EXHIBIT 10(k)
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
by and among
NORSTAN, INC.,
the Banks party thereto
and
U.S. BANK NATIONAL ASSOCIATION,
as Agent and as Lead Arranger
Dated as of July 12, 2002
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 12,
2002, is by and among NORSTAN, INC., a Minnesota corporation (the "Borrower"),
the banks which are signatories hereto (individually, a "Bank" and,
collectively, the "Banks") and U.S. BANK NATIONAL ASSOCIATION, a national
banking association, one of the Banks, as agent for the Banks (in such capacity,
the "Agent").
RECITALS
A. The Borrower, the Banks, the Exiting Banks (defined below) and the Agent
are parties to an Amended and Restated Credit Agreement dated as of December 20,
2000, as amended by a First Amendment dated as of March 19, 2001, a Second
Amendment dated as of March 30, 2001, a Third Amendment dated as of April 4,
2001, a Fourth Amendment dated as of May 15, 2001 and a Fifth Amendment dated as
of June 29, 2001 (as so amended, the "Existing Credit Agreement").
B. Pursuant to the Existing Credit Agreement, as of the Closing Date, the
Banks and the Exiting Banks advanced, and there remain outstanding, Revolving
Loans and Term B Loans (each as defined in the Existing Credit Agreement) (the
"Existing Loans").
C. The Borrower has requested the Banks to restructure the credit
facilities under the Existing Credit Agreement and the Borrower has requested,
and, upon receipt by them of the Payoff Amount (defined below), the Exiting
Lenders (defined below) have each agreed, to cease to be Banks under the
Existing Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
the parties hereto hereby agree to amend and restate the Existing Credit
Agreement in the entirety as follows:
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):
"Accounts": With respect to any Person, the aggregate unpaid
obligations of customers and other account debtors to such Person
arising out of the sale or lease of goods or rendition of services by
such Person on an open account or deferred payment basis.
"Account Debtors": As defined in the Security Agreement
executed by the Borrower or any Subsidiary (as the context may
require).
"Acquisition": Any transaction or series of transactions by
which the Borrower acquires, either directly or through a Subsidiary or
otherwise, (a) any or all of the stock or other securities of any class
of any Person or (b) a substantial portion of the assets, or a division
or line of business of any Person.
"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.
"Advance": Any portion of the outstanding Revolving Loans or
Term Loan by a Bank as to which one of the available interest rate
options and, if pertinent, an Interest Period, is applicable. An
Advance may be a Eurodollar Rate Advance or a Prime 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, ten 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, ten percent of more of the
voting stock (or if such Person is not a corporation, ten 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 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.
"Agent": As defined in the opening paragraph hereof.
"Aggregate Revolving Commitment Amounts": As of any date,
the sum of the Revolving Commitment Amounts of all the Banks on such
date.
"Aggregate Revolving Outstandings": As of any date, the sum
of the Revolving Outstandings of all Banks on such date.
"Applicable Lending Office": For each Bank, 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 Agent and the Borrower as the
office by which its Advances are to be made and maintained.
"Applicable Margin": For each Prime Rate Advance, for each
Eurodollar Rate Advance (as in effect on the first day of the
applicable Interest Period for such Eurodollar Rate Advance) and for
each Unused Revolving Commitment Fee, the Applicable Margin set forth
in the table below as in effect on the date of determination,
determined based on the Cash Flow Leverage Ratio calculated as of the
end of the most recent fiscal quarter of the Borrower (adjustment to
the Applicable Margins to become effective on the first day of the
first month following the date the Borrower is required to deliver its
financial statements for the last month of any fiscal quarter under
Section 5.1(c)):
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Eurodollar Rate Prime Rate Unused Revolving
Cash Flow Leverage Ratio Advances Advances Commitment Fees
------------------------ -------- -------- ---------------
Greater than 1.75 to 1.00 3.00% 1.00% 0.375%
Less than or equal to 1.75 to 2.50% 0.500% 0.375%
1.00, but greater than 1.50 to
1.00
Less than or equal to 1.50 to 2.00% 0.000% 0.250%
1.00
Notwithstanding the foregoing, (a) if the Borrower has not furnished the
financial statements and reports required under Section 5.1(c) for the last
month of any fiscal quarter by the time specified in such section, the
Applicable Margins shall be calculated as if the Cash Flow Leverage Ratio as of
the end of such fiscal quarter was greater than 1.75 to 1.00 for the period from
the first day of the first month following the date the Borrower is required to
deliver its financial statements for the last month of any fiscal quarter under
Section 5.1(c) until the first day of the month following the month in which
such financial statements and reports are delivered and (b) until and including
December 31, 2002, the Applicable Margin for Eurodollar Rate Advances shall be
3.00%, the Applicable Margin for Prime Rate Advances shall be 1.00% and the
Applicable Margin for Unused Revolving Commitment Fees shall be 0.375%.
"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, the Notes, and the
Security Documents to which the Borrower is a party.
"Borrowing Base": As of any date of determination, the sum of
the following:
(a) 75% of the lower of face amount or fair market
value of Eligible Accounts, plus
(b) 30% of the lower of cost (determined on a
first-in, first-out basis) or fair market value of Eligible
Inventory.
"Borrowing Base Availability": As of any date of
determination, the positive amount, if any (and not to exceed the
Unused Revolving Commitments of all the Banks), by which the Borrowing
Base exceeds the Revolving Outstandings of all the Banks.
"Borrowing Base Certificate": A certificate in the form of
Exhibit A hereto.
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"Borrowing Base Deficiency": At the time of any
determination, the amount, if any, by which Aggregate Revolving
Outstandings exceed the Borrowing Base.
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which national banks are
permitted to be open in Minneapolis, Minnesota, and Chicago, Illinois.
