<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
-----------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- ----------------------
Commission File Number 1-11411
----------------------------------------------------------
Polaris Industries Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-1790959
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1225 Highway 169 North, Minneapolis, MN 55441
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 542-0500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 10, 1995, 18,206,258 shares of Common Stock of the issuer were
outstanding.
<PAGE>
POLARIS INDUSTRIES INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets Pg. 3
Statements of Operations Pg. 4
Statements of Cash Flows Pg. 5
Statement of Shareholders' Equity Pg. 6
Notes to Financial Statements Pg. 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations Pg. 9
Cash Dividends and Special Cash Distributions Pg. 10
Liquidity and Capital Resources Pg. 10
Inflation and Exchange Rates Pg. 11
Part II OTHER INFORMATION Pg. 13
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults upon Senior Securities
Item 4 - Submission of Matters to a Vote
of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE Pg. 14
-2-
<PAGE>
POLARIS INDUSTRIES INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $38,878 $62,881
Trade receivables 26,005 29,700
Inventories 105,365 88,714
Prepaid expenses and other 4,572 5,194
Deferred tax assets 16,000 20,000
------ ------
Total current assets 190,820 206,489
------- -------
Deferred Tax Assets 44,000 45,000
------ ------
Property and Equipment, at cost, net of accumulated
depreciation of $44,464 in 1995 and $38,368 in 1994 59,238 53,661
------ ------
Intangible Assets
Cost in excess of net assets of business acquired, net
of amortization of $5,910 in 1995 and $5,722 in 1994 24,768 24,956
Other, net of amortization of $2,448 in 1995 and $2,421 in 1994 1,033 1,060
----- -----
Total intangible assets 25,801 26,016
------ ------
Total Assets $319,859 $331,166
-------- --------
-------- --------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $68,074 $58,932
Distributions payable 34,956 12,736
Accrued expenses 55,440 74,634
Income taxes payable 14,864 15,155
------ ------
Total current liabilities 173,334 161,457
------- -------
Shareholders' Equity
Common stock 182 181
Additional paid in capital 108,806 103,935
Compensation payable in common stock 8,928 12,251
Retained earnings 28,609 53,342
------ ------
Total shareholders' equity 146,525 169,709
------- -------
Total Liabilities and Shareholders'
Equity $319,859 $331,166
-------- --------
-------- --------
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1995 1994
---- ----
<S> <C> <C>
Sales $254,793 $145,471
Cost of Sales 208,078 117,613
------- -------
Gross profit 46,715 27,858
Operating Expenses 27,098 18,020
------ ------
Operating income 19,617 9,838
Nonoperating Expense (Income), net (1,255) (72)
------ ---
Income before income taxes 20,872 9,910
Provision for Income Taxes 7,932 1,344
----- -----
Net Income $12,940 $8,566
------- ------
------- ------
Net Income Per Share $0.70
-----
-----
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 18,523 18,407
------ ------
------ ------
PRO FORMA INFORMATION (NOTE 7)
Income before income taxes $9,910
Provision for income taxes 3,766
-----
Net income $6,144
------
------
Net income per share $0.33
-----
-----
</TABLE>
See Notes to Financial Statements
-4-
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $12,940 $8,566
Adjustments to reconcile net income to
cash flow from operating activities
Depreciation 6,047 4,418
Amortization 215 1,787
First Rights compensation 1,614 1,786
Deferred income taxes 5,000 -
Changes in current operating items
Trade receivables 3,695 571
Inventories (16,651) (21,196)
Accounts payable 9,142 6,326
Accrued expenses (19,194) (11,528)
Income taxes payable (291) (523)
Others, net 557 362
--- ---
Net cash provided by (used
in) operating activities 3,074 (9,431)
----- ------
Cash Flows From Investing Activities
Purchase of property and equipment (11,624) (5,474)
------- ------
Cash Flows From Financing Activities
Cash distributions to partners (12,736) (11,851)
Cash dividends to shareholders (2,717) -
------ -------
Net cash used in financing
activities (15,453) (11,851)
------- -------
Increase (decrease) in cash
and cash equivalents (24,003) (26,756)
Cash and Cash Equivalents, Beginning 62,881 33,798
------ ------
Cash and Cash Equivalents, Ending $38,878 $7,042
------- ------
------- ------
</TABLE>
See Notes to Financial Statements
-5-
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
Compensation
Common Additional Payable in Retained
Stock Paid-In Capital Stock Earnings Total
----- --------------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $181 $103,935 $12,251 $53,342 $169,709
First Rights conversion to common stock 1 4,871 (4,937) - (65)
First Rights grants - - 1,614 - 1,614
Dividends declared - - - (37,673) (37,673)
Net Income for the period - - - 12,940 12,940
---- -------- ------ ------ ------
Balance, March 31, 1995 $182 $108,806 $8,928 $28,609 $146,525
---- -------- ------ ------- --------
---- -------- ------ ------- --------
</TABLE>
See Notes to Financial Statements
-6-
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and, therefore, do not include all information
and disclosures of results of operations, financial position and
changes in cash flow in conformity with generally accepted accounting
principles for complete financial statements. In the opinion of
management, such statements reflect all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation
of the financial position, results of operations, and cash flows for
the periods presented.
NOTE 2. INVENTORIES
The major components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Raw Materials $31,772 $32,717
Service Parts 27,703 29,067
Finished Goods 45,890 26,930
------- -------
$105,365 $88,714
-------- -------
-------- -------
</TABLE>
NOTE 3. FINANCING AGREEMENT
Through the first quarter of 1995, the Company had an unsecured bank
line of credit arrangement to meet seasonal short-term financing needs
with a maximum available of $40,000,000. Interest was charged at the
prime interest rate, C.D.-based or LIBOR-based rates. That line of
credit agreement was replaced with a new $125 million unsecured bank
line of credit arrangement dated as of May 8, 1995.
NOTE 4. DIVIDEND PAYABLE
On January 26, 1995, the Board of Directors of the Company declared a
special cash distribution of $1.92 per share payable on April 1, 1995,
to holders of record on March 17, 1995. This special cash distribution
totals approximately $34,956,000.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company has elected not to insure for product liability losses.
The estimated costs resulting from any losses are charged to operating
-7-
<PAGE>
NOTE 5. COMMITMENTS AND CONTINGENCIES
(cont'd)
expenses when it is probable a loss has been incurred and the amount
of the loss is determinable.
The Company is a defendant in lawsuits and subject to claims arising
in the normal course of business. While it is not feasible to
determine the outcome of any of these cases, it is the opinion of
management that their outcomes will not, in the aggregate, have a
material adverse effect on the financial position or operations of the
Company.
In 1990, the Canadian income tax authorities proposed certain
adjustments, principally relating to the original purchase price
allocation to the Canadian subsidiary of the Company's predecessor and
transfer pricing matters, for additional income taxes payable by the
Canadian subsidiary for 1987 and 1988. The resolution of these
proposed adjustments may also affect the Company's Canadian income tax
expense for years subsequent to 1988. The Canadian income tax
authorities have recently initiated an audit of the tax years 1989
through 1991. Management continues to vigorously contest certain of
the proposed adjustments. Management does not believe that the
outcome of this matter will have a materially adverse impact on the
financial position or operations of the Company.
NOTE 6. SUBSEQUENT EVENTS
On April 18, 1995, the Board of Directors of the Company declared a
regular cash dividend of $0.15 per share payable on May 15, 1995, to
holders of record on May 3, 1995.
On April 25, 1995, the Company filed a registration statement with the
Securities and Exchange Commission relating to a proposed secondary
offering of 1,836,852 shares of the Company's common stock. The
Company will issue no new shares and will receive none of the proceeds
of the sale.
NOTE 7. PRO FORMA INFORMATION
Pro forma information for 1994 is presented to assist in comparing the
continuing results of operations of the Company as if the Company were
a taxable corporation throughout 1994. The pro forma provision for
income taxes has been calculated at an effective tax rate of 38
percent.
-8-
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion pertains to the results of operations and financial
position of Polaris Industries Inc., a Minnesota corporation (the "Company"),
for the quarters ended March 31, 1995 and 1994. Due to the seasonality of the
snowmobile, all terrain vehicle (ATV) and personal watercraft (PWC) business,
and to certain changes in production and shipping cycles, results of such
periods are not necessarily indicative of the results to be expected for the
complete year.
RESULTS OF OPERATIONS
Sales increased to $254.8 million in the first quarter of 1995, representing a
75 percent increase over the $145.5 million of sales for the same period in
1994. Total finished goods unit shipments for the 1995 period increased 85
percent over the same period in 1994. The increase in sales is attributable to
a significant increase in sales of ATVs and PWC, due largely to continued strong
demand and enhanced manufacturing capacity compared with the first quarter of
1994.
ATV unit sales volume in the first quarter of 1995 increased 119 percent over
the comparable period in 1994, primarily because of the continued growth in the
utility and sports-enthusiasts' markets and the improvement in product
availability at the dealer level as a result of manufacturing capacity
expansions.
PWC unit sales volume in the first quarter of 1995 increased 41 percent over the
comparable period in 1994, primarily because of the fast growth in the PWC
market and the introduction of models aimed at both the family and sports rider
market segments. All Polaris PWC are now being assembled at the Company's new
manufacturing facility in Spirit Lake, Iowa.
Sales of related parts, garments and accessories in the first quarter of 1995
increased 26 percent over the comparable period in 1994, as a result of
increased sales volumes of the other product lines.
Gross profit of $46.7 million in the 1995 period represents a 68 percent
increase over gross profit of $27.9 million for the same period in 1994. The
gross profit margin percentage decreased to 18.3 percent for the first quarter
of 1995 from 19.2 percent for the same period in 1994. This decrease in gross
margin percentage is primarily a result of: (a) continued increases in raw
material purchase prices for engines and certain other component parts because
of the weakening of the U.S. dollar in relation to the Japanese yen; (b)
increase in warranty expenses as a result of the emphasis on technological
innovation and introduction of new high-performance
-9-
<PAGE>
Polaris Industries Inc.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations (cont'd)
models; and (c) strengthening of the U.S. dollar in relation to the Canadian
dollar which results in lower gross margins from the Company's Canadian
subsidiary operation.
Operating expenses in the 1995 period increased $9.1 million (50 percent) over
the 1994 period as a result of the sales volume increase, but as a percentage of
sales, decreased to 10.6 percent for the first quarter of 1995 compared to 12.4
percent for the same period in 1994. The percentage decrease is due primarily
to the Company's supporting an increasing level of sales without a corresponding
increase in selling and administrative expenses.
The increase in nonoperating income for the 1995 period over the 1994 period is
primarily attributable to investment income generated by higher cash and cash
equivalent balances during the 1995 period compared to the same period in 1994.
CASH DIVIDENDS AND SPECIAL CASH DISTRIBUTIONS
On January 26, 1995, the Board of Directors of the Company declared a regular
dividend of $0.15 per share payable on February 15, 1995, to holders of record
on February 6, 1995, and a special cash distribution of $1.92 per share payable
on April 1, 1995, to holders of record on March 17, 1995.
On April 18, 1995, the Board of Directors declared a regular cash dividend of
$0.15 per share payable on May 15, 1995, to holders of record on May 3, 1995.
Management has recommended to the Board of Directors that it pay an initial cash
dividend of $0.15 per share per quarter, and make two additional special cash
distributions, each of $1.92 per share, payable during the third and fourth
quarters of 1995. Management expects to incur indebtedness of up to $70 million
in connection with the payment of the special cash distributions. The timing
and amount of future dividends and distributions will be at the discretion of
the Board of Directors and will depend, among other things, on continuing levels
of performance and the financial strength of the Company. There can be no
assurance that the recommended dividends or cash distributions for 1995 will be
declared and paid.
LIQUIDITY AND CAPITAL RESOURCES
The seasonality of production and shipments causes working capital requirements
to fluctuate during the year. At March 31, 1995, the Company had no short-term
debt and had utilized its bank line to the extent of letters of credit
outstanding of $18.2
-10-
<PAGE>
Polaris Industries Inc.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations (cont'd)
million related to purchase obligations for raw materials. During the first
quarter of 1995, the Company had a $40 million unsecured bank line of credit
arrangement with interest charged at the prime interest rate, C.D.-based or
LIBOR-based rates. That line of credit was replaced with a new $125 million
unsecured bank line of credit agreement dated as of May 8, 1995.
Management believes that existing cash balances, cash flow to be generated from
operating activities and available borrowing capacity under the new line of
credit arrangement will be sufficient to fund operations, regular dividends,
special cash distributions and capital requirements for 1995.
INFLATION AND EXCHANGE RATES
The Company does not believe that inflation has had a material impact on the
results of its operations. However, the changing relationships of the U.S.
dollar to the Canadian dollar and Japanese yen have had a material impact from
time to time.
Over the past several years, weakening of the U.S. dollar in relation to the yen
has resulted in higher raw material purchase prices. The material weakening of
the U.S. dollar in relation to the yen during the latter part of the first
quarter of 1995 did not have a material effect on the Company's cost of goods
sold during the first quarter of 1995 due to the timing of engine purchases. In
1994, approximately 28 percent of the Company's cost of sales was attributable
to purchases from Japanese suppliers. Accordingly, the Company anticipates that
in future periods the devaluation of the U.S. dollar in relation to the yen will
have an impact on cost of goods sold. However, management believes that such
cost increases also affect its principal competitors in ATVs, and, to varying
degrees, some of its snowmobile and PWC competitors.
The Company operates in Canada through a wholly-owned subsidiary. Strengthening
of the U.S. dollar in relation to the Canadian dollar has caused unfavorable
foreign currency fluctuations from prior periods resulting in lower gross margin
levels.
In the past, the Company has been a party to, and in the future may enter into,
foreign hedging contracts for both the Japanese yen and the Canadian dollar to
minimize the impact of exchange rate fluctuations within each year. At March
31, 1995, the Company had certain open contracts to purchase Japanese yen and to
sell Canadian dollars which mature throughout 1995.
-11-
<PAGE>
Polaris Industries Inc.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations (cont'd)
In February 1995, the Company entered into an agreement with Fuji Heavy
Industries Ltd. to build engines in the United States for recreational and
industrial products. Potential advantages to the Company of participation in
such venture include reduced foreign exchange risk, lower shipping costs and
less dependence on a single source for engines in the future. However, such
benefits are not expected to be significant for some time.
-12-
<PAGE>
POLARIS INDUSTRIES INC.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
(a) EXHIBITS
Exhibit No. 10 - Credit Agreement by and between Polaris
Industries Inc. and First Bank National Association and Bank of
America Illinois, and First Union National Bank of North
Carolina, dated May 8, 1995.
Exhibit No. 11 - Computation of Per Share Earnings.
Exhibit No. 27 - Financial Data Schedule.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for
which this report was filed.
-13-
<PAGE>
POLARIS INDUSTRIES INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLARIS INDUSTRIES INC.
(Registrant)
Date: May 15, 1995 /s/ W. Hall Wendel, Jr.
-----------------------
W. Hall Wendel, Jr.
Chairman of the Board
and Chief Executive Officer
Date: May 15, 1995 /s/ John H. Grunewald
---------------------
John H. Grunewald
Executive Vice President, Chief Financial
Officer and Secretary (Principal Financial
and Chief Accounting Officer)
-14-
<PAGE>
CREDIT AGREEMENT
By and Between
POLARIS INDUSTRIES INC.
