute to a Pension Plan that has either an "accumulated funding
deficiency", as defined in Section 302 of ERISA, or any "unfunded vested
benefits", as defined in Section 4006(a)(3)(e)(iii) of ERISA, in the case of any
plan other than a Multiemployer Plan, and in Section 4211 of ERISA in the case
of a Multiemployer Plan, in excess of $100,000, (ii) permit or suffer any
representation set forth in Schedule 3.14 to cease to be met and satisfied at
any time, (iii) terminate any Pension Plan that is subject to Title IV of ERISA
where such termination could reasonably be anticipated to result in liability in
excess of $100,000 to such Person, (iv) permit any accumulated funding
deficiency, as defined in Section 302(a)(2) of ERISA, to be incurred with
respect to any Pension Plan, in excess of $100,000, (v) fail to make any
material contributions or fail to pay any amounts due and owing as required by
the terms of any Plan before such contributions or amounts become delinquent,
(vi) make a complete or partial withdrawal (within the meaning of Section 4201
of ERISA) from any Multiemployer Plan, or (vii) fail to promptly provide Agent
with copies of any Plan documents or governmental reports or filings, if
requested by Agent.
6.10 Financial Covenants. Borrower shall not breach or fail to
comply with any of the Financial Covenants (the "Financial Covenants") set forth
in Schedule H.
6.11 Hazardous Materials. No Borrower shall, nor shall it cause or
permit any Subsidiary thereof or any other Person within its control to, cause
or permit a material Release or the presence, use, generation, manufacture,
installation, Release, discharge, storage or disposal of any Hazardous Materials
on, under, in, above or about any of its real estate or the transportation of
any Hazardous Materials to or from any real estate where such Release or such
presence, use,
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generation, manufacture, installation, Release, discharge, storage or disposal
would violate in any material respect, or form the basis for any material
liability under, any Environmental Laws.
6.12 Sale-Leasebacks. Borrower shall not, nor shall it cause or
permit any Subsidiary (other than LaserMaster Europe) thereof to, engage in any
sale-leaseback or similar transaction involving any of its assets.
6.13 Cancellation of Indebtedness. Borrower shall not, nor shall it
cause or permit any Subsidiary thereof to, cancel any claim or debt owing to it,
except for reasonable consideration negotiated on an arm's-length basis and in
the ordinary course of its business consistent with past practices.
6.14 Restricted Payments. Borrower shall not, nor shall it cause or
permit any Subsidiary thereof to, make any Restricted Payment, other than (i)
payments necessary to enable Holdings to satisfy its Federal, state and local
income tax obligations to the extent such obligations are the result of the net
consolidated income of Borrower and its Subsidiaries being attributed to
Holdings for tax purposes which are directly related to the operations of
Borrower and its Subsidiaries, (ii) payments to Holdings to pay for the actual
incurrence by Holdings of necessary legal, accounting and other fees and
expenses which are related to the operations of Borrower and its Subsidiaries
and (iii) payments to Holdings in an aggregate amount that do not exceed 50% of
the Cumulative Net Income Capex/Restricted Payment Basket, if positive, from and
after January 1, 1996; provided, however, that in no event shall the aggregate
amount of all payments made under clause (ii) above exceed $500,000 in any
month.
6.15 Leases. (a) Borrower shall not, nor shall it cause or permit
any Subsidiary (other than LaserMaster Europe) thereof to, enter into any lease
of real property or similar agreement or arrangement except (i) those certain
leases set forth on Schedule 6.15 hereto, including any renewals or replacements
thereof on terms which are not materially different from such leases, and (ii)
leases for additional space entered into in the ordinary course of business.
(b) Borrower shall not nor shall it permit any Subsidiary to enter
into or be a party to any operating lease for equipment or personal property if
the aggregate of all such operating lease payments payable in any Fiscal Year
for Borrower and its Subsidiaries would exceed $2,500,000.
6.16 Fiscal Year. Borrower shall not, nor shall it cause or permit
any Subsidiary thereof to, change its Fiscal Year.
6.17 Change of Corporate Name or Location. (a) Borrower shall not,
nor shall it cause or permit any Subsidiary (other than LaserMaster Europe)
thereof to, (i) change its corporate name or (ii) change its chief executive
office, principal place of business, corporate offices or warehouses or
Collateral locations, or the location of its records concerning the Collateral,
in any case without at least thirty (30) days' prior written notice to Agent and
after Agent's written acknowledgment that any reasonable action requested by
Agent in connection therewith, including, without limitation, to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders,
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in any Collateral has been completed or taken and provided that any such new
location shall be in the continental United States; (b) in furtherance of and
without limiting the scope of clause (a) above, Borrower shall not, nor shall it
permit any of its Subsidiaries (other than LaserMaster Europe), to change its
name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9.402(7) of the Code or any other then
applicable provision of the Code except upon prior written notice to Agent and
Lenders and after Agent's written acknowledgment that any reasonable action
requested by Agent in connection therewith, including, without limitation, to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in
any Collateral has been completed or taken.
6.18 Sale of Stock. Borrower shall not, nor shall it cause or permit
any Subsidiary thereof to, sell (whether in a public or private offering or
otherwise) any of its Stock, except with respect to any issuances of any Stock
by LaserMaster Europe or any of its Subsidiaries in connection with a
transaction permitted by Section 6.1.
6.19 Cash Management. Borrower shall not, nor shall it cause or
permit any Subsidiary (other than LaserMaster Europe) thereof to, accumulate or
maintain cash in disbursement or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements other than
accounts at ColorMasters with deposits which do not exceed $25,000 in the
aggregate at any time.
6.20 No Impairment of Upstreaming. Borrower shall not, nor shall it
cause or permit any Subsidiary thereof to, directly or indirectly, enter into or
become bound by any agreement, instrument, indenture or other obligation (other
than this Agreement and the other Loan Documents) which could directly or
indirectly restrict, prohibit or require the consent of any Person with respect
to the payment of dividends or distributions or the making of intercompany loans
by a Subsidiary of Borrower to Borrower.
6.21 Changes Relating to Subordinated Debt. Borrower shall not, nor
shall it cause or permit any Subsidiary thereof to do any of the following:
(A) change or amend the terms of any Subordinated Debt (or any
indenture or agreement in connection therewith); or
(B) prepay, defease or purchase any of the Subordinated Debt;
provided, however, that the TimeMasters Debt may be paid at any time in
accordance with the terms and conditions of the TimeMasters Debt Documents
and the TimeMasters Subordination Agreement.
6.22 LaserMaster Export Corporation. Borrower shall not cause or
permit LaserMaster Export Corporation, a Virgin Island corporation and a wholly-
owned Subsidiary of Borrower, to own any assets or to conduct any business other
than operations solely as a foreign sales corporation.
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6.23 Asia/Pacific. Borrower shall not cause or permit Asia/Pacific
to incur obligations (whether contingent or otherwise) or any Indebtedness other
than (a) obligations owing to Borrower, (b) obligations arising solely by
operation of law, (c) Indebtedness permitted under Sections 6.7(iii) and 6.3(i),
and (d) obligations under any lease of real property which do not exceed
$200,000 in calendar years 1996 or 1997 or $300,000 in calendar year 1998.
7. TERM
7.1 Termination. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Revolving
Credit Loan and all other Obligations shall be automatically due and payable in
full on such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of Borrower or the rights of Agent and
Lenders relating to any unpaid portion of the Revolving Credit Loan or any other
Obligation, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon Borrower, and all rights of Agent and each
Lender, all as contained in the Loan Documents shall not terminate or expire,
but rather shall survive such termination or cancellation and shall continue in
full force and effect until such time as all of the Obligations have been paid
in full in accordance with the terms of the agreements creating such
Obligations.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower shall fail to make any payment of (i) principal of the
Revolving Credit Loan when due and payable or declared due and payable or (ii)
interest on, or any other amount owing in respect of, the Revolving Credit Loan
or any other Obligation (other than as set forth in Clause (b) below) within
three (3) days after such amount is due and payable or declared due and payable.
(b) Borrower shall fail to pay any Fees, costs or expenses payable or
reimbursable by Borrower under this Agreement or under any other Loan Document,
and such failure shall have remained unremedied for a period of 5 days or more
after Borrower has received written notice of such failure from Agent or any
Lender.
(c) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of (i) Sections 1.8, 5.5 or 6, or any of the provisions set forth
in Schedules D or H,
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respectively; or (ii) Section 4 or any provisions set forth in Schedules F or G,
respectively, within twenty (20) days after written notice from Agent.
(d) Borrower shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents (other
than any provision embodied in or covered by any other clause of this Section
8.1) and the same shall remain unremedied for 30 days or more after Borrower has
received written notice of any such failure from Agent or any Lender.
(e) Holdings shall fail or neglect to perform, keep or observe any
provision of the Holdings Guaranty, and the same shall remain unremedied for 30
days or more after Holdings shall have received written notice of any such
failure from Agent or any Lender.
(f) A default or breach shall occur under any other agreement,
document or instrument to which Holdings, Borrower or any Subsidiary of Borrower
is a party and such default is not cured within any applicable grace period and
such default or breach (i) involves the failure to make any payment when due in
respect of any Indebtedness (other than the Obligations) of Holdings, Borrower
or any Subsidiary of Borrower in excess of $200,000 in the aggregate, or (ii)
causes such Indebtedness or a portion thereof in excess of $200,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or (iii) entitles any holder of such Indebtedness or
a trustee to cause such Indebtedness or a portion thereof in excess of $200,000
in the aggregate to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, regardless of whether such right is
exercised or waived by such holder or trustee.
(g) Any representation or warranty herein or in any Loan Document or
in any written statement, report, financial statement or certificate made or
delivered to any Lender by Borrower shall be untrue or incorrect in any material
respect, as of the date when made or deemed made.
(h) Any representation or warranty in the Holdings Guaranty or in any
written statement pursuant thereto, or in any report, financial statement or
certificate made or delivered to any Lender by Holdings shall be untrue or
incorrect in any material respect, as of the date when made or deemed made.
(i) Assets of Holdings, Borrower or any Subsidiary of Borrower with a
fair market value of $200,000 or more shall be attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of
Holdings, Borrower or any Subsidiary of Borrower and shall such condition shall
continue for thirty (30) days or more.
(j) A case or proceeding shall have been commenced against Holdings,
Borrower or any Subsidiary of Borrower in a court having competent jurisdiction
seeking a decree or order in respect of Holdings, Borrower or any Subsidiary of
Borrower (i) under Title 11 of the United States Code, as now constituted or
hereafter amended or any other applicable federal, state or foreign
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bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for
Holdings, Borrower or any Subsidiary of Borrower or of any substantial part of
any such Person's assets, or (iii) ordering the winding-up or liquidation of the
affairs of Holdings, Borrower or any Subsidiary of Borrower and such case or
proceeding shall remain undismissed or unstayed for forty-five (45) days or more
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(k) Holdings, Borrower or any Subsidiary of Borrower shall (i) file a
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, State or
foreign bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Holdings, Borrower or
any Subsidiary of Borrower or of any substantial part of any such Person's
assets, (iii) make an assignment for the benefit of creditors, or (iv) take any
corporate action in furtherance of any such action.
(l) A final judgment or judgments for the payment of money in excess
of $200,000 in the aggregate shall be rendered against Holdings, Borrower or any
Subsidiary of Borrower and the same shall not (i) be fully covered by insurance,
or (ii) within the applicable statutory time for filing an appeal with respect
thereto, have been discharged or execution thereof stayed pending appeal, or
shall not have been discharged prior to the expiration of any such stay.
(m) With respect to any Plan: (i) which is a Defined Contribution Plan
or Welfare Plan, Borrower or any ERISA Affiliate thereof or any other party-in-
interest or disqualified Person shall engage in any transactions which in the
aggregate results in a final assessment to Borrower or any Subsidiary of
Borrower in excess of $100,000 under Section 409 or 502 of ERISA or IRC Section
4975 which assessment has not been paid within 30 days of final assessment and
which is not being contested pursuant to Sections 6.2(b) or (c) hereof; (ii)
Borrower or any ERISA Affiliate thereof shall incur any accumulated funding
deficiency, as defined in IRC Section 412, in the aggregate in excess of
$100,000, or request a funding waiver from the IRS for contributions in the
aggregate in excess of $100,000; (iii) Borrower or any ERISA Affiliate thereof
shall not pay any withdrawal liability which involves annual withdrawal
liability payments which exceed $100,000, as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA, within 30 days
after the date such payment becomes due, unless such payment is being contested
pursuant to Sections 6.2(b) or (c) hereof; (iv) Borrower or any ERISA Affiliate
thereof shall fail to make a required contribution by the due date under Section
412 of the IRC or Section 302 of ERISA which would result in the imposition of a
lien under Section 412 of the IRC or Section 302 of ERISA within 30 days after
the date such payment becomes due; or (v) an ERISA Event (other than an event
described in 29 CFR (S)2615.23) with respect to a Plan has occurred, and within
thirty (30) days Borrower has not contested such ERISA Event by appropriate
proceedings.
(n) Any material provision of any Loan Document shall for any reason
(other than any actions taken by Agent) cease to be valid or enforceable in
accordance with its terms (or Holdings, Borrower or any Subsidiary thereof, or
any other Person party thereto, shall challenge the
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enforceability of any Loan Document), or any security interest created under any
Loan Document shall cease to be a valid and perfected first priority security
interest or Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.
(o) Borrower shall cease to be a wholly-owned Subsidiary of Holdings.
(p) Any "Change of Control" shall occur.
8.2 Remedies. If any Default or Event of Default shall have occurred
and be continuing, Agent may (and at the written request of the Requisite
Lenders shall), with notice to Borrower, terminate this facility with respect to
further Revolving Credit Advances, whereupon any further Revolving Credit
Advances shall be made in Agent's sole discretion. If any Event of Default
shall have occurred and be continuing, Agent may (and at the written request of
the Requisite Lenders shall), with notice to Borrower, (a) declare all or any
portion of the Obligations, including all or any portion of the Revolving Credit
Loan, to be forthwith due and payable, all without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by Borrower;
(b) increase the rate of interest applicable to the Revolving Credit Loan to the
Default Rate, as provided in Section 1.4(d); and (c) exercise any rights and
remedies provided to Agent under the Loan Documents and/or at law or equity,
including all remedies provided under the Code; provided, however, that upon the
occurrence of an Event of Default specified in Sections 8.1 (j) or (k), all of
the Obligations, including the Revolving Credit Loan, shall become immediately
due and payable without declaration, notice or demand by any Person.
8.3 Waivers by Borrower. Except as otherwise provided for in this
Agreement or by applicable law, Borrower waives: (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent on which Borrower may in any way be liable, and hereby
ratifies and confirms whatever Agent may do in this regard, (ii) all rights to
notice and a hearing prior to Agent's taking possession or control of, or to
Agent's replevy, attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing Agent to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Borrower acknowledges that it has been advised by counsel of its choice
with respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations. (a) Borrower hereby consents to
any Lender's sale of participations, and to any Lender's assignment, at any time
or times, of any of the Loan Documents, any Commitment or of any portion thereof
or interest therein, including, without limitation, any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not; provided, however, that any assignment by a Lender of all or any part
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of its Commitment shall (i) require the consent of Agent and the execution of a
Lender Addition Agreement in form and substance satisfactory to Agent; (ii) be
conditioned on such assignee Lender representing to the assigning Lender and the
Agent that it is purchasing the Revolving Credit Loans to be assigned to it for
its own account, for investment purposes and not with a view to the distribution
thereof; (iii) if a partial assignment, be in an amount at least equal to
$2,500,000 and, after giving effect to any such partial assignment, the
assigning Lender shall have retained Commitments in an amount at least equal to
$2,500,000; and (iv) include a payment by the assigning Lender to the Agent of
an assignment fee of $3,000; and, provided, further, that any participation by a
Lender of all or any part of its Commitments shall be in an amount at least
equal to $2,500,000, and with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount,
interest rate or fees payable hereunder in which such holder participates, (ii)
any extension of the final scheduled maturity date of the principal amount of
the Revolving Credit Loan in which such holder participates, and (iii) any
release of all or substantially all of the Collateral (other than in accordance
with the terms of this Agreement, the Collateral Documents or the other Loan
Documents). Borrower hereby acknowledges and agrees that any participation will
give rise to a direct obligation of Borrower to the participant and the
participant shall for purposes of Sections 1.14, 1.15 and 9.8 be considered to
be a "Lender".
(b) In the case of an assignment by a Lender under this Section 9.1,
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender hereunder. The
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitments or assigned portion thereof. Borrower hereby acknowledges and
agrees that any assignment will give rise to a direct obligation of Borrower to
the assignee and that the assignee shall be considered to be a "Lender". In all
instances, each Lender's liability to make Loans hereunder shall be several and
not joint and shall be limited to such Lender's Pro Rata Share.
(c) Except as otherwise provided in this Section 9.1, no Lender shall,
as between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Loans, the Notes or other
Obligations owed to such Lender.
(d) Borrower shall assist any Lender permitted to sell assignments or
participations under this Section 9.1 as reasonably required to enable the
assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and the preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants.
(e) A Lender may furnish any information concerning Borrower in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided, however, that any
potential assignee or participant shall, before being provided with any
confidential information with respect to Borrower, agree to maintain the
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confidentiality of confidential information of Borrower by executing a
confidentiality agreement substantially in the form of the confidentiality
agreement executed by Borrower and GE Capital, or such other form as shall be
reasonably acceptable to such prospective assignee or participant and Borrower.
In the event Agent or any Lender assigns or otherwise transfers all or any part
of a Note, Agent or any such Lender shall so notify Borrower and Borrower shall,
upon the request of Agent or such Lender, execute new Notes in exchange for the
Notes being assigned.
9.2 Appointment of Agent. GE Capital is hereby appointed Agent to
act on behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and neither Borrower nor any Subsidiary thereof nor any other
Person shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and the other Loan Documents, Agent shall act solely as an agent of Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower, any Subsidiary thereof or
any other Person. Agent shall have no duties or responsibilities except for
those expressly set forth in this Agreement and the other Loan Documents. The
duties of Agent shall be mechanical and administrative in nature and Agent shall
not have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.
Neither Agent nor any of its officers, directors, employees, agents or
representatives shall be liable to any Lender for any action taken or omitted to
be taken by it hereunder or under any other Loan Document, or in connection
herewith or therewith, except for damages caused by its or their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction after all possible appeals have been exhausted.
If Agent shall request instructions from Requisite Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Agent shall be entitled to refrain
from such act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders, and Agent shall not incur liability to any
Person by reason of so refraining. Agent shall be fully justified in failing or
refusing to take any action hereunder or under any other Loan Document (a) if
such action would, in the opinion of Agent, be contrary to law or the terms of
this Agreement or any other Loan Document or (b) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders.
9.3 Agent's Reliance, Etc. Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement or the other
Loan Documents, except for its or their own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction after all
possible appeals have been exhausted. Without limitation of the generality of
the foregoing, Agent: (i) may treat the payee of any Revolving Credit Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory
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to Agent; (ii) may consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Lender and shall not be responsible to any Lender for any statements,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of Borrower
or to inspect the Collateral (including the books and records) of Borrower; (v)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (vi) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4 GE Capital and Affiliates. With respect to its commitment
hereunder to make Revolving Credit Advances, GE Capital shall have the same
rights and powers under this Agreement and the other Loan Documents as any other
Lender and may exercise the same as though it were not Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include GE
Capital in its individual capacity. GE Capital and its Affiliates may lend
money to, invest in, and generally engage in any kind of business with,
Borrower, any of its Subsidiaries and Affiliates and any Person who may do
business with or own securities of Borrower or any such Subsidiary or Affiliate,
all as if GE Capital were not Agent and without any duty to account therefor to
Lenders. GE Capital and its Affiliates may accept fees and other consideration
from Borrower and any of its Subsidiaries for services in connection with the
Agreement or otherwise without having to account for the same to Lenders.
9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 3.4 and such other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of Borrower and its Subsidiaries and its own decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of the Lenders holding disproportionate interests in the Loans, and
expressly consents to, and waives any claim based upon, such conflict of
interest.
9.6 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower and without limiting the Obligations of Borrower
hereunder), ratably according to their respective Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or
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omitted by Agent in connection therewith; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or wilful misconduct as finally
determined by a court of competent jurisdiction after all possible appeals have
been exhausted. Without limiting the foregoing, each Lender agrees to reimburse
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and each
other Loan Document, to the extent that Agent is not reimbursed for such
expenses by Borrower.
9.7 Successor Agent. Agent may resign at any time by giving not less
than thirty (30) days' prior written notice thereof to Lenders and Borrower.
Upon any such resignation, the Requisite Lenders shall have the right to appoint
a successor Agent which shall be reasonably acceptable to Borrower. If no
successor Agent shall have been so appointed by the Requisite Lenders and shall
have accepted such appointment, within 30 days after the resigning Agent's
giving notice of resignation then the resigning Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is
willing to accept such appointment, or otherwise shall be a commercial bank or
financial institution organized under the laws of the United States of America
or of any State thereof having a combined capital and surplus of at least
$300,000,000, which is reasonably acceptable to Borrower. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent, and the resigning Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue. After any resigning Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents.
9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account of Borrower
(regardless of whether such balances are then due to Borrower) and any other
properties or assets any time held or owing by that Lender or that holder to or
for the credit or for the account of Borrower against and on account of any of
the Obligations which are not paid when due. Any Lender or holder of any Note
having a right to set off shall, to the extent the amount of any such set off
exceeds its Pro Rata Share of the Obligations, purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share such excess with each other Lender or holder in accordance
with their respective Pro Rata Shares. Borrower agrees, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its right to set
off with respect to amounts in excess of its Pro
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Rata Share of the Obligations and may sell participations in such excess to
other Lenders and holders and (b) any Lender or holders so purchasing a
participation in the Revolving Credit Advances made or other Obligations held by
other Lenders or holders may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of Revolving Credit Advances and
other Obligations in the amount of such participation.
9.9 Disbursement of Funds. Agent may, on behalf of Lenders, disburse
funds to Borrower for Revolving Credit Advances requested. Each Lender shall
reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if
Agent so requests, each Lender will remit to Agent its Pro Rata Share of any
Revolving Credit Advance before Agent disburses same to Borrower. If any Lender
fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand,
Agent shall promptly notify Borrower and Borrower shall immediately repay such
amount to Agent. Nothing in this Section 9.9 or elsewhere in this Agreement or
the other Loan Documents shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Revolving Credit Loan Commitment hereunder or to prejudice any rights that
Borrower may have against any Lender as a result of any default by such Lender
hereunder.
9.10 Advances; Payments; Information; Non-Funding Lenders.
(a) Revolving Credit Advances; Payments; Fee Payments.
(i) The Revolving Credit Loan balance may fluctuate from day to
day through Agent's disbursement of funds to, and receipt of funds from,
Borrower. In order to minimize the frequency of transfers of funds between Agent
and each Lender, Revolving Credit Advances and payments in respect thereof will
be settled according to the procedures described in Sections 9.10(a)(ii) and
9.10(a)(iii) below. Notwithstanding these procedures, each Lender's obligation
to fund its portion of any advances made by Agent to Borrower will commence on
the date such advances are made by Agent. Such payments will be made by each
Lender without setoff, counterclaim or reduction of any kind.
(ii) Not later than 11:00 a.m. (Chicago time) on the second
(2nd) Business Day of each week, or more frequently (including daily) if Agent
so elects (each such day being a "Settlement Date"), Agent will advise each
Lender by telephone, telex or telecopy of the amount of such Lender's Pro Rata
Share of the Revolving Credit Loan balance as of the close of business on the
first (1st) Business Day immediately preceding the Settlement Date. In the event
that payments are necessary to adjust the amount of such Lender's portion of the
Revolving Credit Loan to such Lender's Pro Rata Share of the Revolving Credit
Loan as of any Settlement Date, the party from which such payment is due will
pay the other, in same day funds, by wire transfer to the other's account not
later than 2:00 p.m. (Chicago time) on the Settlement Date. Notwithstanding the
foregoing, if Agent so elects, Agent may require that each Lender make its Pro
Rata Share of any requested Revolving Credit Advance available to Agent for
disbursement prior to the funding of such Revolving Credit Advance. If Agent
elects to require that such funds be so made available,
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Agent shall advise each Lender by telephone, telex or telecopy of the amount of
such Lender's Pro Rata Share of the requested Revolving Credit Advance no later
than 11:00 a.m. (Chicago time) on the date of funding thereof, and each such
Lender shall pay Agent such Lender's Pro Rata Share of such requested Revolving
Credit Advance, in same day funds, by wire transfer to the Agent's account not
later than 2:00 p.m. (Chicago time) on the date of funding such Revolving Credit
Advance.