"Capital Expenditures": For any period, the sum of all amounts
that would, in accordance with GAAP, be included as additions to
property, plant and equipment on a consolidated statement of cash flows
for the Borrower during such period, in respect of (a) the acquisition,
construction, improvement, replacement or betterment of land,
buildings, machinery, equipment or of any other fixed assets or
leaseholds, (b) to the extent related to and not included in (a) above,
materials, contract labor (excluding expenditures properly chargeable
to repairs or maintenance in accordance with GAAP), and (c) other
capital expenditures and other uses recorded as capital expenditures or
similar terms having substantially the same effect (including
expenditures for nonrecurrent tangible assets such as software).
"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 Leverage Ratio": As of the last day of any fiscal
quarter of the Borrower, the ratio of
(a) Total Interest-bearing Debt as of such date
(excluding Indebtedness existing on the date hereof secured by
NFS Lease Accounts or Norstan Canada Lease Accounts and
related leases, equipment and servicing arrangements), to
(b) EBITDA for the period of four consecutive fiscal
quarters of the Borrower ended on such date.
"Closing Date": July 12, 2002.
"Collateral": As defined in the Security Agreement executed
by the Borrower or any Subsidiary (as the context may require).
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"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.
"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.
"Defaulting Bank": At any time, any Bank that, at such time
(a) has failed to make a Loan or any Advances thereunder required
pursuant to the terms of this Agreement, including the funding of any
participation in accordance with the terms of this Agreement, (b) has
failed to pay to the Agent or any Bank an amount owed by such Bank
pursuant to the terms of this Agreement, or (c) has been deemed
insolvent or has become subject to a bankruptcy, receivership or
insolvency proceeding, or to a receiver, trustee or similar official.
"Dollars" and "$": Lawful money of the United States of
America.
"Dormant Subsidiaries": Norstan-UK Limited, Norstan
Information Systems, Inc. and Summit Gear, Inc.
"EBT": For any period of determination, the sum of the
consolidated net income of the Borrower and its Subsidiaries plus
income taxes (to the extent that income taxes were deducted in
calculating consolidated net income), and calculated prior to
extraordinary gains and losses and prior to gains and losses arising
from discontinued operations, all as determined in accordance with
GAAP.
"EBITDA": For any period of determination, the sum of the
consolidated net income of the Borrower and its Subsidiaries plus
income taxes, Interest Expense, depreciation and amortization (in each
case, to the extent that such amounts were deducted in calculating
consolidated net income), and calculated prior to extraordinary gains
and losses and prior to gains and losses arising from discontinued
operations, all as determined in accordance with GAAP, provided that,
for purposes of calculating the Cash Flow Leverage Ratio, the economic
impact of Permitted Acquisitions by the Borrower or any Subsidiary
which occur in the four fiscal quarters immediately preceding the last
day of such period of determination shall be included, based upon the
financial impact (as shown on financial statements to and in a form
acceptable to the Banks) of such acquisition as if such business
operations comprising such Permitted Acquisition had been under the
Borrower's or such Subsidiary's ownership for such four fiscal quarter
period.
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"Eligible Accounts": The right of the Borrower, any Guarantor
or Norstan Canada to receive payment for goods sold or services
rendered, including any such right evidenced by instruments or chattel
paper and any such right constituting retainage items or costs in
excess of ▇▇▇▇▇▇▇▇, provided such right to payment:
(a) has arisen out of the sale of goods or the
performance of services by the Borrower, such Guarantor or
Norstan Canada within the United States or Canada, or, if such
goods are sold or services performed outside the United States
or Canada, is backed by a letter of credit issued or confirmed
by a bank chartered under the laws of the United States or of
any State;
(b) is the valid, binding and legally enforceable
obligation of the obligor and such right to payment has not
been subordinated by the Borrower, such Guarantor or Norstan
Canada to any other claim against the obligor and such obligor
is not (i) the Borrower, or a Subsidiary or an Affiliate of
the Borrower, (ii) a Person who is a shareholder, director,
officer or employee of the Borrower, (iii) a debtor under any
proceeding under the Bankruptcy Code or comparable provision
of state or foreign law, (iv) an assignor for the benefit of
creditors; and (v) the United States, a province, state,
county or local government authority, or any department,
agency or instrumentality of the forgoing, unless the Borrower
such Subsidiary or Norstan Canada shall have instructed such
entity to either (a) deposit all payments upon the Accounts
owed by such entity into a lockbox acceptable to the Agent or
(b) make such payments by other means acceptable to the Agent;
(c) is assignable pursuant to the Uniform Commercial
Code;
(d) (i) except for accounts owing to Norstan Canada,
is subject to a perfected first security interest in favor of
the Agent and (ii) is free and clear of any other Lien;
(e) is not subject to any claimed offset,
counterclaim or other defense with respect thereto, but only
to the extent of such claimed offset, counterclaim or other
defense;
(f) is not unpaid more than 90 days from the date of
the relevant invoice;
(g) is evidenced by a written invoice delivered to
the Account Debtor with respect thereto;
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(h) is not a right to payment arising under a lease
of equipment by the Borrower, such Guarantor or Norstan Canada
to any Person;
(i) is not owed by an obligor located in New Jersey,
Minnesota or Indiana, unless the Borrower, such Guarantor or
Norstan Canada is in compliance with applicable laws of the
same states with respect to which failure to comply would
impair the Borrower's, such Guarantor's or Norstan Canada's
ability to enforce its rights with respect to such Account;
(j) is not subject to any repurchase obligations
(other than normal customer service warranties relating to
inventory sold by the Borrower, such Guarantor or Norstan
Canada which have not been invoked by the applicable customer)
on the part of the Borrower, such Guarantor or Norstan Canada
or any accrued return privilege on the part of such obligor;
(k) is not owing by an obligor for which 25% or more
of the aggregate Accounts (measured based upon the face amount
of such Accounts) owing by such obligor to the Borrower or any
Subsidiary are past due beyond the period set forth in
subsection (f) of this definition; and
(l) does not comprise that portion of the Eligible
Accounts owed to Norstan Canada which would cause the total
Eligible Accounts owed to Norstan Canada to exceed 10% of the
aggregate Eligible Accounts owed to each of the Borrower, the
Guarantors and Norstan Canada, in each case but for this
subclause (l) and in each case based upon the lower of face
amount or fair market value of such Accounts;
provided, that the Majority Banks shall, notwithstanding the foregoing,
have the right, in the reasonable exercise of their discretion, to
establish reserves against the aggregate amount of Eligible Accounts.
