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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 22, 1996
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(Date of Report - date of earliest event reported)
Northstar Computer Forms, Inc.
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(Exact name of registrant as specified in charter)
Minnesota 0-19056 41-0882640
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(State or other (Commission (IRS Employer
jurisdiction of file number) Identification No.)
incorporation)
7130 Northland Circle North
Brooklyn Park, Minnesota 55428
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(Address of principal executive offices) (Zip Code)
(612) 531-7340
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On July 22, 1996, Northstar Computer Forms, Inc. (the "Company")
acquired substantially all of the assets of the Financial Forms Division (the
"Division") of Deluxe Corporation, a Minnesota corporation ("Deluxe") from
Deluxe. Deluxe provides products and services primarily to the financial
payment systems industry and also markets specialty products to small businesses
and consumers. The purchase price for the Division was $9,200,000 cash. The
Company financed the purchase price with a $9,000,000 term loan and a $1,500,000
revolving credit facility issued by First Bank National Association.
(b) Substantially all of the assets acquired constituted plant, equipment
and other physical property used by the Division in the conduct of its financial
forms business. The Company intends to continue to use the assets for these
purposes in connection with its own financial forms business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
(4) It is impractical at this time to file the required financial
statements for the acquired business. Such statements will be filed as they
become available.
(b) Pro forma financial information:
(2) It is impractical at this time to file the required financial
statements for the acquired business. Such statements will be filed as they
become available.
(c) Exhibits:
2.1 Agreement of Purchase and Sale of Assets dated July 22, 1996, by
and between Northstar Computer Forms, Inc. and Deluxe Corporation
2.2 Revolving Credit and Term Loan Agreement dated July 22, 1996, by
and between Northstar Computer Forms, Inc., General Financial
Supply, Inc., and First Bank National Association
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 6, 1996.
NORTHSTAR COMPUTER FORMS, INC.
By /s/ Mary Ann Morin
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Mary Ann Morin,
Treasurer and Controller
(Principal Financial Officer)
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is entered into as of the 22nd day of July, 1996, and is
effective as of 12:01 a.m. Central time on July 21, 1996, by and among NORTHSTAR
COMPUTER FORMS, INC., a Minnesota corporation (hereinafter referred to as
"Buyer") and DELUXE CORPORATION, a Minnesota corporation (hereinafter referred
to as "Seller").
WHEREAS, Seller is a major provider of checks, bank forms and business
forms and Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, on the terms and subject to the conditions of this Agreement,
substantially all of the assets of Seller used in its Financial Forms Division
(the "Division").
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties of this Agreement, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 SALE AND TRANSFER OF ASSETS. Subject to the terms and conditions set
forth in this Agreement, Seller agrees to sell, convey, transfer, assign,
deliver and license to Buyer, and Buyer agrees to purchase and license from
Seller all of the assets listed on the specified Sections of the disclosure
statement, a final copy of which shall be delivered at Closing (the "Disclosure
Statement"), which are collectively referred to as the "Assets" and consist of
the following:
(a) All tangible personal property used in the Division including
equipment, office machinery, computers (the "Equipment"), supplies,
furniture, fixtures and any assignable warranties with respect to the
Equipment, a schedule of which is set forth on Section 1.1(a) of the
Disclosure Statement.
(b) All work in process and unfilled sales orders or contracts of the
Division, if any, including pricing information with respect to
products produced on the Equipment, as well as pricing information for
products produced on those of the Excluded Assets (as set forth in
Section 1.1(i) of the Disclosure Statement) which Buyer will be
permitted to use for a period subsequent to the Date of Closing as
provided in Sections 10.3 and 10.4 below.
(c) Certain computer software and electronic data used primarily by the
Division and the copyrights thereon (to the extent such software and
data are owned by Seller), including all Seller-owned software for the
Division's internal systems for production and inventory control, but
excluding certain computer software and electronic data which are part
of the Excluded Assets, as set forth in Section 1.1(i) of the
Disclosure Statement and excluding Seller's FOrMS software, for
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which Buyer will receive a license as provided in the next subsection
(the "Software").
(d) A perpetual, irrevocable, world-wide license to use, but not to
sublicense or to assign to any other party, Seller's FOrMS software,
such software to be licensed "as is", and delivered in magnetic tape
with source code and documentation.
(e) All customer lists and files of the Division, as well as all art work,
negatives, compositional materials and like items used on or with
respect to the Equipment, a preliminary description of which is
contained in Section 1.1(e) of the Disclosure Statement, which
description shall be updated at Closing.
(f) All tooling necessary for the Division or related to the operation of
the Equipment including tooling in the possession of third parties.
(g) All Qualified Inventory (as defined in Section 1.8 hereof), of the
Division, a list of which, along with the prices thereof, will be
contained in Section 1.1(g) of the Disclosure Statement. The parties
acknowledge that the list of Qualified Inventory may be completed
after Closing.
(h) All tangible personal property and all intangible assets or
intellectual property not otherwise specified herein, including, but
not limited to, sales and marketing materials, goodwill permits and
franchises, confidential information, proprietary information, trade
secrets, financial information, books and records, and similar
materials helpful and/or necessary for the performance of the business
of the Division.
Specifically excluded from the Assets being purchased hereunder are the assets
of the Division listed in Section 1.1(i) of the Disclosure Statement, and any
accounts receivable of the Division as of the Date of Closing (the "Excluded
Assets").
1.2 CONSIDERATION FROM BUYER FOR ASSETS. In consideration for the
transfer of the Assets by Seller to Buyer, Buyer shall deliver to Seller:
(a) at Closing, in accordance with the provisions of Article VIII hereof,
a certified or bank cashier's check, payable to the order of Seller or a
wire transfer of federal funds to Seller's bank account, in an amount equal
to $9,200,000 (the "Purchase Price"); and
(b) in six equal monthly installments commencing one month after the Date
of Closing a check payable to the order of Seller or a wire transfer of
federal funds to Seller's bank account in an amount equal to one-sixth of
the value of the Qualified Inventory as defined in Section 1.8 hereof.
1.3 [Intentionally omitted]
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1.4 EXCISE AND SALES AND PURCHASE TAXES. Buyer shall pay all sales, use
or excise taxes due, if any, arising out of the transfer of the Assets.
1.5 FULFILLMENT OF SALES ORDERS. Buyer agrees to fulfill the unfilled
sales orders received in the normal course of the Division's business which are
unfilled on the Date of Closing, and to pay for supplies and maintenance
services ordered in the ordinary course of business but not delivered until
after the Date of Closing.
1.6 ASSUMPTION OF LIABILITIES. With the exception of the obligations
under Section 1.5, Buyer does not assume and Buyer shall not be liable for any
of the obligations or liabilities of Seller, of any kind and nature, other than
those specifically assumed by Buyer pursuant to this Agreement. With respect to
any Assumed Contract Documents, as provided in Section 6.7, the parties shall
enter into an Assignment and Assumption Agreement in the form attached as
Exhibit 1.6.
1.7 EMPLOYEES. Buyer shall extend offers of continued employment to a
sufficient number of Seller's employees located at Seller's St. Paul, Minnesota
plant (including the FOrMS Management employees at its Grey Fox Road plant,
collectively the "St. Croix Facility") so that no "plant closing" or "mass
layoff," as defined under the Federal Worker's Adjustment & Retraining
Notification Act ("WARN") shall occur and no WARN notices shall be required by
Seller. Notwithstanding the foregoing, Buyer does not hereby agree to employ
any specific employee of Seller or assume any employment or collective
bargaining agreement of Seller. Provided it performs its obligations under the
first sentence of this Section 1.7, Buyer shall have the option but not the
obligation to hire, on the Closing Date, any specific person employed by the
Division who is willing to enter into Buyer's employment. It is expressly
understood and agreed that:
(a) Buyer is not a successor or joint employer by virtue of anything in
this Agreement or anything done or not done by Seller pursuant to this
Agreement and Buyer shall not, solely by virtue of this Agreement, be
obligated or responsible for performance of any terms of any labor
agreement applicable to any of Seller's employees, salaried or hourly.
(b) Buyer is not assuming, under this Agreement or otherwise, and Seller
is and shall remain fully responsible for any obligation, responsibility or
liability, whether contractual or statutory, arising out of Seller's
termination of employment of any employees of the Division including
without limitation any liability or obligation with respect to wages,
salaries, severance, holiday, sick leave entitlements, bonuses, vacations,
health care plans or employee benefit plans or any other compensation
arrangement of any nature whatsoever which arise from or relate to any
person's employment by Seller in the Division, or for any "Employee Pension
Benefit Plan" or "Employee Welfare Benefit Plan" as defined in Sections
3(2) and 3(1), respectively, of ERISA (as defined below), sponsored or
maintained by Seller. Buyer shall not be obligated to continue any
employee benefit plans or arrangements of any nature whatsoever presently
or previously sponsored or maintained by Seller.
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(c) Seller agrees to defend, indemnify and hold harmless Buyer and its
directors, officers, employees and representatives from any liability in
connection with this Agreement and the transactions contemplated hereby
arising, all or in part, out of any employee benefit plan maintained by
Seller or to which Seller contributes or has contributed on behalf of the
employees employed by Seller at or prior to the Closing.
(d) Except as provided in this Section, Buyer has no obligation by reason
of this Agreement or any other understanding with Seller to hire nor shall
Buyer be restricted from hiring any terminated employees of Seller at
Closing. All terms and conditions of the employment of any person Buyer
determines to hire are matters within Buyer's sole discretion, it being
expressly understood that Buyer reserves full right (among others) to
terminate the employment of such persons hired by Buyer at any time.
(e) Immediately upon execution of this Agreement and at all times
thereafter unless and until this Agreement is terminated as provided in
Section 14.4, Seller shall make available for inspection and copying its
current Employee List as defined in Section 2.14(a) below along with all
personnel records pertaining to each person employed by Seller including,
without limitation, home address, job position, rate of pay, date and
amount of last salary increase, date of hire and social security number,
job performance reports, absenteeism records and any other information
reasonably requested by Buyer (the "Employee Personnel Data").
(f) Any persons employed with the Division who accept Buyer's offer of
employment may be hired and therefore be considered new hires on the Date
of Closing. The service hours accrued by any individual during their
employment by Seller will not be recognized by Buyer for any purpose,
except as specifically agreed to by Buyer. The eligibility for
participation by any new hires in any health care plan, profit sharing
plan, or any other employee benefit plan sponsored by Buyer will depend
upon the service hours accrued by them during their employment with Buyer
without regard to the number of hours accrued by them during their
employment with Seller, except that all new full time employees shall be
immediately eligible to participate in Buyer's health care plan. For
purposes of determining the amount of paid vacation any hired employee is
entitled to, Buyer shall treat years of service to Seller the same as if
such employee had been employed by Buyer for such period of time, but the
actual amount of paid vacation attributable to a specific number of years
of service shall remain within Buyer's discretion and shall be applied on a
consistent basis with Buyer's policies with respect to its own pre-existing
employees. Any accrued vacation by such employees may be taken by them
after the Date of Closing on an unpaid basis (with respect to Buyer) and
any payment for such vacation period shall remain Seller's obligation
pursuant to Section 1.7(b) above.
(g) Buyer may, at Buyer's expense, conduct any meeting or set up any
interview with any of Seller's employees employed in the Division at or
prior to the Closing which Buyer deems necessary in effecting the
transactions contemplated in this Agreement.
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Seller agrees to permit its employees to participate in such meetings with
Buyer during normal business hours while continuing on the payroll of
Seller and without any pay reduction on account of attendance at such
meetings during Seller's normal business hours.
(h) Seller agrees that as of the Closing Date, it shall pay or have
arranged to pay to each of its employees employed in the Division all wages
and salary amounts due or owing to such employees from Seller with respect
to employment up to the Date of Closing, and at such time shall pay or
arrange to pay to each such employee such additional amounts as may be
necessary to fully compensate the employee for all other employment related
benefits or entitlements owing or accrued by such employee through the Date
of Closing. Notwithstanding the foregoing, Seller agrees that it shall not
pay any severance (other than unpaid vacation pay and accrued cash bonuses)
to Seller's employees who become employees of Buyer until the earlier of
six months from the Date of Closing or their earlier termination by Buyer.
Seller represents to Buyer that it is not under any obligation to pay such
severance at an earlier date.
(i) Seller hereby covenants and agrees that it shall be solely responsible
for and shall pay any and all severance pay or other severance obligations
attributable or owing to any employee of Seller terminated on or before the
Date of Closing and shall have sole responsibility for direct pay or
charge-backs by any governmental agency on account of unemployment
compensation attributable thereto.
(j) Seller hereby acknowledges the possible applicability of WARN to
certain employees of Seller. In order to assure that all employees are
provided the notice to which they may be entitled under the provisions of
WARN or any applicable state or local laws, Seller agrees that it shall
provide any requisite notice to all employees of the Division other than
those located at the St. Croix Facility of any and all employment laws due
to a plant closing or mass layoff resulting from actions taken by Seller
prior to the Closing Date, whether or not the obligation for such notice is
Buyer's or Seller's. Buyer does not contemplate hiring employees from
Seller's Jacksonville, Florida plant (the "Jacksonville Facility"). Seller
shall pay any and all fines, penalties, back pay, benefits and attorneys'
fees determined to be owing by either Buyer or Seller due to any failure of
Seller to comply with any applicable law pertaining to Seller's employees
located at facilities other than the St. Croix Facility, including, without
limitation, by failing to provide the required notice to any such employees
of Seller suffering unemployment loss as a result of termination of
employment on or prior to the Date of Closing.
(k) Seller hereby covenants and agrees that it will be solely responsible
to provide continuation of any and all health benefits required to be
provided by Seller under the Consolidated Omnibus Reconciliation Act of
1985 (COBRA) and under applicable provisions of any state law for any
employee or former employee of the Division, or any qualified beneficiary
of any employee or former employee of the Division, regardless of
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whether Buyer subsequently hires such employee or former employee. Seller
also covenants and agrees that it shall be solely responsible to provide
continuation of any and all other benefits required to be continued for
employees or former employees of the Division under applicable state or
federal law, including without limitation, life insurance continuation
under state law.
1.8 PURCHASE OF QUALIFIED INVENTORY. As used herein, the term "Qualified
Inventory" means all inventory of the Division held for sale in the normal
course of business in quantities which Buyer and Seller reasonably determine
would be inventoried by the Division as a going concern to assure its ability to
meet its customers' requirements in the ordinary course of business within 180
days after the Date of Closing. The amount of Qualified Inventory will be
jointly determined by the parties just prior to the Date of Closing and shall
take into account the historical rate of usage of such items by Seller.
Qualified Inventory shall fall into three categories: (i) raw paper stock ("Raw
Stock"); (ii) semi-finished ("Semi-Finished Stock); and (iii) finished
("Finished Stock"). In determining whether inventory is or is not Qualified
Inventory, Buyer and Seller shall act in a reasonable manner and shall be
entitled to take into consideration whether it has been customized or ordered to
meet a specific customer's requirements or standards and whether or not each
customer still has the same standards or requirements. Within ten (10) days of
the Date of Closing, all Qualified Inventory shall be allocated to one of the
three foregoing categories and a cost for all Qualified Inventory for each
category shall be determined as follows: the cost of raw stock shall equal the
lesser of Seller's cost (net of rebates, special discounts and credits which
Seller receives on such stock) or its current market price (the "Raw Cost"); the
cost for all Semi-Finished Stock (the "Semi-Finished Cost") shall be computed
based on Seller's cost thereof (including a reasonable allocation of Seller's
production cost to such products, as agreed to in advance by the parties, and
reflecting any rebates, special discounts and credits), and the cost for all
Finished Stock shall be in an amount equal to 70% of the retail price thereof
(the "Finished Cost"). Buyer agrees to purchase the Qualified Inventory in six
equal monthly installments, commencing one month after the Date of Closing, with
delivery to occur on an as needed basis, with final delivery to occur six months
after the Date of Closing, provided that Seller has maintained the applicable
Qualified Inventory in a merchantable condition. The purchase price shall be
equal to the Raw Cost, Semi-Finished Cost or Finished Cost (as the case may be)
applicable to the Qualified Inventory purchased. All Qualified Inventory shall
be F.O.B. point of shipment.
1.9 LEASE OF ST. CROIX FACILITY. On the Date of Closing, Seller and Buyer
shall enter into a Lease in the form attached hereto as Exhibit 1.9, whereby
Seller shall lease to Buyer the St. Croix Facility (the "St. Croix Lease").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants that:
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2.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and is duly qualified as a foreign corporation under the laws of the
State of Florida and has all necessary corporate power to own its properties and
to operate its business as now owned and operated by it.
2.2 ABSENCE OF SPECIFIC CHANGES. Since February 25, 1996, there have not
been any:
(a) transactions by the Division outside the ordinary course of business
as conducted on that date;
(b) destruction, damage to or loss of any Asset;
(c) changes in accounting methods or practices;
(d) sale or transfer of any Asset, except in the ordinary course of
business;
(e) amendment or termination (prior to its expiration date) of any
contract, agreement or license entered into with, or entered into primarily
with respect to the products of, the Division;
(f) mortgages, pledges or other encumbrances upon any Asset; or
(g) labor trouble including but not limited to charges of unfair labor
practices, grievances filed under any collective bargaining agreement,
arbitration awards, side letters or any other written agreements which
"interpret" or modify any of Seller's existing collective bargaining
agreements, EEOC charges, state employment discrimination charges, OSHA
compliance, wrongful discharge claims or other event or condition of any
character which would materially affect the financial condition, business,
Assets, or prospects of the Division;
(h) agreement by Seller to do any of the foregoing.
2.3 TAXES. There are no tax liens on any Assets. No personal property
tax nor any other tax is payable with respect to any of the Assets. Seller
knows of no unpaid assessment for additional state, county, local, federal or
foreign taxes for any fiscal year period ending on or before the Closing Date
with respect to the Assets or the Division.
2.4 TANGIBLE PERSONAL PROPERTY. The Assets to be conveyed by Seller to
Buyer constitute all of the assets owned by Seller in operating the Division,
except for the Excluded Assets. Except as stated in Section 2.4 of the
Disclosure Statement, no tangible personal property used by Seller in connection
with the Division's business is held under any lease, security agreement,
conditional sales contract, or other title retention or security agreement, or
is located other than in the possession of Seller at either the Jacksonville
Facility, the St. Paul
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Facility, the Grey Fox Road Facility or delivered at Closing (with respect to
certain back-up records of Seller). With the exception of the Excluded Assets
and the property listed in Section 2.4 of the Disclosure Statement, the Assets
constitute all the personal and real property necessary for producing the
products produced by the Division as now operated.
2.5 INTELLECTUAL PROPERTY RIGHTS. (a) All copyright, trademark or trade
name registrations, patents and all applications pending thereon, which are
owned by Seller and used primarily by the Division, and (b) all material
trademark, trade name, copyright, patent or know-how licenses granted by or to
the Seller with respect to the Division which Seller is authorized to assign,
are being conveyed to Buyer hereunder and are set forth in Section 2.5 of the
Disclosure Statement together with all registration, patent numbers or other
identification information with respect thereto. To Seller's knowledge, Seller
owns or possesses adequate rights to use all trademarks, trade names,
copyrights, patents, know-how and other proprietary information used or held for
use in connection with the Division's business as currently being conducted and
the validity and the rights thereto of the Seller have not been questioned in
any litigation to which the Seller or any affiliate is a party nor to Seller's
knowledge is any such litigation threatened. With the exception of any art work
or designs specified by a customer of the Division, as to which Seller makes no
representation, in connection with the operation of the Division, Seller has not
infringed and/or is not now infringing, on any of the copyrights or patents
belonging to any other person, firm, or corporation.
2.6 TITLE TO ASSETS. Seller has good and marketable title to the Assets,
whether real, personal or mixed, tangible or intangible. The Assets are free
and clear of liens and restrictions on or conditions to transfer or assignment,
and free and clear of mortgages, liens, pledges, charges, encumbrances,
conditions, restrictions, etc.
2.7 CUSTOMERS AND SALES. A list of customers of the Division purchasing
Restricted Products (as defined in Section 9.1 below), together with summaries
of the sales of such products made to each such customer during 1995, has
previously been delivered to Buyer (the "Customer List"). The Customer List is
a true and accurate list of such information.
2.8 NO REGULATORY VIOLATION. With respect to the operations of the
Division, Seller has received no notice of any violation of any law, order,
rule, regulation, writ, injunction or decree of any governmental authority or
court, domestic or foreign, and, to the best of its knowledge, there are no such
violations. In addition, the execution of this Agreement and the consummation
of the transactions contemplated hereby will not result in any such violation.
2.9 PENDING LITIGATION. There is no suit, action, arbitration or legal,
administrative or other proceeding or government investigation pending or, to
the best knowledge of Seller, threatened against or affecting the operations of
the Division or the Assets. Seller has no knowledge of any defects in any of
the Division's products, which might result in the assertion of a claim and no
such claim has been asserted.
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2.10 AUTHORITY AND CONSENT. Seller has the right, power, legal capacity
and authority to enter into, and perform its obligations under this Agreement.
All approvals and consents of any party necessary in connection with this
transaction have been obtained by Seller. The execution and delivery of this
Agreement by Seller has been duly authorized by Seller and constitutes a valid
and binding agreement of Seller, enforceable in accordance with its terms.
2.11 FINANCIAL STATEMENTS. Section 2.11 of the Disclosure Statement
contains the unaudited profit and loss statements of the Division (including the
subsidiary profit and loss statements for each of the locations of the Division)
for the one year and three month periods ended December 31, 1995 and March 31,
1996, respectively (the "Financial Statements"). The Financial Statements
contain a footnote explaining the handling of rebates, special discounts (each
of which are not included in net sales) and credits (which are included in net
sales) and the approximate percentage of net sales represented by the Restricted
Products (as defined in Section 9.1 below). The Financial Statements fairly
present the results of operations for the respective periods indicated.