(iii) For purposes of this Section 9.10(a)(iii), the following
terms and conditions will have the following meanings:
(A) "Daily Loan Balance" means, with respect to the Revolving
Credit Loan, an amount calculated as of the end of each
calendar day by subtracting (i) the cumulative principal
amount paid by Agent to a Lender with respect to such Loan
from the Closing Date through and including such calendar
day, from (ii) the cumulative principal amount of such
Loan advanced by such Lender to Agent from the Closing
Date through and including such calendar day.
(B) "Daily Interest Rate" means, with respect to the Revolving
Credit Loan, an amount calculated by dividing the interest
rate payable to a Lender on such Loan (as set forth in
Section 1.5) as of each calendar day by three hundred
sixty (360) days.
(C) "Daily Interest Amount" means, with respect to the
Revolving Credit Loan, an amount calculated by multiplying
the Daily Loan Balance of such Loan by the associated
Daily Interest Rate applicable to such Loan.
(D) "Interest Ratio" means, with respect to the Revolving
Credit Loan, a number calculated by dividing the total
amount of interest on such Loan received by Agent during
the immediately preceding month by the total amount of
interest on such Loan due from Borrower during the
immediately preceding month.
On the first (1st) Business Day of each calendar month (an "Interest Settlement
Date"), Agent will advise each Lender by telephone, telex or telecopy of the
amount of such Lender's Pro Rata Share of principal, interest and Fees paid for
the benefit of Lenders on the Revolving Credit Loan as of the end of the last
day of the immediately preceding month. Provided that such Lender has made all
payments required to be made by it under this Agreement and the other Loan
Documents, Agent will pay to such Lender, by wire transfer to such Lender's
account (as specified by such Lender on the applicable Lender Addition
Agreement, as amended by such Lender from time to time after the date hereof
pursuant to the notice provisions contained herein or in the applicable Lender
Addition Agreement) not later than 12:00 noon (Chicago time) on the next
Business Day following the Interest Settlement Date, such Lender's Pro Rata
Share of principal, interest and Fees paid for the
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benefit of Lenders on the Revolving Credit Loan. Such Lender's Pro Rata Share
of interest on the Revolving Credit Loan will be calculated by adding together
the Daily Interest Amounts for each calendar day of the prior month for such
Loan and multiplying the total thereof by the Interest Ratio for such Loan.
(b) Availability of Lender's Pro Rata Share.
(i) Agent may assume that each Lender will make its Pro Rata Share of
each Revolving Credit Advance available to Agent on the first (1st) Business Day
following each Settlement Date. If such Pro Rata Share is not, in fact, paid to
Agent by such Lender when due, Agent will be entitled to recover such amount on
demand from such Lender without set-off, counterclaim or deduction of any kind.
(ii) Nothing contained in this Section 9.10(b) will be deemed to
relieve any Lender of its obligation to fulfill its Commitments or to prejudice
any rights Agent or Borrower may have against any Lender as a result of any
default by such Lender under this Agreement.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, Agent will not
be required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
(d) Dissemination of Information.
Agent will use reasonable efforts to provide Lenders with any
information received by Agent from Borrower which is required to be provided to
Lenders hereunder, with any notice of Default or Event of Default received by
Agent from Borrower, with any notice of Default or Event of Default delivered by
Agent to Borrower, with notice of any Default or Event of Default of which Agent
has actually become aware and with notice of any action taken by Agent following
any Default or Event of Default; provided, however, that Agent shall not be
liable to any Lender for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction after all possible
appeals have been exhausted.
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(e) Non-Funding Lenders. The failure of any Lender (such Lender, a
"Non-Funding Lender") to make any Revolving Credit Advance to be made by it on
the date specified therefor shall not relieve any other Lender (each such other
Lender, an "Other Lender") of its obligations to make its Revolving Credit
Advance on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make a Revolving Credit
Advance to be made by such Non-Funding Lender, and no Non-Funding Lender shall
have any obligation to Agent or any Other Lender for the failure by such Non-
Funding Lender. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a "Lender" (or be included in the
calculation of "Required Lenders" hereunder) for any voting or consent rights
under, or with respect to, any Loan Document. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other Lender that
no Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including, without limitation, exercising any
rights of set-off) without first obtaining the prior written consent of Agent or
Required Lenders, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Notes shall be taken in concert
and at the direction or with the consent of the Agent.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of Borrower, Agent,
Lenders and their respective successors and assigns, except as otherwise
provided herein or therein. Borrower may not assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Agent and Requisite Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by Borrower without the prior express written
consent of Agent shall be void. The terms and provisions of this Agreement are
for the purpose of defining the relative rights and obligations of Borrower,
Agent and Lenders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2 below. Except for the confidentiality letter dated
November 22, 1995 between Borrower and GE Capital, any letter of interest or
commitment letter and/or fee letter between Borrower and Agent or any of its
affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.
11.2 Amendments and Waivers. (a) Except as otherwise provided
herein, no amendment, modification, termination or waiver of any provision of
this Agreement or any of the
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Notes or consent to any departure by Borrower or any of its Subsidiaries
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, Requisite Lenders and Borrower.
(b) In furtherance of and without limiting the foregoing, no
amendment, modification, termination or waiver of or consent with respect to any
provision of this Agreement which (i) increases the percentage advance rates set
forth in the definition of Borrowing Base or (ii) makes less restrictive the
nondiscretionary criteria for exclusion from Eligible Accounts and Eligible
Inventory set forth in Schedule B and Schedule C hereto shall be effective
unless the same shall be in writing and signed by Agent, Requisite Lenders and
Borrower.
(c) Notwithstanding the foregoing, except to the extent permitted by
any applicable Lender Addition Agreement, no amendment, modification,
termination or waiver shall, unless in writing and signed by Agent and each
affected Lender, do any of the following: (a) increase the principal amount of
the Commitment of any affected Lender; (b) reduce the principal of, rate of
interest on or Fees payable with respect to any Revolving Credit Advance; (c)
extend the final scheduled maturity date of the principal amount of any Loan;
(d) waive, forgive, defer, extend or postpone any payment of interest or Fees
required hereunder; (e) release the Holdings Guaranty; (f) except as otherwise
contemplated herein or in one of the other Loan Documents, permit Borrower to
sell or otherwise dispose of any Collateral with a value exceeding $5,000,000 in
the aggregate; (g) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which shall be required for Lenders or any
of them to take any action hereunder; and (h) amend or waive this Section 11.2
or the definitions of the terms used in this Section 11.2 insofar as the
definitions affect the substance of this Section 11.2; and provided, further,
that no amendment, modification, termination or waiver affecting the rights or
duties of Agent under this agreement or any other Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to
Lenders required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or
waiver of any provision of any Note shall be effective without the written
concurrence of the holder of that Note. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.2 shall be binding
upon each holder of the Notes at the time outstanding and each future holder of
the Notes.
11.3 Fees and Expenses. Borrower shall reimburse Agent for all
reasonable out-of-pocket expenses incurred in connection with (a) the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its special loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the transactions contemplated thereby and
advice in connection therewith), and (b) wire transfers to the account of
Borrower. Borrower shall reimburse Agent (and, with respect to clauses (iii) and
(iv) below, each Lender) for all fees, costs and expenses, including the fees,
costs and expenses of counsel or other advisors
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(including environmental and management consultants) for advice, assistance, or
other representation in connection with:
(i) the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of the Revolving Credit Advances;
(ii) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or advice in connection with the administration of
the loans made pursuant hereto or its rights hereunder or thereunder;
(iii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, Borrower or any other Person) in any
way relating to the Collateral, any of the Loan Documents or any other agreement
to be executed or delivered in connection therewith or herewith, whether as
party, witness, or otherwise, including any litigation, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in connection with
a case commenced by or against Borrower or any other Person that may be
obligated to Agent by virtue of the Loan Documents;
(iv) any attempt to enforce any rights of Agent or any Lender against
Borrower or any other Person that may be obligated to Agent or any Lender by
virtue of any of the Loan Documents;
(v) efforts to (A) monitor the Loans or any of the other Obligations,
(B) evaluate, observe, assess Borrower, any Subsidiary thereof or their
respective affairs, and (C) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, without limitation, all the attorneys' and other professional and
service providers' fees arising from such services, including those in
connection with any appellate proceedings; and all expenses, costs, charges and
other fees incurred by such counsel and others in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section 11.3 shall be payable, on demand, by Borrower to Agent. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and paralegals;
court costs and expenses; photocopying and duplication expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express charges;
telegram charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.
11.4 No Waiver. Agent's or any Lender's failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of an Event of
Default under this Agreement or any of the other Loan Documents shall not
suspend, waive or affect any other Event of Default under this Agreement and any
of the other Loan Documents whether the
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same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by Borrower under this Agreement
and no defaults by Borrower under any of the other Loan Documents shall be
deemed to have been suspended or waived by Agent or any Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer of or
other authorized employee of Agent and Requisite Lenders and directed to
Borrower specifying such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which Agent or any Lender may have under any other agreement, including the
other Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.8 Authorized Signature. Until Agent shall be notified by
Borrower to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an officer of Borrower listed on Schedule 11.8
shall bind Borrower and be deemed to be the act of Borrower affixed pursuant to
and in accordance with resolutions duly adopted by Borrower's Board of
Directors.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER,
AGENT AND LENDERS HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS
LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS,
AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
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AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND
BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF COOK COUNTY, CITY OF CHICAGO, ILLINOIS AND, PROVIDED,
THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT.
11.10 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon either of the
parties by the other party, or whenever either of the parties desires to give or
serve upon the other party any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (i) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (ii) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10), (iii) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (iv) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated on Schedule I or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Agent) designated on
Schedule I to receive copies shall in no way adversely affect the effectiveness
of such notice, demand, request, consent, approval, declaration or other
communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.
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11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND BORROWER ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases. Borrower hereby agrees that it is not on the
date hereof issuing any press releases with respect to this Agreement or the
Related Transactions which mentions or uses the name of General Electric Capital
Corporation or its affiliates. Borrower further agrees that it will not make in
the future any press releases using the name of General Electric Capital
Corporation or its affiliates referring to this Agreement without the prior
written consent of GE Capital unless Borrower is required to do so under law and
then, in any event, Borrower will consult with GE Capital before issuing such
press release.
11.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Borrower for liquidation or reorganization, should Borrower become insolvent or
make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of Borrower's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Obligations, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
11.16 Release of Intellectual Property Lien. The Agent and the
Lenders agree to release their Lien created under the Loan Documents solely with
respect to the Intellectual Property of Borrower, ColorMasters and Asia/Pacific
if, and only if, the following terms and conditions have been satisfied: (i) no
Default or Event of Default has occurred and is continuing; (ii) Excess
Availability is equal to or greater than $2,000,000; (iii) the Average Payable
Days is less than 60 days; (iv) Holdings and its Subsidiaries shall have
positive net income, determined on a consolidated basis in accordance with GAAP,
for each of the immediately preceding two (2) Fiscal Quarters; (v) Holdings and
its Subsidiaries shall have cumulative positive net income, determined on a
consolidated basis in accordance with GAAP, or new cash equity in the form of
cash proceeds of
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sales of common stock and/or capital contributions received by Borrower (net of
any fees, costs and expenses incurred in connection with any such sale or
contribution, including, without limitation, underwriters' discounts) (but
excluding any such equity proceeds (x) which are invested in or otherwise used
to benefit LaserMaster Europe or (y) used to repay the TimeMasters Debt pursuant
to Section 5(d) of the TimeMasters Subordination Agreement), if any, of at least
$5,000,000 from and after January 1, 1996; (vi) prior to or contemporaneously
with such release, Borrower shall deliver a certificate of the Chief Executive
Officer of Borrower certifying, in form and substance satisfactory to Agent, as
to the satisfaction of all of the terms and conditions set forth in this Section
11.16; and (vii) prior to or contemporaneously with such release, Borrower shall
have caused TimeMasters to release all Liens and return all collateral securing
all or any portion of the TimeMasters Debt, after which time the TimeMasters
Debt shall no longer be secured by any property or assets. The capital stock of
Borrower shall not be pledged to secure any Indebtedness or other obligations.
Anything in this Section 11.16 to the contrary notwithstanding, Agent shall at
all times retain for the benefit of itself and Lenders the right to utilize such
Intellectual Property to the extent permitted in Section 9 of the applicable
Borrower Security Agreement or Subsidiary Security Agreements.
[signature page follows]
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first written above.
LASERMASTER CORPORATION
By: /s/ Melvin Masters
----------------------------------
Name: Mel Masters
---------------------------------
Title: CEO, LMC
--------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
Revolving Credit Loan as Agent and Lender
Commitment:
$10,000,000 By: /s/ Shaun Pettit
-----------------------------------
Name: Shaun Pettit
---------------------------------
Title: Duly Authorized Signatory
--------------------------------
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Exhibit 10.02
REPAYMENT, SUBORDINATION AND INTERCREDITOR AGREEMENT
----------------------------------------------------
THIS REPAYMENT, SUBORDINATION AND INTERCREDITOR AGREEMENT (this
"Agreement") is made as of January 17, 1996 by and among LaserMaster
Corporation, a Minnesota corporation (the"Borrower"), LaserMaster Asia/Pacific,
Ltd., a Minnesota corporation ("Asia/Pacific"), ColorMasters, Inc., a Minnesota
corporation ("ColorMasters"), TimeMasters, Inc., a Minnesota corporation
("TimeMasters"), and General Electric Capital Corporation ("GE Capital"), as
agent (the "Agent") for the Lenders (as defined below).
RECITALS:
WHEREAS, as of the date hereof the Borrower is obligated to
TimeMasters for indebtedness (excluding Other Obligations) in the amount
specified on Exhibit A hereto; such indebtedness is evidenced in part by that
certain Promissory Note dated January 17, 1996 by the Borrower in favor of
TimeMasters in the principal amount of $1,765,000 (as from time to time amended,
supplemented, restated, replaced or otherwise modified, the "TimeMasters Note");
WHEREAS, the Borrower, GE Capital, individually and as Agent for the
financial institutions from time to time parties thereto (including their
successors and assigns, the "Lenders") have entered into that certain Credit
Agreement dated as of the date hereof (as from time to time amended,
supplemented, restated or otherwise modified, the "Credit Agreement") pursuant
to which the Lenders have agreed to make certain financial accommodations
available to the Borrower on the terms and conditions set forth therein;
WHEREAS, Holdings, Asia/Pacific and ColorMasters have guaranteed all
of the obligations of the Borrower to the Agent and the Lenders and the
Borrower, Asia/Pacific and ColorMasters have granted to the Agent a security
interest in certain of their property in connection therewith;
WHEREAS, as a condition to entering into the Credit Agreement, the
Agent and the Lenders have required that TimeMasters enter into this Agreement;
WHEREAS, TimeMasters is entering into this Agreement in consideration
of obtaining a security interest in certain assets of the Borrower and agreeing
to subordinate its rights under the TimeMasters Note and other documents
executed in connection therewith, pursuant to the terms and conditions of this
Agreement; and
WHEREAS, TimeMasters is entering into this Agreement to induce the
Agent and the Lenders to enter into and extend credit pursuant to the Credit
Agreement;
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used herein and not otherwise
defined herein shall have the meaning ascribed to it by the Credit Agreement as
in effect on the date hereof. When used herein, the following terms shall have
the meanings indicated:
"Collection Action" shall mean (a) to ask, demand, sue for, take or
receive from or on behalf of the Borrower, Holdings, Asia/Pacific or
ColorMasters, by set-off or in any other manner, the whole or any part of any
monies which may now or hereafter be owing by the Borrower, Holdings,
Asia/Pacific or ColorMasters with respect to the Subordinated Indebtedness
except to obtain the benefits of the TimeMasters Warrant, (b) except for the
receipt at any time and from time to time of all or any portion of the
TimeMasters Warrant by the holder of Subordinated Indebtedness, to take, accept
or otherwise receive any present or future collateral or other security or any
proceeds thereof in payment of all or any portion of the Subordinated
Indebtedness (whether by settlement, compromise, strict foreclosure, self-help,
judicial sale or otherwise), (c) to initiate or participate with any other
Person in any suit, action or proceeding against the Borrower, Holdings,
Asia/Pacific or ColorMasters to (i) enforce payment of or to collect the whole
or any part of the Subordinated Indebtedness or (ii) commence judicial
enforcement of any of the rights and remedies available to any holder of
Subordinated Indebtedness, including but not limited to, to commence any action
to foreclose on any collateral, but excluding judicial enforcement of any rights
set forth in this Agreement and excluding any judicial enforcement against
Holdings to obtain the benefits of the TimeMasters Warrant, (d) except in the
case of the filing of any petition by or against the Borrower as debtor under
any bankruptcy or insolvency laws, to accelerate any Subordinated Indebtedness
or (e) to file or join with any other Person in filing a petition against the
Borrower, Holdings, Asia/Pacific or ColorMasters under any bankruptcy law with
respect to the Subordinated Indebtedness.
"IP Collateral" shall mean the Intellectual Property of the Borrower,
Asia/Pacific and ColorMasters which from time to time constitutes Collateral
under the Senior Loan Documents.
"Post-Petition Interest" shall mean interest accruing in respect of
Senior Indebtedness after the commencement of any bankruptcy, insolvency,
receivership or similar proceedings by or against the Borrower, Holdings,
Asia/Pacific or ColorMasters at the rate applicable to such Senior Indebtedness
pursuant to the Senior Credit Agreement, whether or not such interest is allowed
as a claim enforceable against the Borrower, Holdings, Asia/Pacific or
ColorMasters (as the case may be) in any such proceeding and any other interest
that would have accrued but for the commencement of such proceedings.
"Senior Credit Agreement" shall mean the Credit Agreement, as from
time to time amended, supplemented restated, modified, refunded, refinanced or
replaced.
"Senior Indebtedness" shall mean all indebtedness, obligations and
liabilities of every kind and nature now existing or hereafter arising, of the
Borrower, Holdings, Asia/Pacific
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or ColorMasters under, in connection with, or evidenced by, the Senior
Credit Agreement or any other Loan Documents, including, without
limitation, all principal, premium (if any), interest (including Post-
Petition Interest), fees, costs, expenses, indemnities and liabilities
provided for therein, and any renewals, extensions, modifications and
refundings of any of the foregoing, provided that the aggregate principal
amount of such Senior Indebtedness shall not exceed $12,000,000 at any
time.
"Subordinated Indebtedness" means all principal, interest and other
Indebtedness from time to time owing by the Borrower, Holdings,
Asia/Pacific or ColorMasters to TimeMasters, including, but not limited to,
the Indebtedness owing by the Borrower to TimeMasters under the TimeMasters
Note and any guarantee thereof by Holdings, Asia/Pacific and/or
ColorMasters. Subordinated Indebtedness shall not include the TimeMasters
Warrant, trade payables incurred in the ordinary course of business and any
obligation of Borrower owing pursuant that certain Amended and Restated
Lease Agreement dated as of December 31, 1995 between Grandchildren's
Realty Alternative Management Program I Limited Partnership, a Minnesota
limited partnership, and the Borrower (collectively, "Other Obligations").
"TimeMasters Warrant" means that certain Warrant for the Purchase of
277,953 shares of Common Stock dated the date hereof, issued by Holdings in
favor of TimeMasters, that certain Conversion Right (as defined in the
TimeMasters Note) but only as such right is enforceable against Holdings,
any common stock or similar rights to be granted pursuant to such Warrant
and such Conversion Right and any subsequent warrant, stock appreciation
right, stock or other equity interest of Holdings which the holder of
Subordinated Indebtedness may acquire from Holdings, including, without
limitation, any common stock of Holdings issuable upon conversion of the
TimeMasters Note.
References to a "holder of Subordinated Indebtedness" shall be deemed references
to TimeMasters and any assignee or successor of any of them solely with respect
to Subordinated Indebtedness and in its capacity solely as the holder of the
Subordinated Debt Documents (as defined below).
2. General Intercreditor Provisions.
---------------------------------
(a) Notwithstanding any provision of law, the order or time of
attachment, the order, time or manner of perfection, or the order or time of
filing or recordation of any document or instrument, or other method of
perfecting a Lien in favor of the holders of Senior Indebtedness in any
Collateral, and notwithstanding any conflicting terms or conditions which may be
contained in any of the Subordinated Debt Documents (as defined below) and the
Senior Loan Documents (as defined below), the Liens of the Agent upon the
Collateral pursuant to the Loan Documents or in connection with any debtor-in-
possession financing provided to the Borrower, Asia/Pacific or ColorMasters by
Agent or other lenders or holders of debt or any other Person (collectively, the
"Senior Creditors") have and shall have priority over the Liens, if any, of each
holder of Subordinated Indebtedness upon the Collateral, which are and shall be,
in all respects, junior and subordinate to the Liens of the Agent therein to the
full extent of the Senior Indebtedness and any debtor-in-possession financing,
outstanding at any time and from time to time, provided that the
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aggregate principal amount of any debtor-in-possession financing, when
aggregated with the aggregate principal amount of Senior Indebtedness shall not,
for purposes of Section 2, exceed $12,000,000 at any time outstanding
(collectively, the "Senior Obligations").
(b) The Lien priority provided in clause (a) above shall not be
altered or otherwise affected by any modification, renewal, restatement,
extension, waiver or refinancing of any Senior Indebtedness, nor by any action
or inaction which any Senior Creditor may take or fail to take in respect of the
Collateral, whether or not any holder of Subordinated Indebtedness shall have
received notice thereof or consented thereto.
(c) Subject to Section 3 below, the Senior Creditors shall have the
exclusive right to manage, perform and enforce the terms of the Senior Credit
Agreement and all documents, instruments and agreements executed from time to
time in connection therewith (collectively, the "Senior Loan Documents") with
respect to the Collateral to exercise and enforce all privileges and rights
thereunder in their discretion. Without limiting the foregoing, the Senior
Creditors shall, subject to Section 3 below, have the exclusive right to take or
retake control or possession of all or any part of the Collateral and to hold,
prepare for sale, process, sell, lease, dispose of or liquidate the Collateral.
The Senior Creditors shall not be under any obligation to maintain, preserve or,
subject to Section 3 below, take any other action in respect of the Collateral,
or in respect of the disposition thereof, including, without limitation, any of
the actions described in the preceding sentence, and each holder of Subordinated
Indebtedness, subject to Section 3 below, expressly waives any rights and claims
of any kind whatsoever it may have in connection therewith to the extent
permitted under applicable law. Without limiting the generality of the
foregoing, each holder of Subordinated Indebtedness hereby waives the
application of the doctrine of marshalling of assets or collateral.
(d) Notwithstanding anything to the contrary contained in any of the
Subordinated Debt Documents, but subject to Section 3 below, only the Senior
Creditors shall have the right to restrict or permit, or approve or disapprove,
the sale, transfer or other disposition of all or any portion of the Collateral,
provided that the Agent agrees to give prior notice to TimeMasters of any such
sale, transfer or other disposition by the Agent. Subject to Section 3 below,
each holder of Subordinated Indebtedness will, immediately upon the request of
the Agent, release or otherwise terminate its Liens on any of the Collateral
(except with respect to any excess proceeds, if any, from the sale or other
disposition of such Collateral which remain after payment in full in cash of all
of the Senior Indebtedness) to the extent such Collateral is sold or otherwise
disposed of either by Agent or its agents, or by the Borrower, Asia/Pacific or
ColorMasters with the consent of Agent, and will immediately deliver such other
release documents as the Agent may require in connection therewith or in
connection with any deemed release provided below. If Agent releases its Liens
on any or all of the Collateral or waives any rights with respect thereto,
except in connection with the repayment in full of the Senior Obligations other
than out of proceeds of a sale of the Collateral, or if each holder of
Subordinated Indebtedness is required to release its Liens pursuant to the
preceding sentence, each holder of Subordinated Indebtedness shall be deemed,
subject to Section 3 below, to have released it Liens on the Collateral or
waived such rights, as the case may be. Each holder of Subordinated Indebtedness
hereby irrevocably constitutes and appoints, until such time as all of the
Senior Indebtedness has been indefeasibly paid in full in cash and the Senior
Loan Documents
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<PAGE>
have terminated, the Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such holder and in the name of
such holder or in its own name, from time to time in the Agent's discretion, to
execute and record or file all UCC financing statements (including, without
limitation, partial release and termination statements) and any other
instruments or documents necessary to terminate or release any Liens as provided
in this clause (d).