Satisfaction of the conditions specified in clauses (a) through (l) of
this definition shall be determined each month by the Agent in the
reasonable exercise of its discretion.
"Eligible Inventory": All inventory held by the Borrower, any
Guarantor or Norstan Canada as raw materials or finished product held
for sale in the ordinary course of business (including work in process,
but excluding supplies) and which:
(a) (i) except for inventory held by Norstan Canada, is
subject to a perfected first security interest in favor of
the Agent and (ii) is free and clear of any other Lien and
is not leased to any Person;
(b) is located at one of the Borrower's, such
Guarantor's or Norstan Canada's business locations or is in
transit to one of such business locations;
(c) is not so identified to a contract to sell that it
is evidenced by an Account;
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(d) is of good and merchantable quality free from any
defects which would affect the market value thereof;
(e) is not, as reasonably determined by the Agent,
nonsaleable in the ordinary course of the Borrower's or any
Subsidiary's business;
(f) is insured against loss or damage in accordance
with the provisions of this Agreement and the applicable
Security Agreement;
(g) is not subject to or covered by a negotiable
document of title, including, without limitation, negotiable
warehouse receipts and negotiable bills of lading;
(h) is not stored in a public warehouse or held by any
Person as bailee, unless the terms of such storage or
bailment are satisfactory to the Agent;
(i) complies with all standards imposed by any
governmental agency having regulatory authority over such
goods and/or their use, manufacture or sale;
(j) does not constitute slow-selling or obsolete
inventory which have been identified as such on the
Borrower's books and records in accordance with its past
practices and with GAAP;
(k) does not constitute over-ordered custom switches;
and
(l) does not comprise that portion of the Eligible
Inventory held by Norstan Canada which would cause the total
Eligible Inventory held by Norstan Canada to exceed 15% of
the aggregate Eligible Inventory held by each of the
Borrower, the Guarantors and Norstan Canada, in each case
but for this subclause (l) and in each case based upon the
lower of cost (determined on a first-in, first-out basis) or
fair market value unpaid balance of such inventory;
provided, that the Majority Banks shall, notwithstanding the foregoing,
have the right, in the reasonable exercise of their discretion, to
establish reserves against the aggregate amount of Eligible Inventory.
Satisfaction of the conditions specified in clauses (a) through (l) of
this definition shall be determined each month by the Agent in the
reasonable exercise of its discretion.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"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.
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"Eurodollar Rate Advance": An Advance with respect to which
the interest rate is determined by reference to the Eurodollar Rate.
"Eurodollar Rate": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the average offered rate for
deposits in United States dollars (rounded upward, if necessary, to the
nearest 1/16 of 1%) for delivery of such deposits on the first day of
such Interest Period, for the number of days in such Interest Period,
which appears on Telerate page 3750 as of 11:00 AM, London time (or
such other time as of which such rate appears) two Eurodollar Business
Days prior to the first day of such Interest Period, or the rate for
such deposits determined by the Agent at such time based on such other
published service of general application as shall be selected by the
Agent for such purpose; provided, that in lieu of determining the rate
in the foregoing manner, the Agent may determine the rate based on
rates at which United States dollar deposits are offered to the Agent
in the interbank Eurodollar market at such time for delivery in
Immediately Available Funds on the first day of such Interest Period in
an amount approximately equal to the Advance by the Agent to which such
Interest Period is to apply (rounded upward, if necessary, to the
nearest 1/16 of 1%). "Telerate page 3750" means the display designated
as such on the Telerate reporting system operated by Telerate System
Incorporated (or such other page as may replace page 3750 for the
purpose of displaying London interbank offered rates of major banks for
United States dollar deposits).
"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 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.
"Existing Credit Agreement": As defined in Recital A of this
Agreement.
"Existing Loans": As defined in Recital B of this Agreement.
"Exiting Lenders": ▇▇▇▇▇▇ Trust and Savings Bank and ▇▇▇▇▇
Fargo Bank Minnesota, National Association.
"Federal Funds Rate": For any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided that (a) if
the day for which such rate is to be determined is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the
next succeeding Business Day and (b) if such rate is not so published
for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate quoted to U.S. Bank on such Business Day on
such transactions as determined by the Agent.
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"Fixed Charge Coverage Ratio": As of the last day of any
fiscal quarter of the Borrower, the ratio of
(i) EBITDA, plus to the extent not included in EBITDA,
all payments on all NFS Lease Accounts and Norstan Canada
Lease Accounts received by the Borrower or a Subsidiary (net
of payments upon any Indebtedness secured thereby), minus
Capital Expenditures not financed with Indebtedness (other
than Indebtedness under this Agreement), minus income taxes
paid in cash, minus Restricted Payments,
to
(ii) Mandatory Debt Repayments plus Interest Expense
in each case determined in accordance with GAAP on a consolidated basis
for the Borrower and its Subsidiaries for the last four fiscal quarters
of the Borrower.
"Fleet": Fleet Business Credit Corporation.
"Fleet Intercreditor Agreement": An intercreditor agreement
between the Agent, Fleet, the Borrower and any appropriate Subsidiary
in form and substance acceptable to the Banks and Fleet, as the same
may be amended, restated or otherwise modified from time to time.
"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 determination.
"Guaranties": Separate Guaranties given by the Guarantors in
favor of the Agent and the Banks, as any of the same may be amended,
restated or otherwise modified from time to time.
"Guarantors": Norstan Financial Services, Inc., a Minnesota
corporation; Norstan Communications, Inc., a Minnesota corporation;
Norstan International, Inc., a Minnesota corporation; Vibes
Technologies, Inc., a Minnesota corporation; and Norstan Canada, Inc.
a Minnesota corporation.