2.12 CONTRACT DOCUMENTS. All material agreements and contracts entered
into with, or entered into primarily with respect to products of, the Division
relating to products to be supplied to customers of the Division, service or
maintenance agreements on the Assets, and warranties with respect to the Assets
are scheduled and identified in Section 2.12 of the Disclosure Statement
(collectively hereinafter referred to as "Contract Documents"). Copies of the
Contract Documents shall be furnished by Seller to Buyer immediately upon its
request.
2.13 SUPPLIERS. All of the Division's suppliers or vendors have been
provided by Seller to Buyer and Seller is not aware of any fact or circumstance
that would inhibit or prohibit such suppliers or vendors continuing to supply
Buyer on a similar ongoing basis subsequent to the Date of Closing.
2.14 EMPLOYMENT MATTERS.
(a) Seller has provided Buyer with a true and accurate list (the "Employee
List") of the names of all the employees of the Division employed by Seller
at its St. Croix Facility (including Forms Management employees employed at
its Grey Fox Road Facility). The Employee List includes each employee's
name, job position, rate of pay and length of service.
(b) The Deluxe employee handbook entitled "Checking in with Deluxe", which
has been previously delivered to Buyer, sets forth a description, with
respect to the non-exempt employees of the Division, of all employment and
consulting agreements, executive compensation plans, deferred compensation
agreements, profit sharing plans, employee pension and other retirement
plans, death benefit plans, sickness or disability plans, severance plans,
educational assistance plans, employee stock options or stock purchase
plans and group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments, whether or not
legally binding,
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including without limitation fringe benefit programs or practices, holiday,
vacation and other bonus practices, whether written or oral, and whether
express or implied. Seller may omit from listing employee benefit plans
not currently in effect; provided, however, that such omissions shall not
relieve Seller from any past or future obligations arising from such former
employees' benefits plans and further agrees to indemnify Buyer from any
liability, as provided below, from such former employee benefit plans
notwithstanding the omission of the description of such former employee
benefit plan from Section 2.14(b) of the Disclosure Statement. All such
employees are employed "at will" and their employment is terminable by
Seller on 30 days' notice or less, without penalty or damages.
(c) All employees and former employees of the Division will be paid by
Seller under their respective employment agreements, if any, for the period
up to and including the Date of Closing.
2.15 ENVIRONMENTAL AND SAFETY LAWS. With respect to the Assets, the
Division, the St. Croix Facility and the Jacksonville Facility, Seller is not in
violation of any applicable federal, state or local statute, law or regulation
relating to environmental matters or occupational health and safety matters, no
expenditures are or will be, as of the Date of Closing, required in order to
comply with any such statute, law or regulation relating to the Assets, the
Division's business, the St. Croix Facility or the Jacksonville Facility.
Neither Seller, nor any entity or person has, at any time, with respect to the
Assets or the Division's business or the St. Croix Facility or Jacksonville
Facility (i) "released," "discharged," or actively or passively consented to the
"release," "discharge," or "threatened release" of any Hazardous Substance (as
defined below); (ii) taken any action in "response" to a "release" in connection
with the Assets, the Division's business or the St. Croix Facility or
Jacksonville Facility; or (iii) failed to give notice of the "discharge" if
required by applicable law; or (iv) otherwise engaged in any activity or omitted
to take any action which could subject Seller or Buyer to claims for intentional
or negligent torts, strict or absolute liability, either pursuant to statute or
common law, in connection with Hazardous Substances located in or about the
Assets or in connection with the Division's business, including the generating,
transporting, treating, storage or manufacture of any Hazardous Substance. The
terms set within quotation marks above shall have the meaning given to them in
the Comprehensive Environmental Response and Liability Act, 42 U.S.C. Section
6901, et. seq., as amended by the Super Fund Amendments and Reauthorization Act
of 1986 ("CERCLA"), or any other federal, state or local environmental law,
including but not limited to the Minnesota Environmental Response and Liability
Act, Minn.Stat. Section 115B ("MERLA") and the Minnesota Petroleum Tank Release
Cleanup Act, Minn.Stat. Section 115C. "Hazardous Substances" means hazardous
waste, urea formaldehyde, polychlorinated biphenyls, asbestos, petroleum,
natural gas, radon, synthetic gas used for fuel or mixtures thereof, any
materials related to any of the foregoing, and substances defined as "hazardous
substances," "toxic substances," "hazardous waste," "pollutant," "contaminant,"
"source material," "special nuclear materials" and "by-product material" in
CERCLA, the Resource Conservation Recovery Act as amended 2 U.S.C. Section 6901,
et. seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et. seq., the Clean Water Act, 33 U.S.C. Section 1251, et. seq.,
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MERLA and all other local, state and governmental environmental laws or any
regulations promulgated pursuant to any of the foregoing statutes.
2.16 CORPORATE POWERS. Seller has the corporate power to own, lease or
operate all properties and Assets owned, leased or operated by the Division, to
carry on its business as now conducted, to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement.
2.17 NO CONTRACTUAL VIOLATIONS. Neither the execution of this Agreement
nor the performance of Seller's obligations pursuant hereto or the consummation
of the transactions contemplated hereby, will conflict with, or result in a
breach or violation of any of the terms or provisions of, or constitute, or with
the passage of time or the giving of notice constitute, a default under any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond
debenture, note agreement or other evidence of indebtedness, lease, contract or
other agreement or instrument to which Seller is a party, or by which Seller or
any of the Assets is bound, or Seller's Articles of Incorporation or Bylaws.
2.18 ADDITIONAL ST. CROIX LEASE REPRESENTATIONS. With respect to the St.
Croix Lease:
(a) There are no service agreements or other agreements between any other
parties which relate to the operation of the St. Croix Facility that
are not terminable on 30 days or less notice without penalty for
termination.
(b) Seller has received no notice or complaint threatened or otherwise
from any governmental authority or insurance underwriter relating to
the condition of or operations at either of the St. Croix Facility.
(c) Any improvements constituting a part of the premises subject to the
St. Croix Lease will be maintained in good condition up to the Closing
Date.
(d) To the best of its knowledge there are no existing proceedings nor any
threatened proceedings against the St. Croix Facility, either
administrative or judicial, on account of any alleged violation of any
laws, any rules, regulations or order, and there is no litigation or
condemnation proceeding pending, nor to the best of its knowledge,
threatened, which would affect the St. Croix Facility or the use
thereof by Buyer.
(e) Seller has good and marketable title to the St. Croix Facility, free
and clear of all liens, mortgages, charges and encumbrances.
2.19 TOOLING. There is no material tooling used in connection with any
products being produced on the Equipment or the packaging thereof.
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2.20 SELLER'S BUSINESS. Seller is not in the business of selling the type
of property which is being sold pursuant to this Agreement; the Assets
constitute substantially all of the assets of the Division; and the Division
constitutes an identifiable segment of Seller's trade or business.
2.21 PREPAID SERVICE AGREEMENTS. Seller has no prepaid service agreements
with respect to any of the Equipment.
2.22 FULL DISCLOSURE. None of the representations and warranties made by
Seller, or made in the Exhibits to this Agreement, the Disclosure Statement or
in any certificate or memorandum furnished or to be furnished pursuant to this
Agreement, contains or will contain any untrue statement of a material fact.
Wherever the terminology "to the best of Seller's knowledge" or similar phrases
are used, such term refers to the actual knowledge of the officers of Seller
involved in the operation of the Division and, if not officers, the senior
management of the Division.
ARTICLE III
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants that:
3.1 ORGANIZATION. Buyer is a corporation duly organized, existing and in
good standing under the laws of the State of Minnesota. The execution and
delivery of this Agreement and the consummation of the transaction by Buyer have
been duly authorized and no further corporate authorization is necessary on the
part of Buyer.
ARTICLE IV
SELLER'S OBLIGATIONS BEFORE CLOSING
Seller covenants that from the date of this Agreement until the Closing:
4.1 BUYER'S ACCESS TO PREMISES AND INFORMATION. Buyer, its counsel, its
accountants and other representatives shall have full access during normal
business hours to all properties, accounts, records, contracts and documents of
or relating primarily to the Division or as may be necessary to determine the
accuracy of Seller's representations and warranties. Seller shall furnish or
cause to be furnished to Buyer and its representatives all data and information
concerning the business, finances and properties of the Division as Buyer shall
reasonably request. Seller shall provide Buyer with copies of all of its
Contract Documents and Trademark and Trade Name registrations within 15 days of
the date hereof.
4.2 CONDUCT OF BUSINESS IN NORMAL COURSE. Seller will carry on the
business and activities of the Division diligently and in substantially the same
manner as previously had been carried out and shall not make or institute any
unusual or novel business practice which varies from the methods used by Seller
as of the date of this Agreement.
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4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Seller will use its best
efforts to preserve the Division's business intact and to preserve the present
relationships with its customers, suppliers and employees. In the event that
Buyer determines prior to the Date of Closing that the Division's business and
relationships are in danger of deteriorating, the parties shall mutually agree
to an accelerated closing.
4.4 REPRESENTATIONS AND WARRANTIES AT CLOSING. All representations and
warranties of Seller set forth in this Agreement and any written statements
delivered to Buyer under this Agreement, including the Disclosure Statement,
will be true and correct in all material respects as of the Date of Closing as
if made on that date.
4.5 EXCLUSIVE DEALINGS. Seller agrees that prior to the Date of Closing
it shall not enter into or conduct any discussions, directly or indirectly, with
any prospective purchaser, suitor or other entity interested in acquiring,
merging with or consolidating with the Assets or the Division.
4.6 PROMPT ACTION. It will promptly take all action contemplated by this
Agreement necessary to complete the transactions contemplated by this Agreement.
4.7 CONFIDENTIALITY. It will treat this Agreement, and the transactions
contemplated hereby, as confidential, and will not issue any press release or
otherwise provide any information regarding such transactions without the prior
consent of Buyer.
ARTICLE V
BUYER'S OBLIGATIONS BEFORE CLOSING
5.1 COOPERATION IN SECURING CONSENTS OF THIRD PARTIES. Buyer will use its
best efforts to assist Seller in obtaining the consent of any necessary third
persons or agencies to the assignment and transfer to Buyer of any of the Assets
to be assigned and transferred under the terms of this Agreement.
5.2 PROMPT ACTION. It will promptly take all action contemplated by this
Agreement necessary to complete the transactions contemplated by this Agreement.
5.3 CONFIDENTIALITY. Subject to its rights under Article XII hereof, it
will treat this Agreement, and the transactions contemplated hereby, as
confidential, and will not issue any press release or otherwise provide any
information regarding such transactions without the prior consent of Seller.
5.4 [INTENTIONALLY BLANK]
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ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
6.1 OBLIGATION TO PURCHASE. The obligation of Buyer to purchase the
Assets and proceed pursuant to this Agreement are subject to the satisfaction at
or before the Closing of all of the conditions set forth within this Agreement
and within this Article. Buyer may waive any or all of these conditions in
whole or in part without prior notice, provided, however, that no such waiver of
a condition shall constitute a waiver by Buyer of any of the other rights or
remedies, at law or in equity, if Seller shall be in default of any of the
representations, warranties or covenants under this Agreement.
6.2 ACCURACY OF REPRESENTATIONS. Except as otherwise permitted by this
Agreement, all representations and warranties of Seller contained in this
Agreement, or in any written statement delivered to Buyer under this Agreement,
shall be true in all material respects on and as of the Date of Closing as
though made at such time.
6.3 PERFORMANCE OF SELLER. Seller shall have performed, satisfied and
complied with all of the terms and conditions of this Agreement.
6.4 NO ADVERSE CHANGE. During the period from the date of execution until
the Date of Closing, there shall have been no material adverse change in the
business of the Division.
6.5 OPINION OF SELLER'S COUNSEL. Buyer shall have received from counsel
to the Seller an opinion dated the Closing Date, in form and substance
satisfactory to Buyer and its counsel, which opinion shall be in substantially
the form attached hereto as Exhibit 6.5.
6.6 ABSENCE OF LITIGATION. No action, suit or proceeding before any court
or government body, pertaining to the transactions contemplated by this
Agreement or the Assets, shall have been instituted or threatened on or before
the Date of Closing.
6.7 APPROVAL OF CONTRACT DOCUMENTS. On or before 15 days after receipt of
the Contract Documents, Buyer shall notify Seller, which, if any, of the
Contract Documents it elects to assume (the "Assumed Contract Documents").
Buyer shall only assume the Contract Documents set forth in the notice and all
others shall remain Seller's obligation.
6.8 [Intentionally blank]
6.9 [Intentionally blank]
6.10 DUE DILIGENCE REVIEW. Buyer having completed its due diligence on the
Assets and having determined that all representations and warranties of Seller
relative to the Assets and the Division are true and correct in all material
respects.
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6.11 FEDERAL TRADE COMMISSION CLEARANCE. Buyer obtaining (if applicable)
any necessary clearances or exceptions from the Federal Trade Commission (and
any corresponding state agency) for the transactions contemplated by this
Agreement. If it is determined that a filing is required under the Hart Scott
Rodino Act, then the parties will timely complete their respective filings, at
their own expense, or share the costs of a joint filing equally, as they shall
mutually agree.
6.12 [Intentionally blank]
6.13 ENVIRONMENTAL MATTERS. Buyer having approved, which approval shall
not be unreasonably withheld, the results of what is commonly referred to as a
Phase I Environmental Assessment of the St. Croix Facility performed by an
environmental engineer selected by Buyer and approved by Seller. The cost of
conducting the Phase I Environmental Assessment shall be paid for by Buyer.
Buyer and its environmental engineer shall be permitted reasonable access to the
St. Croix Facility for the purpose of conducting such inspections as may be
necessary in order to complete the Phase I Environmental Assessment. In the
event that the Phase I Environmental Assessment discloses matters of concern
which require testing that would fall within the scope of what is commonly
referred to as a Phase II Environmental Assessment, Seller agrees to pay the
cost of performing such tests and preparation of a Phase II Environmental
Assessment and shall undertake and pay the cost of any remedial action
recommended therein or required or recommended by any governmental agency. In
the event that either of the Phase I or Phase II Environmental Assessments
cannot be completed prior to the Closing Date, Buyer at its option may waive
its/their completion prior to Closing, in which case they shall be completed as
soon as practical after Closing. In the event that a Phase I or Phase II
Environmental Assessment discloses the release or discharge of any Hazardous
Substance upon the St. Croix Facility and Buyer elects, at its option, to waive
the requirement that such matter be remediated prior to Closing (or after
Closing, as the case may be), as between Seller and Buyer, Seller shall be
irrebuttably presumed to be the sole party responsible for such release or
discharge even though Buyer may subsequent to the Date of Closing use similar
chemicals, Hazardous Substances or processes to those used by Seller prior to
the Date of Closing and Seller hereby agrees to indemnify and hold harmless
Buyer against loss or liability including attorneys' fees to third parties and
governmental authorities arising out of such releases or discharges. In the
event that Buyer requires that a Phase II Environmental Assessment be prepared,
then Buyer must also approve, which approval shall not be unreasonably withheld,
the results of the Phase II Environmental Assessment.
6.14 NO CHANGE IN STATUS OR CONDITION OF ASSETS. There shall have been no
material casualty or other material physical change in the condition of the
Assets and no proceeding in condemnation shall be pending with respect to any of
the Assets.
6.15 CONSENTS. Seller having obtained the consents of any third parties
necessary for consummation of this Agreement and the transactions contemplated
hereby.
6.16 [Intentionally blank]
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6.17 SELLER TRANSFERS OF EMPLOYEES. Except for the 12 employees with
experience in Seller's DCOP press production operations specified in Section 5.4
above, Seller will discontinue transfers of employees from the St. Croix
Facility.
6.18 LICENSES. Seller and Buyer having obtained any required consents to
assignments of any licenses by Seller to Buyer or with respect to Seller using
any computer software for the benefit of Buyer.
ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Seller to sell the Assets under this Agreement are
subject to the satisfaction, on or before the Date of Closing, of all of the
following conditions:
7.1 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Buyer contained within this Agreement or in
any written statement delivered by Buyer under this Agreement shall be true in
all material respects on and as of the Date of Closing as though such
representations and warranties were made on such date.
7.2 BUYER'S PERFORMANCE. Buyer shall have performed and complied with all
of the covenants and agreements and satisfied all conditions that it is required
by this Agreement to perform, comply with or satisfy before the Date of Closing.
ARTICLE VIII
THE CLOSING
8.1 TIME AND PLACE. The transfer of the Assets by Seller to Buyer (the
"Closing") shall take place at the offices of Parsinen Bowman Kaplan & Levy
P.A., 100 South Fifth Street, Suite 1100, Minneapolis, Minnesota 55402, at 10:00
a.m. local time on July 22, 1996, or at such other time and place as the parties
shall agree (the "Closing Date" or the "Date of Closing").
8.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall deliver
or cause to be delivered to Buyer:
(a) A Bill of Sale together with such other instruments of assignment and
transfer of all of the Assets, in a form acceptable to Buyer's
counsel, which shall be free and clear of liens and encumbrances.
(b) Executed St. Croix Lease.
(c) Appropriate assignments of all trademarks, service marks, copyrights,
trade names, patents, applications for the foregoing and Assumed
Contract Documents in form and substance acceptable to Buyer and its
counsel.
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(d) Original counterparts of all Assumed Contract Documents.
(e) Such other agreements, contracts, certificates and/or exhibits as are
required and/or contemplated pursuant to this Agreement.
(f) An opinion of Seller's counsel dated the Date of Closing as provided
for in Section 6.5.
(g) [Intentionally blank].
(h) Any and all back-up records relating to the Division which are not
kept at the St. Croix Facility, and any such records kept at the St.
Croix Facility.
(i) A certified copy of the Disclosure Statement.
8.3 BUYER'S OBLIGATION AT CLOSING. At the Closing, Buyer shall deliver to
Seller the following instruments and documents against delivery of the items
specified in Article 8.2:
(a) A certified or bank cashier's check or wire transfer of federal funds
to Seller's bank account in the amount of $9,200,000.
(b) Certified copies of Buyer's Articles of Incorporation and Bylaws and
resolutions of Buyer's Board of Directors in form satisfactory to
counsel for Seller, authorizing the execution and performance of this
Agreement and all actions to be taken by the Buyer hereunder.
(c) Such other agreements, contracts, certificates and/or exhibits as are
required and/or contemplated pursuant to this Agreement.
ARTICLE IX
NON-COMPETE AGREEMENT
9.1 NON-COMPETE AGREEMENT. As a condition to Buyer's obligations under
this Agreement, for a period of four (4) years from the Date of Closing, Seller
shall not manufacture any of the following products (except as specifically
authorized in the next sentence): cash tickets, general ledger tickets, process
control documents, teller receipts, IBM test documents, drive-up envelopes and
any products listed in Section 9.1 of the Disclosure Statement (the "Restricted
Products"); and, for a one (1) year period after the Date of Closing, all
requests for information on those products will be referred to Buyer.
Notwithstanding the foregoing, during the four (4) year period, Seller shall be
permitted to (i) take orders on the Restricted Products, provided that it
provides Buyer with a right of first refusal (the "Right of First Refusal," as
described in the next three sentences) to produce such products on a sub-
contract basis on behalf of Seller, (ii) continue to service customers as
provided in Section 10.5 hereof, and (iii) market forms production software
which may enable purchasers to produce Restricted Products. The
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Right of First Refusal shall permit Buyer to fill an order for Restricted
Products on the same terms and conditions as proposed by any other
subcontractor. Seller shall submit a request for proposal to Buyer
contemporaneously with any request to another subcontractor and shall furnish
Buyer with the material terms and conditions, including pricing, of the other
subcontractor's proposal. Buyer shall then have three days after receipt of the
other subcontractor's proposal in which to exercise the Right of First Refusal
by written notice to Seller.
9.2 INJUNCTIVE RELIEF. Seller agrees that injunctive relief is an
appropriate remedy for breach of any covenant contained in this Article. Such
injunctive relief shall be in addition to and not in limitation of any monetary
relief or other remedies or rights to which Buyer is or may be entitled to at
law, in equity or under this Agreement.
ARTICLE X
SELLER'S OBLIGATIONS AFTER CLOSING
10.1 CUSTOMER CONCESSIONS. The parties acknowledge that Seller offers
customers various price concessions in the form of discounts, rebates and free
quantities of internal bank forms in connection with the purchasing programs of
its customers ("Concessions"). In connection with sales of any of the
Restricted Products on which Seller has granted a Concession to a customer which
it desires Buyer to honor, Buyer shall sell said Restricted Products to such
customer at the Concession price and bill Seller for the difference between
Seller's customary price for such products (as specified in Seller's catalogue,
or as discounted for volume) and the Concession price. Buyer shall invoice
Seller for the value of such Concessions as they are shipped and such invoices
shall be paid on a net 30 day basis. In connection with any such customers,
Seller represents and warrants to Buyer that its pricing has been and will
continue to be in compliance with all applicable non-discriminatory pricing
requirements of 15 U.S.C. Section 13(a)-(f)(1988) (the "Robinson-Patman Act")
and agrees to indemnify and hold Buyer harmless from and against claims arising
out of asserted violations thereof with respect to the Concessions whether
asserted by governmental entities or agencies, or by third parties, as provided
in Section 10.10 below.