(e) Notwithstanding any rights or remedies available to any holder of
Subordinated Indebtedness under the Subordinated Debt Documents, applicable law
or otherwise, until all of the Senior Obligations have been indefeasibly paid in
full in cash, each holder of Subordinated Indebtedness will not, directly or
indirectly, (i) take any Collection Action (other than as expressly permitted by
Section 3, 4(f) or 5 below), (ii) object or take any action to oppose, or seek
adequate protection in respect of, any debtor-in-possession or similar financing
provided by Agent or any other Person to the Borrower or its Subsidiaries
(including, without limitation, Asia/Pacific and ColorMasters), except to the
extent that the principal amount of such financing, when aggregated with the
aggregate principal amount of Senior Indebtedness, exceeds $12,000,000, or the
Borrower's or such Subsidiaries' use of cash collateral in any bankruptcy
proceeding, (iii) vote in any bankruptcy, insolvency or similar proceeding with
respect to the Borrower, Holdings, Asia/Pacific or ColorMasters in any manner
adverse to the Senior Creditors or their interests, (iv) except as expressly
permitted under Section 3 below, take any other action that would interfere in
any manner with the rights of the Senior Creditors under the Senior Loan
Documents in the Collateral, (v) have any other right in respect of the
Collateral, other than its subordinate Lien on the Collateral and as expressly
provided in Section 3 below and to receive payments permitted under Section 5
below and the excess proceeds, if any, received by the Agent from the
Collateral, after the indefeasible payment in full in cash of the Senior
Obligations, (vi) seek in respect of any part of the Collateral or proceeds
thereof or any Lien which may exist thereon, any relief from or modification of
the automatic stay as provided in Section 362 of Title 11 of the United States
Code (the "Bankruptcy Code") or (vii) seek adequate protection as provided in
Section 363 of the Bankruptcy Code. In addition, each holder of Subordinated
Indebtedness will not take any actions or vote in any way so as to contest
either the validity or the priority (as set forth in Section 2(a) above) of the
Liens in favor of the Senior Creditors.
3. Special Intercreditor Provisions.
---------------------------------
(a) IP Collateral. Notwithstanding any provision of this Agreement
to the contrary, the Agent hereby agrees, on its behalf and on behalf of the
Lenders, for the benefit of TimeMasters and, as expressly provided in clauses
(iii), (iv), (v) and (vii) below, the Borrower that:
(i) During the 120-day period (the "120-Day Period") commencing on
the earliest of (A) an acceleration of the Senior Indebtedness, (B) the filing
of any petition by the Borrower as debtor under any bankruptcy or insolvency
laws and (C) the filing of any petition against the Borrower as debtor under any
bankruptcy or insolvency laws which constitutes an Event of Default under the
Senior Credit Agreement, the Agent will not, without the prior written consent
of TimeMasters, sell or otherwise dispose of, or contract to sell or otherwise
dispose of, all or any portion of the IP Collateral or actively market for sale
or disposition all or any portion of the IP
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<PAGE>
Collateral, provided that if the Agent receives any inquiry for the sale or
disposition of all or any portion of the IP Collateral, the Agent will endeavor
to inform TimeMasters of such inquiry;
(ii) During the 120-Day Period, the Agent will endeavor to exercise
its remedies against the accounts and inventory to the extent that it is not
stayed, enjoined or otherwise prohibited from doing so, and with the express
understanding and agreement that any failure or delay by the Agent to do so
shall not in any way give rise to any liability on the part of the Agent or any
Lender or in any way impair, diminish or otherwise affect any of the Agent's or
any Lender's rights or remedies;
(iii) TimeMasters and the Borrower shall have the exclusive right
during the 120-Day Period, and thereafter on a non-exclusive basis, to solicit
bids for the sale or other disposition of the IP Collateral and to submit such
bids in writing to the Agent, provided that the Borrower and TimeMasters shall
promptly inform the Agent of all formal and informal, written and oral, bids
received with respect to such sale or disposition and the terms and conditions
of such bids;
(iv) The Agent will release its Liens on the IP Collateral in
connection with any sale or other disposition of any IP Collateral by
TimeMasters or the Borrower during the 120-Day Period which indefeasibly pays in
full in cash during the 120-Day Period (and contemporaneously with the
effectiveness of such release) all of the Senior Indebtedness;
(v) If at the end of the 120-Day Period TimeMasters or the Borrower
delivers a written request therefor to the Agent, the Agent will endeavor to
notify TimeMasters and the Borrower within a reasonable period of time
thereafter of the approximate amount of the Senior Indebtedness that was
outstanding as of the end of the 120-Day Period (after giving effect to the
application of any proceeds from the sale or other disposition, subject to
clause (i) above, of the Collateral), but with the understanding and agreement
that neither any failure or delay by the Agent to do so, nor any inaccuracy in
such notice, shall in any way give rise to any liability on the part of the
Agent or any Lender or in any way impair, diminish or otherwise affect any of
the Agent's or any Lender's rights or remedies;
(vi) During the 30-day period (the "30-Day Period") commencing on the
last day of the 120-Day Period, the Agent will release its Lien on the IP
Collateral in connection with any sale or other disposition of any IP Collateral
by TimeMasters during such 30-Day Period but before such time as the Agent has
sold or otherwise disposed of such IP Collateral or entered into a contract for
the sale or other disposition of such IP Collateral, which indefeasibly pays in
full in cash during the 30-Day Period (and contemporaneously with the
effectiveness of such release) all of the Senior Indebtedness; and
(vii) After the 120-Day Period and the 30-Day Period, the Agent will
consider and evaluate in good faith any written bids for the sale or other
disposition of the IP Collateral which may be submitted in reasonable detail by
TimeMasters or the Borrower to the Agent before such time as the Agent has sold
or otherwise disposed of such IP Collateral or entered into a contract for the
sale or other disposition of such IP Collateral to the same extent as the Agent
would consider and evaluate any other bids received from any other Person.
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<PAGE>
(b) Right of Redemption. At any time before the Agent has sold or
otherwise disposed of such Collateral or entered into a contract for the sale or
other disposition of such Collateral, the Borrower, Asia/Pacific, ColorMasters
and TimeMasters shall each have the right, unless otherwise agreed in writing
after a Default under the Senior Credit Agreement, to redeem the Collateral by
tendering indefeasible payment in full in cash of all of the Senior
Indebtedness.
(c) Consent and Waiver. The Borrower, Asia/Pacific and ColorMasters
do each hereby (i) consent to each of the provisions of this Section 3, (ii)
agree that such provisions, as well as any action or inaction taken by the Agent
in compliance therewith, shall be commercially reasonable (as that phrase is
used in the Code) under all circumstances, and (iii) waive any and all claims
which it may have, now or at any time hereafter, against the Agent arising out
of or in connection with such provisions or any action or inaction taken by the
Agent in compliance therewith. In addition, the Borrower, Asia/Pacific,
ColorMasters and TimeMasters agree that nothing herein shall in any way restrict
or impair the right of the Agent to utilize any IP Collateral pursuant to the
terms and conditions of the Senior Loan Documents to the extent necessary or
appropriate in connection with the sale or other disposition of any Inventory or
other Collateral at any time.
(d) Excess Proceeds. Upon the indefeasible payment in full in cash
of all Senior Indebtedness, any excess proceeds of any sale, disposition or
other realization upon the Collateral, if any, shall be distributed to
whomsoever may be lawfully entitled to receive the same.
4. Subordination Provisions.
-------------------------
(a) Subordination. The Borrower, Holdings, Asia/Pacific and
ColorMasters, each for itself and its successors, covenants and agrees, and each
holder of the Subordinated Indebtedness by such holder's execution hereof or
acceptance of any Subordinated Indebtedness, likewise covenants and agrees, that
the payment of the Subordinated Indebtedness is hereby expressly subordinated,
to the extent and in the manner set forth in this Agreement (including, without
limitation, Section 5 and each other Section hereof), in right of payment to the
prior payment in full in cash of all Senior Indebtedness. For all purposes
hereof, a payment or distribution on account of the Subordinated Indebtedness
may consist of cash, property or securities, by set-off or otherwise, and a
payment or distribution on account of the Subordinated Indebtedness shall
include, without limitation, any redemption, purchase or other acquisition of
the Subordinated Indebtedness; provided, however, that the TimeMasters Warrant
and the exercise of the TimeMasters Warrant shall not be deemed to be a payment
or distribution on account of the Subordinated Indebtedness.
(b) Distribution on Dissolution, Liquidation and Reorganization.
Upon any distribution of assets of the Borrower, Holdings, Asia/Pacific or
ColorMasters, upon any foreclosure, dissolution, winding up or liquidation of
the Borrower, Holdings, Asia/Pacific or ColorMasters, whether voluntary or
involuntary, or upon any reorganization, readjustment, arrangement or similar
proceeding relating to the Borrower, Holdings, Asia/Pacific or ColorMasters, or
any of their respective property or assets, and whether in bankruptcy,
insolvency or receivership proceedings or otherwise:
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<PAGE>
(i) the holders of all Senior Indebtedness shall be entitled to
receive payment in full in cash of the Senior Indebtedness before the holder or
holders of the Subordinated Indebtedness are entitled to receive any payment
with respect to the Subordinated Indebtedness except for the receipt of all or
any portion of the TimeMasters Warrant or the exercise of the TimeMasters
Warrant; and
(ii) any payment or distribution of assets of the Borrower, Holdings,
Asia/Pacific or ColorMasters, of any kind or character, whether in cash,
property or securities, to which the holder or holders of the Subordinated
Indebtedness would be entitled except for the provisions hereof shall be paid by
the liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Senior Indebtedness (or to the agent
for such holders) to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; provided, however, that
this clause (ii) shall not apply to any payment or distribution by Holdings with
respect to the TimeMasters Warrant.
The holder of the Subordinated Indebtedness may file a proper claim or
proof of debt in the form required in any proceeding referred to above;
provided, however, that if any holder of Subordinated Indebtedness does not file
a proper claim or proof of debt in the form required in any proceeding referred
to above prior to ten (10) days before the expiration of the time to file such
claim in such proceeding, then the holder of any such Senior Indebtedness is
hereby irrevocably appointed, until such time as all of the Senior Indebtedness
has been indefeasibly paid in full in cash and the Senior Loan Documents have
terminated, the agent and attorney-in-fact (in its own name or in the name of
any holder of any Subordinated Indebtedness or otherwise), but shall have no
obligation, to execute, verify, deliver and file any such proofs of claim,
consents, assignments or other instruments for or on behalf of such holder. Each
holder of the Subordinated Indebtedness agrees that such holder will not take
any acts or vote in any way so as to contest the enforceability of the
subordination provisions set forth herein.
(c) Default Under Senior Indebtedness. Except as expressly permitted
under Section 5(c) below and except for the receipt or distribution of all or
any portion of the TimeMasters Warrant, no payment or distribution of any kind
or character shall be made by the Borrower, Holdings, Asia/Pacific or
ColorMasters on account of the Subordinated Indebtedness if, at the time of such
payment or distribution, the Borrower shall have received written notice from
the holders of the Senior Indebtedness or a representative thereof of the
occurrence and continuance of any Default or Event of Default or that a Default
or Event of Default would arise out of any such payment or distribution on
account of the Subordinated Indebtedness. The Borrower may resume payments in
respect of the Subordinated Indebtedness (including any missed payments) when
such Default or Event of Default shall have been cured or waived in writing by
the applicable entity in accordance with the terms of the Senior Credit
Agreement, or all of the Senior Indebtedness shall have been paid in full in
cash, but only if such payments are permitted by Section 5 below.
(d) Payment Remittance. In the event that, notwithstanding the
foregoing, any payment or distribution of assets of the Borrower, Holdings,
Asia/Pacific or ColorMasters, or any
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<PAGE>
payment by or on behalf of the Borrower, Holdings, Asia/Pacific or ColorMasters,
of any kind or character, whether in cash, property or securities, prohibited by
any of Sections 2, 4 or 5 shall be paid to or received by any holder of
Subordinated Indebtedness, then and in such event such payment or distribution
shall be held in trust for the benefit of the holders of Senior Indebtedness and
paid over and delivered forthwith to the holders of Senior Indebtedness (or to
the agent for such holders), for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have been
paid in full in cash.
(e) Subrogation. If any amount payable in respect of the Subordinated
Indebtedness is paid over to the holders of Senior Indebtedness, then subject to
the payment in full in cash of all Senior Indebtedness, the holder or holders of
the Subordinated Indebtedness shall be subrogated to the rights of the holders
of Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Borrower, Holdings, Asia/Pacific or ColorMasters applicable to
Senior Indebtedness until the principal of and interest on the Subordinated
Indebtedness shall be paid in full and, for the purposes of such subrogation, no
such payments or distributions to the holders of Senior Indebtedness of cash,
property or securities otherwise distributable to the holder or holders of the
Subordinated Indebtedness shall, as between the Borrower, Holdings,
Asia/Pacific, ColorMasters and their respective creditors other than the holders
of Senior Indebtedness, and the holder or holders of the Subordinated
Indebtedness, be deemed to be a payment by the Borrower, Holdings, Asia/Pacific
or ColorMasters to or on account of Senior Indebtedness.; provided, however,
that this clause (e) shall not apply to the TimeMasters Warrant.
(f) Standstill. Prior to the holders of all Senior Indebtedness
receiving payment in full in cash of the Senior Indebtedness, no holder of any
Subordinated Indebtedness shall (i) except for the receipt of all or any portion
of the TimeMasters Warrant, receive any payment or distribution in respect of
such Subordinated Indebtedness other than as expressly permitted in Section 5
below or (ii) take any Collection Action or otherwise exercise any right or
remedy in respect of such Subordinated Indebtedness other than as expressly
permitted by Section 3 above or the filing of such documents as may be necessary
to preserve the rights of such holder relative to such Subordinated Indebtedness
in any proceeding referenced in Section 4(b) above.
(g) Reliance on Subordination. Each holder of the Subordinated
Indebtedness by its execution hereof and by its acceptance of any Subordinated
Indebtedness acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each of the
Lenders to acquire and/or to hold Senior Indebtedness and each present and
future holder of the Senior Indebtedness shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold such
Senior Indebtedness, and shall be deemed a third party beneficiary of this
Agreement and shall be entitled to enforce the provisions hereof.
(h) Waiver and Consent. Each holder of the Subordinated Indebtedness
waives any and all notice of the acceptance of these provisions or of the
creation, renewal, extension or accrual, now or at any time in the future, of
any Senior Indebtedness or of the reliance of the holders of the Senior
Indebtedness on these provisions. Each holder of the Subordinated Indebtedness
acknowledges and agrees that (i) the subordination provisions set forth herein
shall be specifically
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enforceable against such Persons by the holders of the Senior Indebtedness, and
(ii) without notice to or further assent by it, the Senior Indebtedness may from
time to time, in whole or in part, be renewed, extended, refunded or released by
the holders thereof, as they may deem advisable, the credit agreements and any
other instruments or documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated.
(i) Subordination Unaffected by Certain Events. The rights set forth
herein of the holders of the Senior Indebtedness as against each holder of the
Subordinated Indebtedness shall remain in full force and effect without regard
to, and shall not be impaired or affected by:
(i) any act or failure to act on the part of the Borrower,
Holdings, Asia/Pacific or ColorMasters;
(ii) any extension or indulgence in respect of any payment or
prepayment of the Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of the Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition or
supplement to, or deletion for, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) subject to Section 3 above, any exercise or nonexercise by
any holder of Senior Indebtedness of any right, power, privilege or
remedy under or in respect of such Senior Indebtedness or the
Subordinated Indebtedness or any waiver of any such right, power,
privilege or remedy or any default in respect of such Senior
Indebtedness or the Subordinated Indebtedness, or any receipt by any
holder of Senior Indebtedness of any security, or any failure by such
holder to perfect a security interest in, or any exchange, sale,
release or surrender by such holder of, any security for the payment
of such Senior Indebtedness; or
(v) any merger or consolidation of the Borrower or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
other Person, or, subject to Section 3 above, any sale, lease or
transfer of any or all of the assets of the Borrower or any of its
Subsidiaries to any other Person; or
(vi) the absence of any notice to, or knowledge by, any holder
of the Subordinated Indebtedness of the existence or occurrence of any
of the matters or events set forth in the foregoing clauses (i)
through (v).
(j) Reinstatement of Subordination. The obligations of each holder
of the Subordinated Indebtedness under the subordination provisions set forth
herein shall continue to be effective, or be reinstated, as the case may be, as
to any payment in respect of any Senior Indebtedness that is rescinded or must
otherwise be returned by the holder of such Senior Indebtedness upon the
occurrence or as a result of any proceeding, all as though such payment had not
been made.
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<PAGE>
(k) Legend. TimeMasters shall cause each document or instrument creating,
evidencing or securing any Subordinated Indebtedness to bear the following
legend:
"The obligations of LaserMaster Corporation hereunder are subordinated
to certain Senior Indebtedness to the extent and on the terms set forth in
that certain Repayment, Subordination and Intercreditor Agreement dated as
of January 17, 1996 by and among LaserMaster Corporation, LaserMaster
Asia/Pacific, Ltd., ColorMasters, Inc., TimeMasters, Inc. and General
Electric Capital Corporation, as agent, as such agreement is from time to
time amended."
5. Permitted Payments. Subject to Sections 2 and 4 above, the Borrower
may make the following payments with respect to the Subordinated Indebtedness
and, to the extent any such payments are permitted by clause (a), (b), (c) or
(d) below, TimeMasters may make demand for such payment under the TimeMasters
Note:
(a) so long as (i) no Default or Event of Default has occurred and is
continuing, or would result therefrom, (ii) Excess Availability is equal to or
greater than $1,200,000 immediately prior to any such payment and (iii) the
Average Payable Days is less than 75 days, then the Borrower may after the
Closing Date pay up to an aggregate amount not to exceed $400,000 in respect of
the Subordinated Indebtedness (whether for principal, interest or any other
obligations);
(b) after payments of $400,000 with respect to the Subordinated
Indebtedness under clause (a) above, so long as (i) no Default or Event of
Default has occurred and is continuing, or would result therefrom, (ii) Excess
Availability is equal to or greater than $1,200,000 during the 30-day period
ending on the date of any such payment and immediately after giving effect to
any such payment, (iii) the Average Payable Days is less than 60 days and (iv)
Holdings and its Subsidiaries shall have positive net income for the immediately
preceding three months on an aggregate basis, determined on a consolidated basis
in accordance with GAAP, then the Borrower may pay any additional amounts owing
in respect of the Subordinated Indebtedness;
(c) so long as the Borrower is not in default in the payment of, or has
otherwise failed to pay, any interest on the Senior Indebtedness which is due
and owing, the Borrower may pay interest on a monthly basis which is owing in
respect of the Subordinated Indebtedness, which payments under this clause (c)
shall not count against any payments permitted to be made under clause (a)
above; and
(d) so long as no Default or Event of Default has occurred and is
continuing, or would result therefrom, the Borrower may pay any amounts owing in
respect of the Subordinated Indebtedness directly with, and contemporaneously
upon receipt by the Borrower of, cash proceeds of any sale of common stock or
capital contribution received by the Borrower after the date of this Agreement
(net of any fees, costs and expenses incurred in connection with any such sale
or contribution, including, without limitation, underwriters' discounts).
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<PAGE>
6. Liens. TimeMasters hereby represents and warrants as of the date
hereof that it has not been granted or obtained any Liens in any assets of
Holdings or any of its Subsidiaries or any other assets or property to secure
the Subordinated Indebtedness other than a second priority and subordinate lien
on the Collateral. Each of the holders of the Subordinated Indebtedness agrees
that it will not take or otherwise be granted any Lien on any property or assets
of Holdings or any of its Subsidiaries to secure all or any part of the
Subordinated Indebtedness, except for the Liens on the Collateral granted on the
date hereof. Each of the holders of the Subordinated Indebtedness agrees that
it will not file any security agreement or any other document or instrument with
the U.S. Patent and Trademark Office or the U.S. Copyright Office until such
time as the Senior Indebtedness has been indefeasibly paid in full in cash and
the Senior Loan Documents have terminated.
7. Amendment of Subordinated Debt Documents. Prior to the payment in
full in cash of the Senior Indebtedness and notwithstanding anything to the
contrary in the documents, instruments and agreements executed in connection
with the Subordinated Indebtedness, other than those documents, instruments or
agreements creating or evidencing the TimeMasters Warrant (collectively,
including the TimeMasters Note, the "Subordinated Debt Documents"), neither the
Borrower, Holdings, Asia/Pacific, ColorMasters nor TimeMasters shall amend or
modify the Subordinated Debt Documents without the Agent's prior written
consent.
8. Sale or Transfer of Subordinated Indebtedness. In the event of any
proposed sale, assignment, disposition or other transfer of all or any portion
of the Subordinated Indebtedness, the holder thereof, prior to the consummation
of any such action, shall cause the transferee thereof to execute and deliver to
the holders of Senior Indebtedness (or the agent for such holders) an agreement
substantially identical to this Agreement, providing for the continued payment
and lien subordination, to the extent set forth herein, of the portion of the
Subordinated Indebtedness so transferred to the Senior Indebtedness, as provided
herein and for the continued effectiveness of all of the rights of the holders
of the Senior Indebtedness with respect to such transferred Subordinated
Indebtedness. Notwithstanding the failure to execute and/or deliver any such
agreement, the subordination of the Subordinated Indebtedness to the Senior
Indebtedness effected hereby shall survive any sale, assignment, disposition or
other transfer of all or any portion of the Subordinated Indebtedness.
9. Miscellaneous. (a) The provisions of this Agreement are solely for
the purpose of defining the relative rights of the holders of Subordinated
Indebtedness on the one hand and the holders of Senior Indebtedness on the
other, and shall not be deemed to create any rights or priorities in any other
Person, including without limitation, the Borrower, Holdings, Asia/Pacific or
ColorMasters (except solely in connection with clauses (iii), (iv), (v) and
(vii) in Section 3(a) above).
(b) This Agreement may be amended only by a written instrument signed
by the Agent, TimeMasters and the Borrower. No waiver of any term or provision
of this Agreement shall be effective unless it is in writing and signed by the
party against whom such waiver is sought to be enforced. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement may be signed in one or more
counterparts which, when taken together, shall constitute one and the same
document.
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(c) Any notices provided for hereunder shall be given in accordance
with Section 11.10 of the Credit Agreement, and, in the case of TimeMasters,
shall be addressed as set forth below or as TimeMasters may otherwise designate
in writing to the Agent:
TimeMasters, Inc.
6425 Beach Road
Eden Prairie, MN 55344
Attention: Melvin L. Masters
Telecopy: (612) 941-8652
(d) If any provision of this Agreement shall be prohibited by or be
invalid under applicable law, such provision shall be deemed ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(e) The Section headings used in this Agreement are for convenience
only and shall not effect the interpretation of any of the provisions hereof.
(f) THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED
TO THE CONFLICT OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
(g) The parties hereto agree that in the event of any conflict between
the provisions of this Agreement and the provisions of any Subordinated Debt
Document, the provisions of this Agreement shall control.
(h) The parties hereto agree that there are no conditions to the
effectiveness of this Agreement or its enforceability.
(i) Time is of the essence of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
LASERMASTER CORPORATION GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Robert J. Wenzel By: /s/ Shaun Pettit
------------------------------- -------------------------------------
Name: Robert J. Wenzel Name: Shaun Pettit
----------------------------- -------------------------------------
Title: President Title: Duly Authorized Signatory
---------------------------- ------------------------------------
TIMEMASTERS, INC. LASERMASTER ASIA/PACIFIC, LTD.
By: /s/ Mel Masters By: /s/ Randall L. Ruegg
------------------------------- ---------------------------------------
Name: Mel Masters Name: Randall L. Ruegg
- ---------------------------------- -------------------------------------
Title: CEO, TMI Title: CFO
---------------------------- ------------------------------------
COLORMASTERS, INC.
By: /s/ Randall L. Ruegg
-------------------------------
Name: Randall L. Ruegg
-----------------------------
Title: CFO
----------------------------
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EXHIBIT A
---------
SUBORDINATED INDEBTEDNESS
-------------------------
Amount Payee
------ -----
$1,765,000 TimeMasters, Inc.
<PAGE>
Exhibit 10.03
AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (the "LEASE") is made and entered
into as of December __, 1995, by and between Grandchildren's Realty Alternative
Management Program I Limited Partnership, a Minnesota limited partnership
("LANDLORD"), and LaserMaster Corporation, a Minnesota corporation ("TENANT").
RECITALS:
A. Landlord is the owner of the Project (as hereinafter defined).
B. Tenant and Landlord's predecessors in interest are parties to that
certain Building Lease dated April 3, 1987, as amended (the "ORIGINAL LEASE").