and
FIRST BANK NATIONAL ASSOCIATION, as Administrative Agent,
Co-Lead Manager and a Bank,
and
BANK OF AMERICA ILLINOIS
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
Co-Lead Managers and Banks
Dated as of May 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Accounting Terms and Calculations . . . . . . . . . . . . 13
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . . . 14
Section 1.4 Other Definitional Terms . . . . . . . . . . . . . . . . . 14
ARTICLE II
TERMS OF THE CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 The Revolving Commitments . . . . . . . . . . . . . . . . 14
Section 2.2 Procedure for Revolving Loans . . . . . . . . . . . . . . 15
Section 2.3 Revolving Notes . . . . . . . . . . . . . . . . . . . . . 16
Section 2.4 Conversions and Continuations . . . . . . . . . . . . . . 16
Section 2.5 Interest Rates, Interest Payments and Default Interest . . 17
Section 2.6 Repayment . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.7 Optional Prepayments . . . . . . . . . . . . . . . . . . . 18
Section 2.8 Letters of Credit . . . . . . . . . . . . . . . . . . . . 18
Section 2.9 Procedures for Letters of Credit . . . . . . . . . . . . . 18
Section 2.10 Terms of Letters of Credit . . . . . . . . . . . . . . . . 19
Section 2.11 Agreement to Repay Letter of Credit Drawings . . . . . . . 19
Section 2.12 Obligations Absolute . . . . . . . . . . . . . . . . . . . 20
Section 2.13 Increased Cost for Letters of Credit . . . . . . . . . . . 21
Section 2.14 Optional Reduction of Revolving Commitment Amounts
or Termination of Revolving Commitments . . . . . . . . . 21
Section 2.15 Loans to Cover Unpaid Drawings . . . . . . . . . . . . . . 23
Section 2.16 Revolving Commitment, Administrative Agent's,
Upfront and Origination Fees . . . . . . . . . . . . . . . 24
Section 2.17 Letter of Credit Fees . . . . . . . . . . . . . . . . . . 24
Section 2.18 Computation . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.19 Payments . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.20 Revolving Commitment Ending Date and Extension . . . . . . 25
Section 2.21 Use of Loan Proceeds . . . . . . . . . . . . . . . . . . . 26
Section 2.22 Interest Rate Not Ascertainable, Etc. . . . . . . . . . . 26
Section 2.23 Increased Cost . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.24 Illegality . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.25 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . 28
Section 2.26 Funding Losses; Eurodollar Rate Advances . . . . . . . . . 29
Section 2.27 Discretion of Banks as to Manner of Funding . . . . . . . 29
-i-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.1 Conditions of Initial Transaction . . . . . . . . . . . . 29
Section 3.2 Conditions Precedent to all Loans and Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.1 Organization, Standing, Etc. . . . . . . . . . . . . . . . 32
Section 4.2 Authorization and Validity . . . . . . . . . . . . . . . . 33
Section 4.3 No Conflict; No Default . . . . . . . . . . . . . . . . . 33
Section 4.4 Government Consent . . . . . . . . . . . . . . . . . . . . 34
Section 4.5 Financial Statements and Condition . . . . . . . . . . . . 34
Section 4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.7 Environmental, Health and Safety Laws . . . . . . . . . . 35
Section 4.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.9 Federal Reserve Regulations . . . . . . . . . . . . . . . 35
Section 4.10 Title to Property; Leases; Liens; Subordination . . . . . 36
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.12 Trademarks, Patents . . . . . . . . . . . . . . . . . . . 36
Section 4.13 Burdensome Restrictions . . . . . . . . . . . . . . . . . 36
Section 4.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.15 Investment Company Act . . . . . . . . . . . . . . . . . . 37
Section 4.16 Public Utility Holding Company Act . . . . . . . . . . . . 37
Section 4.17 Retirement Benefits . . . . . . . . . . . . . . . . . . . 37
Section 4.18 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 37
Section 4.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.1 Financial Statements and Reports . . . . . . . . . . . . . 38
Section 5.2 Corporate or Partnership Existence . . . . . . . . . . . . 40
Section 5.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . 40
Section 5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.6 Maintenance of Properties . . . . . . . . . . . . . . . . 41
Section 5.7 Books and Records . . . . . . . . . . . . . . . . . . . . 41
Section 5.8 Compliance . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.9 Notice of Litigation . . . . . . . . . . . . . . . . . . . 41
Section 5.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.11 Environmental Matters; Reporting . . . . . . . . . . . . . 42
-ii-
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.2 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.3 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.4 [INTENTIONALLY OMITTED.] . . . . . . . . . . . . . . . . . 44
Section 6.5 Subsidiaries; Acquisitions . . . . . . . . . . . . . . . . 44
Section 6.6 Negative Pledges; Subsidiary Restrictions . . . . . . . . 45
Section 6.7 Restricted Payments . . . . . . . . . . . . . . . . . . . 45
Section 6.9 Investments . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.11 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.12 Contingent Liabilities . . . . . . . . . . . . . . . . . . 49
Section 6.13 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . 49
Section 6.14 Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . 49
Section 6.15 Interest Coverage Ratio . . . . . . . . . . . . . . . . . 50
Section 6.16 Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.17 Transactions with Affiliates . . . . . . . . . . . . . . . 50
Section 6.18 Accounting Changes . . . . . . . . . . . . . . . . . . . . .50
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . 50
Section 7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.3 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII
THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.1 Appointment and Authorization . . . . . . . . . . . . . . 54
Section 8.2 Note Holders . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.3 Consultation With Counsel . . . . . . . . . . . . . . . . 55
Section 8.4 Loan Documents . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.5 First Bank and Affiliates . . . . . . . . . . . . . . . . 55
Section 8.6 Action by Administrative Agent . . . . . . . . . . . . . . 55
Section 8.7 Credit Analysis . . . . . . . . . . . . . . . . . . . . . 55
Section 8.8 Notices of Event of Default, Etc. . . . . . . . . . . . . 56
Section 8.9 Indemnification . . . . . . . . . . . . . . . . . . . . . 56
Section 8.10 Payments and Collections . . . . . . . . . . . . . . . . . 56
Section 8.11 Sharing of Payments . . . . . . . . . . . . . . . . . . . 57
Section 8.12 Advice to Banks . . . . . . . . . . . . . . . . . . . . . 57
Section 8.13 Resignation . . . . . . . . . . . . . . . . . . . . . . . 57
-iii-
<PAGE>
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.1 Modifications . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.3 Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.6 Successors and Assigns; Participations; Foreign and
Purchasing Banks . . . . . . . . . . . . . . . . . . . . . 60
Section 9.7 Confidentiality of Information . . . . . . . . . . . . . . 64
Section 9.8 Governing Law and Construction . . . . . . . . . . . . . . 64
Section 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . 65
Section 9.10 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . 65
Section 9.11 Survival of Agreement . . . . . . . . . . . . . . . . . . 65
Section 9.12 Indemnification . . . . . . . . . . . . . . . . . . . . . 66
Section 9.13 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 67
Section 9.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.16 Borrower Acknowledgements . . . . . . . . . . . . . . . . 67
LIST OF EXHIBITS
EXHIBIT 1.1-1 FORM OF GUARANTY
EXHIBIT 1.1-2 FORM OF REVOLVING NOTE
EXHIBIT 1.1-3 FINANCING CONTRACT
EXHIBIT 3.1(a) FORM OF CLOSING LEVERAGE CERTIFICATE
EXHIBIT 3.1(b) MATTERS TO BE COVERED BY OPINION OF COUNSEL TO THE BORROWER
AND ITS SUBSIDIARIES
EXHIBIT 4.6 LITIGATION
EXHIBIT 4.12 TRADEMARK DISPUTES
EXHIBIT 4.19 SUBSIDIARIES
EXHIBIT 5.1(d) FORM OF COMPLIANCE CERTIFICATE
EXHIBIT 6.9 EXISTING MATERIAL INVESTMENTS
EXHIBIT 6.10 EXISTING INDEBTEDNESS
EXHIBIT 6.11 EXISTING LIENS
EXHIBIT 6.12 CONTINGENT OBLIGATIONS
EXHIBIT 9.6 FORM OF ASSIGNMENT AGREEMENT
-iv-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 8, 1995, is by and between
POLARIS INDUSTRIES INC., a Minnesota corporation (the "Borrower"), the banks
which are signatories hereto (individually, a "Bank" and, collectively, the
"Banks") and FIRST BANK NATIONAL ASSOCIATION, a national banking association,
one of the Banks, as administrative agent for the Banks (in such capacity, the
"Administrative Agent").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):
"ACQUISITION": As defined in Section 6.5.
"ADDITIONAL GUARANTORS": Collectively, each Subsidiary other than (i)
the Canadian Subsidiary and (ii) the Initial Guarantors.
"ADJUSTED EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate (rounded upward, if necessary,
to the next one hundredth of one percent) determined by dividing the Eurodollar
Rate for such Interest Period by 1.00 minus the Eurodollar Reserve Percentage.
"ADMINISTRATIVE AGENT": As defined in the opening paragraph hereof.
"ADVANCE": Any portion of the outstanding Revolving Loans by a Bank.
An Advance may be a Eurodollar Rate Advance or a Reference Rate Advance.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent or
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by the Person referred to, and (d) each of such Person's
officers, directors, joint venturers and partners. The
<PAGE>
term control (including the terms "controlled by" and "under common control
with") means the possession, directly, of the power to direct or cause the
direction of the management and policies of the Person in question.
"AGGREGATE REVOLVING COMMITMENT AMOUNTS": As of any date, the sum of
the Revolving Commitment Amounts of all the Banks.
"APPLICABLE FEE PERCENTAGE": Subject to the last two sentences of
this definition, with respect to the period beginning on the day the financial
statements required by Section 5.1(c) with respect to a fiscal quarter are
delivered and ending on the earlier of the date the next such financial
statements are actually, or are required to be, delivered, shall mean the
"Applicable Fee Percentage" specified in the table below for the Daily Average
Cash Flow Coverage Ratio calculated as of the end of the fiscal quarter to end
most recently prior to the date of determination, for the period of four fiscal
quarters ending on such quarter end:
<TABLE>
<CAPTION>
Daily Average Applicable
Cash Flow Coverage Ratio Fee Percentage
------------------------ --------------
<S> <C>
Greater than 2.0 to 1.0 0.25%
Greater than 1.0 to 1.0, but 0.185%
less than or equal to
2.0 to 1.0
Less than or equal to 1.0 0.125%
to 1.0
</TABLE>
For the period beginning on the Closing Date and ending on the earlier of the
date the financial statements with respect to the Borrower's second fiscal
quarter of 1995 are actually, or are required to be, delivered, the Applicable
Fee Percentage shall be set by reference to the ratio shown on the certificate
delivered by the Borrower pursuant to Section 3.1(a)(xv). For any period
beginning on a day the financial statements required by Section 5.1(c) with
respect to a fiscal quarter are required to be but are not delivered and ending
on the date such financial statements are delivered, the Applicable Fee
Percentage shall be 0.25%.
"APPLICABLE LENDING OFFICE": For each Bank and for each type of
Advance, the office of such Bank identified pursuant to Section 9.4 or such
other domestic or foreign office of such Bank (or of an Affiliate of such Bank)
as such Bank may specify from time to time to the Administrative Agent and the
Borrower as the office by which its Advances of such type are to be made and
maintained.
"APPLICABLE MARGIN": Subject to the last two sentences of this
definition, with respect to the period beginning on the day the financial
statements required by Section 5.1(c) with respect to a fiscal quarter are
delivered and ending on the earlier of the date the next such financial
statements are actually, or are required
-2-
<PAGE>
to be, delivered, shall mean, with respect to Eurodollar Rate Advances, the
"Applicable Margin" specified in the table below for the Daily Average Cash Flow
Coverage Ratio calculated as of the end of the fiscal quarter to end most
recently prior to the date of determination, for the period of four fiscal
quarters ending on such quarter end:
<TABLE>
<CAPTION>
Daily Average Applicable
Cash Flow Coverage Ratio Margin
------------------------ ----------
<S> <C>
Greater than 2.0 to 1.0 1.0%
Greater than 1.0 to 1.0, but 0.50%
less than or equal to
2.0 to 1.0
Greater than 0.55 to 1.0, but 0.35%
less than or equal to
1.0 to 1.0
Less than or equal to 0.55 0.25%
to 1.0
</TABLE>
For the period beginning on the Closing Date and ending on the earlier of the
date the financial statements with respect to the Borrower's second fiscal
quarter of 1995 are actually, or are required to be, delivered, the Applicable
Margin shall be set by reference to the ratio shown on the certificate delivered
by the Borrower pursuant to Section 3.1(a)(xv). For any period beginning on a
day the financial statements required by Section 5.1(c) with respect to a fiscal
quarter are required to be but are not delivered and ending on the date such
financial statements are delivered, the Applicable Margin shall be 1.0%.
"ASSIGNMENT AGREEMENT": As defined in Section 9.6(c).
"BANK": As defined in the opening paragraph hereof.
"BOARD": The Board of Governors of the Federal Reserve System or any
successor thereto.
"BORROWER": As defined in the opening paragraph hereof.
"BORROWER LOAN DOCUMENTS": This Agreement and the Revolving Notes.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota or the state of New York) on which national
banks are permitted to be open in Minneapolis, Minnesota and New York, New York.
"CANADIAN SUBSIDIARY": Polaris Industries Ltd., a Manitoba
corporation.
-3-
<PAGE>
"CAPITALIZED LEASE": A lease of (or other agreement conveying the
right to use) real or personal property with respect to which at least a portion
of the rent or other amounts thereon constitute Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATIONS": As to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board), and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
"CASH FLOW COVERAGE RATIO": For any period of determination, the
ratio of (a) the sum of the aggregate principal amount outstanding of all
Capitalized Lease Obligations of the Borrower and the Subsidiaries, on a
consolidated basis, and Total Indebtedness determined as of the last day of that
period in accordance with GAAP, to (b) EBITDA determined for said period in
accordance with GAAP.
"CHANGE OF CONTROL": The occurrence, after the Closing Date, of any
of the following circumstances: (a) any Person or two or more Persons acting in
concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Borrower (or other securities
convertible into such securities) representing 25% or more of the combined
voting power of all securities of the Borrower entitled to vote in the election
of directors; or (b) during any period of up to twelve consecutive months,
whether commencing before or after the Closing Date, individuals who at the
beginning of such twelve-month period were directors of the Borrower ceasing for
any reason to constitute a majority of the Board of Directors of the Borrower
(other than by reason of death, disability or scheduled retirement); or (c) any
Person or two or more Persons acting in concert acquiring by contract or
otherwise, or entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, control over securities of the
Borrower (or other securities convertible into such securities) representing 25%
or more of the combined voting power of all securities of the Borrower entitled
to vote in the election of directors.
"CLOSING DATE": May 8, 1995.
"CO-LEAD MANAGER": Any Bank whose Revolving Commitment Amount equals
or exceeds $40,000,000.
"CODE": The Internal Revenue Code of 1986, as amended.
-4-
<PAGE>
"CONTINGENT OBLIGATION": With respect to any Person at the time of
any determination, without duplication, any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or (d)
entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner against
loss in respect thereof; provided, that the term "Contingent Obligation" shall
not include endorsements for collection or deposit, in each case in the ordinary
course of business.
"DAILY AVERAGE CASH FLOW COVERAGE RATIO": For any period of
determination, the ratio of (a) the sum of the aggregate principal amount
outstanding of all Capitalized Lease Obligations of the Borrower and the
Subsidiaries, on a consolidated basis, and Total Indebtedness on each day of the
period, divided by the number of days in the period, to (b) EBITDA determined
for said period in accordance with GAAP.
"DEFAULT": Any event which, with the giving of notice (whether such
notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"EBIT": For any period of determination, the consolidated net income
of the Borrower before deductions for income taxes and Interest Expense, but
after deductions for depreciation and amortization, all as determined in
accordance with GAAP.
"EBITDA": For any period of determination, the consolidated net
income of the Borrower before deductions for income taxes, Interest Expense,
depreciation and amortization, all as determined in accordance with GAAP.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
-5-
<PAGE>
"ERISA AFFILIATE": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the interbank
Eurodollar market and a day on which banks are open for business in New York
City.
"EURODOLLAR RATE": With respect to each Interest Period applicable to
a Eurodollar Rate Advance, the interest rate per annum (rounded upward, if
necessary, to the next one-sixteenth of one percent) at which United States
dollar deposits are offered to the Administrative Agent at 11:00 a.m. London
time in the interbank Eurodollar market two Eurodollar Business Days prior to
the first day of such Interest Period for delivery in Immediately Available
Funds on the first day of such Interest Period and in an amount approximately
equal to the Advance by the Administrative Agent to which such Interest Period
is to apply as determined by the Administrative Agent and for a maturity
comparable to the Interest Period; provided, that in lieu of determining the
rate in the foregoing manner, the Administrative Agent may substitute the per
annum Eurodollar rate (LIBOR) for United States dollars displayed on the
Telerate Systems, Inc. screen, page 3750 (or other applicable page), on the
first day of such Interest Period.
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Adjusted Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System, with deposits comparable in amount to those held by the Administrative
Agent, in respect of "Eurocurrency Liabilities" as such term is defined in
Regulation D of the Board. The rate of interest applicable to any outstanding
Eurodollar Rate Advances shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in Section 7.1.
"FINANCING CONTRACTS": The contracts set forth on Exhibit 1.1-3.
"FIRST BANK": First Bank National Association in its capacity as one
of the Banks hereunder.
-6-
<PAGE>
"FUJI CONTRACT": That certain Shareholder Agreement dated as of
February 3, 1995 between Fuji Heavy Industries, Ltd. and the Borrower, providing
for the Borrower's acquisition of 40% of the shares of Robin Manufacturing
U.S.A. Inc.
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
reporting.
"GUARANTORS": Collectively, the Additional Guarantors and the Initial
Guarantors.
"GUARANTY": A guaranty in the form attached hereto as Exhibit 1.1-1.
"HOLDING ACCOUNT": A deposit account belonging to the Administrative
Agent for the benefit of the Banks into which the Borrower may be required to
make deposits pursuant to the provisions of this Agreement, such account to be
under the sole dominion and control of the Administrative Agent and not subject
to withdrawal by the Borrower, with any amounts therein to be held for
application toward payment of any outstanding Letters of Credit when drawn upon.
The Holding Account shall be a money market savings account or substantial
equivalent (or other appropriate investment medium as the Borrower may from time
to time request and to which the Administrative Agent in its sole discretion
shall have consented) and shall bear interest in accordance with the terms of
similar accounts held by the Administrative Agent for its customers.
"IMMEDIATELY AVAILABLE FUNDS": Funds with good value on the day and
in the city in which payment is received.
"INDEBTEDNESS": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in accordance with GAAP should be classified upon the balance
sheet of such Person as liabilities, but in any event including: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued (other than trade payables), (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
purchased by such Person, (e) all obligations of such Person issued or assumed
as the deferred purchase price of property or services, (f) all obligations of
others secured by any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby
-7-
<PAGE>
have been assumed, (g) all Capitalized Lease Obligations of such Person, (h) all
obligations of such Person in respect of interest rate protection agreements,
(i) all obligations of such Person, actual or contingent, as an account party in
respect of letters of credit or bankers' acceptances, (j) all obligations of any
partnership or joint venture as to which such Person is or may become personally
liable, and (k) all Contingent Obligations of such Person; PROVIDED, HOWEVER
that "Indebtedness" shall not include Undrawn Documentary LC Exposure (but
"Indebtedness" shall include all reimbursement obligations with respect to
standby letters of credit and all reimbursement obligations with respect to any
draws under any letters of credit that have been paid by the issuing financial
institution).
"INITIAL GUARANTORS": Collectively, EIP Capital Corporation, EIP
Associates L.P., Polaris Industries Partners L.P., Polaris Real Estate
Corporation of Iowa, Inc., Polaris Real Estate Corporation and Polaris
Industries Export Ltd.
"INTEREST COVERAGE RATIO": For any period of determination, the ratio
of (a) EBIT, to (b) Interest Expense, in each case determined for said period in
accordance with GAAP.
"INTEREST EXPENSE": For any period of determination, the aggregate
consolidated amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any Indebtedness of the Borrower, including (a) all but
the principal component of payments in respect of conditional sale contracts,
Capitalized Leases and other title retention agreements, (b) commissions,
discounts and other fees and charges with respect to letters of credit and
bankers' acceptance financings, PROVIDED that if any such commission, discount,
fee or charge is paid during such period of determination and would, pursuant to
GAAP, be amortized over a period longer than such period of determination, then
only the portion of such commission, discount, fee or charge which relates to
such period of determination shall be included in Interest Expense, and (c) net
costs under interest rate protection agreements, in each case determined in
accordance with GAAP.
"INTEREST PERIOD": With respect to each Eurodollar Rate Advance, the
period commencing on the date of such Advance or on the last day of the
immediately preceding Interest Period, if any, applicable to an outstanding
Advance and ending one, two, three or six months thereafter, as the Borrower may
elect in the applicable notice of borrowing, continuation or conversion;
PROVIDED THAT:
(a) Any Interest Period that would otherwise end on a day which
is not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Eurodollar Business Day;
-8-
<PAGE>
(b) Any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month;
(c) Any Interest Period that would otherwise end after the
Revolving Commitment Ending Date shall end on the Revolving Commitment
Ending Date; and
(d) No more than 15 Interest Periods may exist at any time.
"INVESTMENT": The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital, extension
of credit (except for trade and customer accounts receivable for inventory sold
or services rendered in the ordinary course of business and payable in
accordance with customary trade terms), any acquisitions of real or personal
property (other than real and personal property acquired in the ordinary course
of business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof
(including, without limitation, a Joint Venture). The amount of any Investment
shall be the original cost of such Investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment.
"JOINT VENTURE": A corporation, partnership, joint venture or other
similar legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any of its
Subsidiaries with another Person in order to conduct a common venture or
enterprise with such Person.
"LETTER OF CREDIT": An irrevocable standby letter of credit issued by
the Administrative Agent pursuant to this Agreement for the account of the
Borrower.
"LETTER OF CREDIT FEE": As defined in Section 2.17.
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"LOAN DOCUMENTS": This Agreement, the Revolving Notes and the
Guaranties.