10.2 INVOICING. For a period of up to one year following the Date of
Closing, Seller shall assist Buyer with respect to invoicing of customers
(including permitting Buyer to use Seller's invoicing system to the extent
previously used by the Division, such customers' accounts receivable master
files, cash receipts and summary billing not specifically transferred to Buyer
pursuant to this Agreement) for Restricted Products, so that such customers will
remain on the same schedule and under the same format as they have been using
with Seller. For 90 days after the Date of Closing new customers may not be
added to the invoicing system other than General Financial Supply, Inc. and
after said 90 days new customers may be added, subject to the restrictions set
forth in Section 10.3 below. Seller agrees to run its billing system in a
manner which does not use any software of American Software, Inc. (one of
Seller's software licensors which forbids Seller from using its software for any
third party's benefit), and to indemnify and hold Buyer harmless from any claims
arising from the breach of any software licensing agreement granted to Seller by
American Software, Inc. Buyer shall pay fees for billing and
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receivable file maintenance, invoice printing, postage, CPU usage, and billing
cost arising from 8100 to FOrMS migration at a price not greater than Seller
charges its own divisions. The specific information to be contained on bills
will be mutually agreed to by Seller and Buyer and designed to insure a smooth
transition for invoicing of customers. In addition, Seller will assist Buyer in
developing a method of producing an account receivable transaction file to
enable Buyer to track accounts receivable, with transition to Buyer's billing to
be accomplished as soon as practical after Closing. Sections 10.2 and 10.3 of
the Disclosure Statement contain, among other things, further understandings of
the parties with respect to these matters, including a provision that for a
period of 90 days after the Date of Closing, Seller shall invoice to customers,
in its name, all production with respect to Restricted Products and shall be
responsible for payment of such invoices to Buyer in accordance with the
schedule identified in Section 10.2 of the Disclosure Statement. Any
uncollected accounts receivable remaining after the final payment from Seller to
Buyer pursuant to the schedule identified in Section 10.2 of the Disclosure
Statement shall be assigned to Buyer and, if subsequently thereto, Seller
collects said receivables, it shall remit the same to Buyer.
10.3 ACCESS TO CERTAIN OF SELLER'S SYSTEMS AND EQUIPMENT. For a period of
one year from the Date of Closing, Seller shall permit Buyer reasonable use of
its O.N.E. system as well as to Seller's mainframe for use in connection with
the FOrMS software system being transferred hereby. Section 10.3 of the
Disclosure Statement contains further understandings of the parties with respect
to these matters, including certain of the specific services to be provided by
Seller and the charges to Buyer therefor. Seller shall also provide reasonable
personnel and assistance to Buyer in order for it to be able to access and use
these systems, as well Seller's dedicated phone lines (subject to applicable
usage charges) for use with the FOrMS software for such period of time.
Specifically, Seller will allow customers currently using the O.N.E. system to
continue to order by use of O.N.E., and agrees, at Buyers request, to add banks
that are part of the First Bank System (FBS) to the O.N.E. system, and will
continue to operate FOrMS on Seller's mainframe for the benefit of Buyer for
order receipt, order assembly, pricing, migrating data from 8150s, and
production of production and customer reports, for said one year period. Seller
shall provide the required support to add FBS banks to the O.N.E. system. In
addition, for a period of 90 days after the Date of Closing, Seller will
continue to input manually generated invoices into its FOrMS management and
accounts receivable systems so that said information is stored in the same place
as other such information of the Division. Buyer will pay applicable mainframe
and system usage charges computed in generally the same manner as previously
charged by Seller to the Division, as outlined in Section 10.3 of the Disclosure
Statement. Seller specifically agrees that for a period of 90 days after the
Date of Closing, at Buyer's request, it will add FBS banks, General Financial
Supply, Inc. (a wholly-owned subsidiary of Buyer) and any other customer of
Buyer which is otherwise a customer of Seller to the FOrMS system data base and
billing function. In addition during such 90 day period, Seller shall develop
and implement, at Buyer's expense a customized Northstar billing system as
provided for in Section 10.3 of the Disclosure Statement to be used up to the
first anniversary of the Date of Closing. After the expiration of the 90 day
period, Seller agrees to continue to add any customers to the separate data base
and the billing function of Buyer on the FOrMS system.
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10.4 SELLER'S "DCOP" PRESSES. In addition to the foregoing, and
conditioned on Buyer taking appropriate steps to ensure restricted access and
confidentiality with respect thereto, Seller shall leave all of its "DCOP
Presses" (the term DCOP Press shall include all necessary and ancillary
equipment listed on Schedule D of Section 1.1 (i) of the Disclosure Statement)
at the St. Croix Facility for a period of up to 270 days after the Date of
Closing, and all of the DCOP Presses located at the Jacksonville Facility for a
period of 60 days after the Date of Closing, for the production of Restricted
Products. The DCOP Presses which are left on the premises of the St. Croix
Facility shall be operated by Buyer's employees, with Buyer being responsible
for customary daily preventive maintenance. For the first 90 days, Seller shall
be responsible for all other costs associated therewith including repair,
replacement and other maintenance and normal wear and tear. For the remaining
180 days Seller shall still be responsible for making repairs to the DCOPs, but
Buyer shall pay Seller for the cost thereof. For the first 90 days after the
Date of closing, there shall be no charge for use of the DCOPs. For the
remaining 180 days, Buyer shall pay Seller a use fee of $2,400.00 per unit per
each 30 day period monthly in advance. Buyer may cease using one or more of the
DCOPs at anytime during said 180 days, upon notice thereof to Seller and
thereupon the use fee shall terminate for such unit and the use fee for such
thirty period shall be prorated on a per diem basis with the unamortized portion
to be refunded to Buyer. Seller shall remove the DCOPs at its own expense when
such use terminates. The DCOPs shall only be used for processing and
manufacturing the Restricted Products and Requirements Products. At Buyer's
option, it may continue its use of the DCOPs for an additional 90 days upon
expiration of said 270 days, upon the same terms and conditions as during the
180 day period except that the use fee per unit per 30 day period shall be
increased to $3,000.00.
10.5 SELLER'S SALES PERSONNEL. For a period of six months following the
Date of Closing, Seller shall cause its sales representatives and other sales
personnel servicing customers who purchase Restricted Products to continue to
service such customers on behalf of Buyer with respect to products produced on
the Equipment (with customer service issues and the like) in the same manner as
they were prior to the Date of Closing. It is the intent of this Section to
ensure a smooth transition of Restricted Products customers from Seller to Buyer
without a noticeable interruption in customer service.
10.6 USE OF JACKSONVILLE FACILITY. For a period of sixty (60) days
following the Date of Closing, Seller shall operate, for the account of Buyer,
the Assets located at the Jacksonville Facility with employees of Seller located
at the Jacksonville Facility and Buyer shall pay Seller (a) 135% of the hourly
wage of these employees, including supervising employees (b) equipment repairs,
(c) telephone and (d) proportionate cafeteria expense.
10.7 DELIVERY OF QUALIFIED INVENTORY. When and as requested by Buyer,
Seller shall deliver such quantities of the Qualified Inventory which are not
warehoused at the St. Croix or Grey Fox Road Facilities as Buyer may request
from time to time; provided, however, that any Qualified Inventory remaining
with Seller six months after the Date of closing shall be delivered to Buyer
within 10 days of such date. In addition, Seller agrees to permit Buyer,
without
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charge, to replenish and supplement inventory stored at the Grey Fox Road
facility from time to time during said six month period.
10.8 REQUIREMENTS AGREEMENT. Seller agrees, for a period of two years from
the Date of Closing, to purchase its requirements of custom official checks and
custom money orders (the "Requirements Products") from Buyer, pursuant to the
terms and conditions of this Section. Seller's purchase price for the
Requirements Products shall equal 65% of its retail price therefor. Seller
agrees to adjust its retail prices for Requirements Products at least once every
six months to reflect then-current market conditions for such products. Section
10.8 of the Disclosure Statement contains a categorization of the Requirements
Products into the following four categories: (i) standard base stock; (ii) base
stock unique to a particular financial institution; (iii) special litho; and
(iv) vendor produced checks. Buyer agrees to meet a five business day
turn-around time for the products falling under categories (i) and (ii) and a
ten business day turn-around time for products falling under categories (iii)
and (iv). In connection with the manufacture of any of the Requirements
Products for Seller, Buyer shall have the option to purchase its base stock
requirements from Seller at Seller's cost, plus an allowance for Seller's direct
production cost, including an overhead allocation but no profit.
Notwithstanding the above, Seller shall be permitted to manufacture up to an
aggregate of 105% of Seller's annual volume (during the preceding 12 calendar
months prior to the Date of Closing) of custom official checks produced out of
its Chicago and Los Angeles facilities annually during the term of this
Requirements Agreement. Subject to the previous sentence, Seller agrees not to
manufacture any of the Requirements Products nor purchase them from any other
source during this period.
10.9 AUDIT OF DIVISION. Seller shall assist and cooperate with Buyer in
obtaining an independent certified audit of the operations of the Division for
the period commencing January 1, 1993 to the Date of Closing, or such lesser
period as Buyer shall determine. Buyer shall pay the expenses associated with
conducting the audit and Seller shall not be entitled to any additional
consideration therefor.
10.10 SELLER'S INDEMNITY. Seller agrees to indemnify, defend and hold
harmless Buyer against and in respect to all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and attorney's fees that Buyer may incur or suffer
which arise, result from, or relate to any breach of, or failure of Seller to
perform any of its representations, warranties, covenants or agreements
contained within this Agreement or on any schedule, certificate, exhibit or
other instrument furnished or to be furnished by it under this Agreement and/or
relating to the operation of the Division or the Assets prior to the Date of
Closing. Seller's indemnification obligations under this Section 10.10 with
respect to breach of representations and warranties only shall only become
operative after, and to the extent that, the total amount of all claims for
indemnification for breach of representations and warranties by Seller exceeds
$60,000, except that claims resulting from the inaccuracy of any representation
or warranty or a failure of any covenant contained in Sections 2.1, 2.3, 2.6 or
2.16 or arising under Article 4 or Section 10.2 shall not be subject to such
limitation. Except with respect to (i) an indemnification claim arising from a
willful and
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intentional fraudulent representation or warranty of Seller, (ii) a claim based
upon the inaccuracy of a representation or warranty contained in Sections 2.1,
2.3, 2.6, or 2.16, or (iii) a claim as to which Buyer has provided notice to
Seller prior to 24 months after the Date of Closing, Seller's indemnification
obligation shall terminate 24 months after the Date of Closing.
10.11 NOTICE OF INDEMNITY. Buyer shall promptly notify Seller of the
existence of any claim, demand or other matter for which indemnification would
apply under this Agreement including such indemnities included in other Articles
hereof, and shall give Seller reasonable opportunity to defend the same in its
own name with counsel of its selection; provided that Buyer shall, at all times,
have the right to fully participate in the defense at its own expense. If
Seller shall, within a reasonable time after notice, fail to defend, Buyer shall
have the right, but not the obligation, to undertake the defense of, and to
compromise or settle (exercising reasonable business judgment) the claims or
other matters on behalf, for the account, and at the risk of Seller. If the
claim is one that cannot be, by its nature, defended solely by Seller, then
Buyer shall make available all information and assistance that Seller may
reasonably request.
10.12 EXTENSION. Buyer, at its option, may extend the one year period set
forth in Section 10.2 above with respect to Seller assisting and providing
invoicing services and/or in Section 10.3 above with respect to use of Seller's
O.N.E. system and mainframe in connection with the FOrMS software for an
additional period of ninety (90) days on the condition that Buyer acts in a
reasonably diligent manner during the one year period to complete transfer of
such systems and related software to its own facilities and systems, but is
unable to complete same within said one year. Buyer shall notify Seller in
writing if it exercises this option and with respect to which services, software
or computer usage under Sections 10.2 and 10.3 on or before thirty (30) days
prior to expiration of the one year. During such ninety (90) days, all fees and
charges shall be computed and paid in the same manner as during the one year,
but shall be charged at a rate equal to 125% thereof.
10.13 TRANSITION MAINTENANCE SUPPORT. For a period of 90 days after the
Date of Closing, to the extent that Seller has customized software or equipment
and such services cannot reasonably be obtained from independent commercial
sources, Seller shall provide to Buyer without charge technical and maintenance
support with respect to plant operations including interpretation and use of
operational and composition procedures and manuals. During the first 90 days
after the Date of Closing, Seller shall at its expense and upon request of
Buyer, transfer logos and title plate updates for all current customers of the
former division to Buyer's Bloc F-3 software system on a continuous basis. For
a period of 90 days after the Date of Closing, a digital file (to the extent
such itmes have been digitized) of all negatives pertaining to current customers
of the former division shall be provided and continuously updated by Seller for
Buyer without charge.
10.14 RELOCATING EQUIPMENT. The DCOP Presses in the Jacksonville Facility
and the Assets in the Jacksonville Facility will be dismantled and shipped to
their respective destinations at Seller's expense. The DCOP Presses will be set
up at the St. Croix Facility at Seller's expense and the Assets will be set up
at Buyer's expense.
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10.15 550 FILES. For the first 90 days after the Date of Closing, on a
continuous basis and for the next 90 days on an as needed basis, Seller shall
update 550 Files for Buyer for all current customers of the former division
without charge.
ARTICLE XI
BUYER'S OBLIGATIONS AFTER CLOSING
11.1 CONFIDENTIALITY WITH RESPECT TO DCOP PRESSES AND SALES, PRICING,
BILLING, CUSTOMER ORDERING AND ORDER PROCESSING INFORMATION. Buyer agrees to
restrict its employees' access to the DCOP Presses and to Seller's sales,
pricing, billing, customer, customer ordering and order processing information
which shall be disclosed to Buyer as a result of the transition services
provided to Buyer under Sections 10.2, 10.3 and 10.4 of this Agreement. It
shall be a condition to Buyer's access to the DCOP Presses and Seller's
invoicing and order processing systems that it obtain
confidentiality/non-disclosure agreements from any employees who will have
access to this equipment or information, and said confidentiality/non-disclosure
agreements shall be in a form approved by and run in favor of Seller.
11.2 PAYMENT FOR QUALIFIED INVENTORY. Buyer shall make the monthly
payments for the Qualified Inventory as provided in Section 1.8 hereof.
11.3 PAYMENT FOR USE OF SELLER'S EMPLOYEES. On a monthly basis, against an
accounting thereof, Buyer shall pay Seller for the use of its employees as
provided in Sections 10.4 and 10.6 hereof.
11.4 SELLER'S TRADEMARKS. Subject to the last sentence in this Section,
following the Closing Date, Buyer shall not use the following trademarks, trade
names or logos of Seller "Deluxe," "Deluxe Financial Forms," or "Deluxe Internal
Bank Forms" (the "Deluxe Marks") in the conduct of Buyer's business. The
foregoing shall prohibit the use of the Deluxe Marks (i) in Buyer's trade name,
(ii) in any intellectual properties of Buyer, and (iii) on any and all business
forms, literature, advertising, product labeling or other material used in
Buyer's business. Notwithstanding the foregoing, Buyer shall be permitted to
use the designation "formerly a division of Deluxe..." in connection with the
business of the Division in any of the respects listed above for a period of 12
months after the Date of Closing in order to ensure a smooth transition of the
business of the Division.
11.5 BUYER'S INDEMNITY. Buyer shall indemnify, defend and hold harmless
Seller against and respect of all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and attorney's fees that it may incur or suffer which arise,
result from, or relate to any breach of, or failure of Buyer to perform any of
its representations, warranties, covenants or agreements contained within this
Agreement or on any schedule, certificate, exhibit or other instrument furnished
or to be furnished by Buyer under this Agreement and/or relating to the
operation of Buyer's business after the Date of Closing. Buyer's
indemnification obligations under this Section 11.5 with respect to breach of
representations and warranties only shall only become operative after, and
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to the extent that, the total amount of all claims for indemnification for
breach of representations and warranties by Buyer exceeds $60,000, except that
claims resulting from the inaccuracy of any representation or warranty or a
failure of any covenant contained in Articles 3 or 5 shall not be subject to
such limitation. Except with respect to (i) an indemnification claim arising
from a willful and intentional fraudulent representation or warranty of Buyer,
or (ii) a claim based upon the inaccuracy of a representation or warranty
contained in Section 3.1, or (iii) a claim as to which Buyer has provided notice
to Seller prior to 24 months after the Date of Closing, Buyer's indemnification
obligation shall terminate 24 months after the Date of Closing.
11.6 NOTICE OF INDEMNITY. Seller shall promptly notify Buyer of the
existence of any claim, demand or other matter for which indemnification would
apply, and shall give Buyer reasonable opportunity to defend the same in its own
name with counsel of its selection; provided that Seller shall, at all times,
have the right to fully participate in the defense at its own expense. If Buyer
shall, within a reasonable time after notice, fail to defend, Seller shall have
the right, but not the obligation, to undertake the defense of, and to
compromise or settle (exercising reasonable business judgment) the claims or
other matters on behalf, for the account, at the risk of Buyer. If the claim is
one that cannot be, by its nature, defended solely by Buyer, then Seller shall
make available all information and assistance that Buyer may reasonably request.
ARTICLE XII
PUBLICITY
12.1 CONFIDENTIALITY. Each party agrees not to make any public disclosure
of the transaction contemplated by this Agreement without the advance consent of
the other. Notwithstanding the foregoing, Buyer shall be permitted to publicly
disclose the transactions contemplated by this Agreement in order to comply with
its obligations as a public company, but agrees to use its best efforts to
inform Seller in advance of same and seek its approval of the substance of the
disclosure.
12.2 PUBLIC ANNOUNCEMENTS. All notices to third parties and all other
public announcements concerning the transaction contemplated by this Agreement
shall be planned jointly by Buyer and Seller. Subject to its obligations as a
public company, Buyer shall use its best efforts to obtain Seller's advance
review and approval of all such notices.
ARTICLE XIII
COSTS
13.1 FINDERS AND BROKERS FEES. Each of the parties represents and warrants
that he or it has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement (except for Enterprise Investments,
Inc., the "Broker," who's commission shall be the sole responsibility of Seller)
and, insofar as each party is aware, no broker other than the Broker or other
person is entitled nor is any broker or other person claiming any commission or
finder's fees in connection with this transaction.
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13.2 EXPENSES. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
ARTICLE XIV
REMEDIES
14.1 SPECIFIC PERFORMANCE. Each party's obligation under this Agreement is
unique. If any party shall default in its obligations under this Agreement, the
parties each acknowledge that it would be extremely impractical to measure the
resulting damages; accordingly, the non-defaulting party, in addition to any
other available rights or remedies, shall have the right to obtain, in a court
of competent jurisdiction, specific performance of this Agreement.
14.2 WAIVER OF RESCISSION RIGHTS. Notwithstanding any breach or default by
any of the parties of any of their respective representations, warranties,
covenants or agreements under this Agreement, if the purchase and sale
contemplated hereby shall be consummated at the Closing, each of the parties
waives any rights that it may have to rescind this Agreement or the transactions
contemplated hereby; provided, however, this waiver shall not affect any other
rights or remedies available to the parties under this Agreement or under
applicable law.
14.3 ARBITRATION. All controversies and claims arising out of or under
this Agreement shall be settled by arbitration, except a party's right to
equitable relief. The arbitration shall be conducted in Minneapolis, Minnesota,
in accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA"). In any such arbitration the parties shall be entitled to
full discovery to the extent permitted in proceedings brought in the trial
courts of general jurisdiction in Minnesota. The arbitration proceeding shall
be deemed commenced when a party submits its request for arbitration of the
dispute to AAA.
14.4 RECOVERY OF LITIGATION COSTS. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorney's fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
14.5 DEFAULTS PERMITTING TERMINATION. If either Buyer or Seller materially
defaults in the due and timely performance of any of its respective warranties,
covenants or agreements under this Agreement, the non-defaulting party or
parties may not later than five days prior to the Closing Date, give notice of
termination of this Agreement (unless the default shall occur after such date,
in which case the notice shall be furnished as soon as practicable thereafter),
in the manner provided in Section 15.6. The notice shall specify with
particularity the default or defaults on which the notice is based. The
termination shall be effective on the Closing Date, unless the specified default
or defaults have been cured on or before the Closing Date.
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ARTICLE XV
MISCELLANEOUS
15.1 EFFECT OF HEADINGS. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
15.2 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties and their agents and
representatives. No supplement, modification or amendment of this agreement
shall be binding unless executed in writing by both parties. No waiver of any
of the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.4 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
15.5 SURVIVAL OF REPRESENTATIONS. The closing of this transaction will not
extinguish any of the representations, warranties, covenants, indemnities and/or
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion or other writing provided for herein.
15.6 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the second day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
To Seller at: Deluxe Corporation
1080 West County Road F
Shoreview, MN 55126
Attention: Charles Feltz
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With copy to: Stephen L. Peterson
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126
To Buyer at: Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
With copy to: John C. Levy, Esq.
Parsinen Bowman Kaplan & Levy P.A.
100 South Fifth Street
Suite 1100
Minneapolis, MN 55402
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
16.7 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the substantive laws of the State of Minnesota.
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.
BUYER:
NORTHSTAR COMPUTER FORMS, INC.,
a Minnesota corporation
By: /s/ Roger Bredesen
-----------------------------------
Its: Chairman CEO
-------------------------------
SELLER:
DELUXE CORPORATION,
a Minnesota corporation
By: /s/ Guy C. Feltz
-----------------------------------
Its: Vice President - GM
-------------------------------
By: /s/ Stephen L. Peterson
-----------------------------------
Its: Vice President
-------------------------------
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EXHIBIT 1.6 TO AGREEMENT OF PURCHASE AND SALE OF ASSETS
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into effective as of
the 23rd day of July, 1996 by and between DELUXE CORPORATION, a Minnesota
corporation (hereinafter referred as to "Seller") and NORTHSTAR COMPUTER FORMS,
INC., a Minnesota corporation (hereinafter referred to as "Buyer").
WITNESSETH
WHEREAS, Seller and Buyer have entered into that certain Agreement of
Purchase and Sale of Assets dated of even date herewith, whereby Seller has
agreed to sell and Buyer has agreed to purchase certain Assets, as more fully
defined therein, located at or used in connection with Seller's Financial Forms
Division (the "Purchase Agreement" and all undefined terms used herein shall
have the meaning given them in the Purchase Agreement);
WHEREAS, pursuant to Sections 1.6 and 6.7 of the Purchase Agreement, Buyer
has decided to acquire all of Seller's rights and assume all of Seller's
liabilities under the Contract Documents, which are described on EXHIBIT A
attached hereto (the "Assumed Contract Documents"), as of July 22, 1996 (the
"Closing Date"); and
WHEREAS, Section 1.6 of the Purchase Agreement provides that Seller and
Buyer enter into a formal Assignment and Assumption Agreement, whereby Seller
assigns to Buyer its interest in the Assumed Contract Documents as of the
Closing Date and Buyer agrees to perform all of Seller's obligations thereunder
from and after the Closing Date and the parties desire to set forth their
agreements with respect thereto.