C. Landlord and Tenant desire to amend and restate the Original Lease in
its entirety.
D. Tenant desires to lease from Landlord and Landlord desires to lease to
Tenant the Premises (as hereinafter defined), subject to and in accordance with
the terms and conditions set forth herein.
AGREEMENTS:
NOW, THEREFORE, for good, fair and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby covenant
and agree to amend and restate the Original Lease in its entirety as follows as
of the Commencement Date (as hereinafter defined):
ARTICLE 1.
DEFINITIONS
The following words and terms shall have the following meanings ascribed to
them:
1.1. "ACCELERATED AMOUNT" shall have the meaning ascribed to such term in
Section 11.2(a) hereof.
1.2. "ADDITIONAL PREMISES" shall mean those portions of the Project
depicted as such on Exhibit "C" attached hereto, consisting of 24,501 square
feet.
1.3. "ADDITIONAL PREMISES LEASES" shall mean any current lease or
occupancy agreement to which Landlord is a party with respect to any portion of
the Additional Premises.
<PAGE>
1.4. "ADDITIONAL RENT" shall mean all costs, expenses, charges and other
amounts owed by Tenant to Landlord hereunder, other than Base Rent. Additional
Rent shall include Tenant's Share of Impositions and Operating Expenses, as well
as any cost incurred by Landlord in fulfilling Tenant's obligations hereunder.
Additional Rent shall be due and payable on the earlier of the date Landlord
advances funds or demand, unless specifically provided to the contrary in this
Lease.
1.5. "AWARD" shall have the meaning ascribed to such term in Section 10.1
hereof.
1.6. "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as
amended.
1.7. "BASE RENT" shall have the meaning ascribed to such term in Section
3.1 hereof.
1.8. "COMMENCEMENT DATE" shall mean January 1, 1996.
1.9. "COMMON AREAS" shall mean, to the extent applicable, all parking
areas, driveways, entrances, exits, loading docks, pick-up stations, sidewalks,
ramps, landscaped areas, exterior stairways, public elevators, escalators,
hallways, lobbies, and other areas and improvements provided by Landlord for the
common use of tenants of the Project, the guests, customers, and employees of
tenants of the Project, and all other portions of the Project that are not
leased to Tenant or other tenants of the Project or otherwise leasable,
including mechanical rooms and bathrooms available to more than one tenant.
1.10. "DEFAULT" shall mean an event which but for the giving of notice or
passing of time, or both, would constitute an Event of Default hereunder.
1.11. "DEFAULT RATE" shall mean the annual rate of interest of eighteen
percent (18%), or such lesser amount as may be the maximum amount permitted by
applicable law. In the event that Rent is not paid when due, the amount of Rent
not so paid shall bear interest at the Default Rate from the date due until the
date paid.
1.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 2.6 hereof.
1.13. "ENVIRONMENTAL REGULATION(S)" means any law, rule, regulation or
permit relating to the environment, human health or safety now existing or
hereafter enacted.
1.14. "EVENT OF DEFAULT" shall have the meaning ascribed to such term in
Section 11.1 hereof.
1.15. "EXCESS CASH AVAILABILITY" shall mean for the applicable period cash
on hand plus cash available and permitted to be drawn under any existing credit
facility during such period less the sum (without duplication) of (i) the
provision for income taxes for such period for the proposed subtenant and its
subsidiaries, (ii) accrued expenses and charges for such period for
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the proposed subtenant and its subsidiaries, and (iii) capital expenditures by
the proposed subtenant and its subsidiaries during such period.
1.16. "FINANCIAL TEST" shall mean either (a) the proposed subtenant shall
have total stockholder equity of not less than $45 million and Excess Cash
Availability of not less than $15 million (all as determined by Landlord in
accordance with GAAP), or (b) for eight (8) consecutive fiscal quarters
preceding the effective date of a proposed sublease the proposed subtenant shall
have all of the following (as determined by Landlord in accordance with GAAP):
(i) Excess Cash Availability of not less than $4 million, and (ii) pre-tax net
income of not less than $1 million (accounting for inventory on a first in -
first out basis).
1.17. "GAAP" shall mean generally accepted accounting principles as in
effect in the United States on the Commencement Date applied on a consistent
basis.
1.18. "GOVERNMENTAL AUTHORITY" means any federal, state, or local
governmental body including elected bodies, departments, agencies, commissions,
boards or instrumentalities having or purporting to have jurisdiction over
Landlord, Tenant, the Project, the Premises or the business conducted or to be
conducted from the Project or the Premises.
1.19. "HAZARDOUS SUBSTANCES" means any substance, pollutant or
contaminant, as those terms are now or hereafter defined in any Environmental
Regulation, and specifically includes, but is not limited to, asbestos,
asbestos-containing materials, petroleum, or petroleum-based products,
formaldehyde, and polychlorinated biphenyls.
1.20. "IMPOSITIONS" shall mean all taxes of every kind and nature imposed
upon or assessed of or against Landlord with respect to the Project, Tenant or
any portion of the Project or interest therein, all charges for any easement or
agreement maintained for the benefit of any portion of the Project, all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges and all other public charges, levies or taxes,
whether of a like or different nature, even if unforeseen or extraordinary,
imposed upon or assessed of or against Landlord with respect to the Project,
Tenant or any portion of the Project or interest therein, together with any
penalties or interest on any of the foregoing to the extent Tenant has not
provided Landlord with funds with respect to the payment of such taxes and
charges under Section 3.2(a) hereof.
1.21. "IMPROVEMENTS" shall mean all buildings, structures and improvements
now located or hereafter constructed on the Land and all fixtures and equipment
attached to, forming a part of and necessary for the operation of such
buildings, structures and improvements.
1.22. "INSURED CASUALTY" shall have the meaning ascribed to such term in
Article 9 hereof.
1.23. "LAND" shall mean that certain real property located in Hennepin
County, Minnesota and legally described on Exhibit A attached hereto, together
with all easements and rights benefitting or appurtenant to such real property.
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1.24. "LANDLORD" shall mean Grandchildren's Realty Alternative Management
Program I Limited Partnership, a Minnesota limited partnership, and its
successors and assigns.
1.25. "LEASE TERM" shall mean the period from the Commencement Date
through and including December 31, 2011.
1.26. "LEASE YEAR" shall mean a full calendar year, provided that the last
Lease Year shall be determined in accordance with Section 2.5 hereof.
1.27. "LEGAL REQUIREMENTS" shall mean all present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, injunctions, rules,
regulations and requirements pertaining to the Premises including any applicable
insurance, environmental, zoning or building, use and land use laws, ordinances,
rules or regulations and all covenants, restrictions and conditions now or
hereafter of record which may be applicable to any of the Premises, or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration,
construction, repair or reconstruction of any of the Premises.
1.28. "OPERATING EXPENSES" shall mean all costs and expenses of owning,
operating, maintaining, repairing, restoring and replacing all or any portion of
the Project. Operating Expenses shall include all costs and expenses of
protecting, operating, managing the Project (including attorneys' and other
professional fees, except those related to negotiation or enforcement of
leases), repairing, repaving, lighting, cleaning, painting, striping, insuring,
removing of snow, ice and debris, police protection, security and security
patrol, fire protection, regulating traffic, inspecting, repairing and
maintaining of machinery and equipment used in the operation of the Common
Areas, including heating, ventilating and air conditioning machinery and
equipment, depreciation of machinery and equipment providing heating,
ventilating and air conditioning for the interior Common Areas, cost and expense
of inspecting, maintaining, repairing and replacing storm and sanitary drainage
systems, sprinkler and other fire protection systems, electrical, gas, water,
telephone and irrigation systems, cost and expense of maintaining, repairing and
replacing the Project and the exterior of the buildings in the Project,
including, but not limited to floors, roofs, skylights, elevators, walls, stairs
and signs, cost and expense of installing, maintaining and repairing burglar or
fire alarm systems, if installed, cost and expense of landscaping and shrubbery,
expense of utilities, property management, administrative and overhead costs.
The following shall not be included in Operating Expenses: (a) interest or
payments on any financing for the Project; (b) any expenses resulting from the
negligence of the Landlord, its agents or employees; (c) any items for which
Landlord is reimbursed by insurance; (d) the cost of providing improvements
within or services to or allowances for the benefit of the premises and for the
individual use of any other tenants in the Project at any time (as distinguished
from tenants generally); (e) any other cost or expense otherwise paid by Tenant
under the Lease; (f) leasing commissions; (g) property management fees in an
amount in excess of five percent (5%) of Rent in the case of a property manager
which is not affiliated with Landlord and an amount in excess of three percent
(3%) of Rent in the case of a property manager which is affiliated with
Landlord; and (h) fines and penalties incurred other than as a result of a
Default.
1.29. "ORIGINAL LEASE" shall have the meaning ascribed to such term in
Recital B
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hereof.
1.30. "PERMITTED USE" shall mean the use of the Premises as an office,
warehouse and light manufacturing facility in compliance with all Legal
Requirements and the terms and conditions of this Lease.
1.31. "PREMISES" shall mean that portion of the Project depicted as such
on Exhibit "C" attached hereto, consisting of 163,276 square feet, together with
such portions of the Additional Premises which, pursuant to the provisions of
Section 2.6 hereof, are deemed to become part of the Premises.
1.32. "PRESENT VALUE" shall have the meaning ascribed to such term in
Section 11.2(f) hereof.
1.33. "PROHIBITED CASUALTY" shall have the meaning ascribed to such term
in Article 9 hereof.
1.34. "PROHIBITED TAKING" shall have the meaning ascribed to such term in
Section 10.1 hereof.
1.35. "PROJECT" shall mean the collective reference to the Land and
Improvements, which consist of the Shadyview Business Center located at 7100
through 7198 Shady Oak Road, Eden Prairie, Minnesota consisting of two separate
buildings, one of which contains approximately 67,255 square feet and the other
which contains approximately 120,522 square feet. The aggregate square footage
of the buildings comprising the Project is 187,777.
1.36. "RENT" shall mean the sum of Base Rent and Additional Rent.
1.37. "RULES" shall mean those rules and regulations adopted from time to
time by Landlord with respect to the use and care of the Project.
1.38. "STATE" shall mean the State in which the Project is located.
1.39. "TAX CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.40. "TENANT" shall mean LaserMaster Corporation, a Minnesota
corporation.
1.41. "TENANT'S SHARE" shall mean a percentage determined by dividing the
number of square feet contained in the Premises by 187,777. As of the
Commencement Date and without giving effect to the provisions of Section 2.6
hereof, Tenant's Share is eighty seven percent (87%).
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ARTICLE 2.
DEMISE; COMMON AREAS; TERM; LEASE YEAR
2.1. DEMISE. Subject to the terms and conditions of this Lease, Landlord
leases to Tenant and Tenant hereby leases from Landlord, the Premises. Landlord
reserves unto itself the right to grant easements across, under or through the
Land, which do not materially interfere with Tenant's access to or use of the
Premises.
2.2. USE OF COMMON AREAS. Use by Tenant of the Premises shall include the
non-exclusive use, in common with others, of the Common Areas, and such use
shall be subject to the provisions of this Lease.
2.3. CONTROL OF COMMON AREAS. The Common Areas shall be subject to the
exclusive control and management of Landlord. Landlord shall have the right to
establish, modify and enforce the Rules with regard to the Common Areas, as the
Rules may be reasonably modified by Landlord from time to time upon written
notice to Tenant, and Tenant agrees to cooperate with Landlord in enforcing the
Rules. Landlord shall have the right to alter the Common Areas and to construct
additions to or additional buildings in the Project resulting in a diminution of
Common Areas. Landlord shall have the right to construct and operate lighting
and signs on all the Common Areas and improvements, to police the same, to
change the area and location of parking areas and other common facilities, to
restrict parking by Tenant, its agents and employees, to close temporarily or
permanently the parking areas or facilities, and to perform other acts in and to
the areas and improvements as Landlord may deem advisable in its sole
discretion, provided such actions do not materially interfere with Tenant's
access to or use of the Premises.
2.4. LEASE TERM. The initial term of this Lease shall be for the Lease
Term, unless terminated sooner pursuant to any of the provisions hereof. The
Lease Term and Tenant's obligation to pay Rent shall commence on the
Commencement Date.
2.5. LEASE YEAR. The first Lease Year shall begin on the Commencement
Date and shall end on December 31, 1996. The second Lease Year shall begin on
January 1, 1997, and each Lease Year thereafter during the Lease Term shall
consist of a full calendar year, provided that if the Lease Term expires on a
date other than December 31, the period of time from January 1 of that calendar
year until such expiration date shall be construed as a Lease Year.
2.6. ADDITIONAL PREMISES. The Additional Premises Leases are identified
on the rent roll with respect to the Additional Premises attached hereto as
Exhibit "D". Landlord covenants and agrees with Tenant that provided no Default
or Event of Default shall have occurred, Landlord will not without the express
written consent of Tenant extend the term of any Additional Premises Lease
beyond that set forth on Exhibit "D" attached hereto. Tenant covenants and
agree with Landlord upon delivery by Landlord to Tenant of written notice that
all or any portion of the Additional Premises are vacant and no longer occupied
by any tenant under any Additional Premises Leases or such tenant's assignees,
subtenants or licensees, the portion of the Additional Premises identified in
such notice shall, without further action of Landlord or Tenant, automatically
become part of and be added to the Premises as of the date of such notice
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(the "EFFECTIVE DATE"). On each applicable Effective Date, Tenant's Share and
Base Rent shall increase based on the number of square feet for those portions
of the Additional Premises identified in such notice.
ARTICLE 3.
RENT AND OTHER CHARGES
3.1. BASE RENT.
Tenant shall pay as base rent (the "BASE RENT") the amount set forth in
Exhibit "B" attached hereto multiplied by the amount of square feet contained in
the Premises, as the same may be increased in accordance with the provisions of
Section 2.6 hereof. Base Rent shall be payable in advance in equal monthly
installments commencing on the Commencement Date and continuing thereafter on
the first day of each subsequent calendar month. Base Rent for any period
during the Lease Term which is less than one (1) month shall be a pro-rata
portion of the applicable monthly installment.
3.2. PAYMENT OF IMPOSITIONS.
(a) Tenant shall deposit with Landlord monthly (as a deposit and not a
payment) commencing on the Commencement Date and continuing thereafter on the
first day of each subsequent calendar month an amount equal to Tenant's Share of
one-twelfth of the annual Impositions estimated by Landlord and communicated by
Landlord to Tenant in writing so that Landlord shall have sufficient funds to
pay the Impositions on the first day of the month preceding the month in which
they become due. To the extent within Tenant's control, Tenant further agrees
to cause all bills, statements or other documents relating to Impositions to be
sent or mailed directly to Landlord. Provided Tenant has deposited sufficient
funds with Landlord pursuant to this Section 3.2(a), Landlord shall pay, when
due, such Impositions as may be due out of the funds so deposited with Landlord.
If at any time and for any reason the funds deposited with Landlord are or will
be insufficient to pay such Impositions as may then or subsequently be due,
Landlord shall notify Tenant and Tenant shall deposit an amount equal to such
deficiency with Landlord within seven (7) days after such notice.
Notwithstanding the foregoing, nothing contained herein shall cause Landlord to
be obligated to pay any amounts in excess of the amount of funds deposited with
Landlord pursuant to this Section 3.2(a). If amounts collected by Landlord
under this Section 3.2(a) exceed amounts necessary in order to pay Impositions,
Landlord shall retain such excess payments and Tenant shall receive a credit for
such excess amount toward the next payments due for such Impositions. Should
Tenant fail to deposit with Landlord sums sufficient to pay such Impositions in
full at least thirty (30) days before delinquency thereof Landlord may, at
Landlord's election, but without any obligation so to do, advance any amounts
required to make up the deficiency, which advances, if any, shall be treated as
Additional Rent. Upon expiration of the Lease Term, the sums held by Landlord
under this Section 3.2(a) shall be allocated between Landlord and Tenant as of
such expiration date based upon the periods with respect to which such sums are
due and payable, and Landlord shall be entitled to retain such portion as
represents amounts due
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and payable up through such expiration date, and the balance shall be returned
to Tenant. In the event this Lease is terminated due to an Event of Default, all
sums held by Landlord under this Section 3.2(a) shall be retained by Landlord.
(b) Subject to the following conditions, Tenant shall have the right, at
Tenant's sole cost and expense, to contest or object in good faith to any
Imposition, but such right shall not be deemed or construed in any way as
relieving, modifying or extending Tenant's covenant to pay any such Imposition
at the time and in the manner provided in this Section 3.2: (i) Landlord has
given Tenant prior written notice that Landlord does not intend to contest or
object to such Imposition; (ii) Tenant has given prior written notice to
Landlord of Tenant's intent so to contest or object to an Imposition; (iii)
Tenant shall demonstrate to Landlord's satisfaction that the legal proceedings
shall operate conclusively to prevent the sale of the Project, or any part
thereof; (iv) if Tenant has not deposited with Landlord all amounts required to
be deposited under Section 3.2(a) hereof, Tenant shall furnish a good and
sufficient bond or surety in the amount of such Impositions, or other evidence
reasonably satisfactory to Landlord of Tenant's ability to pay such Impositions,
which are being contested plus any interest and penalty which may be imposed
thereon and which could become a lien against the Project or any part thereof
and otherwise in an amount and form acceptable to Landlord; (v) no Default or
Event of Default has occurred; and (vi) Tenant covenants and agrees that any
increase in Impositions resulting from such contest or objection shall be paid
by Tenant upon demand.
(c) Landlord shall use all reasonable efforts to obtain the benefit of the
provisions of any statute or ordinance permitting any real property assessment
for public betterments or improvements to be paid over the maximum period of
time allowed by the relevant taxing authority.
3.3. UTILITIES; OPERATING EXPENSES.
(a) Tenant shall pay or cause to be paid when due, all charges, fees,
assessments and related costs for public utility services (including, without
limitation, gas, water, sewer, electricity, light, power, telephone, cable and
other communication services and refuse and garbage collection) used, rendered
or supplied in connection with the Premises throughout the Lease Term.
(b) Tenant shall deposit with Landlord monthly (as a deposit and not as a
payment) an amount equal to Tenant's Share of one-twelfth of the annual
Operating Expenses estimated by Landlord and communicated by Landlord to Tenant
in writing so that Landlord will have sufficient funds to pay Operating Expenses
on the first day of the month preceding the month in which they become due.
Provided Tenant has deposited sufficient funds with Landlord pursuant to this
Section 3.3(b), Landlord shall pay, when due, such Operating Expenses as may be
due out of the funds so deposited with Landlord. If at any time and for any
reason the funds deposited with Landlord are or will be insufficient to pay such
amounts as may then or subsequently be due, Landlord shall notify Tenant and
Tenant shall within seven (7) days after such notice deposit an amount
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equal to such deficiency with Landlord. Notwithstanding the foregoing, nothing
contained herein shall cause Landlord to be obligated to pay any amounts in
excess of the amount of funds deposited with Landlord pursuant to this Section
3.3(b). If amounts collected by Landlord under this Section 3.3(b) exceed
amounts necessary in order to pay Operating Expenses, Landlord shall retain such
excess payments and Tenant shall receive a credit for such excess amount toward
the next payments due for such Operating Expenses. Should Tenant fail to
deposit with Landlord sums sufficient to pay such Operating Expenses in full at
least thirty (30) days before delinquency thereof Landlord may, at Landlord's
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances if any, shall be treated as Additional
Rent. Upon expiration of the Lease Term, the sums held by Landlord under this
Section 3.3(b) shall be allocated between Landlord and Tenant as of such
expiration date based upon the periods with respect to which such sums are
incurred, and Landlord shall be entitled to retain such portion as represents
amounts incurred through such expiration date, and the balance shall be returned
to Tenant. In the event this Lease is terminated due to an Event of Default,
all sums held by Landlord under this Section 3.3(b) shall be retained by
Landlord.
(c) Within one hundred twenty (120) days after the end of each Lease Year,
Landlord shall provide Tenant with a statement of the actual Operating Expenses
for the preceding Lease Year, and if Tenant has overpaid or underpaid its share
of the actual Operating Expenses for the preceding Lease Year, Tenant or
Landlord shall pay the other, as appropriate, the amount of such overpayment or
underpayment, as the case may be, within thirty (30) days after the statement of
actual Operating Expenses is delivered.
(d) After Landlord has provided Tenant with a statement of the actual
Operating Expenses for any Lease Year, Tenant, at its expense, shall have the
right for a period of ninety (90) days after receipt of such statement, to audit
Landlord's books and records relating to the actual Operating Expenses for the
period covered by such statement. If Tenant fails to exercise its audits rights
within said ninety (90) day period, Landlord's statement of actual Operating
Expenses shall be deemed binding on Tenant. If any audit shall prove that Tenant
has overpaid in share of Operating Expenses, the amount of such overpayment
shall be applied as a credit against the next installment(s) of Additional Rent
due hereunder or refunded if Landlord is holding any such overpayment at the
expiration of the Lease Term. While Tenant shall bear the costs of any audit
conducted for or by it, Landlord hereby agrees to reimburse Tenant for the
reasonable cost of such audit with respect to any Lease Year if said audit shall
prove that actual Operating Expenses for the period of time covered by such
audit had been overstated by five percent (5%) or more. Tenant may not request
such an audit more than once for any particular Lease Year (or a portion
thereof).
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3.4. LOCATION OF PAYMENTS. Tenant shall for the entire Lease Term pay
Rent to Landlord as herein provided at the address for Landlord set forth in
Section 13.8 hereof or at such place as Landlord may from time to time in
writing designate.
3.5. NO SETOFF. All amounts due by Tenant to Landlord hereunder,
including Base Rent and Additional Rent, shall be paid without any setoff,
counterclaim or deduction whatsoever or any prior demand. The covenant to pay
Rent, whether Base Rent or Additional Rent, is hereby declared to be an
independent covenant on the part of Tenant to be kept and performed and no act
or circumstance whatsoever shall release, relieve or otherwise excuse Tenant of
the obligation to pay Rent.
ARTICLE 4.
ALTERATIONS AND ADDITIONS
4.1. ALTERATIONS.
(a) Tenant will not make or allow to be made any alterations, additions or
deletions in or to the Premises without the prior written consent of Landlord,
except as set forth in Section 4.1(b) hereof. Such alterations, physical
additions, or improvements shall become part of the Premises and the property of
the Landlord. It is the responsibility of Tenant to restore the Premises to the
condition that existed when Tenant first took possession (ordinary wear and tear
excepted), as such condition may have been altered by Landlord or Tenant with
the prior express written approval of Landlord, if Landlord so requests.
(b) Tenant may, at its sole cost and expense, make alterations or additions
to the Premises without Landlord's prior consent, provided (i) such alterations
or additions do not affect the structural integrity of the Improvements
comprising the Premises, adversely affect any of the mechanical or electrical
systems of the Improvements comprising the Premises, or alter in any way the
intended or current use of the Premises; (ii) the cost of any such alteration or
addition does not exceed $50,000 in any one instance or $150,000 in any single
Lease Year; (iii) such alterations or additions are performed by duly licensed
and qualified contractors in accordance with all Legal Requirements and in a
good and workmanlike manner; (iv) such alterations or additions are completed
prior to the expiration of the Lease Term; (v) such alterations or improvements
do not reduce the value of the Project or the Premises; (vi) such alterations
and improvements are made pursuant to plans and specifications delivered to
Landlord in advance; (vii) no Default or Event of Default has occurred and is
continuing, and (viii) no such alteration or addition is made or commenced
within the last twelve (12) months of the Lease Term.
4.2. CONSTRUCTION LIENS. Tenant shall pay when due, and indemnify,
protect, defend and hold Landlord harmless from, all claims for labor or
materials furnished or alleged to have been furnished to Tenant for use in the
Premises, which claims are or may be secured by any lien against the Premises or
any interest therein in accordance with applicable law. Tenant shall not permit
any liens to be filed against the Premises or any interest therein and shall
immediately
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obtain a release from any lien so filed or remove the same by bond in form and
content satisfactory to Landlord. Nothing in the Lease shall be construed in
any way as constituting the consent or request of Landlord to any contractor,
subcontractor, laborer, or materialman for the performance of any labor or the
furnishing of any materials for any alteration, addition, improvement or repair
to the Premises, nor as giving Tenant any right, power or authority to contract
for or permit the rendering of services or the furnishing of materials that
would give rise to the filing of a lien against the Premises.
4.3. REMOVAL OF IMPROVEMENTS. All alterations, additions and other
improvements by Tenant shall become the property of Landlord and shall not be
removed from the Premises, unless request is made by Landlord to Tenant to
remove those alterations, additions and other improvements which were made
without Landlord's approval where such approval was required under this Lease.