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"Holding Account": A deposit account belonging to the 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 Agent and not
subject to withdrawal by the Borrower, with any amounts therein to be
held for application toward any drawings made under any Letter of
Credit. 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 Agent in its
sole discretion shall have consented) and shall bear interest in
accordance with the terms of similar accounts held by the 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, (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 (other than trade
payables incurred in the ordinary course of such Person's business and
not more than 90 days past due), (f) all obligations of others secured
by any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby 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 to the extent that such Contingent Obligations are or
should be classified as liabilities on the balance sheet of such Person
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 and the Subsidiaries, 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 and (c) net costs
under interest rate protection agreements, but excluding the interest
paid or accrued upon Indebtedness existing on the date hereof secured
by NFS Lease Accounts or Norstan Canada Lease Accounts, 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:
(1) 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;
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(2) 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; and
(3) Any Interest Period applicable to an Advance on a
Revolving Loan that would otherwise end after the Revolving
Commitment Ending Date shall end on the Revolving Commitment
Ending Date, and any Interest Period applicable to an Advance
on a Term Loan that would otherwise end after the scheduled
maturity of such Term Loan shall end on such maturity.
Interest Periods shall be selected so that the installment payments on
the Term Notes can be paid without having to pay a Eurodollar Rate
Advance prior to the last day of the Interest Period applicable
thereto. For purposes of determining an Interest Period, a month means
a period starting on one day in a calendar month and ending on the
numerically corresponding day in the next calendar month; provided,
however, that if there is no numerically corresponding day in the month
in which such an Interest Period is to end or if such an Interest
Period begins on the last Business Day of a calendar month, then such
Interest Period shall end on the last Business Day of the calendar
month in which such Interest Period is to end.
"Inventory": With respect to any Person, goods held for sale
or lease or to be furnished under contracts of service by such entity,
raw materials, and work in process or materials used or consumed in the
business of such Person.
"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. 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.
"Letter of Credit": Any irrevocable issued by the Agent
pursuant to this Agreement for the account of the Borrower or a
Guarantor.
"Letter of Credit Fee": As defined in Section 2.10.
"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.
13
"Loan": A Revolving Loan or a Term Loan.
"Loan Documents": This Agreement, the Notes and the Security
Documents.
"Majority Banks": As of any date of determination, such Banks,
other than Defaulting Banks, holding at least 66.67% of the aggregate
unpaid principal amount of the Notes, excluding Notes held by
Defaulting Banks or, if no Loans are at the time outstanding hereunder,
such Banks other than Defaulting Banks whose Total Percentages
aggregate at least 66.67% of the Aggregate Revolving Outstandings (with
Total Percentages being computed without reference to the Revolving
Commitment Amounts of Defaulting Banks), provided that, if at any date
of determination, there are two or fewer Banks, the "Majority Banks"
shall constitute 100% of the Banks other than Defaulting Banks.
"Mandatory Debt Repayments": For any period of determination,
the sum of (a) all required principal payments upon all Indebtedness of
the Borrower or any Subsidiary (including all payments, without
duplication, with respect to Capitalized Lease Obligations of the
Borrower and the Subsidiaries, but excluding (x) any mandatory
prepayments applied to the Term Loans under Section 2.6(d) and (y)
payments upon Indebtedness existing on the date hereof secured by NFS
Lease Accounts or Norstan Canada Lease Accounts and related leases,
equipment and servicing arrangements), provided, that (i) for the
fiscal quarters ending on or about July 31, 2002, October 31, 2002,
January 31, 2003 and April 30, 2003, the required principal payments
with respect to the Term Loan shall be assumed to be $4,000,000 for the
four fiscal quarters then ended and (ii) for all periods, the required
principal payments with respect to the Existing Loans shall be assumed
to be zero.
"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.
"NCI": Norstan Communications, Inc.
"Net Proceeds": With respect to the sale or disposition of
property, sale of capital stock and offering of debt securities by the
Borrower or a Subsidiary, or other non-recurring event, an amount equal
to (a) the cash (including deferred cash proceeds) and other
consideration received by the Borrower or a Subsidiary in connection
with such transaction or event, minus (b) the sum of (i) any closing
costs or selling costs arising in connection with such sale or offering
and (ii) any sales or income tax paid or payable by the Borrower in
connection with such transaction or event (excluding any tax for which
the Borrower is reimbursed by the purchaser).
"NFS": Norstan Financial Services, Inc., a Minnesota
corporation.
14
"NFS Lease Account": An Account arising from a lease of
Inventory by NFS.
"Norstan Canada": Norstan Canada, Ltd., a Canadian
corporation.
"Norstan Canada Lease Account": An Account arising from a
lease of Inventory by Norstan Canada.
"Note": A Term Note or a Revolving Note.
"NNS Note": That certain Promissory Note to be made by
NetWolves Acquisitions, Inc. in favor of the Borrower in the amount
of $3,750,000.
"NNS Note Collateral": Collectively, (a) the NNS Note and the
instruments and other agreements evidencing the NNS Note, and all
interest, cash, instruments, agreements and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for the NNS Note, (b) any and all collateral security now or
hereafter securing all or any items of the NNS Note, and all agreements
granting such security, and all rights, remedies, powers and privileges
of NNS under all of the foregoing, and (c) all proceeds of any and all
of the foregoing (including proceeds that constitute property of types
described above in this definition).
"NNS Sale Agreement": That certain Stock Purchase Agreement
dated as of January 30, 2002 between the Borrower, NetWolves
Corporation, a New York corporation and NetWolves Acquisitions, Inc., a
Delaware corporation.