NOW, THEREFORE, the Seller and Buyer hereby mutually agree as follows:
1. Effective on the Closing Date, Seller does hereby assign to Buyer all
of its right, title and interest in the Assumed Contract Documents, except that
(i) Seller shall retain all rights and obligations with respect to all
non-Restricted Products contemplated by the Assumed Contract Documents and Buyer
shall have no obligations therefor and (ii) Seller shall remain liable to Buyer
for any customer rebates on Restricted Products previously supplied by Seller
pursuant to the Assumed Contract Documents. With respect to Assumed Contract
Documents listed on Exhibit "B" ("Forms Purchase Agreements") that provide for
discounts which are not market based volume discounts, by reason of their
inclusion as an Assumed Contract Document, the parties hereby have agreed to
treat such discounts as a Concession under Section 10.1 of the Purchase
Agreement and such discount will be honored by Buyer with respect to Forms
Purchase Agreements that provide for customer credits based upon purchases of
checks from Seller that may only be taken against Restricted Products, as
defined in the Purchase Agreement, by reason of their inclusion as an Assumed
Contract Document, the parties hereby have agreed to treat such
<PAGE>
credits as Concessions under Section 10.1 of the Purchase Agreement and such
credits will be honored by Buyer. With respect to Forms Purchase Agreements
that provide for customer credits based upon purchase of checks from Seller that
may be taken against any present or past products of Seller including the
Restricted Products, Seller may advise the customer that it no longer produces
the Restricted Products and the credits should be applied elsewhere, but that if
the customer insists on taking them against the Restricted Products, the credits
shall be treated as Concessions as provided in Section 10.1 of the Purchase
Agreement and Buyer shall honor the credits. Forms Purchase Agreements shall
only give rise to Concessions if such Forms Purchase Agreement is in effect on
the date of this Agreement; and, such discounts and such credits shall only give
rise to Concessions until the earliest date that the contract may be terminated
by any party. Seller shall remain liable for the performance of any of its
obligations which accrue under the Contract Documents prior to the Closing Date
and hereby indemnifies and holds harmless Buyer against any loss or liability
arising out of its failure to perform and discharge each of such obligations,
including, but not limited to, attorneys' fees.
2. As of the Closing Date, Buyer hereby assumes all of Seller's
obligations under each of the Assumed Contract Documents, which shall accrue
from and after the Closing Date. Buyer hereby indemnifies and holds harmless
Seller against any loss or liability arising out of Buyer's failure to perform
and discharge each of such obligations including, but not limited to, attorneys'
fees.
3. This Agreement shall be construed in accordance with the laws of the
State of Minnesota. If a party shall bring legal action to enforce its
respective rights hereunder, the prevailing party in such action shall also be
permitted to recover attorneys' fees and costs incurred in connection therewith.
4. Each of the parties shall be permitted to furnish a copy of this
Agreement to any third party, which is also a party to an Assumed Contract
Document.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
SELLER:
DELUXE CORPORATION
a Minnesota corporation
By:
--------------------------------------------------------
Its:
--------------------------------------------------
By:
--------------------------------------------------------
Its:
--------------------------------------------------
BUYER:
NORTHSTAR COMPUTER FORMS, INC.
a Minnesota corporation
By:
--------------------------------------------------------
Its:
--------------------------------------------------
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EXHIBIT 1.9 TO AGREEMENT OF PURCHASE AND SALE OF ASSETS
LEASE
THIS LEASE, made this 22nd day of July, 1996, between DELUXE CORPORATION, a
Minnesota corporation, (hereinafter designated as "Landlord") and NORTHSTAR
COMPUTER FORMS, INC., a Minnesota corporation, (hereinafter designated
"Tenant");
WITNESSETH:
ARTICLE 1 - PREMISES AND TERM. The Landlord, in consideration of the
rental herein agreed to be paid by the Tenant and the other conditions,
agreements and stipulations of the Tenant herein expressed and agreed to be kept
and performed by the Tenant, does hereby demise and lease unto the Tenant the
building containing approximately 40,000 square feet situated in the City of St.
Paul, County of Ramsey, State of Minnesota, located at 2341 St. Croix Street,
Roseville, MN 55113, together with parking areas, sidewalks and yard areas
adjacent thereto, all legally described in the attached Exhibit A hereinafter
referred to as the "leased premises".
TO HAVE AND TO HOLD the leased premises and appurtenances for a term
commencing July 22, 1996, and shall continue for a period of One (1) year and
nine (9) days unless sooner terminated, as hereinafter provided until July 31,
1997. Tenant shall have the option to extend the term for an additional six (6)
calendar months on the same terms and conditions, which option must be exercised
by written notice given by Tenant to Landlord not less than ninety (90) days
prior to expiration of the initial term.
ARTICLE 2 - RENT. Landlord reserves and Tenant covenants to pay to
Landlord, without demand, at its office, or at such other place as Landlord may,
from time to time, designate in writing, a gross rent of Two Hundred Thousand
Dollars ($280,000.00) for the term payable in monthly installments of $23,333.33
per month on the first day of each and every calendar month in advance during
the year of the term. Partial months shall be pro-rated.
ARTICLE 3 - BUSINESS USE. The leased premises shall be used and occupied
by Tenant for operation as a printing facility or for any other legal purpose.
ARTICLE 4 - CERTIFICATION THAT LEASE IS IN FULL FORCE AND EFFECT. For the
purposes of mortgaging the leased premises or for the sale of the leased
premises, Tenant shall, at any time, on fifteen (15) days' prior written notice
by Landlord, execute, acknowledge, and deliver to Landlord a written statement
certifying that this Lease continues unmodified and is in full force and effect
(or if there have been modifications, that this Lease continues in full force
and effect as modified and stating the modifications), and the dates to which
the rent and the additional rent have been paid, and stating whether Tenant is
in default in performing any covenant to this Lease, and, should Tenant be in
default, specifying each and every such default.
ARTICLE 5 - CARE OF PREMISES. Tenant shall, at its expense, keep the
leased premises used by it and all of Tenant's leasehold improvements used by it
in a clean, safe and
<PAGE>
sanitary and a good and reasonable condition.
ARTICLE 6 - REPAIRS. Tenant shall at all times keep the interior non-
structural components of leased premises and all of Tenant's leasehold
improvements in a good state of repair subject to ordinary wear. Landlord shall
be responsible for maintenance, repair or replacement of exterior walls and
entrances, all glass, and window moldings, parking areas, striping, seal-coating
thereof and the surface thereof, floors, lighting, heating and plumbing
fixtures, utility lines, roof, heating and air conditioning systems any of which
are located in or about the leased premises in good order and condition.
Structural portions of the building shall be the responsibility of Landlord.
For purposes of this Article, structural portions of the building shall include
the outer walls, roof, foundation and supporting members of the building
structure of which the leased premises constitute a part. If the exterior walls
entrances, glass, window moldings, parking areas, striping, seal coating (or the
surface thereof), floors, lighting, plumbing fixtures, utility lines, roof,
heating or air conditioning systems located in or about the leased premises fall
into a state of disrepair or become damaged or destroyed through the negligence,
carelessness or misuse of Tenant or its agents or employees, the cost of the
necessary maintenance, repair or replacement shall be the responsibility of
Tenant.
ARTICLE 7 - SIGNS. The Tenant may erect, place or display or allow to be
erected, placed, or displayed any lettering, sign, advertisement, awning, or
other projection in or on the leased property or in or on the building of which
it forms a part without the Landlord's consent.
At the end of the term of this Lease or of any renewal thereof, the Tenant
shall remove its signs at its own expense and repair any damage to the demised
premises resulting from the erection, maintenance, or removal of its sign.
ARTICLE 8 - ALTERATIONS, INSTALLATIONS, FIXTURES. Except as hereinafter
provided, Tenant shall not make any alterations in or additions to the leased
premises which exceed $50,000.00 in costs without the written consent of
Landlord and alterations or additions under $50,000.00 may be made without the
consent of the Landlord. If alterations become necessary because of the
application of laws or ordinances or of the directions, rules or regulations of
any regulatory body, Landlord shall make such alterations at its own cost and
expense. At the expiration or sooner termination of this Lease, Tenant, at the
option of the Landlord, shall return the premises to their original condition,
subject to normal wear and tear. Title to any and all such leasehold
improvements, alterations, installations or additions shall revert to Landlord
upon expiration or sooner termination of this Lease at Landlord's option at
Tenant's option.
ARTICLE 9 - COVENANTS TO HOLD HARMLESS. Unless the liability for damage or
loss is caused by intentional acts or the negligence of Landlord, its agents or
employees, Landlord shall be held harmless by Tenant from any liability for
damages to any person or property in or upon the leased premises, including the
person and property of Tenant and its employees and all persons in the building
at its or their invitation. All property kept, stored or maintained in the
leased premises shall be so kept, stored or maintained at the sole risk of
Tenant. Tenant agrees to pay all sums of money in respect of any labor,
services, materials,
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supplies, or equipment furnished or alleged to have been furnished to Tenant in
or about the leased premises, and not furnished on order of Landlord, which may
be secured by any Mechanic's, Materialmen's or other lien against the leased
premises or the Landlord's interest therein and will cause each such lien to be
discharged at the time performance of any obligation secured thereby matures.
Landlord shall have the right to post and maintain on the leased premises,
notice of non-responsibility under the laws of Minnesota. Tenant shall have the
reasonable right to protest any such Mechanic's, Materialmen's or other such
lien through appropriate legal proceedings provided Tenant shall provide
Landlord a bond or other evidence satisfactory to Landlord evidencing Tenant's
ability to pay such lien even if so contested.
ARTICLE 10 - ASSIGNMENT OR SUBLETTING. Tenant may not sell, assign,
mortgage, pledge, sublease, or transfer this Lease or any estate or interest
thereunder without the previous written consent of Landlord in each instance.
Landlord's right to assign this Lease is and shall remain unqualified.
ARTICLE 11 - UTILITY SERVICE. Gas, Water, and Electricity. Landlord
agrees to cause mains, conduits, and other facilities to be provided to the
property lines and to supply gas, water, electricity and sanitary sewer to the
property lines. Tenant shall pay, when billed, for all water, gas and
electricity or other utility services used in the leased premises.
ARTICLE 12 - EMINENT DOMAIN. In the event of any eminent domain or
condemnation proceeding commenced by the filing of a petition in respect to the
leased premises during the term hereof, the following provisions shall apply:
(a) TOTAL CONDEMNATION OF LEASED PREMISES. If the whole of the leased
premises shall be acquired or condemned by eminent domain for any
public or quasi-public use or purpose, then the term of this Lease
shall cease and terminate as of the date possession shall be taken in
such proceeding and all rentals shall be paid up to that date and
Tenant shall have no claim against Landlord nor the condemning
authority for the value of any unexpired term of this Lease.
(b) PARTIAL CONDEMNATION. If any part of the leased premises shall be
acquired or condemned as aforesaid, and in the event that such partial
taking or condemnation shall render the leased premises substantially
unsuitable for the business of the Tenant in the reasonable opinion of
Tenant, then the term of this Lease shall cease and terminate as of
the date possession shall be taken in such proceeding. Tenant shall
have a claim against Landlord or the condemning authority for the
value of any unexpired term of this Lease and rent shall be adjusted
to the date of such termination. In the event of a partial taking or
condemnation which is not extensive enough to render the premises
unsuitable for the business of the Tenant in the reasonable opinion of
the Tenant and Landlord, then Landlord shall promptly restore the
leased premises so as to constitute the remaining premises a complete
architectural unit, and this Lease shall continue in full force and
effect with a proportionate abatement of rent based on the portion of
the leased premises
3
<PAGE>
taken. The rent shall also abate during restoration as to the portion
of the leased premises rendered untenantable.
(c) TENANT'S DAMAGES. Tenant shall have the further right to claim and
recover from the condemning authority such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on
account of any cost or loss to which Tenant might be put in removing
and relocating Tenant's inventory, merchandise, equipment and personal
property.
(d) LANDLORD'S DAMAGES. In the event Landlord seeks any recovery from the
condemning authority, Tenant shall provide reasonable cooperation to
Landlord in such pursuit, provided such action shall not be
detrimental to Tenant's own claim for damages.
ARTICLE 13 - DAMAGE.
(a) PARTIAL OR TOTAL DESTRUCTION. In case the leased premises shall be
partially or totally destroyed by fire or other casualty insurable
under full standard fire and extended coverage insurance so as to
become partially or totally untenantable, the same, unless either
party shall elect to terminate this Lease as provided for in
subparagraph (b) below, shall be repaired as speedily as possible at
the cost of Landlord and a portion of the rent based upon the amount
of the leased premises rendered untenantable shall be abated until so
repaired.
(b) In the event the leased premises shall be substantially destroyed due
to a cause which is not insurable under such insurance, either party
may elect, within ten (10) days of such event by sending written
notice thereof, to terminate this Lease. In the event that such
partial or total destruction shall be to the extent that (i) the cost
of repair is reasonably estimated to exceed thirty-five (35%) percent
of the replacement cost of the building and improvements, or (ii) the
reasonably estimated time period for repair will exceed three (3)
months or will extend beyond the expiration date of the Lease term, as
extended by an exercise of the renewal option, either party may elect
to terminate this Lease within ten (10) days of such event by sending
written notice thereof to the other. Upon such termination, the
parties shall remain liable for their obligations which accrued prior
to the termination. Such termination shall be retroactive to the date
of casualty, but Tenant shall be permitted reasonable opportunity post
termination to remove its property.
(c) FIRE INSURANCE PROVISION.
(1) Landlord hereby waives and releases all claims, liabilities and
causes of action against Tenant and its agents, servants and
employees for loss or damage to, or destruction of, the leased
premises or buildings and other improvements situated on the
property resulting from fire, explosion or the
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other perils included in standard extended coverage insurance,
whether caused by the negligence of any of said persons or
otherwise. Likewise, Tenant hereby waives and releases all
claims, liabilities and causes of action against Landlord and its
agents, servants and employees or other tenants in the building
for loss or damage to, or destruction of, any of the
improvements, fixtures, equipment, supplies, merchandise and
other property, whether that of Tenant or of others in, upon or
about the leased premises or the buildings or improvements of
which the leased premises are a part resulting from fire,
explosion or the other perils included in standard extended
coverage insurance, whether caused by the negligence of any of
said persons or otherwise.
(2) Landlord will keep in force a standard form of Fire and Extended
Coverage Insurance with replacement cost endorsement in the event
of damage or destruction of the building and including public
liability insurance of the Landlord with respect to the leased
premises with limits of $500,000 for injury or death to any one
person, $1,000,000 for injury or death to more than one person,
and $500,000 with respect to damage to property. The Tenant
shall not pay any of the annual cost of such insurance premiums.
Tenant shall have sole responsibility to insure its leasehold
improvements, trade fixtures, fixtures, furnishings, inventory,
personal property and equipment.
ARTICLE 14 - SURRENDER. On the last day of the term demised or on the
sooner termination thereof, Tenant shall peaceably surrender the leased premises
in good order and condition, casualty loss only excepted. On or before the last
day of the term or the sooner termination thereof, Tenant shall, at its expense,
remove its trade fixtures, personal property and equipment and signs from the
leased premises and any property not removed shall be deemed abandoned. Any
damage caused by Tenant in the removal of such items shall be repaired by and at
Tenant's expense. All alterations, additions, improvements and fixtures (other
than Tenant's trade fixtures and equipment) which shall have been made or
installed by either Landlord or Tenant upon the leased premises and all flooring
shall remain upon and be surrendered with the leased premises as a part thereof,
without disturbance, molestation or injury, and without charge, at the
expiration or termination of this Lease.
ARTICLE 15 - DEFAULT OF TENANT AND REMEDIES.
(a) RIGHT TO RE-ENTER. In the event of any failure of Tenant to pay any
rental within five (5) days written notice after the same shall be
due, or any failure to perform any other of the terms, conditions or
covenants of this Lease to be observed or performed by Tenant for more
than thirty (30) days after written notice of such other default shall
have been given to Tenant, (or in the event such other default cannot
reasonably be cured within thirty (30) days and Tenant commences to
cure and diligently pursue a course of action to so cure and continue
towards completion then for a reasonable period of time thereafter, or
if an agent of Tenant
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shall substantially falsify any report required to be furnished to
Landlord pursuant to the terms of this Lease, or if Tenant or any
guarantor of this Lease shall become bankrupt or insolvent, or file
any debtor proceedings or take or have against Tenant or any guarantor
of this Lease in any court pursuant to any statute either of the
United States or of any state a petition in bankruptcy or insolvency
or for reorganization or for the appointment of a receiver or trustee
of all or a portion of Tenant's or any such guarantor's property, or
if Tenant or any such guarantor makes an assignment for the benefit of
creditors, or petitions for or enters into an arrangement, or suffer
this Lease to be taken under any writ of execution, then Landlord,
besides other rights or remedies it may have, shall have the immediate
right of re-entry and may remove all persons and property from the
leased premises in accordance with applicable law.
(b) RIGHT TO RELET. Should Landlord elect to re-enter, as herein
provided, or should it take possession, it may either terminate this
Lease or make such reasonable alterations and repairs at Tenant's
expense as may be necessary in order to relet the premises, and relet
said premises or any part thereof upon reasonable terms and conditions
and Landlord shall use its best efforts to mediate Tenant's damages.
(c) LEGAL AND OTHER EXPENSES. In case suit shall be brought because of
the breach of any covenant herein contained on the part of Tenant or
Landlord to be kept or performed, and a breach shall be established,
or a party shall successfully defend against an alleged breach, the
party so breaching or unsuccessfully defending against an alleged
breach shall pay to the party establishing the breach or successfully
defending against an alleged breach, all expenses incurred therefor,
including a reasonable attorney's fee and costs and any court having
jurisdiction over the matter shall fix and order payment of same. The
parties hereto waive any right to a trial by a jury to the maximum
extent waivable.
ARTICLE 16 - GENERAL. This Lease does not create the relationship of
principal and agent or of partnership or of joint venture or of any association
between Landlord and Tenant, the sole relationship between Landlord and Tenant
being that of Landlord and Tenant. No waiver of any default by a party
hereunder shall be implied from any omission by the other party to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect any default other than the default specified in
the express waiver and that only for the time and to the extent therein stated.
The marginal or topical headings of the several articles, paragraphs and clauses
are for convenience only and do not define, limit or construe the contents of
such articles, paragraphs or clauses. All preliminary negotiations are merged
into and incorporated in the Lease. The laws of the State of Minnesota shall
govern the validity, performance and enforcement of the Lease. This paragraph
likewise applies in favor of the Tenant to the same extent as if it had been
retyped with the applicable terminology reversed.
(a) ENTIRE AGREEMENT. This Lease and the Exhibits attached hereto and
forming a part hereof, set forth all the covenants, promises,
agreements, conditions and
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understandings between Landlord and Tenant concerning the leased
premises and there are no covenants, promises, agreements, conditions
or understandings, either oral or written, between them other than are
herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed
by them.
(b) PARTIAL INVALIDITY. If any term, covenant or condition of this Lease
or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant
or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE 17 - HOLDING OVER. In the event Tenant remains in possession of
the premises herein leased after the expiration of this Lease and without the
execution of a new lease, it shall be deemed to be occupying said premises as a
tenant from month-to-month, subject to all the conditions, provisions and
obligations of the Lease insofar as the same can be applicable to a
month-to-month tenancy.
ARTICLE 18 - QUIET ENJOYMENT. Landlord covenants and agrees with Tenant
and upon Tenant paying the rent and performing all of the terms and conditions
on Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the premises hereby leased for the business uses permitted hereunder,
subject, nevertheless, to the terms and conditions of this Lease.
ARTICLE 19 - REAL ESTATE TAXES. Landlord shall pay all of the real estate
taxes and installments of assessments (including interest thereon) attributable
to the land and building of the leased premises, including the parking area and
any and all charges or fees imposed by any City County or State, whether by
special assessment or otherwise, for services rendered or to be rendered in the
future to or for the benefit of all or any part of the leased premises and which
are due and payable during the term or any renewal term of this Lease and Tenant
shall be under no obligation to reimburse Landlord for any such matters.
ARTICLE 20 - NOTICES. Any notice required or permitted under this Lease
shall be deemed sufficiently given or served if sent by registered or certified
return receipt mail to Tenant at the address of the leased premises, and to
Landlord at 3680 Victoria Street North, Shoreview, MN 55126 and either party
may by like written notice at the address where rent is currently paid at any
time designate a different address to which notices shall subsequently be sent.
ARTICLE 21 - SUCCESSORS AND ASSIGNS. The terms, covenants and conditions
hereof shall be binding upon and inure to the successors in interest and assigns
of the parties hereto.
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ARTICLE 22 - NON-LIABILITY. Landlord, except for Landlord's intentional or
negligent acts, shall not be liable for any damage to property of Tenant or of
others located on the leased premises, nor for the loss of or damage to any
property of Tenant or of others by theft or otherwise.
ARTICLE 23 - HAZARDOUS MATERIALS INDEMNITY. Tenant covenants, represents
and warrants to Landlord, its successors and assigns, (i) that it will not use
or permit the leased premises to be used, whether directly or through
contractors, agents or tenants, for the generating, transporting, treating,
storage, manufacture, emission of, spillage, or disposal of any dangerous, toxic
or hazardous pollutants, chemicals, wastes or substances as defined in the
Federal Comprehensive Environmental Response Compensation and Liability Act of
1980 as amended by the Super Fund Amendments Reauthorization Act of 1986
("CERCLA"), the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"),
the Minnesota Petroleum Tank Release Cleanup Act (Minn. Stat. Section 115C), or
the Minnesota Response and Liability Act (Minn. Stat. Section 115B) ("MERLA"),
or any other federal, state or local environmental laws, statutes, regulations,
requirements and ordinances as amended from time to time ("Hazardous Materials")
in violation of any applicable law (provided that Tenant may use the leased
premises or permit the uses specified in this subparagraph provided they do so
in compliance with the requirements of any Federal, State, or local government
or any agency or department thereof without the written consent of the
Landlord); (ii) that it will disclose within 3 business days any investigations
or reports involving Tenant, or the leased premises by any governmental
authority which in any way pertain to Hazardous Materials (iii) that Tenant
shall not bring upon, use in, or incorporate into the leased premises any
polychlorinated biphenyls (PCB's), petroleum or petroleum based derivations,
urea formaldehyde, or asbestos except in compliance with the requirements at
law.