-9-
<PAGE>
"MAJORITY BANKS": At any time, Banks holding at least 66-2/3% of the
aggregate unpaid principal amount of the Revolving Notes or, if no Revolving
Loans are at the time outstanding hereunder, Banks holding at least 66-2/3% of
the Aggregate Revolving Commitment Amounts.
"MULTIEMPLOYER PLAN": A multiemployer plan, as such term is defined
in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal and interest on the Revolving Notes and Unpaid
Drawings when and as due, whether by acceleration or otherwise and all fees
(including Commitment Fees), expenses, indemnities, reimbursements and other
obligations of the Borrower under this Agreement or any other Borrower Loan
Document, in all cases whether now existing or hereafter arising or incurred.
"PARTICIPANT": As defined in Section 9.6(b).
"PARTNERSHIP GUARANTORS": Collectively, EIP Associates L.P. and
Polaris Industries Partners L.P.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PERSON": Any natural person, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.
"PLAN": Each employee benefit plan (whether in existence on the
Closing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate.
"PRIOR FIRST BANK AGREEMENT": that certain Credit Agreement dated as
of March 31, 1992, as amended by that certain First Amendment to Credit
Agreement dated as of November 16, 1992, that certain Second Amendment to Credit
Agreement dated as of March 31, 1993, and that certain Third Amendment to Credit
Agreement dated as of March 31, 1994, each between Polaris Industries L.P. and
First Bank, and as further amended by that certain Fourth Amendment to
-10-
<PAGE>
Credit Agreement dated as of December 21, 1994, among Polaris Industries L.P.,
Polaris Industries Partners L.P. and First Bank, that certain Fifth Amendment to
Credit Agreement dated as of March 28, 1995 between Polaris Industries Partners
L.P. and First Bank, and that certain Sixth Amendment to Credit Agreement dated
as of April 28, 1995 between Polaris Industries Partners L.P. and First Bank.
"PROHIBITED TRANSACTION": The respective meanings assigned to such
term in Section 4975 of the Code and Section 406 of ERISA.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Administrative Agent as its "reference rate." The
Administrative Agent may lend to its customers at rates that are at, above or
below the Reference Rate. For purposes of determining any interest rate
hereunder or under any other Loan Document which is based on the Reference Rate,
such interest rate shall change as and when the Reference Rate shall change.
"REFERENCE RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.
"REGULATORY CHANGE": Any change after the Closing Date in federal,
state or foreign laws or regulations or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
including any Bank under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"REPORTABLE EVENT": A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, PROVIDED that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any waiver in accordance with
Section 412(d) of the Code.
"RESTRICTED PAYMENTS": With respect to any Person, collectively, all
dividends or other distributions of any nature (cash, securities, assets or
otherwise), and all payments on any class of equity securities (including
warrants, options or rights therefor) issued by that Person, whether such
securities are authorized or outstanding on the Closing Date or at any time
thereafter and any redemption or purchase of, or distribution in respect of, any
of the foregoing, whether directly or indirectly.
-11-
<PAGE>
"REVOLVING COMMITMENT": With respect to a Bank, the agreement of such
Bank to make Revolving Loans to the Borrower in an aggregate principal amount
outstanding at any time not to exceed such Bank's Revolving Commitment Amount
upon the terms and subject to the conditions and limitations of this Agreement.
"REVOLVING COMMITMENT AMOUNT": With respect to a Bank, initially the
amount set opposite such Bank's name on the signature page hereof as its
Revolving Commitment Amount, or as specified in the most recent Assignment
Agreement to which such Bank is a party, but as the same may be from time to
time reduced pursuant to Section 2.14.
"REVOLVING COMMITMENT ENDING DATE": As defined in Section 2.20.
"REVOLVING COMMITMENT FEES": As defined in Section 2.16.
"REVOLVING LOAN": As defined in Section 2.1.
"REVOLVING LOAN DATE": The date of the making of any Revolving Loans
hereunder.
"REVOLVING NOTE": A promissory note of the Borrower in the form of
Exhibit 1.1-2 hereto.
"REVOLVING PERCENTAGE": With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the Revolving Commitment
Amount of such Bank and the denominator of which is the Aggregate Revolving
Commitment Amounts.
"SUBORDINATED DEBT": Any Indebtedness of the Borrower, now existing
or hereafter created, incurred or arising, which is subordinated in right of
payment to the payment of the Obligations in a manner and to an extent (a) that
Majority Banks have approved in writing prior to the creation of such
Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the date
of this Agreement, that Majority Banks have approved as Subordinated Debt in a
writing delivered by Majority Banks to the Borrower on or prior to the Closing
Date.
"SUBSIDIARY": Any corporation, partnership or other entity of which:
(a) securities or other ownership interests having ordinary voting power for the
election of a majority of the board of directors or other Persons performing
similar functions are owned by the Borrower, either directly or through one or
more Subsidiaries; and/or (b) a majority of the capital, profit or partnership
interests are owned by the Borrower, either directly or through one or more
Subsidiaries; specifically including but not limited to the Initial Guarantors.
-12-
<PAGE>
"TANGIBLE NET WORTH": As of any date of determination, the sum of the
amounts set forth on the consolidated balance sheet of the Borrower as the sum
of the common stock, preferred stock, additional paid-in capital, retained
earnings of the Borrower and compensation payable in common stock less the book
value of all assets of the Borrower and its Subsidiaries that would be treated
as intangibles under GAAP (other than the deferred tax asset recorded by the
Borrower in connection with the consummation of the transactions described in
that certain Agreement and Plan of Merger dated as of September 29, 1994, by and
among the Borrower, Polaris Industries Partners L.P. and certain other Persons,
which deferred tax asset SHALL be included in Tangible Net Worth), including all
such items as goodwill, trademarks, trade names, service marks, copyrights,
patents, licenses, unamortized debt discount and expenses and the excess of the
purchase price of the assets of any business acquired by the Borrower or any of
its Subsidiaries over the book value of such assets.
"TERMINATION DATE": The earliest of (a) the Revolving Commitment
Ending Date, (b) the date on which the Revolving Commitments are terminated
pursuant to Section 7.2 hereof or (c) the date on which the Revolving Commitment
Amounts are reduced to zero pursuant to Section 2.14 hereof.
"TOTAL INDEBTEDNESS": At the time of any determination, the amount,
on a consolidated basis, of all interest bearing obligations, liabilities and
indebtedness (other than trade payables) of the Borrower and its Subsidiaries as
determined in accordance with GAAP.
"TOTAL REVOLVING OUTSTANDINGS": As of any date of determination, the
sum of (a) the aggregate unpaid principal balance of Advances outstanding on
such date, (b) the aggregate maximum amount available to be drawn under Letters
of Credit outstanding on such date and (c) the aggregate amount of Unpaid
Drawings on such date.
"UNDRAWN DOCUMENTARY LC EXPOSURE": means reimbursement obligations
with respect to the amount available to be drawn (but not with respect to
amounts already drawn) under letters of credit issued to provide for, or to
ensure, the payment of the purchase price of goods acquired by the Borrower or a
Subsidiary.
"UNPAID DRAWING": As defined in Section 2.11.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and Majority Banks agree in writing on an
adjustment to such
-13-
<PAGE>
computation or determination to account for such change in GAAP. Calculations
of Cash Flow Coverage Ratio, Daily Average Cash Flow Coverage Ratio, EBIT,
EBITDA, Interest Coverage Ratio, Interest Expense and other financial ratios for
any period of determination including any part of 1994 shall be made on a pro
forma basis, assuming that the acquisition of Polaris Industries Partners L.P.
by the Borrower occurred on January 1, 1994.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
Section 1.4 OTHER DEFINITIONAL TERMS. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly
requires, "or" has the inclusive meaning represented by the phrase "and/or".
ARTICLE II
TERMS OF THE CREDIT FACILITIES
PART A -- TERMS OF LENDING
Section 2.1 THE REVOLVING COMMITMENTS. On the terms and subject to
the conditions hereof, each Bank severally agrees to make loans (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower on a
revolving basis at any time and from time to time from the Closing Date to the
Termination Date, during which period the Borrower may borrow, repay and
reborrow in accordance with the provisions hereof, provided, that no Revolving
Loan will be made in any amount which, after giving effect thereto, would cause
the Total Revolving Outstandings to exceed the Aggregate Revolving Commitment
Amounts. Revolving Loans hereunder shall be made by the several Banks ratably
in the proportion of their respective Revolving Commitment Amounts. Revolving
Loans may be obtained and maintained, at the election of the Borrower but
subject to the limitations hereof, as Reference Rate Advances or Eurodollar Rate
Advances or any combination thereof.
-14-
<PAGE>
Section 2.2 PROCEDURE FOR REVOLVING LOANS. Any request by the
Borrower for Revolving Loans hereunder shall be in writing, or by telephone
promptly confirmed in writing, and must be given so as to be received by the
Administrative Agent not later than noon (Minneapolis time) three Eurodollar
Business Days prior to the requested Revolving Loan Date if the Revolving Loans
are requested as Eurodollar Rate Advances and not later than noon (Minneapolis
time) on the requested Revolving Loan Date if the Revolving Loans are requested
as Reference Rate Advances. Each request for Revolving Loans hereunder shall
be irrevocable and shall be deemed a representation by the Borrower that on the
requested Revolving Loan Date and after giving effect to the requested Revolving
Loans the applicable conditions specified in Article III have been and will be
satisfied. Each request for Revolving Loans hereunder shall specify (i) the
requested Revolving Loan Date, (ii) the aggregate amount of Revolving Loans to
be made on such date which shall be in a minimum amount of $500,000 or, if more,
an integral multiple thereof, (iii) whether such Revolving Loans are to be
funded as Reference Rate Advances or Eurodollar Rate Advances, and (iv) in the
case of Eurodollar Rate Advances, the duration of the initial Interest Period
applicable thereto. If such a request does not specify which interest option
shall apply, the Revolving Loans shall be funded as Reference Rate Advances.
Without in any way limiting the Borrower's obligation to confirm in writing any
telephone request for Revolving Loans hereunder, the Administrative Agent may
rely on any such request which it believes in good faith to be genuine; and the
Borrower hereby waives the right to dispute the Administrative Agent's record of
the terms of such telephone request. The Administrative Agent shall promptly
notify each other Bank of the receipt of such request, the matters specified
therein, and of such Bank's ratable share of the requested Revolving Loans. On
the date of the requested Revolving Loans, each Bank shall provide its share of
the requested Revolving Loans to the Administrative Agent in Immediately
Available Funds not later than 2:00 p.m., Minneapolis time. Unless the
Administrative Agent determines that any applicable condition specified in
Article III has not been satisfied, the Administrative Agent will make available
to the Borrower at the Administrative Agent's principal office in Minneapolis,
Minnesota in Immediately Available Funds not later than 5:00 p.m. (Minneapolis
time) on the requested Revolving Loan Date the amount of the requested Revolving
Loans which the Banks have provided to it; PROVIDED, HOWEVER, that if any Bank
has not provided its share of the requested Revolving Loans to the
Administrative Agent, the Administrative Agent may, but is not required to, make
available such amount to the Borrower as provided above; PROVIDED, FURTHER,
HOWEVER, that the Administrative Agent shall not make any Revolving Loan on
behalf of a Bank if the Administrative Agent has received prior notice from such
Bank that it will not make such Revolving Loan. If the Administrative Agent has
made a Revolving Loan to the Borrower on behalf of a Bank but has not received
the amount of such Revolving Loan from such Bank by the time herein required,
such Bank shall pay interest to the Administrative Agent on the amount so
advanced at the overnight Federal Funds rate from the date of
-15-
<PAGE>
such Revolving Loan to the date funds are received by the Administrative Agent
from such Bank, such interest to be payable with such remittance from such Bank
of the principal amount of such Revolving Loan. If the Administrative Agent
does not receive payment from such Bank by the next Business Day after the date
of any Revolving Loan, the Administrative Agent shall be entitled to recover
such Revolving Loan, with interest thereon at the rate then applicable to the
such Revolving Loan, on demand, from the Borrower, without prejudice to the
Administrative Agent's and the Borrower's rights against such Bank. If such
Bank pays the Administrative Agent the amount herein required with interest at
the overnight Federal Funds rate before the Administrative Agent has recovered
from the Borrower, such Bank shall be entitled to the interest payable by the
Borrower with respect to the Revolving Loan in question accruing from the date
the Administrative Agent made such Revolving Loan.
Section 2.3 REVOLVING NOTES. The Advances of each Bank shall be
evidenced by a single Revolving Note payable to the order of such Bank in a
principal amount equal to such Bank's Revolving Commitment Amount originally in
effect. Upon receipt of each Bank's Revolving Note from the Borrower, the
Administrative Agent shall mail such Revolving Note to such Bank. Each Bank
shall enter in its ledgers and records the amount of each Revolving Loan, the
various Advances made, converted or continued and the payments made thereon, and
each Bank is authorized by the Borrower to enter on a schedule attached to its
Revolving Note a record of such Revolving Loans, Advances and payments;
provided, however that the failure by any Bank to make any such entry or any
error in making such entry shall not limit or otherwise affect the obligation of
the Borrower hereunder and on the Revolving Notes, and, in all events, the
principal amounts owing by the Borrower in respect of the Revolving Notes shall
be the aggregate amount of all Revolving Loans made by the Banks less all
payments of principal thereof made by the Borrower.
Section 2.4 CONVERSIONS AND CONTINUATIONS. On the terms and subject
to the limitations hereof, the Borrower shall have the option at any time and
from time to time to convert all or any portion of the Advances into Reference
Rate Advances or Eurodollar Rate Advances, or to continue a Eurodollar Rate
Advance as such; PROVIDED, HOWEVER that a Eurodollar Rate Advance may be
converted or continued only on the last day of the Interest Period applicable
thereto and no Advance may be converted to or continued as a Eurodollar Rate
Advance if a Default or Event of Default has occurred and is continuing on the
proposed date of continuation or conversion. Advances may be converted to, or
continued as, Eurodollar Rate Advances only in integral multiples, as to the
aggregate amount of the Advances of all Banks so converted or continued, of
$500,000. The Borrower shall give the Administrative Agent written notice of
any continuation or conversion of any Advances and such notice must be given so
as to be received by the Administrative Agent not later than noon (Minneapolis
time) three Eurodollar
-16-
<PAGE>
Business Days prior to requested date of conversion or continuation in the case
of the continuation of, or conversion to, Eurodollar Rate Advances and on the
date of the requested conversion to Reference Rate Advances. Each such notice
shall specify (a) the amount to be continued or converted, (b) the date for the
continuation or conversion (which must be (i) the last day of the preceding
Interest Period for any continuation or conversion of Eurodollar Rate Advances,
and (ii) a Eurodollar Business Day in the case of continuations as or
conversions to Eurodollar Rate Advances and a Business Day in the case of
conversions to Reference Rate Advances), and (c) in the case of conversions to
or continuations as Eurodollar Rate Advances, the Interest Period applicable
thereto. Any notice given by the Borrower under this Section shall be
irrevocable. If the Borrower shall fail to notify the Administrative Agent of
the continuation of any Eurodollar Rate Advances within the time required by
this Section, such Advances shall, on the last day of the Interest Period
applicable thereto, automatically be converted into Reference Rate Advances of
the same principal amount. Subject to Section 2.22 and 2.24, all conversions
and continuation of Advances must be made uniformly and ratably among the Banks.
(E.g., when continuing a two-month Eurodollar Rate Advance of one Bank to a
three-month Eurodollar Rate Advance, the Borrower must simultaneously continue
all two-month Eurodollar Rate Advances of all Banks having Interest Periods
ending on the date of continuation as three-month Eurodollar Rate Advances.)
Section 2.5 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Advances on the Revolving Loans as
follows:
2.5(a) Each Eurodollar Rate Advance shall bear interest on the
unpaid principal amount thereof during the Interest Period applicable
thereto at a rate per annum equal to the sum of (i) the Adjusted Eurodollar
Rate for such Interest Period, plus (ii) the Applicable Margin as of the
first day in that Interest Period.
2.5(b) Until due, each Reference Rate Advance shall bear
interest on the unpaid principal amount thereof at a varying rate equal to
the Reference Rate.
2.5(c) Any Advance not paid when due, whether at the date
scheduled therefor or earlier upon acceleration, shall bear interest until
paid in full (i) during the balance of any Interest Period applicable to
such Advance, at a rate per annum equal to the sum of the rate applicable
to such Advance during such Interest Period plus 2.0%, and (ii) otherwise,
at a rate per annum equal to the sum of (1) the Reference Rate, plus (2)
2.0%.
-17-
<PAGE>
2.5(d) Interest shall be payable (i) with respect to each
Eurodollar Rate Advance having an Interest Period of three months or less,
on the last day of the Interest Period applicable thereto; (ii) with
respect to any Eurodollar Rate Advance having an Interest Period greater
than three months, on the last day of the Interest Period applicable
thereto and on each day that would have been the last day of the Interest
Period for such Advance had successive Interest Periods of three months
duration been applicable to such Advance; (iii) with respect to any
Reference Rate Advance, on the last day of each fiscal quarter; (iv) with
respect to all Advances, upon any permitted prepayment (on the amount
prepaid); and (E) with respect to all Advances, on the Termination Date;
provided that interest under Section 2.5 (c) shall be payable on demand.
Section 2.6 REPAYMENT. The unpaid principal amount of all Advances,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Termination Date.
Section 2.7 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or penalty.
Except upon an acceleration following an Event of Default or upon termination of
the Revolving Commitments in whole, the Borrower may pay Eurodollar Rate
Advances only on the last day of the Interest Period applicable thereto. Each
partial prepayment shall be in an aggregate amount for all the Banks of $500,000
or an integral multiple thereof. Amounts paid (unless following an acceleration
or upon termination of the Revolving Commitments in whole) or prepaid on
Advances under this Section 2.7 may be reborrowed upon the terms and subject to
the conditions and limitations of this Agreement. Amounts paid or prepaid on
the Advances under this Section 2.7 shall be for the account of each Bank in
proportion to its share of outstanding Revolving Loans.
PART B -- TERMS OF THE LETTER OF CREDIT FACILITY
Section 2.8 LETTERS OF CREDIT. Upon the terms and subject to the
conditions of this Agreement, the Administrative Agent agrees to issue Letters
of Credit for the account of the Borrower from time to time between the Closing
Date and the Termination Date in such amounts as the Borrower shall request up
to an aggregate amount at any time outstanding not exceeding the Aggregate
Revolving Commitment Amounts; provided that no Letter of Credit will be issued
in any amount which, after giving effect to such issuance, would cause Total
Revolving Outstandings to exceed the Aggregate Revolving Commitment Amounts.
Section 2.9 PROCEDURES FOR LETTERS OF CREDIT. Each request for a
Letter of Credit shall be made by the Borrower in writing, by telex, facsimile
transmission or electronic conveyance received by the Administrative Agent by
2:00 p.m.,
-18-
<PAGE>
Minneapolis time, on a Business Day which is not less than one Business Day
preceding the requested date of issuance (which shall also be a Business Day).