"Obligations": The Borrower's obligations in respect of the
due and punctual payment of principal and interest (including, without
limitation and to the extent permitted by law, interest accruing after
the commencement of a case by or against the Borrower under the United
States Bankruptcy Code) on the Notes and Unpaid Drawings when and as
due, whether by acceleration or otherwise and all fees (including
Unused Revolving Commitment Fees and Letter of Credit Fees), expenses,
indemnities, reimbursement and other obligations of the Borrower under
this Agreement, any other Borrower Loan Document, and any letter of
credit application and reimbursement agreement executed and delivered
by the Borrower to U.S. Bank in connection with the issuance of any
Letter of Credit, in all cases whether now existing or hereafter
arising or incurred.
"Operating Lease": A lease of (or other agreement conveying
the right to use) real or personal property classified as an operating
lease in accordance with GAAP.
"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.
"Permitted Acquisition": Any Acquisition by the Borrower or
any Subsidiary of the stock or assets of Persons conducting businesses
in the same general line of business as the Borrower, so long as (a)
the Agent is notified of such Acquisition not less than 15 days prior
to the proposed consummation thereof and is provided with such
information as the Agent may request on the acquired business, (b) both
15
before and after giving effect to such Acquisition, no Default or Event
of Default will have occurred and be continuing, (c) without limiting
the generality of clause (b) above, after giving effect to any
additional Revolving Loans to finance such Acquisition, the Borrowing
Base Availability will not be less than $5,000,000, (d) the Borrower
demonstrates to the satisfaction of the Majority Banks pro forma
compliance with Sections 6.13, 6.14, 6.15, 6.16, 6.17 and 6.18 for the
first four fiscal quarters ending after the closing of such
Acquisition, (e) concurrently with the consummation of such
Acquisition, the Agent shall have received the documents specified in
Section 5.14, and (f) after giving effect to such Acquisition, the
total consideration paid by the Borrower in connection with all
Permitted Acquisitions completed during the four fiscal quarters
preceding such Acquisition does not exceed the Permitted Acquisition
Limit. For purposes of the foregoing, (a) "total consideration" shall
mean, without duplication, cash or other consideration paid, the fair
market value of property or stock exchanged (or the face amount, if
preferred stock), the total amount of any deferred payments or purchase
money debt, all Indebtedness incurred to the seller, and the total
amount of any Indebtedness or other acquisition-related obligations
(including, without limitation, obligations pursuant to non-compete or
consulting arrangements) assumed or undertaken in such transactions and
(b) "pro forma" means such financial covenants shall be calculated
after giving effect to such Acquisition and any Indebtedness and
Capitalized Lease Obligations incurred or assumed in connection
therewith from any source (including any additional Revolving Loans to
finance such Acquisition).
"Permitted Acquisition Limit": With respect to any proposed
Acquisition, (a) $2,500,000, if the pro forma Cash Flow Leverage Ratio
(calculated in the manner set forth in the definition of Permitted
Acquisition) is greater than or equal to 1.50 to 1.00 and (b)
$5,000,000, if the pro forma Cash Flow Leverage Ratio (calculated in
the manner set forth in the definition of Permitted Acquisition) is
less than 1.50 to 1.00.
"Person": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization,
government or governmental agency or political subdivision or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan": 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.
"Pledge Agreements": Collectively, the separate Pledge
Agreements of the Borrower, Norstan Canada, NCI and Norstan
International, Inc. pursuant to which the Agent has been granted, for
the benefit of the Banks, a security interest in the capital stock (or
the equivalent) of certain direct and indirect Subsidiaries of the
Borrower, as any of the same may be amended, supplemented, extended,
restated or otherwise modified from time to time.
"Primary Distribution Facilities": The primary distribution
facilities of the Borrower and the Subsidiaries described on Schedule
1.1A.
16
"Prime Rate": The rate of interest from time to time publicly
announced by the Agent as its "prime rate." The Agent may lend to its
customers at rates that are at, above or below the Prime Rate. For
purposes of determining any interest rate hereunder or under the Note
which is based on the Prime Rate, such interest rate shall change as
and when the Prime Rate changes.
"Prime Rate Advance": An Advance with respect to which the
interest rate is determined by reference to the Prime Rate.
"Prohibited Transaction": The respective meanings assigned to
such term in Section 4975 of the Code and Section 406 of ERISA.
"Regulatory Change": Any change after the Closing Date in
federal, state or foreign laws, regulations, guidelines or orders 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, regulations, guidelines or
orders (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 such waivers in accordance with
Section 412(d) of the Code.
"Restricted Payments": With respect to the Borrower,
collectively, all dividends or other distributions of any nature (cash,
securities other than common stock of the Borrower, assets or
otherwise), and all payments on any class of equity securities
(including warrants, options or rights therefor) issued by the
Borrower, 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.
"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 Schedule 1.1B
hereto (as such Schedule may from time to time be amended) as its
Revolving Commitment Amount, but as the same may be from time to time
increased or reduced as provided by Sections 2.6(e) or 2.8.
"Revolving Commitment Ending Date": As defined in Section
2.14.
17
"Revolving Commitment 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.
"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 B hereto.
"Revolving Outstandings": As of any date of determination with
respect to any Bank, the sum of (a) the aggregate unpaid principal
balance of Advances outstanding under such Bank's Revolving Note on
such date, (b) an amount equal to the aggregate stated amount of each
Letter of Credit multiplied by such Bank's Revolving Commitment
Percentage, and (c) an amount equal to the aggregate amount of Unpaid
Drawings on such date (after applying any funds held in the Holding
Account to the payment thereof) multiplied by such Bank's Revolving
Commitment Percentage.
"Revolving Outstandings Percentage": As of any date of
determination with respect to any Bank, the percentage equivalent of a
fraction the numerator of which is the Revolving Outstandings of such
Bank on such date and the denominator of which is the Aggregate
Revolving Outstandings on such date.
"Security Agreements": Collectively, the separate Security
Agreements of the Borrower and the Guarantors pursuant to which the
Agent is granted, for the benefit of the Banks, a security interest in
the personal property described therein, as the same may hereafter be
amended, supplemented, extended, restated or otherwise modified from
time to time, each in form and substance satisfactory to the Agent.