Landlord covenants, represents and warrants to Tenant, its successors and
assigns, to its knowledge, (i) that it has not used or permitted the leased
premises to be used, for the generating, transporting, treating, storage,
manufacture, emission of, or disposal of any Hazardous Materials; (ii) that
there have been no investigations or reports involving Landlord, or the leased
premises by any governmental authority which in any way pertain to Hazardous
Materials (iii) that the operation of the leased premises is not currently
violating any federal, state or local law, regulation, ordinance or requirement
governing Hazardous Materials; (iv) that the leased premises is not listed in
the United States Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites nor any other list, schedule, log, inventory or record of
Hazardous Materials or hazardous waste sites, whether maintained by the United
States Government or any state or local agency; and (v) that the leased premises
does not contain any PCB's, petroleum or petroleum based derivations, urea
formaldehyde, or asbestos, except as may have been disclosed in writing to
Tenant by Landlord at the time of execution and delivery of this Lease. In
connection with the purchase of certain assets by Tenant from Landlord, Tenant's
environmental engineer is undertaking a Phase I Environmental Assessment of the
Premises, which may or may not be completed as of the commencement of the term
hereof and approval of which shall not be unreasonably withheld. If the Phase I
Environmental Assessment has not been completed as of the commencement of the
term hereof, Tenant shall take reasonable action to have it promptly completed.
Tenant's environmental engineer shall be permitted reasonable access to the
leased
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premises for the purpose of conducting such inspections as may be necessary in
order to complete the Phase I Environmental Assessment. In the event that the
Phase I Environmental Assessment discloses matters of concern which may require
testing that would fall within the scope of what is commonly referred to as a
Phase II Environmental Assessment, Landlord agrees to pay the cost of performing
such tests and preparation of a Phase II Environmental Assessment and shall
undertake and pay the cost of any remedial action recommended therein or
required or recommended by any governmental agency. In the event that a Phase I
or Phase II Environmental Assessment discloses the release or discharge of any
Hazardous Substance upon the leased premises, as between Landlord and Tenant,
Landlord shall be irrebuttably presumed to be the sole party responsible for
such release or discharge and such release or discharge shall be deemed to have
occurred prior to the date hereof even though Tenant may subsequent to the date
of this Lease use similar chemicals, Hazardous Substances or processes to those
used by Landlord prior to the date of this Lease and Landlord hereby agrees to
indemnify and hold harmless Tenant against loss or liability including
attorneys' fees to third parties and governmental authorities arising out of
such releases or discharges occurring prior to the effective date of this Lease
and Tenant agrees to indemnify and hold harmless Landlord against any loss or
liability including attorneys' fees to third parties and governmental
authorities arising out of such subsequent releases or discharges. Tenant shall
repair or fill any borings taken as part of the Phase II Environmental
Assessment.
Additionally, each party agrees to indemnify and reimburse the other party,
its successors and assigns, for:
(a) any breach of any representations or warranties, and
(b) any loss, damage, expense or cost arising out of or incurred by the
other party which is the result of a breach of, misstatement of or
misrepresentation of the above covenants, representations and
warranties, and
together with all attorneys' fees, costs and disbursements incurred in
connection with the defense of any action against Landlord arising out of the
above. These covenants, representations and warranties shall be deemed
continuing covenants, representations and warranties for the benefit of
Landlord, and any successors and assigns of Landlord and shall survive
expiration or sooner termination of this Lease. The amount of all such
indemnified loss, damage, expense or cost, shall bear interest thereon at the
rate of 1% in excess of the prime rate or reference rate established from time
to time by Norwest Bank of Minnesota, N.A. and shall become immediately due and
payable in full on demand of any party so indemnified and entitled to
reimbursement, its successors and assigns. The indemnification contained herein
shall survive expiration or sooner termination of this Lease.
ARTICLE 24 - MISCELLANEOUS.
(a) The paragraph headings of this Lease are inserted only as a matter of
convenience and for reference and in no way define, limit or describe
the scope or intent of this agreement or any provision thereof or in
any way affect this agreement.
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(b) This Lease may be executed in counterparts and when so executed shall
constitute one agreement binding on all parties hereto,
notwithstanding that they are not signatory to the original or same
counterpart.
This Lease is a gross lease and Tenant shall not be obligated to pay all or
any portion of AD VALOREM real estate taxes, assessments, insurance premiums, or
any other Landlord obligations or incurred costs or expenses, and Tenant shall
be put to no other expense except its obligation to pay rent and utilities and
other expenses specifically described herein.
ARTICLE 25 - QUIET PERIOD. For a period of 120 days after the date hereof
Landlord agrees (i) not to list the leased Premises for sale with a broker, (ii)
not to offer the leased premises for sale, and (iii) not to negotiate with any
third party for sale of the leased premises nor enter into any agreement of
sale.
IN WITNESS WHEREOF, the Landlord and the Tenant have hereunto set their
hands the day and year first above written.
LANDLORD:
DELUXE CORPORATION, a Minnesota
corporation
By:____________________________________
Its:__________________________________
By:____________________________________
Its:__________________________________
TENANT:
NORTHSTAR COMPUTER FORMS, INC.,
INC., a Minnesota corporation
By:____________________________________
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Its:__________________________________
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EXHIBIT 6.5 TO AGREEMENT OF PURCHASE AND SALE OF ASSETS
[Deluxe Corporation letterhead]
July ___, 1996
Northstar Computer Forms, Inc.
7130 Northland Circle North
Brooklyn Park, MN 55428
RE: AGREEMENT OF PURCHASE AND SALE OF ASSETS BY AND BETWEEN NORTHSTAR COMPUTER
FORMS, INC. ("NORTHSTAR") AND DELUXE CORPORATION DATED JULY ___, 1996 (THE
"PURCHASE AGREEMENT")
Gentlemen:
I have acted as in-house counsel for Deluxe Corporation, a Minnesota corporation
(the "Company") in connection with the negotiation, execution and delivery of
the Purchase Agreement and all documents related to the transaction contemplated
thereby ("Documents").
For purposes of this opinion, I have reviewed such questions of law and examined
such corporate records, certificates and other documents as I have considered
necessary or appropriate.
Based upon the foregoing, it is my opinion that:
1. The Company is a Minnesota corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota with all power
and authority to execute and deliver the Purchase Agreement and Documents.
2. The Purchase Agreement and Documents have been duly authorized, executed
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to such equitable relief as the courts may grant, general
principles of equity and applicable bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors generally.
3. The execution and delivery of the Purchase Agreement and Documents by the
Company has been duly authorized by all necessary corporate action and will
not violate any provision of law or of the Articles of Incorporation or
Bylaws
<PAGE>
Deluxe Corporation
Page 2
July ___, 1996
of the Company or any court order or any material provision of any
agreement, indenture, mortgage, lease or other obligation or instrument
by which the Company is bound and no approval or other action by any
governmental authority or agency is required in connection therewith.
4. The execution, delivery and performance of the Purchase Agreement and
Documents by the Company has not and will not require the consent of any
person or the giving of notice to, any exemption by, any registration,
declaration or filing with or any taking of any other actions in respect of
any person, including without limitation any court, governmental or
regulatory authority.
5. The instruments of conveyance, transfer and assignment in respect of the
assets delivered on the date hereof or hereafter to be delivered, by the
Company to Northstar are legal, valid, binding and enforceable in
accordance with their terms and legally sufficient to vest in and convey to
Northstar all right, title and interest of the Company in and to such
assets. Upon completion of such delivery, Northstar will have good and
marketable title to such assets subject only to encumbrances specifically
noted in the Purchase Agreement and Documents.
Very truly yours,
Stephen L. Peterson
Deluxe Corporation
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of July 22, 1996,
is by and between NORTHSTAR COMPUTER FORMS, INC., a Minnesota corporation
("Northstar"), GENERAL FINANCIAL SUPPLY, INC., an Iowa corporation ("GFS";
Northstar and GFS are collectively called the "Borrowers" or individually each
"Borrower" and each obligation of the Borrowers hereunder shall be the joint and
several obligation of each of Northstar and GFS), and FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
PRELIMINARY STATEMENT
Each of the Borrowers has requested that the Bank make advances and extend
credit hereunder, and that either of the Borrowers be able to borrow under the
Bank's commitment hereunder, it being understood that either of the Borrowers
may borrow advances that shall be used for its own corporate purposes, for the
common enterprises of the Borrowers and to be able to make advances to the other
Borrower for the other Borrower's corporate purposes.
The Borrowers and the Bank have agreed as follows:
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following respective meanings
(and such meanings shall be equally applicable to both the singular and plural
form of the terms defined, as the context may require):
"ACCOUNT": Any right to payment for goods sold or leased or for services
rendered which is not evidenced by an instrument or chattel paper.
"ACCOUNT DEBTOR": Any Person obligated on an Account.
"ACQUISITION DOCUMENTS": That certain Agreement of Purchase and Sale of
Assets, dated as of July __, 1996 (the "Acquisition Agreement"), between
Northstar and Deluxe Corporation ("Deluxe"), the lease agreement between
Northstar and Deluxe pertaining to the St. Croix Facility, as described therein,
and related material instruments, documents and agreements.
"ACQUISITION TRANSACTION": The acquisition by Northstar of the Financial
Forms Division of Deluxe Corporation, as described in the Acquisition Agreement.
"ADVANCE": The portion of the outstanding Loans bearing interest at an
identical rate for an identical Interest Period, provided that all Reference
Rate Advances shall be deemed a single Advance. An Advance may be a "Eurodollar
Advance", "Offered Rate Advance" or "Reference Rate Advance" (each, a "type" of
Advance).
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"ADVERSE EVENT": The occurrence of any event that could have a material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrowers the Subsidiaries as a consolidated
enterprise or on the ability of either of the Borrowers or any other party
obligated thereunder to perform its obligations under the Loan Documents.
"AGREEMENT": This Revolving Credit and Term Loan Agreement, as it may be
amended, modified, supplemented, restated or replaced from time to time.
"APPLICABLE MARGIN": The percentages set forth below for the respective
types of Advances of the Revolving Credit Loans, if the Cash Flow Leverage Ratio
and Fixed Charge Coverage Ratio for the most recently-ended period of four
consecutive fiscal quarters is in the following ranges:
Ratios Applicable Margins
Cash Flow Fixed Charge Eurodollar Reference Rate
Leverage Ratio: Coverage Ratio: Advances: Advances:
- -------------- --------------- --------- ----------
less than greater than
1.50 to 1.00 1.50 to 1.00 1.50% -1.00%
(negative 1.00%)
greater than less than
1.50 to 1.00 1.50 to 1.00
but less than but greater than
1.75 to 1.00 1.40 to 1.00 2.00% -0.50%
(negative 0.50%)
greater than less than
1.75 to 1.00 1.40 to 1.00 2.50% 0.00%
If the Cash Flow Leverage Ratio and Fixed Charge Coverage Ratio are in different
categories on the foregoing chart, the Applicable Margins shall be the higher of
the two options. The Applicable Margin shall initially be 2.50% for Eurodollar
Advance and 0.00% for Reference Rate Advances. The Applicable Margins shall be
adjusted once each fiscal quarter, effective as of the date 55 days after the
end of each fiscal quarter, commencing 55 days after the fiscal quarter ending
October 31, 1997, based on the Cash Flow Leverage Ratio and Fixed Charge
Coverage Ratio for the period of four consecutive fiscal quarters most recently
ended as demonstrated by the quarterly financial statements of the Borrower
through and including those for the quarter most recently ended, and as
certified by the Borrowers' financial officer. In the event that such financial
statements are not delivered as required by SECTION 8.1(A), the Applicable
Margin shall be the highest percentage set forth above for each type of Advance
until such time as such financial statements are delivered, after which time the
Applicable Margin shall be readjusted to the rate applicable to the Cash Flow
Leverage Ratio and Fixed Charge Coverage Ratio calculated from such statements.
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"AUTHORIZED REPRESENTATIVE": The representative of the Borrowers
authorized to request and authorize repayment of Loans and Advances, agree to
Interest Periods and rates of interest, sign and deliver Borrowing Base
Certificates and Compliance Certificates, and otherwise deal with the Bank on
behalf of the Borrowers, as designated by the Borrowers to the Bank from time to
time.
"BORROWING BASE": The sum of (a) the product of (i) 80%, MULTIPLIED BY
(ii) Eligible Accounts, PLUS (b) the product of (i) 50%, MULTIPLIED BY (ii) the
lowest of cost, current fair market value or book value of Eligible Inventory
LESS the outstanding principal amount of the Deluxe Obligation.
"BORROWING BASE CERTIFICATE": A certificate in the form of EXHIBIT C, duly
completed and signed by an Authorized Representative.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal holiday in
the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota and, with respect to Eurodollar Advances, a day on which
dealings in Dollars may be carried on by the Bank in the interbank eurodollar
market.
"CAPITAL EXPENDITURE": Any amount debited to the fixed asset account on
the consolidated balance sheet of the Borrowers in respect of (a) the
acquisition (including, without limitation, acquisition by entry into a
Capitalized Lease), construction, improvement, replacement or betterment of
land, buildings, machinery, equipment or of any other fixed assets or
leaseholds, and (b) to the extent related to and not included in (a) above,
materials, contract labor and direct labor (excluding expenditures properly
chargeable to repairs or maintenance in accordance with GAAP).
"CAPITALIZED LEASE": Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
"CASH FLOW LEVERAGE RATIO": The ratio of (a) interest-bearing Indebtedness
of the Borrowers and the Subsidiaries as of the last day of any fiscal quarter,
to (b) EBITDA for the period of four fiscal quarter then ending.
"CODE": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
"COMMITMENT": The agreement of the Bank to make Loans to the Borrowers
subject to the terms and conditions of this Agreement.
"COMPLIANCE CERTIFICATE": A certificate in the form of EXHIBIT D, duly
completed and signed by an Authorized Representative.
"CONSOLIDATED TANGIBLE NET WORTH": As of any date of determination, the
sum of the amounts set forth on the consolidated balance sheet of the Borrowers
as the sum of the
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common stocks, preferred stock, additional paid-in capital and retained earnings
of the Borrowers (excluding treasury stock), less the book value of all assets
of the Borrowers and the Subsidiaries that would be treated as intangibles under
GAAP, including, without limitation, all such items as goodwill, trademarks,
trade names, service marks, copyrights, patents, licenses, unamortized debt
discount and unamortized deferred charges.
"DEFAULT": Any event which, with the giving of notice to the Borrowers or
lapse of time, or both, would constitute an Event of Default.
"DELUXE OBLIGATION": The obligation of the Borrower to pay to Deluxe an
amount estimated at approximately $1,600,000 for inventory in connection with
the Acquisition Transaction.
"EBITDA ": For any period of determination, the consolidated net income of
the Borrowers and the Subsidiaries before provision for income taxes, interest
expense (including, without limitation, implicit interest expense on Capitalized
Leases), depreciation and amortization, all as determined in accordance with
GAAP, excluding therefrom (to the extent included): (a) non-operating gains
(including, without limitation, extraordinary or nonrecurring gains, gains from
discontinuance of operations and gains arising from the sale of assets other
than inventory) during the applicable period; and (b) similar non-operating
losses during such period.
"ELIGIBLE ACCOUNTS": The total amount of each Account of either of the
Borrowers which meets each of the following requirements:
(a) the goods giving rise to such Account have been shipped or delivered to
the Account Debtor;
(b) it is bona fide in all respects, and a valid, legally enforceable
obligation of the Account Debtor thereunder, and is not subject to any
offset, counterclaim or other defense on the part of such Account Debtor or
to any claim on the part of such Account Debtor denying liability
thereunder in whole or in part, PROVIDED, that if an Account Debtor
disputes only a portion of its liability on an Account and is currently
paying the remainder of the Account, only the portion disputed shall not be
deemed an Eligible Account;
(c) it is subject to the security interest in favor of the Bank under the
Security Agreements, and is not subject to any other lien or security
interest;
(d) it is evidenced by an invoice (dated not later than the date of
shipment or performance and having payment terms reasonably acceptable to
the Bank) rendered to such Account Debtor, and is not evidenced by any
instrument or chattel paper;
(e) it is not owing by any Account Debtor whose obligations the Bank shall
have notified the Borrower in writing are not deemed to constitute Eligible
Accounts,
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which notice may be given by the Bank based on the Bank's reasonable credit
assessment of such Account Debtor and its ability to pay the relevant
Account;
(f) it is not owing by an Account Debtor who shall have failed to pay in
full an invoice or invoices evidencing 10% or more of the unpaid net amount
of all Accounts owing by such Account Debtor within 60 days after the due
date of such invoice(s);
(g) the invoice evidencing such Account is not more than 60 days overdue;
(h) the Account Debtor with respect thereto is not a Subsidiary, Related
Party or Obligor, or a director, officer, employee or agent of the
Borrower, a Subsidiary, Related Party or Obligor;
(i) the Account Debtor with respect thereto is a resident or citizen of and
is located within the United States of America; and
(j) if the Account Debtor with respect thereto is the United States of
America or any department, agency or instrumentality thereof, the Borrowers
have assigned its right to payment of such Account to the Bank pursuant to
the Assignment of Claims Act of 1940 as amended.
An Account which is at any time an Eligible Account but which subsequently fails
to meet any of the foregoing requirements shall cease to be an Eligible Account.
Further, with respect to any Account, if the Bank at any time or times hereafter
determines, in its sole and absolute discretion, that the prospect of payment or
performance by the Account Debtor with respect thereto is or will be impaired
for any reason whatsoever, notwithstanding anything to the contrary contained
above, such Account shall cease to be an Eligible Account. The Borrowers and
the Bank agree that the Bank shall have the right to amend such definition,
without further agreement or consent of the Borrowers, based on the asset audit
or asset audits contemplated by SECTION 8.5 hereof.
"ELIGIBLE INVENTORY": Inventory of the Borrowers consisting of raw
materials, work-in-progress, and finished goods which meets the following
additional requirements:
(a) it is owned by the Borrowers, it is subject to the security interest in
favor of the Bank under the Security Agreements, and is not subject to any
other lien or security interest, and if it is located on leased premises,
the lessor of such premises shall have delivered to the Bank a landlord's
waiver in form and substance satisfactory to the Bank;
(b) except as the Bank may otherwise consent, it is not stored with a
bailee, warehouseman or similar party; if so stored with the Bank's
consent, such bailee, warehouseman or similar party has issued and
delivered to the Bank, in form and substance acceptable to the Bank, such
documents and agreements as the Bank may require, including but not limited
to warehouse receipts therefor in the Bank's name;
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(c) the Bank has determined, in its reasonable discretion, that it is not
unacceptable due to age, type, category, quality and/or quantity;
(d) it is not held by the Borrower on "consignment," not subject to any
other repurchase or return agreement;
(e) it does not, in any way, fail to meet or violate any warranty,
representation or covenant contained in the Loan Documents relating
directly or indirectly to the Borrower's Inventory; and
(f) if it is work-in-progress or finished goods, it is subject to a binding
purchase order, and the customer on such purchase order is not disqualified
as an Account Debtor for Eligible Accounts under the definition of
"Eligible Accounts".
Inventory which is at any time Eligible Inventory but which subsequently fails
to meet any of the foregoing requirements shall cease to be an Eligible
Inventory. The Borrowers and the Bank agree that the Bank shall have the right
to amend such definition, without further agreement or consent of the Borrowers,
based on the asset audit or asset audits contemplated by SECTION 8.5 hereof.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with regulations thereunder.
"ERISA AFFILIATE": Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrowers are a member and which is
treated as a single employer under Section 414 of the Code.
"EURODOLLAR ADVANCE": An Advance designated as such in a notice of
borrowing under SECTION 2.3 or a notice of continuation or conversion under
SECTION 2.4.
"EURODOLLAR INTERBANK RATE": The offered rate for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%), for
delivery of such deposits on the first day of an Interest Period of a Eurodollar
Advance, for the number of days comprised therein, which appears on the Reuters
Screen LIBO Page as of 11:00 a.m., London time, on the day that is two Business
Days preceding the first day of the Interest Period of such Eurodollar Advance
or the rate determined by the Bank at such time based on such other published
service of general application as shall be selected by the Bank for such
purpose. If the Reuters Screen LIBO Page or such other service does not report
such rates or such rates do not, in the judgment of the Bank, accurately reflect
the rates of interest applicable to the Bank in the relevant markets, the rate
for such Interest Period shall be determined by the Bank based on rates offered
to the Bank for United States Dollar deposits in the interbank eurodollar
market. "Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuter Monitor Money Rates Service (or such other page as may replace the
LIBO Page on that service for the purpose of displaying London interbank offered
rates of major banks for United States Dollar deposits).
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"EURODOLLAR RATE (RESERVE ADJUSTED)": A rate per annum (rounded upward, if
necessary, to the nearest 1/16th of 1%) calculated for the Interest Period of a
Eurodollar Advance in accordance with the following formula:
ERRA = Eurodollar Interbank Rate
---------------------------
1.00 - ERR
In such formula, "ERR" means "Eurodollar Reserve Rate" and "ERRA" means
"Eurodollar Rate (Reserve Adjusted)", in each instance determined by the Bank
for the applicable Interest Period. The Bank's determination of all such rates
for any Interest Period shall be conclusive in the absence of manifest error.