Each request for a Letter of Credit shall be deemed a representation by the
Borrower that on the date of issuance of such Letter of Credit and after giving
effect thereto the applicable conditions specified in Article III have been and
will be satisfied. The Administrative Agent may require that such request be
made on such letter of credit application and reimbursement agreement form as
the Administrative Agent may from time to time specify, along with satisfactory
evidence of the authority and incumbency of the officials of the Borrower making
such request. The Administrative Agent shall promptly notify the other Banks of
the receipt of the request and the matters specified therein. On the date of
each issuance of a Letter of Credit the Administrative Agent shall send notice
to the other Banks of such issuance, accompanied by a copy of the Letter or
Letters of Credit so issued.
Section 2.10 TERMS OF LETTERS OF CREDIT. Letters of Credit shall be
issued in support of obligations of the Borrower other than the import of goods,
for the Borrower's general business purposes in a manner not in conflict with
any of the Borrower's covenants in this Agreement. All Letters of Credit must
expire not later than the Business Day preceding the Revolving Commitment Ending
Date. No Letter of Credit may have a term longer than twelve months.
Section 2.11 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. If the
Administrative Agent has received documents purporting to draw under a Letter of
Credit that the Administrative Agent believes conform to the requirements of
that Letter of Credit, or if the Administrative Agent has decided that it will
comply with the Borrower's written or oral request or authorization to pay a
drawing on any Letter of Credit that the Administrative Agent does not believe
conforms to the requirements of the Letter of Credit, the Administrative Agent
will notify the Borrower of that fact. If the Borrower requests or authorizes
the Administrative Agent to pay a drawing that does not conform to the
requirements of that Letter of Credit, or waives discrepancies contained in the
documentation submitted in connection with such drawing (whether such request,
authorization or waiver is by telephone or in writing), the Borrower shall be
obligated to reimburse the Administrative Agent to the same extent as if the
documents presented in connection with that drawing conformed in all respects to
the requirements of the Letter of Credit. Telephone authorization for payment
against discrepant documents is final and need not be confirmed in writing. The
Borrower shall reimburse the Administrative Agent by 9:30 a.m. (Minneapolis
time) on the day on which such drawing is to be paid in Immediately Available
Funds in an amount equal to the amount of such drawing. Any amount by which the
Borrower has failed to reimburse the Administrative Agent for the full amount of
such drawing by 10:00 a.m. on the date on which the Administrative Agent in its
notice indicated that it would pay such drawing, until reimbursed from the
proceeds of Revolving
-19-
<PAGE>
Loans pursuant to Section 2.15 or out of funds available in the Holding Account,
is an "Unpaid Drawing."
Section 2.12 OBLIGATIONS ABSOLUTE. The obligation of the Borrower
under Section 2.11 to repay the Administrative Agent for any amount drawn on any
Letter of Credit and to repay the Banks for any Revolving Loans made under
Section 2.15 to cover Unpaid Drawings shall be absolute, unconditional and
irrevocable, shall continue for so long as any Letter of Credit is outstanding
notwithstanding any termination of this Agreement, and shall be paid strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, setoff, defense or other right which
the Borrower may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom any
such beneficiary, transferee or holder may be acting), the Administrative
Agent or any Bank or any other Person, whether in connection with a Letter
of Credit, this Agreement, the transactions contemplated hereby, or any
unrelated transaction; or
(c) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever.
Neither the Administrative Agent nor any Bank nor officers, directors or
employees of any thereof shall be liable or responsible for, and the obligations
of the Borrower to the Administrative Agent and the Banks shall not be impaired
by:
(i) The use which may be made of any Letter of Credit or for any
acts or omissions of any beneficiary, transferee or holder
thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of documents, or of
any endorsements thereon, even if such documents or
endorsements should, in fact, prove to be in any or all
respects invalid, insufficient, fraudulent or forged;
(iii) The acceptance by the Administrative Agent of documents that
appear on their face to be in order, without responsibility
for further investigation, regardless of any notice or
information to the contrary; or
-20-
<PAGE>
(iv) Any other action of the Administrative Agent in making or
failing to make payment under any Letter of Credit if in good
faith and in conformity with U.S. or foreign laws, regulations
or customs applicable thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against the
Administrative Agent, and the Administrative Agent shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower which the Borrower proves were
caused by the Administrative Agent's willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit comply with
the terms thereof.
Section 2.13 INCREASED COST FOR LETTERS OF CREDIT. If any Regulatory
Change shall either (a) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against Letters of Credit issued by the
Administrative Agent or any Bank's obligations to make Advances to cover Letters
of Credit, or (b) shall impose on any Bank any other conditions affecting this
Agreement or any Letter of Credit; and the result of any of the foregoing is to
increase the cost to the Administrative Agent or any Bank of issuing or
maintaining any Letter of Credit or such Bank's obligations to make Advances to
cover Unpaid Drawings, or reduce the amount of any sum received or receivable by
the Administrative Agent or any Bank hereunder, then, upon demand (which demand
shall be given by a Bank affected by such increased cost or reduction promptly
after it determines such increased cost or reduction) to the Borrower by such
Bank, the Borrower shall pay to such Bank the additional amount or amounts as
will compensate such Bank for such increased cost or reduction. A certificate
submitted to the Borrower by such Bank setting forth the basis for the
determination of such additional amount or amounts necessary to compensate such
Bank as aforesaid shall be conclusive and binding on the Borrower absent error.
PART C -- GENERAL
Section 2.14 OPTIONAL REDUCTION OF REVOLVING COMMITMENT AMOUNTS OR
TERMINATION OF REVOLVING COMMITMENTS.
(a) The Borrower may, at any time, upon not less than ten Business
Days prior written notice to the Administrative Agent, reduce the Revolving
Commitment Amounts, ratably (except as provided in Section 2.14(b)), with
any such reduction in a minimum aggregate amount for all the Banks of
$5,000,000, or, if more, in an integral multiple of $1,000,000; PROVIDED,
HOWEVER, that the Borrower may not at any time reduce the Aggregate
Revolving Commitment Amounts below the Total Revolving Outstandings.
-21-
<PAGE>
The Borrower may, at any time when there are no Letters of Credit
outstanding, upon not less than ten Business Days prior written notice to
the Administrative Agent, terminate the Revolving Commitments in their
entirety. Upon termination of the Revolving Commitments pursuant to this
Section, the Borrower shall pay to the Administrative Agent for the account
of the Banks the full amount of all outstanding Advances, all accrued and
unpaid interest thereon, all unpaid Commitment Fees accrued to the date of
such termination, any indemnities payable with respect to Advances pursuant
to Section 2.26 (a) and all other unpaid obligations of the Borrower to the
Administrative Agent and the Banks hereunder.
(b) If any Bank (or with respect to clauses (ii) and (iii), any
Participant of such Bank pursuant to Section 9.6(b)) shall (i) fail to make
a Revolving Loan when required pursuant to Section 2.2 (unless the
Administrative Agent shall have made such Revolving Loan and such Bank
shall have paid the Administrative Agent the principal amount of such
Revolving Loan together with interest thereon, all as provided in Section
2.2), or (ii) suspend its obligation to make Eurodollar Rate Advances
pursuant to Section 2.22 or 2.24 hereof, or (iii) request compensation from
the Borrower pursuant to Section 2.23, 2.25 or 9.5, then the Borrower,
within 30 Business Days of such failure, suspension or request, may either
(A) replace such Bank (a "replaced Bank") with such other bank or
financial institution acceptable to the Administrative Agent (in its
reasonable discretion) as may be selected by the Borrower (a
"successor Bank"), effective upon: (i) payment by the successor Bank
to the Administrative Agent for the account of the replaced Bank of
the full amount of all outstanding Advances made by the replaced Bank,
all accrued and unpaid interest thereon, all unpaid Commitment Fees
accrued to the date of such transfer with respect thereto, any
indemnities payable with respect to such Advances pursuant to Section
2.26(a) and all other unpaid obligations of the Borrower to the
replaced Bank hereunder, including, without limitation, all
obligations to the replaced Bank arising under Sections 2.23, 2.25 and
9.5 (all to the extent that such obligations would be payable if this
Agreement were terminated on the date such replaced Bank is replaced),
and (ii) the successor Bank's execution of an Assignment Agreement
with respect to the replaced Bank's entire Revolving Commitment (which
the replaced Bank shall be obligated to execute, but which shall be
deemed effective upon the payment described in clause (i), even if the
replaced Bank refuses to execute it, unless the replaced Bank claims
that the payment described in clause (i) did not satisfy the
Borrower's obligations to the replaced Bank under this Agreement, in
which case the Assignment Agreement shall not be deemed effective
until and
-22-
<PAGE>
unless the Borrower pays the disputed amount [but such payment may be
made under protest or with reservation of rights]), whereupon the
Revolving Commitment and Revolving Note of the replaced Bank shall be
deemed transferred to the successor Bank; or
(B) with the prior written consent of all other Banks, terminate the
Revolving Commitment of such Bank, PROVIDED that upon such termination
the Borrower shall pay to the Administrative Agent for the account of
such terminated Bank the full amount of all outstanding Advances made
by such Bank, all accrued and unpaid interest thereon, all unpaid
Commitment Fees accrued to the date of such termination with respect
thereto, any indemnities payable with respect to such Advances
pursuant to Section 2.26(a) and all other unpaid obligations of the
Borrower to such terminated Bank hereunder, including, without
limitation, all obligations to such Bank arising under Sections 2.23,
2.25 and 9.5 (all to the extent that such obligations would be payable
if this Agreement were terminated on the date such terminated Bank's
Revolving Commitment is terminated); PROVIDED, HOWEVER, that the
Borrower may not terminate such Bank's Commitment if such termination
would reduce the Aggregate Revolving Commitment Amounts below the
Total Revolving Outstandings.
Section 2.15 LOANS TO COVER UNPAID DRAWINGS. Whenever any Unpaid
Drawing exists for which there are not then funds in the Holding Account to
cover the same, the Administrative Agent shall give the other Banks notice to
that effect, specifying the amount thereof, in which event each Bank is
authorized (and the Borrower does here so authorize each Bank) to, and shall,
make a Revolving Loan (as a Reference Rate Advance) to the Borrower in an
amount equal to such Bank's Revolving Percentage of the amount of the Unpaid
Drawing. The Administrative Agent shall notify each Bank by 11:00 a.m.
(Minneapolis time) on the date such Unpaid Drawing occurs of the amount of the
Revolving Loan to be made by such Bank. Notices received after such time shall
be deemed to have been received on the next Business Day. Each Bank shall then
make such Revolving Loan (regardless of noncompliance with the applicable
conditions precedent specified in Article III hereof and regardless of whether
an Event of Default then exists) and each Bank shall provide the Administrative
Agent with the proceeds of such Revolving Loan in Immediately Available Funds,
at the office of the Administrative Agent, not later than 2:00 p.m. (Minneapolis
time) on the day on which such Bank received such notice (or, in the case of
notices received after 11:00 a.m., Minneapolis time, is deemed to have received
such notice). The Administrative Agent shall apply the proceeds of such
Revolving Loans directly to reimburse itself for such Unpaid Drawing. If any
portion of any such amount paid to the Administrative Agent should be recovered
by or on behalf of the Borrower from the Administrative Agent
-23-
<PAGE>
in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss
of the amount so recovered shall be ratably shared between and among the Banks
in the manner contemplated by Section 8.10 hereof. If at the time the Banks
make funds available to the Administrative Agent pursuant to the provisions of
this Section, the applicable conditions precedent specified in Article III shall
not have been satisfied, the Borrower shall pay to the Administrative Agent for
the account of the Banks interest on the funds so advanced at a floating rate
per annum equal to the sum of the Reference Rate plus the Applicable Margin for
Reference Rate Advances plus two percent (2.00%). If for any reason the Banks
are unable to make Advances to the Borrower to reimburse the Administrative
Agent for an Unpaid Drawing, then the other Banks shall immediately purchase
from the Administrative Agent risk participations in such Unpaid Drawing, at
par, in amounts equal to such Banks' Revolving Percentages of the Unpaid
Drawing.
Section 2.16 REVOLVING COMMITMENT, ADMINISTRATIVE AGENT'S, UPFRONT
AND ORIGINATION FEES.
(a) The Borrower shall pay to the Administrative Agent for the
account of each Bank fees (the "Revolving Commitment Fees") in an amount
determined by applying a per annum rate equal to the Applicable Fee
Percentage to the average daily Revolving Commitment Amount of such Bank
for the period from the Closing Date to the Termination Date. Such
Revolving Commitment Fees are payable quarterly in arrears on the last day
of each calendar quarter and on the Termination Date.
(b) On the Closing Date and on each anniversary thereof, the Borrower
shall pay to the Administrative Agent, for the Administrative Agent's own
account, a yearly agent's fee in the amount provided in a side letter dated
May 8, 1995 from the Borrower to the Administrative Agent. No Bank (other
than the Administrative Agent) shall be entitled to any portion of such
fee.
(c) On the Closing Date, the Borrower shall pay to each Co-Lead
Manager, for the Co-Lead Manager's own account, an origination fee in the
amount provided in a side letter dated May 8, 1995 from the Borrower to the
Co-Lead Managers. No Bank (other than the Co-Lead Managers) shall be
entitled to any portion of that origination fee.
(d) On the Closing Date, the Borrower shall pay to the Administrative
Agent, for the account of each Bank, an upfront fee equal to five one
hundredths of one percent (0.05%) of that Bank's Revolving Commitment
Amount.
Section 2.17 LETTER OF CREDIT FEES. For each Letter of Credit
issued, the Borrower shall pay to the Administrative Agent for the account of
the Banks, in
-24-
<PAGE>
advance payable on the date of issuance, a fee (a "Letter of Credit Fee") in an
amount determined by applying a per annum rate equal to the Applicable Margin
that would be in effect if the Borrower received a Eurodollar Advance on the
date the Letter of Credit was issued to the original face amount of the Letter
of Credit for the period from the date of issuance to the scheduled expiration
date of such Letter of Credit. In addition to the Letter of Credit Fee, the
Borrower shall pay to the Administrative Agent for its own account, on demand,
all issuance, amendment, drawing and other fees regularly charged by the
Administrative Agent to its letter of credit customers and all out-of-pocket
expenses incurred by the Administrative Agent in connection with the issuance,
amendment, administration or payment of any Letter of Credit. If the face
amount of any Letter of Credit is increased, or the expiration date of any
Letter of Credit is extended, by any amendment to such Letter of Credit after
the original issuance, the Borrower shall pay to the Administrative Agent, for
the account of the Banks, an additional Letter of Credit Fee, calculated in a
manner consistent with this Section. All Letter of Credit Fees shall be deemed
fully earned when paid, and shall be nonrefundable.
Section 2.18 COMPUTATION. Revolving Commitment Fees and Letter of
Credit Fees and interest on Advances shall be computed on the basis of actual
days elapsed (or, in the case of Letter of Credit Fees which are paid in
advance, actual days to elapse) and a year of 360 days.
Section 2.19 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Revolving Notes and all fees, expenses and other obligations
under this Agreement payable to the Administrative Agent or the Banks shall be
made without setoff or counterclaim in Immediately Available Funds not later
than noon (Minneapolis time) on the dates called for under this Agreement and
the Notes to the Administrative Agent at its main office in Minneapolis,
Minnesota. Funds received after such time shall be deemed to have been received
on the next Business Day. The Administrative Agent will promptly distribute in
like funds to each Bank its ratable share of each such payment of principal,
interest, Commitment Fees and Letter of Credit Fees received, by the
Administrative Agent for the account of the Banks. Whenever any payment to be
made hereunder or on the Revolving Notes shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time, in the case of a payment of principal,
shall be included in the computation of any interest on such principal payment.
Section 2.20 REVOLVING COMMITMENT ENDING DATE AND EXTENSION. The
"Revolving Commitment Ending Date" is March 31, 1998; PROVIDED, HOWEVER, that if
the Borrower by written notice given to the Administrative Agent at least 90
days but not more than 180 days prior to the Revolving Commitment Ending Date
requests in writing an extension of the Revolving Commitment Ending Date for an
additional period of time of up to one year and if each Bank, in its sole and
absolute
-25-
<PAGE>
discretion consents in writing to such extension not later than 45 days prior to
the Revolving Commitment Ending Date, then the Revolving Commitment Ending Date
shall be extended for such additional period and shall be the last day of the
period for which such extension has been granted; PROVIDED, FURTHER, HOWEVER,
that not more than two one-year extensions shall be granted pursuant to this
Section 2.20. The failure of any Bank to consent in writing to an extension by
the time provided above shall be deemed a consent by such Bank to have its
Revolving Commitment terminated or transferred to a new bank, in each case, as
of the Revolving Commitment Termination Date (determined without giving effect
to the extension to which such Lender did not timely consent). No Bank shall be
under any obligation or commitment to extend the Revolving Commitment Ending
Date, and no such obligation or commitment on the part of any Bank should be
inferred from the provisions of this Section.
Section 2.21 USE OF LOAN PROCEEDS. The proceeds of the initial
Revolving Loans shall be used first to repay any amounts outstanding under the
Prior First Bank Agreement as of the Closing Date. Any remaining balance of the
initial Revolving Loans and the proceeds of any subsequent Revolving Loans and
shall be used for the Borrower's general business purposes (including capital
expenditures, the cost of Acquisitions and Restricted Payments permitted
pursuant to Section 6.7(b)) in a manner not in conflict with any of the
Borrower's covenants in this Agreement.
Section 2.22 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior
to the date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period for any Eurodollar Rate Advance, any Bank determines (which
determination shall be conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not being made
available to such Bank in the relevant market for such Interest Period, or
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to such Bank of funding or maintaining Eurodollar Rate
Advances for such Interest Period,
such Bank shall forthwith give notice to the Borrower and the other Banks of
such determination, whereupon the obligation of such Bank to make or continue,
or to convert any Advances to, Eurodollar Rate Advance shall be suspended until
such Bank notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist (and such Bank
shall promptly notify the Borrower and the Administrative Agent if such
circumstances cease to exist). While any such suspension continues, all further
Advances by such Bank shall be made as Reference Rate Advances. No such
suspension shall affect the interest rate
-26-
<PAGE>
then in effect during the applicable Interest Period for any Eurodollar Rate
Advance outstanding at the time such suspension is imposed.
