<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
WINTHROP RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1415469
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
------------------------------
1015 OPUS CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(612) 936-0226
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
JOHN L. MORGAN
WINTHROP RESOURCES CORPORATION
1015 OPUS CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(612) 936-0226
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------
COPIES TO:
Thomas R. Marek, Esq. Patrick Delaney, Esq.
Michael J. Kolar, Esq. Robert E. Tunheim, Esq.
Oppenheimer Wolff & Donnelly Lindquist & Vennum P.L.L.P.
45 South Seventh Street, 3400 Plaza VII 80 South Eighth Street, Suite 4200
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
(612) 344-9300 (612) 371-3211
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, par value $.01 per share..... 1,725,000 shares (1) $22.25 (2) $38,381,250 (2) $13,235
% Senior Notes due 2003................. $28,750,000 (3) 100% (3) $28,750,000 (3) $9,914
Total Registration Fee..................... $23,159
</TABLE>
(1) Includes an aggregate of 750,000 shares to be sold by the Selling
Shareholders and an over-allotment option to purchase up to an additional
225,000 shares granted to the Underwriters by the Selling Shareholders.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
based upon the average between the high and low reported sales prices of the
Registrant's Common Stock on May 17, 1996, as reported by the Nasdaq
National Market.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
WINTHROP RESOURCES CORPORATION
------------------------
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B)
OF REGULATION S-K SHOWING LOCATION IN THE
PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF PART I OF FORM S-2
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ----------------------------------------- ------------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................. Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front Cover Page; Outside
Back Cover Page; Available
Information; Documents Incorporated
by Reference
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................ Prospectus Summary; Risk Factors;
Capitalization
4. Use of Proceeds..................... Use of Proceeds
5. Determination of Offering Price..... *
6. Dilution............................ *
7. Selling Security Holders............ Principal and Selling Shareholders
8. Plan of Distribution................ Outside Front Cover Page;
Underwriting
9. Description of Securities to be
Registered......................... Outside Front Cover Page; Prospectus
Summary; Dividend Policy;
Capitalization; Description of
Capital Stock; Description of Notes
10. Interests of Named Experts and
Counsel............................ Legal Matters; Experts
11. Information with Respect to the
Registrant......................... Outside Front Cover Page; Inside
Front Cover Page; Prospectus
Summary; Risk Factors; Use of
Proceeds; Price Range of Common
Stock; Dividend Policy; Selected
Financial and Other Data;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal and Selling
Shareholders; Description of
Capital Stock; Description of
Notes; Consolidated Financial
Statements
12. Incorporation of Certain Information
by Documents Incorporated by
Reference.......................... Documents Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ *
</TABLE>
- ------------
*Omitted from Prospectus because item is inapplicable or answer is in the
negative.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 24, 1996
DATED , 1996
WINTHROP RESOURCES CORPORATION
[Logo]
1,500,000 SHARES OF COMMON STOCK AND
$25,000,000 OF % SENIOR NOTES DUE 2003
The Common Stock and the % Senior Notes due 2003 (the "Notes") of Winthrop
Resources Corporation (the "Company") are offered separately and not as units.
Of the 1,500,000 shares of Common Stock offered hereby, 750,000 shares are being
sold by the Company and 750,000 shares are being sold by certain shareholders of
the Company (the "Selling Shareholders"). See "Principal and Selling
Shareholders." The Company will receive none of the proceeds from the sale of
shares of Common Stock by the Selling Shareholders. The Company's Common Stock
is traded on the Nasdaq National Market under the symbol "WINR." On May 23,
1996, the last sale price of the Common Stock as reported on the Nasdaq National
Market was $21.875 per share. See "Price Range of Common Stock."
Interest on the Notes will be payable monthly on the fifteenth day of each
month, commencing 15, 1996. The Notes mature on , 2003. The
Notes are redeemable in whole or in part upon not less than 30 nor more than 60
days' notice at any time after , 2001 at the option of the Company at
par plus accrued interest to the date fixed for redemption. The Notes will be
issued only in fully registered form and in denominations of $1,000 and integral
multiples thereof. The Notes will be general unsecured senior obligations of the
Company ranking PARI PASSU with all other existing and future unsecured and
unsubordinated obligations of the Company. The Notes will be effectively
subordinated to any secured indebtedness of the Company, including indebtedness
under the Company's two current lines of credit with availability totaling
$23,000,000, to the extent of the value of the assets securing such
indebtedness. At May 31, 1996, the total amount of secured indebtedness was
$ , excluding discounted lease rentals of $ , substantially
all of which are non-recourse to the Company. See "Business -- Financing" and
"Description of Notes."
The Company does not intend to list the Notes on any securities exchange or to
have them included on any quotation system, and no active trading market is
likely to develop. Although the Underwriters have each indicated an intention to
make a market in the Notes, neither Underwriter is obligated to make a market in
the Notes and any market making may be discontinued at any time at the sole
discretion of such Underwriter. See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(2)
<S> <C> <C> <C> <C>
Per Share............................... $ $ $ $
Total(3)................................ $ $ $ $
Per Note................................ 100% % % --
Total(4)................................ $25,000,000 $ $ --
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated offering expenses payable by the Company and the
Selling Shareholders of $ and $ , respectively.
(3) The Selling Shareholders have granted the Underwriters a 30-day option to
purchase up to 225,000 additional shares of Common Stock solely to cover
over-allotments, if any, at the Price to Public shown above, less the
Underwriting Discount. If the Underwriters exercise this option in full, the
total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Shareholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
$3,750,000 additional principal amount of Notes, solely to cover
over-allotments, if any, at the Price to Public shown above, less the
Underwriting Discount. If the Underwriters exercise this option in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------------
The Common Stock and Notes are being offered severally by the Underwriters named
herein, subject to prior sale and when, as and if delivered to and accepted by
the Underwriters. It is expected that delivery of the Notes and certificates
representing the Common Stock will be made at the offices of Piper Jaffray Inc.
in Minneapolis, Minnesota on or about , 1996. The Notes will be issued
initially as book-entry notes in the form of one fully registered global
security deposited with or on behalf of The Depository Trust Company or its
nominees ("DTC"). The Notes will not initially be issuable in definitive
certificated form to any person other than DTC.
PIPER JAFFRAY INC. DAIN BOSWORTH
INCORPORATED
<PAGE>
[A photo appears on this page, depicting typical types of of high technology
and business-essential equipment leased by the Company under the heading
"Four Product Strategy," with each of the Company's four products -- Value
Added Lease, Small Ticket Lease, Enterprise Lease and Wholesale Lease --
identified and above a caption that states "Building a Portfolio of High
Technology and Business Essential Equipment."]
------------------------
Information contained in this Prospectus contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which can be identified by the use of forward-looking terminology such
as "may," "will," "expect," "anticipate," "estimate," or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
statements in "Risk Factors" beginning on page 7 of the Prospectus constitute
cautionary statements identifying important factors, including certain risks and
uncertainties, with respect to such forward-looking statements that could cause
actual results to differ materially from those reflected in such forward-looking
statements.
------------------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMMON
STOCK AND THE NOTES AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THE OFFERING OF THE COMMON STOCK, CERTAIN UNDERWRITERS
AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, ALL
INFORMATION IN THIS PROSPECTUS RELATING TO THE SHARES OF COMMON STOCK AND NOTES
OUTSTANDING ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTIONS.
UNLESS THE CONTEXT CLEARLY SUGGESTS OTHERWISE, REFERENCES IN THIS PROSPECTUS TO
THE ASSETS AND OPERATIONS OF THE COMPANY INCLUDE THE ASSETS AND OPERATIONS OF
THE COMPANY'S WHOLLY-OWNED SUBSIDIARY, WINR BUSINESS CREDIT CORPORATION ("WINR
BUSINESS CREDIT"), DURING THE PERIOD TO WHICH THE INFORMATION RELATES.
THE COMPANY
The Company is engaged in the business of providing non-cancelable leases
for high technology and business-essential equipment to both large organizations
and smaller, growing companies. The Company's lease products are marketed
nationally through a 17-member sales force located in Minneapolis, Minnesota;
Dallas, Texas; Philadelphia, Pennsylvania; Knoxville, Tennessee; Santa Barbara
and Oakland, California; and Henderson, Nevada. To differentiate itself from its
competitors in the leasing industry, the Company offers innovative lease
products and concentrates on building long-term, relationship-based associations
with its customers.
Since its founding in 1982, the Company's focus has been primarily on the
Value Added Lease. These lease transactions generally have terms from three to
five years and are with large organizations (generally corporations with
revenues of $50,000,000 or more). Such transactions typically range from
$250,000 to $20,000,000 and cover high technology equipment, including
computers, telecommunications equipment, point-of-sale systems and other
technology-based equipment. The leases are creative and flexible in structure to
accommodate equipment additions and upgrades to meet customers' changing needs.
Value Added Leases are retained in the Company's portfolio.
Responding to the expanding technological needs of increasing numbers of
small, growing businesses, the Company commenced operations of WINR Business
Credit in 1995. WINR Business Credit focuses on the small business market by
providing the Small Ticket Lease which covers business-essential equipment,
including computers, telecommunications equipment and production equipment.
Lease transactions in the small ticket area typically are for less than $250,000
and have lease terms of between two and five years. The Company manages the
risks and costs associated with high volume small ticket leases through
centralized credit evaluation, lease administration and collections and business
alliances with vendors of business-essential equipment. Small Ticket Leases are
primarily generated for the Company's portfolio.
With the commencement of operations of WINR Business Credit the Company has
also developed the Enterprise Lease which is designed to meet the needs of large
corporations with influence over multiple business entities, such as
franchisor-franchisee relationships. The Enterprise Lease integrates the Value
Added Lease and Small Ticket Lease for organizations in need of enterprise-wide
equipment and systems solutions.
The Company added the Wholesale Lease to its product portfolio in January
1996 through the acquisition of the assets of Capital Business Leasing, Inc., an
equipment lease broker that, for a fee, arranges lease financings with other
leasing companies for a variety of unrelated brokers and vendors. The Wholesale
Lease is generally sold to an outside funding source and does not become part of
the Company's lease portfolio.
The Company's strategy is to differentiate itself by continuing to maintain
a focused, long-term, customer-service approach to its business. Key elements of
its strategy include:
- FOCUS ON LEASING. Leasing high technology and business-essential
equipment is the Company's only business.
- FOUR PRODUCT STRATEGY. The Company provides a comprehensive range of
lease products through its Value Added Lease, Small Ticket Lease,
Enterprise Lease and Wholesale Lease.
3
<PAGE>
- ASSET OWNERSHIP. The Company retains ownership of its leases and the
underlying equipment, except Wholesale Leases. This affords the Company
the flexibility to accommodate customers' desire to add to or upgrade
equipment.
- DIVERSIFICATION. The Company leases a wide variety of equipment to
companies in diverse industries in many geographic locations.
The Company is a Minnesota corporation and was founded in 1982 by Kirk A.
MacKenzie, John L. Morgan and Jack A. Norqual. The Company's corporate offices
are located at 1015 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota
55343, and its telephone number is (612) 936-0226.
THE OFFERINGS
<TABLE>
<S> <C>
COMMON STOCK
Common Stock offered by
Company.................. 750,000 shares
Common Stock offered by
Selling Shareholders..... 750,000 shares
Common Stock to be
outstanding after the
offering................. 8,599,800 shares (1)
Nasdaq National Market
symbol................... WINR
NOTES
Notes offered............. $25,000,000 in aggregate principal amount of
% Senior Notes due 2003. See "Description of
Notes."
Denominations............. $1,000 and integral multiples thereof.
Maturity.................. , 2003.
Interest payment dates.... Interest is payable monthly on the fifteenth day
of each month, commencing , 1996. The
first interest payment will include interest
from issuance through , 1996.
Sinking fund.............. None.
Redemption at the
Company's option......... The Notes may not be redeemed prior to ,
2001. Thereafter, the Notes may be redeemed in
whole or in part upon not less than 30 nor more
than 60 days' prior written notice at the option
of the Company at par plus accrued interest to
the date fixed for redemption. See "Description
of Notes -- Redemption at Option of the
Company."
</TABLE>
- ------------
(1) Does not include 390,000 shares of Common Stock issuable upon exercise of
outstanding stock options, of which 254,374 shares of Common Stock are
subject to options that are immediately exercisable. See Note 7 of Notes to
Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<S> <C>
Ranking................... The Notes will be general unsecured senior
obligations of the Company ranking PARI PASSU
with all other existing and future unsecured and
unsubordinated obligations of the Company. The
Notes will be effectively subordinated to any
secured indebtedness of the Company, including
indebtedness under the Company's two current
lines of credit with availability totaling
$23,000,000, to the extent of the value of the
assets securing such indebtedness. At May 31,
1996, the total amount of secured indebtedness
was $ , excluding discounted lease
rentals of $ , substantially all of
which are non-recourse to the Company. The Notes
will also be structurally subordinated to all
existing and future liabilities of the Company's
subsidiaries. See "Description of Notes --
Unsecured Obligations; Ranking."
Covenants................. The Indenture pursuant to which the Notes will
be issued, among other things, restricts the
ability of the Company under certain
circumstances to pay dividends or to make other
capital distributions. The Indenture also
contains covenants limiting the Company's
ability to create or incur Funded Recourse Debt.
See "Description of Notes -- Covenants --
Restrictions on Dividends, Redemption and Other
Payments" and "-- Restrictions on Additional
Indebtedness."
Repayment option upon
death.................... Upon the death of any holder of Notes, the
Company will redeem, at par plus accrued
interest, such holder's Notes upon request up to
$25,000 in principal amount per holder per year,
subject to an aggregate limit for all holders of
$250,000 in principal amount in any twelve-month
period and certain conditions being met,
including the condition that the Company not be
in default on any Funded Recourse Debt as a
result of such redemption. See "Description of
Notes -- Repayment Option Upon Death."
USE OF PROCEEDS The net proceeds to be received by the Company
from the sale of Common Stock and Notes will be
used for repayment of any amounts then
outstanding under the two lines of credit, for
purchases of equipment for lease to customers,
for expansion of operations and for working
capital and general corporate purposes, possibly
including future acquisitions. The Company has
no current acquisition plans and is not
conducting any negotiations with respect to
potential acquisitions. See "Use of Proceeds."
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(Dollars in thousands, except per share --------------------- -----------------------------------------------------------
data) 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Earnings before income tax expense and
cumulative effect of accounting change..... $5,313 $5,432 $19,260 $15,602 $12,766 $7,942 $5,295
Net earnings................................ $3,135 $3,259 $11,556 $ 9,361 $ 7,660 $5,054(1) $3,177
Net earnings per common share............... $ .40 $ .41 $ 1.46 $ 1.16 $ .98 $ .74(1) $ .50
Cash dividend declared per common share..... $ .04 $ .03 $ .12 $ .08 $ .06 $ .02 --
Weighted average number of common shares
outstanding(2)............................. 7,871,525 7,953,181 7,911,854 8,047,326 7,807,534 6,821,858 6,300,000
</TABLE>
<TABLE>
<S> <C>
<CAPTION>
MARCH 31, 1996
--------------------
<S> <C>
BALANCE SHEET DATA:
Investment in leasing operations.................................... $263,660
Total assets........................................................ 277,211
Discounted lease rentals(3)......................................... 185,008
Retained earnings................................................... 47,327
Shareholders' equity................................................ 56,872
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ---------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
New equipment added during the period.................... $33,960 $35,305 $130,360 $108,768 $94,046 $50,374 $53,388
Monthly lease rentals in effect at period-end............ $11,273 $ 9,001 $ 10,239 $ 7,866 $ 6,389 $ 5,294 $ 5,077
Retained earnings as a percentage of shareholders'
equity.................................................. 83.2% 79.9% 82.6% 78.7% 74.1% 81.2% 99.3%
Return on average assets................................. 4.6% 5.6% 4.7% 4.6% 4.8% 3.6% 2.4%
Return on average shareholders' equity................... 22.5% 28.0% 23.1% 22.6% 24.4% 24.6% 22.4%
Ratio of net earnings before fixed charges and taxes to
fixed charges........................................... 2.5x 2.6x 2.4x 2.6x 2.5x 1.9x 1.5x
</TABLE>
- ---------------
(1) In September 1992, the Company adopted Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes, effective as of January 1,
1992. The cumulative effect of this change in accounting for income taxes
was $289,500 or $.04 per share of Common Stock.
(2) Common Stock equivalents are excluded from the weighted average number of
outstanding common shares as the dilutive effect is less than 3%.
(3) Discounted lease rentals includes $184,221,000 of non-recourse and $787,000
of recourse debt.
6
<PAGE>
RISK FACTORS
INVESTMENT IN THE COMMON STOCK OR THE NOTES OFFERED HEREBY INVOLVES CERTAIN
RISKS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING IMPORTANT
FACTORS, IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK OR THE NOTES.
ABILITY TO SUSTAIN AND MANAGE GROWTH. A primary objective of the Company is
to grow in a controlled fashion in order to achieve its desired profit levels.
In order to support its anticipated growth, the Company recently added personnel
and expects to add a significant number of additional employees in the future.
The Company's future operating results will depend on its ability to
successfully hire, train and retain skilled employees and on the ability of its
officers and key employees to continue to improve the efficiency of its
operational and financial control systems, while continuing to attract
significant numbers of new quality customers and maintain existing client
relationships. A key element in achieving the Company's desired profit levels
will be the effective utilization of technology to support this growth,
including support of its small ticket leases. While the Company has historically
met these objectives, there can be no assurance it will be able to do so in the
future at the level necessary to support its anticipated growth. If the Company
is unable to manage growth effectively, there could be a material adverse effect
on the Company's results of operations or financial condition.
ECONOMIC CONDITIONS. The Company's results of operations are affected by
certain economic factors, including the level of economic activity in the
markets in which the Company's customers operate. While the Company historically
has been able to maintain profitability throughout various economic business
cycles, a decline in economic activity may adversely affect the Company. The
Company's growth is dependent upon its ability to place new equipment in
service. In an adverse economic environment, there may be a decline in the
demand for some types of equipment which the Company leases, resulting in a
decline in the amount of new equipment being placed into service. Adverse
economic conditions could also lead to an increase in customer defaults and
credit losses. Although the Company maintains an allowance for losses in lease
receivables in an amount which it believes is sufficient to provide adequate
protection against losses in its portfolio, this allowance could prove to be
inadequate. Adverse economic conditions may also contribute to a decline in the
value of the equipment which the Company could realize upon disposition in case
of customer default. Any of these factors could have a material adverse effect
on the Company's results of operations or financial condition.
CREDIT LOSSES. In addition to general economic and other conditions
affecting the industries and regions of the country in which the Company's
customers operate, major factors affecting the Company's ability to maintain
profitability include risks associated with the creditworthiness and integrity
of the Company's customers. While the Company has not historically maintained a
general loss allowance for its Value Added Leases, from time to time it has
provided a loss allowance for specific leases. The Company maintains a general
allowance for losses on lease finance receivables in its Small Ticket Lease
portfolio in an amount the Company's management believes is sufficient to
provide adequate protection against loss. Because the Small Ticket Lease is a
relatively new product for the Company, the allowance as to these receivables is
determined principally on the basis of leasing industry historical loss
experience and reflects management's judgment of loss potential considering
future economic conditions and the nature and characteristics of the underlying
leases. Although the Company's allowance for losses in lease receivables is
considered adequate by Company management, there can be no assurance that this
allowance will prove to be adequate over time to cover all losses, especially
those in connection with the Small Ticket Lease product. This allowance may
prove to be inadequate due to unanticipated adverse changes in the economy or
discrete events adversely affecting specific customers or industries. In
conjunction with the commencement of operations of WINR Business Credit in 1995,
the Company implemented credit review policies for its small ticket leases which
are different than those utilized for its Value Added Leases. The Company's
results of operations or financial condition could be adversely affected to the
extent that the Company's credit analysis is inadequate or the Company's
allowance for losses is insufficient. See "Business -- Credit and Transaction
Approval."
7
<PAGE>
DEPENDENCE UPON CURRENT MANAGEMENT. The Company's growth and profitability
are dependent upon, among other things, the abilities and experience of the
Company's current management team. There can be no assurance that the Company
will be able to retain its current management team or attract additional
qualified management needed for its business. The loss of the services of one or
more management team members could have an adverse effect on the long-term
growth and profitability of the Company.
HIGHLY COMPETITIVE INDUSTRY. The equipment leasing business is
characterized by intense competition. The Company competes with leasing
companies (including those that are captive of equipment manufacturers),
commercial banks and other financial institutions, some of which may provide the
Company with capital to finance its leases. Many of the Company's competitors
are significantly larger and have substantially greater resources than the
Company. Many competitors have sources of funds at rates that are lower than
those available to the Company, thereby enabling them to provide lower lease
rates in the marketplace. The Company believes it competes on the basis of
flexibility in structuring transactions, a high level of customer service, the
knowledge and competence of its employees, pricing and the ability to gain
referrals of potential transactions from various business contacts, including
existing customers. There can be no assurance that the Company will be able to
compete successfully in the future. See "Business -- Competition."
AVAILABILITY OF FINANCING. The Company is and will continue to be dependent
on various banks and other financial institutions for a significant portion of
the financing necessary to fund its leases. Accordingly, the Company's ability
to successfully execute its business strategy and to grow is dependent, in part,
on its ability to obtain recourse and non-recourse debt capital, both short-term
and long-term, and to raise additional debt or equity capital to meet its cash
requirements in the future.
Although to date the Company has been able to obtain the recourse and
non-recourse borrowing, interim financing, and other capital required to finance
its business, no assurance can be given that the necessary amount of such
financing will continue to be available to the Company on favorable terms or at
all. If the Company were unable to continue to obtain any portion of such
required financing on favorable terms, the Company could be required to reduce
or modify its leasing activity, which would have a material adverse effect on
the Company's results of operations and financial condition. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Financial Condition and Liquidity" and "Business -- Financing."
RESIDUAL VALUES OF LEASED EQUIPMENT. At the inception of each lease, the
Company estimates what the residual value of the leased equipment will be at the
end of the initial lease term. The actual realized residual value of leased
equipment may differ from its estimated residual value, resulting in profit or
loss when the leased equipment is re-leased or sold. A variety of factors may
affect realized residual values of equipment, including changes in equipment
resale market conditions, the failure by users of the equipment to properly
maintain and protect such equipment and, with respect to high technology
equipment, rapid technological obsolescence which typifies the industry. There
can be no assurance that realized residual values of leased equipment will be
equal to or greater than original estimated residual values. While the Company's
experience has generally resulted in equipment values in excess of estimated
residual values, an unexpected decrease in the market value of high technology
and other equipment leased by the Company, whether due to rapid technological
obsolescence or market factors, could adversely affect the Company's results of
operations and financial condition. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Lease Accounting Overview --
Residual Values."
LEASE ACCOUNTING; QUARTERLY FLUCTUATIONS. The Company follows Statement of
Financial Accounting Standards No. 13 ("FASB No. 13") with respect to the
accounting for its lease transactions. Under FASB No. 13, leasing revenues are
recognized during each of the accounting periods within the term of a lease, and
the allocation of leasing revenue among the accounting periods will vary
depending upon the applicable lease classification. The Company cannot always
predict which lease classification will be applicable to a pending transaction
until at or near the end of negotiations with its customer. In addition, it is
difficult to predict when a particular leasing transaction will be consummated.
Moreover, a delay in shipment of equipment to be leased by the Company to a
customer may delay the time of installation and customer acceptance of the
equipment from one quarter to the next. These events, in turn, will delay lease
inception
8
<PAGE>
and the resulting recognition of leasing revenues by the Company. The volume and
type of new lease transactions and the resulting revenues and earnings may
fluctuate from quarter to quarter based upon factors not within the control of
the Company. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition -- Lease Accounting Overview."
CONTROL BY CURRENT MANAGEMENT. After this offering, Messrs. MacKenzie,
Morgan and Norqual collectively will own approximately 51.3% of the Company's
outstanding Common Stock (48.8% if the Underwriters' over-allotment option as to
the Common Stock is exercised in full). Because of such share ownership, these
individuals, who are also directors and executive officers, will, in practice,
be able to exercise significant control over the election of members of the
Company's Board of Directors and the outcome of other corporate actions after
the sale of the shares offered hereby. See "Principal and Selling Shareholders."
In addition, the Board of Directors may, without further action by the
shareholders, issue up to 2,000,000 shares of preferred stock in one or more
series, and determine the rights and preferences, privileges and restrictions
with respect to any such preferred stock. If issued with voting rights or given
a feature making it convertible into Common Stock, such preferred stock could
have an adverse impact on the voting rights of holders of Common Stock and could
discourage tender offers or other attempts to acquire a substantial number of
shares of Common Stock to gain control of the Company. See "Description of
Capital Stock -- Preferred Stock."
POSSIBLE VOLATILITY OF SHARE PRICE. The securities of capital equipment
leasing companies have from time to time experienced extreme price and volume
fluctuations, which may be unrelated to the operating performance of the
individual companies. There may be significant volatility in the market price of
the Company's Common Stock due to factors that may or may not relate to the
Company's performance.
SHARES ELIGIBLE FOR FUTURE SALE. The directors of the Company and the
Selling Shareholders have agreed not to sell their shares publicly or privately
for a period of 120 days after the effective date of the Company's Registration
Statement of which this Prospectus is a part without the Underwriters' consent.
Sales of any such shares after the 120-day period could adversely affect the
market price of the Common Stock. Following the expiration of the lock-up
period, the 4,312,600 shares held by the directors and Selling Shareholders will
be available for sale, subject to the volume and timing restrictions set forth
under Rule 144. See "Underwriting."
STRUCTURAL SUBORDINATION OF THE NOTES. The Notes will be effectively
subordinated to any secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness. In the event of the liquidation,
dissolution, reorganization or any similar proceeding regarding the Company, the
assets of the Company securing any other indebtedness of the Company will be
available to pay obligations on the Notes only after such secured indebtedness
has been paid in full. Accordingly, there may not be sufficient assets remaining
to pay amounts due on the Notes. The Notes will also be structurally
subordinated to indebtedness, other liabilities and preferred stock (if any) of
the Company's subsidiaries. Since the Notes are obligations of the parent
company only, the Company's subsidiaries are not obligated or required to pay
any amounts pursuant to the Notes or to make funds available therefor in the
form of dividends or advances to the Company. See "Description of Notes --
Unsecured Obligations; Ranking."
LIMITED COVENANTS. The covenants in the Indenture are limited and are not
designed to protect holders of the Notes in the event of a material adverse
change in the Company's financial condition or results of operations. The
covenants in the Indenture should not be a significant factor to an investor in
evaluating whether the Company will be able to comply with its obligations under
the Notes. See "Description of Notes -- Covenants."
LIMITED MARKET FOR THE NOTES. The Company does not intend to list the Notes
on any securities exchange or have them included for quotation by Nasdaq or any
other quotation system, and no active trading market is expected to develop.
Although the Underwriters have each indicated an intention to make a market in
the Notes, neither Underwriter is obligated to make a market in the Notes and
any market making may be discontinued at any time at the sole discretion of such
Underwriter. If the Notes are traded after their original issuance, they may
trade at a discount to their principal amount. Without an active market, it may
be difficult for investors to resell the Notes.
9
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes and the 750,000 shares of Common
Stock offered by the Company are estimated to be $ ($ if the
Underwriters' over-allotment options are exercised in full) after deducting the
Underwriters' discount and the Company's share of the estimated expenses of
these offerings. The Company will not receive any of the proceeds from the sale
of shares by the Selling Shareholders. The Company intends to use the net
proceeds for repayment of any amounts then outstanding under its two lines of
credit, for purchases of equipment for lease to customers, for expansion of
operations and for working capital and general corporate purposes, possibly
including future acquisitions. One of Company's lines of credit bears interest
at no greater than prime and expires on July 31, 1996. The other line of credit
bears interest at prime plus 25 basis points and expires on June 30, 1996. At
May 31, 1996, an aggregate of $ was outstanding under these lines of
credit. The Company has no current acquisition plans and is not conducting any
negotiations with respect to potential acquisitions. Pending the use of the net
proceeds of these offerings, the Company may invest the funds in
interest-bearing U.S. government or agency securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol WINR. The following table sets forth, for the periods indicated, the
range of the high and low per share sales prices as reported by the Nasdaq
National Market and the dividends paid in each quarter.
<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW DECLARED
------ --------- --------
<S> <C> <C> <C>
1994
First Quarter................................... $ 13.25 $ 10.00 $.02
Second Quarter.................................. 13.25 11.25 .02
Third Quarter................................... 12.00 10.25 .02
Fourth Quarter.................................. 11.25 10.00 .02
1995
First Quarter................................... $ 12.00 $ 10.25 $.03
Second Quarter.................................. 14.50 11.25 .03
Third Quarter................................... 18.25 13.25 .03
Fourth Quarter.................................. 18.50 16.00 .03
1996
First Quarter................................... $ 18.50 $ 15.47 $.04
Second Quarter (through May 23, 1996)........... 23.00 18.25 .04
</TABLE>
On May 23, 1996, the last sale price of the Common Stock was as set forth on
the cover page of this Prospectus. As of May 23, 1996, the Company's Common
Stock was held by approximately 90 holders of record and approximately 1,200
beneficial holders.
DIVIDEND POLICY
The Company paid a quarterly cash dividend of $.03 per share of Common Stock
on January 2, 1996 to holders of record on December 15, 1995. On April 1, 1996,
the Company paid a quarterly cash dividend of $.04 per share of Common Stock to
holders of record on March 15, 1996. The Company has declared a quarterly cash
dividend of $.04 per share of Common Stock payable on July 1, 1996 to holders of
record on June 14, 1996. Payment of dividends is within the discretion of the
Company's Board of Directors and will be subject to periodic review. Payment of
dividends will depend, among other factors, upon the earnings, capital
requirements, operating results and financial condition of the Company. Under
the Minnesota Business Corporation Act, a dividend may be declared only after
the Board determines that, after payment of the dividend, the Company will be
able to pay its debts in the ordinary course of business. The Indenture that
governs the Notes contains limitations on cash dividends, distributions and
redemptions with respect to the Common Stock. See "Description of Notes --
Covenants -- Restrictions on Dividends, Redemptions and Other Payments."
10
<PAGE>
CAPITALIZATION
The following table sets forth the debt and capitalization of the Company as
of March 31, 1996 and as adjusted to give effect to the sale of the 750,000
shares of Common Stock offered by the Company, the sale of an aggregate
principal amount of $25,000,000 of Notes and the application of the estimated
net proceeds of such sales. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long term debt:
Bank notes payable (1)................................. $ -- $ --
Discounted lease rentals (2)........................... 185,008 185,008
Senior Notes due 2003, offered hereby.................. -- 25,000
-------- -----------
Total long term debt (3)............................. 185,008 210,008
-------- -----------
Shareholders' equity:
Preferred Stock, $.01 par value, 2,000,000 shares
authorized, no shares issued and outstanding (no
shares, as adjusted).................................. -- --
Common Stock, $.01 par value, 15,000,000 shares
authorized, 7,849,800 shares issued and outstanding
(8,599,800 shares, as adjusted) (4)................... 78
Additional paid-in capital............................. 9,467
Retained earnings...................................... 47,327 47,327
-------- -----------
Total shareholders' equity........................... 56,872
-------- -----------
Total capitalization................................. $241,880 $
-------- -----------
-------- -----------
</TABLE>
- ------------
(1) The Company currently has lines of credit with availability totaling
$23,000,000 from two banks to provide interim financing of the Company's
acquisition of equipment for lease. See "Business -- Financing." The Company
intends to use the estimated net proceeds, in part, for repayment of any
amounts then outstanding under the two lines of credit.
(2) Discounted lease rentals includes $184,221,000 of non-recourse and $787,000
of recourse debt.
(3) For information with respect to the Company's debt, see Notes 4 and 5 of
Notes to Consolidated Financial Statements.
(4) Does not include 390,000 shares of Common Stock issuable upon exercise of
outstanding stock options, of which 254,374 shares of Common Stock are
subject to options that are immediately exercisable. See Note 7 of Notes to
Consolidated Financial Statements.
11
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The selected financial data presented below under the captions "Statement of
Earnings Data" and "Balance Sheet Data" for, and as of the end of, each of the
years in the five-year period ended December 31, 1995 are derived from the
Company's Consolidated Financial Statements, which have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The Consolidated
Financial Statements as of December 31, 1995 and 1994 and for each of the years
in the three-year period ended December 31, 1995, and the report thereon, are
included elsewhere in this Prospectus. The selected financial data under the
captions "Statement of Earnings Data" and "Balance Sheet Data" as of March 31,
1996 and 1995 and for the three months ended March 31, 1996 and 1995 are derived
from the Company's unaudited consolidated financial statements and include all
adjustments (consisting of normal recurring accruals) that the Company considers
necessary for a fair presentation of such data. Results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996. The data set forth in the
following tables should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(Dollars in thousands, except per share -------------------- -----------------------------------------------------
data) 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues:
Leasing revenues:
Direct financing and sales-type
leases................................. $ 14,140 $ 15,533 $ 60,986 $ 64,042 $ 56,449 $ 39,561 $ 37,053
Operating leases........................ 1,360 1,361 5,696 3,909 8,721 10,799 12,372
--------- --------- --------- --------- --------- --------- ---------
Total leasing revenues................ 15,500 16,894 66,682 67,951 65,170 50,360 49,425
Sales of equipment........................ 477 870 2,003 1,870 2,194 2,345 6,728
Other revenue............................. 72 48 96 75 536 387 24
--------- --------- --------- --------- --------- --------- ---------
Total revenues........................ 16,049 17,812 68,781 69,896 67,900 53,092 56,177
--------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Leasing costs:
Direct financing and sales-type
leases................................. 3,653 5,691 24,926 34,456 33,155 21,231 19,458
Operating leases........................ 1,001 1,008 3,914 2,813 6,620 8,858 10,315
--------- --------- --------- --------- --------- --------- ---------
Total leasing costs................... 4,654 6,699 28,840 37,269 39,775 30,089 29,773
Cost of equipment sold.................... 259 791 1,555 1,234 1,994 1,826 6,204
Selling, general and administrative....... 2,126 1,526 5,656 5,863 4,764 4,207 4,668
Interest expense.......................... 3,578 3,364 13,470 9,928 8,601 9,028 9,995
Other..................................... 119 -- -- -- -- -- 242
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses.............. 10,736 12,380 49,521 54,294 55,134 45,150 50,882
--------- --------- --------- --------- --------- --------- ---------
Earnings before income tax expense and
cumulative effect of accounting change..... 5,313 5,432 19,260 15,602 12,766 7,942 5,295
Provision for income tax expense............ 2,178 2,173 7,704 6,241 5,106 3,177 2,118
--------- --------- --------- --------- --------- --------- ---------
Earnings before cumulative effect of
accounting change.......................... 3,135 3,259 11,556 9,361 7,660 4,765 3,177
Cumulative effect of accounting change
(1)........................................ -- -- -- -- -- 289 --
--------- --------- --------- --------- --------- --------- ---------
Net earnings................................ $ 3,135 $ 3,259 $ 11,556 $ 9,361 $ 7,660 $ 5,054 $ 3,177
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net earnings per common share before
cumulative effect of accounting change..... $ .40 $ .41 $ 1.46 $ 1.16 $ .98 $ .70 $ .50
Cumulative effect of accounting change per
common share (1)........................... -- -- -- -- -- .04 --
--------- --------- --------- --------- --------- --------- ---------
Net earnings per common share............... $ .40 $ .41 $ 1.46 $ 1.16 $ .98 $ .74 $ .50
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Cash dividends declared per common share.... $ .04 $ .03 $ .12 $ .08 $ .06 $ .02 --
Weighted average number of common shares
outstanding (2)............................ 7,871,525 7,953,181 7,911,854 8,047,326 7,807,534 6,821,858 6,300,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in leasing operations.... $263,660 $233,484 $254,281 $216,737 $171,975 $134,123 $135,494
Total assets........................ 277,211 238,093 267,901 226,711 178,991 139,877 139,108
Discounted lease rentals (3)........ 185,008 161,794 178,457 153,793 119,837 91,262 106,539
Retained earnings................... 47,327 38,241 45,180 35,657 27,736 20,545 15,636
Shareholders' equity................ 56,872 47,847 54,724 45,317 37,423 25,303 15,741
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
New equipment added during the
period............................. $ 33,960 $ 35,305 $130,360 $108,768 $ 94,046 $ 50,374 $ 53,388
Monthly lease rentals in effect at
period-end......................... $ 11,273 $ 9,001 $ 10,239 $ 7,866 $ 6,389 $ 5,294 $ 5,077
Retained earnings as a percentage of
shareholders' equity............... 83.2% 79.9% 82.6% 78.7% 74.1% 81.2% 99.3%
Return on average assets............ 4.6% 5.6% 4.7% 4.6% 4.8% 3.6% 2.4%
Return on average shareholders'
equity............................. 22.5% 28.0% 23.1% 22.6% 24.4% 24.6% 22.4%
Ratio of net earnings before fixed
charges and taxes to fixed
charges............................ 2.5x 2.6x 2.4x 2.6x 2.5x 1.9x 1.5x
</TABLE>
- ---------------
(1) In September 1992, the Company adopted Financial Accounting Standards Board
Statement No. 109, ACCOUNTING FOR INCOME TAXES, effective as of January 1,
1992. The cumulative effect of this change in accounting for income taxes
was $289,500 or $.04 per share of Common Stock.
(2) Common Stock equivalents are excluded from the weighted average number of
common shares outstanding as the dilutive effect is less than 3%.
(3) Discounted lease rentals includes $184,221,000 of non-recourse and $787,000
of recourse debt at March 31, 1996.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LEASE ACCOUNTING OVERVIEW
GENERAL. The Company classifies its lease transactions, as required by FASB
No. 13, as (1) direct financing, (2) sales-type, or (3) operating leases.
Revenues, costs and resulting income are recognized during each of the
accounting periods within the term of the lease. The allocation of income among
the accounting periods within a lease term will vary depending upon the lease
classification.
For financial statement purposes, the Company includes revenue from all
three classifications in leasing revenues, and costs related to these leases in
leasing costs. The Company has in "Selected Financial and Other Data" separated
its leasing revenues into two categories: (1) direct financing and sales-type
leases and (2) operating leases.
DIRECT FINANCING AND SALES-TYPE LEASES. Direct financing and sales-type
leases transfer substantially all benefits and risks of equipment ownership to
the customer. A lease is a direct financing or sales-type lease if the
creditworthiness of the customer and the collectibility of lease payments are
reasonably certain and it meets one of the following criteria: (1) the lease
transfers ownership of the equipment to the customer by the end of the lease
term, (2) the lease contains a bargain purchase option, (3) the lease term at
inception is at least 75% of the estimated economic life of the leased
equipment, or (4) the present value of the minimum lease payments is at least
90% of the fair value of the leased equipment at inception.
Direct financing and sales-type leased assets consist of the present value
of the future minimum lease payments plus the present value of the residual
(collectively referred to as the "net investment"). Sales-type classification
gives rise to dealer profit to the lessor and generally results when the Company
leases used equipment to its customer. This equipment may be obtained in the
secondary marketplace, but most frequently is the result of re-leasing equipment
from the Company's own portfolio to the same customer.
For direct financing leases, leasing revenue consists of interest earned on
the present value of the lease payments and residual. Revenue is recognized
periodically over the lease term as a constant percentage return on the net
investment. There are no costs and expenses recorded for direct financing leases
since leasing revenue is recorded on a net basis. Therefore, the revenues
resulting from the "mix" of lease classifications during an accounting period
will affect the profit margin percentage for such period, with such profit
margin percentage generally increasing as revenues from direct financing leases
increase.
Sales-type leasing revenue, which is recognized at lease inception, consists
of the present value of the total minimum lease payments. Costs and expenses,
also recognized at lease inception, consist of the equipment's net book value,
less the present value of the residual. The difference between the leasing
revenue and such costs and expenses results in a profit recorded at the
inception of the lease. Interest earned on the present value of the lease
payments and residual is recognized periodically over the lease term as a
constant percentage return on the net investment and is included as part of the
Company's leasing revenues.
OPERATING LEASES. All leases that are not classified as direct financing or
sales-type leases are treated as operating leases. Monthly lease payments from
these leases are recognized as leasing revenues. The Company's cost of the
leased equipment is recorded on the balance sheet in "Investment in leasing
operations" and is depreciated on a straight-line basis over the lease term to
the Company's estimate of residual value. Revenue, depreciation expense and
resultant profit for operating leases are recorded evenly over the life of the
lease. Should the lease be financed, the interest expense declines over the term
of the financing as the principal is reduced, with the resultant net profit
being lower in the early periods of the financing and higher in the later
periods.
RESIDUAL VALUES. Residual values, representing the value of the equipment
at the termination of the lease, are estimated by the Company at the inception
of the lease and recorded on its balance sheet. The residual values for direct
financing and sales-type leases are recorded in "Investment in leasing
operations" on a net present value basis. The residual values for operating
leases are included in the leased equipment's net book value. The estimated
residual values will vary, both in amount and as a percentage of the original
14
<PAGE>
equipment cost, depending upon several factors, including the amount of the
monthly rent and the term of the lease. The Company believes that its estimates
of future residual values generally are below or equal to valuations published
by independent third-party residual forecasters.
The Company evaluates residual values on an ongoing basis and records any
required changes in accordance with FASB No. 13. Residual values are affected by
equipment supply and demand and by new product announcements and price changes
by manufacturers. In accordance with generally accepted accounting principles as
stated in FASB No. 13, residuals can only be adjusted downward during the term
of the lease.
The Company seeks to realize the estimated residual value at lease
termination through renewal or extension of the original lease or sale of the
equipment. The difference between the proceeds of a sale and the remaining
estimated residual value results in either a gain or loss when title transfers.
The proceeds from any subsequent lease are accounted for in accordance with FASB
No. 13.
INITIAL DIRECT COSTS. Initial direct costs related to the origination of
direct financing and operating leases, including sales commissions, are
capitalized and recorded as part of the "Investment in leasing operations" and
are amortized over the lease term.
SALES. In equipment sales transactions, sales revenue is recognized by the
Company at the time title to the equipment passes to the customer. If the sale
is to the customer who is leasing the equipment, the revenue is included in
"Leasing revenues," and if the equipment is sold into the secondary marketplace,
the revenue is included in "Sales of equipment."
CASH FLOWS. Cash flows are not affected by lease classification. However,
cash flows are affected by the Company's decision on how it finances its
investment in a particular lease. After lease inception, the Company generally
discounts the remaining lease payments on a non-recourse or recourse basis with
various financial institutions. The Company assigns the remaining lease payments
to these financial institutions at fixed interest rates. In return for the
future remaining lease payments, the Company receives a cash payment
substantially equal to the present value of such lease payments. Proceeds from
discounting are recorded on the Company's balance sheet as discounted lease
rentals. As customers make payments to financial institutions, lease revenue
(i.e., interest income on direct financing and sales-type leases and rental
revenue on operating leases) and interest expense are recorded by the Company
and the discounted lease rentals on the balance sheet are reduced by the
interest method. See "Business -- Financing."
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net earnings for the three months ended March 31, 1996 were $3,135,000, or
$0.40 per share, as compared to $3,259,000, or $0.41 per share, for the
corresponding period in 1995. At March 31, 1996 the Company's net investment in
leasing operations was $263,660,000, an increase of 3.7% over $254,281,000 at
December 31, 1995.