"EURODOLLAR RESERVE RATE": A percentage equal to the daily average during
such Interest Period of the aggregate maximum reserve requirements (including
all basic, supplemental, marginal and other reserves), as specified under
Regulation D of the Federal Reserve Board, or any other applicable regulation
that prescribes reserve requirements applicable to Eurocurrency liabilities (as
presently defined in Regulation D) or applicable to extensions of credit by the
Bank the rate of interest on which is determined with regard to rates applicable
to Eurocurrency liabilities. Without limiting the generality of the foregoing,
the Eurocurrency Reserve Requirement shall reflect any reserves required to be
maintained by the Bank against (i) any category of liabilities that includes
deposits by reference to which the Eurodollar Rate is to be determined, or (ii)
any category of extensions of credit or other assets that includes Eurodollar
Advances. The Bank shall use reasonable and non-discriminatory means to
allocate the burden of maintenance of such reserves to the Loan hereunder and
other such loans or extensions of credit.
"EVENT OF DEFAULT": Any event described in SECTION 10.1.
"EXCESS CASH FLOW": For any fiscal year of the Borrowers, the remainder of
(a) the sum of (i) EBITDA for such fiscal year, (ii) the amount of any cash
refund received by the Borrowers during such fiscal year on taxes paid by the
Borrowers and the Subsidiaries, (iii) cash dividends, cash interest and other
similar cash payments received by the Borrowers and the Subsidiaries in respect
of Investments to the extent not included in EBITDA, and (iv) non-operating
gains to the extent subtracted from net income to determine EBITDA or otherwise
not included in EBITDA for such fiscal year, LESS (b) the sum, without
duplication, of (i) scheduled principal amortization of Indebtedness during such
fiscal year (excluding mandatory prepayments required under SECTION 4.5 hereof),
(ii) cash interest and cash taxes paid during such fiscal year, (iii) Capital
Expenditures during such fiscal year net of any financing of such Capital
Expenditures, (iv) dividends paid during such fiscal year, and (iv)
non-operating losses to the extent added to net income to determine EBITDA for
such fiscal year.
"FEDERAL RESERVE BOARD": The Board of Governors of the Federal Reserve
System or an successor thereto.
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"FIXED CHARGE COVERAGE RATIO": The ratio, calculated as of the last day of
each fiscal quarter, of (a) EBITDA for the period of four fiscal quarters then
ending, to (b) the sum for the Borrowers and the Subsidiaries on a consolidated
basis of (i) required amortization of principal of Indebtedness (including,
without limitation, imputed principal payments of Capitalized Leases) during
such period, (ii) cash interest expense and taxes during such period, (iii)
Capital Expenditures which have not been financed, PLUS (iv) dividends paid
during such period.
"GAAP": Generally accepted accounting principles as applied in the
preparation of the audited financial statement of the Borrowers referred to in
SECTION 7.5.
"INDEBTEDNESS": Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or another
party; (b) any obligation on account of deposits or advances; (c) any obligation
for the deferred purchase price of any property or services, except trade
accounts payable with a maturity of not greater than 90 days incurred in the
ordinary course of business, (d) any obligation as lessee under any Capitalized
Lease; (e) all guaranties, endorsements and other contingent obligations in
respect to Indebtedness of others; and (f) undertakings or agreements to
reimburse or indemnify issuers of letters of credit. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer.
"INTEREST PERIOD" Either (a) for any Eurodollar Advance, the period
commencing on the borrowing date of such Eurodollar Advance or the date a
Reference Rate Advance is converted into such Eurodollar Advance, or the last
day of the preceding Interest Period for such Eurodollar Advance, as the case
may be, and ending on the numerically corresponding day one, two, three or six
months thereafter, as selected by the Borrowers pursuant to SECTION 2.3 or
SECTION 2.4; PROVIDED, that:
(i) any Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day unless such next
succeeding Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period for any Advance of the Revolving Loan shall extend
beyond the Revolving Credit Termination Date; and
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(iv) Interest Periods shall not be chosen for Advances of the Term Loan
that would require payment of any amount of any Advance prior to the last
day of the Interest Period in order to pay an installment of the Term Loan
when due;
OR (b) for any Offered Rate Advance, the period of time agreed upon as provided
in SECTION 2.8.
"INVESTMENT": The acquisition, purchase, making or holding of any stock or
other security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.
"LANDLORD'S WAIVER": A Landlord's Waiver substantially in the form of
EXHIBIT E attached hereto, duly executed by Deluxe and acknowledged by
Northstar.
"LC AGREEMENT": a certain Letter of Credit and Reimbursement Agreement,
dated as of August 1, 1994 (as amended, modified, assigned, restated or replaced
from time to time), between Northstar and the Bank.
"LIEN": Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
"LOAN DOCUMENTS": This Agreement, the Notes, the Landlord's Waiver, the LC
Agreement, the Pledge Agreement, the Security Agreements and each other
instrument, document, guaranty, security agreement, mortgage, or other agreement
executed and delivered by the Borrowers any guarantor or party granting security
interests in connection with this Agreement, the Loans or any collateral for the
Loans, or by Deluxe (in the instance of the Landlord's Waiver).
"LOANS": The Revolving Loans and the Term Loans.
"NOTES": The Revolving Note and the Term Note.
"OFFERED RATE": A fixed rate of interest for an agreed-upon interest
period, as offered by the Bank at its sole discretion and agreed upon by the
Borrower, as provided in SECTION 2.8.
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"OFFERED RATE ADVANCE": An Advance which the Borrowers and the Bank have
agreed shall be an Offered Rate Advance and have established an Interest Period
and rate of interest as provided in SECTION 2.8.
"PAYMENT DATE": The Revolving Credit Termination Date, or date of any
other termination of the Revolving Credit Commitment, including without
limitation the due dates of installments described in SECTION 2.5(b) for
interest on the principal due on such dates, plus (a) the last day of each
Interest Period for each Eurodollar Advance and, if such Interest Period is in
excess of three months, the day three months after the first day of such
Interest Period, and thereafter each day three months after each succeeding
Payment Date; and (b) the last day of each month of each year for each Offered
Rate Advance (unless a different payment schedule is otherwise specifically
agreed to in writing in respect of a particular Offered Rate Advance) and
Reference Rate Advance and for any fees including, without limitation,
Commitment Fees.
"PBGC": The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.
"PERSON": Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
"PLAN": An employee benefit plan or other plan, maintained for employees
of the Borrowers or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
"PLEDGE AGREEMENT": The security agreements of Northstar substantially in
the form of EXHIBIT F as such pledge agreement may be amended, modified or
supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such pledge agreement.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate which is based on the Reference Rate, such
interest rate shall change on the effective date of any change in the Reference
Rate.
"REFERENCE RATE ADVANCE": An Advance designated as such in a notice of
borrowing under SECTION 2.3 or a notice of continuation or conversion under
SECTION 2.4.
"RELATED PARTY": Any Person (other than a Subsidiary): (a) which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, the Borrowers, (b) which beneficially owns or
holds 5% or more of the equity interest of the Borrowers; or (c) 5% or more of
the equity interest of which is beneficially owned or held by the Borrowers or a
Subsidiary. The term "control" means the possession, directly or
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indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"REPORTABLE EVENT": A reportable event as defined in Section 4043 of ERISA
and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
"REVOLVING CREDIT COMMITMENT": The maximum unpaid principal amount of
Loans which may from time to time be outstanding hereunder, being initially
$1,500,000, as the same may be reduced from time to time pursuant to SECTION 4.3
and, as the context may require, the agreement of the Bank to make Loans to the
Borrowers subject to the terms and conditions of this Agreement.
"REVOLVING CREDIT TERMINATION DATE": The earliest of (a) July 31, 1999,
(b) the date on which the Revolving Credit Commitment is terminated pursuant to
SECTION 11.2 hereof or (c) the date on which the Revolving Credit Commitment is
reduced to zero pursuant to SECTION 4.4 hereof.
"REVOLVING LOANS": The Loans described in SECTION 2.1(A).
"REVOLVING NOTE": The promissory note of the Borrowers described in
SECTION 2.5(A), substantially in the form of EXHIBIT A, as such promissory note
may be amended, modified or supplemented from time to time, and such term shall
include any substitutions for, or renewals of, such promissory note.
"SECURITY AGREEMENTS": The security agreements of each of the Borrowers
substantially in the form of EXHIBIT G as such security agreements may be
amended, modified or supplemented from time to time, and such term shall include
any substitutions for, or renewals of, such security agreements.
"SUBSIDIARY": Any Person of which or in which the Borrowers and the other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
"TERM LOAN": The Loan described in SECTION 2.1(B).
"TERM NOTE" The promissory note of the Borrowers described in SECTION
2.5(B), substantially in the form of EXHIBIT B, as such promissory note may be
amended, modified or
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supplemented from time to time, and such term shall include any substitutions
for, or renewals of, such promissory note.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder (including, without
limitation, determination of compliance with financial ratios and restrictions
in ARTICLES VIII and IX hereof) shall be made in accordance with GAAP
consistently applied. Any reference to "consolidated" financial terms shall be
deemed to refer to those financial terms as applied to the Borrowers and the
Subsidiaries in accordance with GAAP.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding."
Section 1.4 OTHER DEFINITIONAL TERMS. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided.
Section 1.5 BORROWERS. Any reference to "Borrowers" shall be deemed a
reference to both the Borrowers together and to each Borrower separately. For
example, a reference to the "Borrowers'" liabilities shall mean both the
Borrowers' joint liabilities and the liabilities of each Borrower considered
separately.
ARTICLE II TERMS OF LENDING
Section 2.1 THE LOANS. Subject to the terms and conditions hereof and in
reliance upon the warranties of the Borrowers herein, the Bank agrees:
(a) REVOLVING LOANS. To make loans (each, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrowers from time to time
from the date hereof until the Revolving Credit Termination Date, during
which period the Borrowers may repay and reborrow in accordance with the
provisions hereof, PROVIDED, that the aggregate unpaid principal amount of
all outstanding Revolving Loans shall not exceed the lesser of (i) the
Revolving Credit Commitment at any time, or (ii) the Borrowing Base; and
(b) TERM LOAN. To make a loan (the "Term Loan") to the Borrowers not
later than July 31, 1996, upon request of the Borrowers to the Bank in such
amount as the Borrowers shall request, but not exceeding $9,000,000.
Section 2.2 ADVANCE OPTIONS. The Loans shall be constituted of Eurodollar
Advances and Reference Rate Advances, as shall be selected by the Borrowers,
except as otherwise provided herein. Any combination of types of Advances may
be outstanding at the same
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time, except that the total of outstanding Eurodollar Advances shall not exceed
six (6) at any one time. Each Eurodollar Advance shall be in an amount that is
an integral multiple of $100,000. Each Reference Rate Advance shall be in an
amount that is an integral multiple of $50,000.
Section 2.3 BORROWING PROCEDURES FOR REVOLVING LOANS. Any request by the
Borrowers for a Revolving Loan shall be in writing, or by telephone promptly
confirmed in writing, and must be given so as to be received by the Bank not
later than:
(a) 10:00 a.m., Minneapolis time, on the date of the requested Loan, if the
Revolving Loan shall be comprised of Reference Rate Advances; or
(b) 10:00 a.m., Minneapolis time, two Business days prior to the date of
the requested Revolving Loan, if the Revolving Loan shall be, or shall
include, a Eurodollar Advance.
Each request for a Revolving Loan shall specify (i) the borrowing date (which
shall be a Business Day), (ii) the amount of such Revolving Loan and the type or
types of Advances comprising such Revolving Loan (subject to the limitation on
amount set forth in SECTION 2.2), and (iii) if such Loan shall include
Eurodollar Advances, the initial Interest Periods for such Advances. Unless the
Bank determines that any applicable condition specified in ARTICLE VI has not
been satisfied, the Bank will make the amount of the requested Loan available to
the Borrowers at the Bank's principal office in Minneapolis, Minnesota, in
immediately available funds not later than 5:00 p.m., Minneapolis time, on the
date requested.
2.4 CONTINUATION OR CONVERSION OF LOANS. The Borrowers may elect to (i)
continue any outstanding Eurodollar Advance from one Interest Period into a
subsequent Interest Period to begin on the last day of the earlier Interest
Period, or (ii) convert any outstanding Advance into another type of Advance (on
the last day of an Interest Period only, in the instance of a Eurodollar
Advance), by giving the Bank notice in writing, or by telephone promptly
confirmed in writing, given so as to be received by the Bank not later than:
(a) 10:00 a.m., Minneapolis time, on the date of the requested continuation
or conversion, if the continuing or converted Advance shall be a Reference
Rate Advance; or
(b) 10:00 a.m., Minneapolis time, two Business days prior to the date of
the requested continuation or conversion, if the continuing or converted
Advance shall be a Eurodollar Advance.
Each notice of continuation or conversion of an Advance shall specify (i) the
effective date of the continuation or conversion date (which shall be a Business
Day), (ii) the amount and the type or types of Advances following such
continuation or conversion (subject to the limitation on amount set forth in
SECTION 2.2), and (iii) for continuation as, or conversion into, Eurodollar
Advances, the Interest Periods for such Advances. Absent timely notice of
continuation or conversion, each Eurodollar Advance shall automatically convert
into a Reference Rate
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Advance on the last day of an applicable Interest Period, unless paid in full on
such last day. No Advance shall be continued as, or converted into, a
Eurodollar Advance if the shortest Interest Period for such Advance may not
transpire prior to the Revolving Credit Termination Date (for a Revolving Loan)
or the date due (for the Term Loan) or if a Default or Event of Default shall
exist.
Section 2.5 THE NOTES AND MATURITIES. The Loans shall be evidenced by the
following Notes:
(a) REVOLVING NOTE. The Revolving Loans shall be evidenced by the
Revolving Note, in the amount of the Revolving Credit Commitment originally
in effect and dated as of the date of this Agreement. The Revolving Loans
and the Revolving Note shall mature and be payable on the Revolving Credit
Termination Date. The Bank shall enter in its records the amount of each
Advance comprising the Revolving Loans, the rate of interest borne by each
Advance and the payments of the Revolving Loans, and such records shall be
conclusive evidence of the subject matter thereof, absent manifest error.
(b) TERM LOAN. The Term Loans shall be evidenced by the Term Note, in the
amount of the Term Loan when made, dated as of the date of this Agreement.
The Term Loan and the Term Note shall mature and be payable in quarterly
installments, payable on the last Business Day of January, April, July and
October of each year, commencing on July 31, 1997, in the following amounts
for the following dates:
Dates: Amount:
July 31, 1997 through
and including
April 30, 1998: $187,500
July 31, 1998 through
and including
April 30, 2003: $262,500
July 31, 2003 entire remaining principal
balance of the Term Loan.
The Bank shall enter in its records the amount of each Advance comprising
the Term Loan, the rate of interest borne by each Advance and the payments
of the Term Loan, and such records shall be conclusive evidence of the
subject matter thereof, absent manifest error.
Section 2.6 FUNDING LOSSES. The Borrowers will indemnify the Bank upon
demand against any loss or expense which the Bank may sustain or incur
(including, without limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund, or maintain any Advance) as a consequence
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of (a) any failure of the Borrowers to borrow, continue or convert an Advance on
a date specified therefor in a notice thereof (including an acceptance of a
Offered Rate, as provided in SECTION 2.8 below), or (b) any payment (including,
without limitation, any payment pursuant to SECTION 4.2, 4.3 4.4, 4.5 or 10.2),
prepayment or conversion of any Eurodollar Advance or Offered Rate Advance on a
date other than the last day of the Interest Period for such Advance.
Determinations by the Bank for purposes of this SECTION 2.6 of the amount
required to indemnify the Bank shall be conclusive in the absence of manifest
error. Indemnities under this SECTION 2.6 in respect of Offered Rate Advances
shall be calculated in accordance with EXHIBIT H.
Section 2.7 JOINT AND SEVERAL OBLIGATIONS. The Borrowers each agree that
all obligations hereunder and under each Note and other Loan Document are joint
and several and the primary obligations of each of them, enforceable against
each Borrower separately or all Borrowers together notwithstanding of any right
or power of any party to assert any claim or defense as to the invalidity or
unenforceability of any such obligations. Each Borrower hereby waives any
defense it may claim as a guarantor, surety or accommodation party. The Bank
may, from time to time, without notice to any of the Borrowers, (a) obtain or
release any security interest in any property to secure any of the obligations
hereunder; (b) obtain or release the primary or secondary liability of any party
or parties with respect to any of the obligations hereunder (including without
limitation the liability of any other Borrower); (c) extend or renew for any
period, alter or exchange any of the obligations hereunder or release or
compromise any obligation of any nature of any obligor with respect to any of
the obligations hereunder; or (d) resort to any Borrower for payment of any of
the obligations hereunder whether or not the Bank shall have resorted to any
property securing the obligations or to any other Borrower or any other party
primarily or secondarily liable with respect to such obligations.
Section 2.8 PROCEDURES FOR OFFERED RATE ADVANCES. The Borrowers may
request an Offered Rate Advance on any Business Day. Such request shall be made
by an Authorized Representative not later than 10:00 a.m. on the day of the
requested Offered Rate Advance and shall specify that amount of the requested
Offered Rate Advance (which shall be at least $100,000 or an integral multiple
thereof if above such amount), and the Interest Period. The Bank shall respond
as promptly as practicable to inform the Authorized Representative whether the
Bank is willing to make such Offered Rate Advance and, if so, the proposed
Offered Rate and any additional terms or conditions that would apply to such
Offered Rate Advance. The Authorized Representative shall, upon receiving any
such proposal by the Bank, promptly inform the Bank whether such Offered Rate,
Interest Period and additional terms or conditions (if any) are acceptable to
the Borrowers. If the Authorized Representative accepts such Offered Rate,
Interest Period and terms and conditions, the Borrowers shall be deemed to have
given notice of borrowing and such Offered Rate will apply to the Advance for
the specified Interest Period.
Section 2.9 AUTHORIZED REPRESENTATIVES. Each request for a Revolving
Loan, selection of Interest Period for Revolving Loans or Term loans,
authorization of repayment of the Loans, and other communication by the
Borrowers may be made by an Authorized Representative. The Borrowers authorize
the Bank to rely upon the telephone or written instructions of any
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person identifying himself as an Authorized Representative and upon any
signature which the Bank believes to be genuine.
ARTICLE III INTEREST AND FEES
Section 3.1 INTEREST.
(a) EURODOLLAR ADVANCES. The unpaid principal amount of each Eurodollar
Advance shall bear interest prior to maturity at a rate per annum equal to
the Eurodollar Rate (Reserve Adjusted) in effect for each Interest Period
for such Eurodollar Advance plus the Applicable Margin for Eurodollar
Advances.
(b) REFERENCE RATE ADVANCES. The unpaid principal amount of each Reference
Rate Advance shall bear interest prior to maturity at a rate per annum
equal to the Reference Rate plus the Applicable Margin for Reference Rate
Advances.
(c) OFFERED RATE ADVANCES. The unpaid principal amount of each Offered
Rate Advance shall bear interest prior to maturity at a rate per annum
equal to the Offered Rate established for the Interest Period thereof, as
provided in SECTION 2.8.
(d) INTEREST AFTER MATURITY. Any amount of the Loans not paid when due,
whether at the date scheduled therefor or earlier upon acceleration, shall
bear interest until paid in full at a rate per annum equal to the greater
of (i) 2.00% in excess of the rate applicable to the unpaid principal
amount immediately before it became due, or (ii) the Reference Rate plus
2.00% per annum.
Section 3.2 COMMITMENT FEE. The Borrowers shall pay to the Bank fees (the
"Commitment Fees") in an amount determined by applying a rate of 0.375% per
annum to the average daily unused amount of the Revolving Credit Commitment for
the period from the date hereof to the Revolving Credit Termination Date.
Section 3.3 COMPUTATION. Interest and Commitment Fees shall be computed
on the basis of actual days elapsed and a year of 360 days.
Section 3.4 PAYMENT DATES. Accrued interest under SECTION 3.1(a), (b) and
(c) and commitment fees under SECTION 3.2 shall be payable in arrears on the
Payment Dates for the applicable types of Advances and for fees. Accrued
interest under SECTION 3.1(d) shall be payable on demand.
ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF
Section 4.1 REPAYMENT. Principal of the Loans, together with all accrued
and unpaid interest thereon, shall be due and payable as provided in SECTION 2.5
regarding maturity of the Notes.
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Section 4.2 OPTIONAL PREPAYMENTS. The Borrowers may, upon at least 3
Business Days' prior written or telephonic notice received by the Bank, prepay
the Loans, in whole or in part, at any time subject to the provisions of SECTION
2.6, without any other premium or penalty. Any such prepayment must be
accompanied by accrued and unpaid interest on the amount prepaid. Each partial
prepayment shall be in an amount of $100,000 or an integral multiple thereof.
Each prepayment of the Term Loan shall be applied to the unpaid installments of
the Term Loan in the inverse order of their maturities. The Borrower may elect,
by written notice to the Bank, the outstanding Advances to which any prepayment
shall be applied, but in the absence of such election the Bank shall apply all
prepayments first to any Reference Rate Advances, second to any Eurodollar
Advances, and finally to any Offered Rate Advances.
Section 4.3 OPTIONAL REDUCTION OR TERMINATION OF REVOLVING CREDIT
COMMITMENT. The Borrowers may, at any time, upon no less than 3 Business Days
prior written or telephonic notice received by the Bank, reduce the Revolving
Credit Commitment, with any such reduction in a minimum amount of $100,000 or an
integral multiple thereof. Upon any reduction in the Revolving Credit
Commitment pursuant to this Section, the Borrowers shall pay to the Bank the
amount, if any, by which the aggregate unpaid principal amount of outstanding
Loans exceeds the Revolving Credit Commitment as so reduced. Amounts so paid
cannot be reborrowed. The Borrowers may, at any time, upon not less than 3
Business Days prior written notice to the Bank, terminate the Revolving Credit
Commitment in its entirety. Upon termination of the Revolving Credit Commitment
pursuant to this Section, the Borrowers shall pay to the Bank the full amount of
all outstanding Loans, all accrued and unpaid interest thereon, all unpaid
Commitment Fees accrued to the date of such termination and all other unpaid
obligations of the Borrowers to the Bank hereunder. All payment described in
this Section is subject to the provisions of SECTION 2.6.