Section 2.23 INCREASED COST. If any Regulatory Change:
(a) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Eurodollar Rate Advances,
its Revolving Note or its obligation to make Eurodollar Rate Advances or
shall change the basis of taxation of payment to any Bank (or its
Applicable Lending Office) of the principal of or interest on its
Eurodollar Rate Advances or any other amounts due under this Agreement in
respect of its Eurodollar Rate Advances or its obligation to make
Eurodollar Rate Advances (except for changes in the rate of tax on the
overall net income of such Bank or its Applicable Lending Office imposed by
the jurisdiction in which such Bank's principal office or Applicable
Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including, without
limitation, any such requirement imposed by the Board, but excluding with
respect to any Eurodollar Rate Advance any such requirement to the extent
included in calculating the applicable Adjusted Eurodollar Rate) against
assets of, deposits with or for the account of, or credit extended by, any
Bank's Applicable Lending Office or shall impose on any Bank (or its
Applicable Lending Office) or the interbank Eurodollar market any other
condition affecting its Eurodollar Rate Advances, its Revolving Note or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Eurodollar Rate
Advance, or to reduce the amount of any sum received or receivable by such Bank
(or its Applicable Lending Office) under this Agreement or under its Revolving
Note, then, within 30 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction. Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If any Bank
fails to give such notice within 45 days after it obtains knowledge of such an
event, such Bank shall, with respect to compensation payable pursuant to this
Section, only be entitled to payment under this Section for costs incurred from
and after the date 45 days prior to the date that such Bank does give such
notice. A certificate of any Bank claiming compensation
-27-
<PAGE>
under this Section, setting forth the additional amount or amounts to be paid to
it hereunder and stating in reasonable detail the basis for the charge and the
method of computation, shall be conclusive in the absence of error. In
determining such amount, any Bank may use any reasonable averaging and
attribution methods. Failure on the part of any Bank to demand compensation for
any increased costs or reduction in amounts received or receivable with respect
to any Interest Period shall not constitute a waiver of such Bank's rights to
demand compensation for any increased costs or reduction in amounts received or
receivable in any subsequent Interest Period.
Section 2.24 ILLEGALITY. If any Regulatory Change shall make it
unlawful or impossible for any Bank to make, maintain or fund any Eurodollar
Rate Advances, such Bank shall notify the Borrower and the Administrative Agent,
whereupon the obligation of such Bank to make or continue, or to convert any
Advances to, Eurodollar Rate Advances shall be suspended until such Bank
notifies the Borrower and the Administrative Agent that the circumstances giving
rise to such suspension no longer exist. Before giving any such notice, such
Bank shall designate a different Applicable Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. If such Bank determines
that it may not lawfully continue to maintain any Eurodollar Rate Advances to
the end of the applicable Interest Periods, all of the affected Advances shall
be automatically converted to Reference Rate Advances as of the date of such
Bank's notice, and upon such conversion the Borrower shall indemnify such Bank
in accordance with Section 2.26.
Section 2.25 CAPITAL ADEQUACY. In the event that any Regulatory
Change reduces or shall have the effect of reducing the rate of return on any
Bank's capital or the capital of its parent corporation (by an amount such Bank
deems material) as a consequence of its Revolving Commitment and/or Advances to
a level below that which such Bank or its parent corporation could have achieved
but for such Regulatory Change (taking into account such Bank's policies and the
policies of its parent corporation with respect to capital adequacy), then the
Borrower shall, within five days after written notice and demand from such Bank
(with a copy to the Administrative Agent), pay to such Bank additional amounts
sufficient to compensate such Bank or its parent corporation for such reduction.
If any Bank fails to give such notice within 45 days after it obtains knowledge
of such a Regulatory Change, such Bank shall, with respect to compensation
payable pursuant to this Section, only be entitled to payment under this Section
for costs incurred from and after the date 45 days prior to the date that such
Bank does give such notice. Any determination by such Bank under this Section
and any certificate as to the amount of such reduction given to the Borrower by
such Bank shall be final, conclusive and binding for all purposes, absent error.
-28-
<PAGE>
Section 2.26 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower
shall compensate each Bank, upon its written request, for all losses, expenses
and liabilities (including any interest paid by such Bank to lenders of funds
borrowed by it to make or carry Eurodollar Rate Advances to the extent not
recovered by such Bank in connection with the re-employment of such funds and
including loss of anticipated profits) which such Bank may sustain: (i) if for
any reason, other than a default by such Bank, a funding of a Eurodollar Rate
Advance does not occur on the date specified therefor in the Borrower's request
or notice as to such Advance under Section 2.2 or 2.4, or (ii) if, for whatever
reason (including, but not limited to, acceleration of the maturity of Advances
following an Event of Default), any repayment of a Eurodollar Rate Advance, or a
conversion pursuant to Section 2.24, occurs on any day other than the last day
of the Interest Period applicable thereto. A Bank's request for compensation
shall set forth the basis for the amount requested and shall be final,
conclusive and binding, absent error.
Section 2.27 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Each Bank
shall be entitled to fund and maintain its funding of Eurodollar Rate Advances
in any manner it may elect, it being understood, however, that for the purposes
of this Agreement all determinations hereunder (including, but not limited to,
determinations under Section 2.26, but excluding determinations that the
Administrative Agent may elect to make from the Telerate System, Inc. screen)
shall be made as if such Bank had actually funded and maintained each Eurodollar
Rate Advances during the Interest Period for such Advance through the purchase
of deposits having a maturity corresponding to the last day of the Interest
Period and bearing an interest rate equal to the Eurodollar Rate for such
Interest Period.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS OF INITIAL TRANSACTION. The making of the
initial Revolving Loans and the issuance of the initial Letter of Credit shall
be subject to the prior or simultaneous fulfillment of the following conditions:
3.1(a) DOCUMENTS. The Administrative Agent shall have received
the following in sufficient counterparts (except for the Revolving Notes) for
each Bank:
(i) A Revolving Note drawn to the order of each Bank executed by a
duly authorized officer (or officers) of the Borrower and dated the Closing
Date.
(ii) Guaranties executed by each of the Initial Guarantors.
-29-
<PAGE>
(iii) A copy of the corporate resolution of the Borrower authorizing
the execution, delivery and performance of the Borrower Loan Documents,
certified as of the Closing Date by the Secretary or an Assistant Secretary
of the Borrower.
(iv) An incumbency certificate showing the names and titles and
bearing the signatures of the officers of the Borrower authorized to
execute the Borrower Loan Documents and to request Letters of Credit, Loans
and conversions and continuations of Advances hereunder, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(v) A copy of the corporate resolution of each Initial Guarantor
(other than the Partnership Guarantors) authorizing the execution, delivery
and performance of that Initial Guarantor's Guaranty, certified as of the
Closing Date by the Secretary or an Assistant Secretary of that Initial
Guarantor.
(vi) An incumbency certificate showing the names and titles and
bearing the signatures of the officers of each Initial Guarantor (other
than the Partnership Guarantors) authorized to execute that Initial
Guarantor's Guaranty, certified as of the Closing Date by the Secretary or
an Assistant Secretary of the Borrower.
(vii) A certificate of authority with respect to each of the
Partnership Guarantors, certifying copies of their respective limited
partnership agreements and the written actions of the general partners of
EIP Associates L.P. and otherwise in form and substance satisfactory to the
Banks.
(viii) A copy of the Articles of Incorporation of the Borrower, each
Initial Guarantor (other than the Partnership Guarantors) and the Canadian
Subsidiary with all amendments thereto, certified by the appropriate
governmental official of the jurisdiction of its incorporation as of a date
not more than 15 days prior to the Closing Date.
(ix) A copy of the certificate of limited partnership of each of the
Partnership Guarantors, with all amendments thereto, certified by the
appropriate governmental official of the jurisdiction of its organization
as of a date not more than 15 days prior to the Closing Date.
(x) A certificate of good standing for the Borrower, each Initial
Guarantor and the Canadian Subsidiary in the jurisdiction of its
incorporation or organization and in the State of Minnesota, in the State
of Iowa (with respect to the Borrower), in the State of Wisconsin, with
respect to Polaris Real Estate Corporation, in the State of Iowa, with
respect to Polaris Real Estate Corporation of Iowa, and in the State of
Minnesota, with respect to
-30-
<PAGE>
Polaris Industries Partners L.P., certified by the appropriate governmental
officials as of a date not more than 15 days prior to the Closing Date.
(xi) A copy of the bylaws of the Borrower, each Initial Guarantor
(other than the Partnership Guarantors) and the Canadian Subsidiary,
certified as of the Closing Date by the Secretary or an Assistant Secretary
of the Borrower.
(xii) A certificate dated the Closing Date of the chief executive
officer or chief financial officer of the Borrower certifying as to the
matters set forth in Sections 3.2 (a) and 3.2 (b) below.
(xiii) A certificate signed by First Bank and Polaris Industries
L.P., terminating the Prior First Bank Agreement.
(xiv) A Cash Flow Coverage Ratio certificate dated the Closing Date
of the chief financial officer substantially in the form of Exhibit 3.1(a),
duly completed, certifying as to the matters set forth therein.
(xv) A copy of each of the Financing Contracts and the Fuji Contract,
certified as true, correct and complete by the chief executive officer or
chief financial officer of the Borrower.
3.1(b) OPINION. The Borrower shall have requested Kaplan,
Strangis and Kaplan, P.A., as counsel to the Borrower and the Initial
Guarantors, to prepare a written opinion, addressed to the Banks and dated the
Closing Date, covering the matters set forth in Exhibit 3.1(b) hereto, and such
opinion shall have been delivered to the Administrative Agent in sufficient
counterparts for each Bank.
3.1(c) COMPLIANCE. The Borrower shall have performed and
complied with all agreements, terms and conditions contained in this Agreement
required to be performed or complied with by the Borrower prior to or
simultaneously with the Closing Date.
3.1(d) OTHER MATTERS. All corporate and legal proceedings
relating to the Borrower and the Initial Guarantors and all instruments and
agreements in connection with the transactions contemplated by this Agreement
shall be satisfactory in scope, form and substance to the Administrative Agent,
the Banks and their respective counsel, and the Administrative Agent shall have
received all information and copies of all documents, including records of
corporate proceedings, as any Bank or such counsel may reasonably have requested
in connection therewith, such documents where appropriate to be certified by
proper corporate or governmental authorities.
-31-
<PAGE>
3.1(e) FEES AND EXPENSES. The Administrative Agent shall have
received for itself and for the account of the Co-Lead Managers and the Banks
all fees and other amounts due and payable by the Borrower on or prior to the
Closing Date, including the agent's fee, origination fee and upfront fee payable
pursuant to Section 2.16 and the reasonable fees and expenses of counsel to the
Administrative Agent payable pursuant to Section 9.2.
Section 3.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT.
The obligation of the Banks to make any Loans hereunder (including the initial
Revolving Loans) and of the Administrative Agent to issue each Letter of Credit
(including the initial Letter of Credit) shall be subject to the fulfillment of
the following conditions:
3.2(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV shall be true and correct on and as of
the Closing Date and on the date of each Revolving Loan or the date of
issuance of each Letter of Credit, with the same force and effect as if
made on such date.
3.2(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the Closing Date and on the date of each
Revolving Loan or the date of issuance of each Letter of Credit or will
exist after giving effect to the Loans made on such date or the Letter of
Credit so issued.
3.2(c) NOTICES AND REQUESTS. The Administrative Agent shall
have received the Borrower's request for such Loans as required under
Section 2.2 or its application for such Letters of Credit specified under
Section 2.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make Revolving
Loans hereunder and to induce the Administrative Agent to issue Letters of
Credit, the Borrower represents and warrants to the Banks:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a
corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted, to
enter into this Agreement and to issue the Revolving Notes and to perform its
obligations under the Borrower Loan Documents. Each Subsidiary is either a
corporation duly incorporated or a
-32-
<PAGE>
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, and has all requisite
corporate or partnership power and authority to carry on its business as now
conducted. Each of the Borrower and the Subsidiaries (a) holds all certificates
of authority, licenses and permits necessary to carry on its business as
presently conducted in each jurisdiction in which it is carrying on such
business, except where the failure to hold such certificates, licenses or
permits would not have a material adverse effect on the business, operations,
property, assets or condition, financial or otherwise, of the Borrower and the
Subsidiaries taken as a whole, and (b) is duly qualified and in good standing as
a foreign corporation or partnership in each jurisdiction in which the character
of the properties owned, leased or operated by it or the business conducted by
it makes such qualification necessary and the failure so to qualify would
permanently preclude the Borrower or such Subsidiary from enforcing its rights
with respect to any assets or expose the Borrower or such Subsidiary to any
liability, which in either case would be material to the Borrower and the
Subsidiaries taken as a whole.
Section 4.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents have been duly
authorized by all necessary corporate action by the Borrower, and this Agreement
constitutes, and the Revolving Notes and other Borrower Loan Documents when
executed will constitute, the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, subject to limitations as to enforceability which might result from
bankruptcy, insolvency, moratorium and other similar laws affecting creditors'
rights generally and subject to limitations on the availability of equitable
remedies. The execution, delivery and performance by the Guarantors of the
Guaranties have been duly authorized by all necessary corporate or partnership
action by each Guarantor, and each Guaranty when executed will constitute the
legal, valid and binding obligations of the relevant Guarantor, enforceable
against that Guarantor in accordance with its terms, subject to limitations as
to enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
Section 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents will not (a) violate
any provision of any law, statute, rule or regulation or any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Borrower,
(b) violate or contravene any provision of the Articles of Incorporation or
bylaws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien thereunder. The
execution, delivery and performance by each Guarantor
-33-
<PAGE>
of its Guaranty will not (i) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to that Guarantor, (ii) violate or contravene any provision of
that Guarantor's partnership agreement or Articles of Incorporation or bylaws,
or (c) result in a breach of or constitute a default under any indenture, loan
or credit agreement or any other agreement, lease or instrument to which that
Guarantor is a party or by which it or any of its properties may be bound or
result in the creation of any Lien thereunder. Neither the Borrower nor any
Subsidiary is in default under or in violation of any such law, statute, rule or
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, loan or credit agreement or other agreement, lease or
instrument in any case in which the consequences of such default or violation
could have a material adverse effect on the business, operations, properties,
assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.
Section 4.4 GOVERNMENT CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is required
on the part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Borrower Loan Documents. No order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or authority
is required on the part of any Guarantor to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Guaranties.
Section 4.5 FINANCIAL STATEMENTS AND CONDITION. The audited
consolidated financial statements as at December 31, 1994 of the Borrower and
the Borrower's unaudited financial statements as at February 28, 1995, as
heretofore furnished to the Banks, have been prepared in accordance with GAAP on
a consistent basis (except for year-end audit adjustments and the omission of
footnotes as to the interim statements) and fairly present the financial
condition of the Borrower (or its predecessor in interest) and its Subsidiaries
as at such dates and the results of their operations and changes in financial
position for the respective periods then ended. As of the dates of such
financial statements, neither the Borrower nor any Subsidiary had any material
obligation, contingent liability, liability for taxes or long-term lease
obligation which is not reflected in such financial statements or in the notes
thereto. Since December 31, 1994, there has been no material adverse change in
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and its Subsidiaries taken as a whole.
-34-
<PAGE>
Section 4.6 LITIGATION. Except as set forth in Exhibit 4.6, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, would have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower or any Subsidiary to perform its obligations under the
Loan Documents.
Section 4.7 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Borrower or any Subsidiary of any applicable federal,
state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.
Section 4.8 ERISA. Each Plan is in substantial compliance with all
applicable requirements of ERISA and the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Banks) of such Plan's projected benefit obligations did not
exceed the fair market value of such Plan's assets.
Section 4.9 FEDERAL RESERVE REGULATIONS. Neither the Borrower nor
any Subsidiary is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board). The value of all margin
stock owned by
-35-
<PAGE>
the Borrower does not constitute more than 25% of the value of the assets of the
Borrower.
Section 4.10 TITLE TO PROPERTY; LEASES; LIENS; SUBORDINATION. Each
of the Borrower and the Subsidiaries has (a) good and marketable title to its
real properties and (b) good and sufficient title to, or valid, subsisting and
enforceable leasehold interest in, its other material properties, including all
real properties, other properties and assets, referred to as owned by the
Borrower and its Subsidiaries in the most recent financial statement referred to
in Section 4.5 (other than property disposed of since the date of such financial
statements in the ordinary course of business and minor defects in title that do
not interfere with the Borrower's and its Subsidiaries' use and proposed use of
such properties). None of such properties is subject to a Lien, except as
allowed under Section 6.11. The Borrower has not subordinated any of its rights
under any obligation owing to it to the rights of any other person.
Section 4.11 TAXES. Each of the Borrower and the Subsidiaries has
filed all federal, state and local tax returns required to be filed and has paid
or made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
and all other taxes, fees and other charges imposed on it or any of its property
by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrower). No tax Liens have been filed and no
material claims are being asserted with respect to any such taxes, fees or
charges. The charges, accruals and reserves on the books of the Borrower in
respect of taxes and other governmental charges are adequate and the Borrower
knows of no proposed material tax assessment against it or any Subsidiary or any
basis therefor.
Section 4.12 TRADEMARKS, PATENTS. Except as set forth in Exhibit
4.12, each of the Borrower and the Subsidiaries possesses or has the right to
use all of the patents, trademarks, trade names, service marks and copyrights,
and applications therefor, and all technology, know-how, processes, methods and
designs used in or necessary for the conduct of its business, without known
conflict with the rights of others.
Section 4.13 BURDENSOME RESTRICTIONS. Neither the Borrower nor any
Subsidiary is a party to or otherwise bound by any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Subsidiary or on the
ability of the Borrower or any Subsidiary to carry out its obligations under any
Loan Document.
-36-
<PAGE>
Section 4.14 FORCE MAJEURE. Since the date of the most recent
audited financial statement referred to in Section 4.5, the business, properties
and other assets of the Borrower and the Subsidiaries have not been materially
and adversely affected in any way as the result of any fire or other casualty,
strike, lockout, or other labor trouble, embargo, sabotage, confiscation,
condemnation, riot, civil disturbance, activity of armed forces or act of God.
Section 4.15 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 4.16 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of
a holding company or an "affiliate" of a holding company or of a subsidiary
company of a holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 4.17 RETIREMENT BENEFITS. Except as required under Section
4980B of the Code, Section 601 of ERISA or applicable state law, neither the
Borrower nor any Subsidiary is obligated to provide post-retirement medical or
insurance benefits with respect to employees or former employees.
Section 4.18 FULL DISCLOSURE. Subject to the following sentence,
neither the financial statements referred to in Section 4.5 nor any other
certificate, written statement, exhibit or report furnished by or on behalf of
the Borrower in connection with or pursuant to this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Borrower to the
Banks consisting of projections or forecasts of future results or events have
been prepared in good faith and based on good faith estimates and assumptions of
the management of the Borrower, and the Borrower has no reason to believe that
such projections or forecasts are not reasonable.
Section 4.19 SUBSIDIARIES. Exhibit 4.19 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock or percentage of general and limited
partnership interests owned beneficially or of record by the Borrower or any
Subsidiary therein, and the jurisdiction of incorporation or organization of
each Subsidiary.