All moveable trade fixtures, furniture, furnishings and signs installed in the
Premises by Tenant and paid for by Tenant, shall remain the property of Tenant
and may be removed upon the expiration of the term of this Lease; provided that
any of such items as are affixed to the Premises and require severance may be
removed only if Tenant repairs any damage caused by such removal and that Tenant
shall otherwise comply with all of the terms, conditions and covenants to be
performed by Tenant under this Lease with respect to such removal. If Tenant
fails to remove such items from the Premises by the expiration of the Lease Term
or earlier termination of this Lease, all such trade fixtures, furniture,
furnishings and signs shall become the property of Landlord, unless Landlord
elects to require their removal, in which case Tenant shall, at its sole cost
and expense, promptly remove the same and restore the Premises to its condition
on the date of this Lease. The covenants contained in this Section shall
survive the expiration Lease Term or earlier termination hereof.
4.4. SIGNS. Tenant covenants and agrees that it shall not, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed, paint, erect or install any signs, lettering or placards or
make any additions, alterations or changes to the exterior of the Premises.
Upon expiration of the Lease Term or the earlier termination of the Lease,
Tenant shall at the request of Landlord remove such signs and shall promptly
restore the surfaces to which the signs were affixed to their former condition.
The obligation set forth in the preceding sentence shall survive the expiration
of the Lease Term or the earlier termination hereof.
ARTICLE 5.
REPAIRS AND MAINTENANCE
5.1. TENANT'S OBLIGATIONS. Tenant is solely responsible for causing the
Premises to be kept in a clean, safe, sanitary and first class condition and
state of repair in accordance with all Legal Requirements. In this regard and
by way of example, Tenant shall keep the exterior of the Premises and the
foundations, roof, and structural portions of the walls and roofs of the
Improvements comprising the Premises in good condition and repair; Tenant shall
also keep the Premises and every part thereof and any fixtures, facilities or
equipment contained therein, in good condition and repair, including, but not
limited to, exterior doors, window frames and all portions of the store front
area(s), columns, nonstructural walls, and partitions, the heating, air-
conditioning, ventilating, electrical, lighting, plumbing and sewer systems, and
shall make
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any replacements thereof and of all broken and cracked glass which may become
necessary during the Lease Term. Tenant shall provide for all scheduled
servicing of the Premises and maintain necessary maintenance contracts to assure
proper maintenance of the Premises. As used in this Section, the term "REPAIRS"
shall include replacements and other improvements as are necessary to maintain
the Premises as is required under this Lease. If Landlord is required to make
repairs by reason of Tenant's acts or omissions or those of Tenant's employees,
agents, invitees, licensees or contractors, Landlord shall have the right, but
shall not be obligated, to make such repairs or replacements on behalf of and
for the account of Tenant. In such event, such work shall be paid for in full
by Tenant as Additional Rent.
5.2. SURRENDER. On the last day of the Lease Term, or on any sooner
termination of this Lease, Tenant shall surrender the Premises in the same
condition as the Premises existed on the date which Tenant first took possession
thereof, ordinary wear and tear and damage by an Insured Casualty excepted, with
such additions, replacements, betterments, alterations and improvements thereto
as permitted or required hereunder, broom clean, and shall surrender all keys,
to Landlord in the condition required to be maintained by Tenant under this
Lease.
5.3. RIGHT OF ENTRY. Landlord and its authorized representatives shall
have the right to enter the Premises (a) upon prior notice to Tenant at all
reasonable times to inspect the Project or to show the Premises to prospective
purchasers or tenants, provided any such entry is done in a manner such as to
avoid interference with the operation of the Premises, and at the request of
Tenant occurs in the presence of a representative of Tenant and, (b) in the
event of the existence of an Event of Default hereunder, to make repairs,
alterations, improvements or additions as Landlord may reasonably deem
necessary, including those to be performed by Tenant, without the same
constituting an eviction of Tenant in whole or in part, and rent shall not abate
as a result of such entry. Nothing herein shall imply any duty upon the part of
Landlord to do any work which the Tenant may be required to perform under this
Lease, and the performance thereof by Landlord shall not constitute a waiver of
Tenant's default in failing to perform it. If Tenant is not present to permit
entry into the Premises, Landlord may, in case of emergency, enter by master
key, or may forcibly enter, without rendering Landlord liable therefor. During
the twelve (12) month period prior to the expiration of the Lease Term, Landlord
may place upon the Premises "For Rent" signs and notices.
ARTICLE 6.
HAZARDOUS SUBSTANCES
6.1. NO HAZARDOUS SUBSTANCES. Tenant shall not bring into or permit the
existence of any Hazardous Substance on the Premises other than as permitted by
applicable Environmental Regulations. If Tenant discovers the presence of any
Hazardous Substance on or in the Premises which is in violation of any
Environmental Regulation, Tenant shall promptly give Landlord notice thereof.
If during Tenant's occupancy or at any time throughout the Lease Term the
existence of a Hazardous Substance is caused or permitted by Tenant, (a) Tenant
shall remove such Hazardous Substance and dispose of it as required by any and
all applicable Environmental Regulations, or (b) Landlord, if it is advised to
remove such Hazardous Substance itself to protect or minimize against any
liability to Landlord as a result of the presence of any Hazardous Substance by
no less than five (5) days' notice to Tenant, may elect to remove any Hazardous
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Substance and dispose of it as required by any Environmental Regulation, in
which case Tenant shall pay the entire cost of such disposal within ten (10)
days after receipt of a statement for such cost by Landlord, such amount to be
treated as Additional Rent. If any Governmental Authority shall require any
remedial action or other response with respect to the Premises as the result of
any Hazardous Substance brought into or permitted by Tenant on or in the
Premises, Tenant shall notify Landlord of such action or response and shall,
with the prior written approval of Landlord, be responsible for satisfying the
requirements of the applicable Governmental Authority.
6.2. TENANT INDEMNITY. Tenant agrees to indemnify, defend, protect and
hold Landlord harmless from any and all claims, causes of action, damages,
penalties, costs and expenses (including attorneys' fees, consultant fees and
related expenses) which may be asserted against or incurred by Landlord
resulting from the failure by Tenant to fulfill its obligations under Section
6.1 hereof. Tenant's duty to indemnify, defend, protect and hold harmless
includes, but is not limited to, proceedings or actions commenced by any
Governmental Authority.
6.3. LANDLORD INDEMNITY. Provided no Default shall have occurred,
Landlord agrees to indemnify, defend, protect and hold Tenant harmless from any
and all claims, causes of action, damages, penalties, costs and expenses
(including attorneys' fees, consultant fees and related expenses) which may be
asserted against or incurred by Tenant resulting from the failure by Landlord to
comply with any Environmental Regulation for which Landlord is otherwise
responsible under this Lease or as a matter of law. Landlord's duty to
indemnify, defend, protect and hold harmless includes, but is not limited to,
proceedings or actions commenced by any Governmental Authority.
6.4. SURVIVAL. The foregoing covenants and indemnifications shall be
deemed continuing covenants and indemnifications for the benefit of Landlord,
Tenant and their respective successors and assigns and shall survive the
expiration of the Lease Term or earlier termination of this Lease.
ARTICLE 7.
COVENANTS OF TENANT
7.1. USE OF PREMISES. Tenant covenants and agrees that from and after the
Commencement Date, use and occupy the Premises solely for the purpose of the
Permitted Use and for no other purpose.
7.2. CONTINUING COVENANTS. Tenant covenants and agrees with Landlord to:
(a) [Intentionally Omitted]
(b) maintain the Premises in a good condition
and state of repair;
(c) promptly make all of repairs, renewals, replacements and
additions, to the Premises which may be necessary, required
under any Legal Requirement
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or otherwise required under the terms of this Lease;
(d) not commit or suffer waste with respect to the Premises;
(e) [Intentionally Omitted]
(f) not remove, demolish or in any respect alter any of the Improvements
comprising the Premises, provided that Tenant may make alterations
in accordance with Section 4.1 hereof;
(g) subject to any Legal Requirement, not make, install or permit to be
made or installed, any alterations or additions to the Premises if
doing so will violate the terms and conditions of this Lease unless
approved by Landlord in writing;
(h) not make, suffer or permit any nuisance to exist on the Premises;
(i) keep the Premises neat and clean at all times and to keep any refuse
in proper containers out of sight until the same is removed;
(j) neither do nor suffer anything to be done or kept in or about the
Premises which contravenes Landlord's insurance policies or
increases the premiums therefor;
(k) adequately heat and cool the Premises;
(l) promptly comply with, or cause to be complied with, and conform to
all Legal Requirements; and
(m) to comply with all of the Rules.
ARTICLE 8.
INSURANCE AND INDEMNITIES
8.1. INSURANCE COVERAGES.
(a) Landlord shall obtain beginning on the Commencement Date and
shall maintain throughout the Lease Term, as an Operating Expense, the following
insurance coverages:
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(i) A policy of public liability insurance on the Common Areas,
providing such coverages and in such amounts as Landlord shall from
time to time determine.
(ii) A policy providing commercial property insurance on the
Common Areas and such other portions of the Project as Landlord shall
determine, providing such coverages and in such amounts as Landlord
shall from time to time determine.
(b) Tenant shall obtain, at Tenant's expense, beginning on the
Commencement Date and shall maintain through the Lease Term, the following
insurance coverages:
(i) A policy of commercial general liability insurance (including
"Insurance Service Office" (ISO) forms and endorsements or their
equivalent) naming Landlord, Tenant and any other party designated by
Landlord as an additional insured, to insure against injury to
property, person or loss of life arising out of the ownership, use,
occupancy or maintenance of the Premises with limits of general
liability not less than $10,000,000 for death and/or bodily injury,
personal injury, advertising injury and property damage. The policy
shall contain supplemental endorsements covering contractual
liability as provided in an ISO liability policy under the definition
of insured contract.
(ii) A policy providing commercial property insurance containing
the insuring agreement "Cause of Loss-Special Form" or its
equivalent, together with such endorsements as may be deemed
advisable by Landlord to insure the Improvements comprising the
Premises, Tenant's leasehold improvements, merchandise, trade
fixtures, furnishings, equipment and personal property, and naming
Landlord as loss payee. Such policy shall provide coverage in an
amount not less than the full replacement cost of the Improvements
comprising the Premises. An "Agreed Amount Clause" waiving the
coinsurance clause must be included, as well as flood and earthquake
coverage, to the extent available, at limits equal to the maximum
foreseeable loss at the location of the Premises. Coverage must also
include an "Ordinances or Law Regulations" insuring agreement
governing the construction, use or repair of property. Such coverage
must include the expense of tearing down any property, including the
cost of removing its debris. Increased cost of construction coverage
must also be included.
(iii) A policy of workers' compensation insurance must be
provided that insures the benefits required by the State law and
includes coverage B Employer's Liability. The Employer's liability
limits must be:
Bodily Injury By Accident -- $1,000,000 Each Accident
Bodily Injury By Disease -- $1,000,000 Policy Limit
Bodily Injury By Disease -- $1,000,000 Each Employee
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Landlord does not, by requiring such insurance or by any other act or
event, assume or undertake liability for any work-related injuries or
death to Tenant or Tenant's employees.
(iv) If Tenant commits or permits any activity or the placing or
operation of any equipment on or about the Premises creating unusual
hazards, Tenant shall promptly upon notice or demand from Landlord,
procure and maintain in force, during such activity or operation,
insurance sufficient to cover the risks created thereby. Landlord's
demand for unusual hazard insurance shall not constitute a waiver of
any right Landlord may have to demand the removal or cessation of
such activity or operation.
(v) A policy of business interruption insurance with an "Extra
Expense" insuring agreement naming Landlord and any other party
designated by Landlord as an additional insured providing coverage of
not less than twelve (12) months of Rent and other business income.
Such policy must include an endorsement providing an extended period
of indemnity for 180 days.
(vi) All other insurance, if any, customarily maintained by
businesses of like type, or required by any Legal Requirement to be
carried or maintained by Tenant, or as otherwise may be required by
Landlord, including but not limited to boiler and machinery coverage,
automobile and garagekeepers liability coverage, and service
interruption coverage.
8.2. INSURANCE POLICIES. Insurance required under Section 8.1 shall be
written by companies duly qualified to do business in the State and shall be
satisfactory in all respects to Landlord and the holder of any mortgage against
the Project. The companies providing such insurance shall deliver to Tenant and
Landlord copies of such policies or certificates evidencing the existence and
amount of such insurance with loss payable clauses satisfactory to Landlord,
including, specifically, the holder of the first mortgage on the Project as a
loss payee. No such policy shall be cancelable or subject to reduction of
coverage or modification except after thirty (30) days prior written notice to
Landlord and such other persons designated by Landlord. At least ten (10) days
prior to the expiration of such policies, Landlord may order such insurance and
charge the cost to Tenant as Additional Rent. Tenant shall not do or permit
anything to be done which will invalidate the insurance policies furnished
pursuant to Section 8.1 or otherwise by Landlord and shall comply with all
requirements imposed by such insurers, unless such compliance is expressly
waived in writing by Landlord. Landlord may from time to time reasonably
require that the policy limits of any or all such insurance be increased to
reflect the effects of inflation and changes in normal commercial insurance
practices.
8.3. EXEMPTION OF LANDLORD FROM LIABILITY. Tenant hereby agrees that
Landlord shall not be liable and Tenant hereby waives all claims against
Landlord for injury to Tenant's business or any loss of income or other
consequential damages or for damage to the inventory, fixtures, furnishings,
improvements or other property of Tenant, Tenant's employees, invitees,
customers, sublessees, agents, occupants, contractors, or injury to the person
of Tenant, Tenant's employees, agents, contractors, occupants, invitees,
customers, sublessees, or any other person in
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or about the Premises, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air-conditioning or lighting fixtures, or from any other cause
whatsoever, whether said damage or injury results from conditions arising upon
the Premises, or from other sources or places, and regardless of whether the
cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant. Landlord shall not be liable to Tenant for any damages
arising from any act or neglect of any other tenant of the Project.
8.4. INDEMNIFICATION.
(a) Tenant shall indemnify, defend, protect and hold harmless
Landlord from and against any and all claims arising from Tenant's use of
the Premises, or from the conduct of Tenant's business or from any
activity, work or things done, permitted or suffered by Tenant in or about
the Premises or elsewhere, and shall further indemnify, defend, protect and
hold harmless Landlord from and against any and all claims arising from any
breach or default in the performance of any obligation on Tenant's part to
be performed under the terms of this Lease, or arising from any negligence
of the Tenant, or any of Tenant's sublessees, agents, customers, invitees,
contractors, occupants, or employees, and from and against all costs,
attorneys' fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon; and in case any
action or proceeding be brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense by counsel satisfactory to Landlord. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord. The provisions of this Section shall survive expiration of the
Lease Term or the earlier termination thereof.
(b) Provided no Event of Default has occurred, Landlord shall
indemnify, defend, protect and hold harmless Tenant from and against any
and all claims arising from any breach or default in the performance of any
obligation on Landlord's part to be performed under the terms of this
Lease, or arising from any negligence of the Landlord, or any of Landlord's
tenants (other than Tenant), agents, customers, invitees, contractors,
occupants, or employees, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in the defense of any such claim or any
action or proceeding brought thereon. The provisions of this Section shall
survive expiration of the Lease Term or the earlier termination thereof.
8.5. MUTUAL WAIVER OF SUBROGATION. Nothing in this Lease shall be
construed so as to authorize or permit any insurer of Landlord or Tenant to be
subrogated to any right of Landlord or Tenant against the other party arising
under this Lease. Landlord and Tenant each hereby release the other to the
extent of any loss required to be insured against by either of the parties under
the terms of this Lease, whether or not such insurance has actually been
secured, and to the extent of their respective insurance coverage actually
received for any loss or damage caused by any such casualty, even if such
incidents shall be brought about by the fault or negligence of either party or
persons for whose acts or negligence the other party is responsible.
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Landlord and Tenant shall, to the extent permitted by their respective insurers,
each obtain appropriate waivers of subrogation from their respective insurance
carriers giving effect to this Section.
8.6. INSURANCE PREMIUM DEPOSIT. In the event the premiums with respect to
the insurance coverages set forth in Section 8.1(b) hereof are not paid annually
in advance, or in the case of a Default or an Event of Default hereunder,
Tenant, upon Landlord's request, shall deposit in advance with Landlord (as a
deposit and not a payment) an amount equal to one-twelfth of the aggregate
annual insurance premiums (as estimated by Landlord and communicated by Landlord
to Tenant in writing) on all policies of insurance required by Section 8.1(b)
hereof on the first day of each month. Upon Landlord's request, Tenant shall
cause all bills, statements or other documents relating to the foregoing
insurance premiums to be sent or mailed directly to Landlord. Upon receipt of
such bills, statements or other documents, and provided Tenant has deposited
sufficient funds with Landlord pursuant to this Section, Landlord shall pay,
when due, such insurance premiums as may be due thereunder out of the funds so
deposited with Landlord. If at any time and for any reason the funds deposited
with Landlord are or will be insufficient to pay such amounts as may then or
subsequently be due, Landlord shall notify Tenant and Tenant shall within seven
(7) days following such notice deposit an amount equal to such deficiency with
Landlord. Notwithstanding the foregoing, nothing contained herein shall cause
Landlord to be obligated to pay any amounts in excess of the amount of funds
deposited with Landlord pursuant to this Section. Landlord may impound or
reserve for future payment of insurance premiums such portion of such payments
as Landlord in its absolute discretion may deem proper. Should Tenant fail to
deposit with Landlord sums sufficient to pay in full such insurance premiums at
least thirty (30) days before delinquency thereof, Landlord may, at Landlord's
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances, if any, shall be treated as Additional
Rent. Upon expiration of the Lease Term, and provided there exists at such time
no Event of Default or Default, all sums held by Landlord under this Section 8.6
shall be remitted to Tenant.
ARTICLE 9.
DAMAGE OR DESTRUCTION
In the event (a) the Improvements are damaged by fire, explosion or other
casualty insured under the fire and extended coverage insurance policy required
hereunder (an "INSURED CASUALTY") to the extent of thirty percent (30%) or more
of the insurable value thereof immediately preceding the casualty, (b) the
Improvements are damaged by a casualty or occurrence other than an Insured
Casualty, (c) such damage occurs at anytime within the last twelve (12) months
of the Lease Term, or (d) the Premises or any portion thereof is damaged by
fire, explosion or other casualty and the Premises cannot be repaired, rebuilt
or restored to substantially the same condition, under any Legal Requirement or
other governmental order or under any other agreement to which the Premises is
subject (a "PROHIBITED CASUALTY"), then in such event Landlord may terminate
this Lease by giving Tenant written notice of termination within thirty (30)
days after the happening of the event causing the damage. In the event the
damage is not extensive enough to give rise to Landlord's option to terminate
this Lease, a Prohibited Casualty has not occurred, or Landlord does not elect
to terminate this Lease,
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Landlord shall promptly repair and replace the Improvements comprising the
Premises existing immediately preceding such fire, explosion or other casualty.
Upon completion of such repairs and replacements by Landlord, Tenant shall
promptly repair or replace all portions of the Premises not repaired or replaced
by Landlord to the condition existing immediately preceding such fire, explosion
or other casualty. All work by Tenant shall comply with the requirements and
limitations imposed by Landlord. During any period of reconstruction or repair
of the Premises, Tenant shall operate its business in the Premises to the extent
practicable. Base Rent shall be abated during the period of such repair and
restoration to the extent the Premises is not tenantable.
ARTICLE 10.
CONDEMNATION
10.1. TAKING OF WHOLE. In the event (a) the whole of the Premises shall
be taken or condemned for a public or quasi-public use or purpose by a competent
authority or sold by Landlord in lieu thereof, (b) such a portion of the
Premises shall be taken, condemned or sold in lieu thereof so that the balance
cannot be used for the same purpose and with substantially the same utility to
Tenant as immediately prior to such taking, or (c) the Premises or any portion
thereof shall be taken or condemned for a public or quasi-public use or purpose
by a competent authority or sold by Landlord in lieu thereof and Landlord is
unable to repair, rebuild or restore the same under the terms of any agreement
to which it is a party, or under any Legal Requirement or other governmental
order to which Landlord or the Premises is subject (a "PROHIBITED TAKING"), this
Lease shall terminate upon delivery of possession to the condemning authority or
its assignee, and any award, compensation or damage (the "AWARD") shall be paid
to and be the sole property of Landlord whether the Award shall be made as
compensation for diminution of the value of the leasehold estate or the fee of
the Land or otherwise, and Tenant hereby assigns to Landlord all of Tenant's
right, title and interest in and to any and all of the Award. Tenant shall have
no claim against Landlord by reason of such taking or termination and, subject
to the provisions of Section 10.3 hereof, shall not have any claim or right to
any portion of the Award to be paid to Landlord. Tenant shall continue to pay
Rent and other charges hereunder until the Lease is terminated.
10.2. PARTIAL TAKING. In the event (a) only a part of the Premises is
taken or condemned but the Premises or the part remaining can still be used for
the same purpose and with substantially the same utility to Tenant as
immediately prior to such taking, or (b) a Prohibited Taking has not occurred,
this Lease shall not terminate and Landlord shall repair and restore the
remaining Improvements comprising the Premises provided the cost and expense of
such repair and restoration does not exceed the amount of the Award. If the
cost of such repair and restoration exceeds the amount of the Award, Landlord
may terminate this Lease by giving Tenant written notice of termination to
Tenant within thirty (30) days of the delivery of possession to the condemning
authority. If Landlord is obligated to repair and restore the remaining
Improvements comprising the Premises, as herein provided, there shall be no
abatement or reduction in any Rent or other charges payable by Tenant under this
Lease because of such taking or condemnation.
10.3. TENANT'S AWARD. Subject to the rights of Landlord's lenders,
termination of this
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Lease because of condemnation shall be without prejudice to the rights of either
Landlord or Tenant to recover from the condemning authority compensation and
damages for the injury and loss sustained by them as a result of the taking, and
Tenant shall have the right to make a claim against the condemning authority for
the unamortized value of Tenant's leasehold improvements; interruption or
dislocation of business in the Premises; loss of good will and for moving and
remodeling expenses. Tenant shall not have the right to make a claim for
diminution in value of Tenant's leasehold estate. If this Lease is terminated
as a result of a condemnation, Tenant shall, subject to the rights of Landlord's
lenders, make a separate claim to the condemning authority for the above-
mentioned items. If the condemning authority refuses to allocate the award
between Landlord's and Tenant's claims for damages and instead grants a single,
lump sum award to Landlord, Landlord and Tenant shall use reasonable, good-faith
efforts to determine that portion of the award which is attributable to Tenant's
leasehold improvements (but only the extent such leasehold improvements were
paid for by Tenant).
ARTICLE 11.
DEFAULTS; REMEDIES
11.1. DEFAULTS. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant and each such
event shall be referred to herein as an "EVENT OF DEFAULT":
(a) The failure of Tenant to make any payment of Rent or any other
payment required to be made by Tenant under this Lease, within ten (10)
days after the date due.
(b) The failure by Tenant to observe or perform any of the terms,
covenants or conditions of this Lease to be observed or performed by Tenant
(other than those described in Sections 11.1(a), (c) or (d) hereof) where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant (or without notice in case of
emergency or a hazardous condition or in case any fine, penalty, interest
or cost may otherwise be imposed or incurred); provided, however, that if
the nature of such failure is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said thirty (30) day period
and thereafter diligently prosecutes such cure to completion, but in no
event shall the period to cure such failure exceed ninety (90) days.
(c) (i) The making by Tenant or any entity holding a controlling
interest in Tenant of any general assignment, or general arrangement for
the benefit of creditors; (ii) the filing by or against Tenant or any
entity holding a controlling interest in Tenant of a petition to have
Tenant or such controlling entity adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant or such controlling entity,
the same is dismissed within sixty (60) days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within sixty (60) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this
Lease or in the Premises, where such
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seizure is not discharged within sixty (60) days.
(d) An assignment shall occur in violation of Article 12 hereof.
(e) A default shall occur under that certain Guaranty of even date
herewith made by LaserMaster Technologies, Inc., a Minnesota corporation,
in favor of Landlord.