Section 4.4 MANDATORY PREPAYMENT UPON BORROWING BASE DEFICIENCY. The
Borrower shall, immediately upon demand of the Bank, if the Revolving Loans
exceed the Borrowing Base at any time prepay the Revolving Loans so that they do
not exceed the Borrowing Base.
Section 4.5 MANDATORY PREPAYMENT OF TERM LOAN.
(a) EXCESS CASH FLOW. Upon delivery of annual audited financial
statements, and on or prior to the date 100 days after the end of each
fiscal year of the Borrowers, commencing with the year ending October 31,
1996, the Borrowers shall prepay the Term Loan in the amount of (i) 75% of
the Excess Cash Flow in respect of the fiscal years ending October 31, 1996
and October 31, 1997, and (ii) 50% of the Excess Cash Flow in respect of
each further fiscal year.
(b) ISSUANCE OF EQUITY. Upon issuance by Northstar of any capital stock
of any type or class, the Borrowers shall prepay the Term Loan in an amount
equal to the net proceeds of such issuance. For this purpose, "net
proceeds" shall mean the cash proceeds received from such issuance net of
investment banking fees, legal fees
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accountants fees, underwriting discounts and commissions and other
customary fees and expenses and other reasonable costs and expenses
actually incurred in connection therewith. This SECTION 4.5(b) shall not
require prepayment upon issuance of stock to employees or directors under
incentive or stock option plans.
(c) ORDER OF APPLICATION. Each prepayment of the Term Loan under this
SECTION shall be applied to the unpaid installments of the Term Loan in the
inverse order of their maturities. The Borrower may elect, by written
notice to the Bank, the outstanding Advances to which any prepayment shall
be applied, but in the absence of such election the Bank shall apply all
prepayments first to any Reference Rate Advances, second to any Eurodollar
Advances, and finally to any Offered Rate Advances.
Section 4.6 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under the
Loan Documents shall be made without set-off or counterclaim in immediately
available funds not later than 2:00 p.m., Minneapolis time, on the dates due at
the main office of the Bank in Minneapolis, Minnesota. Funds received on any
day after such time shall be deemed to have been received on the next Business
Day. Subject to the definition of the term "Interest Period", whenever any
payment to be made hereunder or on the Notes shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
any interest or fees.
ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS
Section 5.1 INCREASED COSTS. If, as a result of any law, rule,
regulation, treaty or directive, or any change therein or in the interpretation
or administration thereof, or compliance by the Bank with any request or
directive (whether or not having the force of law) from any court, central bank,
governmental authority, agency or instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any Loan, the Notes or
the Commitment is imposed, modified or deemed applicable, or the basis of
taxation of payments to the Bank of interest or principal of the Loans or
of the Commitment Fees (other than taxes imposed on the overall net income
of the Bank by the jurisdiction in which the Bank has its principal office)
is changed;
(b) any reserve, special deposit, special assessment or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, the Bank is imposed, modified or deemed applicable;
(c) any increase in the amount of capital required or expected to be
maintained by the Bank or any Person controlling the Bank is imposed,
modified or deemed applicable; or
(d) any other condition affecting this Agreement or the Commitment is
imposed on the Bank or the relevant funding markets;
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and the Bank determines that, by reason thereof, the cost to the Bank of making
or maintaining the Loans or the Commitment is increased, or the amount of any
sum receivable by the Bank hereunder or under the Notes in respect of any Loan
is reduced;
THEN, the Borrowers shall pay to the Bank upon demand such additional amount or
amounts as will compensate the Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that the Bank has
not been compensated for such additional cost or reduction in the calculation of
the Eurodollar Reserve Rate). Determinations by the Bank for purposes of this
SECTION 5.1 of the additional amounts required to compensate the Bank shall be
conclusive in the absence of manifest error. In determining such amounts, the
Bank shall use reasonable and non-discriminatory means to allocate the burden of
such increased costs and other conditions to the Loan and Commitment hereunder
and other such loans or extensions of credit.
Section 5.2 DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE OR
INADEQUATE; IMPRACTICABILITY. If the Bank determines (which determination shall
be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant Interest Period for
any Eurodollar Advance are not available to the Bank in the relevant
markets or that, by reason of circumstances affecting such market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period;
(b) the Eurodollar Rate (Reserve Adjusted) will not adequately and fairly
reflect the cost to the Bank of making or funding the Eurodollar Advances
for a relevant Interest Period; or
(c) the making or funding of Eurodollar Advances has become impracticable
as a result of any event occurring after the date of this Agreement which,
in the opinion of the Bank, materially and adversely affects such Advances
or the Bank's Commitment to make such Advances or the relevant market;
the Bank shall promptly give notice of such determination to the Borrowers, and
(i) any notice of a new Eurodollar Advance previously given by the Borrowers and
not yet borrowed or converted shall be deemed to be a notice to make a Reference
Rate Advance, and (ii) the Borrowers shall be obligated to either prepay in full
any outstanding Eurodollar Advances without premium or penalty on the last day
of the current Interest Period with respect thereto or convert any such Advance
to a Reference Rate Advance, on such last day.
Section 5.3 CHANGES IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL. If at
any time due to the adoption of any law, rule, regulation, treaty or directive,
or any change therein or in the interpretation or administration thereof by any
court, central bank, governmental authority, agency or instrumentality, or
comparable agency charged with the interpretation or administration thereof, or
for any other reason arising subsequent to the date of this Agreement, it shall
become unlawful or impossible for the Bank to make or fund any Eurodollar
Advance, the obligation of the Bank to provide such Advance shall, upon the
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happening of such event, forthwith be suspended for the duration of such
illegality or impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any or Eurodollar Advance previously made by
it hereunder, the Bank shall, upon the happening of such event, notify the
Borrowers thereof in writing, and the Borrowers shall, at the time notified by
the Bank, either convert each such unlawful Advance to a Reference Rate Advance
or Offered Rate Advance (if available) or repay such Advance in full, together
with accrued interest thereon, subject to the provisions of SECTION 2.6.
Section 5.4 FUNDING. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall be entitled to fund and maintain its funding of all
or any part of the Loans in any manner it elects; it being understood, however,
that for purposes of this Agreement, all determinations hereunder shall be made
as if the Bank had actually funded and maintained each Eurodollar Advance during
the Interest Period for such Advance through the purchase of deposits having a
term corresponding to such Interest Period and bearing an interest rate equal to
the Eurodollar Rate for such Interest Period (whether or not the Bank shall have
granted any participations in such Advances).
ARTICLE VI CONDITIONS PRECEDENT
Section 6.1 CONDITIONS OF INITIAL LOAN. The obligation of the Bank to
make the initial Loan hereunder shall be subject to the satisfaction of the
conditions precedent, in addition to the applicable conditions precedent set
forth in SECTION 6.2 below, that the Bank shall have received all of the
following, in form and substance satisfactory to the Bank, each duly executed
and certified or dated the date of the initial Loan or such other date as is
satisfactory to the Bank:
(a) The Revolving Notes and the Term Note executed by a duly authorized
officer (or officers) of the Borrowers.
(b) A copy of the corporate resolution of the Borrowers authorizing the
execution, delivery and performance of the Loan Documents, certified by the
Secretary or an Assistant Secretary of the Borrowers.
(c) An incumbency certificate showing the names and titles, and bearing
the signatures of, the officers of the Borrowers authorized to execute the
Loan Documents and to request Loans hereunder, certified by the Secretary
or an Assistant Secretary of the Borrowers.
(d) A copy of the Articles or Certificate of Incorporation of the
Borrowers with all amendments thereto, certified by the Secretary or an
Assistant Secretary of the Borrowers.
(e) A Certificate of Good Standing for the Borrowers in the jurisdiction
of its incorporation, certified by the appropriate governmental officials.
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(f) A copy of the By-Laws of the Borrowers with all amendments thereto,
certified by the Secretary or an Assistant Secretary of the Borrowers.
(g) The Security Agreements, together with all UCC searches, financing
statements, insurance certificates and other documents in connection
therewith as shall be requested by the Bank.
(h) The Landlord's Waiver.
(i) The Pledge Agreement, together with delivery of all certificates of
the shares pledged thereunder and assignments separate from certificates
for all such certificates.
(j) A certificate designating Authorized Representatives of the Borrowers.
(k) Copies of the Acquisition Documents with all amendments thereto,
certified by the Secretary or an Assistant Secretary of the Borrowers.
(l) Provision of and satisfactory review by the Bank of environmental
reports on the Borrowers' business premises as shall be requested by the
Bank.
(m) An opinion of counsel to the Borrowers, addressed to the Bank, in
substantially the form of EXHIBIT H.
(l) Payment of a closing fee in the amount of $26,250, and fees and
expenses under SECTION 11.2.
Section 6.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the Bank
to make any Loan hereunder (including the initial Loan) shall be subject to the
satisfaction of the following conditions precedent (and any request for a Loan
shall be deemed a representation and warranty that the following are true and
correct):
(a) Before and after giving effect to such Loan, the representation and
warranties contained in ARTICLE VII shall be true and correct, as though
made on the date of such Loan.
(b) Before and after giving effect to such Loan, no Default or Event of
Default shall have occurred and be continuing.
(c) The Acquisition Transaction shall have been approved by all applicable
regulatory authorities, and the Acquisition Transaction shall have been
completed substantially in accordance with the Acquisition Documents.
(d) The most recent Borrowing Base Certificate submitted to the Bank shall
show adequate availability to permit the making of the requested Loan.
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ARTICLE VII REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to grant the Commitment
and to make Loans hereunder, the Borrowers represents and warrants to the Bank:
Section 7.1 ORGANIZATION, STANDING, ETC. The Borrowers and each of the
corporate Subsidiaries are corporations duly incorporated and validly existing
and in good standing under the laws of the jurisdiction of their respective
incorporation and have all requisite corporate power and authority to carry on
their respective businesses as now conducted, to (in the instance of the
Borrowers) enter into the Loan Documents and to perform its obligations under
the Loan Documents. The Borrowers and each of the Subsidiaries are duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary.
Section 7.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrowers of the Loan Documents have been duly authorized by
all necessary corporate action by the Borrowers, and the Loan Documents
constitute the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms,
subject to limitations as to enforceability which might result from bankruptcy,
insolvency, moratorium and other similar laws affecting creditors' rights
generally and subject to limitations on the availability of equitable remedies.
Section 7.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrowers of the Loan Documents will not (a) violate any
provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrowers, (b)
violate or contravene any provisions of the Articles (or Certificate) of
Incorporation or by-laws of the Borrowers, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Borrowers are a party or by which it
or any of its properties may be bound or result in the creation of any Lien on
any asset of the Borrowers or any Subsidiary. Neither the Borrowers nor any
Subsidiary is in default under or in violation of any such law, statute, rule or
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, loan or credit agreement or other agreement, lease or
instrument in any case in which the consequences of such default or violation
could constitute an Adverse Event.
Section 7.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrowers to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents.
Section 7.5 FINANCIAL STATEMENTS AND CONDITION.
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(a) ANNUAL AND QUARTERLY STATEMENTS. Northstar's audited consolidated
financial statements as at October 31, 1995, and its unaudited consolidated
financial statements as at April 30, 1996, as heretofore furnished to the
Bank, have been prepared in accordance with GAAP on a consistent basis and
fairly present the financial condition of the Borrowers and the
Subsidiaries as at such dates and the results of their operations and
changes in financial position for the respective periods then ended,
subject in the instance of such unaudited statements to adjustments
resulting from year-end audit. As of the dates of such financial
statements, neither the Borrowers nor any Subsidiary had any material
obligation, contingent liability, liability for taxes or long-term lease
obligation which is not reflected in such financial statements or in the
notes thereto.
(b) PRO FORMA STATEMENTS. The PRO FORMA balance sheet and projections of
the Borrowers, giving effect to the Acquisition Transaction, which are
attached hereto as SCHEDULE 7.5 fairly presents the Borrowers' reasonable,
good faith estimate of the effect of the Acquisition Transaction, and the
Borrower is not aware of any reason that such balance sheet and projections
are not true and accurate in all material respects.
(c) ADVERSE EVENT. Since October 31, 1995, no Adverse Event has
occurred.
Section 7.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described in
SCHEDULE 7.6, there are no actions, suits or proceedings pending or, to the
knowledge of the Borrowers, threatened against or affecting the Borrowers or any
Subsidiary or any of their properties before any court or arbitrator, or any
governmental department, board, agency or other instrumentality which, if
determined adversely to the Borrowers or such Subsidiary, could constitute an
Adverse Event. Except as described in SCHEDULE 7.6, neither the Borrowers nor
any Subsidiary has any contingent liabilities which are material to the
Borrowers and the Subsidiaries as a consolidated enterprise.
Section 7.7 COMPLIANCE. The Borrowers and the Subsidiaries are in
material compliance with all statutes and governmental rules and regulations
applicable to them.
Section 7.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist
any violation by the Borrowers or any Subsidiary of any applicable federal,
state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrowers or a Subsidiary or which would require a material
expenditure by the Borrowers or such Subsidiary to cure. Neither the Borrowers
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which non-compliance or remedial action could
constitute an Adverse Event.
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Section 7.9 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for
which the reporting requirements have been waived by regulations of the PBGC,
has occurred and is continuing with respect to any Plan. All of the minimum
funding standards applicable to such Plans have been satisfied and there exists
no event or condition which would permit the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. The current value of the Plans'
benefits guaranteed under Title IV or ERISA does not exceed the current value of
the Plans' assets allocable to such benefits.
Section 7.10 REGULATION U. The Borrowers are not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan will be used to purchase or carry margin
stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.
Section 7.11 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrowers and the
Subsidiaries has good and marketable title to its owned real properties and good
and sufficient title to its other properties, including all properties and
assets referred to as owned by the Borrowers and the Subsidiaries in the audited
financial statement of the Borrowers referred to in SECTION 7.5 (other than
property disposed of since the date of such financial statement in the ordinary
course of business). None of the properties, revenues or assets of the
Borrowers or any of the Subsidiaries is subject to a Lien, except for (a) Liens
disclosed in the financial statements referred to in SECTION 7.5, (b) Liens
listed on SCHEDULE 7.11, or (c) Liens allowed under SECTION 9.13.
Section 7.12 TAXES. Each of the Borrowers and the Subsidiaries has filed
all federal, state and local tax returns required to be filed and has paid or
made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
and all other taxes, fees and other charges imposed on it or any of its property
by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrowers). No tax Liens have been filed and no
material claims are being asserted with respect to any such taxes, fees or
charges. The charges, accruals and reserves on the books of the Borrowers in
respect of taxes and other governmental charges are adequate.
Section 7.13 TRADEMARKS, PATENTS. Each of the Borrowers and the
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others,
including without limitation all software and technology necessary to conduct
the business operations contemplated by the Acquisition Transaction. It is
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acknowledged that certain inventory tracking and billing relating to the
business operations contemplated by the Acquisition Transaction will continue to
be conducted by Deluxe for a period of not more than eight months, and no
representation is made concerning either (a) the Borrowers' present ownership of
software or technology that would duplicate the functions being performed by
Deluxe during such time, or (b) Deluxe's ownership or license of all relevant
software or technology for such functions.
Section 7.14 INVESTMENT COMPANY ACT. Neither the Borrowers nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 7.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrowers
nor any Subsidiary is a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or of a subsidiary company of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 7.16 SUBSIDIARIES. SCHEDULE 7.16 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock owned beneficially or of record by the
Borrowers or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.
Section 7.17 PARTNERSHIPS AND JOINT VENTURES. SCHEDULE 7.17 sets forth
as of the date of this Agreement a list of all partnerships or joint ventures in
which the Borrowers or any Subsidiary is a partner (limited or general) or joint
venturer.
ARTICLE VIII AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Loans and all other liabilities of the Borrowers
to the Bank hereunder and under the Notes have been paid in full, unless the
Bank shall otherwise expressly consent in writing, the Borrowers will do, and
will cause each Subsidiary (except in the instance of SECTION 8.1) to do, all of
the following:
Section 8.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank:
(a) As soon as available and in any event within 100 days after the end of
each fiscal year of the Borrowers: (ii) the annual audit report of the
Borrowers and the Subsidiaries prepared on a consolidated basis and in
conformity with GAAP, consisting of at least statements of income, cash
flow, changes in stockholders' equity, and a consolidated balance sheet as
at the end of such year, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified without
qualification by independent certified public accountants of recognized
standing selected by the Borrowers and acceptable to the Bank, together
with any management letters, management reports or other supplementary
comments or reports to the Borrowers or its board of directors furnished by
such accountants, and (ii) the unaudited consolidating financial report of
the Borrowers for such fiscal year.
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(b) Together with the audited financial statements required under SECTION
8.1(a), a statement by the accounting firm performing such audit stating
that it has reviewed this Agreement and that in performing its examination
nothing came to its attention that caused it to believe that the Borrower
was not in compliance with the financial covenants herein.
(c) As soon as available and in any event within 50 days after the end of
each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited financial statement of the Borrowers and the Subsidiaries
prepared in the same manner as the audit report referred to in SECTION
8.1(a), signed by the Borrowers' chief financial officer, consisting of at
least consolidated statements of income, cash flow, changes in financial
position and stockholders' equity for the Borrowers and the Subsidiaries
for such quarter and for the period from the beginning of such fiscal year
to the end of such quarter, and a consolidated balance sheet of the
Borrowers as at the end of such quarter.
(d) As soon as available and in any event within 21 days after the end of
each month, a copy of the unaudited balance sheet and income statement of
the Borrowers and the Subsidiaries prepared in the same manner as the audit
report referred to in SECTION 8.1(a), signed by the Borrowers' chief
financial officer.
(e) Together with the financial statements furnished by the Borrowers under
SECTIONS 8.1(a) and 8.1(c), a Compliance Certificate statement signed by an
Authorized Representative stating that as at the date of each such
financial statement there did not exist any Default or Event of Default or,
if such Default or Event of Default existed, specifying the nature and
period of existence thereof and what action the Borrowers propose to take
with respect thereto.
(f) Within 15 days after the end of each month, a Borrowing Base
Certificate as of the last day of such month, duly certified.
(g) As soon as available and in any event within 30 days after the end of
each fiscal year of the Borrowers, the Borrowers' budget for the following
year including anticipated sales, estimates of revenues, operating income,
cash flows and a balance sheet (and if not otherwise disclosed to the Bank
by provisison of other filings, a list of material contracts), and as soon
as available a supplement to such budget including comparisons with the
previous years results.
(h) Immediately upon becoming aware of any Default or Event of Default, a
notice describing the nature thereof and what action the Borrowers proposes
to take with respect thereto.
(i) Immediately upon becoming aware of the occurrence, with respect to any
Plan, of any Reportable Event (other than a Reportable Event for which the
reporting requirements have been waived by PBGC regulations) or any
"prohibited transaction"
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(as defined in Section 4975 of the Code), a notice specifying the nature
thereof and what action the Borrowers proposes to take with respect
thereto, and, when received, copies of any notice from PBGC of intention to
terminate or have a trustee appointed for any Plan.
(j) Promptly upon the mailing or filing thereof, copies of all financial
statements, reports and proxy statements mailed to the Borrowers'
shareholders, and copies of all registration statements, periodic reports
and other documents filed with the Securities and Exchange Commission (or
any successor thereto) or any national securities exchange.
(k) Immediately upon becoming aware of the occurrence thereof, notice of
the institution of any litigation, arbitration or governmental proceeding,
or the rendering of a judgment or decision in such litigation or
proceeding, which could constitute an Adverse Event, and the steps being
taken by the Person(s) affected by such proceeding.
(l) Immediately upon becoming aware of the occurrence thereof, notice of
any violation as to any environmental matter by the Borrowers or any
Subsidiary and of the commencement of any judicial or administrative
proceeding relating to health, safety or environmental matters (i) in which
an adverse determination or result could result in the revocation of or
have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other permits
held by the Borrowers or any Subsidiary which are material to the
operations of the Borrowers or such Subsidiary, or (ii) which will or
threatens to impose a material liability on the Borrowers or such
Subsidiary to any Person or which will require a material expenditure by
the Borrowers or such Subsidiary to cure any alleged problem or violation.
(m) From time to time, such other information regarding the business,
operation and financial condition of the Borrowers and the Subsidiaries as
the Bank may reasonably request.
Section 8.2 CORPORATE EXISTENCE. Subject to SECTION 9.1 in the instance
of a Subsidiary, maintain its corporate existence in good standing under the
laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction in which the character of the properties owned,
leased or operated by it or the business conducted by it makes such
qualification necessary.
Section 8.3 INSURANCE. Maintain with financially sound and reputable
insurance companies such insurance as may be required by law and such other
insurance in such amounts and against such hazards as is customary in the case
of reputable corporations engaged in the same or similar business and similarly
situated, and all insurance on the Collateral required under the Security
Agreement.
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Section 8.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and reports
which are required by law to be filed by it and pay before they become
delinquent all taxes, assessments and governmental charges and levies imposed
upon it or its property and all claims or demands of any kind (including,
without limitation, those of suppliers, mechanics, carriers, warehouses,
landlords and other like Persons) which, if unpaid, might result in the creation
of a Lien upon its property; PROVIDED that the foregoing items need not be paid
if they are being contested in good faith by appropriate proceedings, and as
long as the Borrowers' or such Subsidiary's title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on the Borrowers' or such Subsidiary's books
in accordance with GAAP.