-37-
<PAGE>
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Revolving
Loans and of the Administrative Agent to issue Letters of Credit shall have
expired or been terminated and the Revolving Notes and all of the other
Obligations have been paid in full and all outstanding Letters of Credit shall
have expired or the liability of the Administrative Agent thereon shall have
otherwise been discharged, unless the Majority Banks shall otherwise consent in
writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will
furnish to the Banks:
5.1(a) As soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, the consolidated
financial statements of the Borrower and the Subsidiaries consisting of at
least statements of income, cash flow, changes in stockholders' equity, and
a consolidated balance sheet as at the end of such year, setting forth in
each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by McGladrey & Pullen or
other independent certified public accountants of recognized national
standing selected by the Borrower and acceptable to the Administrative
Agent, together with (i) any management letters, management reports or
other supplementary comments or reports to the Borrower or its board of
directors furnished by such accountants, and (ii) the unaudited
consolidating financial statements of the Borrower and the Subsidiaries
consisting of at least statements of income, cash flow, changes in
stockholders' equity, and consolidating balance sheets as at the end of
such year, setting forth in each case in comparative form corresponding
figures from the previous annual consolidating financial statements,.
5.1(b) Together with the audited financial statements required
under Section 5.1 (a), a statement by the accounting firm performing such
audit to the effect that it has reviewed this Agreement and that in the
course of performing its examination nothing came to its attention that
caused it to believe that any Default or Event of Default exists, or, if
such Default or Event of Default exists, describing its nature.
5.1(c) As soon as available and in any event within forty five
(45) days after the end of each fiscal quarter, unaudited consolidated
statements of income, cash flow and changes in stockholders' equity for the
Borrower and the Subsidiaries for such quarter and for the period from the
beginning of such fiscal year to the end of such quarter, and a
consolidated
-38-
<PAGE>
balance sheet of the Borrower as at the end of such quarter, setting forth
in comparative form figures for the corresponding period for the preceding
fiscal year, accompanied by a certificate signed by the chief financial
officer of the Borrower stating that such financial statements present
fairly the financial condition of the Borrower and the Subsidiaries and
that the same have been prepared in accordance with GAAP.
5.1(d) As soon as practicable and in any event within forty five
(45) days after the end of each fiscal quarter, a Compliance Certificate in
the form attached hereto as Exhibit 5.1(d) signed by the chief financial
officer of the Borrower, stating that as at the end of such quarter there
did not exist any Default or Event of Default or, if such Default or Event
of Default existed, specifying the nature and period of existence thereof
and what action the Borrower proposes to take with respect thereto, and
demonstrating in reasonable detail compliance (or noncompliance, as the
case may be) with Sections 6.13 through 6.15 as at the end of such quarter.
5.1(e) As soon as practicable and in any event within 90 days
after the beginning of each fiscal year of the Borrower, consolidated
statements of forecasted income, forecasted cash flow and forecasted
changes in stockholders' equity and a forecasted balance sheet of the
Borrower and the Subsidiaries, together with supporting assumptions. All
such financial statements shall contain forecasts for each fiscal year
beginning with the fiscal year in which such statements are being delivered
through the fiscal year in which the Revolving Commitment Ending Date is
scheduled to occur.
5.1(f) Immediately upon any officer of the Borrower becoming
aware of any Default or Event of Default, a notice describing the nature
thereof and what action the Borrower proposes to take with respect thereto.
5.1(g) Immediately upon any officer of the Borrower becoming
aware of the occurrence, with respect to any Plan, of any Reportable Event
or any Prohibited Transaction, a notice specifying the nature thereof and
what action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or have
a trustee appointed for any Plan.
5.1(h) Promptly upon the mailing or filing thereof, copies of
all financial statements, reports and proxy statements mailed to the
Borrower's shareholders, and copies of all registration statements,
periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.
-39-
<PAGE>
5.1(i) Promptly upon the Borrower's receipt or transmission of
the same, copies of any notices of default, breach or termination under any
of the Financing Contracts.
5.1(j) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as any Bank may reasonably request.
Section 5.2 CORPORATE OR PARTNERSHIP EXISTENCE. The Borrower will
maintain, and cause each Subsidiary to maintain, its corporate or partnership
existence in good standing under the laws of its jurisdiction of incorporation
or organization and its qualification to transact business in each jurisdiction
where failure so to qualify would permanently preclude the Borrower or such
Subsidiary from enforcing its rights with respect to any material asset or would
expose the Borrower or such Subsidiary to any material liability; provided,
however, that nothing herein shall prohibit the merger or liquidation of any
Subsidiary allowed under Section 6.1.
Section 5.3 INSURANCE. The Borrower shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
firms engaged in the same or similar business and similarly situated, except
that the Borrower may maintain a program of self-insurance with respect to
products liability.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower shall file,
and cause each Subsidiary to file, all tax returns and reports which are
required by law to be filed by it and will pay, and cause each Subsidiary to
pay, before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's or such Subsidiary's title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower's or such
Subsidiary's books in accordance with GAAP.
Section 5.5 INSPECTION. The Borrower shall permit any Person
designated by the Administrative Agent or the Majority Banks to visit and
inspect any of the properties, corporate books and financial records of the
Borrower and the Subsidiaries, to examine and to make copies of the books of
accounts and other
-40-
<PAGE>
financial records of the Borrower and the Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and the Subsidiaries with, and to
be advised as to the same by, its officers at such reasonable times and
intervals as the Administrative Agent or the Majority Banks may designate. So
long as no Event of Default exists, the expenses of the Administrative Agent or
the Banks for such visits, inspections and examinations shall be at the expense
of the Administrative Agent and the Banks, but any such visits, inspections and
examinations made while any Event of Default is continuing shall be at the
expense of the Borrower.
Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain,
and cause each Subsidiary to maintain its properties used or useful in the
conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep, and will
cause each Subsidiary to keep, adequate and proper records and books of account
in which full and correct entries will be made of its dealings, business and
affairs.
Section 5.8 COMPLIANCE. The Borrower will comply, and will cause
each Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a materially adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower or such
Subsidiary and the Borrower or such Subsidiary is acting in good faith and with
reasonable dispatch to cure such noncompliance.
Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt
written notice to the Administrative Agent of the commencement of any action,
suit or proceeding before any court or arbitrator or any governmental
department, board, agency or other instrumentality affecting the Borrower or any
Subsidiary or any property of the Borrower or a Subsidiary or to which the
Borrower or a Subsidiary is a party in which an adverse determination or result
could have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of the Borrower and the Subsidiaries taken as
a whole or on the ability of the Borrower or any Subsidiary to perform its
obligations under this Agreement and the other Loan Documents, stating the
nature and status of such action, suit or proceeding.
Section 5.10 ERISA. The Borrower will maintain, and cause each
Subsidiary to maintain, each Plan in compliance with all material applicable
-41-
<PAGE>
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 ENVIRONMENTAL MATTERS; REPORTING. The Borrower will
observe and comply with, and cause each Subsidiary to observe and comply with,
all laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise have a material adverse effect on the Borrower and the
Subsidiaries taken as a whole. The Borrower will give the Administrative Agent
prompt written notice of any violation as to any environmental matter by the
Borrower or any Subsidiary and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental matters
(a) in which an adverse determination or result could result in the revocation
of or have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other permits held
by the Borrower or any Subsidiary which are material to the operations of the
Borrower or such Subsidiary, or (b) which will or threatens to impose a material
liability on the Borrower or such Subsidiary to any Person or which will require
a material expenditure by the Borrower or such Subsidiary to cure any alleged
problem or violation.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Revolving
Loans and of the Administrative Agent to issue Letters of Credit shall have
expired or been terminated and the Revolving Notes and all of the other
Obligations have been paid in full and all outstanding Letters of Credit shall
have expired or the liability of the Administrative Agent thereon shall have
otherwise been discharged, unless the Majority Banks shall otherwise consent in
writing:
-42-
<PAGE>
Section 6.1 MERGER. The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
or permit any Subsidiary to do any of the foregoing; PROVIDED, HOWEVER, that
(a) any Subsidiary may be merged with or liquidated into the Borrower or
any wholly-owned Subsidiary of the Borrower if (i) the Borrower or such
wholly-owned Subsidiary is the surviving corporation and (ii) in the case
of a merger or liquidation into a wholly-owned Subsidiary, such wholly-
owned Subsidiary, prior to such merger or liquidation, has executed and
delivered to the Administrative Agent a Guaranty, together with documents
similar to those required with respect to the Initial Guarantors pursuant
to Sections 3.1(a)(v) through (xi), as appropriate, and 3.1(b); and
(b) the Borrower or any Subsidiary may effectuate any Acquisition permitted
under Section 6.5 by means of a merger if the Borrower or a wholly-owned
Subsidiary is the surviving corporation.
Section 6.2 SALE OF ASSETS. The Borrower will not, and will not
permit any Subsidiary to, sell, assign, transfer, lease or otherwise convey or
dispose of (whether in one or a series of transactions) all or any part of its
assets (including accounts and notes receivable, with or without recourse), or
enter into any agreement to do any of the foregoing, except for:
(a) sales and leases of inventory, or worn-out or surplus equipment,
in the ordinary course of business;
(b) sales or other transfers by a Subsidiary to the Borrower or a
wholly-owned Subsidiary of the Borrower;
(c) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement equipment;
(d) the sale of receivables pursuant to the Financing Contracts or
any replacement arrangement with the same economic effect; and
(e) other dispositions that do not cause the aggregate net book value
of all assets disposed of during the term of this Agreement pursuant to
this clause 6.2(e) to exceed 10% of the Borrower's total assets as shown on
its consolidated balance sheet for its most recent prior fiscal quarter.
-43-
<PAGE>
Section 6.3 PLANS. The Borrower will not permit, and will not allow
any Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower or
any Subsidiary; and the Borrower will not permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the Banks) of such
Plan's projected benefit obligations to exceed the fair market value of such
Plan's assets.
Section 6.4 [INTENTIONALLY OMITTED.]
Section 6.5 SUBSIDIARIES; ACQUISITIONS. After the date of this
Agreement, the Borrower will not, and will not permit any Subsidiary to: (a)
form or acquire any corporation or partnership which would thereby become a
Subsidiary; (b) sell, transfer or otherwise convey any interest in a Subsidiary
(except for transfers to the Borrower or a wholly-owned Subsidiary thereof); or
(c) acquire all or a material portion of the assets of another Person; PROVIDED,
HOWEVER that the Borrower or a Subsidiary
(x) may form a new Subsidiary and transfer assets thereto so long as such
new Subsidiary (i) is a wholly-owned Subsidiary of the Borrower, (ii) prior
to the transfer of any assets thereto, executes and delivers to the
Administrative Agent a Guaranty, together with documents similar to those
required with respect to the Initial Guarantors pursuant to Sections
3.1(a)(v) through (xi), as appropriate, and 3.1(b) and (iii) does not
acquire all or a material portion of the assets of any Person other than
the Borrower and its wholly-owned Subsidiaries, or if it does acquire the
assets of another Person, it complies with clause (y) below; and
(y) may acquire all or a material portion of the assets or liabilities of
another Person (collectively, "Acquisitions"), if and only if each of the
following conditions is satisfied: (i) the aggregate consideration paid or
investment made in connection with all such Acquisitions (including but not
limited to all Indebtedness assumed by the Borrower or a Subsidiary) does
not exceed $300,000,000; (ii) the aggregate Indebtedness assumed by the
Borrower and the Subsidiaries in connection with all Acquisitions does not
exceed $150,000,000; (iii) after giving effect to any proposed Acquisition,
the Borrower would remain in compliance with all covenants on a PRO FORMA
basis and no Default or Event of Default exists at the time of, or would be
caused by, such Acquisition; (iv) if the aggregate consideration to be paid
for a particular Acquisition (including but not limited to all Indebtedness
assumed in connection with such Acquisition) equals or exceeds $10,000,000,
the Borrower executes and delivers to the Administrative Agent PRO FORMA
calculations
-44-
<PAGE>
demonstrating in reasonable detail that the Borrower would have complied
with Sections 6.13 through 6.15 had the Acquisition been consummated prior
to the end of the most recently ended fiscal quarter, and that based on the
Borrower's projections, the Borrower will comply with Sections 6.13 through
6.15 at the end of the current fiscal quarter, after giving effect to the
Acquisition; (v) if the Acquisition involves the formation or acquisition
of a new Subsidiary, the new Subsidiary complies with clause (x) above;
(vi) the Acquisition is undertaken in accordance with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees and
awards to which any party to the Acquisition may be subject; (vii) if the
Acquisition involves the acquisition of an existing corporation or
partnership, the written consent to or approval of such Acquisition is
obtained from the board of directors or equivalent governing body of the
acquiree prior to any tender or other offer for the capital stock or
equivalent equity interest in such acquiree; and (viii) the Acquisition
will not alter the basic lines of business of the Borrower and its
Subsidiaries, considered as a whole.
Section 6.6 NEGATIVE PLEDGES; SUBSIDIARY RESTRICTIONS. The Borrower
will not, and will not permit any Subsidiary to, enter into any agreement, bond,
note or other instrument with or for the benefit of any Person other than the
Banks which would (i) prohibit the Borrower or such Subsidiary from granting,
or otherwise limit the ability of the Borrower or such Subsidiary to grant, to
the Banks any Lien on any assets or properties of the Borrower or such
Subsidiary, PROVIDED that the Borrower or any Subsidiary may enter into an
agreement in connection with Indebtedness permitted pursuant to Section 6.10(c)
which prohibits the Borrower or such Subsidiary from granting to the Banks a
Lien on the assets of the Borrower or such Subsidiary which secure such
Indebtedness, PROVIDED that such prohibition may only apply to the assets
acquired with such Indebtedness, or (ii) require the Borrower or such Subsidiary
to grant a Lien to any other Person if the Borrower or such Subsidiary grants
any Lien to the Banks. The Borrower will not permit any Subsidiary to place or
allow any restriction, directly or indirectly, on the ability of such Subsidiary
to (a) pay dividends or any distributions on or with respect to such
Subsidiary's capital stock or partnership interests or (b) make loans or other
cash payments to the Borrower.
Section 6.7 RESTRICTED PAYMENTS. The Borrower will not, and will not
permit any Subsidiary to, make any Restricted Payments, except that the Borrower
and any wholly-owned Subsidiary may:
(a) declare and make dividend payments or other distributions payable
solely in its common stock; and
(b) declare or pay cash dividends to its stockholders and purchase,
redeem or otherwise acquire shares of its capital stock or warrants or
options
-45-
<PAGE>
to acquire any such shares for cash PROVIDED that, before and immediately
after giving effect to such action, no Default or Event of Default exists
or would exist.
Section 6.8 [INTENTIONALLY OMITTED]
Section 6.9 INVESTMENTS. The Borrower will not, and will not permit
any Subsidiary to, acquire for value, make, have or hold any Investments,
except:
6.9(a) Any Investment existing on the date of this Agreement, to
the extent that either: (i) the cost of each such Investment was less than
$1,000,000, or (ii) such Investment is disclosed on Exhibit 6.9 hereto.
6.9(b) Travel advances to management personnel and employees in
the ordinary course of business.
6.9(c) Investments in readily marketable direct obligations
issued or guaranteed by the United States or any agency thereof and
supported by the full faith and credit of the United States.
6.9(d) Certificates of deposit or bankers' acceptances issued by
any commercial bank organized under the laws of the United States or any
State thereof which has (i) combined capital and surplus of at least
$100,000,000, and (ii) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service that is
satisfactory to the Administrative Agent.
6.9(e) Commercial paper given the highest rating by a nationally
recognized rating service.
6.9(f) Repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America.
6.9(g) Investments in tax-exempt municipal bonds rated AA or
better by Standard & Poor's or Aa2 or better by Moody's or, if not rated by
Standard & Poor's or Moody's, with a similar rating by another nationally
recognized rating agency.
6.9(h) Other readily marketable Investments in debt securities
which are reasonably acceptable to the Majority Banks.
6.9(i) Investments in those Subsidiaries that are permitted
under Section 6.5, if and only if there are no restrictions (either
contractual or imposed by applicable law or regulation) on the Subsidiary's
ability to return the amount of any equity investment or repay any loan.
-46-
<PAGE>
6.9(j) Investments pursuant to the Fuji Contract, or pursuant to
an expansion of the engine manufacturing facility contemplated thereby, in
an aggregate amount of up to $20,000,000.
6.9(k) Investments in the Canadian Subsidiary (including but not
limited to Investments in the form of any intercompany receivable or
contributions of or investments in plant, property or equipment); PROVIDED
that the aggregate cost of all such Investments outstanding at any time
shall not exceed $30,000,000; and PROVIDED FURTHER that neither any
existing Investment in the Canadian Subsidiary, as disclosed on Exhibit
6.9, nor any accumulated earnings and profits at the Canadian Subsidiary,
shall be deemed to be an Investment under this clause (k).
6.9(l) Other Investments in an aggregate amount up to
$20,000,000.
Any Investments under clauses (c), (d), (e), (f) or (g) above must mature within
one year of the acquisition thereof by the Borrower or a Subsidiary.
Section 6.10 INDEBTEDNESS. The Borrower will not permit any
Subsidiary to incur, create, issue, assume or suffer to exist any Indebtedness,
except:
6.10(a) Current liabilities, other than for borrowed money,
incurred in the ordinary course of business.
6.10(b) Indebtedness existing on the date of this Agreement and
disclosed on Exhibit 6.10 hereto, but not including any extension or
refinancing thereof.
6.10(c) Indebtedness incurred to finance the acquisition of
specific assets and secured by a Lien on such assets, PROVIDED that the
maximum aggregate amount of Indebtedness outstanding for all Subsidiaries
at any time under this clause 6.10(c) shall not exceed $10,000,000.
6.10(d) Indebtedness incurred by the Canadian Subsidiary,
PROVIDED that the maximum aggregate amount of Indebtedness outstanding at
any time under this clause 6.10(d) shall not exceed $15,000,000.
6.10(e) Other Indebtedness, PROVIDED that the maximum aggregate
amount of Indebtedness outstanding for all Subsidiaries at any time under
clauses 6.10(b) and (e) shall not exceed $10,000,000.
-47-
<PAGE>
6.10(f) Reimbursement obligations with respect to draws under
letters of credit issued to provide for, or to ensure, the payment of the
purchase price of goods acquired by the Subsidiary, provided that such
reimbursement obligations are paid in full on the dates the financial
institutions that issued the letters of credit pay the draws.
The Borrower will not, and will not permit any Subsidiary to, incur any
Indebtedness if such Indebtedness would cause the Cash Flow Coverage Ratio,
computed as of the end of the most recent fiscal quarter for the four fiscal
quarters ending on that date but giving effect to all Indebtedness repaid and
additional Indebtedness incurred since such date, to exceed 2.25 to 1.0. Except
for the preceding sentence, nothing in this Section 6.10 limits the ability of
the Borrower to incur Indebtedness.