Total revenues of $16,049,000 for the three months ended March 31, 1996 were
down 9.7% from $17,768,000 for the same three-month period in 1995. Leasing
revenues accounted for 97.0% and 95.1% of total revenues for the three-month
periods ended March 31, 1996 and 1995, respectively. The quarter-to-quarter
fluctuations in leasing revenues result primarily from the allocation between
types of leasing revenues and the manner and timing in which leasing revenues
are recognized over the term of each particular lease. See "-- Lease Accounting
Overview." Total revenues for the three months ended March 31, 1996 also include
$2,128,000 of commissions generated from the financing of lease transactions
which were placed by the Company's wholesale lease broker business acquired on
January 19, 1996. See Note 2 of Notes to Consolidated Financial Statements.
Total leasing costs as a percentage of leasing revenue were 29.9% and 39.6%
for the three-month periods ended March 31, 1996 and 1995, respectively. Total
leasing costs for the three months ended March 31, 1996 include $1,354,000 of
commissions paid to third-party brokers for the origination of lease
15
<PAGE>
transactions for the Company's wholesale lease broker business. The decrease in
leasing costs as a percentage of leasing revenues reflects the influence of the
relative size and lease classification of transactions for the respective
periods, offset by the impact of commissions earned versus commissions paid.
Revenues from outright sales of equipment as a percentage of the total
revenues were 3.0% and 4.9% for the three-month periods ended March 31, 1996 and
1995, respectively. Cost of the equipment sold as a percent of outright sales
was 54.3% and 90.9% for the respective 1996 and 1995 periods. The period-to-
period variations in outright sales of equipment and cost of equipment sold as a
percent of these sales were the result of fluctuations in the value and timing
of the return to the Company of equipment placed on lease in earlier periods.
Selling, general and administrative expenses increased $601,000 (39.4%) in
the three months ended March 31, 1996 over the corresponding 1995 period,
primarily as a result of increased employment costs and general operating
expenses. Employment costs increased primarily as a result of the addition of
personnel since the commencement of operations in July 1995 of WINR Business
Credit and the acquisition of the wholesale lease broker business. At March 31,
1996 the Company had a total of 83 full-time employees compared to 48 full-time
employees at March 31, 1995. General operating expenses have increased due to
the growth of the Company, through the formation of WINR Business Credit and the
wholesale lease broker business acquisition, as well as the expansion of sales
offices.
Interest expense increased $256,624 (7.7%) in the first quarter of 1996 over
the first quarter of 1995. This increase was the result of higher average
borrowings in the form of discounted lease rentals, coupled with higher
effective interest rates on the aggregate debt of the Company during the current
period, as compared with the period ended March 31, 1995.
Income tax expense as a percentage of earnings before income tax was
approximately 41% and 40% for the three-month periods ended March 31, 1996 and
1995, respectively. The actual income tax paid varies depending on many factors,
including the alternative minimum tax rate, various state tax laws, timing
differences due to accelerated tax depreciation rules and a variety of other tax
considerations.
As a result of the foregoing factors, net earnings decreased by $125,000
(3.8%) for the three months ended March 31, 1996 as compared with the
corresponding 1995 period.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1995
Net earnings for the years ended December 31, 1995, 1994 and 1993 were
$11,556,000 ($1.46 per share), $9,361,000 ($1.16 per share) and $7,660,000
($0.98 per share), respectively. At December 31, 1995, the Company's net
investment in leasing operations was $254,281,000 as compared with $216,737,000
at December 31, 1994 and $171,975,000 at December 31, 1993.
Total revenues of $68,709,000 for the year ended December 31, 1995 were down
1.7% from total revenues of $69,878,000 recorded during the year ended December
31, 1994. Total revenues for the year ended December 31, 1994 were up 3.7% over
the $67,401,000 of total revenues recognized during the year ended December 31,
1993. Leasing revenues accounted for 97.1%, 97.3% and 96.7% of total revenues in
the years ended December 31, 1995, 1994 and 1993, respectively. The year-to-year
fluctuations in leasing revenues result primarily from the allocation between
types of leasing revenues and the manner and timing in which leasing revenues
are recognized over the term of each particular lease. The allocation of
revenues is a function of the lease classification as determined in accordance
with FASB No. 13. See "-- Lease Accounting Overview." For this reason, the
Company believes that more meaningful measures of growth are the increases in
leased assets and net earnings.
Total leasing costs as a percentage of leasing revenue were 43.2%, 54.8% and
61.0% for the years ended December 31, 1995, 1994 and 1993, respectively. The
decrease in leasing cost percentage in 1995 from 1994 was the result of a
greater contribution from certain large transactions. In 1994, leasing costs as
a percent of revenue decreased from 1993, again reflecting the contribution from
certain large transactions.
Revenues from outright sales of equipment as a percentage of total revenues
were 2.9%, 2.7% and 3.3% for the years ended December 31, 1995, 1994 and 1993,
respectively. Contributing to the year-to-year
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<PAGE>
variation in outright sales were fluctuations in size and timing of the return
to the Company of equipment placed on lease in earlier periods. Cost of
equipment sold for the years ended December 31, 1995, 1994 and 1993 was 77.6%,
66.0% and 90.9% of sales of equipment, respectively.
Selling, general and administrative expenses decreased $207,000 (3.5%) in
1995 from 1994 and increased $1,099,000 (23.1%) in 1994 over 1993. The decrease
in 1995 from 1994 is the result of increased deferral of initial direct costs
associated with direct finance and operating leases, offset by increased
employment costs and general operating expenses. The increase in the deferral of
initial direct costs is primarily the result of an increase in the proportionate
volume of direct finance leases recorded during 1995 compared to 1994.
Employment costs increased as a result of general growth due to increased
business volume coupled with the addition of personnel resulting from the
commencement of operations of WINR Business Credit. General operating expenses
increased due to increased business volume and physical growth of the Company.
In September 1995, the Company opened an East Coast sales office in
Philadelphia, Pennsylvania and expanded the facilities in the San Francisco Bay
area by combining the Company's office in Mill Valley, California with the sales
operations of WINR Business Credit. The increase in 1994 over 1993 is primarily
due to increased commissions and salaries. Net commission expense varies from
period to period depending upon relative profits generated by individual sales
representatives. The increased salary expense reflects the change in
compensation arrangements for a senior management employee which went into
effect January 1, 1994, whereby the employee's previous commission arrangement
was phased out during 1994 in favor of salary and bonus compensation that more
accurately reflects his duties and responsibilities.
Interest expense increased $3,541,000 (35.7%) in 1995 over 1994 and
increased $1,327,000 (15.4%) in 1994 over 1993. The increase in 1995 is
primarily the result of greater discounted lease rental borrowings and higher
effective interest rates during 1995 as compared with the corresponding 1994
period. The increase in 1994 was primarily the result of greater discounted
lease rental borrowings resulting from more equipment being placed on lease as
compared with the corresponding 1993 period, offset by reduced borrowings from
lines of credit and lower effective interest rates on the aggregate outstanding
debt of the Company during 1994.
Income tax expense as a percentage of earnings before income tax was
approximately 40% in each of the years 1995, 1994 and 1993. The actual income
tax paid varies depending on many factors, including the alternative minimum tax
rate, various state tax laws, timing differences due to accelerated tax
depreciation rules and a variety of other tax considerations.
As a result of the foregoing factors, net earnings and net earnings per
common share increased each year in the three-year period ended December 31,
1995. Net earnings increased $2,195,000 (23.4%) in 1995 over 1994 and $1,701,000
(22.2%) in 1994 over 1993.
FINANCIAL CONDITION AND LIQUIDITY
The funds necessary to support the Company's leasing activities have been
provided primarily from operations and discounted lease financing and, to a
lesser extent and only on an interim basis, from bank borrowings under lines of
credit. During 1995 the daily average borrowings under these lines of credit was
$299,000, compared with $11,000 in 1994. The extent to which the Company employs
these lines is dependent upon its available internal funds and the volume of its
sales and lease transactions. At March 31, 1996, there were no amounts
outstanding under these lines of credit.
Generally upon commencement of a lease, the Company assigns the remaining
lease payment stream to a financial institution, and the discounted lease
proceeds are used to reduce any amounts outstanding under the lines of credit.
The Company generally funds its equity investments in leased equipment with
internally generated funds. See "Business -- Financing."
The Company's entire lease portfolio was originated by the Company and the
majority consists of leases that have been discounted with financial
institutions. The Company does finance selected leases with internally generated
funds. The portion of the Company's current portfolio that was financed
internally at December 31, 1995 was 11.5% of the total portfolio (as measured by
original equipment cost). The leases financed internally are typically leases
too small to be attractive to a financial institution or where the value
17
<PAGE>
of the underlying equipment or the credit status of the customer is not
acceptable to financial institutions for non-recourse financing. In these cases,
the Company believes there are other circumstances that warrant such internal
funding.
At March 31, 1996, the Company had discounted lease rentals outstanding of
$185,008,000 of which 99.6% were non-recourse loans. At the end of 1995, the
Company had discounted lease rentals outstanding of $178,457,000, of which 99.3%
were non-recourse loans. The increase in discounted lease rentals for the three
months ended March 31, 1996 is due primarily to the proceeds from the
discounting of new leases during the quarter exceeding the amortization of
previously discounted lease rentals. At March 31, 1996, approximately
$202,717,000 of the Company's $260,569,000 total minimum lease payments
receivable represented leases that were discounted, $28,973,000 consisted of
leases pending discounting and the remaining $28,879,000 consisted of internally
funded leases. The Company depends on discounted lease financing to provide
funds for its operations at rates that reflect prevailing market interest rates
and the credit standing of its customers. Based on the Company's experience in
the leasing industry, its strong financial history and its long-standing
relationships with certain financial institutions, the Company believes that
discounted lease financing will continue to be available at competitive rates of
interest.
The primary use of cash for the three years ended December 31, 1995 has been
for the purchase of equipment for leasing. At December 31, 1995, the lease
portfolio for all lease classifications included equipment owned by the Company
with an original cost of equipment of approximately $397,996,000.
The Company's current financial resources and estimated cash flow from
operations, together with the proceeds to the Company from these offerings, are
expected to be adequate to fund the Company's operations for at least the next
twelve months. There can be fluctuations in cash flow from period to period due
to the timing of payments by customers and timing of permanent financing.
However, the Company has consistently generated positive cash flow and has
increased its net worth from its initial equity capital of $105,000 in 1982 to
approximately $56,872,000 at March 31, 1996, including equity infusions totaling
$9,581,000 from the Company's public offerings in 1993 and 1992. On January 19,
1996, the Company made a $5,100,000 cash payment pursuant to an asset purchase
agreement (the "Agreement") for the purchase of substantially all the assets of
Capital Business Leasing, Inc. Under the terms of the Agreement, on December 31,
1996 the Company is required to make a final payment of up to $2,000,000, plus
accrued interest thereon at a rate of six percent (6%) per annum.
Inflation has not been a significant factor in the Company's operations.
18
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BUSINESS
GENERAL
The Company is engaged in the business of providing non-cancelable leases
for high technology and business-essential equipment to both large organizations
and smaller, growing companies. The Company's lease products are marketed
nationally through a 17-member sales force located in Minneapolis, Minnesota;
Dallas, Texas; Philadelphia, Pennsylvania; Knoxville, Tennessee; Santa Barbara
and Oakland, California; and Henderson, Nevada. To differentiate itself from its
competitors in the leasing industry, the Company offers innovative lease
products and concentrates on building long-term, relationship-based associations
with its customers.
Since its founding in 1982, the Company's focus has been primarily on the
Value Added Lease. These lease transactions generally have terms from three to
five years and are with large organizations (generally corporations with
revenues of $50,000,000 or more). Such transactions typically range from
$250,000 to $20,000,000 and cover high technology equipment, including
computers, telecommunications equipment, point-of-sale systems and other
technology-based equipment. The leases are creative and flexible in structure to
accommodate equipment additions and upgrades to meet customers' changing needs.
Value Added Leases are retained in the Company's portfolio.
Responding to the expanding technological needs of increasing numbers of
small, growing businesses, the Company commenced operations of WINR Business
Credit in 1995. WINR Business Credit focuses on the small business market by
providing the Small Ticket Lease which covers business-essential equipment,
including computers, telecommunications equipment and production equipment.
Lease transactions in the small ticket area typically are for less than $250,000
and have lease terms of between two and and five years. The Company manages the
risks and costs associated with high volume small ticket leases through
centralized credit evaluation, lease administration and collections and business
alliances with vendors of business-essential equipment. Small Ticket Leases are
primarily generated for the Company's portfolio.
With the commencement of operations of WINR Business Credit the Company has
also developed the Enterprise Lease which is designed to meet the needs of large
corporations with influence over multiple business entities, such as
franchisor-franchisee relationships. The Enterprise Lease integrates the Value
Added Lease and the Small Ticket Lease for organizations in need of
enterprise-wide equipment and systems solutions.
The Company added the Wholesale Lease to its product portfolio in January
1996 through the acquisition of the assets of Capital Business Leasing, Inc., an
equipment lease broker that, for a fee, arranges lease financings with other
leasing companies for a variety of unrelated brokers and vendors. The Wholesale
Lease is generally sold to an outside funding source and does not become part of
the Company's lease portfolio.
INDUSTRY
The equipment leasing industry in the United States has greatly expanded
during the last decade. According to the Equipment Leasing Association ("ELA"),
a leading industry trade association, lease financing plays a significant role
in the United States economy, representing 29% of all business investment in
productive assets during 1994. The ELA also estimates that approximately 80% of
all United States companies lease some or all of their equipment. According to
the United States Department of Commerce, the annual volume of new capital
equipment, measured by original equipment cost, placed on lease in the United
States was approximately $147 billion in 1994 and is estimated to have been $160
billion in 1995, representing an 8.8% increase.
BUSINESS STRATEGY
The Company's strategy is to differentiate itself from its competitors in
the leasing industry by maintaining a focused, long-term, customer-service
approach to its business. Key elements of this strategy include:
- FOCUS ON LEASING. Leasing high technology and business-essential equipment
is the Company's only business. All of the Company's efforts are directed
toward providing the most effective leasing
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products for its customers. The Company makes no recommendation regarding
hardware, software or other services in the analysis of the most effective
financial arrangements for its customers. As a result, the Company has
developed a network of informal relationships with equipment
manufacturers, consultants, valued-added remarketers, lease brokers and
software providers. These informal alliances provide the Company with
referral sources for a significant number of quality prospects for its
lease products.
- FOUR PRODUCT STRATEGY. The Company's Four Product Strategy provides a
range of comprehensive lease finance products addressing the financing
needs of diverse companies. The VALUE ADDED LEASE features innovative
lease structures and the flexibility to upgrade or change technology-based
equipment during the lease term. These transactions typically range from
$250,000 to $20,000,000. Customers for this product are large,
creditworthy companies with critical technological needs. The SMALL TICKET
LEASE targets smaller, growing companies with a need for equipment that is
critical for the operation of their businesses. This product provides a
relatively fast and straightforward way for these customers to acquire
business-essential equipment. Lease transactions typically are less than
$250,000. The ENTERPRISE LEASE, which is a combination of the Value Added
Lease and the Small Ticket Lease, is marketed to business enterprises
typified by a large corporate entity with influence over a number of
smaller business entities, such as the franchisor/franchisee relationship.
The Enterprise Lease is designed to provide enterprise-wide equipment
financing solutions. Consolidation of financing for the enterprise
provides the customer with an all-inclusive solution that promotes the
installation of equipment throughout the enterprise. The WHOLESALE LEASE
is typically a small ticket lease brought to the Company by a lease broker
and sold to an outside funding source and does not become part of the
Company's lease portfolio.
- ASSET OWNERSHIP. The Company retains ownership of its leases and the
underlying equipment, except Wholesale Leases. This affords the Company
the flexibility to accommodate customers' desire to add to or upgrade
their equipment. This strategy of asset ownership and lease structure
provides a means for the customer to meet its changing needs on an
economically viable basis for both the customer and the Company.
- DIVERSIFICATION. The Company believes that it maximizes the stability and
profitability of its portfolio by leasing a wide variety of equipment to
companies in diverse industries in many geographic locations. Equipment in
the Company's portfolio is leased to customers across the country in
industries including retail, wholesale, manufacturing, financial services
and health care. See "Business -- Portfolio."
LEASING AND SALES ACTIVITIES
The Company generally leases high technology and business-essential
equipment for terms ranging from two to five years. The Company's standard
master lease agreements, entered into with each customer, are non-cancelable
"net" leases which contain "hell-or-high-water" provisions under which the
customer, upon acceptance of the equipment, must make all lease payments
regardless of any defects in the equipment, and which require the customer to
maintain and service the equipment, insure the equipment against casualty loss
and pay all property, sales and other taxes related to the equipment. Although
the Company's leases are non-cancelable, leases are frequently modified during
the term of the lease to upgrade a customer's equipment configuration. The
Company retains ownership of the equipment it leases and, in the event of
default by the customer, the Company or the financial institution to whom the
lease has been assigned may declare the customer in default, accelerate all
lease payments due under the lease and pursue other available remedies,
including repossession of the equipment. Upon completion of the initial term of
the lease, the customer may: (i) return the equipment to the Company, (ii) renew
the lease for an additional term, or (iii) purchase the equipment. If the
equipment is returned to the Company, it is sold into the secondary user
marketplace.
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The Company sometimes leases operating system software and application
software to its customers, but only with a hardware lease. Generally, software
leasing is only a financing of the customer's license agreement with its
software vendor and no title passes to either the customer or the Company. As a
result, the Company generally provides software leasing only to its most
creditworthy customers.
The Company conducts its leasing business in a manner designed to conserve
its working capital and minimize its credit exposure. The Company does not
purchase equipment until it has received a non-cancelable lease from its
customer and has determined that the lease can be discounted with a bank or
financial institution or financed with internal funds.
FINANCING
The Company's ability to arrange financing is important to its business. The
Company uses its lines of credit when needed on an interim basis to finance the
purchase of equipment for lease. Lease rentals are typically discounted with
financial institutions to provide longer term financing of a substantial portion
of the equipment cost.
The Company generally arranges permanent financing of Value Added Leases
through non-recourse discounting of lease rentals with various financial
institutions at fixed interest rates. The proceeds from the assignment of the
lease rentals are equal to the present value of the remaining lease payments due
under the lease, discounted at the interest rate charged by the financial
institution. Interest rates obtained under this type of financing are negotiated
on a transaction-by-transaction basis and reflect the financial condition of the
customer, the term of the lease, and the prevailing interest rates. For leases
discounted on a non-recourse basis, the financial institution has no recourse
against the Company unless the Company is in default of the terms of the
agreement under which the lease and the leased equipment are assigned to the
institution as collateral. The institution may, however, take title to the
collateral in the event the customer fails to make lease payments or certain
other defaults by the customer occur under the terms of the lease.
The Company expects to permanently finance its Small Ticket Leases by
discounting pools of lease receivables with various financial institutions on a
partial recourse basis. The recourse amount may vary from pool to pool, but the
Company's responsibility is generally expected to be limited to 10% of the total
discounted amount. In addition to the recourse responsibility of the Company,
these loans will be secured by the specific leases and equipment assigned to
each pool.
The Company also uses its available cash to fund leases internally rather
than discounting the leases with financial institutions. The Company has funded
leases internally where the lease amounts are too small to be attractive to a
financial institution or where the value of the underlying equipment or the
credit rating of the customer is not acceptable for non-recourse financing. In
these cases, the Company believes there are other circumstances that warrant
such internal funding. The Company also internally funds leases in its portfolio
pending discounting. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Financial Condition and Liquidity."
The Company has line of credit agreements for the purpose of interim
financing of the Company's acquisition of equipment for lease with First Bank
National Association ("First Bank") and Norwest Equipment Finance, Inc.
("Norwest") (collectively the "Banks"). The First Bank line provides credit up
to $15,000,000 at its prime rate or, at the Company's option, at a rate
determined by a specified alternative rate calculation and terminates on July
31, 1996. The Norwest line provides credit up to $8,000,000 at 25 basis points
over its prime rate and expires on June 30, 1996. Both line of credit agreements
are secured by the specific leases and equipment assigned to each of the Banks
and, under the First Bank agreement, all other personal property and fixtures of
the Company. The Company expects that each of these credit lines will be
extended; however, such line of credit financing may not always be available or,
if so, on terms acceptable to the Company.
PORTFOLIO
As of March 31, 1996, the Company had a total investment in leasing
operations of $263,659,839. Of this amount, $242,946,082 represented direct
financing and sales-type leases, $4,842,593 represented operating leases, and
$15,871,164 represented equipment purchased for leases that were not yet
commenced.
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As measured by original equipment cost, approximately 35% of the portfolio
as of March 31, 1996 was comprised of a variety of equipment manufactured by
IBM. The remainder of the portfolio was comprised of other types of data
processing equipment, point-of-sale systems, telecommunications equipment,
office automation equipment and other business-essential equipment made by a
variety of other manufacturers.
The entire portfolio has been originated by the Company and is owned and
administered by the Company. The Company's portfolio consists of equipment
located in all 50 states with the heaviest concentration in the following states
as measured by the percentage of original equipment cost of the entire portfolio
as of December 31, 1995:
California 14.3% Arizona 6.4%
Texas 12.3% Wisconsin 5.1%
Illinois 7.8% New York 4.3%
Minnesota 7.4% Ohio 4.0%
CUSTOMERS
The Company currently provides leasing services to a variety of corporations
located across the country, some of whom are listed below:
Bank of America Johnson & Johnson
Citibank Mattel, Inc.
PETsMART, Inc. Pacific Telesis
The Dun & Bradstreet Corporation Pier 1 Imports, Inc.
Time Warner, Inc. Berkshire Hathaway, Inc.
Texaco Kinko's
The Company enters into standard master lease agreements with its customers
that may contain many separate lease schedules, each with its own particular
lease term. Most of the Company's customers have a number of lease schedules in
place. Customers' repeat business, through the addition of new lease schedules
and modification of existing leases, is an important source of earnings for the
Company. Each lease schedule constitutes a lease of additional equipment. For
any one customer, its lease schedules can end on many different dates. The
Company's representatives maintain close contact with all of its customers.
During 1995, a single customer accounted for approximately 14% of total
revenues, which resulted from a merger-driven buyout of a lease and the
underlying equipment. No other customer accounted for more than 6% of total
revenues during 1995.
CREDIT AND TRANSACTION APPROVAL
The Company's credit policies, procedures and transaction criteria are
established by its executive officers. The Credit Committee, comprised of
experienced credit professionals, has the responsibility to enforce policy and
ensure the quality of the Company's transactions. Small ticket lease
transactions under $50,000 in equipment cost are reviewed and graded using
credit information supplied by the lessee and by credit agencies with whom the
Company has contracted. These transactions are either approved, rejected or
re-submitted when credit enhancements are established. For transactions that are
greater than $50,000, the Company requires financial statements, additional
credit information and senior management approval. For transactions over
$250,000, additional approval is required by outside funding sources who fund
those transactions on a non-recourse or recourse basis.
OPERATIONS
The Company's Account Management staff provides lease administration
services to the Value Added Lease customer, while WINR Business Credit's
Customer Sales and Service provides these services to the Small Ticket Lease
customer. Account Management delivers a service to the customer by coordinating
and managing the installation of a customer's leased assets. Account Management
approves vendor payments for installed equipment, tracks assets by serial number
and location, and is responsible for the preparation of lease documentation.
WINR Business Credit's Customer Sales and Service tracks Small Ticket Lease and
Wholesale Lease applications and inquiries. This group is responsible for all
customer contact, customer satisfaction and the quality and control of all lease
documents.
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MARKETING
The Company markets its leasing products by selling directly to end-users
and indirectly through vendors of equipment, software, value-added services and
consulting services. Marketing to customers and prospects directly by the
Company's sales representatives is also done by telephone canvassing.
The Company's sales representatives spend a significant amount of their
efforts building networks of equipment manufacturers, value-added remarketers,
software suppliers, lease brokers and consultants. The objective is to build
informal strategic alliances in order to provide customers with the most
effective method for their acquisition of each supplier's products. Most of
these referral sources do not provide lease products and look to the Company and
other leasing companies to provide these products.
Personal visits to customers and prospects by Company sales representatives
allow the sales representative to build strong relationships with customers in
order to provide the most attractive financial products. Repeat business is an
important source of earnings for the Company. During the year ended December 31,
1995, a substantial majority of the Company's lease transactions was with
existing customers.
As of May 15, 1996, the Company had a total of 17 sales representatives. The
Company generally seeks to hire sales representatives who have experience in
equipment sales. The Company expects to hire additional sales personnel in 1996.
In addition to its headquarters in Minneapolis, the Company also has sales
offices located in Santa Barbara and Oakland, California; Henderson, Nevada;
Philadelphia, Pennsylvania; Knoxville, Tennessee; and Dallas, Texas.
COMPETITION
The Company competes in the equipment leasing marketplace with a variety of
companies, some of which have more capital and resources. These firms include
equipment manufacturers (as well as captive leasing companies), brokers, leasing
companies and financial institutions. The Company frequently encounters
competition from IBM Credit Corporation, Comdisco Incorporated, GE Capital
Corporation, AT&T Capital, Advanta Corporation, Dana Commercial Credit
Corporation and Amplicon Inc.
The Company competes on the basis of flexibility in structuring
transactions, providing a high level of customer service, the knowledge and
competence of its employees, pricing and the ability to gain referrals of
potential transactions from various business contacts including existing
customers.
EMPLOYEES
As of May 15, 1996, the Company had 85 employees, including 17 sales
representatives. The other employees are managerial, administrative, MIS and
clerical personnel. The Company considers its employee relations to be
excellent.
PROPERTIES
The Company's corporate offices are located at 1015 Opus Center, 9900 Bren
Road East, Minnetonka, Minnesota, 55343. The Company leases approximately 18,000
square feet pursuant to a lease expiring in June 1999. Over the term of the
lease, the rent expense is approximately $29,000 per month. The Company also
pays monthly parking expenses and a pro rata share of operating expenses and
real estate taxes if such expenses and taxes exceed certain thresholds. The
Company also leases sales and customer services offices in California, Nevada,
Tennessee, Pennsylvania and Texas.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings that are
material to the Company's business or financial condition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
- -------------------- --- -----------------------------------------------------
<S> <C> <C>
John L. Morgan 55 President and Director
Kirk A. MacKenzie 57 Executive Vice President, Treasurer and Director
Jack A. Norqual 50 Senior Vice President and Director
Paul C. Reyelts 49 Director
Gerald W. Simonson 65 Director
Mark L. Wilson 47 Director and Secretary
Deborah L. Mogensen 44 Vice President
Robert P. Murphy 45 Vice President of Sales and Marketing
Janice R. Englund 50 Vice President
Coleman P. Griffing 39 Vice President of Sales
Gary W. Anderson 43 Vice President, Controller and Assistant Secretary
Richard J. Pieper 46 Vice President
Paul L. Gendler 30 Vice President and General Counsel
</TABLE>
JOHN L. MORGAN is a founder of the Company and has served as President since
January 1985. He has been a director and executive officer of the Company since
1982.
KIRK A. MACKENZIE is a founder of the Company and has served as Executive
Vice President since July 1992. From January 1985 to July 1992, Mr. MacKenzie
was a Vice President of the Company. He has been Treasurer, a director and
executive officer of the Company since 1982.
JACK A. NORQUAL is a founder of the Company and has served as Senior Vice
President since July 1992. From January 1985 to July 1992, Mr. Norqual served as
Vice President and Secretary of the Company. He has been a director and
executive officer of the Company since 1982.
PAUL C. REYELTS became a director of the Company in May 1994. He has been
Vice President, Finance and Chief Financial Officer of the Valspar Corporation
since 1982. Valspar Corporation is a manufacturer of consumer paints and
industrial coatings and related products.
GERALD W. SIMONSON became a director of the Company in July 1992. Mr.
Simonson has been a venture capital investor for more than 24 years. He has been
the Chief Executive Officer of Omnetics Connector Corporation, a manufacturer of
microminiature connectors, since March 1991. He is also a director of Fairview
Hospital and Healthcare Services, Medtronic, Inc. and Northwest Teleproductions,
Inc.
MARK L. WILSON was named Secretary and Director of the Company in February
1995. He has been a practicing attorney since 1974. From 1986 to February 1995,
he was a shareholder and officer of the Minneapolis law firm Ross Rosenblatt &
Wilson, Ltd. Since February 1995, he has been a shareholder and officer of the
Minneapolis law firm Ravich Meyer Wilson Kirkman McGrath & Nauman, P.A.
DEBORAH L. MOGENSEN joined the Company in 1982 and has been a Vice President
of the Company since 1986. She is currently responsible for re-marketing
previously leased equipment.
ROBERT P. MURPHY joined the Company in 1986 as a Vice President. He is
currently responsible for the Company's sales and marketing efforts.
JANICE R. ENGLUND joined the Company in 1986 and has been a Vice President
since 1990. She is responsible for the Company's customer account management
functions.
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COLEMAN P. GRIFFING joined the Company in 1987 as a sales representative. In
January 1994 he became a Vice President.
GARY W. ANDERSON, a certified public accountant, joined the Company in 1988
as Controller and has served as Assistant Secretary since October 1992. In
January 1993, he became Vice President/Controller.
RICHARD J. PIEPER joined the Company in 1991 as a Vice President. He is
currently responsible for the Company's bank financing functions.
PAUL L. GENDLER, an attorney and certified public accountant, has been
Counsel of the Company since August 1994. In October 1995, he became Vice
President. From 1993 to 1994 he was an attorney in the General Counsel's Office
of the Federal Reserve Bank of Minneapolis. Prior to that he was the law clerk
to Chief United States Bankruptcy Judge Robert J. Kressel from 1992 to 1993.
AUDIT AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Audit and Compensation Committees are composed of the Company's three
outside directors, Paul C. Reyelts, Gerald W. Simonson and Mark L. Wilson. The
Audit Committee has responsibility for selecting and recommending to the Board
of Directors the Company's independent auditors, subject to shareholder
approval, reviewing the audit plan of the independent auditors, reviewing annual
financial statements and overseeing the monitoring of the Company's system of
internal control. The Compensation Committee has responsibility for reviewing
and recommending to the Board of Directors any major change in the personnel
policies or employee benefits of the Company, plans to provide management
continuity, and employee and executive compensation policies, approving
compensation changes for executives, and administering the Company's stock-based
compensation plans.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of May 1, 1996 certain information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
shareholder known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) each Selling Shareholder, (iii) each director
of the Company, (iv) each of the named executive officers listed under
"Management" and (v) all directors and executive officers as a group. The table
also sets forth the number of shares of Common Stock being offered by each of
the Selling Shareholders and the number and percentage of the outstanding shares
to be owned after the offering by each person or group identified in the table.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES TO BE BENEFICIALLY
PRIOR TO OFFERING (1) OWNED AFTER OFFERING (1)
NAME OF ------------------------------ SHARES ------------------------------
BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- -------------------------------------------- --------------- ------------- --------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Jack A. Norqual (2)(3) 1,762,000 22.3% 250,000 1,512,000 17.5%
John L. Morgan (2)(4) 1,715,000 21.7 250,000 1,465,000 17.0
Kirk A. MacKenzie (2)(5) 1,702,400 21.6 250,000 1,452,400 16.8
C.C. Dunnavan & Co., Inc. (6) 406,775 5.2 -- 406,775 4.7
Paul C. Reyelts (7) 6,866 * -- 6,866 *
Gerald W. Simonson (8) 10,000 * -- 10,000 *
Mark L. Wilson (9) 6,333 * -- 6,333 *
Deborah L. Mogensen (8) 10,100 * -- 10,100 *
Robert P. Murphy (10) 87,000 1.1 -- 87,000 1.0
Janice R. Englund (8) 10,100 * -- 10,100 *
Gary W. Anderson (8) 12,000 * -- 12,000 *
Richard J. Pieper (11) 51,850 * -- 51,850 *
Coleman P. Griffing (12) 31,000 * -- 31,000 *
Paul L. Gendler (13) 1,250 * -- 1,250 *
All directors and executive officers as a
group (13 persons)(14) 5,405,899 66.3 750,000 4,655,899 52.3
</TABLE>
- ------------
* Less than 1%.
(1)Unless otherwise noted, each person identified possesses sole voting and
investment power with respect to the shares shown. Shares not outstanding
but deemed beneficially owned by virtue of the right of a person or member
of a group to acquire them within 60 days are treated as outstanding only
when determining the amount and percent owned by such person or group.
(2)Located at 1015 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota
55343.
(3)Includes 50,000 shares owned by Mr. Norqual's spouse, 29,000 shares owned by
Mr. Norqual's son and 3,000 shares owned by a not-for-profit organization of
which Mr. Norqual is a board member, as to all of which Mr. Norqual
disclaims beneficial ownership. Includes 40,000 shares that Mr. Norqual has
the right to acquire pursuant to outstanding options.
(4)Includes 50,000 shares owned by Mr. Morgan's spouse as to which Mr. Morgan
disclaims beneficial ownership. Includes 40,000 shares that Mr. Morgan has
the right to acquire pursuant to outstanding options.
(5)Includes 18,400 shares owned by Mr. MacKenzie's spouse as to which Mr.
MacKenzie disclaims beneficial ownership. Includes 40,000 shares that Mr.
MacKenzie has the right to acquire pursuant to outstanding options.
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<PAGE>
(6)As reported in Schedule 13G dated August 15, 1993 filed with the Securities
and Exchange Commission. C.C. Dunnavan & Co., Inc., located at 4540 Norwest
Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, has sole
voting and investment power with respect to 22,925 shares; shared voting
power with respect to 22,925 shares; and shared investment power with
respect to 383,850 shares.
(7)Includes 6,666 shares that Mr. Reyelts has the right to acquire pursuant to
outstanding options.
(8) Includes 10,000 shares that the individual has the right to acquire
pursuant to outstanding options.
(9) Includes 3,333 shares that Mr. Wilson has the right to acquire pursuant to
outstanding options.
(10) Includes 80,000 shares that Mr. Murphy has the right to acquire pursuant to
outstanding options.
(11) Includes 2,300 shares owned by Mr. Pieper's spouse and 1,550 shares owned
by Mr. Pieper's sons, as to all of which Mr. Pieper disclaims beneficial
ownership. Includes 27,500 shares that Mr. Pieper has the right to acquire
pursuant to outstanding options.
(12) Includes 20,000 shares that Mr. Griffing has the right to acquire pursuant
to outstanding options.
(13) Includes 1,250 shares that Mr. Gendler has the right to acquire pursuant to
outstanding options.
(14) Includes 120,700 shares owned by spouses of executive officers, 30,550
shares owned by sons of executive officers and 3,000 shares owned by a
not-for-profit organization of which an executive officer is a board member,
as to all of which such executive officers disclaim beneficial ownership.
Includes 298,749 shares that executive officers and directors have the right
to acquire pursuant to outstanding options.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred Stock,
par value $.01 per share.
COMMON STOCK
As of May 1, 1996, there were 7,849,800 shares of Common Stock issued and
outstanding. All outstanding shares of Common Stock are, and the shares offered
hereby will be, fully paid and nonassessable. The holders of Common Stock are
entitled to one vote for each share held of record on all matters voted upon by
shareholders and may not use cumulative voting for the election of directors.
Thus, the owners of a majority of the shares of Common Stock outstanding may
elect all of the directors, if they choose to do so, and the owners of the
balance of such shares would not be able to elect any directors. Since the
Selling Shareholders will continue to collectively own more than fifty percent
of the outstanding shares of Common Stock after these offerings, acting together
they effectively have the power to elect all directors of the Company. Subject
to the rights of the holders of any future series of shares of Preferred Stock,
each share of outstanding Common Stock is entitled to participate equally in any
distribution of net assets made to the shareholders in liquidation, dissolution
or winding up of the Company and is entitled to participate equally in dividends
and other distributions if, as and when declared by the Board of Directors.
There are no redemption, sinking fund, conversion or preemptive rights with
respect to the shares of Common Stock. All shares of Common Stock have equal
rights and preferences.
The transfer agent and registrar for the shares of Common Stock is Norwest
Bank Minnesota, National Association.
PREFERRED STOCK
None of the Company's 2,000,000 authorized shares of Preferred Stock has
been issued or authorized by the Board of Directors for issuance. Furthermore,
the Company currently has no plans or arrangements to issue shares of Preferred
Stock. Under the Minnesota Business Corporation Act and the Company's Restated
Articles of Incorporation, no action by the Company's shareholders is necessary,
and only action of the Board of Directors is required, to establish and
designate one or more series of Preferred Stock and to authorize the issuance of
shares of any such series. The Board of Directors is empowered to set the terms
of each such series (including terms with respect to redemption, sinking fund,
dividend, liquidation, preemptive, conversion and voting rights and
preferences). Accordingly, the Board of Directors, without shareholder approval,
may issue shares of Preferred Stock in one or more series with terms that could
adversely effect the voting power and other rights of holders of the Common
Stock.
The authorization or issuance of one or more series of the Company's
Preferred Stock may have the effect of discouraging an attempt, through
acquisition of a substantial number of shares of Common Stock, to acquire
control of the Company with a view to effecting a merger, sale or exchange of
assets or a similar transaction. The anti-takeover effects of any such series of
Preferred Stock may deny shareholders the receipt of a premium on their Common
Stock and may also have a depressive effect on the market price of the Common
Stock.
CERTAIN LIMITED LIABILITY, INDEMNIFICATION AND ANTI-TAKEOVER PROVISIONS
The Company's Restated Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Minnesota Business Corporation
Act. Specifically, directors of the Company will not be personally liable for
monetary damages for a breach of fiduciary duty as directors, except for
liability for: (1) any breach of the duty of loyalty to the Company or its
shareholders, (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (3) dividends or other
distributions of corporate assets that are in contravention of certain statutory
or contractual restrictions, (4) violations of certain Minnesota securities
laws, or (5) any transaction from which the director derives an improper
personal benefit. Liability under federal securities law is not limited by the
Restated Articles.
The Minnesota Business Corporation Act requires the Company to indemnify any
director, officer or employee made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of the person,
against judgments, penalties, fines, settlements and reasonable expenses
incurred by
28
<PAGE>
the person in connection with the proceeding if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including a derivative
action in the name of the Company. Reference is made to the detailed terms of
the Minnesota indemnification statute (Minn. Stat. Section302A.521) for a
complete statement of such indemnification rights. The Company's Restated Bylaws
require the Company to provide indemnification to the fullest extent of the
Minnesota indemnification statute.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company is aware that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
The Company is subject to the provisions of Sections 302A.671, .673 and .675
of the Minnesota Business Corporation Act. These Sections could operate to deny
shareholders the receipt of a premium on their Common Stock and may also have a
depressive effect on the market price of the Company's Common Stock.
Section 302A.671 provides that the shares of a corporation acquired in a
"control share acquisition" have no voting rights unless voting rights are
approved in a prescribed manner. A "control share acquisition" is an acquisition
of beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of stated percentages (20%, 33 1/3% or 50%) or more in the election
of directors.
Section 302A.673 prohibits a public corporation from engaging in a "business
combination" with an "interested shareholder" for a period of four years after
the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions. An
"interested shareholder" is a person who is the beneficial owner of 10% or more
of the corporation's voting stock. This provision would not apply to any
"business combination" with or involving all or any of the founders of the
Company.
In the event of certain tender offers for stock of the Company, Section
302A.675 of the Minnesota Business Corporation Act precludes the tender offeror
from acquiring additional shares of stock (including acquisitions pursuant to
mergers, consolidations or statutory share exchanges) within two years following
the completion of such an offer unless the tendering shareholders are given the
opportunity to sell the shares on terms that are substantially equivalent to
those contained in the earlier tender offer. The Section does not apply if a
committee of the Board consisting of all of its disinterested directors
(excluding present and former officers of the corporation) approves the
subsequent acquisition before shares are acquired pursuant to the earlier tender
offer.
29
<PAGE>
DESCRIPTION OF NOTES
The Notes are to be issued under the Indenture, dated as of ,
1996, between the Company and Norwest Bank Minneapolis, National Association, as
trustee (the "Trustee"). The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Indenture (including the
definition of certain terms in the Indenture), the form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
Wherever particular provisions and definitions of the Indenture are referred to,
such provisions and definitions are incorporated by reference as part of the
statements made, and the statements are qualified in their entirety by such
reference. Article and Section references are to Articles and Sections of the
Indenture.
GENERAL
The Notes offered by this Prospectus will be limited to $25,000,000
aggregate principal amount, plus up to an additional $3,750,000 aggregate
principal amount if the Underwriters' over-allotment option is exercised in
full. The Notes will be issued only in fully registered form and in
denominations of $1,000 and any integral multiple thereof. The Notes will be
issued initially as book-entry notes in the form of one fully registered global
security deposited with or on behalf of The Depository Trust Company or its
nominees ("DTC"). The Notes will not initially be issuable in definitive
certificated form to any person other than DTC. Interest on the Notes will
accrue from the date of original issuance and will be payable on the fifteenth
day of each month, commencing , 1996, at the rate per annum stated on
the cover page of this Prospectus. Interest will be payable to the person in
whose name the Note is registered at the close of business on the tenth day of
the month of such Interest Payment Date. (Sections 201, 202, 301, 307, 308 and
311) The Notes will mature on , 2003, unless redeemed earlier at the
option of the Company or repaid earlier upon the death of a Holder as set forth
below. See "-- Redemption at Option of the Company" and "-- Repayment Option
Upon Death."
Principal and interest will be payable at an office or agency to be
maintained by the Company in Minneapolis, Minnesota, except that, at the option
of the Company, principal and interest may be paid by check mailed to the person
entitled thereto. (Sections 301, 307 and 1002) The Notes may be presented for
registration of transfer or exchange at an office or agency to be maintained by
the Company in Minneapolis, Minnesota. (Section 305) The Notes will be
exchangeable without service charge, but the Company may require payment to
cover taxes or other government charges. (Section 305)
So long as the Company is a reporting company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Company will furnish to
Holders of the Notes such reports of the Company as are furnished to the holders
of Common Stock. If the Company ceases to be a reporting company under the
Exchange Act, the Company will furnish to Holders of the Notes annual audited
consolidated financial statements and quarterly unaudited consolidated summary
financial statements. (Section 704)
UNSECURED OBLIGATIONS; RANKING
The Notes will be senior unsecured obligations of the Company. The Notes
will not be secured by the assets of the Company or any of its Subsidiaries or
Affiliates or otherwise. As such, the Notes will be effectively subordinated to
any secured debt of the Company to the extent of the value of the assets
securing such obligations. The Notes will also be structurally subordinated to
all existing and future liabilities of the Company's Subsidiaries to the extent
of the assets of such Subsidiaries, since the rights of the Company to
participate in any distribution of assets of any Subsidiary, including WINR
Business Credit, upon its liquidation or reorganization or otherwise (and thus
the ability of the Holders of the Notes to benefit indirectly from such
distribution) are subject to the prior claims of creditors of the Subsidiary.
Although historically the Company has not incurred debt at the subsidiary level,
it may do so in the future.