Section 8.5 ASSET AUDIT. Permit any Person designated by the Bank to
visit and inspect any of its properties, corporate books and financial records,
to examine and to make copies of its books of accounts and other financial
records, to audit the collateral for the Loans, and to discuss the affairs,
finances and accounts of the Borrowers and the Subsidiaries with, and to be
advised as to the same by, its officers at such reasonable times and intervals
as the Bank may designate. The first such audit and inspection of the
collateral for the Loans shall be conducted by the Bank as soon as practicable
after the closing date of this Agreement. The expenses of such first audit and
inspection, and audits and inspections to be performed (a) on a quarterly basis,
for the first year after the closing date of this Agreement, and (b) on an
annual basis, thereafter, shall be for the account of the Borrower and shall be
promptly reimbursed upon the Bank's request. The expenses of other audits
performed prior to an Event of Default shall be for the account of the Bank and
paid for by the Bank, but expenses for any audits performed while any Event of
Default is continuing shall be for the account of the Borrower and shall be
promptly reimbursed upon the Bank's request.
Section 8.6 MAINTENANCE OF PROPERTIES. Maintain its properties used or
useful in the conduct of its business in good condition, repair and working
order, and supplied with all necessary equipment, and make all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 8.7 BOOKS AND RECORDS. Keep adequate and proper records and books
of account in which full and correct entries will be made of its dealings,
business and affairs.
Section 8.8 COMPLIANCE. Comply in all material respects with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject.
Section 8.9 ERISA. Maintain each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and of
the Code.
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Section 8.10 ENVIRONMENTAL MATTERS. Observe and comply with all laws,
rules, regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a material liability or otherwise
constitute an Adverse Event.
ARTICLE IX NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Commitment is
terminated or expires and the Loans and all other liabilities of the Borrowers
to the Bank hereunder and under the Notes have been paid in full, unless the
Bank shall otherwise expressly consent in writing, the Borrowers will not, and
will not permit any Subsidiary to, do any of the following:
Section 9.1 MERGER. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person; PROVIDED, however, any
wholly-owned Subsidiary may be merged with or liquidated into either of the
Borrowers (if such Borrower is the surviving corporation) or any other
wholly-owned Subsidiary, and GFS may be merged with or liquidated into
Northstar, if Northstar is the surviving corporation.
Section 9.2 SALE OF ASSETS. Sell, transfer, lease or otherwise convey all
or any substantial part of its assets except for sales and leases of inventory
in the ordinary course of business and except for sales or other transfers by a
wholly-owned Subsidiary to the Borrowers or another wholly-owned Subsidiary.
Section 9.3 PURCHASE OF ASSETS. Purchase or lease or otherwise acquire
all or substantially all of the assets of any Person, except for purchases or
other transfers by the Borrowers or a wholly-owned Subsidiary from a
wholly-owned Subsidiary.
Section 9.4 PLANS. Permit any condition to exist in connection with any
Plan which might constitute grounds for the PBGC to institute proceedings to
have such Plan terminated or a trustee appointed to administer such Plan, permit
any Plan to terminate under any circumstances which would cause the lien
provided for in Section 4068 of ERISA to attach to any property, revenue or
asset of the Borrowers or any Subsidiary or permit the underfunded amount of
Plan benefits guaranteed under Title IV of ERISA to exceed $100,000.
Section 9.5 CHANGE IN NATURE OF BUSINESS. Make any material change in the
nature of the business of the Borrowers or such Subsidiary, as carried on at the
date hereof.
Section 9.6 SUBSIDIARIES, PARTNERSHIPS, JOINT VENTURES AND OWNERSHIP OF
STOCK. Do any of the following: (a) form or acquire any corporation which would
thereby become a Subsidiary; (b) form or enter into any partnership as a
limited or general partner or into any joint venture; (c) permit any Subsidiary
to purchase or otherwise acquire any shares of the stock of the Borrowers; or
(d) take any action, or permit any Subsidiary to take any action, which would
result in a decrease in the Borrowers' or any Subsidiary's ownership interest in
any Subsidiary (including, without limitation, decrease in the percentage of the
shares of any class of stock owned).
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Section 9.7 OTHER AGREEMENTS. Enter into any agreement, bond, note or
other instrument with or for the benefit of any Person other than the Bank which
would: (a) prohibit the Borrowers or such Subsidiary from granting, or otherwise
limit the ability of the Borrowers or such Subsidiary to grant, to the Bank any
Lien on any assets or properties of the Borrowers or such Subsidiary; or (b) be
violated or breached by the Borrowers' performance of its obligations under the
Loan Documents.
Section 9.8 RESTRICTED PAYMENTS. Either: (a) purchase or redeem or
otherwise acquire for value any shares of the Borrowers' or any Subsidiary's
stock, declare or pay any dividends thereon (other than stock dividends and
dividends payable solely to the Borrowers), make any distribution on, or payment
on account of the purchase, redemption, defeasance or other acquisition or
retirement for value of, any shares of the Borrowers' or any Subsidiary's stock
or set aside any funds for any such purpose (other than payment to, or on
account of or for the benefit of, the Borrowers only), PROVIDED, HOWEVER, that
if no Default or Event of Default shall exist at the time of the declaration or
payment thereof or shall result from such payment, Northstar may pay dividends
or redeem stock in aggregate amounts not to exceed (i) $225,000 during the
fiscal year ending October 31, 1996, and (ii) 20% of its consolidated net income
for the subject fiscal year during any fiscal year thereafter; or (b) directly
or indirectly make any payment on, or redeem, repurchase, defease, or make any
sinking fund payment on account of, or any other provision for, or otherwise
pay, acquire or retire for value, any Indebtedness of the Borrowers or any
Subsidiary that is subordinated in right of payment to the Loans (whether
pursuant to its terms or by operation of law), except for regularly-scheduled
payments of interest and principal (which shall not include payments
contingently required upon occurrence of a change of control or other event)
that are not otherwise prohibited hereunder or under the document or agreement
stating the terms of such subordination.
Section 9.9 CAPITAL EXPENDITURES. Make Capital Expenditures in an amount
exceeding $250,000 during the period from the date of this Agreement through
October 31, 1996, or exceeding the following during the following fiscal years:
During the fiscal year ending: Permitted
Capital Expenditures:
October 31, 1997: $1,000,000
October 31, 1998: $1,000,000
October 31, 1999: $1,200,000
October 31, 2000: $1,200,000
October 31, 2001 and each
fiscal year thereafter: $1,400,000
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Notwithstanding the foregoing, the Bank has been informed that the Borrowers
contemplate (i) purchasing the St. Croix Facility (as defined in the Acquisition
Documents), (ii) purchasing or leasing new facilities for the business
operations acquired in the Acquisition Transaction, or (iii) expanding its
facility located in Nevada, Iowa for purposes of such business operations. The
Bank has agreed to consider the Borrowers' proposal to modify this SECTION to
permit the Borrowers to take one or the other of these actions, and to not
unreasonably withhold consent to such modification.
Section 9.10 LEASES. Enter into or permit to exist any arrangements for
the leasing by the Borrowers or any of the Subsidiaries, as lessee, of any real
or personal property (or any interest therein) under leases (other than
Capitalized Leases) which require the payment by the Borrowers and the
Subsidiaries on a consolidated bases of rental amounts in the aggregate in
excess of $700,000 in any one fiscal year.
Section 9.11 INVESTMENTS. Acquire for value, make, have or hold any
Investments, except:
(a) Investments outstanding on the date hereof and listed on SCHEDULE 9.11;
(b) Travel advances to officers and employees in the ordinary course of
business;
(c) Investments in readily marketable direct obligations of the United
States of America having maturities of one year or less from the date of
acquisition;
(d) 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 (i) combined capital, surplus and undivided profits of at least
$100,000,000, and (ii) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service that is
satisfactory to the Bank;
(e) Commercial paper maturing within 270 days from the date of issuance and
given the highest rating by a nationally recognized rating service;
(f) Repurchase agreements relating to securities issued or guaranteed as to
principal and interest by the United States of America;
(g) 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;
(h) share of stock, obligations or other securities received in settlement
of claims arising in the ordinary course of business; and
(i) Investments outstanding on the date hereof in Subsidiaries by the
Borrowers and other Subsidiaries.
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Section 9.12 INDEBTEDNESS. Incur, create, issue, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Current liabilities, other than for borrowed money, incurred in the
ordinary course of business;
(c) Indebtedness existing on the date of this Agreement and disclosed on
SCHEDULE 9.12 hereto;
(d) Indebtedness secured by Liens permitted under SECTION 9.13(A) hereof,
PROVIDED, that the total amount of such Indebtedness incurred during any
period shall not exceed 75% of the maximum amount of Capital Expenditures
permitted during such period under SECTION 9.9 (without regard to the final
sentence of such SECTION);
(e) Indebtedness consisting of endorsements for collection, deposit or
negotiation and warranties of products or services, in each case incurred
in the ordinary course of business.
Section 9.13 LIENS. Create, incur, assume or suffer to exist any Lien
with respect to any property, revenues or assets now owned or hereafter arising
or acquired, except:
(a) Liens in connection with the acquisition of property after the date
hereof by way of purchase money mortgage, conditional sale or other title
retention agreement, Capitalized Lease or other deferred payment contract,
and attaching only to the property being acquired if the Indebtedness
secured thereby shall not exceed 80% (100% in the case of a Capitalized
Lease) of the fair market value of such property at the time of acquisition
thereof;
(b) Liens existing on the date of this Agreement and disclosed on SCHEDULE
7.11 hereto;
(c) Deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of business of the Borrowers or a
Subsidiary;
(d) Liens for taxes, fees, assessments and governmental charges not
delinquent or to the extent that payments therefor shall not at the time be
required to be made in accordance with the provisions of SECTION 8.4;
(e) Liens of carriers, warehousemen, mechanics and materialmen, and other
like Liens arising in the ordinary course of business, for sums not due or
to the extent that payment therefor shall not at the time be required to be
made in accordance with the provisions of SECTION 8.4; and
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(f) Deposits to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature incurred in
the ordinary course of business.
Section 9.14 CONTINGENT LIABILITIES. Either: (i) endorse, guarantee,
contingently agree to purchase or to provide funds for the payment of, or
otherwise become contingently liable upon, any obligation of any other Person,
except by the endorsement of negotiable instruments for deposit or collection
(or similar transactions) in the ordinary course of business, or (ii) agree to
maintain the net worth or working capital of, or provide funds to satisfy any
other financial test applicable to, any other Person.
Section 9.15 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a party
to any contract for the purchase or lease of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether or not delivery is ever made of such materials, supplies
or other property or services.
Section 9.16 TRANSACTIONS WITH RELATED PARTIES. Enter into or be a party
to any transaction or arrangement, including, without limitation, the purchase,
sale lease or exchange of property or the rendering of any service, with any
Related Party, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrowers' or the applicable Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrowers or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not a
Related Party.
Section 9.17 USE OF PROCEEDS. Permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Federal Reserve Board, as amended from time to
time, and furnish to the Bank, upon its request, a statement in conformity with
the requirements of Federal Reserve Form U-1 referred to in Regulation U.
Section 9.18 CASH FLOW LEVERAGE RATIO. Permit the Cash Flow Leverage
Ratio to exceed the following for the following quarter ends:
Quarters ending: Maximum ratio:
July 31, 1996 through and
including April 30, 1997: 3.00 to 1.00
July 31, 1997 through and
including April 30, 1998: 2.50 to 1.00
July 31, 1998 through and thereafter: 2.00 to 1.00
Compliance with this SECTION shall be subject to the annualization provisions of
SECTION 9.20 during the first three fiscal quarters following closing of the
Acquisition Transaction.
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Section 9.19 FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge
Coverage Ratio, calculated as of the last day of each fiscal quarter, to be less
than 1.25 to 1.00.
Compliance with this SECTION shall be subject to the annualization provisions of
SECTION 9.20 during the first three fiscal quarters following closing of the
Acquisition Transaction.
Section 9.20 ANNUALIZATION OF COVENANTS. Compliance with Section 9.18 and
9.19 shall be measured for each of the first three quarters ending after
completion of the Acquisition Transaction by (a) giving effect to the
Acquisition Transaction on a PRO FORMA basis from the first day of the quarter
during which the Acquisition Transaction was contemplated (regardless of whether
the Acquisition Transaction shall have been consummated later during such
quarter), and (b) in lieu of taking the results for the four quarters then
ended, multiplying the results from each of the quarters ending after
consummation of the Acquisition Transaction by (i) 4 for the first such quarter,
(ii) 2 for the second such quarter, and (iii) 4/3 for the third such quarter.
Section 9.21 CURRENT RATIO. Permit the ratio of the Borrowers'
consolidated current assets to consolidated current liabilities to be less than
2.50 to 1.00 at any time.
Section 9.22 CONSOLIDATED TANGIBLE NET WORTH. Permit the Borrowers'
Consolidated Tangible Net Worth at any time to be less than the sum of (a)
$8,700,000, PLUS (b) 50% of the Borrowers' aggregate consolidated net income for
each fiscal quarter that has ended after the date of this Agreement and before
the date of determination (without giving effect to any loss occurring during
any such fiscal quarter).
ARTICLE X EVENTS OF DEFAULT AND REMEDIES
Section 10.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Borrowers shall fail to make when due, whether by acceleration or
otherwise, any payment of principal of or interest on the Notes or any fee
or other amount required to be made to the Bank pursuant to the Loan
Documents;
(b) Any representation or warranty made or deemed to have been made by or
on behalf of the Borrowers or any Subsidiary in the Loan Documents or on
behalf of the Borrowers or any Subsidiary in any certificate, statement,
report or other writing furnished by or on behalf of the Borrowers to the
Bank pursuant to the Loan Documents or any other instrument, document or
agreement shall prove to have been false or misleading in any material
respect on the date as of which the facts set forth are stated or certified
or deemed to have been stated or certified;
(c) The Borrowers shall fail to comply with SECTION 8.2 hereof or any
Section of ARTICLE IX hereof;
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(d) The Borrowers shall fail to comply with any agreement, covenant,
condition, provision or term contained in the Loan Documents (and such
failure shall not constitute an Event of Default under any of the other
provisions of this SECTION 10.1) and such failure to comply shall continue
for 15 calendar days after notice thereof to the Borrowers by the Bank;
(e) The Borrowers or any Subsidiary shall become insolvent or shall
generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian, trustee
or receiver of the Borrowers or such Subsidiary or for a substantial part
of the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrowers or a Subsidiary or for a substantial part of the property thereof
and shall not be discharged within 60 days;
(f) Any bankruptcy, reorganization, debt arrangement or other proceedings
under any bankruptcy or insolvency law shall be instituted by or against
the Borrowers or a Subsidiary, and, if instituted against the Borrowers or
a Subsidiary, shall have been consented to or acquiesced in by the
Borrowers or such Subsidiary, or shall remain undismissed for 60 days, or
an order for relief shall have been entered against the Borrowers or such
Subsidiary, or the Borrowers or any Subsidiary shall take any corporate
action to approve institution of, or acquiescence in, such a proceeding;
(g) Any dissolution or liquidation proceeding shall be instituted by or
against the Borrowers or a Subsidiary and, if instituted against the
Borrowers or such Subsidiary, shall be consented to or acquiesced in by the
Borrowers or such Subsidiary or shall remain for 60 days undismissed, or
the Borrowers or any Subsidiary shall take any corporate action to approve
institution of, or acquiescence in, such a proceeding;
(h) A judgment or judgments for the payment of money in excess of the sum
of $50,000 in the aggregate shall be rendered against the Borrowers or a
Subsidiary and the Borrowers or such Subsidiary shall not discharge the
same or provide for its discharge in accordance with its terms, or procure
a stay of execution thereof, prior to any execution on such judgments by
such judgment creditor, within 30 days from the date of entry thereof, and
within said period of 30 days, or such longer period during which execution
of such judgment shall be stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal;
(i) The institution by the Borrowers or any ERISA Affiliate of steps to
terminate any Plan if in order to effectuate such termination, the
Borrowers or any ERISA Affiliate would be required to make a contribution
to such Plan, or would incur a liability or obligation to such Plan, in
excess of $25,000, or the institution by the PBGC of steps to terminate any
Plan;
(j) The maturity of any Indebtedness of the Borrowers (other than
Indebtedness under this Agreement) or a Subsidiary shall be accelerated, or
the Borrowers or a Subsidiary
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shall fail to pay any such Indebtedness when due or, in the case of such
Indebtedness payable on demand, when demanded, or any event shall occur or
condition shall exist and shall continue for more than the period of grace,
if any, applicable thereto and shall have the effect of causing, or
permitting (any required notice having been given and grace period having
expired) the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause, such Indebtedness to become due
prior to its stated maturity or to realize upon any collateral given as
security therefor; or
(k) Any of the Loan Documents shall not be, or shall cease to be, binding
in accordance with its terms, or the Bank shall not have a first-priority
security interest in the collateral described in the Pledge Agreement and
the Security Agreements; or
(l) Any Person, or group of Persons acting in concert, that owned less
than 5% of the shares of any voting class of stock of the Borrowers shall
have acquired more than 30% of the shares of such voting stock.
Section 10.2 REMEDIES. If (a) any Event of Default described in SECTIONS
10.1(e), (f) or (g) shall occur with respect to the Borrowers, the Commitment
shall automatically terminate and the outstanding unpaid principal balance of
the Notes, the accrued interest thereon and all other obligations of the
Borrowers to the Bank under the Loan Documents shall automatically become
immediately due and payable; or (b) any other Event of Default shall occur and
be continuing, then the Bank may take any or all of the following actions: (i)
declare the Commitment terminated, whereupon the Commitment shall terminate,
(ii) declare the outstanding unpaid principal balance of the Notes, the accrued
and unpaid interest thereon and all other obligations of the Borrowers to the
Bank under the Loan Documents to be forthwith due and payable, whereupon the
Notes, all accrued and unpaid interest thereon and all such obligations shall
immediately become due and payable, in each case without demand or notice of any
kind, all of which are hereby expressly waived, anything in this Agreement or in
the Notes to the contrary notwithstanding, (iii) exercise all rights and
remedies under any other instrument, document or agreement between the Borrowers
and the Bank, and (iv) enforce all rights and remedies under any applicable law.
Section 10.3 OFFSET. In addition to the remedies set forth in SECTION
10.2, upon the occurrence of any Event of Default or at any time thereafter
while such Event of Default continues, the Bank or any other holder of the Notes
may offset any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or monies of the Borrowers then or
thereafter with the Bank or such other holder, or any obligations of the Bank or
such other holder of the Notes, against the Indebtedness then owed by the
Borrowers to the Bank.
ARTICLE XI MISCELLANEOUS
Section 11.1 WAIVER AND AMENDMENT. No failure on the part of the Bank or
the holder of the Notes to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or
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partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The remedies herein and in
any other instrument, document or agreement delivered or to be delivered to the
Bank hereunder or in connection herewith are cumulative and not exclusive of any
remedies provided by law. No notice to or demand on the Borrowers not required
hereunder or under the Notes shall in any event entitle the Borrowers to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Bank or the holder of the Notes to any
other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of any provision of this Agreement or consent
to any departure by the Borrowers therefrom shall be effective unless the same
shall be in writing and signed by the Bank, and then such amendment,
modifications, waiver or consent shall be effective only in the specific
instances and for the specific purpose for which given.
Section 11.2 EXPENSES AND INDEMNITIES. Whether or not any Loan is made
hereunder, the Borrowers jointly and severally agree to reimburse the Bank upon
demand for all reasonable expenses paid or incurred by the Bank (including
filing and recording costs and fees and expenses of legal counsel, who may be
employees of the Bank) in connection with the preparation, review, execution,
delivery, amendment, modification, interpretation, collection and enforcement of
the Loan Documents. The Borrowers jointly and severally agree to pay, and save
the Bank harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of the Loan Documents. The
Borrowers jointly and severally agree to indemnify and hold the Bank harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans or disbursing the proceeds
thereof. The obligations of the Borrowers under this SECTION 11.2 shall survive
any termination of this Agreement.
Section 11.3 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; PROVIDED, HOWEVER, that
any notice to the Bank under ARTICLE II hereof shall be deemed to have been
given only when received by the Bank.
Section 11.4 SUCCESSORS. This Agreement shall be binding upon the
Borrowers and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrowers and the Bank and the successors and
assigns of the Bank. The Borrowers shall not assign their rights or duties
hereunder without the written consent of the Bank.
Section 11.5 PARTICIPATIONS AND INFORMATION. The Bank may sell
participation interests in any or all of the Loans and in all or any portion of
the Commitment to any Person, PROVIDED, that in doing so the Bank shall comply
with all applicable securities laws, including
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without limitation the Securities Act of 1933. The Bank may furnish any
information concerning the Borrowers in the possession of the Bank from time to
time to participants and prospective participants and may furnish information in
response to credit inquiries consistent with general banking practice.
Section 11.6 SEVERABILITY. Any provision of the Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.7 SUBSIDIARY REFERENCES. The provisions of this Agreement
relating to Subsidiaries shall apply only during such times as the Borrowers
have one or more Subsidiaries.
Section 11.8 CAPTIONS. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 11.9 ENTIRE AGREEMENT. This Agreement and the Notes embody the
entire agreement and understanding between the Borrowers and the Bank with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
Section 11.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 11.11 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS.
Section 11.12 CONSENT TO JURISDICTION. AT THE OPTION OF THE BANK, THIS
AGREEMENT AND THE NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWERS CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWERS COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
NORTHSTAR COMPUTER FORMS, INC.
By: /s/ Mary Ann Morin
---------------------------
Title: Treasurer
------------------------
7130 Northland Circle North
Brooklyn Park, MN 55428-1530
Attention: Mary Ann Morin
Controller and Treasurer
Telephone: (612) 531-7340
Fax: (612) 535-5671
GENERAL FINANCIAL SUPPLY, INC.
By: /s/ Mary Ann Morin
----------------------------
Title: Treasurer
-------------------------
(Same address and attention as above)
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Elliot Jaffee
-----------------------------
Title: Vice President
---------------------------
601 2nd Ave. S.
Minneapolis, MN 55402-4302
Attention: Carol M. Preisinger
Midwest B Division
Telephone: (612) 973-0529
Fax: (612) 973-0821
39