Section 6.11 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien, or enter into,
or make any commitment to enter into, any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements, with respect to any property now owned or hereafter acquired by the
Borrower or a Subsidiary, except:
6.11(a) Liens granted to the Administrative Agent and the Banks
to secure the Obligations.
6.11(b) Liens existing on the date of this Agreement and
disclosed on Exhibit 6.11 hereto.
6.11(c) Liens (other than any Lien imposed by ERISA) consisting
of deposits or pledges required, in the ordinary course of business of the
Borrower or a Subsidiary, to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security
obligations.
6.11(d) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payment therefor shall not at
the time be required to be made in accordance with the provisions of
Section 5.4, PROVIDED that no notice of lien has been filed or recorded
under the Code.
6.11(e) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall not
at the time be required to be made in accordance with the provisions of
Section 5.4.
-48-
<PAGE>
6.11(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
6.11(g) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property
and landlord's Liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use
thereof in the business of the Borrower or a Subsidiary.
6.11(h) Liens granted to secure indebtedness incurred pursuant
to Section 6.10(c), PROVIDED that such Liens attach to such property
concurrently with or within 20 days of the acquisition or lease thereof,
are limited to the property acquired or leased and do not secure
Indebtedness other than the related Capitalized Lease Obligations or the
purchase price of such property.
6.11(i) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; PROVIDED THAT (i) such
deposit account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Borrower or the Subsidiary in
excess of those set forth by regulations promulgated by the Board, and (ii)
such deposit account is not intended by the Borrower or any Subsidiary to
provide collateral to the depository institution.
Section 6.12 CONTINGENT LIABILITIES. The Borrower will not, and will
not permit any Subsidiary to, be or become liable on any Contingent Obligations
except Contingent Obligations existing on the date of this Agreement and
described on Exhibit 6.12.
Section 6.13 TANGIBLE NET WORTH. The Borrower will not permit its
Tangible Net Worth at any time to be less than: (a) $50,000,000 at all times
until December 31, 1996; (c) $100,000,000 at all times on and after December 31,
1996, until December 31, 1997; and (d) $120,000,000 at all times on and after
December 31, 1997.
Section 6.14 CASH FLOW COVERAGE RATIO. The Borrower will not permit
the Cash Flow Coverage Ratio, as of the last day of any fiscal quarter, for the
four consecutive fiscal quarters ending on that date, to be more than 2.25 to
1.0 at any time
-49-
<PAGE>
Section 6.15 INTEREST COVERAGE RATIO. The Borrower will not permit
the Interest Coverage Ratio, as of the last day of any fiscal quarter, for the
four consecutive fiscal quarters ending on that date, to be less than 4.0 to
1.0.
Section 6.16 LOAN PROCEEDS. The Borrower will not, and will not
permit any Subsidiary to, use any Letter of Credit or any part of the proceeds
of any Revolving Loan or Advances directly or indirectly, and whether
immediately, incidentally or ultimately, (a) to purchase or carry margin stock
(as defined in Regulation U of the Board) or to extend credit to others for the
purpose of purchasing or carrying margin stock or to refund Indebtedness
originally incurred for such purpose or (b) for any purpose which entails a
violation of, or which is inconsistent with, the provisions of Regulations G, U
or X of the Board.
Section 6.17 TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction with any
Affiliate of the Borrower, except upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary; PROVIDED, HOWEVER, that this Section 6.17 shall not apply to
transactions between the Borrower and a wholly-owned Subsidiary or between
wholly-owned Subsidiaries of the Borrower.
Section 6.18 ACCOUNTING CHANGES. Without the prior written consent
of the Majority Banks, the Borrower will not, and will not permit any Subsidiary
to, make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of the Borrower or any
Subsidiary.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on any
Revolving Note or any other Obligation required to be made to the
Administrative Agent or any Bank pursuant to this Agreement.
7.1(b) Any representation or warranty made by or on behalf of
the Borrower, any Subsidiary or any Guarantor in this Agreement or any
other Loan Document or by or on behalf of the Borrower, any Subsidiary or
any Guarantor in any certificate, statement, report or document herewith or
hereafter furnished to any Bank or the Administrative Agent pursuant to
this Agreement or any other Loan Document shall prove to have been false or
-50-
<PAGE>
misleading in any material respect on the date as of which the facts set
forth are stated or certified.
7.1(c) The Borrower shall fail to comply with Sections 5.2 or
5.3 hereof or any Section of Article VI hereof.
7.1(d) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement (other than those hereinabove set forth in this Section 7.1) and
such failure to comply shall continue for thirty calendar days (or, if such
failure to comply cannot be cured within thirty calendar days, then such
longer period as is reasonably necessary to cure such failure to comply,
provided that the Borrower is diligently pursuing appropriate measures to
cure such failure to comply at all times during such extended period) after
whichever of the following dates is the earliest: (i) the date the
Borrower gives notice of such failure to the Banks, (ii) the date the
Borrower should have given notice of such failure to the Banks pursuant to
Section 5.1, or (iii) the date the Administrative Agent or any Bank gives
notice of such failure to the Borrower.
7.1(e) Any default (however denominated or defined) shall occur
under any Guaranty.
7.1(f) The Borrower, any Subsidiary or any Guarantor shall
become insolvent or shall generally not pay its debts as they mature or
shall apply for, shall consent to, or shall acquiesce in the appointment of
a custodian, trustee or receiver of the Borrower, such Subsidiary or such
Guarantor or for a substantial part of the property thereof or, in the
absence of such application, consent or acquiescence, a custodian, trustee
or receiver shall be appointed for the Borrower, a Subsidiary or a
Guarantor or for a substantial part of the property thereof and shall not
be discharged within 45 days, or the Borrower, any Subsidiary or any
Guarantor shall make an assignment for the benefit of creditors.
7.1(g) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, any Subsidiary or any Guarantor, and, if
instituted against the Borrower, any Subsidiary or any Guarantor, shall
have been consented to or acquiesced in by the Borrower, such Subsidiary or
such Guarantor, or shall remain undismissed for 60 days, or an order for
relief shall have been entered against the Borrower, such Subsidiary or
such Guarantor.
-51-
<PAGE>
7.1(h) Any dissolution or liquidation proceeding not permitted
by Section 6.1 shall be instituted by or against the Borrower or a
Subsidiary or any dissolution or liquidation proceeding shall be instituted
by or against any Guarantor, and, if instituted against the Borrower, any
Subsidiary or any Guarantor, shall be consented to or acquiesced in by the
Borrower, such Subsidiary or such Guarantor or shall remain for 45 days
undismissed.
7.1(i) A judgment or judgments for the payment of money in
excess of the sum of $500,000 in the aggregate shall be rendered against
the Borrower or a Subsidiary and either (i) the judgment creditor executes
on such judgment or (ii) such judgment remains unpaid or undischarged for
more than the longer of 60 days from the date of entry thereof or such
longer period during which execution of such judgment shall be stayed
during an appeal from such judgment.
7.1(j) Both: (x) the occurrence of the maturity of any material
Indebtedness of the Borrower (other than Indebtedness under this Agreement)
or a Subsidiary shall be accelerated, or the Borrower or a Subsidiary shall
fail to pay any such material Indebtedness when due (after the lapse of any
applicable grace period) or, in the case of such Indebtedness payable on
demand, when demanded (after the lapse of any applicable grace period), or
any event shall occur or condition shall exist and shall continue for more
than the period of grace, if any, applicable thereto and shall have the
effect of causing, or permitting the holder of any such Indebtedness or any
trustee or other Person acting on behalf of such holder to cause, such
material Indebtedness to become due prior to its stated maturity or to
realize upon any collateral given as security therefor; and (y) such
Indebtedness is not paid in full within three (3) Business Days of the
occurrence of an event described in the preceding clause (x). For purposes
of this Section, Indebtedness of the Borrower or a Subsidiary shall be
deemed "material" if it exceeds $10,000,000 as to any item of Indebtedness
or in the aggregate for all items of Indebtedness with respect to which any
of the events described in this Section 7.1(j) has occurred.
7.1(k) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 30 days after the issuance thereof.
7.1(l) Any Guarantor shall repudiate or purport to revoke its,
his or her Guaranty, or any Guaranty for any reason shall cease to be in
full force and effect as to the Guarantor executing and delivering the same
or shall be judicially declared null and void as to such Guarantor.
-52-
<PAGE>
7.1(m) Any Change of Control shall occur.
7.1(n) Any "event of default" or similar term, however
denominated, shall occur under any of the Financing Contracts and is not
cured or waived within 30 days, or any of the Financing Contracts is
terminated and the Borrower does not enter into a replacement thereof,
satisfactory to the Majority Banks in their sole discretion, within 30
days, PROVIDED that regardless of whether a replacement arrangement is
entered into, the termination of a Financing Contract shall not be an Event
of Default if, in the reasonable discretion of the Majority Banks, the
impact of such termination is not forecast to cause an Event of Default
under any other subsection of this Section 7.1; and PROVIDED FURTHER that
the termination of a Financing Contract providing for the sale of
receivables by the Borrower or its Subsidiaries shall not be an Event of
Default if, at the time of the termination, the Borrower and its
Subsidiaries have aggregate unused availability (under this Agreement and
all other committed credit facilities) equal to or greater than the
greatest amount of receivables subject to the terminated Financing Contract
as of the end of a month for each of the twelve months preceding the date
of determination.
Section 7.2 REMEDIES. If (a) any Event of Default described in
Sections 7.1(f), (g) or (h) shall occur with respect to the Borrower, the
Revolving Commitments shall automatically terminate and the Revolving Notes and
all other Obligations shall automatically become immediately due and payable,
and the Borrower shall without demand pay into the Holding Account an amount
equal to the aggregate face amount of all outstanding Letters of Credit; or (b)
any other Event of Default shall occur and be continuing, then, upon receipt by
the Administrative Agent of a request in writing from the Majority Banks, the
Administrative Agent shall take any of the following actions so requested: (i)
declare the Revolving Commitments terminated, whereupon the Revolving
Commitments shall terminate, (ii) declare the outstanding unpaid principal
balance of the Revolving Notes, the accrued and unpaid interest thereon and all
other Obligations to be forthwith due and payable, whereupon the Revolving
Notes, all accrued and unpaid interest thereon and all such Obligations shall
immediately become due and payable, in each case without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement or in the Revolving Notes to the contrary
notwithstanding, and (iii) demand that the Borrower pay into the Holding Account
an amount equal to the aggregate face amount of all outstanding Letters of
Credit. Upon the occurrence of any of the events described in clause (a) of the
preceding sentence, or upon the occurrence of any of the events described in
clause (b) of the preceding sentence when so requested by the Majority Banks,
the Administrative Agent may exercise all rights and remedies under any of the
Loan Documents, and enforce all rights and remedies under any applicable law.
-53-
<PAGE>
Section 7.3 OFFSET. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes each Bank to set off
any Obligations owed to such Bank against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, such Bank. Such
right shall exist whether or not such Bank shall have made any demand hereunder
or under any other Loan Document, whether or not the Obligations, or any part
thereof, or deposits and credits held for the account of the Borrower is or are
matured or unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to such
Bank or the Banks. Each Bank agrees that, as promptly as is reasonably possible
after the exercise of any such setoff right, it shall notify the Borrower of its
exercise of such setoff right; provided, however, that the failure of such Bank
to provide such notice shall not affect the validity of the exercise of such
setoff rights. Nothing in this Agreement shall be deemed a waiver or
prohibition of or restriction on any Bank to all rights of banker's Lien, setoff
and counterclaim available pursuant to law.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
The Administrative Agent and the Banks agree that the following
provisions shall govern the relationship of the Administrative Agent with the
Banks.
Section 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such respective powers under the Loan Documents as are delegated
to the Administrative Agent by the terms thereof, together with such powers as
are reasonably incidental thereto. Neither the Administrative Agent nor any of
its directors, officers or employees shall be liable for any action taken or
omitted to be taken by it under or in connection with the Loan Documents, except
for its own gross negligence or willful misconduct. The Administrative Agent
shall act as an independent contractor in performing its obligations as
Administrative Agent hereunder and nothing herein contained shall be deemed to
create any fiduciary relationship among or between the Administrative Agent, the
Borrower or the Banks.
Section 8.2 NOTE HOLDERS. The Administrative Agent may treat the
payee of any Revolving Note as the holder thereof until written notice of
transfer shall have been filed with it, signed by such payee and in form
satisfactory to the Administrative Agent.
-54-
<PAGE>
Section 8.3 CONSULTATION WITH COUNSEL. The Administrative Agent may
consult with legal counsel selected by it and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
counsel.
Section 8.4 LOAN DOCUMENTS. The Administrative Agent shall not be
under a duty to examine or pass upon the validity, effectiveness, genuineness or
value of any of the Loan Documents or any other instrument or document furnished
pursuant thereto, and the Administrative Agent shall be entitled to assume that
the same are valid, effective and genuine and what they purport to be.
Section 8.5 FIRST BANK AND AFFILIATES. With respect to its Revolving
Commitment and the Revolving Loan made by it, First Bank shall have the same
rights and powers under the Loan Documents as any other Bank and may exercise
the same as though it were not the Administrative Agent consistent with the
terms thereof, and First Bank and its affiliates may accept deposits from, lend
money to, issue letters of credit for the account of, and generally engage in
any kind of business with the Borrower or its Subsidiaries as if First Bank were
not the Administrative Agent.
Section 8.6 ACTION BY ADMINISTRATIVE AGENT. Except as may otherwise
be expressly stated in this Agreement, the Administrative Agent shall be
entitled to use its discretion with respect to exercising or refraining from
exercising any rights which may be vested in it by, or with respect to taking or
refraining from taking any action or actions which it may be able to take under
or in respect of, the Loan Documents. The Administrative Agent shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Banks,
and such instructions shall be binding upon all holders of Revolving Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to the Loan Documents or applicable law. The Administrative Agent
shall incur no liability under or in respect of any of the Loan Documents by
acting upon any notice, consent, certificate, warranty or other paper or
instrument believed by it to be genuine or authentic or to be signed by the
proper party or parties and to be consistent with the terms of this Agreement.
Section 8.7 CREDIT ANALYSIS. Each Bank has made, and shall continue
to make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Borrower in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Borrower. Except as explicitly provided herein, the
Administrative Agent has no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect to such operations, business, property, condition or creditworthiness,
-55-
<PAGE>
whether such information comes into its possession on or before the first Event
of Default or at any time thereafter.
Section 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event that the
Administrative Agent shall have acquired actual knowledge of any Event of
Default or Default, the Administrative Agent shall promptly give notice thereof
to the Banks.
Section 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the
Administrative Agent, as Administrative Agent (to the extent not reimbursed by
the Borrower), ratably according to such Bank's share of the aggregate Revolving
Loans from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on or incurred by the
Administrative Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by the Administrative Agent under the Loan
Documents, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. No payment by any Bank under this Section
shall relieve the Borrower of any of its obligations under this Agreement.
Section 8.10 PAYMENTS AND COLLECTIONS. All funds received by the
Administrative Agent in respect of any payments made by the Borrower on the
Revolving Notes, Revolving Commitment Fees or Letter of Credit Fees shall be
distributed forthwith by the Administrative Agent among the Banks, in like
currency and funds as received, ratably according to each Bank's Revolving
Percentage. After any Event of Default has occurred, all funds received by the
Administrative Agent, whether as payments by the Borrower or as realization on
collateral or on any Guaranties, shall (except as may otherwise be required by
law) be distributed by the Administrative Agent in the following order: (a)
first to the Administrative Agent or any Bank who has incurred unreimbursed
costs of collection with respect to any Obligations hereunder, ratably to the
Administrative Agent and each Bank in the proportion that the costs incurred by
the Administrative Agent or such Bank bear to the total of all such costs
incurred by the Administrative Agent and all Banks; (b) next to the
Administrative Agent for the account of the Banks (in accordance with their
respective Revolving Percentages) for application on the Revolving Notes and the
Unpaid Drawings; (c) next to the Administrative Agent for the account of the
Banks (in accordance with their respective Revolving Percentages) for any unpaid
Revolving Commitment Fees or Letter of Credit Fees owing by the Borrower
hereunder; and (d) last to the Administrative Agent to be held in the Holding
Account to cover any outstanding Letters of Credit.
-56-
<PAGE>
Section 8.11 SHARING OF PAYMENTS. If any Bank shall receive and
retain any payment, voluntary or involuntary, whether by setoff, application of
deposit balance or security, or otherwise, in respect of Indebtedness under this
Agreement or the Revolving Notes in excess of such Bank's share thereof as
determined under this Agreement, then such Bank shall purchase from the other
Banks for cash and at face value and without recourse, such participation in the
Revolving Notes held by such other Banks as shall be necessary to cause such
excess payment to be shared ratably as aforesaid with such other Banks;
provided, that if such excess payment or part thereof is thereafter recovered
from such purchasing Bank, the related purchases from the other Banks shall be
rescinded ratably and the purchase price restored as to the portion of such
excess payment so recovered, but without interest. Subject to the participation
purchase obligation above, each Bank agrees to exercise any and all rights of
setoff, counterclaim or banker's lien first fully against any Revolving Notes
and participations therein held by such Bank, next to any other Indebtedness of
the Borrower to such Bank arising under or pursuant to this Agreement and to any
participations held by such Bank in Indebtedness of the Borrower arising under
or pursuant to this Agreement, and only then to any other Indebtedness of the
Borrower to such Bank.
Section 8.12 ADVICE TO BANKS. The Administrative Agent shall forward
to the Banks copies of all notices, financial reports and other communications
received hereunder from the Borrower by it as Administrative Agent, excluding,
however, notices, reports and communications which by the terms hereof are to be
furnished by the Borrower directly to each Bank.
Section 8.13 RESIGNATION. If at any time First Bank shall deem it
advisable, in its sole discretion, it may submit to each of the Banks and the
Borrower a written notification of its resignation as Administrative Agent under
this Agreement, such resignation to be effective upon the appointment of a
successor Administrative Agent, but in no event later than 30 days from the date
of such notice. Upon submission of such notice, the Majority Banks may appoint
a successor Administrative Agent.
ARTICLE IX
MISCELLANEOUS
Section 9.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure therefrom by the Borrower or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such amendment, modification, waiver or consent shall be effective only
in
-57-
<PAGE>
the specific instance and for the purpose for which given. (The Administrative
Agent may enter into amendments or modifications of, and grant consents and
waivers to departure from the provisions of, those Loan Documents to which the
Banks are not signatories without the Banks joining therein, PROVIDED the
Administrative Agent has first obtained the separate prior written consent to
such amendment, modification, consent or waiver from the Majority Banks.)