REDEMPTION AT OPTION OF THE COMPANY
The Notes may not be redeemed prior to , 2001. The Notes are
subject to redemption at par plus accrued interest to the dated fixed for
redemption, at the option of the Company in whole at any time or in part from
time to time, commencing on , 2001, upon not less than 30 nor more
than
30
<PAGE>
60 days' notice mailed to the registered Holders thereof. If the Company elects
to redeem less than all of the Notes, the Trustee will select which Notes to
redeem using such method as it shall deem fair and appropriate, including the
selection for redemption of a portion of the principal amount of any Note but
not less than $1,000. On and after the redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption. (Article Eleven)
REPAYMENT OPTION UPON DEATH
Upon the death of any Holder of Notes, the Company will purchase such
Holder's Notes on request, if (a) the Notes have been registered in the Holder's
name since their date of issuance or for a period of six months prior to the
date of such Holder's death, whichever is less, (b) the redemption payments with
respect to such Holder's Notes will not exceed $25,000 in aggregate principal
amount in any calendar year, (c) the Company will not, after giving effect to
such payment, have made redemption payments on Notes of deceased Holders in an
aggregate principal amount exceeding $250,000 in any calendar year (if such
aggregate principal amount exceeds $250,000, the Trustee will repay such Notes
up to $250,000 in aggregate principal amount in the order in which such requests
for repayment were received), (d) either the Company or the Trustee has been
notified in writing of the request for redemption within one year after the
Holder's death, and if less than all of such Holder's Notes are redeemed
pursuant to such initial request, either the Company or the Trustee has been
notified in writing of subsequent requests for redemption of additional Notes of
such Holder within one year after any such preceding notice, (e) the Company is
not, after giving effect to such payment, in default under any Funded Recourse
Debt, and (f) the Company is not subject to any law, regulation, agreement or
administrative directive preventing such repayment. Notes for which such
repayment is requested shall, subject to the limitations described above, be
repaid at 100% of the principal amount thereof, together with interest accrued
to the repayment date, within 30 days following receipt by the Company of the
following: (i) a written request for payment signed by a duly authorized
representative of the deceased Holder, which shall indicate the name of the
deceased Holder, the date of death of the deceased Holder and the principal
amount of Notes to be repaid, (ii) the certificates, if any, representing the
Notes to be repaid and (iii) evidence satisfactory to the Company and the
Trustee of the death of the Holder and evidence of authority of the
representative to the extent required by the Trustee. Authorized representatives
of a deceased Holder shall include executors, administrators or other legal
representatives of an estate, trustees of a trust, joint owners of Notes owned
in joint tenancy or tenancy by the entirety, custodians, conservators,
guardians, attorneys-in-fact and other persons generally recognized as having
legal authority to act on behalf of others. (Section 1201)
The death of a person owning a Note in joint tenancy or tenancy by the
entirety with another or others shall be deemed the death of the Holder of the
Note, and the entire principal amount of the Note so held shall be subject to
repayment, together with interest accrued thereon to the repayment date. The
death of a person owning a Note by tenancy in common shall be deemed the death
of a Holder of a Note only with respect to the deceased Holder's interest in the
Note so held by tenancy in common; except that in the event a Note is held by
husband and wife as tenants in common, the death of either shall be deemed the
death of the Holder of the Note, and the entire principal amount of the Note so
held shall be subject to repayment. The death of a person who, during his or her
lifetime, was entitled to substantially all of the beneficial interests of
ownership of a Note, will be deemed the death of the Holder thereof for purposes
of this provision, regardless of the registered Holder, if such beneficial
interest can be established to the satisfaction of the Trustee. Such beneficial
interest will be deemed to exist in typical cases of nominee ownership,
ownership under the Uniform Transfers (or Gifts) to Minors Act, community
property or other joint ownership arrangements between a husband and wife and
trust arrangements where one person has substantially all of the beneficial
ownership interests in the Note during his or her lifetime. (Section 1201)
COVENANTS
The Indenture will contain a number of covenants relating to the Company and
its operations, including the following:
RESTRICTIONS ON ADDITIONAL INDEBTEDNESS. The Indenture limits the amount of
Funded Recourse Debt of the Company on a consolidated basis. The Company may not
create, incur, assume, guarantee or otherwise
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<PAGE>
be liable for any Funded Recourse Debt if, immediately after giving effect
thereto, the aggregate amount of the Funded Recourse Debt outstanding would
exceed 300% of the Company's Consolidated Net Worth. "Funded Recourse Debt" is
defined in the Indenture as any of the following obligations of the Company or
any Subsidiary which by its terms matures at or is extendable or renewable at
the sole option of the obligor without requiring the consent of the obligee to a
date more than 360 days after the date of the creation or incurrence of such
obligation: (1) any obligations, contingent or otherwise, for borrowed money or
for the deferred purchase price of property or services (including, without
limitation, any interest accruing subsequent to an event of default); (2) all
obligations (including the Notes) evidenced by bonds, notes, debentures or other
similar instruments; (3) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired, except any such obligation that constitutes a trade payable and an
accrued liability arising in the ordinary course of business, if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet prepared in accordance with generally accepted accounting
principles; (4) all Capitalized Lease Obligations; and (5) any guarantee or
endorsement (other than for collection or deposit in the ordinary course of
business) or discount with recourse of, or other agreement, contingent or
otherwise, to purchase, repurchase, or otherwise acquire, to supply or advance
funds or become liable with respect to, any indebtedness or any obligation of
the type referred to in any of the foregoing clauses (1) through (4), regardless
of whether such obligation would appear on a balance sheet; provided, however,
that Funded Recourse Debt shall not include any obligations included in the
foregoing clauses (1) through (5) under which the rights and remedies of the
lender in the event of default are limited to repossession or sale of property
securing such obligation, with no recourse to the Company or any Subsidiary.
"Consolidated Net Worth" is defined as the excess, as determined in accordance
with generally accepted accounting principles, after appropriate deduction for
minority interests in the net worth of Consolidated Subsidiaries, of the
Company's assets over its liabilities. (Sections 101 and 1007) At March 31,
1996, the Company's Consolidated Net Worth was approximately $56,872,000. As of
such date, under the foregoing restriction, and after giving effect to the sale
of $25,000,000 principal amount of the Notes hereby, the Company could incur
approximately $145,000,000 of additional Funded Recourse Debt. (Sections 101 and
1007)
RESTRICTIONS ON DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS. The Indenture
provides that the Company cannot (i) declare or pay any dividend, either in cash
or property, on any shares of its capital stock (except dividends or other
distributions payable solely in shares of capital stock of the Company) or (ii)
purchase, redeem or retire any shares of its capital stock or any warrants,
rights or options to purchase or acquire any shares of its capital stock or
(iii) make any other payment or distribution, either directly or indirectly
through any Subsidiary, in respect of its capital stock (such dividends,
purchases, redemptions, retirements, payments and distributions being herein
collectively called "Restricted Payments") if, after giving effect thereto,
(1) an Event of Default would have occurred; or
(2) the sum of such Restricted Payments plus the aggregate amount of all
Restricted Payments made during the period after December 31, 1995
would exceed the sum of $5,000,000 plus 50% of the Company's
Consolidated Net Income for each fiscal year commencing subsequent to
December 31, 1995 (with 100% reduction for a loss in any fiscal year)
plus the cumulative net proceeds received by the Company from the
issuance or sale after June 30, 1996 of capital stock of the Company
(excluding the proceeds of this offering) or of any warrants, rights
or other options to purchase or acquire its capital stock.
Notwithstanding the foregoing, the Company may make a previously-declared
Restricted Payment if the declaration of such Restricted Payment was permitted
when made. The amount of any Restricted Payment payable in property shall be
deemed to be the fair market value of such property as determined by the Board
of Directors of the Company. (Section 1006)
CONSOLIDATION, MERGER OR TRANSFER. The Company may not consolidate with,
merge with, or transfer all or substantially all of its assets to another entity
where the Company is not the surviving corporation unless (i) such other entity
assumes the Company's obligations under the Indenture, and (ii) after giving
effect thereto, no event shall have occurred and be continuing which, after
notice or lapse of time, or both, would become an Event of Default. (Section
801)
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<PAGE>
LIMITATION ON RANKING OF FUTURE INDEBTEDNESS. The Indenture provides that
the Company will not, directly or indirectly, incur, create, assume or guarantee
any Funded Recourse Debt that is senior in right of payment to the Notes.
(Section 1013)
LIMITATIONS ON RESTRICTING SUBSIDIARY DIVIDENDS. The Indenture provides
that neither the Company nor its Subsidiaries may create or otherwise cause to
become effective any consensual encumbrance or restriction of any kind on the
ability of any Subsidiary to (i) pay dividends or make any other distribution on
its capital stock, (ii) pay any indebtedness owed to the Company or any other
Subsidiary or (iii) make loans, advances or capital contributions to the Company
or any other Subsidiary except in certain specified circumstances. (Section
1014)
LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
Subsidiary may enter into any transactions with any Affiliate on terms and
conditions less favorable to the Company or such Subsidiary, as the case may be,
than would be available at such time in a comparable transaction in arm's length
dealings with an unrelated Person as determined by the Company's Board of
Directors. These provisions do not apply to Restricted Payments otherwise
permitted under the Indenture, fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Subsidiary, as determined by the Company's Board of Directors or
its senior management in the exercise of their reasonable business judgment, or
payments for goods and services purchased in the ordinary course of business on
an arm's length basis. (Section 1015)
EVENTS OF DEFAULT
An Event of Default includes: (a) failure to pay the principal on the Notes
when due at Maturity, upon redemption or upon repayment, as provided in the
Indenture; (b) failure to pay any interest on the Notes for 10 days; (c) failure
to perform any other covenants set forth in the Indenture for 30 days after
receipt of written notice from the Trustee or Holders of at least 25% in
principal amount of the outstanding Notes specifying the default and requiring
the Company to remedy such default; (d) default in the payment at stated
maturity of indebtedness of the Company for money borrowed having an outstanding
principal amount due at stated maturity greater than $1,000,000 and such default
having continued for a period of 30 days beyond any applicable grace period; (e)
an event of default as defined in any mortgage, indenture or instrument of the
Company shall have happened and resulted in acceleration of indebtedness which,
together with the principal amount of any other indebtedness so accelerated,
exceeds $1,000,000 or more at any time, and such default shall not be cured or
waived and such acceleration shall not have been rescinded or annulled; (f)
certain events of insolvency, receivership or reorganization of the Company or
any Subsidiary; and (g) entry of a final judgment, decree or order against the
Company for the payment of money in excess of $5,000,000, which judgment, decree
or order continues unsatisfied for 30 days without a stay of execution. (Section
501)
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a "default" (meaning, for this purpose, the events specified above
without grace periods), give the Holders of the Notes notice of all defaults
known to it which have occurred and remained uncured; provided that, except in
the case of a default in the payment of principal or interest on any of the
Notes, the Trustee shall be protected in withholding such notice if and so long
as it in good faith determines that the withholding of such notice is in the
interest of the Holders. (Section 602)
If an Event of Default shall occur and be continuing, the Trustee, in its
discretion may, and, at the written request of Holders of a majority in
aggregate principal amount of the outstanding Notes shall, proceed to protect
and enforce its rights and the rights of the Holders. If an Event of Default
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of outstanding Notes may accelerate the maturity
of all such outstanding Notes; provided that such acceleration shall occur
automatically and without any action on the part of the Trustee or any Holders
upon (i) the commencement by the Company or any Subsidiary of a voluntary
proceeding under any applicable bankruptcy, insolvency, reorganization or other
similar law or of a voluntary proceeding seeking to be adjudicated insolvent;
(ii) the consent by the Company or any Subsidiary to the entry of a decree or
order for relief in an involuntary proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law or to the
33
<PAGE>
commencement of any insolvency proceeding against it; (iii) the filing by the
Company or any Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable law; (iv) the consent by the
Company or any Subsidiary to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee
or similar official of the Company or any Subsidiary of any substantial part of
the property of the Company or any Subsidiary or the making by the Company or
any Subsidiary of an assignment for the benefit of creditors; or (v) the taking
of corporate action by the Company or any Subsidiary in furtherance of any such
action. The Holders of a majority in aggregate principal amount of outstanding
Notes may waive a default, except a default in the payment of principal of or
interest on any Note. If any Event of Default has occurred and a declaration of
acceleration made before a judgment or decree for payment of money due is
obtained, Holders of a majority of the outstanding Notes may rescind the
acceleration of the Notes if all Events of Default have been remedied and all
payments due, other than those due as a result of acceleration, have been made.
(Sections 502, 503, 512 and 513)
The Company must furnish quarterly to the Trustee an Officers' Certificate
stating whether to the best knowledge of the signers, the Company is in default
under any of the provisions of the Indenture, and specifying all such defaults
and the nature thereof, of which they have knowledge. (Section 1011)
A Holder will not have any right to institute any proceeding with respect to
the Indenture or for any remedy thereunder, unless (a) such Holder shall have
previously given to the Trustee written notice of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the outstanding
Notes shall have made a written request, and offered reasonable indemnity, to
the Trustee to institute such proceeding as Trustee; (c) the Trustee shall have
failed to institute such proceeding within 60 days; and (d) the Trustee shall
not have received from the Holders of a majority in aggregate principal amount
of the outstanding Notes a direction inconsistent with such request. (Section
507) However, the Holder of any Note will have an absolute right to receive
payment of the principal of and interest on such Note on or after the respective
due dates and to institute suit for the enforcement of such right. (Section 508)
MODIFICATION AND WAIVER
With certain limited exceptions which permit modifications of the Indenture
by the Company and the Trustee only, the Indenture may be modified by the
Company with the consent of Holders of not less than a majority in aggregate
principal amount of outstanding Notes; provided, however, that no such changes
shall without the consent of the Holder of each Note affected thereby (a) change
the maturity date of the principal of, or the due date of any installment of
interest on, any Note; (b) reduce the principal of, or the rate of interest on,
any Note; (c) change the currency in which any portion of the principal of, or
interest on, any Note is payable; (d) impair the right to institute suit for the
enforcement of any payment of principal of, or interest on, any Note; (e) reduce
the above-stated percentage of Holders of outstanding Notes necessary to modify
the Indenture; (f) modify the foregoing requirements or reduce the percentage of
outstanding Notes necessary to waive any past default; or (g) impair the
optional right to repayment upon death provided to the Holders. (Sections 513
and 902)
The Holders of a majority in aggregate principal amount of outstanding Notes
may waive compliance by the Company with certain restrictive provisions of the
Indenture. (Section 1012)
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Indenture provides that the Company may terminate its obligations under
the Indenture with respect to all the Notes by delivering to the Trustee, in
trust for such purpose, money, Government Obligations or both, which, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide on the due dates of any payment of principal and
interest, or a combination thereof, money in an amount sufficient to discharge
the entire indebtedness of the Notes. (Sections 401 and 402)
CONCERNING THE TRUSTEE
Norwest Bank Minnesota, National Association is Trustee under the Indenture
and is also the Note Registrar.
34
<PAGE>
UNDERWRITING
SALE OF COMMON STOCK
The Underwriters named below have severally agreed, subject to the terms and
conditions pertaining to the Common Stock set forth in the Purchase Agreement,
to purchase from the Company and the Selling Shareholders the number of shares
of Common Stock indicated below opposite their respective names at the Price to
Public less Underwriting Discount set forth on the cover page of this
Prospectus. The Purchase Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares if they purchase any
shares.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- -------------------------------------------------------------------- ---------
<S> <C>
Piper Jaffray Inc...................................................
Dain Bosworth Incorporated..........................................
---------
Total........................................................... 1,500,000
---------
---------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Common Stock to the public on the terms set forth on the cover page of
this Prospectus. The Underwriters may allow to selected dealers a concession of
not more than $ per share; and the Underwriters may allow, and such dealers
may reallow, a concession of not more than $ per share to certain other
dealers. After the offering, the offering price and other selling terms may be
changed by the Underwriters. The Common Stock is offered subject to receipt and
acceptance by the Underwriters, and to certain other conditions, including the
right to reject orders in whole or in part.
The Selling Shareholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of 225,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial shares to be
purchased by the Underwriters. To the extent that the Underwriters exercise this
option, the Underwriters will purchase such additional shares in approximately
the same proportion as set forth in the above table. The Underwriters may
purchase such shares only to cover over-allotments, if any, made in connection
with this offering.
The Company, its directors and the Selling Shareholders have agreed not to
offer, sell or otherwise dispose of any equity securities of the Company for a
period of 120 days from the date of this Prospectus without the prior written
consent of the Underwriters. Following the expiration of the lock-up period, the
4,312,600 shares held by the directors and Selling Stockholders will be
available for sale, subject to the volume and timing restrictions set forth
under Rule 144.
In connection with this offering, the Underwriters and certain selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market in accordance with Rule 10b-6A under the Exchange Act
during the two-business-day period before commencement of offers or sales of the
Common Stock offered hereby. Any passive market making transactions must comply
with applicable volume and price limits and be identified as such. In general, a
passive market maker may display its bids at a price not in excess of the
highest independent bid for the security; if all independent bids are below the
passive market maker's bid, however, such bid must be lowered when certain
purchase limits are exceeded. Passive market making may stabilize the market
price of the Common Stock at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.
SALE OF NOTES
The Underwriters named below have severally agreed, subject to the terms and
conditions pertaining to the Notes set forth in the Purchase Agreement, to
purchase from the Company the respective principal amount of the Notes indicated
below opposite their names at the Price to Public less Underwriting Discount
35
<PAGE>
set forth on the cover page of this Prospectus. The Purchase Agreement provides
that the obligations of the Underwriters are subject to certain conditions
precedent and that the Underwriters are committed to purchase all of the Notes
if they purchase any Notes.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
- ------------------------------------------------------------ -----------------
<S> <C>
Piper Jaffray Inc........................................... $
Dain Bosworth Incorporated..................................
-----------------
Total................................................... $ 25,000,000
-----------------
-----------------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the Price to Public and to selected dealers at
such price less a concession of not more than % of the principal amount of the
Notes. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of % of the principal amount of Notes to certain other dealers.
After the initial public offering, the offering price and other selling terms
may be changed by the Underwriters.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of $3,750,000 in aggregate principal amount of the Notes, solely to cover
over-allotments, if any, incurred in the sale of the Notes offered hereby. Any
such purchase will occur at the same price as the initial Notes to be purchased
by the Underwriters. To the extent that the Underwriters exercise this option,
the Underwriters will purchase a principal amount of the Notes in approximately
the same proportion as set forth in the above table, and the Company will be
obligated, pursuant to the option, to sell such Notes to the Underwriters.
The Company does not intend to list the Notes on any securities exchange or
have them included for quotation by Nasdaq or any other quotation system, and no
active trading market is expected to develop. Although the Underwriters have
each indicated an intention to make a market in the Notes, no Underwriter is
obligated to make a market in the Notes and any market making may be
discontinued at any time at the sole discretion of such Underwriter. If the
Notes are traded after their original issuance, they may trade at a discount to
their principal amount.
GENERAL
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Act,
or to contribute to payments which the Underwriters may be required to make in
respect thereto.
LEGAL MATTERS
The validity of the shares of Common Stock and the Notes being offered
hereby is being passed upon for the Company by Oppenheimer Wolff & Donnelly,
Minneapolis, Minnesota. Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota, has
acted as counsel for the Underwriters in connection with the offering.
EXPERTS
The Consolidated Financial Statements of Winthrop Resources Corporation as
of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, have been included and incorporated herein and
in the Registration Statement by reference in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, included and
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C.
36
<PAGE>
20549, and at the following Regional Offices of the Commission: New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-2 (the "Registration Statement") of which this
Prospectus is a part, including exhibits relating thereto, which has been filed
with the Commission in Washington, D.C. Copies of the Registration Statement and
exhibits thereto may be obtained, upon payment of the fee prescribed by the
Commission, or may be examined without charge, at the office of the Commission.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, its Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996 and its Proxy Statement dated March 29, 1996 are incorporated herein by
reference. All other reports filed by the Company pursuant to Sections 13 or
15(d) of the Exchange Act since the end of the fiscal year covered by the above
referenced Annual Report and prior to the date of this Prospectus are
incorporated by reference in this Prospectus. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered upon the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference in this Prospectus (except for certain exhibits to such documents).
Written requests for such copies should be directed to Gary W. Anderson, Vice
President and Controller of the Company, 1015 Opus Center, 9900 Bren Road East,
Minnetonka, Minnesota 55343; telephone number (612) 936-0226.
37
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Interim Consolidated Financial Statements and Notes to Interim
Consolidated Financial Statements
Consolidated Balance Sheet as of March 31, 1996 and 1995................ F-2
Consolidated Statements of Earnings for the three-month periods ended
March 31, 1996 and 1995................................................ F-3
Consolidated Statement of Common Shareholders' Equity for the
three-month period ended March 31, 1996................................ F-4
Consolidated Statements of Cash Flows for the three-month periods ended
March 31, 1996 and 1995................................................ F-5
Condensed Notes to Unaudited Interim Consolidated Financial
Statements............................................................. F-6
Audited Consolidated Financial Statements and Notes to Consolidated
Financial Statements
Independent Auditors' Report............................................ F-8
Consolidated Balance Sheets as of December 31, 1996 and 1995............ F-9
Consolidated Statements of Earnings for each of the years in the
three-year period ended December 31, 1995.............................. F-10
Consolidated Statements of Common Shareholders' Equity for each of the
years in the three-year period ended December 31, 1995................. F-11
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1995.............................. F-12
Notes to Consolidated Financial Statements.............................. F-13
</TABLE>
F-1
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash and cash equivalents......................... $ 2,671,587 $ 2,472,352
Receivables:
Trade accounts.................................. 2,729,982 1,537,116
Other receivables............................... 208,707 39,454
------------ ------------
Total receivables............................. 2,938,689 1,576,570
Investment in leasing operations:
Direct financing and sales-type leases.......... 242,946,082 211,166,725
Operating leases, less accumulated
depreciation................................... 4,842,593 7,642,071
Equipment installed on leases not yet
commenced...................................... 15,871,164 14,675,050
------------ ------------
Total investment in leasing operations........ 263,659,839 233,483,846
Furniture and equipment, less accumulated
depreciation and amortization of $582,139 and
$456,025......................................... 702,774 322,831
Goodwill and other intangible assets, less
accumulated amortization of $119,560............. 6,789,137 --
Other assets...................................... 448,868 237,047
------------ ------------
$277,210,894 $238,092,646
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable............................ $ 5,754,109 $ 4,409,318
Accrued liabilities............................... 6,416,237 4,749,985
Income taxes payable.............................. 1,899,553 1,696,195
Customer deposits................................. 2,574,550 1,695,549
Rents received in advance......................... 2,384,453 1,618,985
Deferred income taxes............................. 16,301,734 14,281,456
Discounted lease rentals.......................... 185,007,934 161,793,846
------------ ------------
Total liabilities........................... 220,338,570 190,245,334
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding...................................... -- --
Common shareholders' equity:
Common stock, $.01 par value. Authorized
15,000,000 shares; issued and outstanding
7,849,800 shares and 7,934,400 shares.......... 78,498 79,344
Additional paid-in capital...................... 9,467,104 9,527,043
Retained earnings............................... 47,326,722 38,240,925
------------ ------------
Total common shareholders' equity............. 56,872,324 47,847,312
------------ ------------
$277,210,894 $238,092,646
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-2
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Leasing........................................... $15,499,784 $16,894,607
Sales............................................. 477,525 869,814
Other............................................. 71,937 47,782
----------- -----------
Total revenues.................................. 16,049,246 17,812,203
----------- -----------
Costs and expenses:
Leasing........................................... 4,654,327 6,699,168
Sales............................................. 259,337 790,790
Selling, general and administrative............... 2,126,295 1,525,727
Interest.......................................... 3,577,662 3,364,601
Other............................................. 118,727 --
----------- -----------
Total costs and expenses........................ 10,736,348 12,380,286
----------- -----------
Earnings before income tax expense.................. 5,312,898 5,431,917
Provision for income tax expense.................... 2,178,300 2,172,800
----------- -----------
Net earnings........................................ $ 3,134,598 $ 3,259,117
----------- -----------
----------- -----------
Net earnings per common share....................... $ 0.40 $ 0.41
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-3
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995.......................... 7,882,900 $ 78,829 $9,465,205 $45,179,662 $54,723,696
Repurchase and retirement of common shares.......... (43,100) (431) (51,751) (673,746) (725,928)
Common shares issued upon exercise of stock
options............................................ 10,000 100 53,650 -- 53,750
Dividends declared.................................. -- -- -- (313,792) (313,792)
Net earnings for the period......................... -- -- -- 3,134,598 3,134,598
--------- --------- ---------- ----------- -----------
Balance, March 31, 1996............................. 7,849,800 $ 78,498 $9,467,104 $47,326,722 $56,872,324
--------- --------- ---------- ----------- -----------
--------- --------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-4
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................................................... $ 3,134,598 $ 3,259,117
Adjustments to reconcile net earnings to net cash used in operating activities:
Leasing costs, primarily depreciation and interest expense on discounted lease
rentals........................................................................ 8,294,455 10,746,757
Leasing revenue, primarily amortization of unearned income on sales-type and
direct finance leases.......................................................... (1,723,425) (7,190,918)
Deferred initial direct costs................................................... (10,528) (245,137)
Deferred income taxes........................................................... 871,320 869,120
Amortization of goodwill and other intangible assets............................ 118,727 --
Depreciation and amortization on furniture and equipment........................ 53,154 20,446
Changes in operating assets and liabilities:
Trade accounts and other receivables.......................................... (593,033) 847,480
Other assets.................................................................. (81,792) 140,698
Accounts payable and accrued liabilities...................................... 400,057 (437,748)
Income taxes payable.......................................................... 254,671 1,258,349
Customer deposits and rents received in advance............................... (992,825) (916,366)
-------------- --------------
Net cash provided by operating activities................................... 9,725,379 8,351,798
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment for leasing............................................... (33,960,483) (35,304,921)
Purchase of furniture and equipment............................................. (148,850) (32,114)
Acquisition, net of cash and equipment acquired................................. (6,842,031) --
-------------- --------------
Net cash used in investing activities....................................... (40,951,364) (35,337,035)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from discounted lease rentals.......................................... 25,064,660 24,089,096
Early retirement of discounted lease rentals.................................... (492,582) (840,895)
Borrowings under lines of credit................................................ 800,000 9,300,000
Repayment of borrowings under lines of credit................................... (800,000) (9,300,000)
Proceeds from exercise of stock options......................................... 53,750 --
Repurchase of common stock...................................................... (725,928) (490,309)
Dividends paid.................................................................. (236,487) (161,050)
-------------- --------------
Net cash provided by financing activities................................... 23,663,413 22,596,842
-------------- --------------
Net decrease in cash and cash equivalents......................................... (7,562,572) (4,388,395)
Cash and cash equivalents, beginning of period.................................... 10,234,159 6,860,747
-------------- --------------
Cash and cash equivalents, end of period.......................................... $ 2,671,587 $ 2,472,352
-------------- --------------
-------------- --------------
Cash paid during the period for:
Interest........................................................................ $ 22,819 $ 41,246
-------------- --------------
-------------- --------------
Income taxes.................................................................... $ 1,052,308 $ 45,331
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
F-5
<PAGE>
WINTHROP RESOURCES CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements included in this Prospectus have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed, or omitted,
pursuant to such rules and regulations, although management believes the
disclosures are adequate to make the information presented not misleading. These
statements should be read in conjunction with the Consolidated Financial
Statements and related notes included elsewhere in this Prospectus.
The financial statements presented herein as of March 31, 1996 and 1995 and
for the three months then ended reflect, in the opinion of management, all
material adjustments consisting only of normal recurring adjustments necessary
for a fair presentation of the financial position, results of operations and
cash flows for the interim periods. Certain 1995 balances have been reclassified
to conform to the 1996 method of presentation.
(2) ACQUISITION
On January 19, 1996, the Company acquired substantially all of the assets of
Capital Business Leasing, Inc. ("Capital"), a Nevada corporation with its
headquarters in Henderson, Nevada and a sales office in Knoxville, Tennessee.
Capital was a small-ticket lease broker that served as a focal point or
consolidator for a variety of unrelated brokers and vendors, and arranged for
the financing of these lease transactions with other leasing companies. The
Company plans to operate this wholesale lease broker business as it was
previously conducted. Capital's assets, which included cash, furniture and
equipment and other intangibles including goodwill, were acquired pursuant to an
asset purchase agreement for $7,100,000. The Company paid $5,100,000 on January
19, 1996 from existing cash reserves, and will pay up to $2,000,000 on December
31, 1996, plus accrued interest thereon at a rate of six percent (6%) per annum.
The acquisition has been accounted for as a purchase and the results of
operations of Capital since the date of acquisition have been included in the
Company's consolidated financial statements. The Company allocated $1,000,000 of
the purchase price to other intangible assets and is amortizing such amount on a
straight-line basis over five years. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $5,842,000
was recognized as goodwill and is being amortized on a straight-line basis over
15 years.
(3) INVESTMENT IN LEASING OPERATIONS
The components of the net investment in direct financing and sales-type
leases as of March 31, 1996 were as follows:
<TABLE>
<S> <C>
Minimum lease payments receivable........................... $260,568,947
Estimated residual values................................... 23,135,261
Initial direct costs........................................ 4,138,711
Less unearned revenue on lease payments receivable.......... (40,986,792)
Less unearned revenue on residuals.......................... (3,910,045)
------------
Net investment in direct financing and sales-type leases.... $242,946,082
------------
------------
</TABLE>
Unearned revenue is recorded as leasing revenue over the lease terms.
F-6
<PAGE>
WINTHROP RESOURCES CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) INVESTMENT IN LEASING OPERATIONS (CONTINUED)
Investment in operating lease assets included the following as of March 31,
1996:
<TABLE>
<S> <C>
Operating lease assets...................................... $ 9,915,680
Less accumulated depreciation and amortization.............. (5,073,087)
------------
Net operating lease assets.................................. $ 4,842,593
------------
------------
</TABLE>
(4) DISCOUNTED LEASE RENTALS
Discounted lease rentals as of March 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Non-recourse borrowings..................................... $184,220,729
Recourse borrowings......................................... 787,205
------------
Total discounted lease rentals.............................. $185,007,934
------------
------------
</TABLE>
(5) NOTES PAYABLE TO BANKS
At March 31, 1996, the Company had lines of credit totaling $23,000,000
available from two banks. The interest rates are charged at one bank's prime
rate, or, at the Company's option, at a rate determined by a specified
alternative-rate calculation, and at 25 basis points over the other bank's prime
rate. These agreements expire in July 1996 and June 1996, respectively. All
borrowings under these agreements are secured by specific leases and the
underlying equipment and, in the case of one credit line, all other personal
property and fixtures of the Company. At March 31, 1996, no amounts were
outstanding under these lines of credit.
(6) INCOME TAXES
The Company accounts for income taxes under FASB No. 109. Income tax expense
for the three months ended March 31, 1996 consisted of current and deferred tax
expense of $1,306,980 and $871,320, respectively.
(7) EARNINGS PER SHARE
Earnings per share are computed on the weighted average number of common
shares outstanding of 7,871,525 and 7,953,181 for the three months ended March
31, 1996 and 1995, respectively. Common equivalent shares are excluded from the
weighted average number of common shares as the dilutive effect is less than 3%.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Winthrop Resources Corporation:
We have audited the consolidated balance sheets of Winthrop Resources
Corporation and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of earnings, common shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Winthrop
Resources Corporation and Subsidiary as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1996
F-8
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Cash and cash equivalents........................................................ $ 10,234,159 $ 6,860,747
Receivables:
Trade accounts................................................................. 2,215,747 2,372,863
Other receivables.............................................................. 129,909 51,187
-------------- --------------
Total receivables............................................................ 2,345,656 2,424,050
Investment in leasing operations:
Direct financing and sales-type leases......................................... 238,651,547 194,379,184
Operating leases, less accumulated depreciation................................ 5,542,906 8,527,321
Equipment installed on leases not yet commenced................................ 10,086,568 13,830,784
-------------- --------------
Total investment in leasing operations....................................... 254,281,021 216,737,289
Furniture and equipment, less accumulated depreciation and amortization of
$528,985 and $435,579........................................................... 607,078 311,163
Other assets..................................................................... 432,909 377,745
-------------- --------------
$ 267,900,823 $ 226,710,994
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable........................................................... $ 8,001,592 $ 5,453,696
Accrued liabilities.............................................................. 3,691,392 4,066,373
Income taxes payable............................................................. 1,644,882 437,846
Customer deposits................................................................ 2,017,070 1,595,957
Rents received in advance........................................................ 3,934,758 2,634,943
Deferred income taxes............................................................ 15,430,414 13,412,336
Discounted lease rentals......................................................... 178,457,019 153,793,307
-------------- --------------
Total liabilities............................................................ 213,177,127 181,394,458
Preferred stock, $.01 par value. Authorized 2,000,000 shares; no shares issued
and outstanding................................................................. -- --
Common shareholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares; issued and
outstanding 7,882,900 and 7,978,500 shares.................................... 78,829 79,785
Additional paid-in capital..................................................... 9,465,205 9,579,995
Retained earnings.............................................................. 45,179,662 35,656,756
-------------- --------------
Total common shareholders' equity............................................ 54,723,696 45,316,536
-------------- --------------
$ 267,900,823 $ 226,710,994
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Leasing........................................................... $ 66,705,791 $ 68,007,754 $ 65,206,846
Sales............................................................. 2,003,054 1,870,024 2,194,413
------------- ------------- -------------
Total revenues.................................................. 68,708,845 69,877,778 67,401,259
------------- ------------- -------------
Costs and expenses:
Leasing........................................................... 28,840,374 37,269,426 39,775,398
Sales............................................................. 1,555,212 1,233,988 1,993,963
Selling, general and administrative............................... 5,655,555 5,862,466 4,763,810
Interest expense.................................................. 13,469,746 9,928,313 8,600,891
------------- ------------- -------------
Total costs and expenses........................................ 49,520,887 54,294,193 55,134,062
------------- ------------- -------------
Investment income................................................... 72,019 17,913 498,866
------------- ------------- -------------
Earnings before income tax expense.................................. 19,259,977 15,601,498 12,766,063
Provision for income tax expense.................................... 7,704,000 6,240,600 5,106,500
------------- ------------- -------------
Net earnings........................................................ $ 11,555,977 $ 9,360,898 $ 7,659,563
------------- ------------- -------------
------------- ------------- -------------
Net earnings per common share....................................... $ 1.46 $ 1.16 $ 0.98
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding................ 7,911,854 8,047,326 7,807,534
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------ --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992.................. $ 7,300,000 $ 73,000 $ 4,684,735 $ 20,544,898 $ 25,302,633
Issuance of common shares in connection
with public stock offering net of
$508,750 issuance cost................... 750,000 7,500 4,921,250 -- 4,928,750
Dividends declared........................ -- -- -- (468,000) (468,000)
Net earnings for year..................... -- -- -- 7,659,563 7,659,563
------------ --------- ------------ ------------- -------------
Balance, December 31, 1993.................. 8,050,000 80,500 9,605,985 27,736,461 37,422,946
Repurchase and retirement of common
shares................................... (85,666) (857) (102,824) (796,553) (900,234)
Common shares issued upon exercise of
stock options............................ 14,166 142 76,834 -- 76,976
Dividends declared........................ -- -- -- (644,050) (644,050)
Net earnings for year..................... -- -- -- 9,360,898 9,360,898
------------ --------- ------------ ------------- -------------
Balance, December 31, 1994.................. 7,978,500 79,785 9,579,995 35,656,756 45,316,536
Repurchase and retirement of common
shares................................... (95,600) (956) (114,790) (1,084,498) (1,200,244)
Dividends declared........................ -- -- -- (948,573) (948,573)
Net earnings for year..................... -- -- -- 11,555,977 11,555,977
------------ --------- ------------ ------------- -------------
Balance, December 31, 1995.................. $ 7,882,900 $ 78,829 $ 9,465,205 $ 45,179,662 $ 54,723,696
------------ --------- ------------ ------------- -------------
------------ --------- ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-11
<PAGE>
WINTHROP RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993
--------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings................................................... $ 11,555,977 $ 9,360,898 $ 7,659,563
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Leasing costs, primarily depreciation and interest expense on
discounted lease rentals.................................... 41,945,076 46,789,031 48,375,551
Leasing revenues, primarily amortization of unearned income
on sales-type and direct finance leases..................... (16,407,715) (36,279,512) (40,962,075)
Deferred initial direct costs................................ (1,317,625) (360,496) (446,410)
Deferred income taxes........................................ 2,018,078 3,398,444 3,080,163
Net (gain) loss on sales of investments...................... 2,846 -- (498,866)
Depreciation and amortization on furniture and equipment..... 93,406 76,408 67,039
Changes in operating assets and liabilities:
Trade accounts and other receivables......................... 78,394 (1,256,374) 133,215
Other assets................................................. (331,829) 49,048 (55,210)
Accounts payable and accrued liabilities..................... 2,097,478 1,211,301 (5,046,710)
Income taxes payable......................................... 1,207,036 (191,015) (146,088)
Customer deposits and rents received in advance.............. 1,720,928 1,450,619 371,006
--------------- --------------- --------------
Net cash provided by operating activities.................. 42,662,050 24,248,352 12,531,178
--------------- --------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment for leasing............................ (130,359,631) (108,767,816) (94,046,260)
Purchase of furniture and equipment.......................... (389,321) (140,741) (122,461)
Purchase of investments...................................... (40,300) (241,393) (61,028)
Proceeds from sales of investments........................... 314,119 -- 1,222,132
--------------- --------------- --------------
Net cash used in investing activities...................... (130,475,133) (109,149,950) (93,007,617)
--------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from discounted lease rentals....................... 105,065,806 95,686,303 82,140,671
Early retirement of discounted lease rentals................. (11,805,932) (7,873,312) (4,338,932)
Borrowings under lines of credit............................. 17,900,000 1,900,000 45,889,000
Repayment of borrowings under lines of credit................ (17,900,000) (1,900,000) (45,889,000)
Proceeds from issuance of common stock....................... -- -- 4,928,750
Proceeds from exercise of stock options...................... -- 76,976 --
Repurchase of common stock................................... (1,200,243) (900,234) --
Dividends paid............................................... (873,136) (644,000) (307,000)
--------------- --------------- --------------
Net cash provided by financing activities................ 91,186,495 86,345,733 82,423,489
--------------- --------------- --------------
Net increase in cash and cash equivalents...................... 3,373,412 1,444,135 1,947,050
Cash and cash equivalents, beginning of year................... 6,860,747 5,416,612 3,469,562
--------------- --------------- --------------
Cash and cash equivalents, end of year......................... $ 10,234,159 $ 6,860,747 $ 5,416,612
--------------- --------------- --------------
--------------- --------------- --------------
Cash paid during the year for:
Interest..................................................... $ 144,140 $ 91,750 $ 343,042
--------------- --------------- --------------
--------------- --------------- --------------
Income taxes................................................. $ 4,478,886 $ 3,033,071 $ 2,158,874
--------------- --------------- --------------
--------------- --------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-12
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Winthrop Resources Corporation (the "Company") is engaged in the business of
leasing computer systems and other equipment throughout the United States. The
Company extends credit to its customers, substantially all of whom are end users
of the leased equipment, in a wide variety of industries. During 1995, a single
customer accounted for approximately 14% of total revenues. A different customer
during 1994 and 1993 accounted for approximately 20% and 18% of total revenues,
respectively.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, WINR Business Credit Corporation ("WINR
Business Credit"). Intercompany accounts have been eliminated. There were no
intercompany transactions. WINR Business Credit was organized in July 1995 to
provide lease financing to small and emerging-growth companies.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
LEASE ACCOUNTING
LEASE ACCOUNTING POLICIES -- Statement of Financial Accounting Standards No.
13, ACCOUNTING FOR LEASES ("FASB No. 13"), requires that a lessor account for
each lease by either the direct financing, sales-type or operating method
(hereinafter referred to as "accounting methods"). Lease classification is not
affected by the discounting of lease rentals that occurs after lease inception.
ACCOUNTING METHODS AND PROFIT RECOGNITION -- Revenue, cost and resulting
profit are recognized during each of the accounting periods within the lease
term. For all types of leases, the determination of profit recognizes as an
asset the estimated fair market value of the equipment at lease termination,
commonly referred to as "residual" value.
The allocation of profit among the accounting periods within a lease term
will vary depending upon the accounting method applied. The accounting methods
are described below.
DIRECT FINANCING AND SALES-TYPE LEASES -- These leases transfer
substantially all the benefits and risks of equipment ownership to the lessee as
defined in FASB No. 13. Profit recognition under these two accounting methods is
similar, except that the sales-type classification gives rise to dealer profit.
This generally results when the Company provides used equipment to its customer.
This equipment may be obtained in the secondary marketplace, but most frequently
is the result of re-leasing the Company's own portfolio. Under the sales-type
method, dealer profit is recognized at lease inception by recording lease
revenue and lease cost. Revenue consists of the present value of the future
minimum lease payments discounted at the rate implicit in the lease. Cost
consists of the equipment's book value, less the present value of its residual.
For direct financing and sales-type leases, the present value of both the future
minimum lease payments and the residual are recorded as assets. In each period,
interest income, which is included in leasing revenue, is recognized as a
constant percentage return on asset carrying values.
OPERATING LEASES -- Operating lease revenue consists of monthly rentals. The
cost of equipment is recorded as "Investment in leasing operations -- Operating
leases" on the balance sheet and is depreciated
F-13
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
on a straight-line basis over the lease term to the Company's estimate of
residual value. Revenue, depreciation expense and the resultant gross profit
margin are recorded evenly over the life of the lease. Should the lease be
financed, the interest expense declines over the term of the financing as the
principal is reduced, with the resultant net margin being lower in the early
periods of the financing and higher in the later periods.
INITIAL DIRECT COSTS -- Initial direct costs, including sales commissions,
related to direct financing and operating leases are capitalized and recorded as
part of the net investment in leases and are amortized over the lease terms.
RESIDUALS -- Residual values, representing the estimated value of the
equipment at the termination of the lease, are recorded in the financial
statements at the inception of each sales-type or direct financing lease as
amounts estimated by management based upon its experience and judgment. The
residual values for operating leases are included in the leased equipment's net
book value.
The Company evaluates residual values on an ongoing basis and records any
required changes. In accordance with generally accepted accounting principles,
no upward revision of residual values is made subsequent to the period of the
inception of the lease. Residual values for sales-type and direct financing
leases are recorded at their net present value and the unearned interest is
amortized over the lease term so as to produce a constant percentage return on
the net present value.
SALES
Sales revenue includes only proceeds from outright equipment sales and
excludes sales-type lease revenue, which is included in leasing revenue.
EQUIPMENT INSTALLED ON LEASES NOT YET COMMENCED
Equipment installed on leases not yet commenced consists primarily of
equipment installed on lease contracts that are yet to commence and as such is
valued at cost.
DEPRECIATION
The cost of equipment under operating leases and furniture and equipment is
depreciated using an accelerated method for income tax purposes and
straight-line method for financial reporting purposes. The estimated useful
lives of these assets range from three to seven years.
INCOME TAXES
Deferred income taxes are determined on the asset and liability method in
accordance with Statement of Financial Accounting Standards No. 109.
CASH EQUIVALENTS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
EARNINGS PER SHARE
The net earnings per common share is computed by dividing net earnings by
the weighted average number of common shares outstanding. In 1995, 1994 and
1993, common stock equivalents are excluded from the weighted average number of
outstanding common shares as the dilutive effect is less than 3%.
F-14
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(2) INVESTMENT IN LEASING OPERATIONS
The components of the net investment in direct financing and sales-type
leases as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Minimum lease payments receivable:
To be received by the Company........................................ $ 61,018,757 $ 39,715,117
To be received by financial institutions............................. 197,251,654 170,577,470
Estimated residual values.............................................. 22,255,982 17,285,979
Initial direct costs................................................... 4,119,388 2,869,912
Less unearned revenue on lease payments receivable..................... (42,106,109) (32,875,403)
Less unearned revenue on residuals..................................... (3,888,125) (3,193,891)
-------------- --------------
Net investment in direct financing and sales-type leases............... $ 238,651,547 $ 194,379,184
-------------- --------------
-------------- --------------
</TABLE>
Unearned revenue is recognized as leasing revenue over the lease term.