"Security Documents": The Guaranties, the Security
Agreements, the Pledge Agreements, any collateral assignment documents
executed and delivered by the Borrower or any Subsidiary in any
registered intellectual property and any other documents or instruments
executed and delivered by any Person to secure or guaranty all or any
part of the Obligations.
"Subordination Agreement (Norstan Canada)": Subordination
Agreement dated concurrently herewith given by Norstan Canada in favor
of the Banks, as the same may be amended, restated or otherwise
modified from time to time.
"Subordinated Debt": The indebtedness of the Borrower to
Norstan Canada which is subordinated to the Obligations pursuant to the
Subordination Agreement (Norstan Canada) and any other Indebtedness of
the Borrower or any Subsidiary, 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 or any
Subsidiary existing on the date of this Agreement, that Majority Banks
have approved as Subordinated Debt a writing delivered by Majority
Banks to the Borrower on or prior to the Closing Date.
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"Subsidiary": Any corporation or other entity of which
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.
"Tangible Net Worth": As of any date of determination, the sum
of (a) 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, unamortized cost of stock and
foreign currency translation adjustments of the Borrower (excluding
treasury stock), less (b) the book value of all assets of the Borrower
and its Subsidiaries that would be treated as intangibles under GAAP,
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 2.8 hereof.
"Term Loan": As defined in Section 2.1.
"Term Loan Commitment": With respect to a Bank, the agreement
of such Bank to make a Term Loan to the Borrower in an amount equal to
such Bank's Term Loan Commitment Amount upon the terms and subject to
the conditions of this Agreement.
"Term Loan Commitment Amount": With respect to a Bank, the
amount set opposite such Bank's name on Schedule 1.1B as its Term Loan
Commitment Amount.
"Term Loan Percentage": With respect to any Bank, the
percentage equivalent of a fraction, the numerator of which is the
amount of the Term Loan Commitment Amount of such Bank and the
denominator of which is the sum of the Term Loan Commitment Amounts of
all the Banks.
"Term Note": A promissory note of the Borrower in the form of
Exhibit C hereto.
"Total Interest-bearing Debt": At the time of any
determination, the amount, on a consolidated basis, of all Indebtedness
of the Borrower for borrowed money or the deferred purchase price of
property, or which bears interest on such date, after elimination of
intercompany transactions, as determined in accordance with GAAP.
"Total Percentage": With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the sum of the
Revolving Commitment Amount of such Bank (or, if the Revolving
Commitments have been terminated, the Revolving Outstandings of such
Bank), the outstanding Term Loan of such Bank and the denominator of
which is the sum of the Aggregate Revolving Commitment Amounts (or, if
the Revolving Commitments have terminated, the Aggregate Revolving
Outstandings) and the outstanding Term Loans of all the Banks.
19
"Unpaid Drawing": As defined in Section 2.7(b).
"Unpaid Drawing Repayment Loan": As defined in Section 2.15.
"Unused Revolving Commitment": With respect to any Bank as of
any date of determination, the amount by which such Bank's Revolving
Commitment Amount exceeds such Bank's Revolving Outstandings on such
date.
"Unused Revolving Commitment Fees": As defined in Section
2.9.
"U.S. Bank": U.S. Bank National Association, in its
individual corporate capacity.
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 computation or determination to account for such change in
GAAP.
SECTION 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding."
SECTION 1.4 OTHER DEFINITIONAL TERMS. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. 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
SECTION 2.1 LENDING COMMITMENTS; PURPOSES. On the terms and subject to the
conditions hereof, each Bank severally agrees to make the following lending
facilities available to the Borrower:
(a) Revolving Loans. Each Bank severally shall make available a
revolving credit facility available as 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 Aggregate Revolving Outstandings to exceed the lesser of Aggregate
Revolving Commitment Amounts or the Borrowing Base.
20
(b) Term Loans. Upon the Closing Date, each Bank shall make available
to the Borrower a term loan (each being a "Term Loan" and, collectively,
the "Term Loans") in an amount by such Bank equal to its Term Loan
Commitment Amount.
SECTION 2.2 PROCEDURE FOR LOANS; NOTES.
(a) Revolving Loans.
(i) Any request by the Borrower for Revolving Loans hereunder
shall be in writing, or by telephone promptly confirmed in writing or
by facsimile transmission, and must be given so as to be received by
the Agent not later than 1:00 P.M. (Minneapolis time) two Eurodollar
Business Days prior to the requested Revolving Loan Date (which shall
be a Business Day) if the Revolving Loans (or any portion thereof) are
requested as Eurodollar Rate Advances and not later than 1:00 P.M.
(Minneapolis time) on the requested Revolving Loan Date if the
Revolving Loans are requested as Prime 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 $200,000 or, if more, an integral multiple of $100,000,
(iii) whether such Revolving Loans are to be funded as Prime Rate
Advances or Eurodollar Rate Advances, (iv) in the case of Eurodollar
Rate Advances, the duration of the initial Interest Period applicable
thereto, (v) a calculation acceptable to the Agent of the availability
under the Borrowing Base on the requested Revolving Loan Date, after
giving effect to the requested Revolving Loans, and (vi) if such
Revolving Loans are to be Unpaid Drawing Repayment Loans, the Unpaid
Drawing or Unpaid Drawings which are to be repaid with the proceeds of
such Unpaid Drawing Repayment Loans. Without in any way limiting the
Borrower's obligation to confirm in writing any telephone request for
Revolving Loans hereunder, the 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 Agent's record of the terms of such
telephone request, absent gross negligence or willful misconduct on
the part of the Agent. The Agent shall promptly notify each other Bank
of the receipt of such request, the matters specified therein, and of
such Bank's ratable share (based on such Bank's Revolving Commitment
Percentage) 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 Agent in Immediately Available Funds
21
not later than 4:00 P.M. (Minneapolis time). Unless the Agent
determines that any applicable condition specified in Article III has
not been satisfied, the Agent will make available to the Borrower at
the Agent's principal office in Minneapolis, Minnesota in Immediately
Available Funds not later than 5:00 P.M. (Minneapolis time) on the
requested Revolving Loan Date the amount of the requested Revolving
Loans. If the 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 Agent on the amount so advanced at the Federal Funds
Rate from the date of such Revolving Loan to the date funds are
received by the Agent from such Bank, such interest to be payable with
such remittance from such Bank of the principal amount of such
Revolving Loan (provided, however, that the Agent shall not make any
Revolving Loan on behalf of a Bank if the Agent has received prior
notice from such Bank that it will not make such Revolving Loan). If
the Agent does not receive payment from such Bank by the next Business
Day after the date of any Revolving Loan, the Agent shall be entitled
to recover such Revolving Loan, with interest thereon at the rate then
applicable to such Revolving Loan, on demand, from the Borrower,
without prejudice to the Agent's and the Borrower's rights against
such Bank. If such Bank pays the Agent the amount herein required with
interest at the overnight Federal Funds rate before the Agent has
recovered from the Borrower, such Bank shall be entitled to the
interest payable by the Borrower with respect to the Revolving Loan in
question accruing from the date the Agent made such Revolving Loan.