11.2. LANDLORD'S REMEDIES. Upon the occurrence of an Event of Default,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or equity, or elsewhere in this Lease, to which
Landlord may resort cumulatively or in the alternative:
(a) Landlord may, at Landlord's election, terminate this Lease upon
the delivery of written notice of such termination to Tenant. On the
delivery of such notice, all Tenant's rights in the Premises and the
Project, in all improvements located at the Premises, to revenues from the
Premises, and to amounts which may otherwise be due from Landlord to Tenant
under this Lease, shall terminate. Promptly after notice of termination,
Tenant shall surrender and vacate the Premises in a broom clean condition,
and Landlord may reenter and take possession of the Premises and eject all
parties in possession or eject some and not others or eject none.
Termination under this Subsection shall not relieve Tenant from the payment
of any sum then due to Landlord or from any claim for damages previously
accrued or then accruing against Tenant. Upon such termination, Landlord
shall also be entitled to recover from Tenant (i) unpaid Rent or such other
amounts which have been earned or are payable at the time of termination,
and (ii) as liquidated damages and not as a penalty, a sum of money equal
to the Rent and such other amounts and rental costs to be paid by Tenant to
Landlord for the remainder of the Lease Term, provided that, for purposes
of this Section 11.2(a)(ii), the remainder of the Lease Term shall be
deemed to be the earlier of the expiration of the Lease Term or five (5)
years from the date of written demand by Landlord for such liquidated
damages (the "ACCELERATED AMOUNT").
(b) Landlord may, at Landlord's election, terminate Tenant's right to
possession only, without terminating the Lease. Upon termination of
Tenant's right to possession without termination of the Lease, Tenant shall
surrender possession and vacate the Premises immediately and deliver
possession of the Premises to Landlord, and Tenant hereby grants to
Landlord the immediate right to enter into the Premises, remove Tenant's
signs and other evidences of tenancy, and take and hold possession of the
Premises with or without process of law, and to dispossess the others who
may be occupying or within the Premises, without being deemed in any manner
guilty of trespass, eviction, or forcible entry or detainer, without
incurring any liability for any damage resulting therefrom, without such
entry and possession terminating the Lease or releasing Tenant from
Tenant's obligation to pay Rent and to fulfill all other of Tenant's
obligations under this Lease for the full Lease Term. Landlord shall be
entitled to recover from Tenant (i) unpaid Rent or such other amounts which
have been earned or are payable at the time of termination, and (ii) as
liquidated damages and not as a penalty, the Accelerated Amount.
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(c) Landlord may, at Landlord's election, store Tenant's personal
property, if any, for the account and at the cost of Tenant.
(d) Whether or not Landlord elects to terminate the Lease, Landlord
may, but shall be under no obligation to, relet all or any part of the
Premises for such rent and upon such terms as shall be satisfactory to
Landlord (including the right to relet the Premises as a part of a larger
area, the right to change the character or use of the Premises and the
right to restrict prospective tenants to those whose business is compatible
with the nature and character of the Premises). For the purpose of such
reletting, Landlord may decorate or may make any repairs, changes,
alterations or additions in or to the Premises that may be necessary or
convenient. If the Lease is not terminated and if the Premises is not
relet, or if it is relet and a sufficient sum shall not be realized from
such reletting after paying all of the expenses of any such decorations,
repairs, changes, alterations and additions, the expenses of such reletting
and the collection of the rent accruing therefrom (including, but not
limited to, attorneys' fees and brokers' commissions), to satisfy the Rent
and other charges herein provided to be paid for remainder of the term of
this Lease, Tenant shall pay to Landlord promptly any deficiency, and
Tenant agrees that Landlord may file suit to recover and recover any sum
falling due under the terms of this Subsection from time to time.
(e) The term "RENTAL COSTS" as used in this Lease shall be deemed to
include, but shall not be limited by implication, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, alteration costs
and expenses of preparation of the Premises or parts thereof for reletting.
(f) For purposes of Sections 11.2(a) and (b) above, the present value
(the "PRESENT VALUE") of the Accelerated Amount shall be computed by
discounting the Accelerated Amount to the date of determination applying
the rate on the United States Treasury obligation having a maturity equal
to the earlier of the balance of the Lease Term or five (5) years from the
date of written demand by Landlord for the Accelerated Amount and having an
asking price closest to par, as quoted by the Federal Reserve Bank of New
York as published in the Federal Reserve Statistical Release H. 15 (519) on
the date of determination (or the closest preceding date on which such rate
is published), or any successor publication thereto. Landlord and Tenant
agree that in the event of the exercise by Landlord of its remedy under
Sections 11.2(a) or (b) hereof and the payment by Tenant of the Present
Value of the Accelerated Amount, the cost to Landlord will be difficult to
ascertain and that the Present Value of the Accelerated Amount constitutes
a reasonable estimate of such cost and is not a penalty. Accordingly, if
Tenant defaults, the parties agree that, except as may be otherwise
expressly set forth herein to the contrary, the Present Value of the
Accelerated Amount shall be the amount due from Tenant upon such default
and Landlord shall not be obligated to mitigate its cost below such amount.
Notwithstanding anything to the contrary contained herein, Tenant
acknowledges and agrees that if Tenant fails to pay to Landlord the Present
Value of the Accelerated Amount within sixty (60) days after notice of
termination, then Tenant shall forfeit any right to have the Accelerated
Amount discounted to Present Value pursuant to the provisions of this
Section 11.2(f).
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(g) No Accelerated Amount shall be due by Tenant by reason of an
Event of Default based solely on the provisions of Section 11.1(a) hereof
unless such Default has continued for at least thirty (30) days following
delivery of written notice to Tenant.
(h) In the event Landlord elects to terminate Tenant's right to
possession only, without terminating the Lease and without pursuing
recovery of the Accelerated Amount, Landlord shall use "commercially
reasonable efforts" to relet the Premises as the agent of Tenant and
receive the rent therefor; and in the event of such reletting, Tenant shall
pay Landlord the cost of reletting including brokerage and reasonable
attorneys' fees and commissions, renovating, repairing and altering the
Premises for a new tenant or tenants and any deficiency that may arise by
reason of such reletting, on demand; provided, however, the failure of
Landlord to relet the Premises shall not release or affect Tenant's
liability for Rent or for damages and such Rent and damages shall be paid
by Tenant on the dates specified herein. For purposes hereof, "commercially
reasonable efforts" shall mean that Landlord has listed the Premises as
available for leasing with a recognized brokerage firm and if Landlord has
so listed the Premises, Landlord shall not be required to take any other
action with respect to reletting the Premises nor shall Landlord be liable
in any manner for failure to relet the Premises. The Rent payable by Tenant
hereunder shall be reduced by the rent received by Landlord from such
reletting.
11.3. LANDLORD MAY PERFORM. Landlord shall have the right at any time,
after three (3) days notice to Tenant (or without notice with respect to matters
described in Article 8, and in case of emergency or a hazardous condition or in
case any fine, penalty, interest or cost may otherwise be imposed or incurred),
to make any payment or perform any act required of Tenant under any provision in
this Lease, and in exercising such right, to incur necessary and incidental
costs and expenses, including reasonable attorneys' fees. Nothing herein shall
obligate Landlord to make any payment or perform any act required of Tenant, and
this exercise of the right to so do shall not constitute a release of any
obligation or a waiver of any default. All payments made and all costs and
expenses incurred in connection with any exercise of such right shall be
reimbursed to Landlord by Tenant as Additional Rent.
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ARTICLE 12.
ASSIGNMENT AND SUBLETTING
12.1. ASSIGNMENT BY TENANT. Tenant shall not voluntarily or by operation
of law assign, transfer, mortgage, lease, sublet, grant, license or otherwise
transfer or encumber all or any part of Tenant's interest in this Lease or in
the Premises, or permit the use or occupancy of the Premises or any part thereof
by anyone other than Tenant, without Landlord's prior written consent, which
consent may be withheld or conditioned in Landlord's sole and absolute
discretion. Landlord agrees to not unreasonably withhold its consent in the
event Tenant requests to sublet under (a) or (b) below, provided that any
proceeds payable to Tenant by reason of such subletting in excess of Rent due
hereunder are paid to Landlord when due and provided that such entity agrees to
otherwise fulfill the obligations of Tenant hereunder with respect to that
portion of the Premises which are the subject of such subletting: (a) the entire
Premises to an entity which on the effective date of such subletting satisfies
the Financial Test (for purposes of applying the Financial Test such entity
shall be treated as the proposed subtenant), and (b) any portion of the Premises
which is architecturally divisible from the balance of the Premises, provided
that the aggregate portion of the Premises permitted to be sublet under this
subsection 12.1(b) does not exceed twenty percent (20%) of the square footage of
the Premises at any time. Any attempted assignment, transfer, mortgage, use,
lease, occupancy, encumbrance or subletting without such consent shall be void
and shall constitute an Event of Default. In the event that Landlord furnishes
such consent, Tenant shall pay all costs incurred by Landlord in connection with
such consent, including attorney's fees.
12.2. [Intentionally Omitted]
12.3. ASSIGNMENT DUE TO BANKRUPTCY.
(a) In the event a petition is filed by or against Tenant under the
Bankruptcy Code, Tenant, as debtor and debtor in possession, and any
trustee who may be appointed, agree to adequately protect Landlord as
follows:
(i) to pay monthly in advance on the first day of each month
as reasonable compensation for use and occupancy of the
Premises an amount equal to all Rent due pursuant to this
Lease; and
(ii) to perform each and every obligation of Tenant under this
Lease until such time as this Lease is either rejected or
assumed by order of a court of competent jurisdiction; and
(iii) to determine within sixty (60) days after the filing of
such petition whether to assume or reject this Lease; and
(iv) to give Landlord at least thirty (30) days prior written
notice, unless a shorter notice period is agreed to in
writing by the parties, of any proceeding relating to any
assumption of this Lease; and
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(v) to do all other things of benefit to Landlord otherwise
required under the Bankruptcy Code.
Tenant shall be deemed to have rejected this Lease in the event of the
failure to comply with any of the above.
(b) If Tenant or a trustee elects to assume this Lease subsequent to
the filing of a petition under the Bankruptcy Code, Tenant, as debtor and
as debtor in possession, and any trustee who may be appointed agree as
follows:
(i) to cure each and every existing breach by Tenant within
not more than thirty (30) days of assumption of this
Lease; and
(ii) to compensate Landlord for any actual pecuniary loss
resulting from any existing breach, including without
limitation, Landlord's reasonable costs, expenses and
attorney's fees incurred as a result of the breach, as
determined by a court of competent jurisdiction, within
thirty (30) days of assumption of this Lease; and
(iii) in the event of an existing breach, to provide adequate
assurance of Tenant's future performance, including
without limitation:
(1) the deposit of an additional sum equal to Rent for
the remainder of the Lease Term to be held (without
any allowance for interest thereon) to secure
Tenant's obligations under the Lease; and
(2) the production to Landlord of written documentation
establishing that Tenant has sufficient present and
anticipated financial ability to perform each and
every obligation of Tenant under this Lease; and
(3) assurances, in form acceptable to Landlord, as may be
required under any applicable provision of the
Bankruptcy Code; and
(iv) the assumption will not breach any provision of this
Lease; and
(v) the assumption will be subject to all of the provisions of
this Lease unless the prior written consent of Landlord is
obtained; and
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(vi) the prior written consent to the assumption of any
mortgagee to which this Lease has been assigned as
collateral security is obtained.
(c) If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code to any person or entity
who shall have made a bona fide offer to accept any assignment of this
Lease on terms acceptable to Tenant, then notice of such proposed
assignment shall be furnished by Tenant to Landlord, setting forth:
(i) the name and address of such person; and
(ii) all the terms and conditions of such offer; and
(iii) the adequate assurance to be provided Landlord to assure
such person's future performance under the Lease,
including without limitation, the assurances referred to
in any applicable provision of the Bankruptcy Code, shall
be given to Landlord by Tenant no later than twenty (20)
days after receipt by Tenant, but in any event no later
than ten (10) days prior to the date that Tenant shall
make application to a court of competent jurisdiction for
authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior
right and option, to be exercised by notice to Tenant
given at any time prior to the effective date of such
proposed assignment, to accept (or to cause its designee
to accept) an assignment of this Lease upon the same terms
and conditions and for the same consideration, if any, as
the bona fide offer made by such person, less any
brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment
of this Lease. The adequate assurance to be provided
Landlord to assure the assignee's future performance under
the Lease shall include without limitation:
(1) the deposit of a sum equal to Rent for the remainder
of the Lease Term to be held (without any allowance
for interest thereon) as security for performance
hereunder; and
(2) a written demonstration that the assignee meets all
reasonable financial and other criteria of Landlord
as did Tenant and its business at the time of
execution of this Lease, including the production of
the most recent audited financial statement of the
assignee prepared by a certified public accountant;
and
(3) the assignee's use of the Premises will be a
Permitted Use;
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and
(4) assurances, in form acceptable to Landlord, as to all
matters identified in any applicable provision of the
Bankruptcy Code.
12.4. NO RELEASE OF TENANT. Notwithstanding anything to the contrary
contained in this Lease, and regardless of Landlord's consent, no assignment,
encumbrance, subletting, transfer, lease or other permission for the use or
occupancy of all or any part of the Premises shall, unless otherwise agreed by
Landlord, release Tenant of Tenant's obligation to pay the Rent and other
charges and to perform all other obligations to be performed by Tenant under
this Lease. The acceptance of Rent and other charges by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent to one assignment shall not be deemed consent to any subsequent
assignment.
12.5. TRANSFER OF LANDLORD'S RIGHTS. Landlord shall have the right to
transfer and assign, in whole or in part, all and every feature of its rights
and obligations hereunder and in the Premises. Such transfers or assignments,
howsoever made, are to be fully binding upon and recognized by Tenant. Upon
such transfer or assignment and the assumption of Landlord's obligations by the
transferee, and subject to the provisions of Section 13.2 hereof, Landlord shall
be relieved of all obligations under the Lease accruing subsequent to the date
of transfer.
ARTICLE 13.
GENERAL PROVISIONS
13.1. ESTOPPEL CERTIFICATE. Tenant shall at any time, upon not less than
ten (10) days after the giving of written notice by Landlord, execute,
acknowledge and deliver to Landlord or to such person designated by Landlord, a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, (ii)
acknowledging that there are not, any uncured defaults on the part of Landlord
hereunder, or specify such defaults if they are claimed, (iii) acknowledging
that there are no offsets, counterclaims or defenses to the obligations of
Tenant under the Lease, and (iv) certifying as to any other matters as may be
reasonably requested by Landlord. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises. If Tenant
does not execute, acknowledge and deliver the statement referred to in this
Section within time set forth above, the information set forth therein shall be
deemed true and correct.
13.2. LANDLORD'S LIABILITY. The term "LANDLORD," as used in this Lease,
shall mean only the owner or owners at the time in question of fee title to the
Premises. In the event of any transfer of such title or interest, Landlord
shall be released from all liability as respects Landlord's obligations
thereafter to be performed, provided that Landlord's obligations are assumed by
Landlord's transferee.
13.3. SEVERABILITY. The invalidity of any provision of this Lease, or of
its application
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to any person or circumstance as determined by a court of competent
jurisdiction, shall in no way affect the validity of any other provision hereof
and each term, covenant, condition and provision of this Lease shall be valid
and be enforced to the fullest extent permitted by law.
13.4. TIME OF ESSENCE. Time is of the essence hereof.
13.5. CAPTIONS. Article and Section captions are not a part of this
Lease.
13.6. INCORPORATION OF PRIOR AGREEMENTS. This Lease and the attached
exhibits set forth all the agreements, terms, covenants and conditions between
Landlord and Tenant concerning the Premises and there are no agreements, terms,
covenants or conditions, oral or written, between them other than those herein
contained. No amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless it is in writing and signed by each party.
13.7. LANDLORD DEFAULT; TENANT'S REMEDIES.
(a) In the event of any default by Landlord in the observance or
performance of any obligation on Landlord's part to be observed or performed
under this Lease, Tenant shall give Landlord written notice specifying such
default with particularity and Landlord shall thereupon have thirty (30) days in
which to cure any such default; provided, however, that if the nature of such
default is such that more than thirty (30) days are required for its cure, then
Landlord shall not be in default if Landlord commences performance within said
thirty (30) days and thereafter diligently prosecutes the same to completion but
in not event shall such cure period exceed ninety (90) days in the aggregate.
If Landlord fails to cure any such default after such notice and cure period,
Tenant may, as its sole and exclusive remedy, commence an action against
Landlord for specific performance.
(b) If Landlord shall fail to perform any covenant, term or
condition of this Lease required to be performed by Landlord, if any, and if as
a consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution of such judgment and levied thereon against the right,
title and interest of Landlord in the Premises and out of Rent receivable by
Landlord, or out of the consideration received by Landlord from the sale or
other disposition of all or any part of Landlord's right, title and interest in
the Premises, and neither Landlord nor its partners, officers, directors,
shareholders and lenders, nor their respective successors and assigns, shall be
personally liable for any deficiency.
13.8. NOTICES. All notices and demands hereunder shall be in writing, and
shall be deemed to have been properly given or served as of (a) the date of
personal delivery with acknowledgement of receipt; (b) three (3) business days
after the same is deposited in the United States mail, prepaid, for delivery by
registered or certified mail, return receipt requested; or (c) the first
business day after the date delivered to a reputable overnight courier service
providing proof of delivery. The initial addresses of Landlord and Tenant are
set forth below:
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If to Landlord: Grandchildren's Realty Alternative Management Program I
Limited Partnership
6425 Beach Road
Eden Prairie, Minnesota 55344
Attention: Mr. Melvin L. Masters
Facsimile No: (612) 941-8652
Confirmation No.: (612) 943-9101
With a copy to: Popham, Haik, Schnobrich & Kaufman, Ltd.
3300 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Attention: L.J. Rotman, Esq.
Facsimile No.: (612) 334-8888
Confirmation No.: (612) 334-2675
If to Tenant: LaserMaster Corporation
7156 Shady Oak Road
Eden Prairie, Minnesota 55344
Attention: General Counsel
Facsimile No.: (612) 941-8687
Confirmation No.: (612) 941-8652
With a copy to: Rider Bennett Egan & Arundel
2000 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Thomas J. Hoben, Esq.
Facsimile No.: (612) 340-7900
Confirmation No.: (612) 340-7951
Such addresses may be changed at any time or from time to time or additional
notice parties added, by notice as above provided.
13.9. WAIVERS. No waiver by Landlord of any provision of this Lease shall
be deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of any subsequent act by Tenant. No payment by Tenant or
receipt by Landlord of a lesser amount than the amount then due shall be deemed
to be other than on account of the earliest rent due, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
payment be deemed an accord and satisfaction, and Landlord shall accept such
check or payment without prejudice to Landlord's right to recover the balance of
such payment or pursue any other remedy in this Lease provided.
13.10. RECORDING. Landlord agrees, upon Tenant's request, to execute a
short form of
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this Lease, entitled Memorandum of Lease, a copy of which is annexed hereto as
Exhibit "E" and Tenant may record the Memorandum of Lease at its expense. The
provisions of this Lease shall control, however, in regard to any omissions from
the Memorandum of Lease, or with respect to any provisions hereof which may be
in conflict with the Memorandum of Lease. As a condition to Landlord's
obligation to execute the Memorandum of Lease, Tenant will execute, acknowledge
and deliver to Landlord an instrument in recordable form sufficient to discharge
any such Memorandum of Lease (or of any modification thereof) of record. Such
instrument shall be held in escrow by Chicago Title Insurance Company or another
duly licensed title insurance company selected by Landlord pursuant to an escrow
agreement reasonably satisfactory to Landlord, Tenant and Chicago Title
Insurance Company or such other title insurance company selected by Landlord,
which escrow agreement shall provide that such instrument shall only be released
from escrow and placed of record upon the expiration or earlier termination of
this Lease as asserted by Landlord.
13.11. HOLDING OVER. Tenant shall surrender the Premises upon the
expiration of the Lease Term or earlier termination of the Lease. Any holdover
not consented to by Landlord in writing shall not result in a new tenancy or
interest and, in such case, Landlord may treat Tenant as a trespasser. If
Tenant remains in possession of the Premises or any part thereof after the
expiration of the Lease Term or the earlier termination hereof without the
express written consent of Landlord, Tenant shall pay rent (for such holdover
period) equal to the amount of one hundred fifty percent (150%) the amount of
Rent and other charges actually paid by Tenant under this Lease during the last
full Lease Year.
13.12. CUMULATIVE REMEDIES. Except as expressly provided herein, no
remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity.
13.13. COVENANTS AND CONDITIONS. Each provision of this Lease performable
by Tenant and Landlord shall be deemed both a covenant and a condition.
13.14. BINDING EFFECT. This Lease shall bind and inure to the benefit of
Landlord and Tenant and their respective permitted successors and assigns.
13.15. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE.
(a) This Lease, at the option of Landlord or any of its lenders,
shall be subordinate to any ground lease, mortgage or any other
hypothecation for security and any renewals, future advances,
modifications, consolidations, replacements and extensions thereof,
provided Tenant's rights hereunder continue to be recognized so long as no
Event of Default has occurred.
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(b) Provided Tenant's rights hereunder continue to be recognized so
long as no Event of Default has occurred, Tenant shall execute any
documents required to effectuate such subordination or to make this Lease
prior to the lien of any mortgage, ground lease or other security device,
as the case may be.
(c) In the event of (i) a sale, assignment, ground lease, mortgage
or other transfer of Landlord's interest in the Premises or any portion
thereof or in this Lease; or (ii) any proceedings brought for the
foreclosure of, the granting of a deed in lieu of foreclosure of or the
exercise of the power of sale under any mortgage or security agreement made
by Landlord covering the Premises or any portion thereof, and provided that
such mortgagee or other transferee shall agree to recognize Tenant's rights
hereunder so long as an Event of Default has not occurred, Tenant shall
attorn to the mortgagee or other transferee and recognize such mortgagee or
other transferee as Landlord under this Lease.
(d) In the event Landlord desires to convey the Premises pursuant to
a sale/leaseback transaction, Tenant shall upon Landlord's request agree to
terminate this Lease and enter into a new lease upon the same terms and
conditions as set forth herein.
(e) Upon Tenant's written request, Landlord agrees to request from
its mortgagee or other security holder whose interest in the Premises is
superior to Tenant's interest therein a non-disturbance agreement which
shall provide that in the event Landlord defaults under such mortgage or
other security instrument, Tenant's possession of the Premises shall not be
disturbed so long as Tenant is not in breach of or Default of this Lease.
Landlord shall not be liable or responsible for any fees or expenses
charged by such mortgagee or security holder in attempting to secure such
non-disturbance agreement. Further, such mortgagee's or security holder's
failure or refusal to execute a non-disturbance agreement shall not be
deemed to be a breach or default of this Lease by Landlord.
13.16. ATTORNEY'S FEES. If Landlord retains an attorney to enforce the
terms of or determine rights under this Lease, Landlord shall be entitled to
recover reasonable costs, attorneys' fees and expenses, including those incurred
at the appellate level. In the event that Landlord fails to fulfill its
obligations hereunder and Tenant commences an action against Landlord under
Section 13.7(a) hereof, the party prevailing in such action shall be entitled to
its reasonable attorneys' fees and expenses.
13.17. CORPORATE AUTHORITY. Each individual executing this Lease on
behalf of Tenant represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of Tenant, in accordance with a duly adopted
resolution, and that this Lease is binding upon Tenant in accordance with its
terms. Tenant shall, contemporaneous with the execution of this Lease, deliver
to Landlord a certified copy of a resolution of the Board of Directors of Tenant
authorizing or ratifying the execution and delivery of this Lease.
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13.18. NO JOINT VENTURE. Landlord and Tenant, by entering into this Lease
or consummating the transactions contemplated hereby, shall not be considered
partners or joint venturers.
13.19. QUIET ENJOYMENT. Provided Tenant pays the Rent herein recited and
performs all of Tenant's other covenants and agreements herein contained,
Landlord covenants that Tenant shall peacefully have, hold and enjoy the
Premises, subject to all the other provisions herein contained.
13.20. MORTGAGE FINANCING. In the event Landlord desires to obtain
mortgage financing and Landlord's mortgagee or mortgagees request certain
modifications or amendments to this Lease, then Tenant, on not less than twenty
(20) days advance notice, agrees to execute such modifications or amendments as
required. Notwithstanding the foregoing, Tenant shall not be required to
execute any modifications or amendments to this Lease which shall modify the
provisions of this Lease relating to the amount of Rent or other charges to be
paid by Tenant, the size of the Premises, the duration of the term of this
Lease, or otherwise subject Tenant to additional cost or expense. Tenant agrees
to cooperate with Landlord's efforts in obtaining said mortgage financing.
13.21. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute and be construed as one and the same instrument.