Investment in operating lease assets includes the following as of December
31:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operating lease assets................................................... $ 10,152,159 $ 11,935,424
Less accumulated depreciation and amortization........................... (4,609,253) (3,408,103)
------------- -------------
Net...................................................................... $ 5,542,906 $ 8,527,321
------------- -------------
------------- -------------
</TABLE>
(3) FUTURE MINIMUM LEASE PAYMENTS RECEIVABLE ON NONDISCOUNTED LEASES
Future minimum lease payments to be received by the Company on nondiscounted
leases, as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
DIRECT FINANCING AND OPERATING
YEARS ENDING DECEMBER 31 SALES-TYPE LEASES LEASES TOTAL
- ---------------------------------------- -------------------- --------- -----------
<S> <C> <C> <C>
1996.................................... $23,200,074 $300 $23,200,374
1997.................................... 17,600,398 -- 17,600,398
1998.................................... 11,929,115 -- 11,929,115
1999.................................... 6,467,289 -- 6,467,289
2000.................................... 1,821,881 -- 1,821,881
-------------------- --------- -----------
$61,018,757 $300 $61,019,057
-------------------- --------- -----------
-------------------- --------- -----------
</TABLE>
(4) DISCOUNTED LEASE RENTALS
The Company utilizes its lease rentals and underlying equipment as
collateral to borrow from financial institutions at fixed rates on a
non-recourse or recourse basis. In the event of a default by a customer in non-
recourse financing, the financial institution has a first lien on the underlying
leased equipment, with no further recourse against the Company. For recourse
financing, besides having a first lien on the equipment, the financial
institution can seek recourse from the Company. Proceeds from discounting are
recorded on the balance sheet as "Discounted lease rentals." As customers make
payments to financial institutions, lease revenue (i.e., interest income on
direct financing and sales-type leases and rental revenue on operating leases)
and interest expense are recorded. Discounted lease rentals are amortized using
the interest method.
F-15
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(4) DISCOUNTED LEASE RENTALS (CONTINUED)
Discounted lease rentals as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Non-recourse borrowings................................................ $ 177,158,813 $ 145,779,462
Recourse borrowings.................................................... 1,298,206 8,013,845
-------------- --------------
Total.............................................................. $ 178,457,019 $ 153,793,307
-------------- --------------
-------------- --------------
</TABLE>
Future minimum lease rentals and interest expense on leases that have been
discounted as of December 31, 1995 are as follows:
RENTALS TO BE RECEIVED BY
FINANCIAL INSTITUTIONS
<TABLE>
<CAPTION>
DIRECT FINANCING
AND OPERATING DISCOUNTED INTEREST
YEARS ENDING DECEMBER 31 SALES-TYPE LEASES LEASES LEASE RENTALS EXPENSE
- ------------------------------------ ------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
1996................................ $ 80,777,323 $ 2,797,668 $ 71,536,313 $ 12,038,678
1997................................ 62,058,466 1,468,892 56,602,021 6,925,337
1998................................ 33,300,608 36,336 30,352,454 2,984,490
1999................................ 16,859,955 33,308 15,830,940 1,062,323
2000................................ 4,255,302 -- 4,135,291 120,011
------------------- ------------ -------------- -------------
$ 197,251,654 $ 4,336,204 $ 178,457,019 $ 23,130,839
------------------- ------------ -------------- -------------
------------------- ------------ -------------- -------------
</TABLE>
Interest expense was $13,469,746, $9,928,313 and $8,600,891 in 1995, 1994
and 1993, respectively.
(5) NOTES PAYABLE TO BANKS
At December 31, 1995, the Company had lines of credit totaling $23,000,000
available from two banks. The interest rates are charged at one bank's prime
rate, or, at the Company's option, at a rate determined by a specified
alternative-rate calculation, and at 25 basis points over the other bank's prime
rate. These agreements expire in July 1996 and June 1996, respectively. All
borrowings under these agreements are secured by specific leases and the
underlying equipment. At December 31, 1995 and 1994, no amounts were outstanding
under these lines of credit.
(6) INCOME TAXES
Provisions for income taxes for the years ended December 31, 1995, 1994 and
1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal....................................................... $ 4,549,100 $ 2,459,200 $ 1,717,000
State......................................................... 1,136,800 383,000 309,300
------------ ------------ ------------
5,685,900 2,842,200 2,026,300
------------ ------------ ------------
Deferred:
Federal....................................................... 1,763,400 2,649,400 2,424,700
State......................................................... 254,700 749,000 655,500
------------ ------------ ------------
2,018,100 3,398,400 3,080,200
------------ ------------ ------------
$ 7,704,000 $ 6,240,600 $ 5,106,500
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-16
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(6) INCOME TAXES (CONTINUED)
Reconciliation of the statutory federal income tax rate to the Company's
effective rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Statutory rate............................................................. 34.0% 34.0% 34.0%
State taxes, net of federal tax benefit.................................... 5.0% 5.0% 5.0%
Other, net................................................................. 1.0% 1.0% 1.0%
Effective rate............................................................. 40.0% 40.0% 40.0%
</TABLE>
The components of deferred income tax expense for the years ended December
31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------- -------------
<S> <C> <C> <C>
Deferred tax expense (exclusive of the effects of other
components listed below)................................... $ 553,100 $ 4,637,800 $ 4,420,500
Deferred tax credits reinstated for utilization of tax net
operating loss carryforwards............................... -- -- 5,200
Alternative minimum tax credit carryforwards used/
(generated)................................................ 1,465,000 (1,239,400) (1,345,500)
------------ ------------- -------------
$ 2,018,100 $ 3,398,400 $ 3,080,200
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities (assets) at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Investment in leasing operations, principally due to differences in tax
and book accounting methods............................................. $ 20,393,200 $ 19,976,600
Other.................................................................... 53,014 31,636
------------- -------------
Gross deferred tax liability........................................... 20,446,214 20,008,236
------------- -------------
Alternative minimum tax credit carryforwards............................. (4,946,000) (6,411,000)
Other.................................................................... (69,800) (184,900)
------------- -------------
Gross deferred tax asset............................................... (5,015,800) (6,595,900)
------------- -------------
Net deferred tax liability............................................... $ 15,430,414 $ 13,412,336
------------- -------------
------------- -------------
</TABLE>
No valuation allowance for deferred tax assets was considered necessary as
of December 31, 1995 or 1994. The character of the deferred tax assets is such
that they cannot be realized through carryback to prior tax periods, but rather,
by offsetting the tax effects of the reversal of existing taxable temporary
differences.
The Company had federal and state alternative minimum tax credit
carryforwards, for tax purposes, of $4,946,000 at December 31, 1995. These
credits may be used to offset future tax liability if the regular tax exceeds
alternative minimum tax and may be carried forward for an indefinite period.
(7) SHAREHOLDERS' EQUITY
COMMON STOCK
STOCK INCENTIVE PLAN -- On April 21, 1992, the Board of Directors and
shareholders of the Company adopted the Company's Stock Incentive Plan (the
"Plan"). The Plan, effective May 1, 1992, provides for the granting of options
to purchase up to an aggregate of 500,000 shares of Common Stock to certain key
employees, officers, directors and consultants of the Company.
F-17
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(7) SHAREHOLDERS' EQUITY (CONTINUED)
Stock options and common shares reserved for grant under the Plan are as
follows:
<TABLE>
<CAPTION>
OPTION
RESERVED SHARES
FOR GRANT OUTSTANDING PRICE PER SHARE
----------- ----------- --------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992.................................. 230,000 270,000 $ 5 3/8 $ 5 1/2
Granted................................................... (50,000) 50,000 8 1/8 9 3/4
----------- -----------
Balance, December 31, 1993.................................. 180,000 320,000 5 3/8 9 3/4
Granted................................................... (37,500) 37,500 10 11/16 12 5/8
Exercised................................................. -- (14,166) 5 3/8 5 1/2
Forfeited................................................. 13,334 (13,334) 5 3/8 5 1/2
----------- -----------
Balance, December 31, 1994.................................. 155,834 330,000 5 3/8 12 5/8
Granted................................................... (50,000) 50,000 12 17 3/4
----------- -----------
Balance, December 31, 1995.................................. 105,834 380,000 5 3/8 17 3/4
----------- -----------
----------- -----------
</TABLE>
Options granted have ten year terms and vest in equal installments over
periods of three or four years beginning one year after date of grant. At
December 31, 1995, options for 252,708 shares were exercisable.
PUBLIC STOCK OFFERING -- On April 29, 1993, the Company completed a
secondary public stock offering of 1,725,000 shares of Common Stock at $7 1/4
per share, with 750,000 shares being sold by the Company and 975,000 shares by
certain selling shareholders. The net proceeds to the Company of that offering
were $4,928,750.
REPURCHASE OF COMMON STOCK -- On October 26, 1994, the Company's Board of
Directors authorized and the Company implemented a Common Stock repurchase
program in which it would purchase, from time to time in the market and/or in
private transactions, up to an aggregate 250,000 shares of its own Common Stock.
The program is intended to enable the Company to purchase shares in advance of
possible option exercises by persons who have received options pursuant to the
Company's 1992 Stock Incentive Plan. During the years ended December 31, 1995
and 1994, the Company has purchased and retired 95,600 and 85,666 shares of its
Common Stock, respectively, at prices ranging from $10 3/8 to $17 1/8 per share.
RETAINED EARNINGS
Common Stock cash dividends declared were $0.12 per share in 1995 and $0.08
per share in 1994. On October 25, 1995, upon declaration by the Board of
Directors, the Company accrued a quarterly cash dividend of $0.03 per share
payable January 2, 1996, to shareholders of record on December 15, 1995.
(8) PROFIT SHARING 401(K) PLAN
The Company has a 401(k) profit sharing plan (the "Plan"). The Plan is a
salary reduction cash or deferred profit sharing plan intended to meet the
requirements of Section 401(k) and 401(a) of the Internal Revenue Code. All
employees who have completed at least one year of service and have attained the
age of 21 are eligible to participate in the Plan. The Plan allows eligible
employees to contribute a certain percentage of their base compensation into the
Plan each year. The Company may make discretionary contributions to the Plan on
behalf of eligible participants in an amount determined by the Board of
Directors.
The Company's contributions to the Plan were $119,961, $88,766 and $73,779
for 1995, 1994 and 1993, respectively.
F-18
<PAGE>
WINTHROP RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995, 1994 AND 1993
(9) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1995
and 1994, is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995:
Revenues.......................................... $ 17,768.5 $ 22,981.0 $ 12,170.4 $ 15,788.9
Net earnings...................................... 3,259.1 2,766.6 2,688.6 2,841.7
Per common share................................ $ 0.41 $ 0.35 $ 0.34 $ 0.36
1994:
Revenues.......................................... $ 14,443.1 $ 13,424.2 $ 10,633.4 $ 31,377.1
Net earnings...................................... 2,214.7 2,025.3 1,523.1 3,597.8
Per common share................................ $ 0.28 $ 0.25 $ 0.19 $ 0.45
</TABLE>
(10) SUBSEQUENT EVENT
On January 19, 1996, the Company acquired substantially all the assets of
Capital Business Leasing, Inc., a Nevada corporation ("Capital"), headquartered
in Henderson, Nevada with a sales office in Knoxville, Tennessee. Capital was a
small ticket lease re-broker company that served as a focal point or
consolidator of a variety of unrelated brokers. Capital's assets, which included
cash, furniture and equipment and other intangibles including goodwill, were
acquired pursuant to an asset purchase agreement for $7,100,000, of which the
Company paid $5,100,000 on January 19, 1996, and $2,000,000 which will be paid
on December 31, 1996 plus accrued interest thereon at a rate of six percent (6%)
per annum. The Company plans to have its wholly-owned subsidiary, WINR Business
Credit Corporation, operate the business as it was previously conducted. In
1995, over $50 million in equipment was placed in service through transactions
processed by Capital.
F-19
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company, any Selling Shareholder
or the Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person or in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information herein is correct as of any time subsequent to the date of this
Prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 7
USE OF PROCEEDS............................................. 10
PRICE RANGE OF COMMON STOCK................................. 10
DIVIDEND POLICY............................................. 10
CAPITALIZATION.............................................. 11
SELECTED FINANCIAL AND OTHER DATA........................... 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION......................... 14
BUSINESS.................................................... 19
MANAGEMENT.................................................. 24
PRINCIPAL AND SELLING SHAREHOLDERS.......................... 26
DESCRIPTION OF CAPITAL STOCK................................ 28
DESCRIPTION OF NOTES........................................ 30
UNDERWRITING................................................ 35
LEGAL MATTERS............................................... 36
EXPERTS..................................................... 36
AVAILABLE INFORMATION....................................... 36
DOCUMENTS INCORPORATED BY REFERENCE......................... 37
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
</TABLE>
WINTHROP
RESOURCES CORPORATION
[Logo]
1,500,000 Shares
of Common Stock
and
$25,000,000 of
% Senior Notes
due 2003
--------------------
P R O S P E C T U S
--------------------
PIPER JAFFRAY INC.
DAIN BOSWORTH
INCORPORATED
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the Common Stock and the Notes being registered, other
than the underwriting discounts and commissions. All amounts shown are estimates
except the Securities and Exchange Commission registration fee, the NASD filing
fee, the Nasdaq fee and the accountable expense allowance.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 23,159
NASD filing fee................................................... 7,213
Nasdaq fees....................................................... 15,000
Printing expenses................................................. 50,000
Fees and expenses of Company counsel.............................. 75,000
Fees and expenses of Company accountants.......................... 35,000
Rating Agency Fee................................................. 53,750
Transfer Agent and Registrar fees................................. 3,000
Trustee and Note Registrar........................................ 6,500
Blue Sky fees and expenses........................................ 3,500
Miscellaneous..................................................... 12,878
---------
Total......................................................... $ 285,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Minnesota Business Corporation
Act. Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for liability
for (i) any breach of the duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) dividends or other distributions of
corporate assets that are in contravention of certain statutory or contractual
restrictions, (iv) violations of certain Minnesota securities laws, or (v) any
transaction from which the director derives an improper personal benefit.
Liability under federal securities law is not limited by the Restated Articles.
The Minnesota Business Corporation Act requires that the Company shall
indemnify any director, officer or employee made or threatened to be made a
party to a proceeding, by reason of the former or present official capacity of
the person, against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceeding if certain
statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including a derivative action in the name of the Company. Reference
is made to the detailed terms of the Minnesota indemnification statute (Minn.
Stat. Section 302A.521) for a complete statement of such indemnification rights.
The Company's Restated Bylaws require the Company to provide indemnification to
the fullest extent of the Minnesota indemnification statute.
The Company maintains a directors and officers insurance policy with a
$3,000,000 coverage limit per occurrence and in the aggregate per year.
Pursuant to Section 6 of the Purchase Agreement as set forth in Exhibit 1.1,
the directors and officers of the Company are indemnified against certain civil
liabilities that they may incur under the Securities Act of 1933 in connection
with this Registration Statement and the related Prospectus.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1 Form of Purchase Agreement (filed herewith electronically).
4.1 Specimen Form of the Company's Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-1 filed April 24, 1992,
(File No. 33-47435)(the "1992 Registration Statement")).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.2 Restated Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to the 1992 Registration Statement).
4.3 Restated Bylaws of the Company as amended on April 21, 1992 (incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 filed
March 19, 1993 (File No. 33-59808)(the "1993 Registration Statement")).
4.4 Restated Bylaws of the Company as amended on May 4, 1994 (incorporated by reference
to Exhibit 4.3 to the Company's Registration Statement on Form S-8 filed June 8, 1994
(File No. 33-80056)).
4.5 Form of Indenture relating to the Notes, including Form of Note (filed herewith
electronically).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly (filed herewith electronically).
10.1 Winthrop Resources Corporation 1992 Stock Incentive Plan (incorporated by reference
to Exhibit 10.1 to the 1992 Registration Statement).
10.2 Office Lease Agreement dated January 15, 1987 between the Company and Alscor
Investors Joint Venture, as amended in Amendment No. 1 dated August 11, 1988;
Amendment No. 2 dated February 28, 1990; Amendment No. 3 dated June 1, 1991; and
Amendment No. 4 dated October 16, 1991 (incorporated by reference to Exhibit 10.2 to
the 1992 Registration Statement).
10.3 Amendment No. 5 dated January 26, 1993 to the Office Lease Agreement between the
Company and Alscor Investors Joint Venture dated January 15, 1987, as amended
(incorporated by reference to Exhibit 10.3 to the 1993 Registration Statement).
10.4 Form of Lease Agreement (incorporated by reference to Exhibit 10.9 to Amendment No. 1
to the 1992 Registration Statement filed June 4, 1992).
10.5 Amendment No. 6 dated May 25, 1994 to the Office Lease Agreement between the Company
and Alscor Investors Joint Venture dated January 15, 1987, as amended (incorporated
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended
June 30, 1994 (File No. 0-20123)).
10.6 Discretionary Credit Facility Letter of Agreement between the Company and First Bank
National Association dated August 2, 1994 (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the period ended September 30,
1994 (File No. 0-20123)).
10.7 Employment and Non-Competition Agreement dated as of October 26, 1994, between the
Company and Kirk A. MacKenzie (incorporated by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
0-20123)).
10.8 Employment and Non-Competition Agreement dated as of October 26, 1994, between the
Company and John L. Morgan (incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
0-20123)).
10.9 Employment and Non-Competition Agreement dated as of October 26, 1994, between the
Company and Robert P. Murphy (incorporated by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
0-20123)).
10.10 Employment and Non-Competition Agreement dated as of October 26, 1994, between the
Company and Jack A. Norqual (incorporated by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No.
0-20123)).
10.11 Addendum to Non-Statutory Stock Option Agreements dated June 17, 1992, October 27,
1993 and October 26, 1994 between Robert P. Murphy and Winthrop Resources Corporation
(incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (File No. 0-20123)).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.12 Discretionary Revolving Credit Note dated June 12, 1995 between the Company and First
Bank National Association (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1995 filed August 14,
1995 (File No. 0-20123)).
10.13 Letter of Agreement dated June 19, 1995 between the Company and Norwest Equipment
Finance, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1995 (File No. 0-20123)).
10.14 Asset Purchase Agreement, dated as of January 19, 1996 by and between Winthrop
Resources Corporation and Capital Business Leasing, Inc. (incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K dated January 19, 1996
filed February 5, 1996 (File No. 0-20123)).
11.1 Statement Regarding Computation of Earnings Per Share incorporated by reference to
Exhibit 11 to the Company's Annual Report on Form 10-K for the year ended December
31, 1995 (File No. 0-20123) and to Exhibit 11 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996 (File No. 0-20123).
12.1 Statements Regarding Computation of Ratios (filed herewith electronically).
23.1 Consent of KPMG Peat Marwick LLP (filed herewith electronically).
23.2 Consent of Oppenheimer Wolff & Donnelly (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
25.1 Statement of Eligibility of Norwest Bank Minnesota, National Association, as Trustee
(filed herewith electronically).
</TABLE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, except as to
certain insurance policies, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis and State of
Minnesota, on May 23, 1996.
WINTHROP RESOURCES CORPORATION
By /s/ JOHN L. MORGAN
------------------------------------
John L. Morgan
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each persons whose signature appears
below constitutes and appoints John L. Morgan and Kirk A. MacKenzie, and each
acting singly, as his true and lawful attorneys-in-fact and agents, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, as well
as any related registration statement (or amendment thereto) filed pursuant to
Rule 462(b) promulgated under the Securities Act of 1933 with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that either of said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statements has been signed by the following persons on May 23, 1996
in the capacities indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/S/ JOHN L. MORGAN President and Director
- ----------------------------------- (Principal Executive May 23, 1996
John L. Morgan Officer)
Executive Vice President,
/S/ KIRK A. MACKENZIE Treasurer and Director
- ----------------------------------- (Principal Financial and May 23, 1996
Kirk A. MacKenzie Accounting Officer)
/S/ JACK A. NORQUAL
- ----------------------------------- Senior Vice President and May 23, 1996
Jack A. Norqual Director
/S/ PAUL C. REYELTS
- ----------------------------------- Director May 23, 1996
Paul C. Reyelts
/S/ GERALD W. SIMONSON
- ----------------------------------- Director May 23, 1996
Gerald W. Simonson
/S/ MARK L. WILSON
- ----------------------------------- Director and Secretary May 23, 1996
Mark L. Wilson
II-4
<PAGE>
WINTHROP RESOURCES CORPORATION
INDEX TO EXHIBITS TO REGISTRATION STATEMENT ON FORM S-2
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
1.1 Form of Purchase Agreement......................... Filed herewith electronically.
4.1 Specimen Form of the Company's Common Stock
Certificate....................................... Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 filed
April 24, 1992, (File No. 33-47435) (the "1992
Registration Statement").
4.2 Restated Articles of Incorporation of the
Company........................................... Incorporated by reference to Exhibit 3.1 to the
1992 Registration Statement.
4.3 Restated Bylaws of the Company as amended on April
21, 1992.......................................... Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 filed
March 19, 1993 (File No. 33-59808) (the "1993
Registration Statement").
4.4 Restated Bylaws of the Company as amended on May 4,
1994.............................................. Incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 filed
June 8, 1994 (File No. 33-80056).
4.5 Form of Indenture relating to the Notes, including
Form of Note...................................... Filed herewith electronically.
5.1 Opinion and Consent of Oppenheimer Wolff &
Donnelly.......................................... Filed herewith electronically.
10.1 Winthrop Resources Corporation 1992 Stock Incentive
Plan.............................................. Incorporated by reference to Exhibit 10.1 to the
1992 Registration Statement.
10.2 Office Lease Agreement dated January 15, 1987
between the Company and Alscor Investors Joint
Venture, as amended in Amendment No. 1 dated
August 11, 1988; Amendment No. 2 dated February
28, 1990; Amendment No. 3 dated June 1, 1991; and
Amendment No. 4 dated October 16, 1991 Incorporated by reference to Exhibit 10.2 to the
1992 Registration Statement.
10.3 Amendment No. 5 dated January 26, 1993 to the
Office Lease Agreement between the Company and
Alscor Investors Joint Venture dated January 15,
1987, as amended.................................. Incorporated by reference to Exhibit 10.3 to the
1993 Registration Statement.
10.4 Form of Lease Agreement............................ Incorporated by reference to Exhibit 10.9 to
Amendment No. 1 to the 1992 Registration Statement
filed June 4, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.5 Amendment No. 6 dated May 25, 1994 to the Office
Lease Agreement between the Company and Alscor
Investors Joint Venture dated January 15, 1987, as
amended........................................... Incorporated reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the period ended
June 30, 1994 (File No. 0-20123).
10.6 Discretionary Credit Facility Letter of Agreement
between the Company and First Bank National
Association dated August 2, 1994.................. Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1994 (File No.
0-20123).
10.7 Employment and Non-Competition Agreement dated as
of October 26, 1994, between the Company and Kirk
A. MacKenzie Incorporated by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-20123).
10.8 Employment and Non-Competition Agreement dated as
of October 26, 1994, between the Company and John
L. Morgan......................................... Incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-20123).
10.9 Employment and Non-Competition Agreement dated as
of October 26, 1994, between the Company and
Robert P. Murphy.................................. Incorporated by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-20123).
10.10 Employment and Non-Competition Agreement dated as
of October 26, 1994, between the Company and Jack
A. Norqual........................................ Incorporated by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-20123).
10.11 Addendum to Non-Statutory Stock Option Agreements
dated June 17, 1992, October 27, 1993 and October
26, 1994 between Robert P. Murphy and Winthrop
Resources Corporation............................. Incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 0-20123).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
10.12 Discretionary Revolving Credit Note dated June 12,
1995 between the Company and First Bank National
Association....................................... Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995 filed August 14, 1995
(File No. 0-20123).
10.13 Letter of Agreement dated June 19, 1995 between the
Company and Norwest Equipment Finance, Inc........ Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995 (File No. 0-20123).
10.14 Asset Purchase Agreement, dated as of January 19,
1996 by and between Winthrop Resources Corporation
and Capital Business Leasing, Inc................. Incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated January
19, 1996 filed February 5, 1996 (File No.
0-20123).
11.1 Statement Regarding Computation of Earnings Per
Share............................................. Incorporated by reference to Exhibit 11 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 0-20123) and to
Exhibit 11 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996
(File No. 0-20123).
12.1 Statements Regarding Computation of Ratios......... Filed herewith electronically.
23.1 Consent of KPMG Peat Marwick LLP................... Filed herewith electronically.
23.2 Consent of Oppenheimer Wolff & Donnelly............ Included in Exhibit 5.1.
24.1 Power of Attorney.................................. Included on signatory page.
25.1 Statement of Eligibility of Norwest Bank Minnesota,
National Association, as Trustee.................. Filed herewith electronically.
</TABLE>
<PAGE>
EXHIBIT 1.1
1,500,000 SHARES OF COMMON STOCK
$25,000,000 PRINCIPAL AMOUNT OF ____% SENIOR NOTES DUE 2003
WINTHROP RESOURCES CORPORATION
PURCHASE AGREEMENT
__________, 1996
PIPER JAFFRAY INC.
DAIN BOSWORTH INCORPORATED
c/o Piper Jaffray Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
Winthrop Resources Corporation, a Minnesota corporation (the "Company"),
and the persons named in Schedule I (the "Selling Shareholders") propose to sell
to you (the "Underwriters") an aggregate of:
A. 1,500,000 shares of Common Stock, $.01 par value per share, of the Company
(such class of stock being herein referred to as the "Common Stock"), of
which 750,000 shares are to be issued and sold by the Company and an
aggregate of 750,000 shares are to be sold by the Selling Shareholders in
the respective amounts set forth opposite their respective names in
Schedule I. Such shares to be purchased from the Company or the Selling
Shareholders are referred to in this Agreement as the "Firm Shares." The
Selling Shareholders have also granted to the Underwriters an option to
purchase up to 225,000 additional shares of Common Stock on the terms and
for the purposes set forth in Section 3(b) hereof. Such additional shares
are referred to in this Agreement as the "Option Shares," and the Firm
Shares and the Option Shares are referred to collectively as the "Shares."
_____________________
(1) Plus an option to purchase up to 225,000 additional shares to cover
over-allotments.
(2) Plus an option to purchase up to $3,750,000 aggregate principal amount of
Notes to cover over-allotments.
<PAGE>
B. The Company's __% Senior Notes due 2003 in an aggregate principal amount of
$25,000,000 (the "Firm Notes"). The Company has also granted to the
Underwriters an option to purchase up to an additional $3,750,000 in
aggregate principal amount of its __% Senior Notes due 2003 on the terms
and for the purposes set forth in Section 3(b) hereof. Such additional
___ % Senior Notes due 2003 are referred to in this Agreement as the
"Option Notes", and the Firm Notes and the Option Notes, if purchased, are
hereinafter referred to as the "Notes." The Notes shall be issued under an
indenture, dated as of _______, 1996 (the "Indenture"), between the Company
and __________________________________, as trustee (the "Trustee").
Each Selling Shareholder has executed and delivered a Power of Attorney in
the form attached hereto as Exhibit A (the "Power of Attorney") pursuant to
which each Selling Shareholder has appointed the persons designated therein as
attorneys-in-fact (each, an "Attorney-in-Fact" and together, the
"Attorneys-in-Fact"), with authority to execute and deliver this Agreement and a
Custody Agreement in the form attached to the Power of Attorney as Exhibit C
thereto (the "Custody Agreement") by and between an Attorney-in-Fact on behalf
of each of the Selling Shareholders and __________________, as custodian (the
"Custodian"), pursuant to which an Attorney-in-Fact has placed such Selling
Shareholder's Shares in custody on behalf of such Selling Shareholder, and to
take certain other actions with respect thereto and hereto.
The Shares and Notes shall be purchased and offered hereunder separately
and not as units. The commitments of the Underwriters hereunder to buy the
Shares and the Notes are separate. The Shares and Notes are sometimes referred
to together herein as the "Securities."
Each of the Company and the Selling Shareholders hereby confirms its or his
agreement with respect to the sale of the Securities to the Underwriters.
1. REGISTRATION STATEMENT. A registration statement on Form S-2 (File
No. 333-__________) with respect to the Securities, including a preliminary form
of prospectus, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and
regulations ("Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") under those acts, and has been filed with the Commission; one
or more amendments to such registration statement have also been so prepared and
have been, or will be, so filed. Copies of such registration statement and
amendments and each related preliminary prospectus have been delivered to the
Underwriters.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, it will prepare and file a
prospectus pursuant to Rule 424(b) that discloses the information previously
omitted from the prospectus in reliance upon Rule 430A. Such
2
<PAGE>
registration statement as amended at the time it is or was declared effective by
the Commission, and, in the event of any amendment thereto after the effective
date and prior to the First Closing Date (as hereinafter defined), but only from
and after the effectiveness of such amendment, including financial statements
and all exhibits thereto, and any information deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable, is hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was declared
effective by the Commission is hereinafter called the "Prospectus," except that
if any prospectus filed by the Company with the Commission pursuant to Rule
424(b) of the Rules and Regulations or any other prospectus provided to the
Underwriters by the Company for use in connection with the offering of the
Securities (whether or not required to be filed by the Company with the
Commission pursuant to Rule 424(b) of the Rules and Regulations) differs from
the prospectus on file at the time the Registration Statement is or was declared
effective by the Commission, the term "Prospectus" shall refer to such differing
prospectus from and after the time such prospectus is filed with the Commission
or transmitted to the Commission for filing pursuant to such Rule 424(b) or from
and after the time it is first provided to the Underwriters by the Company for
such use. The term "Preliminary Prospectus" as used herein means any
preliminary prospectus included in the Registration Statement prior to the time
it becomes or became effective under the Act and any prospectus subject to
completion as described in Rule 430A of the Rules and Regulations. Reference
made herein to any Preliminary Prospectus or Prospectus, as amended or
supplemented, shall include all documents incorporated by reference therein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
(a) The Company represents and warrants to, and agrees with, the
Underwriters as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission and each Preliminary
Prospectus, at the time of filing thereof, did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
except that the foregoing shall not apply to statements in or
omissions from any Preliminary Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by any
Underwriter specifically for use in the preparation thereof.
(ii) As of the time the Registration Statement (or any
post-effective amendment thereto) is or was declared effective by the
Commission, upon the filing or first delivery to the Underwriters of
the Prospectus (or any supplement to the Prospectus) and at the First
Closing Date, Option Shares Closing Date and Option Notes Closing Date
(as hereinafter defined), (A) the Registration
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Statement and Prospectus (in each case, as so amended and/or
supplemented) will conform or conformed in all respects to the
requirements of the Act, the Trust Indenture Act, and the Rules and
Regulations, (B) the Registration Statement (as so amended) will not
or did not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (C) the Prospectus (as
so supplemented) will not or did not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are or were made, not misleading; except
that the foregoing shall not apply to statements in or omissions from
any such document in reliance upon, and in conformity with, written
information furnished to the Company by any Underwriter specifically
for use in the preparation thereof. If the Registration Statement has
been declared effective by the Commission, no stop order suspending
the effectiveness of the Registration Statement has been issued by the
Commission, and no proceeding for that purpose has been initiated or,
to the Company's knowledge after due inquiry, threatened by the
Commission. The documents incorporated by reference in the
Registration Statement, the Prospectus, and the Preliminary Prospectus
pursuant to Item 12 of Form S-2, as of the date they were or are filed
with the Commission, conformed or will conform in all material
respects to the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, as of the date of filing, none
of such documents contained or will contain an untrue statement of a
material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(iii) The consolidated financial statements of the Company,
together with the related notes and schedules, and unaudited interim
financial information, set forth or incorporated by reference in the
Registration Statement and Prospectus comply in all material respects
with the requirements of the Act and fairly present the financial
condition of the Company as of the dates indicated and the results of
operations and changes in cash flows for the periods therein specified
in conformity with generally accepted accounting principles
consistently applied throughout the periods involved (except as
otherwise stated therein), and the independent public accountants
whose reports are contained therein are independent public accountants
as required by the Act and the Rules and Regulations. The financial
statement schedules, if any, included in the Registration Statement or
incorporated by reference therein, or in any post-effective amendment
thereto, and the summary financial information included in the
Prospectus under the caption "Selected Consolidated Financial Data,"
present fairly the information required to be stated therein. No
other financial statements or schedules are required to be included in
the Registration Statement or Prospectus.
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(iv) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid, legal and binding obligation of the
Company, enforceable in accordance with its terms, except as rights to
indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by considerations of
public policy, bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity.
(v) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Indenture
and the Notes. The Indenture has been duly and validly authorized by
the Company and, when the Indenture has been executed and delivered,
will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Notes sold
hereunder have been duly and validly authorized by the Company and,
when the Notes have been executed and authenticated in the manner set
forth in the Indenture and issued, sold, and delivered in the manner
set forth in the Prospectus, will be the valid and binding obligations
of the Company, enforceable against the Company in accordance with
their terms and the terms of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Indenture
will have been duly qualified under the Trust Indenture Act upon
effectiveness of the Registration Statement. The Indenture will be
substantially in the form filed as an exhibit to the Registration
Statement and will comply with the Trust Indenture Act and the
regulations thereunder. The Indenture and the Notes conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(vi) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of capital stock, including the Shares to be
purchased from the Selling Shareholders, have been duly authorized and
validly issued, fully paid and non-assessable, have been issued in
compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the holders thereof are not
subject to personal liability by reason of being such holders. The
Shares conform in substance to all statements relating thereto
contained in the Registration Statement and Prospectus. Except as
described in the Registration Statement and Prospectus, there are no
options, warrants, agreements, contracts
5
<PAGE>
or other rights in existence to purchase or acquire from the Company
or any subsidiary of the Company any shares of the capital stock of
the Company or any subsidiary of the Company. On each Closing Date
hereinafter mentioned, the Shares to be delivered on such Closing
Date, upon issuance and delivery of and payment for the Shares to be
purchased from the Company or the Selling Shareholders as described
herein and in the Prospectus, will be duly authorized, validly issued,
fully paid and non-assessable and will conform to the description
thereof contained in the Prospectus. No preemptive rights or similar
rights of any security holders of the Company exist with respect to
the Shares. The Company has no agreement with any security holder as
to which the Company has not obtained waiver which gives such security
holder the right to require the Company to register under the Act any
securities of any nature owned or held by such person in connection
with the transactions contemplated by this Agreement. Upon payment
for and delivery of the Shares pursuant to this Agreement, the
Underwriters will acquire good and marketable title to the Shares,
free and clear of all liens, encumbrances or claims.
(vii) The Company has no past or present direct or indirect
subsidiaries other than WINR Business Credit Corporation, a
wholly-owned subsidiary of the Company ("WINR"). All of the
outstanding capital stock of WINR has been duly authorized, validly
issued and is fully paid and non-assessable, and is owned directly by
the Company free and clear of any security interest, claim, lien or
other encumbrance. Other than WINR, the Company owns no capital stock
or other equity or ownership or proprietary interest in any
corporation, partnership, limited liability company, association,
trust or other entity.
(viii) The execution, delivery and performance of this
Agreement, the Indenture and the Securities, the issuance and delivery
of the Securities, and the consummation of the transactions herein and
therein contemplated will not conflict with, or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, any agreement or instrument to which the
Company or WINR is a party or by which either the Company or WINR is
bound or to which any of their property is subject, the Company's or
WINR's articles of incorporation or by-laws, or any order, rule,
regulation or decree of any court or governmental agency or body
having jurisdiction over the Company, WINR or any of their respective
properties; no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required by the
Company or WINR for the execution, delivery and performance of this
Agreement, the Indenture or the Securities or for the consummation of
the transactions contemplated hereby and thereby, including the
issuance, sale and delivery of the Securities by the Company and the
sale and delivery of the Shares by the Selling Shareholders,
6
<PAGE>
except such as may be required under the Act, the Trust Indenture Act
or state securities or blue sky laws.
(ix) Neither the Company nor WINR is (A) in violation of its
respective articles of incorporation or charter or its respective
by-laws or other organizational documents, (B) in default (nor has an
event occurred which with notice or passage of time or both would
constitute such a default) under any bond, indenture, mortgage, deed
of trust, note, loan or credit agreement or other material agreement
or instrument to which either of them is a party or by which either of
them or any of their properties or assets may be bound or affected,
(C) in violation of any order of any court, arbitrator or governmental
body or (D) except as disclosed in the Registration Statement and the
Prospectus, in violation of or has violated any franchise, grant,
authorization, license, permit, judgment, decree, order, statute, rule
or regulation, which, in the case of clauses (A)-(D) of this sentence,
would (individually or in the aggregate) (X) adversely affect the
legality, validity or enforceability of this Agreement, the Indenture
or the Securities, or any document related hereto or thereto or (Y)
have a material adverse effect on the condition (financial or
otherwise), properties, assets, business, prospects or results of
operations of the Company and WINR, considered as a whole, or (Z)
materially impair the Company's ability to perform fully on a timely
basis any obligations which it has under this Agreement, the Indenture
or the Securities. The Company or WINR holds; and is operating in
compliance with, all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders of any
governmental or self-regulatory body required for the conduct of their
respective businesses and all such franchises, grants, authorizations,
licenses, permits, easements, consents, certifications and orders are
valid and in full force and effect; and each of the Company and WINR
is in compliance in all material respects with all applicable federal,
state, local and foreign laws, regulations, orders and decrees.
(x) Each of the Company and WINR has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation or organization with full corporate
power and authority to own, lease and operate its properties and
conduct its business as currently being carried on and as described in
the Registration Statement and Prospectus; and is duly qualified to do
business as a foreign corporation and is in good standing in each
other jurisdiction in which it owns or leases real property of a
nature, or transacts business of a type, that would make such
qualification necessary and in which the failure to so qualify would
have a material adverse effect on the condition (financial or
otherwise), properties, assets, business, prospects or results of
operation of the Company and WINR, considered as a whole.
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<PAGE>
(xi) Except as disclosed in the Registration Statement and the
Prospectus, there is no action, suit, investigation or proceeding,
governmental or otherwise, pending, or to the best knowledge of the
Company, threatened, to which the Company or WINR is or may be a party
or of which the business or property of the Company or WINR is or may
be the subject which, in each case, is material to the Company and
WINR, considered as a whole, or which seeks to restrain, enjoin,
prevent the consummation of or otherwise challenge the issuance of the
Securities or any of the other transactions contemplated hereby or by
the Indenture, or which questions the legality or validity of any such
transactions or which seeks to recover damages or obtain other relief
in connection with any of such transactions; and there is no contract
or document of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement which is not described or filed as
required.
(xii) Each of the Company and WINR, as the case may be, has
good and marketable title to the real or personal property described
in the Registration Statement or Prospectus as being owned by the
Company or WINR, respectively, in each case free and clear of any
liens, claims, security interests or other encumbrances except such as
are described in the Registration Statement and the Prospectus; the
property held under lease by the Company or WINR, as the case may be,
is held by them under valid and binding leases with only such
exceptions with respect to any particular lease as do not interfere in
any material respect with the conduct of the business of the Company
or WINR; the Company and WINR owns or possesses all patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and rights necessary for the conduct of the
business of the Company and WINR as currently carried on and as
described in the Registration Statement and Prospectus; no name that
the Company or WINR uses and no other aspect of the business of the
Company or WINR will involve or give rise to any infringement of, or
license or similar fees for, any patents, patent applications,
trademarks, service marks, tradenames, trademark registrations,
service mark registrations, copyrights, licenses, inventions, trade
secrets or other similar rights of others material to the business or
prospects of the Company, and neither the Company nor WINR has
received any notice alleging any such infringement or fee.
(xiii) Each of the Company and WINR has filed all necessary
federal, state, local and foreign income and franchise tax returns and
paid all taxes shown as due thereon. Except as is otherwise expressly
stated in the Registration Statement or Prospectus, the Company has no
knowledge of any tax deficiency which might be asserted against it
which would materially and adversely affect the Company's business or
properties.
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<PAGE>
(xiv) The Company has not distributed and will not distribute
any prospectus or other offering material in connection with the
offering and sale of the Securities other than any Preliminary
Prospectus or the Prospectus or other materials permitted by the Act
to be distributed by the Company.
(xv) A registration statement relating to the Common Stock has
been declared effective by the Commission pursuant to the Exchange
Act, and the Common Stock is duly registered thereunder. The Shares
have been duly listed on the Nasdaq National Market and have been
quoted on the Nasdaq National Market since __________________.
(xvi) Each of the Company and WINR maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted
only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xvii) Other than as contemplated by this Agreement, the
Company has not incurred any liability for any finder's or broker's
fee or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xviii) Neither the Company nor WINR is an investment company,
as defined in the Investment Company Act of 1940, as amended, or a
company controlled by such an investment company.
(xix) Neither the Company nor WINR is involved in any labor
dispute which, either individually or in the aggregate, could have a
material adverse effect on the business, operations, properties,
condition (financial or otherwise), income, earnings or business
prospectus of the Company and WINR (taken as a whole), nor, to the
best of the Company's knowledge, is any such dispute threatened.
(xx) Neither the Company nor WINR has violated any federal, state
or local environmental, safety or similar law (including rules and
regulations of occupational safety and health agencies) applicable to
its or their business, nor any federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees, nor any
applicable federal, state or local wages and hours
9
<PAGE>
laws, nor any provisions of the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act, or the rules
and regulations promulgated thereunder, which in each case might
result in any material adverse change in the business, operations,
properties, condition (financial or otherwise), income, earnings or
business prospects of the Company and WINR, taken as a whole.
(xxi) Neither the Company nor any of its subsidiaries or
affiliates is currently doing business with the government of Cuba or
with any person or affiliate located in Cuba.
(xxii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and except as expressly disclosed therein, neither the Company nor
WINR has incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions, or declared or
paid any dividends or made any distribution of any kind with respect
to its capital stock; and there has not been any change in the capital
stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of shares upon the exercise of
outstanding options), or any material change in the short-term or
long-term debt, or any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock, of the
Company or WINR, or any material adverse change, or any development
involving a prospective material adverse change, in the general
affairs, condition (financial or otherwise), business, key personnel,
property, net worth or results of operations of the Company and WINR,
taken as a whole.
(b) Each Selling Shareholder, severally and not jointly, represents
and warrants to, and agrees with, the Underwriters, as follows:
(i) Such Selling Shareholder is the record and beneficial owner
of, and has, and on the First Closing Date and/or the Options Shares
Closing Date, as the case may be, will have, valid and marketable
title to the Shares to be sold by him hereunder, free and clear of all
security interests, claims, liens, proxies, equities or other
encumbrances (other than pursuant to the Custody Agreement and Power
of Attorney, as defined below); and upon delivery of and payment for
such Shares hereunder, the Underwriters will acquire valid and
marketable title thereto, free and clear of any security interests,
claims, liens, proxies, equities or other encumbrances. Such Selling
Shareholder is selling the Shares for such Selling Shareholder's own
account and is not selling such Shares, directly or indirectly, for
the benefit of the Company, and no part of the proceeds of such sale
received by such Selling Shareholder will inure, either directly or
indirectly, to the benefit of the Company.
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<PAGE>
(ii) Such Selling Shareholder has duly authorized, executed and
delivered a Letter of Transmittal and Custody Agreement ("Custody
Agreement"), which Custody Agreement is a valid and binding obligation
of such Selling Shareholder, to _____________, as Custodian
("Custodian"); pursuant to the Custody Agreement such Selling
Shareholder has placed in custody with the Custodian, for delivery
under this Agreement, the certificates representing the Shares to be
sold by him hereunder; such certificates represent validly issued,
outstanding, fully paid and nonassessable shares of Common Stock; and
such certificates were duly and properly endorsed in blank for
transfer, or were accompanied by all documents duly and properly
executed that are necessary to validate the transfer of title thereto,
to the Underwriters.