The Borrower shall provide to the Agent each Business Day, by not
later than 4:00 P.M. (Minneapolis time) on such Business Day, a
reconciliation in writing or by telecopier showing (i) the total
amount of Revolving Loans on such day, (ii) whether such Revolving
Loans constituted Unpaid Drawing Repayment Loans, and (iii) in the
case of Unpaid Drawing Repayment Loans, the Unpaid Drawing or Unpaid
Drawings repaid with the proceeds of such Unpaid Drawing Repayment
Loans. The Agent shall provide copies of such reconciliation to the
Banks on a monthly basis.
(ii) Whenever any Unpaid Drawing exists for which there are not
then funds in the Holding Account to cover the same and with respect
to which the Agent has not otherwise received a request from the
Borrower for Unpaid Drawing Repayment Loans pursuant to Section
2.2(a), the Borrower shall nevertheless, be deemed to have requested
the Banks to make Unpaid Drawing Repayment Loans to pay such Unpaid
Drawing and the Agent shall give the other Banks notice to that
effect, specifying the amount of such Unpaid Drawing and the amount of
the Unpaid Drawing Repayment Loan to be made by such Bank with respect
thereto, in which event each Bank is authorized (and the Borrower does
here so authorize each Bank) to, and shall, make an Unpaid Drawing
Repayment Loan to the Borrower in an amount equal to such Bank's
Revolving Commitment Percentage of the balance of the Unpaid Drawing
which remains unpaid after applying any funds in the Holding Account
to the payment thereof. The Agent shall notify each Bank by 1:00 P.M.
(Minneapolis time) on the date such Unpaid Drawing occurs of the
amount of the Unpaid Drawing Repayment Loan to be made by such Bank.
22
Notices received after such time shall be deemed to have been received
on the next Business Day. Each Bank shall then make such Unpaid
Drawing Repayment 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 Agent with the proceeds of such Unpaid Drawing
Repayment Loan in Immediately Available Funds, at the office of the
Agent, not later than 4:00 P.M. (Minneapolis time) on the day on which
such Bank received such notice (or, in the case of notices received
after 1:00 P.M., Minneapolis time, is deemed to have received such
notice). The Agent shall apply the proceeds of such Unpaid Drawing
Repayment Loans directly to reimburse itself for such Unpaid Drawing.
If any portion of any such amount paid to the Agent is recovered by or
on behalf of the Borrower from the Agent 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 8.11 hereof. If at the time the Banks
make funds available to the 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 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 Prime Rate plus the
Applicable Margin for Revolving Loans plus two percent (2.00%).
(b) Term Loans. Not later than 1:00 P.M. Minneapolis time) two
Eurodollar Business Days prior to the requested Closing Date if the Term
Loans are requested as Eurodollar Rate Advances and not later than 1:00
P.M. (Minneapolis time) one Business Day prior to the requested Closing
Date if the Term Loans are requested as Prime Rate Advances, the Borrower
shall deliver to the Agent a written notice of borrowing. Such notice of
borrowing shall be irrevocable and shall be deemed a representation by the
Borrower that on the Closing Date and after giving effect to the Term Loans
the applicable conditions specified in Article III have been and will be
satisfied. Such notice of borrowing shall specify (i) the requested Closing
Date, (ii) whether such Term Loans are to be funded as Eurodollar Rate
Advances or Prime Rate Advances, and (iii) in the case of Eurodollar Rate
Advances, the duration of the initial Interest Period applicable thereto.
The Agent shall promptly notify each Bank of the receipt of such notice and
the matters specified therein. On the requested Closing Date, each Bank
shall provide to the Agent the amount of such Bank's Term Loan in
Immediately Available Funds not later than 1:00 P.M., Minneapolis time.
Unless the Agent determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make the proceeds of the
Term Loans available to the Borrower at the Agent's main office on the
requested date.
(c) 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 Prime 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, at the option of the Majority Banks, no Advance may
be made as, converted to or continued as a Eurodollar Rate Advance if a
Default or an Event of Default has occurred and is continuing on the
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proposed date of continuation or conversion. Advances may be converted to,
or continued as, Eurodollar Rate Advances only in an amount equal to
$200,000 or an integral multiple of $200,000 in excess thereof. The
Borrower shall give the Bank written notice of any continuation or
conversion of any Advances and such notice must be given so as to be
received by the Bank not later than 1:00 P.M. (Minneapolis time) two
Eurodollar Business Days prior to the date of the requested date of
conversion or continuation in the case of the continuation of, or
conversion to, Eurodollar Rate Advances and not later than 1:00 p.m.