Notwithstanding the forgoing, no such amendment, modification, waiver or consent
shall:
9.1(a) Reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or modify any of
the provisions of any Revolving Note with respect to the payment or
repayment thereof, without the consent of the holder of each Revolving Note
so affected; or
9.1(b) Increase the amount or extend the time of any Revolving
Commitment of any Bank, without the consent of such Bank; or
9.1(c) Reduce the rate or extend the time of payment of any fee
payable to a Bank, without the consent of the Bank affected; or
9.1(d) Amend the definition of Majority Banks or otherwise
reduce the percentage of the Banks required to approve or effectuate any
such amendment, modification, waiver, or consent, without the consent of
all the Banks; or
9.1(e) Amend any of the foregoing Sections 9.1 (a) through (d),
this Section 9.1 (e) or Section 9.1(h) without the consent of all the
Banks; or
9.1(f) Amend any provision of this Agreement relating to the
Administrative Agent in its capacity as Administrative Agent without the
consent of the Administrative Agent; or
9.1(g) Amend any provision of this Agreement relating to the
issuance of Letters of Credit without the consent of the Administrative
Agent; or
9.1(h) Release or terminate any Guaranty, without the consent of
all the Banks.
Section 9.2 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Administrative
Agent upon demand for all reasonable out-of-pocket expenses paid or incurred by
the Administrative Agent (including filing and recording costs and fees and
-58-
<PAGE>
expenses of Dorsey & Whitney P.L.L.P. counsel to the Administrative Agent) in
connection with the negotiation, preparation, approval, review, execution,
delivery, administration, amendment, modification and interpretation of this
Agreement and the other Loan Documents and any commitment letters relating
thereto. The Borrower shall also reimburse the Administrative Agent and each
Bank upon demand for all reasonable out-of-pocket expenses (including expenses
of legal counsel and allocated in-house counsel costs) paid or incurred by the
Administrative Agent or any Bank in connection with the collection of the
Obligations and the enforcement of this Agreement and any other Loan Document.
The obligations of the Borrower under this Section shall survive any termination
of this Agreement.
Section 9.3 WAIVERS, ETC. No failure on the part of the
Administrative Agent or the holder of a Revolving Note to exercise and no delay
in exercising any power or right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies herein and in the other Loan
Documents provided are cumulative and not exclusive of any remedies provided by
law.
Section 9.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Administrative Agent or any Bank under Article II hereof shall
be deemed to have been given only when received by the Administrative Agent or
such Bank.
Section 9.5 TAXES.
(a) The Borrower agrees to pay, and save the Administrative Agent and
the Banks harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement
or the issuance of the Notes, which obligation of the Borrower shall
survive the termination of this Agreement.
(b) Any and all payments by the Borrower hereunder, under the Notes
or under any other Loan Document shall be made free and clear of and
-59-
<PAGE>
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, EXCLUDING, in the case of each Bank and the Administrative Agent,
taxes imposed on its income, capital, profits or gains and franchise taxes
imposed on it, in each case by (i) the United States (except withholding
taxes contemplated pursuant to Section 9.6(e)(ii)(3)), (ii) any
governmental authority in the jurisdiction in which such Bank's office is
located, or (iii) any governmental authority in which such Bank is
organized, managed, controlled or doing business, in each case including
all political subdivisions thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by
law to withhold or deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes or under any other Loan Document to any Bank
or the Administrative Agent, (x) such sum payable shall be increased as may
be necessary so that after making all required withholdings or deductions
(including withholdings or deductions applicable to additional sums payable
under this Section 9.5(b)) such Bank or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had
no such withholdings or deductions been made (PROVIDED, HOWEVER that the
Borrower shall not be obligated to increase any amount payable to the
extent the increase would be attributable to any amounts withheld or
deducted with respect to any time period more than 45 days prior to the
affected Bank or Administrative Agent giving the Borrower notice of its
obligation to withhold or deduct), (y) the Borrower shall make such
withholdings or deductions, and (z) the Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority
in accordance with applicable law.
Section 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; FOREIGN AND
PURCHASING BANKS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Banks, the Administrative Agent, all future holders of the
Revolving Notes, and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Bank.
(b) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("PARTICIPANTS") participating interests in any
Revolving Loan or other Obligation owing to such Bank, any Revolving Note held
by such Bank, and any Revolving Commitment of such Bank, or any other interest
of such Bank hereunder. In the event of any such sale by a Bank of
participating interests to a Participant, (i) such Bank's obligations under this
Agreement to the other parties to
-60-
<PAGE>
this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible for the performance thereof, (iii) such Bank shall remain the holder
of any such Revolving Note for all purposes under this Agreement, (iv) the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations under this
Agreement and (v) the agreement pursuant to which such Participant acquires its
participating interest herein shall provide that such Bank shall retain the sole
right and responsibility to enforce the Obligations, including, without
limitation the right to consent or agree to any amendment, modification, consent
or waiver with respect to this Agreement or any other Loan Document, PROVIDED
that such agreement may provide that such Bank will not consent or agree to any
such amendment, modification, consent or waiver with respect to the matters set
forth in Sections 9.1(a) - (e) without the prior consent of such Participant.
The Borrower agrees that if amounts outstanding under this Agreement, the
Revolving Notes and the Loan Documents are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have, to the extent permitted by
applicable law, the right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Revolving Note or other Loan Document
to the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement or any Revolving Note or other
Loan Document; PROVIDED, that such right of setoff shall be subject to the
obligation of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in subsection 8.11. The Borrower also
agrees that each Participant shall be entitled to the benefits of subsections
2.22, 2.23, 2.24, 2.25, 2.26 and 9.2 with respect to its participation in the
Revolving Commitments and the Revolving Loans; PROVIDED, that no Participant
shall be entitled to receive any greater amount pursuant to such subsections
than the transferor Bank would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Bank to such
Participant had no such transfer occurred.
(c) Each Bank may, from time to time, with the consent of the
Administrative Agent and the Borrower (neither of which consents shall be
unreasonably withheld, PROVIDED that the Borrower shall not be deemed to be
unreasonable in withholding consent to any foreign lender based on the
Borrower's reasonable expectation that it will incur additional costs under
Sections 2.23, 2.25 or 9.5 as the result of such foreign lender becoming a Bank
hereunder), assign to other lenders ("ASSIGNEES") part of the Indebtedness
evidenced by any Revolving Note then held by that Bank, together with an
equivalent proportion of its Revolving Commitments, pursuant to written
agreements executed by such assigning Bank, such Assignee(s), the Borrower and
the Administrative Agent in substantially the form of Exhibit 9.6, which
agreements shall specify in each instance the portion of the Obligations
evidenced by the Revolving Notes which is to be assigned to each Assignee and
the portion of the Revolving Commitments of such Bank to be
-61-
<PAGE>
assumed by each Assignee (each, an "Assignment Agreement"); PROVIDED, HOWEVER,
that unless the Administrative Agent otherwise consents, (i) the amount of the
Revolving Commitment of the assigning Bank being assigned pursuant to each such
assignment, and the amount of the Revolving Commitment (if any) retained by the
assigning Bank (determined in each case as of the effective date of the relevant
Assignment Agreement), shall each in no event be less than $10,000,000, (ii) the
amount of Revolving Commitment assigned to each Assignee (determined in each
case as of the effective date of the relevant Assignment Agreement) shall be an
integral multiple of $1,000,000 and (iii) the assigning Bank must pay to the
Administrative Agent a processing and recordation fee of $2,500. Upon the
execution of each Assignment Agreement by the assigning Bank, the relevant
Assignee, the Borrower and the Administrative Agent, payment to the assigning
Bank by such Assignee of the purchase price for the portion of the Obligations
being acquired by it and receipt by the Borrower of a copy of the relevant
Assignment Agreement, (x) such Assignee lender shall thereupon become a "Bank"
for all purposes of this Agreement with a Revolving Commitment in the amount set
forth in such Assignment Agreement and with all the rights, powers and
obligations afforded a Bank under this Agreement, (y) such assigning Bank shall
have no further liability for funding the portion of its Revolving Commitment
assumed by such Assignee and (z) the address for notices to such Assignee shall
be as specified in the Assignment Agreement executed by it. Concurrently with
the execution and delivery of each Assignment Agreement, the assigning Bank
shall surrender to the Administrative Agent the Revolving Note a portion of
which is being assigned, and the Borrower shall execute and deliver a Revolving
Note to the Assignee in the amount of its Revolving Commitment, and a new
Revolving Note to the assigning Bank in the amount of its Revolving Commitment
after giving effect to the reduction occasioned by such assignment, all such
Notes to constitute "Revolving Notes" for all purposes of this Agreement and of
the other Loan Documents
(d) The Borrower shall not be liable for any costs incurred by the
Banks in effecting any participation or assignment under subparagraphs (b) or
(c) of this subsection.
(e) FOREIGN BANK CERTIFICATIONS.
(i) Each Bank that is not created or organized under the laws of the
United States or a political subdivision thereof shall deliver to the
Borrower and the Administrative Agent on the date on which such Bank
becomes a Bank hereunder a true and accurate certificate executed in
duplicate by a duly authorized officer of such Bank to the effect that such
Bank is eligible to receive payments hereunder and under the Notes without
deduction or withholding of United States federal income tax (I) under the
provisions of an applicable tax treaty concluded by the United States (in
which case the certificate shall be accompanied by two duly completed
copies of IRS
-62-
<PAGE>
Form 1001 (or any successor or substitute form or forms)) or (II) under
Sections 1441(c)(1) and 1442(a) of the Internal Revenue Code (in which case
the certificate shall be accompanied by two duly completed copies of IRS
Form 4224 (or any successor or substitute form or forms)).
(ii) Each Bank further agrees to deliver to the Borrower and the
Administrative Agent from time to time, a true and accurate certificate
executed in duplicate by a duly authorized officer of such Bank before or
promptly upon the occurrence of any event requiring a change in the most
recent certificate previously delivered by it to the Borrower and the
Administrative Agent pursuant to this Section 9.6(e). Each certificate
required to be delivered pursuant to this Section 9.6(e) shall certify as
to one of the following:
(1) that such Bank can continue to receive payments hereunder
and under the Revolving Notes without deduction or withholding of
United States federal income tax;
(2) that such Bank cannot continue to receive payments hereunder
and under the Revolving Notes without deduction or withholding of
United States federal income tax as specified therein but does not
require additional payments pursuant to Section 9.5(b) because it is
entitled to recover the full amount of any such deduction or
withholding from a source other than the Borrower;
(3) that such Bank is no longer capable of receiving payments
hereunder and under the Revolving Notes without deduction or
withholding of Untied States federal income tax as specified therein
by reason of a change in law (including the Code or applicable tax
treaty) after the date on which that Bank became a Bank hereunder and
that it is not capable of recovering the full amount of the same from
a source other than the Borrower; or
(4) that such Bank is no longer capable of receiving payments
hereunder without deduction or withholding of United States federal
income tax as specified therein other than by reason of a change in
law (including the Code or applicable tax treaty) after the date on
which that Bank became a Bank hereunder.
If the Borrower shall be required by law to withhold or deduct any amount
from or in respect of any sum payable hereunder or under the Revolving
Notes or under any other Loan Document to any Bank or the Administrative
Agent as a result of a circumstance described in clauses (2) or (4) above,
(y) the Borrower shall make such withholdings or deductions, and (z) the
Borrower
-63-
<PAGE>
shall pay the full amount withheld or deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(f) Each Bank may disclose to any Assignee or Participant and to any
prospective Assignee or Participant any and all financial information in such
Bank's possession concerning the Borrower or any of its Subsidiaries which has
been delivered to such Bank by or on behalf of the Borrower or any of its
Subsidiaries pursuant to this Agreement or which has been delivered to such Bank
by or on behalf of the Borrower or any of its Subsidiaries in connection with
such Bank's credit evaluation of the Borrower or any of its Subsidiaries prior
to entering into this Agreement, PROVIDED that prior to disclosing such
information, such Bank shall first obtain the agreement of such prospective
Assignee or Participant to comply with the provisions of Section 9.7.
Section 9.7 CONFIDENTIALITY OF INFORMATION. The Administrative Agent
and each Bank shall use reasonable efforts to assure that information about the
Borrower and its operations, affairs and financial condition, not generally
disclosed to the public or to trade and other creditors, which is furnished to
the Administrative Agent or such Bank pursuant to the provisions hereof is used
only for the purposes of this Agreement and any other relationship between any
Bank and the Borrower and shall not be divulged to any Person other than the
Banks, their Affiliates and their respective officers, directors, employees and
agents, except: (a) to their attorneys and accountants, (b) in connection with
the enforcement of the rights of the Banks hereunder and under the Revolving
Notes, the Guaranties and the other Loan Documents or otherwise in connection
with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in the immediately preceding Section, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over any
Bank or by any applicable law, rule, regulation or judicial process, the opinion
of such Bank's counsel concerning the making of such disclosure to be binding on
the parties hereto. No Bank shall incur any liability to the Borrower by reason
of any disclosure permitted by this Section 9.7.
Section 9.8 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE REVOLVING NOTES SHALL
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS
OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each
provision of this Agreement and the other Loan Documents and any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto shall be interpreted in such manner as to be effective and
valid under such applicable law, but, if any provision of this Agreement, the
other Loan
-64-
<PAGE>
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
Section 9.9 CONSENT TO JURISDICTION. AT THE OPTION OF THE
ADMINISTRATIVE AGENT, THIS AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY
BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS
OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE
OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE ADMINISTRATIVE
AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER , THE
ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 9.11 SURVIVAL OF AGREEMENT. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Borrower
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall survive
the making of the Revolving Loans by the Banks and the execution and delivery to
the Banks by the Borrower of the Revolving Notes, regardless of any
investigation made by or on behalf of the Banks, and shall continue in full
force and effect as long as any Obligation is outstanding and unpaid and so long
as the Revolving Commitments have not been terminated; provided, however, that
the obligations of the Borrower under Section 9.2, 9.5 and 9.12 shall survive
payment in full of the Obligations and the termination of the Revolving
Commitments.
-65-
<PAGE>
Section 9.12 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Administrative Agent and the Banks and
their respective Affiliates and the directors, officers, employees, attorneys
and agents of the Administrative Agent and the Banks and their respective
Affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document, any
commitments relating thereto, or any transaction contemplated by any Loan
Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by any
Person, or the exercise of any rights or remedies thereunder, including the
acquisition of any collateral by the Banks by way of foreclosure of the
Lien thereon, deed or bill of sale in lieu of such foreclosure or
otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's gross negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the later
of the Termination Date or the date of payment in full of the Obligations,
including specifically Obligations arising under clause (b) of this Section.
The indemnification provisions set forth above shall be in addition to any
liability the Borrower may otherwise have. Without prejudice to the survival of
any other obligation of the Borrower hereunder the indemnities and obligations
of the Borrower contained in this Section shall survive the payment in full of
the other Obligations.
Section 9.13 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
-66-
<PAGE>
Section 9.14 ENTIRE AGREEMENT. This Agreement and the other Borrower
Loan Documents embody the entire agreement and understanding between the
Borrower, the Administrative Agent and the Banks with respect to the subject
matter hereof and thereof. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof. Nothing contained in this
Agreement or in any other Loan Document, expressed or implied, is intended to
confer upon any Persons other than the parties hereto any rights, remedies,
obligations or liabilities hereunder or thereunder.
Section 9.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 9.16 BORROWER ACKNOWLEDGEMENTS. The Borrower hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b)
neither the Administrative Agent nor any Bank has any fiduciary relationship to
the Borrower, the relationship being solely that of debtor and creditor, (c) no
joint venture exists between the Borrower and the Administrative Agent or any
Bank, and (d) neither the Administrative Agent nor any Bank undertakes any
responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the business or operations of the Borrower and the
Borrower shall rely entirely upon its own judgment with respect to its business,
and any review, inspection or supervision of, or information supplied to, the
Borrower by the Administrative Agent or any Bank is for the protection of the
Banks and neither the Borrower nor any third party is entitled to rely thereon.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-67-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
POLARIS INDUSTRIES INC.
By /s/ John H. Grunewald
-----------------------------------------
John H. Grunewald, Executive Vice
President, Chief Financial Officer and
Secretary
Address for Borrower:
1225 Highway 169 North
Minneapolis, Minnesota 55441
Attention: Michael W. Malone
Telephone: (612)542-0500
Telecopier: (612)542-0599
[Signature Page to Credit Agreement]
S-1
<PAGE>
Revolving Commitment
Amount:
- --------------------
$45,000,000 FIRST BANK NATIONAL ASSOCIATION
In its individual corporate capacity and
as Administrative Agent, Co-Lead Manager
and a Bank
By /s/ William T. Bailey
--------------------------------------
William T. Bailey
Vice President
Address:
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: William T. Bailey, MPFP0907
Rosemary S. Davis, MPFP0907
Telephone: (612)973-2718/0505
Telecopier: (612)973-0822
$40,000,000 BANK OF AMERICA ILLINOIS, as a Co-Lead
Manager and a Bank
By /s/ Margaret A. Detrick
--------------------------------------
Margaret A. Detrick
Vice President
Address:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Margaret A. Detrick
Bettye Hill
Telephone: (312)828-5201
Telecopier: (312)765-2080
S-2
<PAGE>
$40,000,000
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as a Co-Lead Manager and a
Bank
By /s/ Douglas J. Sleeper
--------------------------------------
Douglas J. Sleeper
Vice President
Address:
U.S., Corporate Banking Division
First Union Capital Markets Group
First Union National Bank of
North Carolina
One First Union Center TW-10
Charlotte, North Carolina 28288
Attention: Douglas J. Sleeper
Telephone: (704)374-4367
Telecopier: (704)374-2802
S-3
<PAGE>
EXHIBIT 11
POLARIS INDUSTRIES INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------
March 31, 1995 March 31, 1994
-------------- --------------
(pro forma)
<S> <C> <C>
Net Income for the Period $12,940 $6,144
------- ------
------- ------
Weighted Average Number of Outstanding:
Common shares 18,159 18,065
Rights 364 342
--- ---
Total common and common equivalent
shares 18,523 18,407
------ ------
------ ------
Net Income Per Share $.70 $.33
---- ----
---- ----
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of Polaris Industries Inc. as of March 31, 1995, and the related
statements of operations, shareholders' equity and cash flows for the quarter
ended March 31, 1995
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 38,878
<SECURITIES> 0
<RECEIVABLES> 26,005
<ALLOWANCES> 0
<INVENTORY> 105,365
<CURRENT-ASSETS> 190,820
<PP&E> 103,702
<DEPRECIATION> 44,464
<TOTAL-ASSETS> 319,859
<CURRENT-LIABILITIES> 173,334
<BONDS> 0
<COMMON> 182
0
0
<OTHER-SE> 146,343
<TOTAL-LIABILITY-AND-EQUITY> 319,859
<SALES> 254,793
<TOTAL-REVENUES> 254,793
<CGS> 208,078
<TOTAL-COSTS> 208,078
<OTHER-EXPENSES> 27,098
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,872
<INCOME-TAX> 7,932
<INCOME-CONTINUING> 12,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,940
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