(iii) Such Selling Shareholder has the power and authority to
enter into this Agreement and to sell, transfer and delivery the
Shares to be sold by him hereunder; and such Selling Shareholder has
duly authorized, executed and delivered to ______________ and
________________, as attorneys-in-fact ("Attorneys-in-Fact"), an
irrevocable power of attorney ("Power of Attorney") authorizing and
directing the Attorneys-in-Fact, or either of them, to effect the sale
and delivery of the Shares and to take all such other action as may be
necessary hereunder.
(iv) This Agreement, the Custody Agreement and the Power of
Attorney have each been duly authorized, executed and delivered by or
on behalf of such Selling Shareholder and each constitutes a valid and
binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as rights to indemnity hereunder or
thereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or laws affecting the rights of creditors
generally and subject to general principles of equity. The execution
and delivery of this Agreement, the Custody Agreement and the Power of
Attorney and the performance of the terms hereof and thereof and the
consummation of the transactions herein and therein contemplated will
not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any agreement or instrument to
which such Selling Shareholder is a party or by which such Selling
Shareholder is bound, or any law, regulation, order or decree
applicable to such Selling Shareholder; no consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body is required for the execution, delivery and performance
of this Agreement, the Custody Agreement and the Power of Attorney or
for the consummation of the transactions contemplated hereby and
thereby, including the sale of the Shares, except such as may be
required under the Act or state securities laws.
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<PAGE>
(v) Such Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection
with the offering and sale of the Securities other than any
Preliminary Prospectus or the Prospectus or other materials permitted
by the Act to be distributed by the Selling Shareholders.
(vi) Other than as contemplated by this Agreement, such Selling
Shareholder has not incurred any liability for any finder's or
broker's fee or agent's commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(vii) Such Selling Shareholder has reviewed the Registration
Statement and the Prospectus and to the best knowledge of such Selling
Shareholder, after due inquiry, neither the Registration Statement nor
the Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(viii) To the best knowledge of such Selling Shareholder,
after due inquiry, the representations and warranties of the Company
contained in paragraph (a) of this Section 2 are true and correct.
(c) Any certificate signed by any officer of the Company as such and
delivered to the Underwriters or to the Underwriters' counsel shall be
deemed a representation and warranty by the Company to the Underwriters as
to the matters covered thereby; any certificate signed by or on behalf of
any Selling Shareholder as such and delivered to the Underwriters or to the
Underwriters' counsel shall be deemed a representation and warranty by such
Selling Shareholder to the Underwriters as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF SECURITIES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company agrees to issue and sell the Firm Notes and the Firm Shares to
be sold by the Company to the Underwriters; each of the Selling
Shareholders, severally and not jointly, agree to sell the Firm Shares to
be sold by each Selling Shareholder to the Underwriters; and the
Underwriters agree to purchase, separately, the respective numbers of Firm
Shares and the respective principal amounts of Firm Notes set forth
opposite each Underwriter's name in Schedule II hereto. The purchase price
for each Firm Share shall be $_____ per share and the purchase price for
each Firm Note shall be ___% of the principal amount thereof. The
obligation of each Underwriter to the Company and the Selling Shareholders
shall be to purchase from the Company and the Selling Shareholders that
number of Firm Shares and that principal amount of Firm Notes set forth
opposite the
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<PAGE>
name of such Underwriter in Schedule II hereof. In making this Agreement,
each Underwriter is contracting severally and not jointly; except as
provided in paragraph (c) of this Section 3 and in Section 8 hereof, the
agreement of each Underwriter is to purchase only its respective number of
Firm Shares and the principal amount of Firm Notes as specified in Schedule
II.
The Firm Shares and the Firm Notes will be delivered by the Company
and by the Custodian to Piper Jaffray Inc. for each Underwriter's account
against payment of the purchase price therefor by wire transfer or
certified or official bank check or checks in next day funds payable to the
order of each of the Company and the Custodian at the offices of Piper
Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota, or such other location as may be mutually acceptable, at 9:00
a.m., Minneapolis time, on the third (or, if the Securities are priced as
contemplated by Rule 15c6-1(c) promulgated pursuant to the Exchange Act,
after 4;30 p.m. Washington, D.C. time, the fourth) full business day
following the date hereof, or at such other time as the Underwriters, the
Company and the Custodian determine, such time and date of delivery being
herein referred to as the "First Closing Date." Certificates for the Firm
Shares and the Firm Notes, each in definitive form and in such
denominations and registered in such names as the Underwriters may request
upon at least two business days' prior notice to the Company and the
Custodian will be made available for checking and packaging at the offices
of Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota, or such other location as may be mutually
acceptable, at least one business day prior to the First Closing Date.
(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
(i) the Selling Shareholders, severally and not jointly, hereby grant to
the Underwriters an option to purchase up to 225,000 Option Shares, at the
same purchase price as the Firm Shares for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution of
the Shares and (ii) the Company hereby grants to the Underwriters an option
to purchase up to $3,750,000 principal amount of Option Notes at the same
purchase price as the Firm Notes for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution of
the Notes. The options granted hereunder may be exercised at any time
(but, as to each option, not more than once) within 30 days after the
effective date of this Agreement upon notice (confirmed in writing) by the
Underwriters to the Company (and to the Attorneys-in-Fact in the case of
the Firm Shares) setting forth the aggregate number of Option Shares or
principal amount of Option Notes, as the case may be, as to which the
Underwriters are exercising the options, the names and denominations in
which the Option Shares or the Option Notes, as the case may be, are to be
registered and the date and time, as determined by the Underwriters, when
the Option Shares or the Option Notes are to be delivered, such time and
date of purchase of the Option Shares being herein referred to as the
"Option Shares Closing" and "Option Shares Closing Date", respectively, and
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<PAGE>
such time and date of purchase of the Option Notes being herein referred to
as the "Option Notes Closing" and "Option Notes Closing Date",
respectively; provided, however, that neither the Option Shares Closing
Date nor the Option Notes Closing Date shall be earlier than the First
Closing Date nor earlier than the second business day after the date on
which the applicable option shall have been exercised. The First Closing
Date, the Option Shares Closing Date and the Option Notes Closing Date are
sometimes herein individually called the "Closing Date" and collectively
called the "Closing Dates." The number of Option Shares and principal
amount of Option Notes to be sold by the Selling Shareholders or the
Company, as the case may be, to the Underwriters and purchased by the
Underwriters from the Selling Shareholders or the Company shall be
determined by the Underwriters. The options granted hereby may be canceled
by the Underwriters as to the Option Shares or the Option Notes for which
the options are unexercised, at any time prior to the expiration of the
30-day period, upon notice to the Company and the Attorney-in-Fact. No
Option Shares shall be sold and delivered unless the Firm Shares previously
have been, or simultaneously are, sold and delivered and no Option Notes
shall be sold and delivered unless the Firm Notes previously have been, or
simultaneously are, sold and delivered.
The Option Shares will be delivered by the Custodian to Piper
Jaffray Inc. for each Underwriter's account against payment of the purchase
price therefor by wire transfer or certified or official bank check or
checks in next day funds payable to the order of the Custodian at the
offices of Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota, or such other location as may be mutually
acceptable at 9:00 a.m., Minneapolis time, on the Option Shares Closing
Date. Certificates for the Option Shares in definitive form and in such
denominations and registered in such names as the Underwriters have set
forth in the notice of option exercise, will be made available for checking
and packaging at the office of Piper Jaffray Inc., Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota, or such other location as may
be mutually acceptable, at least one business day prior to the Option
Shares Closing Date.
The Option Notes will be delivered by the Company to Piper Jaffray
Inc. for each Underwriter's account against payment of the purchase price
therefor by wire transfer or certified or official bank check or checks in
next day funds payable to the order of the Company at the offices of Piper
Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota, or such other location as may be mutually acceptable at 9:00
a.m., Minneapolis time, on the Option Notes Closing Date. The Option Notes
in definitive form and in such denominations and registered in such names
as the Underwriters have set forth in the notice of option exercise, will
be made available for checking and packaging at the office of Piper Jaffray
Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota,
or such other location as may be mutually acceptable, at least one business
day prior to the Option Notes Closing Date.
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(c) It is understood that each Underwriter may (but shall not be
obligated to) make payment to the Company or the Custodian on behalf of
another Underwriter for the Securities to be purchased by such Underwriter.
Any such payment shall not relieve such other Underwriter of any of its
obligations hereunder. Nothing herein contained shall constitute either of
the Underwriters an unincorporated association, joint venturer or partner
with the Company or any Selling Shareholder.
(d) The Underwriters will make a public offering of the Shares and
Notes directly to the public (which may include selected dealers and
special purchasers) as soon as the Underwriters deem practicable after the
Registration Statement becomes effective, at initial public offering prices
as set forth on the cover page of the Prospectus, subject to the terms and
conditions of this Agreement and in accordance with the Prospectus. Such
concessions from the public offering prices may be allowed to selected
dealers and other members of the National Association of Securities
Dealers, Inc. as the Underwriters may determine, and the Underwriters will
furnish the Company with such information about the distribution
arrangements as may be necessary for inclusion in the Registration
Statement. It is understood that the public offering prices and
concessions may vary after the initial public offering.
4. COVENANTS.
(a) The Company covenants and agrees with the Underwriters as
follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to
cause the Registration Statement or any post-effective amendments
thereto to become effective as promptly as possible; the Company will
notify the Underwriters promptly of the time when the Registration
Statement or any post-effective amendment to the Registration
Statement has become effective or any supplement to the Prospectus has
been filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or Prospectus or additional
information; if the Company has elected to rely on Rule 430A of the
Rules and Regulations, the Company will file a Prospectus containing
the information omitted therefrom pursuant to such Rule 430A with the
Commission within the time period required by, and otherwise in
accordance with the provisions of, Rules 424(b) and 430A of the Rules
and Regulations; the Company will prepare and file with the
Commission, promptly upon the request of the Underwriters, any
amendments or supplements to the Regulation Statement or Prospectus
that, in the Underwriters' opinion, may be necessary or advisable in
connection with the distribution of the Securities by the
Underwriters; and the Company will not file any amendment or
supplement to the Registration Statement or Prospectus to which the
Underwriters shall
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reasonably object by notice to the Company after having been furnished a
copy a reasonable time prior to the filing.
(ii) The Company will advise the Underwriters, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose; and
the Company will promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(iii) Within the time during which a prospectus relating to the
Securities is required to be delivered under the Act, the Company will
comply as far as it is able with all requirements imposed upon it by
the Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Securities as
contemplated by the provisions hereof and the Prospectus. If during
such period any event occurs as a result of which the Prospectus would
include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances then existing, not misleading, or if during such
period it is necessary to amend the Registration Statement or
supplement the Prospectus to comply with the Act, the Company will
promptly notify the Underwriters and will amend the Registration
Statement or supplement the Prospectus (at the expense of the Company)
so as to correct such statement or omission or effect such compliance.
(iv) The Company will use its best efforts to qualify the
Securities for sale under the securities laws of such jurisdictions as
the Underwriters may reasonably designate and to continue such
qualifications in effect so long as required for the distribution of
the Securities, except that the Company shall not be required in
connection therewith to qualify as a foreign corporation or to execute
a general consent to service of process in any state. In each
jurisdiction in which the Shares and/or Notes shall have been
qualified as above provided, the Company will make and file such
statements and reports in each year as are or may be reasonably
required by the laws of such jurisdiction to permit secondary trading
of the same.
(v) The Company will furnish to the Underwriters copies of the
Registration Statement (three of which will be signed and will include
all exhibits), the Indenture, each Preliminary Prospectus, the
Prospectus, and all amendments and supplements to such documents, in
each case as soon as
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<PAGE>
available and in such quantities as each Underwriter may from time to
time reasonably request.
(vi) During a period of five years commencing with the date
hereof, the Company will furnish to each Underwriter copies of all
periodic and special reports furnished to the security holders of the
Company and all information, documents and reports filed with the
Commission, the NASD or any securities exchange.
(vii) The Company will make generally available to its
security holders as soon as practicable, but in any event not later
than 15 months after the end of the Company's current fiscal quarter,
an earnings statement (which need not be audited) covering a 12-month
period beginning after the effective date of the Registration
Statement that shall satisfy the provisions of Section 11(a) of the
Act and Rule 158 of the Rules and Regulations.
(viii) The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented
from becoming effective under the provisions of Section 9(a) hereof or
is terminated, will pay or cause to be paid (A) all expenses
(including transfer taxes allocated to the respective transferees)
incurred in connection with the delivery to the Underwriters of the
Securities, (B) all expenses and fees (including, without limitation,
fees and expenses of the Company's accountants and counsel but, except
as otherwise provided below, not including fees of the Underwriters'
counsel) in connection with the preparation, printing, filing,
delivery, and shipping of the Registration Statement (including the
financial statements therein and all amendments, schedules, and
exhibits thereto), the Securities, the Indenture, each Preliminary
Prospectus, the Prospectus, and any amendment thereof or supplement
thereto, and the printing, delivery and shipping of this Agreement and
other underwriting documents, including Blue Sky Memoranda, (C) all
filing fees and fees and disbursements of the Underwriters' counsel
incurred in connection with the qualification of the Securities for
offering and sale by the Underwriters or by dealers under the
securities or blue sky laws of the states and other jurisdictions
which the Underwriters shall designate in accordance with Section
4(a)(iv) hereof, (D) the fees and expenses of the Trustee and counsel
for the Trustee, (E) the filing fees incident to any required review
by the National Association of Securities Dealers, Inc. of the terms
of the sale of the Securities, (F) listing fees, if any, (G) fees or
expenses, if any, incurred in connection with investigating the
legality of an investment in the Securities by certain purchasers in
certain jurisdictions and the preparation of memoranda relating
thereto, and (H) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise
specifically provided for herein. If the sale of the Securities
provided for herein is not
17
<PAGE>
consummated by reason of action by the Company or any Selling
Shareholder pursuant to Section 9(a) hereof which prevents this
Agreement from becoming effective, or by reason of any failure,
refusal or inability on the part of the Company or any Selling
Shareholder to perform any agreement on its or his part to be
performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled by the Company or any
Selling Shareholder is not fulfilled, the Company will reimburse the
Underwriters for all out-of-pocket disbursements (including fees and
disbursements of counsel) incurred by the Underwriters in connection
with their investigation, preparing to market and marketing the
Securities or in contemplation of performing their obligations
hereunder. The Company shall not in any event be liable to either
Underwriter for loss of anticipated profits from the transactions
covered by this Agreement.
(ix) The Company will not, without the prior written consent of
Piper Jaffray Inc., offer for sale, sell, contract to sell, grant any
option for the sale of or otherwise issue or dispose of any Common
Stock or any securities convertible into or exchangeable for, or any
options or rights to purchase or acquire, Common Stock, except
pursuant to existing stock option plans (which options shall not be
exercisable for 120 days from the date hereof) and to the Underwriters
pursuant to this Agreement, for a period of 120 days after the
commencement of the public offering of the Securities by the
Underwriters.
(x) The Company either has caused to be delivered to the
Underwriters or will cause to be delivered to the Underwriters prior
to the effective date of the Registration Statement a letter from each
of the Company's directors and officers stating that such person
agrees that he or she will not, without the prior written consent of
Piper Jaffray Inc., offer for sale, sell, contract to sell or
otherwise dispose of any shares of Common Stock or rights to purchase
Common Stock other than by operation of law or by gift or will to
donees or heirs who agree to be bound by the same restriction, except,
with respect to the Selling Shareholders to the Underwriters pursuant
to this Agreement, for a period of 120 days after commencement of the
public offering of the Securities by the Underwriters.
(xi) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(xii) The Company will not incur any liability for any
finder's or broker's fee or agent's commission in connection with the
execution and
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<PAGE>
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xiii) The Company will inform the Florida Department of
Banking and Finance at any time prior to the consummation of the
distribution of the Securities by the Underwriters if it commences
engaging in business with the government of Cuba or with any person or
affiliate located in Cuba. Such information will be provided within
90 days after the commencement thereof or after a change occurs with
respect to previously reported information.
(xiv) The Company will comply with all registration, filing
and reporting requirements of the Exchange Act and the Nasdaq National
Market.
(xv) So long as any of the Notes are outstanding, the Company
will furnish to each Underwriter the reports required to be filed with
the Trustee pursuant to the Indenture, concurrently with such filing.
(b) Each Selling Shareholder, severally and not jointly, covenants
and agrees with the Underwriters as follows:
(i) The Shares represented by the certificates on deposit with
the Custodian pursuant to the Custody Agreement are subject to the
interest of the Underwriters; the arrangements made for such custody
are, except as specifically provided in the Custody Agreement,
irrevocable; and the obligations of the Selling Shareholder hereunder
shall not be terminated, except as provided in this Agreement or in
the Custody Agreement, by any act of any Selling Shareholder, by
operation of law, by the death or disability of any Selling
Shareholder, or by the occurrence of any other event.
(ii) Such Selling Shareholder will not, without your prior
written consent, offer for sale, sell, contract to sell, grant any
option for the sale of or otherwise dispose of any Common Stock or any
securities convertible into or exchangeable for, or any options or
rights to purchase or acquire, Common Stock other than by operation of
law or by gift or will to donees or heirs who agree to be bound by the
same restriction, except to the Underwriters pursuant to this
Agreement, for a period of 120 days after the commencement of the
public offering of the Securities by the Underwriters.
(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
19
<PAGE>
(iv) Such Selling Shareholder will not incur any liability for
any finder's or broker's fee or agent's commission in connection with
the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(v) Such Selling Shareholder shall immediately notify you if any
event occurs or of any change in information relating to such Selling
Shareholder or the Company or any new information relating to the
Company or relating to any matter stated in the Prospectus or any
supplement thereto, that results in the Prospectus (as supplemented)
including any untrue statement of a material fact or omitting to state
any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(vi) To document the Underwriters' compliance with the reporting
and withholding provisions of the Internal Revenue Code of 1986, as
amended, with respect to the sale of the Securities, such Selling
Shareholder agrees to deliver to you prior to or on the First Closing
Date properly completed and executed United States Treasury Department
Form W-8 or W-9 (or other applicable form of statement specified by
the Treasury Department regulations in lieu thereof).
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder are subject to the accuracy, as of the date hereof and at
each of the First Closing Date, the Option Shares Closing Date and the Option
Notes Closing Date (as if made at such Closing Date), of and compliance with all
representations, warranties and agreements of the Company and the Selling
Shareholders contained herein, to the performance by the Company and the Selling
Shareholders of their respective obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Minneapolis time, on the date of this Agreement, or such
later time and date as the Underwriters shall approve and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have
been timely made; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereof shall have been issued; no
proceedings for the issuance of such an order shall be pending or
threatened; and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the Underwriters' satisfaction.
(b) The Underwriters shall not have advised the Company that the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, contains an untrue statement of fact which, in the
Underwriters' reasonable
20
<PAGE>
opinion, is material, or omits to state a fact which, in the Underwriters'
reasonable opinion, is material and is required to be stated therein or
necessary to make the statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor WINR shall have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions not in the ordinary course of
business; and there shall not have been any change in the capital stock, or
any material change in the short-term or long-term debt of the Company, or
any material adverse change, or any development involving a prospective
material adverse change, in the general affairs, condition (financial or
otherwise), business, key personnel, property, prospects, net worth or
results of operations of the Company and WINR, considered as a whole, that,
in your judgment, makes it unpractical or inadvisable to offer or deliver
the Securities on the terms and in the manner contemplated in the
Prospectus.
(d) On each Closing Date, there shall have been furnished to the
Underwriters, the opinion of Oppenheimer Wolff & Donnelly, counsel for the
Company, dated such Closing Date and addressed to the Underwriters, to the
effect that:
(i) The Company has all requisite corporate power to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized by all requisite corporate action, duly executed and duly
delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable in accordance with its terms
except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity.
(ii) The Company has all requisite corporate power to execute,
deliver and perform its obligations under the Indenture. The
Indenture has been duly and validly authorized by all requisite
corporate action, duly executed and duly delivered by the Company and
constitutes a valid and binding instrument of the Company, enforceable
against the Company in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity; the Notes being
delivered on the Closing Date have been duly and validly authorized,
and, when executed, authenticated, issued and delivered in accordance
with the terms of the Indenture, will constitute valid and binding
obligations of the Company, enforceable against the
21
<PAGE>
Company in accordance with their terms and entitled to the benefits of
the Indenture, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity. The Notes and the Indenture conform, as to legal matters, to
the descriptions thereof contained in the Registration Statement and
the Prospectus. The Indenture complies in all material respects with
the Trust Indenture Act.
(iii) The execution, delivery and performance of this Agreement,
the Indenture and the Securities and the consummation of the
transactions herein and therein contemplated will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, (A) any agreement or instrument known to
such counsel to which the Company or WINR is a party or by which
either such entity is bound or to which any of their property is
subject, (B) the Company's or WINR's charter or by-laws, or (C) any
law of the United States, any law of any state having jurisdiction
over the Company or WINR or their properties, and rules or regulations
of the United States or any state having jurisdiction over the Company
or WINR or any of their properties, or (D) any order or decree known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company, WINR or any of their respective
properties (except for federal and state securities laws which are not
covered by the opinions expressed in this paragraph (iii)); and no
consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required by the Company or
WINR for the execution, delivery and performance of this Agreement,
the Indenture or the Securities or for the consummation of the
transactions contemplated hereby and thereby, including the issuance
or sale of the Securities by the Company, except such as may be
required under the Act, the Trust Indenture Act or state securities
laws.
(iv) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of capital stock of the Company are, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued and fully
paid and non-assessable. No preemptive rights or registration rights,
contractual or otherwise, of security holders of the Company exist
with respect to the issuance or sale of the Shares by the Company
pursuant to this Agreement and there are no outstanding rights to
acquire registration of shares of Common Stock or other securities of
the Company because of the filing of the Registration Statement
(except such rights as to which adequate waiver has been obtained).
The Shares conform in all material respects to the description
concerning them made in the Prospectus and such description accurately
sets forth the description concerning them required to be set forth in
the Prospectus. The Company has no past or present direct or indirect
22
<PAGE>
subsidiaries other than WINR. All of the outstanding capital stock of
WINR has been duly authorized, validly issued and is fully paid and
non-assessable. The Company or WINR is the registered owner of all
the outstanding shares of capital stock of WINR and, to the knowledge
of such counsel, such shares are not subject to any liens, pledges or
other encumbrances. Except as described in the Registration Statement
and Prospectus, there are no options, warrants, agreements, contracts
or other rights in existence to purchase or acquire from the Company
or WINR any shares of the capital stock of the Company or WINR.
(v) Except as disclosed in the Registration Statement and the
Prospectus, such counsel knows of no action, suit, investigation or
proceeding, governmental or otherwise, pending or overtly threatened
against the Company or WINR, or involving the business or properties
of the Company or WINR with respect to the issuance and sale of the
Securities pursuant to this Agreement and the Indenture or which is
required to be described in the Registration Statement or Prospectus
that is not disclosed as required. Such counsel does not know of any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement which are not described or filed as
required. The descriptions contained in the Registration Statement
and Prospectus of contracts and other documents are accurate and
fairly present the information required to be shown. The statements
contained in the Registration Statement or the Prospectus to the
extent such statements relate to matters of law, descriptions of
statutes, legal or governmental proceedings, regulatory matters or
other legal matters or conclusions of law, fairly summarize such
matters.
(vi) The Registration Statement has become effective under the
Act and the Indenture has been qualified under the Trust Indenture
Act, and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission.
(vii) Each of the Company and WINR has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation with full corporate power to
own, lease and operate its properties and conduct its business as
described in the Registration Statement and Prospectus; and is duly
qualified to do business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases real
property of a nature, or transacts business of a type, that would make
such qualification necessary and in which the failure to so qualify
would have a material adverse effect on the condition (financial or
otherwise), properties,
23
<PAGE>
assets, business, prospects, or results of operation of the Company
and WINR, considered as a whole.
(viii) Neither the Company nor WINR is an investment company,
as defined in the Investment Company Act of 1940, as amended, or a
company controlled by such an investment company.
(ix) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company (other
than the financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations. All documents incorporated by reference in the
Prospectus, when they were filed with the Commission, complied as to
form in all material respects with the requirements of the Exchange
Act; and, although such counsel cannot guarantee, and does not assume
responsibility for, the accuracy, completeness or fairness of the
statements contained in such documents and has not independently
verified the accuracy or completeness of the statements contained in
such documents, such counsel have no reason to believe that any of
such documents, when they were so filed, contained an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading.
(x) Each Selling Shareholder is the sole record and beneficial
owner of the Shares to be sold by him to the Underwriters, and
delivery of the certificates for such Shares pursuant to this
Agreement, upon payment therefor by the Underwriters, will pass
marketable title to such Shares to the Underwriters and the
Underwriters will acquire all the rights of the Selling Shareholders
in such Shares, free and clear of any security interests, claims,
liens or other encumbrances.
(xi) Each Selling Shareholder has the power and authority to
enter into the Custody Agreement, the Power of Attorney and this
Agreement and to perform and discharge such Selling Shareholder's
obligations thereunder and hereunder; and this Agreement, the Custody
Agreement and the Power of Attorney have been duly and validly
authorized, executed and delivered by (or by the Attorneys-in-Fact, or
either of them, on behalf of the Selling Shareholders) and are valid
and binding agreements of the Selling Shareholders, enforceable in
accordance with their respective terms except as rights to indemnity
hereunder or thereunder may be limited by federal or state securities
laws and except as such enforceability may be limited by bankruptcy,
24
<PAGE>
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
(xii) The execution and delivery of this Agreement, the
Custody Agreement and the Power of Attorney and the performance of the
terms hereof and thereof and the consummation of the transactions
herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, rule or regulation, or any agreement or
instrument known to such counsel to which any Selling Shareholder is a
party or by which any Selling Shareholder is bound or to which any of
their respective property is subject, or any order or decree known to
such counsel of any court or government agency or body having
jurisdiction over any Selling Shareholder or any of their respective
properties; and no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the Custody
Agreement and the Power of Attorney or for the consummation of the
transactions contemplated hereby and thereby, including the sale of
the Securities, except such as may be required under the Act or state
securities laws.
In rendering such opinion such counsel may rely as to matters of fact,
to the extent such counsel deems reasonable upon certificates of officers
of the Company or WINR, as appropriate, provided that the extent of such
reliance is specified in such opinion.
Such counsel shall also advise the Underwriters that although they are
not opining as to, and do not assume any responsibility for, and cannot
guarantee the accuracy or completeness of, the statements contained in the
Registration Statement or the Prospectus, on the basis of conferences with
officers of the Company and the Subsidiaries, examination of documents
referred to in the Registration Statement and Prospectus and such other
procedures as such counsel deemed appropriate, nothing has come to the
attention of such counsel that causes such counsel to believe that the
Registration Statement or any further amendment thereto (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion), contained or contains an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any further amendment or supplement thereto
(other than the financial statements and related schedules therein, as to
which such counsel need express no opinion) contained or contains an untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances in which
they were made, not misleading.
25
<PAGE>
(e) On each Closing Date, there shall have been furnished to the
Underwriters, such opinion or opinions from Lindquist & Vennum P.L.L.P.,
counsel for the Underwriters, dated such Closing Date and addressed to the
Underwriters, with respect to the formation of the Company, the validity of
the Securities, the Registration Statement, the Prospectus and other
related matters as the Underwriters reasonably may request, and such
counsel shall have received such papers and information as they request to
enable them to pass upon such matters.
(f) On each Closing Date the Underwriters shall have received letters
from each of KPMG Peat Marwick LLP, dated such Closing Date and addressed
to the Underwriters, confirming that they are independent public
accountants within the meaning of the Act and are in compliance with the
applicable requirements relating to the qualifications of accountants under
Rule 2-01 of Regulation S-X of the Commission, and stating, as of the date
of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date of such letter), the conclusions and findings of
said firm with respect to the consolidated financial information and other
matters covered by its letter (as provided in Exhibit B hereto) delivered
to the Underwriters concurrently with the execution of this Agreement, and
the effect of the letter so to be delivered on such Closing Date shall be
to confirm the conclusions and findings set forth in such prior letter.
(g) On each Closing Date, there shall have been furnished to the
Underwriters a certificate, dated such Closing Date and addressed to the
Underwriters, signed by the President and by the Executive Vice President
and Treasurer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made
at and as of such Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness
of the Registration Statement or any amendment thereof or the
qualification of the Securities for offering or sale has been issued,
and, to the best of their knowledge, no proceeding for that purpose
has been instituted or is contemplated by the Commission or any state
or regulatory body; and
(iii) The signers of said certificate have carefully examined
the Registration Statement and the Prospectus, and any amendments
thereof or supplements thereto, and (A) such documents contain all
statements and
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<PAGE>
information required to be included therein, the Registration
Statement, or any amendment thereof, does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as amended or
supplemented, does not include any untrue statement of material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, (B) since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented prospectus which has not been so set forth,
(C) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the
Company nor WINR has incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions, not
in the ordinary course of business, or declared or paid any dividends
or made any distribution of any kind with respect to its capital
stock, and except as disclosed in the Prospectus, there has not been
any change in the capital stock, or any material change in the
short-term or long-term debt, or any issuance of options, warrants,
convertible securities or other rights to purchase the capital stock
of the Company or WINR, or any material adverse change or any
development involving a prospective material adverse change (whether
or not arising in the ordinary course of business) in the general
affairs, condition (financial or otherwise), business, key personnel,
property, prospects, net worth or results of operations of the Company
and WINR, considered as a whole, and (D) except as stated in the
Registration Statement and the Prospectus, there is not pending, or,
to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company or WINR is a party
before or by any court or governmental agency, authority or body, or
any arbitrator, which might result in any material adverse change in
the condition (financial or otherwise), business, prospects or results
of operations of the Company and WINR, considered as a whole.
(h) On each Closing Date, there shall have been furnished to the
Underwriters a certificate dated such Closing Date and addressed to you,
signed by each Selling Shareholder or either of the Selling Shareholders'
Attorneys-in-Fact to the effect that the representations and warranties of
each Selling Shareholder contained in this Agreement are true and correct
as if made at and as of such Closing Date, and that each Selling
Shareholder has complied with all the agreements and satisfied all the
conditions on each Selling Shareholder's part to be performed or satisfied
at or prior to such Closing Date.
(i) The Company shall have furnished to the Underwriters and their
counsel such additional documents, certificates and evidence as the
Underwriters or their counsel may have reasonably requested.
27
<PAGE>
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters. The Company will furnish the Underwriters with such
conformed copies of such opinions, certificates, letters and other
documents as the Underwriters shall reasonably request.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and each Selling Shareholder, jointly and severally,
agrees to indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter
may become subject, under the Act or otherwise (including in settlement of
any litigation if such settlement is effected with the written consent of
the Company or any Selling Shareholder, as the case may be), insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
including the information deemed to be a part of the Registration Statement
at the time of effectiveness pursuant to Rule 430A, if applicable, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim,
damage, liability or action; provided, however, that neither the Company
nor any Selling Shareholder shall be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by the
Underwriters specifically for use in the preparation thereof; and further
provided, however, that in no event shall any Selling Shareholder be liable
under the provisions of this Section 6 for any amount in excess of the
aggregate amount of net proceeds such Selling Shareholder received from the
sale of the Securities pursuant to this Agreement.
(b) Each Underwriter will indemnify and hold harmless the Company and
the Selling Shareholders against any losses, claims, damages or liabilities
to which the Company and the Selling Shareholders may become subject, under
the Act or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter),
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or
28
<PAGE>
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any such amendment or supplement
thereto, in reliance upon and in conformity with written information
furnished to the Company by such Underwriter, specifically for use in the
preparation thereof, and will reimburse the Company and the Selling
Shareholders for any legal or other expenses reasonably incurred by the
Company and the Selling Shareholders in connection with investigating or
defending against any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be
brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party under such subsection for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if the named parties to any such
action (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of all such parties by
the same counsel would in the judgment of the indemnified party be
inappropriate due to actual or potential differing interests between them,
then the indemnified party shall have the right to employ a single counsel
to represent itself, and the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party or parties and reimbursed
to the indemnified party as incurred (in accordance with the provisions of
the second paragraph in Section 6(a) above). It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the reasonable fees
and expenses of more than one separate firm for the Underwriters and any
controlling persons of the Underwriters; (ii) the reasonable fees and
expenses of more than one separate firm for the Company and its indemnified
officers, directors or controlling persons; and (iii) the reasonable fees
and expenses of more than one separate firm for the Selling Shareholders.
It is further understood that, in any case, the indemnifying party shall,
29
<PAGE>
in addition to the separate firm described above, be responsible for any
fees and expenses of local counsel necessary in connection with any such
proceedings. In the case of any such separate firm for the Underwriters
and such control persons of the Underwriters, such firm shall be designated
by the Underwriters. In the case of any such separate firm for the Company
and such officers, directors and control persons of the Company, such firm
shall be designated by the Company. In the case of any such separate firm
for the Selling Shareholders, such firm shall be designated by a majority
of the Selling Shareholders. An indemnifying party shall not be obligated
under any settlement agreement relating to any action under this Section 6
to which it or he has not agreed in writing.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders on the one
hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Shareholders on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company and the Selling Shareholders bear to the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Shareholders or the
Underwriters and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company, the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
subsection (d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this subsection (d).
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection
(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending against any action or claim which is the
30
<PAGE>
subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. Notwithstanding the provisions of this
Section (d) no Selling Shareholder shall be required to contribute any
amount in excess of the amount by which the net proceeds of the offering
received by the Selling Shareholder exceeds the amount of any damages which
the Selling Shareholder has been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
in this subsection (d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(e) The obligations of the Company or the Selling Shareholders under
this Section 6 shall be in addition to any liability which the Company or
the Selling Shareholders may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters
under this Section 6 shall be in addition to any liability that the
respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each director of the Company, to each officer of
the Company who has signed the Registration Statement and to each person,
if any, who controls the Company within the meaning of the Act.
7. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements of the Company and the Selling
Shareholders herein or in certificates delivered pursuant hereto, and the
agreements of the Underwriters, the Company and the Selling Shareholders
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling person thereof, or the Company or any of its officers,
directors, or controlling persons, or any Selling Shareholder and shall survive
delivery of, and payment for, the Securities to and by the Underwriters
hereunder.
8. SUBSTITUTION OF UNDERWRITERS.
(a) If any Underwriter shall fail to take up and pay for the principal
amount of Firm Notes agreed by such Underwriter to be purchased hereunder,
upon tender of such Firm Shares or Firm Notes, as the case may be, in
accordance with the terms hereof, and the number of Firm Shares or
principal amount of Firm Notes not purchased does not in either case
aggregate more than 10% of the number of Firm Shares or the aggregate
principal amount of Firm Notes, as the case may be, set forth
31
<PAGE>
in Schedule II hereto, the remaining Underwriters shall be obligated,
severally, in proportion to the respective principal amount of Firm Shares
or Firm Notes, as the case may be, which they are obligated to purchase
hereunder, to take up and pay for the number of Firm Shares or the
principal amount of Firm Notes, as the case may be, that the withdrawing or
defaulting Underwriter agreed but failed to purchase.
(b) If any Underwriter shall fail to take up and pay for the number
of Firm Shares or the principal amount of Firm Notes, as the case may be,
agreed by such Underwriter to be purchased hereunder, upon tender of such
Firm Shares or Firm Notes, as the case may be, in accordance with the terms
hereof, and the number of Firm Shares or the principal amount of Firm
Notes, as the case may be, not purchased aggregates more than 10% of the
aggregate number of Firm Shares or the aggregate principal amount of Firm
Notes, as the case may be, set forth in Schedule II hereto, and
arrangements for the purchase of such Firm Shares or Firm Notes by other
persons are not made within 36 hours thereafter, this Agreement shall
terminate. In the event of any such termination the Company shall not be
under any liability to any Underwriter (except to the extent provided in
Section 4(a)(viii) and Section 6 hereof) nor shall any Underwriter (other
than an Underwriter who shall have failed, otherwise than for some reason
permitted under this Agreement, to purchase the number of Firm Shares or
the principal amount of Firm Notes, as the case may be, agreed by such
Underwriter to be purchased hereunder) be under any liability to the
Company (except to the extent provided in Section 6 hereof).
If Firm Shares or Firm Notes to which a default relates are to be
purchased by non-defaulting Underwriters or by any other party or parties,
the non-defaulting Underwriters or the Company shall have the right to
postpone the First Closing Date for not more than seven business days in
order that the necessary changes in the Registration Statement, Prospectus
and any other documents, as well as any other arrangements, may be
effected. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 8.
9. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at 10:00 a.m., Minneapolis
time, on the first business day following the date hereof, or at such
earlier time after the effective date of the Registration Statement as the
Underwriters in their discretion shall first release the Securities for
sale to the public. For the purpose of this Section, the Securities shall
be deemed to have been released for sale to the public upon release by the
Underwriters of the publication of a newspaper advertisement relating
thereto or upon release by the Underwriters of telexes offering the
Securities for sale to securities dealers, whichever shall first occur. By
giving notice as hereinafter specified before the time this Agreement
becomes effective, the Underwriters or the Company may prevent this
Agreement from becoming effective without liability of any party to any
32
<PAGE>
other party, except that the provisions of Section 4(a)(viii) and Section 6
hereof shall at all times be effective.
(b) The Underwriters shall have the right to terminate this Agreement
by giving notice as hereinafter specified at any time at or prior to the
First Closing Date, and either option referred to in Section 3(b), if
exercised, may be cancelled at any time prior to the Firm Shares Closing
Date or Firm Notes Closing Date, as applicable, if (i) the Company shall
have failed, refused or been unable, at or prior to such Closing Date, to
perform any agreement on its part to be performed hereunder, (ii) any other
condition of the Underwriters' obligations hereunder is not fulfilled,
(iii) trading on the New York Stock Exchange or the American Stock Exchange
shall have been wholly suspended, (iv) minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities
shall have been required, on the New York Stock Exchange or the American
Stock Exchange, by such Exchange or by order of the Commission or any other
governmental authority having jurisdiction, (v) a banking moratorium shall
have been declared by Federal, New York or Minnesota authorities, or (vi)
there has occurred any material adverse change in the financial markets in
the United States or an outbreak of major hostilities (or an escalation
thereof) in which the United States is involved, a declaration of war by
Congress, any other substantial national or international calamity or any
other event or occurrence of a similar character shall have occurred since
the execution of this Agreement that, in the Underwriters' judgment, makes
it impractical or inadvisable to proceed with the completion of the sale of
and payment for the Securities. Any such termination shall be without
liability of any party to any other party except that the provisions of
Section 4(a)(viii) and Section 6 hereof shall at all times be effective.
(c) If the Underwriters elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company and the Attorneys-in-Fact shall be notified promptly by the
Underwriters by telephone or telegram, confirmed by letter. If the Company
elects to prevent this Agreement from becoming effective, the Underwriters
and the Attorneys-in-Fact shall be notified by the Company by telephone or
telegram, confirmed by letter.
10. INFORMATION FURNISHED BY UNDERWRITERS. The statements set forth in the
last paragraph of the cover page and, insofar as they relate solely to the
Underwriters, under the caption "Underwriting" in any Preliminary Prospectus and
in the Prospectus constitute the only written information furnished by or on
behalf of the Underwriters referred to in Section 2 and Section 6 hereof.
11. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to the Underwriters c/o Piper Jaffray Inc.,
Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402,
except that notices given to an Underwriter pursuant to
33
<PAGE>
Section 6 hereof shall be sent, if to Piper Jaffray Inc., to the address listed
above, and if to Dain Bosworth Incorporated, to Dain Bosworth Plaza, 60 South
Sixth Street, Minneapolis, Minnesota 55402; if to the Company, shall be mailed,
telegraphed or delivered to it at 1015 Opus Center, 9900 Bren Road East,
Minnetonka, Minnesota 55343; if to a Selling Shareholder, shall be mailed,
telegraphed or delivered to him at the Company at the address given above; or in
each case to such other address as the person to be notified may have requested
in writing. All notices given by telegram shall be promptly confirmed by
letter. Any party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 6. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Securities from any of
the Underwriters.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement among the Company,
the Selling Shareholders and the Underwriters in accordance with its terms.
Very truly yours,
WINTHROP RESOURCES CORPORATION
By __________________________________
[Title]
SELLING SHAREHOLDERS NAMED IN
SCHEDULE I ATTACHED HERETO
By __________________________________
Attorney-in Fact
34
<PAGE>
CONFIRMED
as of the date first
above mentioned
By: PIPER JAFFRAY INC.
By____________________________
Managing Director
Acting on behalf of itself
and the other Underwriters
named in Schedule II
35
<PAGE>
SCHEDULE I
SELLING SHAREHOLDERS
Number of Firm Maximum Number of
Name of Selling Shareholder Shares to be Sold Option Shares to be Sold
- --------------------------- ----------------- ------------------------
Jack A. Norqual............... 250,000 75,000
John L. Morgan................ 250,000 75,000
Kirk A. MacKenzie............. 250,000 75,000
------- -------
Total 750,000 225,000
<PAGE>
SCHEDULE II
Principal Amount Number of
Underwriter of Firm Notes(1) Firm Shares(2)
- ----------- ---------------- --------------
Piper Jaffray Inc.. . . . . . . . .
Dain Bosworth Incorporated. . . . .
Total . . . . . . . . . . $25,000,000 1,500,000
---------- ---------
---------- ---------
____________
(1) The Underwriters may purchase up to an additional $3,750,000 in aggregate
principal amount of Notes, to the extent the option to purchase Option
Notes described in Section 3(b) of the Agreement is exercised, in the
proportions and in the manner described in the Agreement.
(2) The Underwriters may purchase up to an additional 225,000 Shares, to the
extent the option to purchase Option Shares described in Section 3(b) of
the Agreement is exercised, in the proportions and in the manner described
in the Agreement.
<PAGE>
EXHIBIT A
_______________________________
(Print Your Name)
WINTHROP RESOURCES CORPORATION
POWER OF ATTORNEY OF SELLING SHAREHOLDER
__________________
__________________
Winthrop Resources Corporation
1015 Opus Center
9900 Bren Road East
Minneapolis, Minnesota 55343
Gentlemen:
The undersigned shareholder (the "undersigned" or "Selling Shareholder") of
Winthrop Resources Corporation, a Minnesota corporation (the "Company"),
understands that it is contemplated that the Company, the undersigned and
certain other shareholders of the Company (the undersigned and such other
shareholders being hereinafter collectively referred to as the "Selling
Shareholders") will sell shares (the "Shares") of the Company's Common Stock,
$.01 par value per share (the "Common Stock"), to Piper Jaffray Inc. and Dain
Bosworth Incorporated (the "Underwriters") and include the Shares among the
securities covered by a Registration Statement on Form S-2, File No. 333-______
(the "Registration Statement"), which the Company has filed with the Securities
and Exchange Commission (the "Commission) for registration under the Securities
Act of 1933, as amended (the "Act").
Delivered herewith are: information relating to the Shares delivered
herewith for sale (Exhibit A); Substitute Form W-9 (Exhibit B); the proposed
form of Custody Agreement among the Selling Shareholders and _____________ (the
"Custodian") who will act as custodian (Exhibit C); and a Stock Power for
endorsement of the Shares (Exhibit D).