13.22. BROKERS. In connection with this Lease, Landlord and Tenant each
warrant and represent that they know of no person who is or might be entitled to
a commission, finder's fee or other like payment in connection herewith, and
each party hereto does hereby indemnify and agree to hold the other harmless
from and against any and all loss, liability and expenses that such other party
may incur should such warranty and representation prove incorrect.
13.23. FINANCIAL STATEMENTS. Tenant shall deliver to Landlord (a) within
120 days after the end of each calendar year annual audited operating statements
for Tenant and a copy of the balance sheet of Tenant as of the end of such year,
and related statements of income and retained earnings and changes in financial
position for such year, and (b) such other information as Landlord may from time
to time reasonably request. All financial statements of Tenant delivered to
Landlord shall be true and correct in all respects, shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present the financial condition of the subject thereof as of the
dates thereof. None of the aforesaid financial statements, or any certificate
or statement furnished to Landlord by or on behalf of Tenant in connection with
the transactions contemplated hereby, shall contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein or herein not misleading.
13.24. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Lease is or will
be made and delivered in the State and shall be governed by and construed and
interpreted in accordance with the laws of the United States of America and the
State, without regard to principles of conflict of laws. All judicial actions,
suits or proceedings brought by or against Landlord or Tenant with
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respect to its rights, obligations, liabilities or any other matter under or
arising out of or in connection with this Lease or any transaction contemplated
hereby or for recognition or enforcement of any judgment rendered in any such
proceedings shall be brought in any state or federal court in the State. By
execution and delivery of this Lease, Landlord and Tenant accept, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agree to be bound by any final judgment rendered thereby in
connection with this Lease or any transaction contemplated hereby from which no
appeal has been taken or is available. Tenant and Landlord each hereby
irrevocably waive any objections, including without limitation any objection to
the laying of venue or based on the grounds of forum non conveniens, which
either may now or hereafter have to the bringing of any such action or
proceeding in any such jurisdiction. Tenant and Landlord acknowledge that final
judgment against it in any action, suit or proceeding referred to in this
Section shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the same.
13.25. "AS IS" LEASE. Notwithstanding anything to the contrary herein
contained, Tenant expressly understands, acknowledges and agrees that the lease
of the Premises shall be made by Landlord to Tenant on an "as is, where is"
basis, and "with all faults," and Tenant acknowledges that Tenant has agreed to
lease the Premises in its present condition and that Tenant is relying solely on
its own examination and inspections of the Premises and not on any statements or
representations made by Landlord or any agents or representatives of Landlord.
Additionally, Tenant hereby acknowledges that, Landlord makes no warranty or
representation, express or implied, or arising by operation of law, including,
but in no way limited to, any warranty of condition, habitability,
merchantability, or fitness for a particular purpose of the Project, the
Premises or any portion thereof. Landlord hereby specifically disclaims any
warranty, guaranty or representation, oral or written, past, present or future,
of, as to, or concerning: (a) the nature and condition of the Project, the
Premises or any part thereof, including but not by way of limitation, as to its
water, soil or geology, or the suitability thereof, for any and all activities
and uses which Tenant may elect to conduct thereon, or any improvements Tenant
may elect to construct thereon, or any income to be derived therefrom or
expenses to be incurred with respect thereto, or any obligations or any other
matter or thing relating to or affecting the same; (b) the absence of any
Hazardous Substances on, in or under the Project on, in or under any land
adjacent to or abutting the Land; (c) the manner of construction or condition or
state of repair or lack of repair of the Project; (d) the nature or extent of
any easement, restrictive covenant, right-of-way, lease, possession, lien,
encumbrance, license, reservation, condition or other similar matter pertaining
to the Project, the Premises or any portion thereof; and (e) the compliance of
the Project, the Premises or the operation of the Project, the Premises or
portion thereof with any Legal Requirements.
13.26. THIRD PARTY BENEFICIARY. There are no third party beneficiaries of
this Lease, intended or otherwise.
13.27. ORIGINAL LEASE. Landlord and Tenant agree that the obligations of
Landlord and Tenant under the Original Lease with respect to adjustments for
estimated Impositions and Operating Expenses with respect to the period prior to
the Commencement Date shall be made prior to May 31, 1996 and shall survive the
execution and delivery of this Lease.
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13.28. GUARANTY. Contemporaneous with the execution and delivery of this
Lease, Tenant shall cause LaserMaster Technologies, Inc. to execute and deliver
to Landlord that certain Guaranty of even date herewith.
IN WITNESS WHEREOF, Tenant and Landlord have executed this Lease as of the
date set forth above.
"LANDLORD"
GRANDCHILDREN'S REALTY
ALTERNATIVE MANAGEMENT PROGRAM I
LIMITED PARTNERSHIP,
a Minnesota limited partnership
By TimeMasters, Inc.,
a Minnesota corporation
Its General Partner
By /s/ Melvin L. Masters
---------------------------------------
Melvin L. Masters
Its President
"TENANT"
LASERMASTER CORPORATION,
a Minnesota corporation
By /s/ Robert J. Wenzel
---------------------------------------
Its President
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Exhibit 10.04
THE OBLIGATIONS OF LASERMASTER CORPORATION HEREUNDER ARE SUBORDINATED TO CERTAIN
SENIOR INDEBTEDNESS TO THE EXTENT AND ON THE TERMS SET FORTH IN THAT CERTAIN
REPAYMENT, SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF JANUARY 17,
1996 BY AND AMONG LASERMASTER CORPORATION, LASERMASTER ASIA/PACIFIC, LTD.,
COLORMASTERS, INC., TIMEMASTERS, INC. AND GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT, AS SUCH AGREEMENT IS FROM TIME TO TIME AMENDED.
THE CONVERSION RIGHT REPRESENTED BY THIS PROMISSORY NOTE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2)
LASERMASTER TECHNOLOGIES, INC. RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
LASERMASTER TECHNOLOGIES, INC., THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
PROMISSORY NOTE
Minneapolis, Minnesota
$1,765,000.00 January 17, 1996
FOR VALUE RECEIVED, LaserMaster Corporation, a Minnesota corporation
("BORROWER"), promises to pay to the order of TimeMasters, Inc., a Minnesota
corporation, or its successors and permitted assigns (collectively, "HOLDER"),
the principal sum of One Million Seven Hundred Sixty Five Thousand and No/100
Dollars ($1,765,000.00) with interest thereon at the rate of one and three
quarters percent (1.75%) above the Prime Rate (as hereinafter defined) upon
demand. Until demand, interest shall be paid on the first day of each month,
commencing on February 1, 1996 and continuing on the same day of each subsequent
month.
1. LOAN AGREEMENT. This Note is executed and delivered pursuant to a Loan
Agreement of even date herewith between Holder and Borrower (the "LOAN
AGREEMENT"). Capitalized terms utilized in this Note, and not separately defined
herein, shall have the meanings ascribed to such terms in the Loan Agreement.
The provisions of Section 4 of the Loan Agreement are, by this reference
thereto, incorporated into the body of this Note and made a part hereof by such
reference.
2. PRIME RATE DETERMINATION. The term "PRIME RATE" as used in this
Promissory Note (the "NOTE") means an annual interest rate equal to the rate per
annum publicly announced by Norwest Bank, N.A. ("NORWEST") at its principal
office from time to time as being its prime rate. The Prime Rate shall change
automatically, without notice and simultaneously with each change in such prime
rate announced by Norwest. In the event that Norwest ceases to announce
<PAGE>
the term "Prime Rate" in setting a base rate of interest for commercial loans,
the Prime Rate herein shall be determined by reference to the rate announced in
substitution for such prime rate by Norwest as such base rate is designated by
Norwest. A certificate of Holder as to such prime rate in effect on any day
shall, for the purposes hereof, be conclusive evidence of such prime rate in
effect on such date. The rate of interest hereunder shall be calculated on the
basis of a 365-day year and shall be adjusted daily on the same day the Prime
Rate changes.
3. APPLICATION OF PAYMENTS; PREPAYMENT PRIVILEGE. Each payment shall be
applied first in payment of interest, and the balance to unpaid principal,
except that, if there are at any time costs, expenses, late fees, advances or
other sums, including any interest thereon, for which Holder is entitled to
payment under this Note, Loan Agreement or any Security Document, then Holder
may, at its option, first apply all or part of any payments to such items.
Prepayment in full or in part may be made at any time without penalty. Partial
prepayment shall not reduce the amount of payments required after the date of
such partial prepayment.
4. LATE CHARGES. If any amount due hereunder is not paid within five (5)
business days of the date due, Borrower agrees to pay a late charge in order to
defray the expense incident to handling such delinquent payment, provided state
law does not proscribe such a charge. Such charge shall be equal to the lesser
of four percent (4%) of the delinquent amount or the maximum amount which shall
be permitted by applicable state law, and shall be immediately due and payable,
and added to the principal balance, without notice or demand by Holder.
5. LOCATION OF PAYMENTS. Amounts due under this Note shall be paid in
lawful money of the United States of America to Holder at 6425 Beach Road, Eden
Prairie, Minnesota 55344 or in such other name and to such other address as
Holder may from time to time designate in writing.
6. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of an Event of
Default, this Note shall, at the election of Holder, become immediately due and
payable in full. Lender shall provide notice of such election to Borrower
except in the case of a bankruptcy proceeding of any Obligor.
7. WAIVERS BY BORROWER. Except as set forth in this Note, the Loan
Agreement or any of the Security Documents, Borrower hereby waives presentment,
demand for payment, notice of dishonor and any or all other notices or demands
in connection with the delivery, acceptance, performance, default, or
enforcement of this Note and hereby consents to and waives any defense relating
to (i) any extensions of time, renewals, discharges, releases, or other
indulgences which may be granted to any party to this Note, (ii) release,
substitution, addition or modification of the Loan Agreement or any Security
Document or any Obligor, and (iii) waivers, modifications, releases or other
indulgences that may be granted or consented to by Holder in respect of the time
of payment or any other provisions of this Note, the Loan Agreement or any of
the Security Documents.
8. ENFORCEMENT COSTS. If, and as often as, the Holder shall take any
action (whether or not involving commencement of legal proceedings) for the
defense or enforcement of Holder's rights under this Note, the Loan Agreement or
any Security Document, including
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without limitation the collection of the moneys due on this Note, there shall be
immediately due from Borrower, in addition to the unpaid principal and interest,
all costs and expenses of such action, including reasonable attorney's fees,
which costs and expenses shall be due when incurred by Holder and shall be added
to the principal balance of this Note as of the date so incurred, provided that
the amount so added to the principal balance shall, when taken together with the
then existing principal balance, not exceed $1,765,000.
9. NO WAIVER BY HOLDER. No delay or omission on the part of Holder in
exercising any right under this Note, the Loan Agreement or any Security
Document shall operate as a waiver or release of any such right or of any other
right under this Note, the Loan Agreement or any Security Document. No waiver,
release or amendment by Holder shall be effective unless made in a written
document signed by Holder. No waiver by Holder of any right in a particular
instance shall operate as a waiver of such right in a separate or later
instance. All amounts required to be paid by the terms of this Note, the Loan
Agreement and any Security Document shall be paid without set-off, recoupment or
abatement of any kind. The rights and remedies of Holder under this Note, the
Loan Agreement and any Security Document shall be cumulative and shall not limit
other rights or remedies available at law or in equity, and such rights and
remedies may be exercised by Holder singularly or in any combination or order,
at the option of Holder.
10. NO USURY. This Note, the Loan Agreement and the Security Documents
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to the Holder
for the use, forbearance, loaning or detention of the indebtedness evidenced
hereby exceed the maximum permissible under applicable law. If from any
circumstances whatsoever, fulfillment of any provisions hereof shall involve
exceeding the maximum interest rate applicable by law to this Note, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
law; and, if from any circumstances, Holder should ever receive, purportedly as
interest, an amount which would exceed the highest lawful rate applicable to
this Note, such amount which would be in excess of such highest lawful rate
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. This provision shall control every other
provision of this Note, the Loan Agreement and the Security Documents and shall
also be binding upon and available to any subsequent holder or endorsee of this
Note.
11. CONVERSION RIGHT.
(a) At any time during which an Event of Default shall have occurred
and be continuing or at any time on or after the date two (2) years from
the date of this Note, Holder shall have the right to require LMT to
convert up to $1,000,000.00 of the outstanding indebtedness evidenced by
this Note (the "CONVERSION RIGHT") into shares of Common Stock of LMT, par
value $.01 per share ("COMMON STOCK") (shares of Common Stock issuable upon
exercise of the Conversion Right are referred to as the "CONVERSION
SHARES") as provided for in this Section.
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(b) Upon exercise of the Conversion Right, LMT shall deliver to Holder
that number of shares of Common Stock equal to the quotient obtained by
dividing (x) the amount of indebtedness evidenced by this Note, which
Holder elects to convert, as specified in the Conversion Notice (as
hereinafter defined), by (y) the Conversion Price (as hereinafter defined).
(c) The Conversion Right may be exercised by Holder on any business
day by delivering a written notice of conversion (the "CONVERSION NOTICE")
to LMT specifying the total amount of indebtedness evidenced by this Note
(up to $1,000,000.00) with respect to which Holder is exercising the
Conversion Right.
(d) The "Conversion Price" shall be equal to the lesser of $5.875 per
share of Common Stock (the "INITIAL CONVERSION PRICE") or the Fair Market
Value of a share of Common Stock as of the date of the Conversion Notice.
For such purposes, the "Fair Market Value" per share of Common Stock shall
mean:
(i) If the Common Stock is traded on an exchange or is quoted on
NASDAQ National Market, then the average closing or last sale prices,
respectively, reported for the ten (10) business days immediately
preceding the date of the Conversion Notice, and
(ii) If the Common Stock is not traded on an exchange or on NASDAQ
National Market but is traded on the over-the-counter market, then the
average closing bid and asked prices reported for the ten (10)
business days immediately preceding the date of the Conversion Notice.
(e) Upon receipt by Holder of the Conversion Shares, as herein
provided, the amount of indebtedness evidenced by this Note shall
automatically be reduced by the amount of the indebtedness set forth in the
Conversion Notice and such reduced amount shall be deemed paid in full.
(f) Notwithstanding the foregoing, the Conversion Right shall lapse
and be of no further force and effect in the event that prior to its
exercise all amounts evidenced by this Note have been indefeasibly paid in
full.
12. CONVERSION SHARE CERTIFICATE. Upon exercise of the Conversion Right,
Holder shall be deemed to be the holder of record of the Conversion Shares
issuable upon such exercise, notwithstanding that the transfer books of LMT
shall then be closed or certificates representing such Conversion Shares shall
not then have been actually delivered to Holder. As soon as practicable after
such exercise of the Conversion Right, LMT shall issue and deliver to Holder a
certificate or certificates for the Conversion Shares issuable upon such
exercise, registered in the name of Holder or its designee.
13. RESTRICTIONS ON TRANSFER.
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(a) This Note may only be assigned as provided in the Loan Agreement.
In addition, the Conversion Right may not be sold, transferred,
hypothecated or otherwise assigned except (1) to persons who are related by
blood or marriage to Melvin Masters, (2) to entities or persons which are
affiliates of, related to, or controlled by Melvin Masters or TimeMasters,
Inc. or (3) in connection with any bona fide pledge by any person or entity
who is a permitted transferee, as described in clause (1) or (2) above, or
otherwise. LMT shall be entitled to treat the registered holder of the
Conversion Right as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in
such Conversion Right on the part of any other person, and shall not be
liable for any registration or transfer of the Conversion Right which is
registered or to be registered in the name of a fiduciary or the nominee of
a fiduciary unless made with the actual knowledge that a fiduciary or
nominee is committing a breach of trust in requesting such registration or
transfer, or with the knowledge of such facts that its participation
therein amounts to bad faith. The Conversion Right shall be transferable
only on the books of LMT upon delivery thereof duly endorsed by Holder or
by its duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment, or authority to transfer. In all cases
of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority
shall be produced. Notwithstanding the foregoing, LMT shall have no
obligation to cause the Conversion Right to be transferred on its books to
any person if, in the opinion of counsel to LMT, such transfer does not
comply with the provisions of the Securities Act of 1933, as amended (the
"ACT"), and the rules and regulations thereunder.
(b) Holder acknowledges that it has been advised by LMT that neither
this Note nor the Conversion Shares have been registered under the Act,
that this Note is being or has been issued and the Conversion Shares may be
issued on the basis of the statutory exemption provided by Section 4(2) of
the Act or Regulation D promulgated thereunder, or both, relating to
transactions by an issuer not involving any public offering. Holder
acknowledges that it has been informed by LMT of, or is otherwise familiar
with, the nature of the limitations imposed by the Act and the rules and
regulations thereunder on the transfer of securities. In particular, Holder
agrees that no sale, assignment or transfer of this Note or the Conversion
Shares issuable upon exercise of the Conversion Right shall be valid or
effective, and LMT shall not be required to give any effect to any such
sale, assignment or transfer, unless (i) the sale, assignment or transfer
of this Note or such Conversion Shares is registered under the Act, it
being understood that neither this Note nor such Conversion Shares are
currently registered for sale and that LMT has no obligation or intention
to so register this Note or such Conversion Shares except as specifically
provided herein, or (ii) this Note or such Conversion Shares are sold,
assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, or (iii) such sale, assignment, or
transfer is otherwise exempt from registration under the Act.
14. RESERVATION OF SHARES. LMT shall at all times reserve and keep
available from its authorized and unissued Common Stock, solely for the purpose
of providing for the exercise of the rights to purchase all Conversion Shares
granted pursuant to the Conversion Right, such
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number of shares of Common Stock as shall, from time to time, be sufficient
therefor. LMT covenants that all shares of Common Stock issuable upon exercise
of this Conversion Right pursuant to exercise of the Conversion Right, shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.
15. ADJUSTMENTS. The Conversion Price shall be subject to adjustment from
time to time as hereinafter provided in this Section 15.
(a) If LMT at any time divides the outstanding shares of its Common
Stock into a greater number of shares (whether pursuant to a stock split,
stock dividend or otherwise), and conversely, if the outstanding shares of
its Common Stock are combined into a smaller number of shares, the Initial
Conversion Price in effect immediately prior to such division or
combination shall be proportionately adjusted to reflect the reduction or
increase in the value of each such share of Common Stock.
(b) If any capital reorganization or reclassification of the capital
stock of LMT, or consolidation or merger of LMT with another corporation,
or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or
in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, Holder
shall have the right to receive upon the basis and upon the terms and
conditions specified in this Note and in lieu of the Conversion Shares
immediately theretofore receivable upon the exercise of the rights
represented hereby, such shares of stock, other securities or assets as
would have been issued or delivered to the holder of this Note if it had
exercised the Conversion Right and had received such shares of Common Stock
prior to such reorganization, reclassification, consolidation, merger or
sale. LMT shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof the successor corporation (if other than
LMT) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and
mailed to the registered holder of this Note at the last address of such
holder appearing on the books of LMT, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to purchase.
(c) If LMT takes any other action, or if any other event occurs, which
should result in an adjustment in the number of Conversion Shares subject
to the Conversion Right in order to fairly protect the rights of Holder, an
appropriate adjustment shall be made by LMT.
(d) Upon each adjustment, Holder shall thereafter be entitled to
receive from such adjustment, the number of shares obtained by multiplying
the Fair Market Value in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Fair Market Value
resulting from such adjustment.
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(e) Upon any adjustment, LMT shall give written notice thereof, by
first class mail, postage prepaid, addressed to Holder at the address of
such Holder as shown on the books of LMT, which notice shall state the
nature of and reason for the adjustment and the increase or decrease, if
any, in the number of Conversion Shares or the Fair Market Value, setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
16. TAXES. The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to Holder for any tax or other charge in respect of such issuance. LMT
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of Holder and LMT shall not be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to LMT the amount of such tax or shall have established
to the satisfaction of LMT that such tax has been paid.
17. REGISTRATION RIGHTS REGARDING CONVERSION SHARES.
(a) If, at any time on and after the date the Conversion Right has
been exercised by Holder, as herein provided, and continuing until two
years following such date (the "REGISTRATION PERIOD"), LMT shall file a
registration statement (other than on Form S-4, Form S-8, or any successor
form) with the Securities and Exchange Commission (the "COMMISSION"), LMT
shall give all the then holders of the Conversion Shares (the "ELIGIBLE
HOLDERS") at least 20 days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing
within 15 days after receipt of any such notice, LMT shall, at LMT's sole
expense (other than the SEC filing fees with respect to the securities of
the Eligible Holder and the fees and disbursements of counsel and any
accountants for the Eligible Holder and the underwriting discounts, if any,
payable in respect of the securities sold by any Eligible Holder), cause
all such shares of Common Stock that are acquired by Eligible Holder upon
the exercise of the Conversion Right and with respect to which Eligible
Holder has requested registration, to be included in such registration
statement, all to the extent requisite to permit the sale or other
disposition by such Eligible Holder of the shares to be so registered;
provided, however, that nothing herein shall prevent LMT from, at any time,
abandoning or delaying any such registration initiated by it; provided
further, that LMT shall not be required to include in any such registration
statement any Conversion Shares of an Eligible Holder if all such
Conversion Shares could be sold by such Eligible Holder under Rule 144 in a
three month period. If any such registration shall be underwritten in whole
or in part, LMT may require that the shares requested for inclusion by
Eligible Holders pursuant to this Section be included in the underwriting
on the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that in the good faith judgment of
the managing underwriter of such public offering the inclusion of all of
the shares originally covered by a request for registration made by
Eligible Holders would reduce the number of shares to be offered by LMT or
interfere with the successful marketing of the shares of stock offered by
LMT, the number of shares owned by Eligible Holders and otherwise to be
included in the underwritten public
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<PAGE>
offering may be reduced; provided, however, that such reduction shall be
made among all other persons (other than LMT and the holders of "Warrant
Shares" under the Warrant) who are participating in such offering before
reduction is made in the shares proposed to be included by the Eligible
Holders.
(b) If, at any time, during the Registration Period, but on two
occasions only, LMT shall receive a written request, from Eligible Holders
who in the aggregate own a majority of the total number of Conversion
Shares ("MAJORITY HOLDERS") to register the sale of all or part of such
Conversion Shares, LMT shall, as promptly as practicable, prepare and file
with the Commission a registration statement sufficient to permit the
public offering and sale of the Conversion Shares through the facilities of
all appropriate securities exchanges and the over-the-counter market, and
will use its best efforts through its officers, directors, auditors, and
counsel to cause such registration statement to become effective as
promptly as practicable; and LMT shall be obligated to pay all expenses
incurred in connection with such registration (other than SEC filing fees
with respect to the securities of the Eligible Holders and the fees and
disbursements of counsel for the Eligible Holders and underwriting
discounts, if any, payable in respect of the Conversion Shares sold by the
Eligible Holders). LMT shall not be obligated to effect any registration of
its securities pursuant to this Section 17(b) (i) within six months after
the effective date of a previous registration statement prepared and filed
in accordance with Sections 17(a) (in which Conversion Shares could have
been included) or 17(b), (ii) with respect to any Conversion Shares of an
Eligible Holder if all such Conversion Shares could be sold by such
Eligible Holder under Rule 144 during a three-month period, or (iii) at any
time during which, in the reasonable judgment of the Board of Directors of
LMT, such filing would interfere with a transaction then contemplated by
LMT; provided, however, that LMT shall not be able to delay filing of such
registration statement pursuant to clause (iii) for a period exceeding one
hundred ten (110) days. Within ten business days after receiving any
request contemplated by this Section 17(b), LMT shall give written notice
to all the other Eligible Holders, advising each of them that LMT is
proceeding with such registration and offering to include therein all or
any portion of any such other Eligible Holder's registrable securities,
provided that LMT receives a written request to do so from such Eligible
Holder within 30 days after receipt by him or it of LMT's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 17, LMT shall use its best efforts to cause the Eligible Holders'
Conversion Shares so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as Holder or
such Eligible Holders may reasonably request; provided, however, that LMT
shall not by reason of this Section 17(c) be required to qualify to do
business in any state in which it is not otherwise required to qualify to
do business or to file a general consent to service process.
(d) LMT shall keep effective any registration or qualification
contemplated by this Section 17 and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for such period
of time as shall be required to permit the Eligible
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Holders to complete the offer and sale of the Conversion Shares covered
thereby or until the date on which all Conversion Shares can be sold
pursuant to Rule 144 under the Act in a period of three months.
(e) In the event of a registration pursuant to the provisions of this
Section 17, LMT shall furnish to each Eligible Holder such number of copies
of the registration statement and of each amendment and supplement thereto
(in each case, including all exhibits), such reasonable number of copies of
each prospectus contained in such registration statement and each
supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder
may reasonably request to facilitate the disposition of the Conversion
Shares included in such registration.