1. In connection with the foregoing, the undersigned hereby appoints
_____________ and ________________, and either one of them, the
attorneys-in-fact (the "Attorneys") of the undersigned, with full power and
authority in the name of and for and on behalf of the undersigned:
(a) To enter into the Custody Agreement in substantially the form attached
hereto as Exhibit C, and to deposit with the Custodian pursuant
thereto the certificates
A-1
<PAGE>
representing the Shares to be delivered to the Attorneys concurrently
herewith and described on Exhibit A hereto;
(b) To sell to the Underwriters, as contemplated by the Purchase Agreement
among the Company, the Selling Shareholders and the Underwriters (the
"Purchase Agreement"), all or a portion of the number of Shares
(represented by certificates delivered by the undersigned herewith)
set forth in Exhibit A hereto under item (b);
(c) For the purpose of effecting such sale, to execute and deliver a
Purchase Agreement in substantially the form filed as an exhibit to
the Registration Statement, but with appropriate insertions for the
purchase price approved by the Pricing Committee of the Company's
Board of Directors and such other modifications to said form which are
approved by the Attorneys and do not materially modify the rights or
obligations of the Selling Shareholders. The public offering price of
the Shares shall be the same as the initial public offering price of
the shares of Common Stock to be sold by the Company in connection
with the proposed offering.
(d) To endorse, transfer and deliver certificates for the Shares to or on
the order of the Underwriters or to their nominee or nominees, and to
give such orders and instructions to the Custodian as the Attorneys,
in their sole discretion, may determine, with respect to (i) the
transfer on the books of the Company of the Shares in order to effect
such sale (including the names in which new certificates representing
the Shares are to be issued and the denominations thereof), (ii) the
delivery to or for the account of the Underwriters of the certificates
representing the Shares against receipt by the Custodian of the
purchase price to be paid therefor, (iii) the remittance to the
undersigned of the balance of the proceeds from the sale of the Shares
after deducting underwriting discounts and commissions, and (iv) the
return to the undersigned of new certificates representing the number
of Shares of the Company, if any, represented by certificates
deposited with the Custodian but not sold by the undersigned pursuant
to the Registration Statement as contemplated herein for any reason;
(e) To retain legal counsel in connection with any and all matters
referred to herein (which counsel will be counsel for the Company);
(f) To take for the Selling Shareholder all steps deemed necessary or
advisable by the Attorneys in connection with the registration of the
Shares under the Act, including without limitation, filing amendments
to the Registration Statement, increasing or decreasing the number of
Shares to be sold by the Selling Shareholder proportionately with any
increase or decrease in the number of
A-2
<PAGE>
shares to be sold by the other Selling Shareholders or reallocating
Shares between the Shares being sold on a firm basis and the Shares
subject to the Underwriters' over-allotment option (provided that such
reallocation is consistent with any reallocation applicable to the
other Selling Shareholders), requesting the acceleration of
effectiveness of the Registration Statement, informing the Commission
that the Selling Shareholder has no knowledge of any material adverse
information with respect to the current and prospective operations of
the Company which is not stated in the Registration Statement, and
such other steps as the Attorneys may in their reasonable discretion
deem necessary or advisable;
(g) To make, acknowledge, verify and file on behalf of the Selling
Shareholder applications, consents to service of process and such
other undertakings or reports as may be required by law with state
commissioners or officers administering state securities or Blue Sky
laws and to take any other action required to facilitate the
qualification of the Shares under the securities or Blue Sky laws of
the jurisdictions in which Shares are to be offered; PROVIDED, HOWEVER
that the Attorneys shall not have the authority to file a general
consent to service of process in any jurisdiction;
(h) To make, execute, acknowledge and deliver all such other contracts,
orders, receipts, notices, requests, instructions, certificates,
letters and other writings and amendments to the Purchase Agreement
(subject, in the case of the Purchase Agreement, to the limitation
stated in paragraph (c) above), and specifically including United
States Treasury Department Form W-9 (or other applicable forms or
statements specified by Treasury Department regulations in lieu
thereof), and in general to do all things and to take all action,
which the Attorneys, or either of them, in their sole discretion, may
consider necessary or proper in connection with or to carry out the
aforesaid sale of Shares as fully as could the undersigned if
personally present and acting as contemplated by the Purchase
Agreement; and
(i) To file on behalf of the undersigned the Registration Statement, any
amendments thereto and any supplements to the prospectus contained in
the Registration Statement at the time it becomes effective (the
"Prospectus"),
as fully as could the undersigned if personally present and acting.
2. In connection with the foregoing, the undersigned hereby represents,
warrants, and covenants that:
(a) All information furnished to the Company by or on behalf of the
undersigned for use in connection with the preparation of the
Registration Statement is and
A-3
<PAGE>
will be true and correct in all material respects and does not and
will not omit any material fact necessary to make such information not
misleading.
(b) The undersigned has, and at the time of delivery of the Shares to the
Underwriters will have, full power and authority to enter into this
Power of Attorney, to carry out the terms and provisions hereof and to
make all the representations, warranties and covenants contained
herein. The undersigned has duly executed and delivered this Power of
Attorney, appointing the Attorneys as attorneys-in-fact for the
undersigned with authority to execute and deliver the Custody
Agreement and the Purchase Agreement and otherwise to act as specified
in this Power of Attorney on behalf of the undersigned in connection
with the transactions contemplated by the Purchase Agreement.
(c) In connection with the offering of the Shares, the Selling Shareholder
has not taken and will not take, directly or indirectly, any action
designed to, or which might reasonably be expected to, cause or result
in stabilization or manipulation of the price of the Shares to
facilitate the sale or resale of the Shares.
(d) The undersigned has not distributed and will not distribute any
prospectus or other offering material in connection with the offering
and sale of the Shares other than a Preliminary Prospectus contained
in the Registration Statement, the Prospectus or other material
permitted by the Act.
(e) The undersigned has, and at the respective times and dates of delivery
to the Underwriters of the Shares (the "Dates of Delivery") will have,
good and marketable title to the Shares, free and clear of all liens,
encumbrances, security interests and claims whatsoever, with full
right and authority to sell and deliver the same; the undersigned has
full right, power and authority to enter into the Purchase Agreement
and to carry out all the terms and provisions thereof to be carried
out by the undersigned; and upon the delivery of and payment for the
Shares, as contemplated by the Purchase Agreement, the Underwriters
will receive good and marketable title to the Shares, free and clear
of all liens, encumbrances, equities, security interests, claims,
restrictions on transfer, legend, proxies, or other defect in title,
and the Shares are, and on the respective Dates of Delivery will be,
validly issued, fully paid and nonassessable.
(f) This Power of Attorney is the valid and binding agreement of the
undersigned and is enforceable against the undersigned in accordance
with its terms. The consummation by the undersigned of the
transactions contemplated by the Purchase Agreement and the
fulfillment of the terms thereof will not result in a breach of any of
the terms and provisions of, or constitute a default under, any
agreement or other instrument to which the undersigned is a party or
by which
A-4
<PAGE>
the undersigned is, or the Shares are, bound, or any judgment, decree,
order, rule or regulation of any court or other governmental body
applicable to the undersigned or to the Shares. No consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body is required for the execution, delivery and performance
of this Power of Attorney or the Purchase Agreement by or on behalf of
the undersigned or for the consummation by the undersigned of the
transactions contemplated hereby and thereby, except as such may be
required under the Act or state securities or Blue Sky laws.
(g) For a period of 120 days after the date of the final prospectus
contained in the Registration Statement, the undersigned will not,
without the prior written consent of Piper Jaffray Inc., sell,
contract to sell or grant any option for the sale of or otherwise
dispose of any Shares of Common Stock of the Company (other than the
Shares sold pursuant to the Purchase Agreement) or other securities
convertible into or exercisable for such Shares owned by the
undersigned, either directly or indirectly.
(h) The undersigned will carefully review the Registration Statement and
will carefully review each amendment thereto immediately upon receipt
thereof from the Company and will promptly advise the Company in
writing if:
(i) The information with respect to the undersigned is not properly
set forth in each preliminary prospectus (the "Preliminary
Prospectus") contained in the Registration Statement and the
Prospectus (the "Prospectus") contained in the Registration
Statement at the time it becomes effective;
(ii) The undersigned has reason to believe that (A) any information
furnished to the Company by or on behalf of the undersigned for
use in connection with the Registration Statement or the
Prospectus or any Preliminary Prospectus is not true and
complete; or (B) any Preliminary Prospectus, the Prospectus and
any supplement or supplements thereto contains or contain any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(iii)The undersigned knows of any material adverse information
with respect to the current or prospective operations of the
Company which is not disclosed in any Preliminary
Prospectus, the Prospectus or the Registration Statement;
and
(iv) Except as indicated in the Prospectus, the undersigned knows of
any arrangements made or to be made by any person, or of any
transaction
A-5
<PAGE>
already effected, (A) to limit or restrict the sale of Shares of
the Company's Common Stock during the period of the public
distribution, (B) to stabilize the market for the Common Stock or
(C) for withholding commissions, or otherwise to hold any other
person responsible for the distribution of the undersigned's
participation.
(i) The undersigned will review a draft of the Purchase Agreement, and (i)
will promptly advise the Company in writing if the representations and
warranties set forth therein are not true and correct with respect to
the undersigned, and (ii) the undersigned will comply with the
agreements and covenants set forth in the Purchase Agreement.
(j) The undersigned authorizes Attorneys to represent and warrant on
behalf of the undersigned to the National Association of Securities
Dealers, Inc., that the undersigned is not a director, partner,
officer or employee of, and does not have any substantial interest in
or own beneficially, directly or indirectly, any share of capital
stock of, any partnership, association, corporation or firm whose
business is investment banking, dealing in securities or the
underwriting of securities.
(k) The undersigned will notify the Company in writing immediately of any
changes in the foregoing information which should be made as a result
of developments occurring after the date hereof and prior to the First
Closing Date and the Option Shares Closing Date under the Purchase
Agreement, and the Attorneys may consider that there has not been any
such development unless advised to the contrary.
The representations, warranties and covenants set forth in this Section 2
may be relied upon, and are made for the benefit of, the Attorneys, the Company,
the Underwriters and Oppenheimer Wolff & Donnelly, counsel for the Company.
3. This Power of Attorney and all authority conferred hereby are granted
and conferred subject to the interests of the Underwriters, the Company and the
other Selling Shareholders who may become parties to the Purchase Agreement, and
in consideration of those interests, and for the purpose of completing the
transactions contemplated by the Underwriting Agreement and this Power of
Attorney. This Power of Attorney and all authority conferred hereby shall be
irrevocable and shall not be terminated by the undersigned or by operation of
law, whether by the death, incapacity, disability or liquidation of the
undersigned or the occurrence of any other event (including, without limitation,
the termination of any trust or estate for which the undersigned is acting as
fiduciary or the death or incapacity of any trustee or trustees or any executor
or executors or administrator or administrators, respectively, of such trust or
estate). If the undersigned should die, become incapacitated or disabled or be
liquidated, or if any other such event shall occur, before the
A-6
<PAGE>
delivery of the Shares, certificates for the Shares shall be delivered by or on
behalf of the undersigned in accordance with the terms and conditions of the
Purchase Agreement and the Custody Agreement, and actions taken by the
Attorneys, or either of them, pursuant to this Power of Attorney shall be as
valid as if such death, incapacity, disability or liquidation or other event had
not occurred, regardless of whether or not the Custodian, the Attorneys, or any
one of them shall have received notice of such death, incapacity, disability or
liquidation or other event.
Notwithstanding the foregoing, if the Purchase Agreement shall not be
entered into on or prior to August 31, 1996, then from and after such date the
undersigned shall have the power, by giving written notice to the Attorneys, in
care of the Custodian, to terminate this Power of Attorney, subject, however, to
all lawful action done or performed by the Attorneys, or either of them,
pursuant to this Power of Attorney prior to the actual receipt of such notice.
4. The undersigned ratifies all that the Attorneys shall do by virtue of
and in accordance with this Power of Attorney.
5. The undersigned agrees that the Attorneys shall not be liable for any
action taken hereunder, for any failure to act hereunder, or for any other
reason except gross negligence or willful misconduct. The undersigned hereby
agrees to indemnify and hold harmless the Attorneys from and against any and all
loss, damage, liability or expense that such Attorneys may sustain directly or
indirectly for any action in connection with this Power of Attorney taken or
omitted in good faith or in accordance with an opinion of counsel, who may be
counsel for the Company.
6. The undersigned declares that, subject to the provisions of this Power
of Attorney, until payment in full for the Shares has been made pursuant to the
provisions of the Custody Agreement and the Purchase Agreement, the undersigned
shall remain the owner of the Shares for the purpose of exercising the rights of
the undersigned as a security holder of the Company.
7. In case any provision in this Power of Attorney shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8. This Power of Attorney shall be governed by the laws of the State of
Minnesota applicable to contracts made and to be performed entirely in such
state.
9. Any notices given pursuant to this Power of Attorney shall be deemed
given if in writing and delivered in person, or by telefax or if given by the
telephone or telegraph if subsequently confirmed by letter, (i) to the
undersigned at the address set forth below the undersigned's signature on this
Power of Attorney, (ii) to the respective Attorneys at the
A-7
<PAGE>
address set forth above, or (iii) in each such case, to such other address as a
party shall give notice to all other parties of this Power of Attorney as
provided in this paragraph.
Dated: ________________ , 1996 Very truly yours,
__________________________
Signature(s) of Selling Shareholder(s)*
*You should sign in exactly the same
manner as the shares are registered.
Signature(s) Medallion guaranteed by:
(Note: All signatures must be Medallion
guaranteed by a bank or broker. See
Instructions.)
Shareholders' Addresses:
__________________________________________
__________________________________________
__________________________________________
A-8
<PAGE>
EXHIBIT A TO POWER OF ATTORNEY
DELIVERY OF SHARES FOR SALE
(a) Number of shares I currently hold: ___________________ Shares
(b) NUMBER OF SHARES TO BE SOLD IN OFFERING:
250,000 shares plus up to 75,000 shares to be sold upon exercise of the
Underwriters' over-allotment option.
(c) STOCK CERTIFICATES DELIVERED HEREWITH:
- -------------------------------------------------------------------------------
Serial Number of Certificates Number of Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-------------------
Total Number of Shares Delivered: -------------------
- -------------------------------------------------------------------------------
(d) PAYMENT SHOULD BE MADE BY CHECK MAILED TO THE FOLLOWING ADDRESS:
Name of Payee:___________________________________
Address:_________________________________________
_________________________________________________
Zip Code:________________________________________
(e) THE SELLING SHAREHOLDER SHOULD INITIAL THIS PAGE
HERE: __________
A-9
<PAGE>
EXHIBIT B TO POWER OF ATTORNEY
FORM W-9 INFORMATION
Under current federal income tax law, a shareholder whose shares are sold
is required to provide the Custodian with such shareholder's correct Taxpayer
Identification Number (TIN) on Substitute Form W-9 below. If backup withholding
applies to a shareholder, the Custodian is required to make such withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Custodian.
To prevent backup withholding on payments that are made to a shareholder
with respect to shares and/or warrants, the shareholder is required to notify
the Custodian of his or her correct TIN by completing the form below. If you
have been notified by the IRS that backup withholdings applies to you, check the
appropriate box below.
The shareholder is required to give the Custodian the social security
number or employer identification number of the record owner of the certificates
representing shares to be sold.
A-10
<PAGE>
- -------------------------------------------------------------------------------
SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER: ___________________________________
(If awaiting a TIN, leave blank
and sign Certificate below.)
- -------------------------------------------------------------------------------
BACKUP WITHHOLDING STATUS (CHECK ONE):
/ / I am NOT subject to backup withholding because (1) I have not been notified
by the IRS that I am subject to backup withholding as a result of failure
to report all interest or dividends or (2) the IRS has notified me that I
am no longer subject to backup withholding.
/ / I have been notified by the IRS that I AM subject to backup withholding.
- -------------------------------------------------------------------------------
CERTIFICATION - Under penalties of perjury, I hereby certify that the
information provided on this form is true, correct and complete.
Signature Date
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 20% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
Signature Date
- -------------------------------------------------------------------------------
A-11
<PAGE>
EXHIBIT C TO POWER OF ATTORNEY
WINTHROP RESOURCES CORPORATION
CUSTODY AGREEMENT
[NAME OF CUSTODIAN]
[ADDRESS]
Ladies and Gentlemen:
Winthrop Resources Corporation, a Minnesota corporation (the "Company"),
has filed a Registration Statement (the "Registration Statement") with the
Securities and Exchange Commission to register for sale to the public under the
Securities Act of 1933, as amended (the "Act"), shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock"). The shares covered by the
Registration Statement include up to 750,000 shares of Common Stock (such shares
of Common Stock are referred to as the "Shares") to be sold by current
shareholders of the Company (each a "Selling Shareholder" and collectively the
"Selling Shareholders").
Each of the Selling Shareholders has executed and delivered a Power of
Attorney (the "Power of Attorney") naming _______________ and ________________,
and either one of them (the "Attorneys"), such Selling Shareholder's
attorneys-in-fact for certain purposes, including the execution, delivery and
performance of this Agreement in such Selling Shareholder's name, place and
stead, in connection with the proposed sale by each Selling Shareholder of the
number of shares of Common Stock set forth opposite such Selling Shareholder's
name in Annex I.
The Selling Shareholders hereby agree with you as follows:
1. You are authorized and directed to hold the certificates deposited in
your custody, and at such time or times as the Attorneys shall have instructed
you from time to time, you are (i) to cause the number of Shares to be
transferred on the books of the Company into such names as Piper Jaffray Inc. or
Dain Bosworth Incorporated (the "Underwriters") shall have instructed you and to
issue, as Transfer Agent for the Company, against surrender of the certificates
representing such Shares registered in such names and in such denominations as
the Underwriters shall have instructed you, and (ii) upon the instructions of
the Attorneys, to deliver such new certificates to the Underwriters or to such
other person or persons as the Attorneys shall have instructed you, against
payment for such Shares, and to give receipt for such payment, and to deposit
the same to your account as Custodian, and to draw upon such account to pay such
expenses, if any, as you may be instructed to pay by the Attorneys, and
A-12
<PAGE>
when instructed by the Attorneys to do so, you are to remit the balance, after
deducting such expenses, of the amount received by you as payment for such
Shares to the respective accounts of the Selling Shareholders as instructed by
the Attorneys. With such remittance you shall also return to each Selling
Shareholder, if so instructed by the Attorneys, new certificates representing
and/or covering the number of shares of Common Stock, if any, of the Company
represented by the certificates deposited that are in excess of the number of
Shares sold by such Selling Shareholder to the Underwriters.
2. Pursuant to the Power of Attorney, the Selling Shareholders, upon
execution and subject to the terms of the Purchase Agreement, will have
unqualifiedly committed to sell the Shares to the Underwriters. If the Purchase
Agreement shall not be entered into on or prior to August 31, 1996, then, upon
the written request of the Attorneys to you on or after such date, you are to
return to the Selling Shareholders any certificates that remain on deposit,
subject in each case to the indemnification obligations set forth in paragraph
7.
3. Under the terms of each Power of Attorney, the authority conferred
thereby is subject to the interests of the Underwriters, the Company and the
other Selling Shareholders and, prior to August 31, 1996, is irrevocable and not
subject to termination by any Selling Shareholder or by operation of law,
whether by death, incapacity, disability or liquidation or otherwise (including,
without limitation, the termination of any trust or estate for which any Selling
Shareholder is acting as fiduciary or fiduciaries), and the obligations of each
Selling Shareholder under the Purchase Agreement are to be similarly not subject
to termination. Accordingly, the certificates deposited and this Custody
Agreement and your authority are subject to the interests of the Underwriters,
the Company and all of the Selling Shareholders, and this Custody Agreement and
your authority hereunder shall be irrevocable and shall not be subject to
termination by any Selling Shareholder or by operation of law, whether by the
death, incapacity, disability or liquidation of any Selling Shareholder or the
occurrence of any other event. If any Selling Shareholder should die, become
incapacitated or disabled or be liquidated, or if any other such event should
occur, before the delivery of the Shares owned by such Selling Shareholder to
the Underwriters under the Purchase Agreement, certificates for such Shares
shall be delivered by or on behalf of such Selling Shareholder to the
Underwriters in accordance with the terms and conditions of the Purchase
Agreement and this Custody Agreement, and actions taken by the Attorneys,
pursuant to the Power of Attorney executed by such Selling Shareholder shall be
as valid as if such death, incapacity, disability or liquidation or other event
had not occurred, regardless of whether or not you or the Attorneys, or either
of them, or the Custodian, shall have received notice of such death, incapacity,
disability or liquidation or other event.
4. It is understood that this transaction will be reported to the
Internal Revenue Service on Form 1099B. To facilitate this report and eliminate
the need for any backup withholding, a Substitute Form W-9 for each Selling
Shareholder is being furnished with this document.
5. Until payment of the purchase price for the Shares to be sold by the
Selling Shareholders to the Underwriters has been made to you by the
Underwriters, the Selling
A-13
<PAGE>
Shareholders shall remain the respective owners of the Shares and shall have the
right to vote shares of Common Stock and all other shares, if any, represented
by the certificates deposited and to receive all dividends and distributions
thereon. Until such payment in full has been made or until the offering of
Shares has been terminated, each Selling Shareholder agrees that such Selling
Shareholder will not sell, pledge, hypothecate, grant any lien on, transfer
(whether by gift or otherwise), deal with or contract with respect to the Shares
and any interests therein.
6. You shall be entitled to act and rely upon any statement, request,
notice or instructions respecting this Custody Agreement given to you by the
Attorneys, provided, however, that any statement or notice to you with respect
to the Closing Date under the Purchase Agreement, or with respect to the
noneffectiveness or termination of the Purchase Agreement, or advising that the
Purchase Agreement has not been executed and delivered, shall have been
confirmed in writing to you by the Underwriters.
7. It is understood that you assume no responsibility or liability to any
person other than to deal with the certificates deposited and the proceeds from
the sale of the Shares represented thereby in accordance with the provisions of
this Custody Agreement, and the undersigned agrees to indemnify and hold you
harmless with respect to anything done by you in good faith in accordance with
the foregoing instructions.
8. Each of the Selling Shareholders, severally and not jointly, hereby
represents and warrants that (a) such Selling Shareholder has, and at the time
of delivery of the Selling Shareholder's Shares to the Underwriters will have,
full power and authority to enter into this Custody Agreement and the Power of
Attorney, to carry out the terms and provisions hereof and thereof and to make
all of the representations, warranties and covenants contained herein and
therein; (b) this Custody Agreement and the Power of Attorney are the valid and
binding agreements of such Selling Shareholder and are enforceable against such
Selling Shareholder in accordance with their respective terms; and (c) that the
Underwriters will receive good title to the Shares, free and clear of all liens,
encumbrances, security interests, equities and claims of any nature.
9. It is understood that you are authorized to accept this Agreement.
The Selling Shareholders agree, severally and not jointly, to indemnify and hold
you harmless from all costs, damages, attorneys' fees, expenses, liabilities,
suits or other claims arising from any actions taken or omitted by you in good
faith and without negligence in accordance with the terms of this Agreement and
upon instructions from the Attorneys, or either of them.
10. This instrument shall be governed by the laws of the State of
Minnesota.
A-14
<PAGE>
Please acknowledge your acceptance hereof as Custodian and receipt of the
certificates deposited by executing and returning the enclosed copy hereof to
the Attorneys.
Dated: _______________________________ , 1996
Very truly yours,
THE SELLING SHAREHOLDERS LISTED IN ANNEX I HERETO
By ________________________________
Attorney-in-Fact for
the Selling Shareholders
A-15
<PAGE>
ACKNOWLEDGMENT AND RECEIPT
____________________________, as Custodian, acknowledges acceptance of the
duties of Custodian under the foregoing Custody Agreement and receipt of the
certificates referred to therein.
Dated: ___________, 1996
[NAME OF CUSTODIAN]
By ________________________________
Its________________________________
A-16
<PAGE>
ANNEX I
SELLING SHAREHOLDERS
1. Jack A. Norqual
2. John L. Morgan
3. Kirk A. MacKenzie
A-17
<PAGE>
EXHIBIT D TO POWER OF ATTORNEY
STOCK POWER
(ASSIGNMENT SEPARATE FROM CERTIFICATE)
FOR VALUE RECEIVED, the undersigned (the "Selling Shareholder") does hereby
sell, assign and transfer unto ________________________, pursuant to the
Purchase Agreement referred to in the attached Power of Attorney of Selling
Shareholder, that number of shares of the Common Stock, $.01 par value per
share, of Winthrop Resources Corporation, a Minnesota corporation, as is
indicated on Exhibit A to the attached Power of Attorney of Selling Shareholder,
standing in the name of the undersigned on the books of said corporation and
represented by the certificate(s) indicated on said Exhibit A and delivered
herewith, and does hereby irrevocably constitute and appoint
_________________________________________ attorney to transfer the said stock on
the books of Winthrop Resources Corporation with full power of substitution in
the premises.
Dated: _________________, 1996
________________________________________
Signature(s) of Selling Shareholder(s)*
*You should sign in exactly the same manner as the
shares are registered.
Signature(s) Medallion guaranteed by:
(Note: All signatures must be
guaranteed by a bank or broker)
A-18
<PAGE>
EXHIBIT B
ACCOUNTANTS' LETTERS
A letter from KPMG Peat Marwick LLP dated and delivered on the date this
Agreement is executed and a similar certificate or letter dated and delivered on
each Closing Date, confirming that they are independent public accountants
within the meaning of the Act and the published rules and regulations
thereunder, shall be issued to the Underwriters stating that:
(a) on the basis of a limited review of unaudited consolidated
financial statements, including a reading of the latest available financial
statements, a reading of the minutes of the meetings of the Board of Directors
of the Company, and discussions with officials of the Company responsible for
financial and accounting matters as to transactions and events subsequent to
[DATE OF MOST RECENT FINANCIAL DATA IN PROSPECTUS], and such other inquiries and
procedures as they may specify, nothing has come to their attention which, in
their judgment, would indicate,
(i) that the unaudited consolidated financial statements of the
Company included in the Registration Statement and Prospectus do not comply
in form in all material respects with the applicable accounting
requirements of the Act and of the related published rules and regulations,
or that such unaudited consolidated financial information contained in the
Registration Statement was not prepared in conformity with generally
accepted accounting principles applied on a basis substantially consistent,
in all material respects, with those followed in the preparation of the
audited financial statements of the Company included therein;
(ii) at the date of the latest balance sheet read by them and at
a subsequent specified date not more than five business days prior to the
date of such letter there was any decrease in the common stock or increase
in long-term debt of the Company as compared with amounts shown in the
unaudited consolidated balance sheet as of [DATE OF MOST RECENT FINANCIAL
DATA IN PROSPECTUS], included in the Registration Statement, except for
changes which the Registration Statement discloses have occurred or may
occur;
(iii) at the date of the latest balance sheet read by them and
at a subsequent specified date not more than five business days prior to
the date of such letter there were any decreases, as compared with amounts
shown in the balance sheet as of [DATE OF MOST RECENT FINANCIAL DATA IN
PROSPECTUS] included in the Registration Statement, in total assets,
shareholders' equity of the Company, except for decreases which the
Registration Statement discloses have occurred or may occur or which are
described in such letter;
B-1
<PAGE>
(iv) for the period from [DATE OF MOST RECENT FINANCIAL DATA IN
PROSPECTUS] to the date of the latest statement of operations read by them
there were any decreases, as compared with the corresponding period of the
preceding year, in revenues or the total or per share amounts of net income
of the Company, except for decreases which the Registration Statement
discloses have occurred or may occur or which are described in such letter;
(v) for the period from the date of the latest statement of
operations to a subsequent specified date not more than five business days
prior to the date of such letter, that certain conclusions described in
such letter were not correct, except as otherwise described in the
Registration Statement or such letter; and
(b) they have compared specific dollar amounts, numbers of shares,
and other financial information pertaining to the Company set forth in the
Registration Statement, which have been specified by the Underwriters prior to
the date of this Agreement, to the extent that such amounts, numbers and
information may be derived from the general accounting records of the Company,
and excluding any questions requiring any interpretation by legal counsel, with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an audit in
accordance with generally accepted auditing standards) set forth in the letter,
and found them to be in agreement.
B-2
<PAGE>
EXHIBIT 4.5
WINTHROP RESOURCES CORPORATION
AS ISSUER
TO
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
AS TRUSTEE
INDENTURE
_______________, 1996
<PAGE>
__% SENIOR NOTES DUE 2003
WINTHROP RESOURCES CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED
AND INDENTURE, DATED AS OF __________, 1996
Trust Indenture Act Indenture
Section Section
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . 608
Section 310 (a)(2) . . . . . . . . . . . . . . . . . . . 608
Section 310 (a)(3) . . . . . . . . . . . . . . . . . . . Inapplicable
Section 310 (a)(4) . . . . . . . . . . . . . . . . . . . Inapplicable
(b) . . . . . . . . . . . . . . . . . . . 605
. . . . . . . . . . . . . . . . . . . 609
Section 311 . . . . . . . . . . . . . . . . . . . 605
Section 312 (a) . . . . . . . . . . . . . . . . . . . 701
. . . . . . . . . . . . . . . . . . . 702
(b) . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . 702
Section 313 (a) . . . . . . . . . . . . . . . . . . . 703
(b)(1) . . . . . . . . . . . . . . . . . . . Inapplicable
(b)(2) . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . 703
Section 314 (a) . . . . . . . . . . . . . . . . . . . 704
. . . . . . . . . . . . . . . . . . . 1012
(b) . . . . . . . . . . . . . . . . . . . Inapplicable
(c)(1) . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Inapplicable
(d) . . . . . . . . . . . . . . . . . . . Inapplicable
(e) . . . . . . . . . . . . . . . . . . . 102
Section 315 (a) . . . . . . . . . . . . . . . . . . . 601
. . . . . . . . . . . . . . . . . . . 603
(b) . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . 601
. . . . . . . . . . . . . . . . . . . 603
(e) . . . . . . . . . . . . . . . . . . . 603
. . . . . . . . . . . . . . . . . . . 607
ii
<PAGE>
Section 316 (a)(1)(A) . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . Inapplicable
(b) . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . 104
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . 1003
Section 318 (a) . . . . . . . . . . . . . . . . . . . 108
______________________________________________________
NOTE: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
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TABLE OF CONTENTS
ARTICLE ONE - DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . 1
Section 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ACQUIRED INDEBTEDNESS . . . . . . . . . . . . . . . . . . . 2
ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . 2
AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . . . 2
AUTHORIZED NEWSPAPER. . . . . . . . . . . . . . . . . . . . 2
BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 3
BOARD RESOLUTION. . . . . . . . . . . . . . . . . . . . . . 3
BUSINESS DAY. . . . . . . . . . . . . . . . . . . . . . . . 3
CAPITALIZED LEASE OBLIGATION. . . . . . . . . . . . . . . . 3
COMMISSION. . . . . . . . . . . . . . . . . . . . . . . . . 3
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 3
COMPANY REQUEST . . . . . . . . . . . . . . . . . . . . . . 3
COMPANY ORDER . . . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED. . . . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED NET WORTH. . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED SUBSIDIARY . . . . . . . . . . . . . . . . . . 4
CORPORATE TRUST OFFICE. . . . . . . . . . . . . . . . . . . 4
CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . 4
DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . 4
DEPOSITORY. . . . . . . . . . . . . . . . . . . . . . . . . 4
EVENT OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 4
FUNDED RECOURSE DEBT. . . . . . . . . . . . . . . . . . . . 4
GOVERNMENT OBLIGATIONS. . . . . . . . . . . . . . . . . . . 5
HOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . 5
INDEPENDENT PUBLIC ACCOUNTANTS. . . . . . . . . . . . . . . 5
INITIAL INTEREST ACCRUAL DATE . . . . . . . . . . . . . . . 6
INTEREST PAYMENT DATE . . . . . . . . . . . . . . . . . . . 6
ISSUE DATE. . . . . . . . . . . . . . . . . . . . . . . . . 6
LEGAL HOLIDAY . . . . . . . . . . . . . . . . . . . . . . . 6
MATURITY. . . . . . . . . . . . . . . . . . . . . . . . . . 6
MAXIMUM ANNUAL REPAYMENT AMOUNT . . . . . . . . . . . . . . 6
MONEY . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
NOTE" OR "NOTES . . . . . . . . . . . . . . . . . . . . . . 6
NOTE REGISTER" AND "NOTE REGISTRAR. . . . . . . . . . . . . 6
OFFICE OR AGENCY. . . . . . . . . . . . . . . . . . . . . . 6
OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . 6
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OPINION OF COUNSEL. . . . . . . . . . . . . . . . . . . . . 7
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . 7
PAYING AGENT. . . . . . . . . . . . . . . . . . . . . . . . 8
PERSON. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PLACE OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . 8
PREDECESSOR NOTE. . . . . . . . . . . . . . . . . . . . . . 8
REDEMPTION DATE . . . . . . . . . . . . . . . . . . . . . . 8
REDEMPTION PRICE. . . . . . . . . . . . . . . . . . . . . . 8
REGULAR RECORD DATE . . . . . . . . . . . . . . . . . . . . 8
REPAYMENT DATE. . . . . . . . . . . . . . . . . . . . . . . 8
REPAYMENT PRICE . . . . . . . . . . . . . . . . . . . . . . 8
RESPONSIBLE OFFICER . . . . . . . . . . . . . . . . . . . . 8
RESTRICTED PAYMENT. . . . . . . . . . . . . . . . . . . . . 8
SPECIAL RECORD DATE . . . . . . . . . . . . . . . . . . . . 9
STATED MATURITY . . . . . . . . . . . . . . . . . . . . . . 9
SUBSIDIARY. . . . . . . . . . . . . . . . . . . . . . . . . 9
TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . 9
TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . 9
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 9
UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . 9
VICE PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . 9
VOTING STOCK. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 102. Compliance Certificates and Opinions. . . . . . . . . . . . 9
Section 103. Form of Documents Delivered to Trustee. . . . . . . . . . . 10
Section 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . 11
Section 105. Notices, Etc. to Trustee and Company. . . . . . . . . . . . 12
Section 106. Notice to Holders of Notes; Waiver. . . . . . . . . . . . . 13
Section 107. Language of Notices . . . . . . . . . . . . . . . . . . . . 13
Section 108. Conflict with Trust Indenture Act . . . . . . . . . . . . . 13
Section 109. Effect of Headings and Table of Contents. . . . . . . . . . 13
Section 110. Successors and Assigns. . . . . . . . . . . . . . . . . . . 14
Section 111. Separability Clause . . . . . . . . . . . . . . . . . . . . 14
Section 112. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 14
Section 113. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 14
Section 114. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . 14
Section 115. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 116. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICE TWO - FORM OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . 15
Section 202. Form of Face of Note. . . . . . . . . . . . . . . . . . . . 16
Section 203. Form of Reverse of Note . . . . . . . . . . . . . . . . . . 18
Section 204. Form of Trustee's Certificate of Authentication . . . . . . 20
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Section 205. Notes in Global Form . . . . . . . . . . . . . . . . . . 21
ARTICLE THREE - THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . 21
Section 302. Currency; Denominations . . . . . . . . . . . . . . . . . . 22
Section 303. Execution, Authentication, Delivery and Dating. . . . . . . 22
Section 304. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . 23
Section 305. Registration, Transfer and Exchange . . . . . . . . . . . . 24
Section 306. Mutilated, Destroyed, Lost and Stolen Notes . . . . . . . . 26
Section 307. Payment of Interest; Rights to Interest Preserved . . . . . 26
Section 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . 28
Section 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 310. Authentication and Delivery of Original Issue . . . . . . . 29
Section 311. Computation of Interest . . . . . . . . . . . . . . . . . . 29
ARTICLE FOUR - SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . 29
Section 401. Satisfaction and Discharge of Indenture . . . . . . . . . . 29
Section 402. Application of Trust Money. . . . . . . . . . . . . . . . . 30
ARTICLE FIVE - REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 501. Events of Default . . . . . . . . . . . . . . . . . . . . . 30
Section 502. Acceleration of Maturity; Rescission and Annulment. . . . . 32
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . 34
Section 505. Trustee May Enforce Claims without Possession of Notes. . . 35
Section 506. Application of Money Collected. . . . . . . . . . . . . . . 35
Section 507. Limitations on Suits. . . . . . . . . . . . . . . . . . . . 36
Section 508. Unconditional Right of Holders to Receive Principal and
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 509. Restoration of Rights and Remedies. . . . . . . . . . . . . 37
Section 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . 37
Section 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . 37
Section 512. Control by Holders of Notes . . . . . . . . . . . . . . . . 38
Section 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 38
Section 514. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . 38
ARTICLE SIX - THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 601. Certain Duties and Responsibilities . . . . . . . . . . . . 39
Section 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . 40
Section 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . 40
Section 604. Not Responsible for Recitals or Issuance of Notes . . . . . 41
Section 605. May Hold Notes. . . . . . . . . . . . . . . . . . . . . . . 42
Section 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . 42
Section 607. Compensation and Reimbursement. . . . . . . . . . . . . . . 42
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Section 608. Corporate Trustee Required; Eligibility . . . . . . . . . . 43
Section 609. Resignation and Removal; Appointment of Successor . . . . . 43
Section 610. Acceptance of Appointment by Successor. . . . . . . . . . . 45
Section 611. Merger, Conversion, Consolidation or Succession to
Business. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 612. Appointment of Authenticating Agent . . . . . . . . . . . . 45
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . 47
Section 701. Company to Furnish Trustee Names and Addresses of Holders 47
Section 702. Preservation of Information; Communications to Holders. . . 47
Section 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . 48
Section 704. Reports by Company. . . . . . . . . . . . . . . . . . . . . 48
ARTICLE EIGHT - CONSOLIDATION, MERGER AND SALES. . . . . . . . . . . . . . . 49
Section 801. Company May Consolidate, Etc., Only on Certain Terms. . . . 49
Section 802. Successor Person Substituted for Company. . . . . . . . . . 50
ARTICLE NINE - SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . 50
Section 901. Supplemental Indentures without Consent of Holders. . . . . 50
Section 902. Supplemental Indentures with Consent of Holders . . . . . . 51
Section 903. Execution of Supplemental Indentures. . . . . . . . . . . . 52
Section 904. Effect of Supplemental Indentures . . . . . . . . . . . . . 52
Section 905. Reference in Notes to Supplemental Indentures . . . . . . . 52
Section 906. Record Date . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE TEN - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 1001. Payment of Principal and Interest . . . . . . . . . . . . 53
Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . 53
Section 1003. Money for Note Payments to Be Held in Trust . . . . . . . 54
Section 1004. Corporate Existence . . . . . . . . . . . . . . . . . . . 55
Section 1005. Maintenance of Properties . . . . . . . . . . . . . . . . 55
Section 1006. Restrictions on Dividends, Redemptions and Other
Payments. . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 1007. Limitation on Funded Recourse Debt. . . . . . . . . . . . 56
Section 1008. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 1009. Payment of Taxes and Other Claims . . . . . . . . . . . . 57
Section 1010. Books and Records . . . . . . . . . . . . . . . . . . . . 57
Section 1011. Statement by Officers as to Default . . . . . . . . . . . 57
Section 1012. Waiver of Certain Covenants . . . . . . . . . . . . . . . 58
Section 1013. Limitation on Ranking of Future Indebtedness. . . . . . . 58
Section 1014. Limitations on Restricting Subsidiary Dividends . . . . . 58
Section 1015. Limitation on Transactions with Affiliates. . . . . . . . 59
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ARTICLE ELEVEN - REDEMPTION OF NOTES . . . . . . . . . . . . . . . . . . . . 60
Section 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . 60
Section 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . 60
Section 1103. Selection by Trustee of Notes to be Redeemed. . . . . . . 60
Section 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . 60
Section 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . 61
Section 1106. Notes Payable on Redemption Date. . . . . . . . . . . . . 62
Section 1107. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . 62
ARTICLE TWELVE - REPAYMENT OPTION UPON DEATH OF HOLDERS. . . . . . . . . . . 62
Section 1201. Repayment Option upon Death of Holders. . . . . . . . . . 62
Section 1202. Deposit of Repayment Price. . . . . . . . . . . . . . . . 65
Section 1203. Notes Payable on Repayment Date . . . . . . . . . . . . . 65
Section 1204. Notes Repaid in Part. . . . . . . . . . . . . . . . . . . 65
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INDENTURE, dated as of __________, 1996 (the "Indenture"), between WINTHROP
RESOURCES CORPORATION, a corporation duly organized and existing under the laws
of the State of Minnesota (hereinafter called the "Company"), having executive
offices located at 1015 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota
55343 and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
corporation duly organized and existing under the laws of the United States of
America (hereinafter called the "Trustee"), having its principal corporate trust
office at ______________________________________.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its __% Senior Notes due 2003
(hereinafter called the "Notes"), to be issued in such amount and to have such
provisions as are hereinafter set forth. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder that are required to be part of this Indenture
and, to the extent applicable, shall be governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by
the Holders (as hereinafter defined) thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders from time to time
of the Notes, as follows:
ARTICLE ONE - DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
Except as otherwise expressly provided in this Indenture or unless the
context otherwise requires, for all purposes of this Indenture:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein;
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(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States at the
date of such computation;
(4) the words "herein", "hereof", "hereto" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision; and
(5) the word "or" is always used inclusively (for example, the
phrase "A or B" means "A or B or both", not "either A or B but not both").
Certain terms used principally in certain Articles hereof are defined in
those Articles.
"ACQUIRED INDEBTEDNESS" means indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with
the acquisition by the Company or a Subsidiary of the Company of assets from
such Person, and not incurred in connection with, or in anticipation of, such
Person becoming a Subsidiary of the Company or such acquisition.
"ACT", when used with respect to any Holder, has the meaning specified in
Section 104.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant
to Section 612 to act on behalf of the Trustee to authenticate Notes.
"AUTHORIZED NEWSPAPER" means a newspaper, in an official language of the
place of publication or in the English language, customarily published on each
day that is a Business Day in the place of publication, whether or not published
on days that are Legal Holidays in the place of publication, and of general
circulation in each place in connection with which the term is used or in the
financial community of each such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any day that is a Business Day in the
place of publication.
2
<PAGE>
"BOARD OF DIRECTORS" means the board of directors of the Company or any
committee of that board duly authorized to act generally or in any particular
respect for the Company hereunder.
"BOARD RESOLUTION" means a copy of one or more resolutions, certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, delivered to the Trustee.
"BUSINESS DAY", with respect to any Place of Payment or other location,
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a Legal
Holiday in such Place of Payment or other location.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as capital lease obligations on a
balance sheet of such Person under generally accepted accounting principles and,
for purposes of this Indenture, the amount of such obligations at any date shall
be the capitalized amount thereof at such date, determined in accordance with
generally accepted accounting principles.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934 or, if at
any time after the execution of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"COMPANY" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person, and any other obligor upon the Notes.
"COMPANY REQUEST" and "COMPANY ORDER" mean, respectively, a written request
or order, as the case may be, signed in the name of the Company by the Chairman
of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, or by another officer of
the Company duly authorized to sign by a Board Resolution, and delivered to the
Trustee.
"CONSOLIDATED" when used in conjunction with any other defined term means
the aggregate amount of the items included within the defined term of the
Company on a consolidated basis, eliminating inter-company items.
"CONSOLIDATED NET INCOME" means the amount of net income (loss) of the
Company and its Subsidiaries determined in accordance with generally accepted
accounting principles;
3
<PAGE>
PROVIDED, HOWEVER, that there shall not be included in Consolidated Net Income
(1) any net income (loss) of a Subsidiary for any period during which it was not
a Consolidated Subsidiary or (2) any net income (loss) of businesses, properties
or assets acquired or disposed of (by way of merger, consolidation, purchase,
sale or otherwise) by the Company or any Subsidiary for any period prior to the
acquisition thereof or subsequent to the disposition thereof.
"CONSOLIDATED NET WORTH" means the excess, as determined in accordance with
generally accepted accounting principles, after making appropriate deductions
for any minority interest in the net worth of Consolidated Subsidiaries, of (1)
the assets of the Company and its Consolidated Subsidiaries over (2) the
liabilities of the Company and its Consolidated Subsidiaries; PROVIDED, HOWEVER,
that any write-up in the book value of any assets owned subsequent to the date
of this Indenture (other than a write-up required for assets acquired in
connection with the purchase of a Person or business and taken at the time of
such acquisition) shall not be taken into account.
"CONSOLIDATED SUBSIDIARY" means a Subsidiary of the Company the financial
statements of which are included in the financial statements of the Company and
its Subsidiaries.
"CORPORATE TRUST OFFICE" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of original execution of this Indenture
is located at Minneapolis, Minnesota.
"CORPORATION" includes corporations, associations, companies and business
trusts.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DEPOSITORY" means, with respect to any Note issued in the form of one or
more global Notes, the Person designated as Depository by the Company in or
pursuant to this Indenture, which Person must be, to the extent required by
applicable law or regulation, a clearing agency registered under the Securities
Exchange Act of 1934, as amended, and any successor to such Person. If at any
time there is more than one such Person, "Depository" shall mean, with respect
to any Notes, the qualifying entity which has been appointed with respect to
such Notes.
"EVENT OF DEFAULT" has the meaning specified in Section 501.
"FUNDED RECOURSE DEBT" means any of the following obligations of the
Company or any Subsidiary which by its terms matures at or is extendable or
renewable at the sole option of the obligor without requiring the consent of the
obligee to a date more than 360 days after the date of the creation or
incurrence of such obligation: (1) any obligations, contingent or otherwise, for
borrowed money or for the deferred purchase price of property, assets, notes or
services (including, without limitation, any interest accruing subsequent to an
event of default), (2) all obligations (including the Notes) evidenced by bonds,
notes, debentures or other similar instruments, (3) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired, except any such obligation that constitutes
4
<PAGE>
a trade payable and an accrued liability arising in the ordinary course of
business, if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet prepared in accordance with generally accepted
accounting principles, (4) all Capitalized Lease Obligations and (5) any
guarantee or endorsement (other than for collection or deposit in the ordinary
course of business) or discount with recourse of, or other agreement, contingent
or otherwise, to purchase, repurchase, or otherwise acquire, to supply, or
advance funds or become liable with respect to, any indebtedness or any
obligation of the type referred to in any of the foregoing Clauses (1) through
(4), regardless of whether such obligation would appear on a balance sheet;
provided, however, that Funded Recourse Debt shall not include any obligations
included in the foregoing clauses (1) through (5) under which the rights and
remedies of the lender in the event of default are limited to repossession or
sale of property securing such obligation, with no recourse to the Company or
any Subsidiary.
"GOVERNMENT OBLIGATIONS" means direct obligations of the United States of
America, or any Person controlled or supervised by and acting as an agency or
instrumentality of such government, in each case where the payment or payments
thereunder are unconditionally guaranteed as a full faith and credit obligation
by such government and which are not callable or redeemable at the option of the
issuer or issuers thereof, and shall also include a depository receipt issued by
a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of or other amount
with respect to any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, PROVIDED that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of or other amount with respect to the Government
Obligation evidenced by such depository receipt.
"HOLDER", when used with respect to the Notes, means the Person in whose
name such Note is registered in the Note Register.
"INDENTURE" means this instrument as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"INDEPENDENT PUBLIC ACCOUNTANTS" means a nationally recognized firm of
accountants that, with respect to the Company, are independent public
accountants within the meaning of the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder, who may be
the independent public accountants regularly retained by the Company or who may
be other independent public accountants. Such accountants or firm shall be
entitled to rely upon any Opinion of Counsel as to the interpretation of any
legal matters relating to the Indenture or certificates required to be provided
hereunder.
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"INITIAL INTEREST ACCRUAL DATE" as to any Note means the date from which
interest shall begin to accrue in connection with the original issuance of such
Note, which shall be the date as of which such Note originally issued by the
Company to the initial purchaser thereof shall be dated, which shall be the date
upon which it was originally sold to such initial purchaser as designated by the
Company Order requesting authentication and delivery thereof.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on the Notes.
"ISSUE DATE" means the date on which the Notes are originally issued in
accordance with the terms of this Indenture.
"LEGAL HOLIDAY" with respect to any Place of Payment or other location,
means a Saturday, a Sunday or a day on which banking institutions or trust
companies in such Place of Payment or other location are not authorized or
obligated to be open.
"MATURITY" means the date on which the principal of the Notes or an
installment of principal becomes due and payable as provided in this Indenture,
whether at the Stated Maturity or by declaration of acceleration, notice of
redemption, notice of option to elect repayment or otherwise, and includes any
Redemption Date.
"MAXIMUM ANNUAL REPAYMENT AMOUNT" means $250,000.
"MONEY", with respect to any payment, deposit or other transfer pursuant to
or contemplated by the terms hereof, means United States dollars or other
equivalent unit of legal tender for payment of public or private debts in the
United States of America.
"NOTE" or "NOTES" means any note or notes, as the case may be,
authenticated and delivered under this Indenture.
"NOTE REGISTER" AND "NOTE REGISTRAR" have the respective meanings specified
in Section 305.
"OFFICE OR AGENCY" means an office or agency of the Company maintained or
designated in a Place of Payment for the Notes pursuant to Section 1002 or any
other office or agency of the Company maintained or designated for the Notes
pursuant to Section 1002 or, to the extent designated or required by Section
1002 in lieu of such office or agency, the Corporate Trust Office of the
Trustee.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the Chief Executive Officer, the President
or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of the Company, that
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complies with the requirements of Section 314(e) of the Trust Indenture Act and
is delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be an
employee of or counsel for the Company or other counsel who shall be reasonably
acceptable to the Trustee, that complies with the requirements of
Section 314 (e) of the Trust Indenture Act.
"OUTSTANDING", when used with respect to any Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(1) any Note theretofore canceled by the Trustee or the Note Registrar
or delivered to the Trustee or the Note Registrar for cancellation;
(2) any Note or portion thereof for whose payment at the Maturity
thereof Money in the necessary amount has been theretofore
deposited pursuant hereto with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of the Notes, PROVIDED that, if the Notes
are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(3) any Note with respect to which the Company has effected defeasance
pursuant to Clauses (1)(b) and (3) of Section 401 hereof; and
(4) any Note which has been paid pursuant to Section 306 or in exchange
for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, unless there shall have been
presented to the Trustee proof satisfactory to it that such Note is
held by a bona fide purchaser in whose hands such Note is a valid
obligation of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making any
such determination or relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee knows to be
so owned shall be so disregarded. Notes so owned which shall have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee (a) the pledgee's right so to act with respect to
such Notes and (b) that the pledgee is not the Company or any other obligor upon
the Notes or any Affiliate of the Company or such other obligor.
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"PAYING AGENT" means any Person authorized by the Company to pay the
principal of or interest on any Note on behalf of the Company.
"PERSON" means any individual, Corporation, partnership, joint venture,
joint stock company, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PLACE OF PAYMENT" has the meaning set forth in Section 301.
"PREDECESSOR NOTE" of a Note means every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular Note; and, for the
purposes of this definition, any Note authenticated and delivered under Section
306 in exchange for or in lieu of a lost, destroyed, mutilated or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed, mutilated or
stolen Note.
"REDEMPTION DATE", with respect to any Note or portion thereof to be
redeemed, means the date fixed for such redemption pursuant to Article Eleven of
this Indenture.
"REDEMPTION PRICE", with respect to any Note or portion thereof to be
redeemed, means the price at which it is to be redeemed pursuant to Article
Eleven of this Indenture.
"REGULAR RECORD DATE" for the interest payable on any Note on any Interest
Payment Date therefor means the date, if any, specified in or pursuant to this
Indenture as the "Regular Record Date".
"REPAYMENT DATE", with respect to any Note or portion thereof to be repaid
pursuant to Article Twelve, means the date fixed for such repayment pursuant to
Article Twelve of this Indenture.
"REPAYMENT PRICE", with respect to any Note or portion thereof to be repaid
pursuant to Article Twelve, means the price at which it is to be repaid pursuant
to Article Twelve of this Indenture.
"RESPONSIBLE OFFICER" means any officer of the Trustee in its Corporate
Trust Office and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"RESTRICTED PAYMENT" has the meaning specified in Section 1006.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on any Note
means a date fixed by the Trustee pursuant to Section 307.
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"STATED MATURITY" with respect to any Note or any installment of principal
thereof or interest thereon means the date established by this Indenture as the
fixed date on which the principal of such Note or such installment of principal
or interest is due and payable.
"SUBSIDIARY" means any Corporation of which at the time of determination
the Company or one or more Subsidiaries owns or controls directly or indirectly
more than 50% of the shares of Voting Stock.
"TRANSACTION" has the meaning specified in Section 1015.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended,
and any reference herein to the Trust Indenture Act or a particular provision
thereof shall mean such Act or provision, as the case may be, as amended or
replaced from time to time or as supplemented from time to time by rules or
regulations adopted by the Commission under or in furtherance of the purposes of
such Act or provision, as the case may be.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
each Person who is then a Trustee hereunder.
"UNITED STATES", except as otherwise provided herein, means the United
States of America (including the states thereof and the District of Columbia),
its territories and possessions and other areas subject to its jurisdiction.
"VICE PRESIDENT", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "Vice President".
"VOTING STOCK" means stock of a Corporation of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers or trustees of such Corporation PROVIDED
that, for the purposes hereof, stock which carries only the right to vote
conditionally on the happening of an event shall not be considered Voting Stock
whether or not such event shall have happened.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents or any of them is
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specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
such individual has made such examination or investigation as is necessary
to enable such individual to express an informed opinion as to whether or
not such condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of counsel or Opinion of Counsel or
representation of counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture or any Note, they may, but need not, be
consolidated and form one instrument.
SECTION 104. ACTS OF HOLDERS.
(1) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by an agent duly appointed in writing. Except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Note, shall
be sufficient for any purpose of this Indenture and (subject to Section 315
of the Trust Indenture Act) conclusive in favor of the Trustee and the
Company and any agent of the Trustee or the Company, if made in the manner
provided in this Section.
Without limiting the generality of this Section, unless otherwise
provided in or pursuant to this Indenture, a Holder, including a Depository
that is a Holder of a global Note, may make, give or take, by a proxy, or
proxies, duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided in or pursuant
to this Indenture to be made, given or taken by Holders, and a Depository
that is a Holder of a global Note may provide its proxy or proxies to the
beneficial owners of interests in any such global Note through such
Depository's standing instructions and customary practices.
The Trustee shall fix a record date for the purpose of determining
the Persons who are beneficial owners of interest in any permanent global
Note held by a Depository entitled under the procedures of such Depository
to make, give or take, by a proxy or proxies duly appointed in writing, any
request, demand, authorization, direction, notice, consent, waiver or other
action provided in or pursuant to this Indenture to be made, given or taken
by Holders. If such a record date is fixed, the Holders on such record
date or their duly appointed proxy or proxies, and only such Persons, shall
be entitled to make, give or take such request, demand, authorization,
direction, notice, consent, waiver or other action, whether or not such
Holders remain Holders after such record date. No such request, demand,
authorization, direction, notice, consent, waiver or other action shall be
valid or effective if made, given or taken more than 90 days after such
record date.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient and
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in accordance with such reasonable rules as the Trustee may determine; and
the Trustee may in any instance require further proof with respect to any
of the matters referred to in this Section.
(3) The ownership, principal amount and serial numbers of Notes
held by any Person, and the date of the commencement and the date of the
termination of holding the same, shall be proved by the Note Register.
(4) If the Company shall solicit from the Holders of any Notes
any request, demand, authorization, direction, notice, consent, waiver or
other Act, the Company may at its option (but is not obligated to), by
Board Resolution, fix in advance a record date for the determination of
Holders of Notes entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only
the Holders of Notes of record at the close of business on such record date
shall be deemed to be Holders for the purpose of determining whether
Holders of the requisite proportion of Outstanding Notes have authorized or
agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and for that purpose the Outstanding
Notes shall be computed as of such record date; PROVIDED that no such
authorization, agreement or consent by the Holders of Notes on such record
date shall be deemed effective unless it shall become effective pursuant to
the provisions of this Indenture not later than six months after the record
date.
(5) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or suffered to be done by the Trustee, any Note
Registrar, any Paying Agent or the Company in reliance thereon, whether or
not notation of such action is made upon such Note.
SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:
(1) the Trustee by any Holder or the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed,
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first-class postage prepaid, or sent by facsimile and U.S. mail,
first-class postage prepaid, to the Company addressed to the attention of
its Chief Financial Officer at the address of its principal office specified
in the first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS OF NOTES; WAIVER.
Except as otherwise expressly provided in this Indenture, where this
Indenture provides for notice to Holders of Notes of any event, such notice
shall be sufficiently given to Holders of Notes if in writing and mailed,
first-class postage prepaid, to each Holder of a Note affected by such event,
at such Holder's address as it appears in the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice.
In any case where notice to Holders of Notes is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder of a Note shall affect the sufficiency of such notice with
respect to other Holders of Notes. Any notice which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given or
provided. In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders of Notes shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107. LANGUAGE OF NOTICES.
Any request, demand, authorization, direction, notice, consent, election or
waiver required or permitted under this Indenture shall be in the English
language.
SECTION 108. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with any duties
under any required provision of the Trust Indenture Act imposed hereon by
Section 318(d) thereof, such required provision shall control.
SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
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SECTION 110. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 111. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, either wholly or partially, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and such provisions shall be given effect to the fullest
extent permitted by law.
SECTION 112. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or implied, shall give
to any Person, other than the parties hereto, any Note Registrar, any Paying
Agent, any Authenticating Agent and their respective successors hereunder and
the Holders of Notes, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 113. GOVERNING LAW.
This Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of Minnesota applicable to agreements made
or instruments entered into and, in each case, performed in said state.
SECTION 114. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, Repayment
Date or Stated Maturity of any Note shall be a Legal Holiday at any Place of
Payment, then (notwithstanding any other provision of this Indenture) payment
need not be made at such Place of Payment on such date, but may be made on the
next succeeding day that is a Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
Repayment Date or at the Stated Maturity, and no interest shall accrue on the
amount payable on such date or at such time for the period from and after such
Interest Payment Date, Redemption Date, Repayment Date or Stated Maturity, as
the case may be.
SECTION 115. SCHEDULES.
Any Schedules attached hereto are by this reference made a part hereof with
the same effect as if herein set forth in full.
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SECTION 116. COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
ARTICLE TWO - FORM OF NOTES
SECTION 201. FORMS GENERALLY.
Each Note issued pursuant to this Indenture shall be in substantially the
forms set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any indenture supplemental hereto and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with any law or with any rule or regulation
of any stock exchange or market system or as may, consistently herewith, be
determined by the officers executing such Note as evidenced by their execution
of such Note. The Notes shall be issuable in global and registered form only
without coupons. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
Definitive Notes shall be printed, lithographed or engraved or produced by
any combination of these methods on a steel engraved border or steel engraved
borders or may be produced in any other manner, all as determined by the
officers of the Company executing such Notes, as evidenced by their execution of
such Notes.
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SECTION 202. FORM OF FACE OF NOTE.
WINTHROP RESOURCES CORPORATION
__% SENIOR NOTE DUE 2003
$________________________ NO._____________________
Winthrop Resources Corporation, a Minnesota corporation (herein called the
"Company"), for value received, hereby promises to pay to _____________________
______________________________, or registered assigns, the principal sum of
________________________ Dollars on ______________, 2003 and to pay interest
thereon at the rate of __% per annum from the Initial Interest Accrual Date or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, on the 15th day of each month commencing _________, 1996
(each an "Interest Payment Date"), until the principal hereof is paid or made
available for payment.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, except as provided in the Indenture hereinafter
referred to, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be the 10th day, whether or not a Business
Day, of the month of the respective Interest Payment Date. Any such interest
not so punctually paid or duly provided for shall forthwith cease to be payable
to the Holder on such Regular Record Date and either may be paid to the Person
in whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to the
Holders not less than ten days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more fully provided in the
Indenture. Payment of the principal of and interest on this Note will be made
at the office or agency of the Company maintained for that purpose in
Minneapolis, Minnesota, or in such other office or agency as may be established
by the Company pursuant to the Indenture (initially the principal corporate
trust office of the Trustee in Minneapolis, Minnesota (the "Corporate Trust
Office")), in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
PROVIDED, HOWEVER, that payment of interest on any Interest Payment Date other
than at Maturity may be made at the option of the Company by check mailed to the
address of the Person entitled thereto as such address shall appear in the Note
Register. Payments of principal and interest at maturity will be made against
presentation of this Note at the Corporate Trust Office (or such other office as
may be established pursuant to the Indenture), by check.
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Reference is hereby made to the further provisions of this Note set forth
on the reverse side hereof, which further provisions shall for all purposes have
the same effect as though fully set forth at this place.
Unless the Certificate of Authentication hereon has been executed by the
Trustee or an Authenticating Agent under the Indenture referred to on the
reverse hereof by the manual signature of one of its authorized officers, this
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by the manual or facsimile signature of its Chief Executive Officer, its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.
Date:
WINTHROP RESOURCES CORPORATION
[Corporate Seal]
By:_______________________________________
President
ATTEST:
____________________________________
Secretary
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SECTION 203. FORM OF REVERSE OF NOTE.
WINTHROP RESOURCES CORPORATION
__% SENIOR NOTE DUE 2003
This Note is one of a duly authorized issue of Notes of the Company
designated as its __% Senior Notes due 2003 (herein called the "Notes') limited
in aggregate principal amount to $25,000,000 (except for such additional
principal amounts, not to exceed $3,750,000, of Notes issued to cover
over-allotments in the initial public offering of the Notes) issued and to be
issued under an Indenture dated as of ___________, 1996 (herein called the
"Indenture"), between the Company and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights thereunder of the Company, the Trustee and the Holders of the Notes, and
the terms upon which the Notes are, and are to be, authenticated and delivered.
The indebtedness of the Company evidenced by the Notes, including the
principal thereof and interest thereon (including post-default interest), is
unsecured by any collateral, including the assets of the Company or any of its
Subsidiaries or Affiliates.
The Notes may not be redeemed by the Company prior to __________, 2001. On
or after __________, 2001, the Notes may be redeemed, at the option of the
Company, in whole at any time or from time to time in part in increments of
$1,000, at 100% of the principal amount thereof, without premium, together with
interest thereon accrued to such Redemption Date. If less than all Notes are
redeemed, the Trustee will select the Notes to be redeemed by such method as the
Trustee may deem fair and appropriate.
Notice of redemption shall be given to the Holders of Notes to be redeemed
by mailing a notice of such redemption not less than 30 or more than 60 days
prior to the Redemption Date at their addresses as they shall appear on the Note
Register, all as provided in the Indenture.
If this Note (or a portion hereof) is duly called for redemption and funds
for payment are duly provided, this Note (or such portion hereof) shall cease to
bear interest from and after such Redemption Date.
Upon the death of the Holder of this Note, and upon the further receipt of
a written request for repayment from a duly authorized representative of the
deceased Holder, along with a certified copy of the Holder's death certificate,
the Company will repay the principal amount of this Note (up to $25,000 in
principal amount per Holder in any calendar year), together with interest
accrued to the Repayment Date, within 30 days following receipt of such request
(which shall be accompanied by the Notes to be repaid (if a certificate, other
than a certificate in global form, has been issued) and evidence of such
representative's authority to act on behalf of the
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Holder), in accordance with the provisions of the Indenture, if (1) this Note
has been registered in the Holder's name since its issue date or for a period of
at least six months prior to the date of the Holders's death, whichever is less,
(2) either the Company or the Trustee receives such written request for
repayment within one year after the Holder's death or, in the case of subsequent
requests for repayment, within one year of the preceding request, provided that
if either the Company or the Trustee receives such a written request it will
promptly notify the other, (3) the aggregate principal amount of Notes repaid
during the then current calendar year on account of the deaths of all Holders
does not exceed the Maximum Annual Repayment Amount (if such aggregate principal
amount exceeds the Maximum Annual Repayment Amount, the Company shall repay such
Notes up to the Maximum Annual Repayment Amount in principal amount in the order
in which requests for repayment were received), (4) the Company is not and,
after giving effect to such repayment, would not be in default under any Funded
Recourse Debt, and (5) the Company is not subject to any law, regulation,
agreement or administrative directive preventing such repayment.
Interest installments whose Stated Maturity is on the Redemption Date or
Repayment Date will be payable to the Holders of such Notes, or one or more
Predecessor Notes, of record at the close of business on the relevant Regular
Record Date referred to on the face hereof, all as provided in the Indenture.
In the event of redemption or repayment of this Note in part only, a new Note or
Notes for the unredeemed or unrepaid portion hereof shall be issued in the name
of the Holder hereof upon the surrender hereof.
Except as may be provided in the Indenture, if an Event of Default with
respect to the Notes shall occur and be continuing, the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Notes may declare
the principal of all the Notes due and payable in the manner and with the effect
provided in the Indenture. The Indenture provides that such declaration and its
consequences may, in certain events, be annulled by the Holders of a majority in
principal amount of the Outstanding Notes.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
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No reference herein to the Indenture and no provisions of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note may be registered on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company to be maintained for that purpose in Minneapolis,
Minnesota or at such other office or agency as may be established by the Company
for such purpose pursuant to the Indenture (initially the principal corporate
trust office of the Trustee in Minneapolis, Minnesota), duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company, and duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Notes are issuable only in global and registered form, without coupons,
in denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000. As provided in the Indenture, and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes in authorized denominations, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to the due presentment of this Note for registration of transfer or
exchange, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.
Each Holder of a Note covenants and agrees by such Holder's acceptance
thereof to comply with and be bound by the foregoing provisions.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Subject to Section 612, the Trustee's certificate of authentication shall
be in substantially the following form:
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This is one of the Notes described herein.
________________________________________
as Trustee
Authentication
Date:_____________
By______________________________________
Authorized Signatory
SECTION 205. NOTES IN GLOBAL FORM.
Notes may be issuable in global form (i.e., in the name of the nominee of a
Depository for purposes of book entry transfer), such that any such Note may
provide that it or any number of such Notes shall represent the aggregate amount
of all Outstanding Notes (or such lesser amount as is permitted by the terms
thereto from time to time endorsed thereon) and may also provide that the
aggregate amount of Outstanding Notes represented thereby may from time to time
be increased or reduced to reflect exchanges. Any endorsement of any Note in
global form to reflect the amount, or any increase or decrease in the amount, or
changes in the rights of Holders, of Outstanding Notes represented thereby shall
be made in such manner and by such Person or Persons as shall be specified
therein or in the Company Order to be delivered pursuant to Section 303 or 304
with respect thereto. Subject to the provisions of Section 303 and, if
applicable, Section 304, the Trustee shall deliver and redeliver any Note in
permanent global form in the manner and upon instructions given by the Person or
Persons specified therein or in the applicable Company Order. If a Company
Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered,
any instructions by the Company with respect to a Note in global form shall be
in writing but need not be accompanied by or contained in an Officers'
Certificate and need not be accompanied by an Opinion of Counsel.
ARTICLE THREE - THE NOTES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $25,000,000 (except for such
additional principal amounts, not to exceed $3,750,000, of Notes issued to cover
over-allotments in the initial public offering of the Notes), except for Notes
authenticated and delivered upon transfer of, or in exchange for, or in lieu of
other Notes pursuant to Sections 304, 305, 306, 905, 1107 and 1204.
The Notes shall be known and designated as the __% Senior Notes due 2003 of
the Company. Their Stated Maturity shall be ___________, 2003, and they shall
bear interest from the date and at the rate per annum specified in, and such
interest shall be payable on the dates specified in, the form of Note set forth
in Sections 202 and 203, until the principal thereof is paid or made available
for payment.
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The principal of and interest on the Notes shall be payable at the Office
or Agency of the Company in Minneapolis, Minnesota ("PLACE OF PAYMENT")
maintained for such purposes pursuant to Section 1002; PROVIDED, HOWEVER, that,
at the option of the Company, payment of interest may be made (subject to
collection) by check mailed to the address of the Person entitled thereto as
such address shall appear on the Note Register.
The Notes shall be redeemable prior to their Stated Maturity as provided in
Article Eleven.
The Notes may be repayable prior to their Stated Maturity as provided in
Article Twelve upon the death of a Noteholder.
SECTION 302. CURRENCY; DENOMINATIONS.
The principal of and interest on the Notes shall be payable in United
States dollars or other equivalent unit of legal tender for payment of public or
private debts in the United States of America. Notes shall be issuable in
global and registered form only without coupons in denominations of $1,000 and
any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Notes shall be executed on behalf of the Company by its Chairman of the
Board, one of its Vice Chairmen of the Board, its Chief Executive Officer, its
President, its Treasurer or one of its Vice Presidents under its corporate seal
reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Notes may be manual
or facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes, executed by the Company, to the
Trustee for authentication and, PROVIDED that a Company Order for the
authentication and delivery of such Notes has been delivered to the Trustee, the
Trustee, in accordance with the Company Order and subject to the provisions
hereof, shall authenticate and deliver such Notes.
The Company may establish by Company Order that the Notes are to be issued
in whole or in part in the form of one or more global Notes. If so established,
the Company shall execute and the Trustee shall, in accordance with this Section
and the Company Order with respect to such Notes, authenticate and deliver one
or more global Notes in permanent form that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of the
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Outstanding Notes to be represented by such global Note or Notes, (ii) shall be
registered in the name of the Depository for such global Note or Notes or the
nominee of such Depository, (iii) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instruction and (iv) shall bear a
legend substantially to the following effect: "Unless and until it is exchanged
in whole or in part for Notes in certificated form, this Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository" or to such other effect as the
Depository and the Trustee may agree.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for in Section 204 or 612
executed by or on behalf of the Trustee by the manual signature of one of its
authorized officers or by an Authenticating Agent. Such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY NOTES.
Pending the preparation of definitive Notes, the Company may execute and
deliver to the Trustee and, upon Company Order, the Trustee shall authenticate
and deliver, in the manner provided in Section 303, temporary Notes in lieu
thereof which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued, in registered form and with
such appropriate insertions, omissions, substitutions and other variations as
the officers of the Company executing such Notes may determine, as conclusively
evidenced by their execution of such Notes. Such temporary Notes may be in
global form.
Except in the case of temporary Notes in global form, which shall be
exchanged in accordance with the provisions thereof, if temporary Notes are
issued, the Company shall cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, such temporary
Notes shall be exchangeable for such definitive Notes upon surrender of such
temporary Notes at an Office or Agency for such Notes, without charge to any
Holder thereof. Upon surrender for cancellation of any one or more temporary
Notes, the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of definitive Notes of authorized
denominations. Unless otherwise provided in or pursuant to this Indenture with
respect to a temporary global Note, until so exchanged the temporary Notes shall
in all respects be entitled to the same benefits under this Indenture as
definitive Notes.
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SECTION 305. REGISTRATION, TRANSFER AND EXCHANGE.
The Company shall cause to be kept a register (herein sometimes referred to
as the "NOTE REGISTER") at an Office or Agency maintained pursuant to Section
1002 in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of the Notes and of transfers of the
Notes. The Trustee is hereby initially appointed as Note Registrar for the
Notes. In the event that the Trustee shall cease to be Note Registrar it shall
have the right to examine the Note Register at all reasonable times.
Upon surrender for registration of transfer of any Note at the Office or
Agency of the Company, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes, denominated as authorized in this Indenture,
of a like aggregate principal amount bearing a number not contemporaneously
outstanding and containing identical terms and provisions.
At the option of the Holder, Notes (except a global Note representing all
of the Outstanding Notes) may be exchanged for other Notes, in any authorized
denominations, and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at such Office or Agency. Whenever any Notes are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive.
Whenever any Notes are surrendered for exchange as contemplated by the
immediately preceding two paragraphs, the Company shall execute, and the Trustee
shall authenticate and deliver, the Notes which the Holder making the exchange
is entitled to receive.
Notwithstanding the foregoing, except as otherwise provided in or pursuant
to this Indenture, any global Note shall be exchangeable for definitive Notes
only if (i) the Depository is at any time unwilling, unable or ineligible to
continue as Depository and a successor depository is not appointed by the
Company within 60 days of the date the Company is so informed in writing, (ii)
the Company executes and delivers to the Trustee a Company Order to the effect
that such global Note shall be so exchangeable, or (iii) an Event of Default has
occurred and is continuing with respect to the Notes. If the beneficial owners
of interests in a global Note are entitled to exchange such interests for
definitive Notes of such series and of like tenor and principal amount of any
authorized form and denomination as specified as contemplated by Section 304,
then without unnecessary delay but in any event not later than the earliest date
on which such interests may be so exchanged, the Company shall deliver to the
Trustee definitive Notes in such form and denominations as are required by or
pursuant to this Indenture, containing identical terms and in aggregate
principal amount equal to the principal amount of such global Note, executed by
the Company. On or after the earliest date on which such interests may be so
exchanged, such global Note shall be surrendered from time to time by the
Depository, and in accordance with instructions given to the Trustee and the
Depository (which instructions shall be in writing but need not be contained in
or accompanied by an Officers'
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Certificate or be accompanied by an Opinion of Counsel), as shall be specified
in the Company Order with respect thereto to the Trustee, as the Company's agent
for such purpose, to be exchanged; provided, however, that no such exchanges may
occur during a period beginning at the opening of business 15 days before any
such selection of Notes for redemption of the same series and containing
identical terms to be redeemed and ending on the relevant Redemption Date.
Promptly following any such exchange in part, such global Note shall be returned
by the Trustee to such Depository in accordance with the instructions of the
Company referred to above. If a Note is issued in exchange for any portion of a
global Note after the close of business at the Office or Agency for such Note
where such exchange occurs on or after (i) any Regular Record Date for such Note
and before the opening of business at such Office or Agency on the next Interest
Payment Date, or (ii) any Special Record Date for such Note and before the
opening of business at such Office or Agency on the related proposed date for
payment of interest or Defaulted Interest, as the case may be, interest shall
not be payable on such Interest Payment Date or proposed date for payment, as
the case may be, in respect of such Note, but shall be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such global Note shall be
payable in accordance with the provisions of this Indenture.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company evidencing the same debt and
entitling the Holders thereof to the same benefits under this Indenture as the
Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange or redemption shall (if so required by the Company or the Note
Registrar for such Note) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Section 304, 905 or 1107 not involving any transfer.
The Company shall not be required (1) to issue, register the transfer of or
exchange any Notes during a period beginning at the opening of business 15 days
before the day of the selection for redemption of Notes under Section 1103 and
ending at the close of business on the day of the mailing of the relevant notice
of redemption, or (2) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except in the case of any Note to
be redeemed in part, the portion thereof not to be redeemed, or (3) to issue,
register the transfer of or exchange any Note which, in accordance with its
terms, has been surrendered for repayment at the option of the Holder, except
the portion, if any, of such Note not to be so repaid.
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SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If any mutilated Note is surrendered to the Trustee, subject to the
provisions of this Section, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Note containing identical
terms and of like principal amount and bearing a number not contemporaneously
outstanding.
If there be delivered to the Company and to the Trustee (1) evidence to
their satisfaction of the destruction, loss or theft of any Note, and (2) such
Note or indemnity as may be required by them to save each of them and any agent
of either of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and, upon the Company's request the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such destroyed, lost or stolen Note,
a new Note containing identical terms and of like principal amount and bearing a
number not contemporaneously outstanding.
Notwithstanding the foregoing provisions of this Section, in case any
mutilated, destroyed, lost or stolen Note has become or is about to become due
and payable for any reason, the Company in its discretion may, instead of
issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an additional original contractual
obligation of the Company, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
The provisions of this Section, as amended or supplemented pursuant to this
Indenture, shall be exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes.
SECTION 307. PAYMENT OF INTEREST; RIGHTS TO INTEREST PRESERVED.
Any interest on any Note which shall be payable and is punctually paid or
duly provided for on any Interest Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered as of the
close of business on the Regular Record Date for such interest.
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Any interest on any Note which shall be payable, but shall not be
punctually paid or duly provided for, on any Interest Payment Date for such Note
(herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the
Holder thereof on the relevant Regular Record Date by virtue of having been a
Holder on such date; and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in Clause (1) or (2) below.
(1) The Company may elect to make payment of any Defaulted
Interest to the Person in whose name such Note (or a Predecessor Note
thereof) shall be registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on such Note and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of Money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to
the date of the proposed payment, such Money when so deposited to be held
in trust for the benefit of the Person entitled to such Defaulted Interest
as in this Clause provided. Thereupon, the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to the Holder of such Note (or a Predecessor
Note thereof) at such Holder's address as it appears in the Note Register
not less than 10 days prior to such Special Record Date. In addition to
the mailing, the Trustee may, in its discretion, in the name and at the
expense of the Company cause a similar notice to be published at least once
in an Authorized Newspaper of general circulation in each Place of Payment,
but such publication shall not be a condition precedent to the
establishment of such Special Record Date and the failure of a Holder to
observe such published notice shall not entitle such Holder to additional
benefits or interest with respect to such Holder's Notes. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Person in whose name such Note (or a Predecessor Note thereof)
shall be registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or national market system on which the Notes may be
listed, and upon such notice as may be required by such exchange or
national market system, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such payment shall
be deemed practicable by the Trustee.
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At the option of the Company, interest on the Notes may be paid (i) by
mailing a check to the address of the Person entitled thereto as such address
shall appear in the Note Register, or (ii) by wire transfer to an account
maintained by the Person entitled thereto as specified in the Note Register.
Subject to the foregoing provisions of this Section and Section 305, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer or
exchange, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered in the Note Register
as the owner of such Note for the purpose of receiving payment of principal of
and (subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not any payment with respect to such Note shall
be overdue, and neither the Company, nor the Trustee or any agent of the Company
or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any global Note held on its behalf
by a Depository shall have any rights under this Indenture with respect to such
global Note, and such Depository may be treated by the Company, the Trustee, and
any agent of the Company or the Trustee as the owner of such global Note for all
purposes whatsoever. None of the Company, the Trustee, any Paying Agent or the
Note Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 309. CANCELLATION.
All Notes surrendered for payment, redemption, repayment pursuant to
Article Twelve, registration of transfer or exchange shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee, and any such
Notes, as well as Notes surrendered directly to the Trustee for any such
purpose, shall be canceled promptly by the Trustee. The Company may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Notes so delivered shall be canceled promptly by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes held by the Trustee shall be destroyed by
the Trustee, unless by a Company Order the Company directs their return to it.
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SECTION 310. AUTHENTICATION AND DELIVERY OF ORIGINAL ISSUE.
Forthwith upon the execution and delivery of this Indenture, or from time
to time thereafter, Notes up to the aggregate principal amount of $25,000,000
(plus such additional principal amounts, not to exceed $3,750,000, of Notes
issued to cover over allotments in the initial public offering of the Notes) may
be executed by the Company and delivered to the Trustee for authentication, and
shall thereupon be authenticated and delivered by the Trustee upon Company
Order, without any further action by the Company.
SECTION 311. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months. Interest shall be payable through and excluding any
Interest Payment Date and interest shall be payable through and including any
Redemption Date or Repayment Date.
ARTICLE FOUR - SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
Upon the direction of the Company by a Company Order, this Indenture shall
cease to be of further effect and the Trustee, on receipt of such Company Order,
at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(a) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii)
Notes for whose payment Money has theretofore been deposited in
trust with the Trustee or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(b) as to all Notes not so theretofore delivered to the
Trustee for cancellation the Company has irrevocably deposited or
caused to be deposited with the Trustee, as trust funds and/or
obligations in trust for such purpose, Money and/or Government
Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms, without
consideration of any reinvestment thereof, will provide not later
than the opening of business on the due dates of any payment of
principal and interest with respect thereto, or a combination
thereof, Money in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the
Trustee for
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cancellation, including the principal thereof and interest thereon,
to the date of such deposit (in the case of Notes which have become
due and payable) or to the Maturity thereof, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company, including amounts owing to the Trustee;
and
(3) the Company has delivered to the Trustee a certificate of
Independent Public Accountants certifying as to the sufficiency of the
amounts deposited pursuant to subclause (b) of Clause (1) of this Section
for payment of the principal and interest on the dates such payments are
due, and an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein providing for or relating to the
satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 612 and, if Money and/or
Government Obligations shall have been deposited with the Trustee pursuant to
subclause (b) of Clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all Money
and Government Obligations deposited with the Trustee pursuant to Section 401
and all Money received by the Trustee in respect of Government Obligations
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such Money has or Government Obligations have been deposited with
or received by the Trustee; but such Money and Government Obligations need not
be segregated from other funds of the Trustee except to the extent required by
law.
ARTICLE FIVE - REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or be effected by operation of law pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
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(1) default in the payment of any interest on any Note when such
interest becomes due and payable, and continuance of such default for a
period of 10 days; or
(2) default in the payment of the principal of any Note when it
becomes due and payable at its Maturity or upon redemption or repayment; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture or the Notes (other than a
covenant or warranty a default in the performance or the breach of which is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 30 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Notes a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(4) default in the payment at stated maturity of any indebtedness
of the Company or any Subsidiary for money borrowed in principal amount due
at stated maturity in excess of $1,000,000, and such default shall
continue, without being cured, waived or consented to and without such
indebtedness being discharged, for a period of 30 days beyond any
applicable period of grace; or
(5) the occurrence of an event of default as defined in any
mortgage, indenture or instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness of the Company or
any Subsidiary for money borrowed (or the payment of which is guaranteed by
the Company), whether such indebtedness now exists or shall hereafter be
created, PROVIDED, HOWEVER, that no such event of default shall constitute
an Event of Default hereunder unless such event of default results in the
acceleration of such indebtedness prior to its expressed maturity, which
together with the principal amount of any such other indebtedness so caused
to be accelerated, aggregates $1,000,000 or more at any one point in time
and such default shall not have been cured or waived and such acceleration
shall not have been rescinded or annulled; or
(6) the entry by a court or agency or supervisory authority
having competent jurisdiction of:
(a) a decree or order for relief in respect of the Company
or any Subsidiary in an involuntary proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law and
such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(b) a decree or order adjudging the Company or any
Subsidiary to be insolvent, or approving a petition seeking
reorganization, arrangement, adjustment
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or composition of the Company or any Subsidiary and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(c) a decree or order appointing any Person to act as a
custodian, receiver, liquidator, assignee, trustee or other similar
official of the Company or any Subsidiary or of any substantial
part of the property of the Company or any Subsidiary, as the case
may be, or ordering the winding up or liquidation of the affairs of
the Company or any Subsidiary and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days;
or
(7) the commencement by the Company or any Subsidiary of a
voluntary proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of a voluntary proceeding seeking to
be adjudicated insolvent or the consent by the Company or any Subsidiary
to the entry of a decree or order for relief in an involuntary proceeding
under any applicable bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any insolvency proceedings against
it, or the filing by the Company or any Subsidiary of a petition or answer
or consent seeking reorganization or relief under any applicable law, or
the consent by the Company or any Subsidiary to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or similar official of the Company
or any Subsidiary or any substantial part of the property of the Company
or any Subsidiary or the making by the Company or any Subsidiary of an
assignment for the benefit of creditors, or the taking of corporate action
by the Company or any Subsidiary in furtherance of any such action; or
(8) a final judgment, judicial decree or order for the payment of
money in excess of $5,000,000 shall be rendered against the Company or any
Subsidiary and such judgment, decree or order shall continue unsatisfied
for a period of 30 days without a stay of execution.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Notes may
declare the principal of all the Notes, and the interest accrued thereon, to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders), and upon any such declaration such amount
shall become immediately due and payable; provided, however, that any Event of
Default specified in Section 501(7) shall result in immediate and automatic
acceleration of maturity of the outstanding Notes, and the principal of all the
Notes and the interest accrued thereon shall be due and payable immediately
without notice, as if a declaration of acceleration, as contemplated in this
Section 502, had been made.
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At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the Money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of not less
than a majority in principal amount of the Outstanding Notes, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum of
Money sufficient to pay
(a) all overdue installments of any interest on all Notes,
(b) the principal of any Notes which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by such Notes,
(c) to the extent that payment of such interest is lawful,
interest upon overdue installments of any interest at the rate
borne by such Notes, and
(d) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the
principal of and interest on Notes which shall have become due solely by
such declaration of acceleration, shall have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any installment of interest
on any Note when such interest shall have become due and payable and such
default continues for a period of 10 days, or
(2) default is made in the payment of the principal of any Note
at its Maturity, the Company shall, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Notes, the whole amount of
money then due and payable with respect to such Notes, with interest upon
the overdue principal and, to the extent that payment of such interest
shall be legally enforceable, upon any overdue installments of interest at
the rate borne by such Notes, and, in addition thereto, such further amount
of Money as shall be sufficient to cover the costs and expenses of
collection, including the reasonable
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compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay the Money it is required to pay the Trustee
pursuant to the preceding paragraph forthwith upon the demand of the Trustee,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the Money so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Notes and collect the Money
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon such Notes, wherever situated.
If an Event of Default with respect to the Notes occurs and is continuing,
the Trustee may in its discretion proceed to protect and enforce its rights and
the rights of the Holders of Notes by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or such Notes or in aid of the exercise of any power granted herein or
therein, or to enforce any other proper remedy.
The rights and remedies under this Section 503 are in addition to the other
rights and remedies available under this Article 5 or otherwise legally
available.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the payment
of any overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of the
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents or counsel) and of the Holders of Notes allowed in such judicial
proceeding, and
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(2) to collect and receive any Money or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Notes to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the Holders
of Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Note any
plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder of a Note in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery or judgment, after provision for
the payment of the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, shall be for the ratable benefit of each
and every Holder of a Note in respect of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any Money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such Money on account of principal or interest,
upon presentation of the Notes, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 607;
SECOND: In the case the principal of the Notes shall not have
become due and payable, to the payment of the amounts then due and unpaid
upon the Notes for interest in respect of which or for the benefit of which
such Money has been collected, in the order of the Maturity of the
installments of such interest, with interest, to the extent that such
interest is lawful and has been collected by the Trustee, upon overdue
installments of interest at the rate borne by the Notes, such payments to
be made ratably, without preference or priority of any kind, according to
the aggregate amounts due and payable on such Notes for interest;
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THIRD: In the case the principal of the Notes shall have become
due and payable, to the payment of the amounts then due and unpaid upon the
Notes for principal and interest in respect of which or for the benefit of
which such Money has been collected, with interest, to the extent that such
interest is lawful and has been collected by the Trustee, upon overdue
installments of interest at the rate borne by the Notes, such payments to
be made ratably, without preference or priority of any kind, according to
the aggregate amounts due and payable on such Notes for principal and
interest, respectively; and
FOURTH: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. LIMITATIONS ON SUITS.