(f) In the event of a registration pursuant to the provisions this
Section 17, LMT shall furnish each Eligible Holder of any Conversion Shares
so registered with an opinion of its counsel (reasonably acceptable to the
Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of
the registration statement, preventing or suspending the use of the
registration statement, any preliminary prospectus, any final prospectus,
or any amendment or supplement thereto has been issued, nor to the best
knowledge of such counsel has the Commission or any securities or blue sky
authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) each document, if any,
incorporated by reference in the registration statement and the prospectus
included therein (except for financial statements and related schedules, as
to which such counsel need express no opinion) complied as to form when
filed with the Commission in all material respects with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder, (iii) the registration statement
and the prospectus included therein and any supplements or amendments
thereto (except for financial statements and related schedules, as to which
such counsel need express no opinion) comply as to form in all material
respects with the Act and the rules and regulations of the Commission
thereunder, and (iv) such counsel believes that (except for financial
statements and related schedules, as to which such counsel need express no
belief) such registration statement and the prospectus included therein at
the time such registration statement became effective did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
and the prospectus, as amended or supplemented, if applicable, does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Such opinion
shall also state the jurisdictions in which the Conversion Shares have been
registered or qualified for sale pursuant to the provisions of this Section
17. LMT shall also furnish to each Eligible Holder a cold comfort letter
from the independent certified public accountants of LMT in customary form
and substance if
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such cold comfort letter is to be provided to any other person in
connection with the registration.
(g) In the event of a registration pursuant to the provision of this
Section 17, LMT and the Eligible Holders shall enter into a cross-indemnity
agreement and a contribution agreement, each in customary form, with each
underwriter, if any, and, if requested, enter into an underwriting
agreement containing conventional representations, warranties, allocation
of expenses, and customary closing conditions, including, without
limitation, opinions of counsel and accountants' cold comfort letters, with
any underwriter who acquires any Conversion Shares.
(h) LMT agrees that, after the completion of such public offering and
until all the Conversion Shares have been sold under a registration
statement or pursuant to Rule 144 under the Act, it shall keep current in
filing all reports, statements and other materials required to be filed
with the Commission to permit holders of the Conversion Shares to sell such
securities under Rule 144.
18. INDEMNIFICATION REGARDING REGISTRATION OF CONVERSION SHARES.
(a) Subject to the conditions set forth below, LMT agrees to indemnify
and hold harmless each Eligible Holder, its officers, directors, partners,
trustees, employees, agents, and counsel, and each person, if any, who
controls any such person within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, from and against any and all loss,
liability, charge, claim, damage, and expense whatsoever (which shall
include, for all purposes of this Section 18(a), without limitation,
attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), as and when incurred, arising out
of, based upon, or in connection with (A) any untrue statement or alleged
untrue statement of a material fact contained (i) in any registration
statement, preliminary prospectus, or final prospectus (as from time to
time amended and supplemented), or any amendment or supplement thereto,
relating to the sale of any of the Conversion Shares, or (ii) in any
application or other document or communication (in this Section 18
collectively called an "application") executed by or on behalf of LMT or
based upon written information furnished by or on behalf of LMT filed in
any jurisdiction in order to register or qualify any of the Conversion
Shares under the securities or blue sky laws thereof or filed with the
Commission or any securities exchange; or (B) any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to LMT with respect to such Eligible Holder
by or on behalf of such person expressly for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. The
foregoing agreement to indemnify shall be in addition to any liability LMT
may otherwise have, including liabilities arising under this Note, the Loan
Agreement and the Security Documents.
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(b) Eligible Holders agree to indemnify and hold harmless LMT and any
underwriter, and each of their respective officers, directors, partners,
trustees, employees, agents and counsel, and each person who controls any
such person within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, from and against any and all loss, damage, liability,
cost or expense whatsoever (which shall include, for all purposes of this
Section 18(b), without limitation, attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing, or defending against
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation) as and when
incurred, arising out of, based upon, or in connection with (A) any untrue
or alleged untrue statement of any material fact contained in (i) any
registration statement, any prospectus contained therein or any amendment
or supplement thereto relating to sale of the Conversion Shares, or (ii) in
any application; or (B) arising out of, or based upon the omission or the
alleged omission to state in any such registration statement, prospectus or
application a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity
with written information furnished by Eligible Holders.
19. LEGEND. Unless registered pursuant to the provisions of Section 17
hereof, the Conversion Shares issued upon exercise of the Conversion Right shall
be subject to a stop transfer order and the certificate or certificates
evidencing such Conversion Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAYBE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS."
20. NO SHAREHOLDER RIGHTS. Holder shall not have solely on account of the
Conversion Right, any rights of a shareholder of LMT, either at law or in
equity, or to any notice of meetings of shareholders or of any other proceedings
of LMT, except as provided in this Note, the Loan Agreement or the Security
Documents.
21. GOVERNING LAW. This Note has been negotiated and consummated in the
State of Minnesota and shall be construed in accordance with the laws of the
State of Minnesota applicable to contracts made and performed within such State,
without regard to principles
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<PAGE>
governing conflicts of law.
22. JURISDICTION. Borrower and LMT irrevocably consent to the
jurisdiction of the courts of the State of Minnesota and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Note, any document or instrument delivered pursuant to, in
connection with or simultaneously with this Note, or a breach of this Note or
any such document or instrument.
23. MISCELLANEOUS. This Note may not be modified orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Time is of the essence
hereof.
24. ORIGINAL NOTE RENEWAL. This Note has been executed and delivered as a
renewal of the Original Note in accordance with the terms and conditions of an
endorsement affixed to the Original Note.
LASERMASTER CORPORATION,
a Minnesota corporation
By /s/ Robert J. Wenzel
-------------------------
Its President
-------------------------
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<PAGE>
CONSENT OF LMT
--------------
The undersigned consents and agrees to be bound to the provisions of
Sections 11 through 24 of the foregoing Note as of the date first above written.
The undersigned has executed and delivered to Lender a Guaranty of even date
herewith by which the undersigned has guaranteed the "Obligations," as such term
is defined in such Guaranty, and by reason of its signature below, the
undersigned shall not be, and shall not deemed, a co-maker, acknowledgement
party, or endorser of the foregoing Note.
LASERMASTER TECHNOLOGIES, INC.,
a Minnesota corporation
By /s/ Robert J. Wenzel
---------------------------
Its COO
-----------------------
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<PAGE>
Exhibit 10.05
PROMISSORY NOTE
$859,516.18 EDEN PRAIRIE, MINNESOTA
NOVEMBER 29, 1995
FOR VALUE RECEIVED, the undersigned, LaserMaster Corporation, a Minnesota
corporation ("Maker"), hereby agrees and promises to pay to the order of
Marubeni International Electronics Corporation ("Holder"), at its address of 20
William Street, Wellesley, MA 02181 or at any other place designated by the
holder hereof, in lawful money of the United States, the principal sum of Eight
Hundred Fifty Nine Thousand Five Hundred Sixteen Dollars and Eighteen Cents
($859,516.18), together with interest on the principal amount at the lesser of
ten percent (10%) per annum, or the maximum allowed by the law. The principal
amount and interest shall be due and payable as follows: Principal in the amount
of $429,758.09 shall be due and payable on March 29, 1996 with the final payment
of the remaining principal and interest due and payable on May 29, 1996. This
note may be prepaid without penalty in whole at anytime, or in part from time to
time prior to the final payment.
This note is a Minnesota contract and Holder may seek to enforce it in any court
sitting in the State of Minnesota and Maker specifically consents to both the
subject matter and personal jurisdiction of such courts. Service of process may
be made by registered or certified mail in addition to the methods allowed by
law.
LASERMASTER CORPORATION
/s/ Melvin L. Masters, CEO
- -------------------------------------------
Name and Title printed: Melvin L. Masters, Chief Executive Officer
Address: 7156 Shady Oak Road
Eden Prairie, MN 55344
Subscribed and sworn to before me a Notary Public this 29th
day of November, 1995.
- -------------------------------------------
Notary Public
My Commission Expires:
Seal
<PAGE>
Exhibit 10.06
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS
RESTRICTED AS DESCRIBED HEREIN.
LASERMASTER TECHNOLOGIES, INC.
Warrant for the Purchase of 277,953 Shares of Common Stock,
par value $.01 per share
January 17, 1996
277,953 Shares
THIS CERTIFIES that, for value received, TimeMasters, Inc., with an address
at 6425 Beach Road, Eden Prairie, Minnesota 55344 (including any transferee, the
"Holder"), is entitled to subscribe for and purchase from LaserMaster
Technologies, Inc., a Minnesota corporation (the "Company"), upon the terms and
conditions set forth herein, at any time or from time to time on and after the
date hereof and continuing until 5:00 p.m. Central Time on a date which is six
(6) years from the date hereof (the "Exercise Period"), Two Hundred Seventy
Seven Thousand Nine Hundred Fifty Three (277,953) shares of the Company's Common
Stock, par value $.01 per share ("Common Stock"), at an exercise price of $6.35
per share (the "Exercise Price"). As used herein, the term "this Warrant" shall
mean and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Warrant Shares, by the surrender of this
Warrant (with the election at the end hereof duly executed) to the Company at
its office at 7156 Shady Oak Road, Eden Prairie, MN 55344, or at such other
place as is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the
<PAGE>
Exercise Price multiplied by the number of Warrant Shares for which this Warrant
is being exercised. In addition, the Holder may, at its option, exercise this
Warrant through exercise of the Conversion Right set forth below.
(a) At any time on or after a date one (1) year from the date hereof
and prior to the expiration of the Exercise Period, the Holder shall have the
right to require the Company to convert this Warrant (the "Conversion Right")
into shares of Common Stock as provided for in this Section 1(a). Upon exercise
of the Conversion Right, the Company shall deliver to the Holder (without
payment by the Holder of any Exercise Price) that number of shares of Common
Stock equal to the quotient obtained by dividing (x) the value of the Warrant at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Warrant Exercise Price for the Warrant Shares to be purchased, as in
effect immediately prior to the exercise of the Conversion Right, from the
aggregate Fair Market Value of the Warrant Shares to be purchased, immediately
prior to exercise of the Conversion Right) by (y) the Fair Market Value of one
share of Common Stock immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time
or from time to time, during the Exercise Period, on any business day by
delivering a written notice of conversion (the "Conversion Notice") to the
Company specifying the total number of Warrant Shares with respect to which the
Holder is exercising the Conversion Right.
(c) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or
is quoted on NASDAQ National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) business
days immediately preceding the Determination Date, and
(ii) If the Company's Common Stock is not traded on an
exchange or on NASDAQ National Market but is traded on the over-the-
counter market, then the average closing bid and asked prices
reported for the ten (10) business days immediately preceding the
Determination Date.
(d) Notwithstanding the foregoing, the Conversion Right shall lapse
and be of no further force and effect in the event that prior to a date one (1)
year from the date hereof all amounts evidenced by that certain Promissory Note
of even date herewith in the original principal amount of $1,765,000 made by
LaserMaster Corporation in favor of TimeMasters, Inc. have been indefeasibly
paid in full.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise,
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<PAGE>
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares (or portions thereof)
subject to purchase hereunder.
3. (a) This Warrant may not be sold, transferred, hypothecated or
otherwise assigned except (1) to persons who are related by blood or marriage to
Melvin Masters, (2) to entities or persons which are affiliates of, related to,
or controlled by Melvin Masters or TimeMasters, Inc. or (3) in connection with
any bona fide pledge by any person or entity who is a permitted transferee, as
described in clause (1) or (2) above, or otherwise. Any Warrants issued upon
the transfer or exercise in part of this Warrant shall be numbered and shall be
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be transferable
only on the books of the Company upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or other
legal representative, duly authenticated evidence of his or its authority shall
be produced. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares (or portions
thereof), upon surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
thereunder.
(b) The Holder acknowledges that he has been advised by the Company
that neither this Warrant nor the Warrant Shares have been registered under the
Act, that this Warrant is being or has been issued and the Warrant Shares may be
issued on the basis of the statutory exemption provided by Section 4(2) of the
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering. The Holder acknowledges that it
has been informed by the Company of, or is otherwise familiar with, the nature
of the limitations imposed by the Act and the rules and regulations thereunder
on the transfer of securities. In particular, the Holder agrees that no sale,
assignment or transfer of this Warrant or the Warrant Shares issuable upon
exercise hereof shall be valid or effective, and the Company shall not be
required to give any effect to any such sale, assignment or transfer, unless (i)
the sale, assignment or transfer of this Warrant or such Warrant Shares is
registered under the Act, it being understood that neither this Warrant nor such
Warrant Shares are currently registered for sale and that the Company has no
obligation or intention to so register this Warrant or such
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<PAGE>
Warrant Shares except as specifically provided herein, or (ii) this Warrant or
such Warrant Shares are sold, assigned or transferred in accordance with all the
requirements and limitations of Rule 144 under the Act, or (iii) such sale,
assignment, or transfer is otherwise exempt from registration under the Act.
4. The Company shall at all times reserve and keep available from its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
this Warrant, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the
Exercise Price therefor or pursuant to exercise of the Conversion Right, shall
be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. The Exercise Price and the number of Warrant Shares shall be subject to
adjustment from time to time as hereinafter provided in this Section 5.
(a) If the Company at any time divides the outstanding shares of its
Common Stock into a greater number of shares (whether pursuant to a stock split,
stock dividend or otherwise), and conversely, if the outstanding shares of its
Common Stock are combined into a smaller number of shares, the Exercise Price in
effect immediately prior to such division or combination shall be
proportionately adjusted to reflect the reduction or increase in the value of
each such share of Common Stock.
(b) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of the Company's Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the holder of
this Warrant shall have the right to purchase and receive upon the basis and
upon the terms and conditions specified in this Warrant and in lieu of the
shares of the Common Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby, such shares
of stock, other securities or assets as would have been issued or delivered to
the holder of this Warrant if it had exercised this Warrant and had received
such shares of Common Stock prior to such reorganization, reclassification,
consolidation, merger or sale. The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed to the registered holder of this
Warrant at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(c) If the Company takes any other action, or if any other event
occurs, which does not come within the scope of the provisions of section 5(a)
or 5(b), but which should result in an adjustment in the Exercise Price and/or
the number of shares subject to this Warrant in order to fairly protect the
purchase rights of the holder of this Warrant, an appropriate adjustment in such
purchase rights shall be made by the Company.
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<PAGE>
(d) Upon each adjustment of the warrant Exercise Price, the holder of
this Warrant shall thereafter be entitled to purchase, at the warrant Exercise
Price resulting from such adjustment, the number of shares obtained by
multiplying the warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant Exercise
Price resulting from such adjustment.
(e) Upon any adjustment of the Exercise Price, the Company shall give
written notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on the
books of the Company, which notice shall state the Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
6. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
7. (a) If, at any time on and after the date hereof until two years
following the earlier of (i) the date upon which this Warrant has been exercised
in full and (ii) the date of expiration of the Exercise Period, the Company
shall file a registration statement (other than on Form S-4, Form S-8, or any
successor form) with the Securities and Exchange Commission (the "Commission"),
the Company shall give all the then holders of this Warrant or any shares issued
upon exercise of this Warrant, (the "Eligible Holders") at least 20 days prior
written notice of the filing of such registration statement. If requested by
any Eligible Holder in writing within 15 days after receipt of any such notice,
the Company shall, at the Company's sole expense (other than the SEC filing fees
with respect to the securities of the Eligible Holder and the fees and
disbursements of counsel and any accountants for the Eligible Holder and the
underwriting discounts, if any, payable in respect of the securities sold by any
Eligible Holder), cause all such shares of the Company's Common Stock that are
acquired by Eligible Holder upon the exercise of this Warrant and with respect
to which Eligible Holder has requested registration, to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by Eligible Holder of the shares to be so registered; provided,
however, that nothing herein shall prevent the Company from, at any time,
abandoning or delaying any such registration initiated by it; provided further,
that the Company shall not be required to include in any such registration
statement any Warrant Shares of an Eligible Holder if all such Warrant Shares
could be sold by such Eligible Holder under Rule 144 in a three month period. If
any such registration shall be underwritten in whole or in part, the Company may
require that the shares requested for inclusion by Eligible Holders pursuant to
this section be included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the
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<PAGE>
underwriters. In the event that in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the shares
originally covered by a request for registration made by Eligible Holders would
reduce the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of shares owned by Eligible Holders and otherwise to be included in the
underwritten public offering may be reduced; provided, however, that such
reduction shall be made among all other persons (other than the Company) who are
participating in such offering before reduction is made in the shares proposed
to be included by the Eligible Holders.
(b) If, at any time, on and after the date hereof until two years
following the earlier of (i) the date upon which this Warrant has been exercised
in full and (ii) the date of expiration of the Exercise Period, but on two
occasions only, the Company shall receive a written request, from Eligible
Holders who in the aggregate own (or which upon exercise of Warrant would own) a
majority of the total number of shares of Common Stock which have been or may be
acquired upon exercise of this Warrant ("Majority Holders") (provided, that the
securities must include Warrant Shares or Warrants exercisable for shares which
in the aggregate represent at least 25% of the aggregate number of Warrant
Shares underlying the Warrant initially issued), to register the sale of all or
part of such Warrant Shares, the Company shall, as promptly as practicable,
prepare and file with the Commission a registration statement sufficient to
permit the public offering and sale of the Warrant Shares through the facilities
of all appropriate securities exchanges and the over-the-counter market, and
will use its best efforts through its officers, directors, auditors, and counsel
to cause such registration statement to become effective as promptly as
practicable; and the Company shall be obligated to pay all expenses incurred in
connection with such registration (other than SEC filing fees with respect to
the securities of the Eligible Holders and the fees and disbursements of counsel
for the Eligible Holder and underwriting discounts, if any, payable in respect
of the Warrant Shares sold by the Eligible Holder). The Company shall not be
obligated to effect any registration of its securities pursuant to this Section
7(b) (i) within six months after the effective date of a previous registration
statement prepared and filed in accordance with Sections 7(a) (in which Warrant
Shares could have been included) or 7(b), (ii) with respect to any Warrant
Shares of an Eligible Holder if all such Warrant Shares could be sold by such
Eligible Holder under Rule 144 during a three-month period, or (iii) at any time
during which, in the reasonable judgment of the Board of Directors of the
Company, such filing would interfere with a transaction then contemplated by the
Company; provided, however, that the Company shall not be able to delay filing
of such registration statement pursuant to clause (iii) for a period exceeding
one hundred ten (110) days. Within ten business days after receiving any request
contemplated by this Section 7(b), the Company shall give written notice to all
the other Eligible Holders, advising each of them that the Company is proceeding
with such registration and offering to include therein all or any portion of any
such other Eligible Holder's registrable securities, provided that the Company
receives a written request to do so from such Eligible Holder within 30 days
after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 7, the Company shall use its best efforts to cause the Eligible Holders'
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such Eligible
Holders may reasonably request; provided, however, that the Company
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<PAGE>
shall not by reason of this Section 7(c) be required to qualify to do business
in any state in which it is not otherwise required to qualify to do business or
to file a general consent to service process.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 7 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Warrant Shares covered thereby or until the date on which all Warrant
Shares can be sold pursuant to Rule 144 under the Act in a period of three
months.
(e) In the event of a registration pursuant to the provisions of this
Section 7, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Warrant Shares included in such registration.
(f) In the event of a registration pursuant to the provisions this
Section 7, the Company shall furnish each Eligible Holder of any Registrable
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to the best knowledge of such counsel
has the Commission or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, (ii) each document, if any, incorporated by reference in the registration
statement and the prospectus included therein (except for financial statements
and related schedules, as to which such counsel need express no opinion)
complied as to form when filed with the Commission in all material respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission thereunder, (iii) the registration
statement and the prospectus included therein and any supplements or amendments
thereto (except for financial statements and related schedules, as to which such
counsel need express no opinion) comply as to form in all material respects with
the Act and the rules and regulations of the Commission thereunder, and (iv)
such counsel believes that (except for financial statements and related
schedules, as to which such counsel need express no belief) such registration
statement and the prospectus included therein at the time such registration
statement became effective did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading and the prospectus, as amended or supplemented, if
applicable, does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Such
opinion shall also state the jurisdictions in which the Warrant Shares have been
registered
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<PAGE>
or qualified for sale pursuant to the provisions of Section 7. The Company
shall also furnish to each Eligible Holder a cold comfort letter from the
independent certified public accountants of the Company in customary form and
substance if such cold comfort letter is to be provided to any other person in
connection with the registration.
(g) In the event of a registration pursuant to the provision of this
Section 7, the Company and the Eligible Holders shall enter into a cross-
indemnity agreement and a contribution agreement, each in customary form, with
each underwriter, if any, and, if requested, enter into an underwriting
agreement containing conventional representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Warrant Shares.
(h) The Company agrees that, after the completion of such public
offering and until all the Registrable Securities have been sold under a
registration statement or pursuant to Rule 144 under the Act, it shall keep
current in filing all reports, statements and other materials required to be
filed with the Commission to permit holders of the Warrant Shares to sell such
securities under Rule 144.
8. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, trustees, employees, agents, and counsel, and each person, if any, who
controls any such person within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all loss, liability, charge,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this Section 8(a), without limitation, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (A) any untrue statement or
alleged untrue statement of a material fact contained (i) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Warrant Shares, or (ii) in any application or other
document or communication (in this Section 8 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Warrant Shares under the securities
or blue sky laws thereof or filed with the Commission or any securities
exchange; or (B) any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
(b) Eligible Holders agree to indemnify and hold harmless the Company
and any underwriter, and each of their respective officers, directors, partners,
trustees, employees, agents
-8-
<PAGE>
and counsel, and each person who controls any such person within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all loss, damage, liability, cost or expense whatsoever (which shall
include, for all purposes of this Section 8(b), without limitation, attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing,
or defending against litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation) as and when incurred, arising out of, based upon, or in connection
with (A) any untrue or alleged untrue statement of any material fact contained
in (i) any registration statement, any prospectus contained therein or any
amendment or supplement thereto relating to sale of the Warrant Shares, or (ii)
in any application; or (B) arising out of, or based upon the omission or the
alleged omission to state in any such registration statement, prospectus or
application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
so made in reliance upon and in strict conformity with written information
furnished by Eligible Holders.
9. Unless registered pursuant to the provisions of Section 7 hereof, the
Warrant Shares issued upon exercise of this Warrant shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAYBE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS."
10. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
11. The Holder shall not have solely on account of such status, any rights
of a shareholder of the Company, either at law or in equity, or to any notice of
meetings of shareholders or of any other proceedings of the Company, except as
provided in this Warrant.
12. This Warrant has been negotiated and consummated in the State of
Minnesota and shall be construed in accordance with the laws of the State of
Minnesota applicable to contracts made and performed within such State, without
regard to principles governing conflicts of law.
-9-
<PAGE>
13. The Company irrevocably consents to the jurisdiction of the
courts of the State of Minnesota and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Warrant, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Warrant, or a breach of this Warrant or any such
document or instrument.
LASERMASTER TECHNOLOGIES, INC.
By: /s/ Robert J. Wenzel
------------------------------
Its: COO
--------------------
James E. Retterath
- ---------------------------
Secretary
-10-
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers
unto ________________ a Warrant to purchase _________ shares of Common Stock,
par value $.01 per share, of LaserMaster Technologies, Inc. (the "Company"),
together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint ______________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution.
Dated: ____________________
Signature ______________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
/11
<PAGE>
To: LaserMaster Technologies, Inc.
7156 Shady Oak Road
Eden Prairie, MN 55344
Attn: General Counsel
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $_______ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: ____________________ Name ___________________________________________
Address: _______________________________________________________________________
__________________________________________
(Signature)
/12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the December 31, 1995 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 720,355
<SECURITIES> 0
<RECEIVABLES> 14,900,418
<ALLOWANCES> 2,017,000
<INVENTORY> 20,918,345
<CURRENT-ASSETS> 42,528,771
<PP&E> 6,202,448
<DEPRECIATION> 13,290,316
<TOTAL-ASSETS> 57,488,485
<CURRENT-LIABILITIES> 30,081,656
<BONDS> 0
<COMMON> 113,146
0
0
<OTHER-SE> 24,673,897
<TOTAL-LIABILITY-AND-EQUITY> 57,488,485
<SALES> 46,605,871
<TOTAL-REVENUES> 46,605,871
<CGS> 28,169,017
<TOTAL-COSTS> 28,169,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 785,552
<INCOME-PRETAX> (1,202,277)
<INCOME-TAX> 361,000
<INCOME-CONTINUING> (841,277)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (841,277)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