No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
satisfactory to the Trustee against the costs, fees, expenses and
liabilities to be incurred in compliance with such request (including
reasonable fees of counsel);
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Notes;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all such Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and (subject to Sections 305 and 307) interest on
such Note on the respective Stated Maturity or Maturities therefor specified in
such Note (or, in the case of redemption, on the Redemption Date or, in the case
of repayment at the option of such Holder, on the date such repayment is due)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder of a Note has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and each such Holder shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and each such
Holder shall continue as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 306,
no right or remedy herein conferred upon or reserved to the Trustee or to each
and every Holder of a Note is intended to be exclusive of any other right or
remedy, and every right and remedy, to the extent permitted by law, shall be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to any Holder of a Note may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by such Holder, as the
case may be.
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SECTION 512. CONTROL BY HOLDERS OF NOTES.
The Holders of a majority in principal amount of the Outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Notes, PROVIDED that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to Section 601, the Trustee need not take any action
which might be unjustly prejudicial to the rights of the other Holders of
Notes not joining in such action.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Notes on behalf of the Holders of all the Notes may waive any past
default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on any Note,
or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants that (to the extent that it may lawfully do so) it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company expressly waives (to the extent
that it may lawfully do so) all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but
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will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE SIX - THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(1) Except during the continuance of an Event of Default,
(a) the Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(2) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(3) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(a) this Subsection shall not be construed to limit the effect of
Subsection (1) of this Section;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Notes, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture with respect to
the
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Notes, provided such direction shall not be in conflict with any rule of
law or with this Indenture; and
(d) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(4) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any default hereunder, the Trustee
shall transmit to the Holders of Notes, in the manner and to the extent provided
in Section 313 (c) of the Trust Indenture Act, notice of such default hereunder
known to the Trustee, unless such default shall have been cured or waived;
PROVIDED, HOWEVER, that, except in the case of a default in the payment of the
principal of or interest on any Note, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders of Notes; and PROVIDED, FURTHER, that in the case of any
default of the character specified in Section 501 (3) with respect to Notes, no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to Sections 315(a) through 315(d) of the Trust Indenture Act:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or a Company Order and
any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
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(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence shall be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officers' Certificate and/or Opinion
of Counsel;
(4) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Notes pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable Note or indemnity
against the costs, fees, expenses and liabilities which might be incurred
by it, including reasonable fees of counsel, in complying with such request
or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, coupon or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine,
during business hours and upon reasonable notice, the books, records and
premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the Trustee's
certificate of authentication, shall be taken as the statements of the Company
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility and Qualification on
Form T-1 supplied to the Company are true and accurate, subject to the
qualifications set forth therein. Neither the Trustee nor any Authenticating
Agent shall be accountable for the use or application by the Company of the
Notes or the proceeds thereof. The
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Trustee shall not be responsible for any statement made in any prospectus or
similar document used to sell the Notes.
SECTION 605. MAY HOLD NOTES.
The Trustee, any Authenticating Agent, any Paying Agent, any Note Registrar
or any other Person that may be an agent of the Trustee or the Company, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Note Registrar or such other Person.
SECTION 606. MONEY HELD IN TRUST.
Except as provided in Section 402 and Section 1003, Money held by the
Trustee in trust hereunder need not be segregated from other funds except to the
extent required by law and shall be held uninvested. The Trustee shall be under
no liability for interest on any Money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by the Trustee hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable costs, expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to the
Trustee's negligence or bad faith; and
(3) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the trust hereunder, including the
costs and expenses of defending themselves against any claim or liability
in connection with the exercise or performance of any of their powers or
duties hereunder.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a lien prior to the Notes upon all property
and funds held or collected by the
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Trustee as such, except funds held in trust for the payment of principal of and
interest on Notes. "Trustee" for the purposes of this Section includes any
predecessor Trustee, but negligence or bad faith of any Trustee shall not be
attributed to any other Trustee.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(6) or Section 501(7), the expenses
(including the reasonable compensation and the expenses and disbursements of
reasonable compensation and the expenses and disbursements of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee and each predecessor Trustee.
SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder that is a Corporation
organized and doing business under the laws of the United States of America, any
state thereof or the District of Columbia, authorized under such laws to
exercise corporate trust powers, or any other person permitted by the Trust
Indenture Act to act as trustee under an indenture qualified under the Trust
Indenture Act and that has a combined capital and surplus (computed in
accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(1) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee pursuant to
Section 610.
(2) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 610 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(3) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Notes delivered to the
Trustee and the Company.
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(4) If at any time:
(a) the Trustee shall fail to comply with the obligations
imposed upon it under Section 310(b) of the Trust Indenture
Act after written request therefor by the Company or any
Holder of a Note who has been a bona fide Holder of a Note
for at least six months, or
(b) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company, by or pursuant to a Board
Resolution, may remove the Trustee, or (ii) subject to Section 315 (e) of
the Trust Indenture Act, any Holder of a Note who has been a bona fide
Holder of a Note for at least six months may, on behalf of such Holder and
all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
(5) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by or pursuant to a Board Resolution, shall promptly
appoint a successor Trustee and shall comply with the applicable
requirements of Section 610. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor
Trustee shall be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Notes delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable
requirements of Section 610, become the successor Trustee and supersede the
successor Trustee appointed by the Company. If no successor Trustee shall
have been so appointed by the Company or the Holders of Notes and accepted
appointment in the manner required by Section 610, any Holder of a Note who
has been a bona fide Holder of a Note for at least six months may, on
behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee.
(6) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first-class mail, postage prepaid,
to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
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SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Upon the appointment hereunder of any successor Trustee, such successor
Trustee so appointed shall execute, acknowledge and deliver to the Company and
the retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties hereunder of the retiring
Trustee; but, on the request of the Company or such successor Trustee, such
retiring Trustee, upon payment of all of its charges, shall execute and deliver
an instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and Money held by such retiring Trustee
hereunder, subject nevertheless to its claim, if any, provided for in Section
607.
Upon request of any Person appointed hereunder as a successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in this Section.
No Person shall accept its appointment hereunder as a successor Trustee
unless at the time of such acceptance such successor Person shall be qualified
and eligible under this Article.
SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any Corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated but
not delivered by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes.
SECTION 612. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint one or more Authenticating Agents acceptable to the
Company with respect to the Notes which shall be authorized to act on behalf of
the Trustee to authenticate Notes issued upon original issue, exchange,
registration of transfer, partial redemption or pursuant to Section 306, and
Notes so authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Notes by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
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Each Authenticating Agent shall be acceptable to the Company and, except as
provided in this Indenture, shall at all times be a Corporation that would be
permitted by the Trust Indenture Act to act as trustee under an indenture
qualified under the Trust Indenture Act, is authorized under applicable law and
by its charter to act as an Authenticating Agent and has a combined capital and
surplus (computed in accordance with Section 310(a) (2) of the Trust Indenture
Act) of at least $50,000,000. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, provided such Corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of Notes,
if any, as their names and addresses appear in the Note Register. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay each Authenticating Agent from time to time
reasonable compensation for its services under this Section. If the Trustee
makes such payments, it shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 607.
The provisions of Sections 308, 604 and 605 shall be applicable to each
Authenticating Agent.
If an Authenticating Agent is appointed pursuant to this Section, the Notes
may have endorsed thereon, in addition to or in lieu of the Trustee's
certificate of authentication, an alternate certificate of authentication in the
following form:
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This is one of the Notes described herein.
________________________________________________
As Authenticating Agent
By_____________________________________________
Authorized Signatory
Authentication Date
____________________
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
In accordance with Section 312 (a) of the Trust Indenture Act, the Company
shall furnish or cause to be furnished to the Trustee
(1) semi-annually on __________ and __________ of each year, a
list, in each case in such form as the Trustee may reasonably require, of
the names and addresses of Holders as of the applicable date, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished,
PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar no such
list shall be required to be furnished for Notes for which the Trustee acts as
Note Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
The Trustee shall comply with the obligations imposed upon it pursuant to
Section 312 of the Trust Indenture Act.
Every Holder of Notes, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company, the Trustee, any Paying Agent
or any Note Registrar shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders of Notes in
accordance with Section 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, and that the Trustee shall not
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be held accountable by reason of mailing any material pursuant to a request made
under Section 312(b) of the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
(1) Within 60 days after May 15 of each year, if required by
Section 313(a) of the Trust Indenture Act, the Trustee shall transmit,
pursuant to Section 313(c) of the Trust Indenture Act, a brief report dated
as of such May 15 with respect to any of the events specified in said
Section 313 (a) which may have occurred since the later of the immediately
preceding May 15 and the date of this Indenture.
(2) The Trustee shall transmit the reports required by Section
313(a) of the Trust Indenture Act at the times specified therein.
(3) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the
Trust Indenture Act.
SECTION 704. REPORTS BY COMPANY.
The Company, pursuant to Section 314(a) of the Trust Indenture Act, shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a Note listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and regulations;
provided that notwithstanding the requirements of such rules and
regulations, so long as any Note is Outstanding the Company shall file with
the Trustee at a minimum (a) as soon as practicable, but in any event no
more than ninety (90) days, after the end of each fiscal year, copies of a
balance sheet and statements of income and retained earnings of the Company
as of the end of and for such fiscal year, audited by Independent Public
Accountants, and (b) as soon as practicable, but in any event no more than
forty-five (45) days, after the end of each quarterly fiscal period, except
for the last quarterly fiscal period in each fiscal year, a summary
statement (which need not be audited) of income and retained earnings of
the Company for such period;
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(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company, as the case may be, with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations;
(3) transmit to the Holders of Notes within 30 days after the
filing thereof with the Trustee, in the manner and to the extent provided
in Section 313(c) of the Trust Indenture Act, such summaries of any
information, documents and reports required to be filed by the Company
pursuant to paragraphs (1) and (2) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission;
provided that notwithstanding the requirements of such rules and
regulations, so long as any Note is Outstanding the Company shall transmit
to the Holders of Notes, within 30 days after the filing thereof with the
Trustee, in the manner and to the extent provided in Section 313(c) of the
Trust Indenture Act, the information, documents and other reports required
to be filed by the Company pursuant to paragraph (1) of this Section;
PROVIDED FURTHER that in lieu of any Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, the Company may transmit an annual or
quarterly report, respectively, containing financial statements and an
undertaking to transmit such Form 10-K or Form 10-Q, as the case may be, to
any Holder upon request, and in lieu of any Current Report on Form 8-K, the
Company may transmit a notice containing a brief description of the event
that is the subject of such Current Report and an undertaking to transmit
such Form 8-K upon request; and
(4) furnish to the Trustee the Officers' Certificates and notices
required by Section 1011 hereof.
ARTICLE EIGHT - CONSOLIDATION, MERGER AND SALES
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Nothing contained in this Indenture shall prevent any consolidation or
merger of the Company with or into any other Person or Persons (whether or not
affiliated with the Company), or successive consolidations or mergers in which
the Company or its successor or successors shall be a party or parties, or shall
prevent any conveyance, transfer or lease of the property of the Company as an
entirety or substantially as an entirety, to any other Person (whether or not
affiliated with the Company); PROVIDED, HOWEVER, that:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the entity formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
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assets of the Company substantially as an entirety shall be a Person
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed by the successor Person and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and interest on all the Notes and the
performance of every other covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction, no event
which, after notice or lapse of time, or both, would become an Event of
Default shall have occurred and be continuing; and
(3) either the Company or the successor Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, stating that such consolidation, merger, conveyance, transfer or
lease and such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 802. SUCCESSOR PERSON SUBSTITUTED FOR COMPANY.
Upon any consolidation or merger or any conveyance, transfer or lease of
the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
and thereafter, except in the case of a lease to another Person, the predecessor
Person shall be released from all obligations and covenants under this Indenture
and the Notes.
ARTICLE NINE - SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder of Notes, the Company (when authorized by
or pursuant to a Board Resolution) and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, which shall
conform with the requirements of the Trust Indenture Act as then in effect and
be in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the covenants of the Company
herein and in the Notes; or
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(2) to add to or change any of the provisions of this Indenture
to change or eliminate any restrictions on the payment of principal of or
interest on Notes or to permit or facilitate the issuance of Notes in
uncertificated form, provided any such action shall not adversely affect
the interests of the Holders of Notes in any material respect; or
(3) to cure any ambiguity or to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to matters
or questions arising under this Indenture which shall not adversely affect
the interests of the Holders of Notes in any material respect; or
(4) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any Notes pursuant to Article Four; provided that any such
action shall not adversely affect the interests of any Holder of a Note in
any material respect; or
(5) to add to the covenants of the Company for the benefit of the
Holders of the Notes (as shall be specified in such supplemental indenture
or indentures) or to surrender any right or power herein conferred upon the
Company; or
(6) to evidence and provide acceptance of the appointment of a
successor Trustee hereunder.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Notes, by Act of said Holders delivered to the Company
and the Trustee, the Company (when authorized by or pursuant to a Board
Resolution), and the Trustee may enter into one or more indentures supplemental
hereto (which shall conform with the requirements of the Trust Indenture Act as
then in effect) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders of Notes under this Indenture; PROVIDED,
HOWEVER, that no such supplemental indenture, without the consent of the Holder
of each Outstanding Note, shall
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
payable upon the redemption thereof or otherwise, or change the rate of
interest thereon, or adversely affect the right of repayment at the option
of any Holder as contemplated by Article Twelve, or change the Place of
Payment, currency in which the principal of or interest on, is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date or, in the case of repayment at the option of
the Holder, on or after the date for repayment), or
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(2) reduce the percentage in principal amount of the Outstanding
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, or Section 513
or Section 1012, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Note.
It shall not be necessary for any Act of Holders of Notes under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
As a condition to executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trust created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 315 of the Trust Indenture Act) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of a Note theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 905. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
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SECTION 906. RECORD DATE.
If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
but shall not be obligated to, fix a record date for the purpose of determining
the Holders entitled to consent to any supplemental indenture, agreement or
instrument or any waiver, and shall promptly notify the Trustee of any such
record date. If a record date is fixed those Persons who were Holders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such supplemental indenture, agreement or instrument or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. The record date shall be a date
no more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.
No such consent shall be valid or effective for more than six months after such
record date. Subject to applicable law, until any supplemental indenture,
agreement, instrument or waiver becomes effective, or a consent to it by a
Holder of a Note shall cease to be valid and effective as set forth in the
preceding sentence, such consent is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.
ARTICLE TEN - COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
The Company will duly and punctually pay the principal of and interest on
the Notes in accordance with the terms thereof and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in each Place of Payment an Office or Agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration, transfer or exchange and where notices and demands
to or upon the Company in respect of the Notes and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such Office or Agency. The Company hereby
initially designates the Corporate Trust Office of the Trustee as its Office or
Agency for each of the foregoing purposes. If at any time the Company shall
fail to maintain any such required Office or Agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
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SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it shall, on
or before each due date of the principal of or interest on the Notes, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum of Money
sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
shall promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it shall, on or
prior to each due date of the principal of or interest on the Notes, deposit
with any Paying Agent a sum of Money sufficient to pay the principal or interest
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee or the
Company to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal of
or interest on Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as provided in this Indenture;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal or
interest on the Notes; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same terms as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such Money.
Any Money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or interest on any
Note and remaining unclaimed for five years after such principal or interest
shall have become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general
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creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust Money, and all liability
of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in an
Authorized Newspaper in each Place of Payment, or to be mailed to Holders of
Notes, or both, notice that such Money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such Money then remaining will
be repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and its
Subsidiaries, and shall comply with all statutes, rules, regulations and orders
of and restrictions imposed by governmental and administrative authorities and
agencies applicable to the Company and its Subsidiaries; PROVIDED, HOWEVER, that
the foregoing shall not obligate the Company to preserve any such right or
franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries and that the loss thereof is not disadvantageous in any material
respect to any Holder.
SECTION 1005. MAINTENANCE OF PROPERTIES.
The Company will:
(1) cause its properties and the properties of its Subsidiaries
(other than properties obtained by the Company or any Subsidiary through
foreclosure or other resolution of any loan or properties subject to valid
and binding leases with customers of the Company or any Subsidiary) used or
useful in the conduct of the business of the Company and its Subsidiaries
to be maintained and kept in good condition, repair and working order and
supplied with all necessary facilities and equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
the foregoing shall not prevent the Company or a Subsidiary from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business and not disadvantageous in any material respect to
any Holder;
(2) take all appropriate steps to preserve, protect and maintain
the trademarks, trade names, copyrights, licenses and permits used in the
conduct of the business of the Company and its Subsidiaries; PROVIDED,
HOWEVER, that the foregoing shall not prevent the Company or a Subsidiary
from selling, abandoning or otherwise disposing of any such
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trademark, trade name, copyright, license or permit if such sale,
abandonment or disposition is, in the judgment of the Company, desirable in
the conduct of its business and not disadvantageous in any material respect
to any Holder; and
(3) The Company and each of its Subsidiaries shall comply with
all statutes, laws, ordinances, or government rules and regulations to
which it is subject, noncompliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole.
SECTION 1006. RESTRICTIONS ON DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS.
The Company shall not (i) declare or pay any dividend, either in cash or
property, on any shares of its capital stock (except dividends or other
distributions payable solely in shares of capital stock of the Company) or (ii)
purchase, redeem or retire any shares of its capital stock or any warrants,
rights or options to purchase or acquire any shares of its capital stock or
(iii) make any other payment or distribution, either directly or indirectly
through any Subsidiary, in respect of its capital stock (such dividends,
purchases, redemptions, retirements, payments and distributions being herein
collectively called "RESTRICTED PAYMENTS") if, after giving effect thereto,
(1) an Event of Default would have occurred; or
(2) (A) the sum of (i) such Restricted Payments plus (ii) the
aggregate amount of all Restricted Payments made during the
period after December 31, 1995 would exceed (B) the sum of
(i) $5 million plus (ii) 50% of the Company's Consolidated
Net Income for each fiscal year commencing subsequent to
December 31, 1995 (with 100% reduction for a loss in any
fiscal year), plus (iii) the cumulative net proceeds received
by the Company from the issuance or sale after June 30, 1996
of capital stock of the Company (excluding the proceeds from
the sale of Common Stock offered concurrently with the Notes)
or of any warrants, rights or other options to purchase or
acquire its capital stock.
Notwithstanding the foregoing, the Company may make a previously-declared
Restricted Payment if the declaration of such Restricted Payment was permitted
under this Section when made. For purposes of this Section, the amount of any
Restricted Payment payable in property shall be deemed to be the fair market
value of such property as determined by the Board of Directors of the Company.
SECTION 1007. LIMITATION ON FUNDED RECOURSE DEBT.
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Neither the Company nor any Subsidiary will create, incur, assume,
guarantee or be liable with respect to any Funded Recourse Debt if, immediately
after giving effect to any such creation, incurrence, assumption or guarantee
(including the retirement of any existing indebtedness from the proceeds of such
additional Funded Recourse Debt), the aggregate amount of Funded Recourse Debt
outstanding would exceed 300% of the Company's Consolidated Net Worth.
SECTION 1008. INSURANCE.
Subject to the right to sell, abandon or otherwise dispose of any building
or property whenever in the opinion of the Company the retention thereof is
inadvisable or not necessary to the business of the Company and its
Subsidiaries, the Company will at all times cause all buildings, equipment and
other insurable properties owned or operated by it or any Subsidiary to be
properly insured and kept insured with responsible insurance carriers, or
adequately insured by means of proper inter-insurance contracts, against loss or
damage by fire and other hazards, to the extent that such properties are usually
insured by Corporations owning or operating properties of a similar character;
PROVIDED, HOWEVER, that the foregoing shall not prevent the Company or any
Subsidiary from maintaining any self-insurance program covering minor risks if
adequate reserves are maintained in connection with such program.
SECTION 1009. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary and (2) all lawful claims
for labor, material and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which disputed amounts adequate reserves (in the good faith judgment of the
Board of Directors of the Company) have been established.
SECTION 1010. BOOKS AND RECORDS.
The Company shall, and shall cause each Subsidiary to, at all times keep
proper books of record and account in which proper entries shall be made in
accordance with generally accepted accounting principles and, to the extent
applicable, regulatory accounting principles.
SECTION 1011. STATEMENT BY OFFICERS AS TO DEFAULT.
(1) The Company will deliver to the Trustee, within 45 days after
the end of each calendar quarter, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in
default in the performance and
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observance of any of the terms, provisions and conditions of this
Indenture, (other than a term, provision or condition specifically dealt
with in Clause (2) of this Section 1011) setting forth the arithmetical
computations required to show compliance with the provisions of Sections
1006 and 1007 during the previous year, and, if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
(2) The Company will deliver to the Trustee, within five days
after the occurrence thereof, written notice of any event which after
notice or lapse of time or both would become an Event of Default pursuant
to Clause (4) of Section 501,.
SECTION 1012. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 1004 through 1007 and 1013 through
1015 with respect to the Notes if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Notes, by
Act of such Holders, either shall waive such compliance in such instance or
generally shall have waived compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
SECTION 1013. LIMITATION ON RANKING OF FUTURE INDEBTEDNESS.
The Company will not, directly or indirectly, incur, create, assume or
guarantee any Funded Recourse Debt that is senior in right of payment to the
Notes.
SECTION 1014. LIMITATIONS ON RESTRICTING SUBSIDIARY DIVIDENDS.
The Company shall not, and shall not permit any Subsidiary of the Company
to, create or otherwise cause to become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary of the Company to (a)
pay dividends or make any other distribution on its capital stock, (b) pay any
indebtedness owed to the Company or any other Subsidiary of the Company or (c)
make loans, advances, or capital contributions to the Company or any other
Subsidiary of the Company except (i) as set forth in the instrument evidencing
or the agreement governing Acquired Indebtedness of any acquired entity which
becomes a Subsidiary of the Company, PROVIDED, that any restriction or
encumbrance under such instrument or agreement existed at the time of
acquisition, was not put in place in anticipation of such acquisition, and is
not applicable to any Person, other than the Person or property or assets of the
Person so acquired; (ii) by agreements and transactions permitted under Section
1006; (iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Subsidiary of the Company; (iv) any
encumbrance or restriction arising under applicable law; (v)
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any encumbrance or restriction arising under indebtedness or other agreements
existing on the date of original issuance of the Notes; (vi) any restrictions,
with respect to a Subsidiary of the Company imposed pursuant to an agreement
that has been entered into for the sale or disposition of the stock, business,
assets or properties of such Subsidiary; (vii) any encumbrance or restriction
arising under the terms of purchase money obligations, but only to the extent
such purchase money obligations restrict or prohibit the transfer of the
property so acquired; (viii) any encumbrance or restriction arising under
customary non-assignment provisions in installment purchase contracts; (ix) any
encumbrance or restriction on the ability of any Subsidiary to transfer any of
its property acquired after the date hereof to the Company or any Subsidiary
that is required by a lender to, or purchaser of any indebtedness of, such
Subsidiary in connection with a financing of the acquisition of such property by
such Subsidiary; and (x) any encumbrance or restriction pursuant to any
agreement that extends, refinances, renews or replaces any agreement described
in the foregoing clauses (i) through (ix).
SECTION 1015. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction (or series of related transactions), including,
without limitation, any loan, advance, guarantee or capital contribution to, or
for the benefit of, or any sale, purchase, lease, exchange or other disposition
of any property or the rendering of any service, or any other direct or indirect
payment, transfer or other disposition (a "Transaction"), involving payments in
excess of $60,000, with any Affiliate of the Company (other than a wholly-owned
Subsidiary), on terms and conditions less favorable to the Company or such
Subsidiary, as the case may be, than would be available at such time in a
comparable Transaction in arm's length dealings with an unrelated Person as
determined by the Board of Directors, such approval to be evidenced by a Board
Resolution.
The provisions of the immediately preceding paragraph will not apply to:
(1) Restricted Payments otherwise permitted pursuant to this
Indenture;
(2) fees and compensation (including amounts paid pursuant to
employee benefit plans) paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any
Subsidiary, as determined by the Board of Directors or the senior
management thereof in the exercise of their reasonable business judgment;
or
(3) payments for goods and services purchased in the ordinary
course of business on an arms-length basis.
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ARTICLE ELEVEN - REDEMPTION OF NOTES
SECTION 1101. RIGHT OF REDEMPTION.
The Notes shall not be redeemable at the option of the Company prior to
_________, 2001. The Company may, at its option, redeem all or any part of the
Notes at any time on or after __________, 2001, at the Redemption Price of 100%
of the principal amount thereof, without premium, together with interest accrued
to the Redemption Date. Redemption of Notes at the option of the Company as
permitted hereby shall be made in accordance with the terms of such Notes and
this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Notes shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption at the election of
the Company of less than all of the Notes, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Notes to be redeemed.
SECTION 1103. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed shall be selected not less than 30 days prior to the Redemption Date by
the Trustee from the Outstanding Notes, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions of the principal amount of Notes; PROVIDED, HOWEVER, that no such
partial redemption shall reduce the portion of the principal amount of a Note
not redeemed to less than the minimum denomination for a Note established
herein.
The Trustee shall promptly notify the Company and the Note Registrar (if
other than itself) in writing of the Notes selected for redemption and, in the
case of any Notes selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Notes shall relate, in the case of
any Notes redeemed or to be redeemed only in part, to the portion of the
principal of such Notes which has been or is to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided in Section 106,
not less than 30 nor more than 60 days prior to the Redemption Date, to the
Holders of Notes to be redeemed. Failure to give notice by mailing in the
manner herein provided to the Holder of any Notes designated for redemption as a
whole or in part, or any defect in the notice to any such Holder,
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shall not affect the validity of the proceedings for the redemption of any other
Notes or portion thereof.
Any notice that is mailed to the Holder of any Notes in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
such Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the principal
amount) of the particular Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the notice
which relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the Holder of such Note will receive,
without charge to such Holder, a new Note or Notes of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Note or portion thereof to be
redeemed and that interest thereon shall cease to accrue on and after said
date,
(6) the place or places where such Notes are to be surrendered
for payment of the Redemption Price, and
(7) the CUSIP number of such Notes, if any (or any other numbers
used by a Depository to identify such Notes).
Notice of redemption of Notes to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) Money, in funds
available for payment by the Trustee on the Redemption Date, in an amount
sufficient to pay the Redemption Price of, and (except if the
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<PAGE>
Redemption Date shall be an Interest Payment Date) any accrued interest on, all
the Notes or portions thereof which are to be redeemed on that date.
SECTION 1106. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with any accrued interest to the Redemption Date;
PROVIDED, HOWEVER, that installments of interest on Notes whose Stated Maturity
is on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the Regular Record Dates therefor according to their terms and the
provisions of Section 307.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal, until paid, shall bear interest from the
Redemption Date at the rate prescribed therefor in the Note.
SECTION 1107. NOTES REDEEMED IN PART.
Any Note which is to be redeemed only in part shall be surrendered at any
Office or Agency for such Note (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Note, without
service charge, a new Note or Notes, of any authorized denomination as requested
by such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered. If a Note in
global form is so surrendered, the Company shall execute, and the Trustee shall
authenticate and deliver to the Depository for such Note in global form as shall
be specified in the Company Order with respect thereto to the Trustee, without
service charge, a new Note in global form in a denomination equal to and in
exchange for the unredeemed portion of the principal of the Note in global form
so surrendered.
ARTICLE TWELVE - REPAYMENT OPTION UPON DEATH OF HOLDERS
SECTION 1201. REPAYMENT OPTION UPON DEATH OF HOLDERS.
(1) Upon the death of any Holder of Notes, and upon the further
receipt by the Company or the Trustee of a written request for repayment
and satisfaction of the conditions set forth in subsection (2) below, the
Company shall be required to pay, in
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accordance with the terms of this Article, the Repayment Price of, and
(except if the Repayment Date shall be an Interest Payment Date) any
accrued interest on all or such portion (which portion shall be an integral
multiple of $1,000 in excess of the minimum authorized denomination) of the
Note or Notes held by the deceased Holder at the date of such Holder's
death as requested, provided that the Company shall not be required to make
repayment payments aggregating more than $25,000 in principal amount (plus
accrued interest) in any calendar year on a Note or Notes held by any one
deceased Holder or aggregating more than the Maximum Annual Repayment
Amount in principal amount (plus accrued interest) in any calendar year on
Notes held by any number of deceased Holders. The "REPAYMENT PRICE" of any
Note repaid pursuant to this Article shall be 100% of the principal amount
thereof. Subject to subsection (2) below, repayment of such Notes shall be
made in the order in which requests therefor are received (subject to the
aforesaid Maximum Annual Repayment Amount limitation) within 30 days
following receipt by the Company or the Trustee of the following:
(a) a written request for repayment of the Note or Notes
signed by a duly authorized representative of the Holder, which
request shall set forth the name of the deceased Holder, the date
of death of the deceased Holder, and the principal amount of the
Note or Notes to be repaid; and
(b) the certificates (if any other than with respect to a
global Note) representing the Note or Notes to be repaid; and
(c) evidence satisfactory to the Company and the Trustee of
the death of such deceased Holder and the authority of the
representative to such extent as may be required by the Trustee.
Notes not repaid in any calendar year because of the Maximum Annual
Repayment Amount may be held by the Trustee at the request of the authorized
representative of the deceased Holder and repaid in subsequent years in the
order in which such Notes are received.
(2) A Note or Notes held by the deceased Holder shall not be
entitled to repayment pursuant to this Section unless all of the following
conditions are met:
(a) the Notes to be repaid shall have been registered on
the Note Register in the name of the deceased Holder since the
issue date of such Notes or for a period of at least six months
prior to the date of the deceased Holder's death, whichever is
less; and
(b) the Company or the Trustee shall have received a
written request for repayment within one year after the date of the
deceased Holder's death or, in the case of requests for a
subsequent repayment of a Note or Notes held by such deceased
Holder, within one year after any such preceding request; and
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(c) the Company shall not, after giving effect to such
repayment, have made repayment payments aggregating more than the
Maximum Annual Repayment Amount in principal amount (plus accrued
interest) of Notes within the then current calendar year; and
(d) the Company shall not, after giving effect to such
repayment, be in default with respect to any Funded Recourse Debt;
and
(e) the Company shall not be subject to any law,
regulation, agreement or administrative directive preventing such
repayment.
(3) Authorized representatives of a Holder shall include the
following: executors, administrators or other legal representatives of an
estate; trustees of a trust; joint owners of Notes owned in joint tenancy
or tenancy by the entirety; custodians; conservators; guardians;
attorneys-in-fact; and other Persons generally recognized as having legal
authority to act on behalf of another.
(4) For purposes of this Section, the death of a Person owning a
Note or Notes in joint tenancy or tenancy by the entirety with another or
others shall be deemed the death of the Holder of the Note or Notes, and
the entire principal amount of the Note or Notes so held shall be subject
to repayment, together with accrued interest thereon to the Repayment Date,
in accordance with the provisions of this Article. For purposes of this
Section, the death of a Person owning a Note or Notes by tenancy in common
shall be deemed the death of a Holder of Note or Notes only with respect to
the deceased Holder's interest in the Note or Notes so held by tenancy in
common; except that in the event a Note or Notes are held by husband and
wife as tenants in common, the death of either shall be deemed the death of
the Holder of the Note or Notes, and the entire principal amount of the
Note or Notes so held shall be subject to repayment in accordance with the
provisions of this Article. A Person who, during such Person's lifetime,
was entitled to substantially all of the beneficial interests of ownership
of Notes will, upon such Person's death, be deemed the Holder thereof for
purposes of this Section, regardless of the registered holder, if such
beneficial interest can be established to the satisfaction of the Trustee.
Such beneficial interest will be deemed to exist in typical cases of
nominee ownership, ownership under the Uniform Transfers (or Gifts) to
Minors Act, community property or other joint ownership arrangements
between a husband and wife, and trust arrangements where one Person has
substantially all of the beneficial ownership interests in Notes during
such Person's lifetime. Beneficial interests shall include the power to
sell, transfer or otherwise dispose of Notes and the right to receive the
proceeds therefrom, as well as principal thereof and interest thereon.
(5) If Notes are issued in global form (i.e., in the name of the
nominee of a Depository for purposes of book-entry transfer) the Company or
the Trustee may adopt appropriate procedures to allow beneficial owners of
Notes to obtain payment in
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accordance with the requirements of the Depository in the event of a
request for repayment of the Notes pursuant to this Section.
SECTION 1202. DEPOSIT OF REPAYMENT PRICE.
Within 30 days after the receipt by the Company or the Trustee of any
request for repayment of a Note or Notes or any portion thereof duly made
pursuant to Section 1201, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of Money sufficient to
pay the Repayment Price of, and (except if the Repayment Date shall be an
Interest Payment Date) any accrued interest on all the Notes or portions thereof
which are to be repaid on that date.
SECTION 1203. NOTES PAYABLE ON REPAYMENT DATE.
A written request having been made as aforesaid, the Note or Notes so to be
repaid shall, on the Repayment Date, become due and payable at the Repayment
Price, and from and after such date (unless the Company shall default in the
payment of the Repayment Price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Note for repayment in accordance with
said request, such Note shall be paid by the Company at the Repayment Price,
together with any accrued interest to the Repayment Date; PROVIDED, HOWEVER,
that installments of interest on Notes whose Stated Maturity is on or prior to
the Repayment Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the Regular
Record Dates therefor according to their terms and the provisions of Section
307.
If any Note to be repaid shall not be so paid upon surrender thereof for
repayment, the principal, until paid, shall bear interest from the Repayment
Date at the rate prescribed therefor in the Note.
SECTION 1204. NOTES REPAID IN PART.
Any Note which is to be repaid only in part shall be surrendered at any
office or Agency for such Note (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Note, without
service charge, a new Note or Notes, containing identical terms and provisions,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unpaid portion of the
principal of the Note so surrendered. If a Note in global form is so
surrendered, the Company shall execute, and the Trustee shall authenticate and
deliver to the Depository for such Note in global form as shall be specified in
the Company Order with respect thereto to the Trustee, without service charge, a
new Note in global form in a
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denomination equal to and in exchange for the unpaid portion of the principal of
the Note in global form so surrendered.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals, if any, to be hereunto
affixed, all as of the day and year first above written.
[SEAL] WINTHROP RESOURCES CORPORATION
By______________________________________
Name:
Title:
Attest:
____________________________________
[SEAL] NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS TRUSTEE
By_______________________________________
Name:
Title:
Attest:
____________________________________
67
<PAGE>
STATE OF __________ )
) SS.:
COUNTY OF ________ )
On the _______ day of __________________________, 199_, before me
personally came ___________________________, to me known, who, being by me
duly sworn, did depose and say that he is the __________________ of Winthrop
Resources Corporation, a ___________ corporation, one of the persons described
in and who executed the foregoing instrument; that he knows the seal of said
Corporation; that the seal affixed to said instrument is such Corporation's
seal; that it was so affixed by authority of the Board of Directors of said
Corporation; and that he signed his name thereto by like authority.
__________________________________________
Notary Public
[NOTARIAL SEAL]
STATE OF _________ )
) SS.
COUNTY OF ________ )
On the ___________ day of_______________________, 199_, before me
personally came ____________________________, to me known, who, being by me duly
sworn, did depose and say that he is a _______________________ of Norwest Bank
Minnesota, National Association, a national banking corporation organized and
existing under the laws of the United States of America, one of the persons
described in and who executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such
Corporation's seal; that it was so affixed by authority of the Board of
Directors of said Corporation; and that he signed his name to said instrument by
authority of the Board of Directors of said corporation.
__________________________________________
Notary Public
[NOTARIAL SEAL]
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<PAGE>
[OPPENHEIMER WOLFF & DONNELLY LETTERHEAD]
EXHIBIT 5.1
May 24, 1996
Winthrop Resources Corporation
1015 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
RE: WINTHROP RESOURCES CORPORATION
REGISTRATION STATEMENT ON FORM S-2
Ladies and Gentlemen:
We are acting as counsel to Winthrop Resources Corporation, a Minnesota
corporation (the "Company"), in connection with the registration by the
Company of (i) 1,725,000 shares of the Company's Common Stock, $.01 par value
(the "Shares"), of which 750,000 shares of Common Stock are being sold by the
Company (the "Company Shares") and 975,000 shares of Common Stock are being
sold on behalf of certain selling shareholders of the Company, including
225,000 shares of Common Stock subject to an Underwriters' over-allotment
option (the "Selling Shareholders' Shares"), and (ii) $28,750,000 aggregate
principal amount of the Company's Senior Notes due 2003, including $3,750,000
aggregate principal amount of Senior Notes due 2003 subject to an
Underwriters' over-allotment option (the "Notes"), pursuant to the Company's
Registration Statement on Form S-2 originally filed with the Securities and
Exchange Commission on May 24, 1996 (the "Registration Statement").
In acting as counsel for the Company and arriving at the opinions expressed
below, we have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company,
agreements and other instruments, certificates of officers and representatives
of the Company, certificates of public officials and other documents as we have
deemed necessary or appropriate as a basis for the opinions expressed herein.
In connection with our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents tendered to us as originals, the
legal capacity of natural persons and the conformity to original documents of
all documents submitted to us as certified or photostatic copies.
Based on the foregoing, and subject to the qualifications and limitations set
forth herein, it is our opinion that:
<PAGE>
Winthrop Resources Corporation
May 24, 1996
Page 2
1. The Company had corporate authority to issue the Selling Shareholders'
Shares, and has authority to issue the Company Shares and the Notes in the
manner and under the terms set forth in the Registration Statement.
2. The Company Shares have been duly authorized and, when issued and delivered
to and paid for by the Underwriters in accordance with the Purchase
Agreement referred to in the Registration Statement, will be validly
issued, fully paid and nonassessable.
3. The Notes have been duly authorized, and when issued, executed,
authenticated and delivered to and paid for by the Underwriters in
accordance with the Indenture referred to in the Registration Statement,
will constitute valid and binding obligations of the Company in accordance
with and subject to their terms and the terms of the Indenture.
4. The Selling Shareholders' Shares have been duly authorized and are validly
issued, fully paid and nonassessable.
We express no opinion with respect to laws other than those of the State of
Minnesota and the federal law of the United States of America, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement as described above. It is not to be
used, circulated, quoted or otherwise referred to for any other purpose. Other
than the Company, no one is entitled to rely on this opinion.
Yours very truly,
/S/ OPPENHEIMER WOLFF & DONNELLY
<PAGE>
Exhibit 12.1
STATEMENTS REGARDING COMPUTATION OF RATIOS
RETAINED EARNINGS AS A PERCENTAGE OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Retained earnings....... $47,326,722 $38,240,925 $45,179,662 $35,656,756 $27,736,461 $20,544,898 $15,636,465
Shareholders' equity.... 56,872,324 47,847,312 54,723,696 45,316,536 37,422,946 25,302,633 15,741,465
Retained earnings as a
percentage of
shareholders'
equity(1).............. 83.2% 79.9% 82.6% 78.7% 74.1% 81.2% 99.3%
</TABLE>
- ---------------------
(1) Retained earnings as a percentage of shareholders' equity is calculated by
dividing Retained Earnings by Shareholders' Equity.
RETURN ON AVERAGE ASSETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings............ $ 3,134,598 $ 3,259,117 $ 11,555,977 $ 9,360,898 $ 7,659,563 $ 5,054,433 $ 3,176,809
Total assets............ 277,210,894 238,092,646 267,900,823 226,710,994 178,991,308 139,877,283 139,108,426
Average assets(1)....... 272,555,909 232,401,820 247,305,959 202,851,151 159,434,296 139,492,854 134,368,491
Return on average
assets(2).............. 4.6% 5.6% 4.7% 4.6% 4.8% 3.6% 2.4%
</TABLE>
- ---------------------
(1) Average assets is computed by adding the beginning and ending total
assets during the period and dividing by 2.
(2) Return on average assets is calculated by dividing net earnings by
average assets. For the three month periods ended March 31, 1996 and
1995, the percentage was annualized by multiplying by 4.
<PAGE>
RETURN ON AVERAGE SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings............ $ 3,134,598 $ 3,259,117 $11,555,977 $ 9,360,898 $ 7,659,563 $ 5,054,433 $ 3,176,809
Shareholders' equity.... 56,872,324 47,847,312 54,723,696 45,316,536 37,422,946 25,302,633 15,741,465
Average Shareholders'
equity(1).............. 55,798,010 46,581,924 50,020,116 41,369,741 31,362,798 20,522,049 14,153,060
Return on average
shareholders'
equity(2).............. 22.5% 28.0% 23.1% 22.6% 24.4% 24.6% 22.4%
</TABLE>
- ---------------------
(1) Average shareholders' equity is computed by adding the beginning and ending
shareholders' equity during the period and dividing by 2.
(2) Return on average shareholders' equity is calculated by dividing net
earnings by average shareholders' equity. For the three month periods
ended March 31, 1996 and 1995, the percentage was annualized by
multiplying by 4.
RATIO OF NET EARNINGS BEFORE
FIXED CHARGES TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings............ $ 3,134,598 $ 3,259,117 $11,555,977 $ 9,360,898 $ 7,659,563 $ 5,054,433 $ 3,176,809
Interest expense........ 3,577,662 3,364,601 13,469,746 9,928,313 8,600,891 9,027,337 9,995,133
Income taxes............ 2,178,300 2,172,800 7,704,000 6,240,600 5,106,500 3,176,700 2,117,800
----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings before fixed
charges................ 8,890,560 8,796,518 32,729,723 25,529,811 21,366,954 17,258,470 15,289,742
Fixed charges (1)....... 3,577,662 3,364,601 13,469,746 9,928,313 8,600,891 9,027,337 9,995,133
Ratio of net earnings
before fixed charges
to fixed charges (2)... 2.5x 2.6x 2.4x 2.6x 2.5x 1.9x 1.5x
</TABLE>
- ---------------------
(1) Fixed charges consists of interest expense.
(2) Ratio of net earnings before fixed charges to fixed charges is calculated
by dividing net earnings before fixed charges by fixed charges.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Winthrop Resources Corporation:
We consent to the use of our report included and incorporated by reference
herein and to the references to our firm under the headings "Selected Financial
and Other Data" and "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 24, 1996
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
______ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
_____________________________
WINTHROP RESOURCES CORPORATION
(Exact name of obligor as specified in its charter)
MINNESOTA 41-1415469
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1015 OPUS CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices) (Zip code)
----------------------------
% SENIOR NOTES DUE 2003
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into
this Form T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to
The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the
Comptroller of the Currency dated
January 2, 1934, approving the
consolidation of the Northwestern
National Bank of Minneapolis and the
Minnesota Loan and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated
January 12, 1943, as to change of corporate
title of Northwestern National Bank and Trust
Company of Minneapolis to Northwestern
National Bank of Minneapolis.*
d. A copy of the certificate of the Comptroller
of the Currency dated May 1, 1983,
authorizing Norwest Bank Minneapolis,
National Association, to act as fiduciary.*
<PAGE>
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January
2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in
effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section
321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.**
Exhibit 8. A copy of the certificate dated May 10, 1983 of
name change from Northwestern National Bank
Minneapolis to Norwest Bank Minneapolis,
National Association.*
Exhibit 9. A copy of the certificate dated January 11,
1988, of name change from Norwest Bank
Minneapolis, National Association to Norwest
Bank Minnesota, National Association.*
* Incorporated by reference to the exhibit of the same number filed with the
registration statement number 33-66086.
** Incorporated by reference to the exhibit of the same number filed with
the registration statement number 333-1126.
<PAGE>
EXHIBIT 6
May 23, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321 (b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal or State authorities authorized to make such
examination may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Curtis D. Schwegman
Corporate Trust Officer
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 23 rd day of May, 1996.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
--------------------------
Curtis D. Schwegman
Corporate Tust Officer