(Minneapolis time) on the date of the requested conversion to Prime 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 current Interest Period for any continuation or
conversion of Eurodollar Rate Advances, (ii) a Eurodollar Business Day in
the case of conversions to or continuations as Eurodollar Rate Advances,
and (iii) a Business Day in the case of conversions to Prime 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 Bank of the continuation of any
Eurodollar Rate Advance within the time required by this Section, such
Advance shall, at any time after the last day of the Interest Period
applicable thereto, at the option of the Agent (a) automatically be
converted into a Prime Rate Advance of the same principal amount or (b)
automatically be continued as a Eurodollar Rate Advance having an Interest
Period selected by the Agent. Notwithstanding anything to the contrary in
the this Agreement, the Borrower will not permit there to be more than (a)
five different Interest Periods for Term Loans constituting Eurodollar Rate
Advances in effect at any one time and (b) five different Interest Periods
for Revolving Loans constituting Eurodollar Rate Advances in effect at any
time.
SECTION 2.3 NOTES. The Revolving Loans 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 plus such
Bank's ratable amount of the conditional increase of the Revolving Commitment
Amounts contemplated by Section 2.6(e). The Term Loan of each Bank shall be
evidenced by a Term Note payable to the order of such Bank in the principal
amount equal to such Bank's Term Loan Commitment Amount. Each Bank shall enter
in its ledgers and records the amount of its Term Loan and each Revolving Loan,
the various Advances made and the payments made thereon, and each Bank is
authorized by the Borrower to enter on a schedule attached to its Term Note or
Revolving Note, as appropriate, a record of such Term Loan, 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 Notes, and, in all
events (a) 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 and (b) the
principal amount owing by the Borrower in respect of the Term Notes shall be the
aggregate amount of all Term Loans made by the Banks less all payments of
principal thereof made by the Borrower.
SECTION 2.4 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Loans as follows:
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(a) Subject to paragraph (c) below, 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.
(b) Subject to paragraph (c) below, each Prime Rate Advance shall bear
interest on the unpaid principal amount thereof at a varying rate per annum
equal to the sum of (i) the Prime Rate, plus (ii) the Applicable Margin.
(c) Upon the occurrence of any Event of Default, each Advance shall,
at the option of the Majority Banks, 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 (A) the Prime Rate, plus (B) the Applicable
Margin for Prime Rate Advances, plus (C) 2.0%.
(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 Prime Rate Advance,
on the last day of each month; (iv) with respect to all Advances, upon any
permitted prepayment (on the amount prepaid); and (v) with respect to all
Advances, on the Termination Date; provided that interest under Section
2.4(c) shall be payable on demand.
SECTION 2.5 REPAYMENT; PAYMENT TO HOLDING ACCOUNT.
(a) Revolving Loans. The Revolving Loans, together with all accrued
and unpaid interest thereon, shall be due and payable on the Termination
Date.
(b) Term Loan. The principal of the Term Loan shall be due and payable
(a) in installments of $1,000,000 due and payable on each of October 25,
2002, January 24, 2003, April 30, 2003, August 1, 2003, October 31, 2003,
January 30, 2004, April 30, 2004 and July 30, 2004 and (b) a final
installment in the amount of all remaining principal of and interest upon
the Term Loan due and payable on October 29, 2004, provided, however, that
(y) any installment of principal due on any date specified above shall be
reduced by any prepayments of principal applied to such installment
pursuant to this Agreement and (z) if the aggregate principal amount
outstanding under the Term Loan as of the date any principal payment is due
is less than the amount specified for such date above, then the principal
amount payable on such date shall be such amount outstanding.
(c) Payment to Holding Account. The Borrower shall pay to the Holding
Account on the Termination Date an amount equal to the aggregate face
amount of the Letters of Credit.
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SECTION 2.6 MANDATORY AND OPTIONAL PREPAYMENTS.
(a) Optional Prepayments. The Borrower may prepay Prime 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 Commitment in whole, the Borrower may pay Eurodollar Rate
Advances only on the last day of the Interest Period applicable thereto.
Any such prepayment must, in the case of a Eurodollar Rate Advance, be
accompanied by accrued and unpaid interest on the amount prepaid. Each
prepayment shall be in an aggregate amount of (i) $200,000 or an integral
multiple of $200,000 in excess thereof, in the case of any prepayment of
Revolving Loans and (ii) $250,000 or an integral multiple of $250,000, in
the case of any prepayment of Term Loans. Amounts paid (unless following an
acceleration or upon termination of the Revolving Commitment in whole) or
prepaid on Revolving under this Section 2.6 may be reborrowed upon the
terms and subject to the conditions and limitations of this Agreement.
Amounts paid or prepaid on the Term Loans may not be reborrowed. Amounts
paid or prepaid on the Loans under this Section 2.6 shall be for the
account of each Bank in proportion to its share of Loans being prepaid. Any
prepayments of the Term Loans made pursuant to Section 2.6(a) shall be
applied to the unpaid installments upon the Term Loan in inverse order of
their maturities, provided that, with respect to any particular prepayment,
the Borrower may give written notice to the Banks that such prepayment
shall be applied to the principal installments of the Term Loan in order of
their maturities and, so long as no Event of Default is then continuing,
the Banks shall apply such prepayment in such manner.
(b) Mandatory Prepayment of Revolving Loans. If at any time the
Aggregate Revolving Outstandings exceed the Aggregate Revolving Commitment
Amounts (including but not limited to any excess caused by a reduction in
the Revolving Commitment Amounts pursuant to Sections 2.6(e) or 2.8
hereof), the Borrower shall repay the Revolving Notes in an aggregate
amount equal to such excess, which prepayment shall be apportioned among
the Banks' Revolving Notes in accordance with their respective Revolving
Outstandings Percentages.
(c) Mandatory Prepayments Due to Certain Transactions. At any time
during the continuation of any Default or Event of Default, immediately
upon the receipt thereof by the Borrower or any Subsidiary, the Borrower
shall prepay the Loans in an aggregate amount of 100% of the Net Proceeds
received in cash by the Borrower or any Subsidiary as a result of any
public or private sale or offering by the Borrower of its capital stock .
(d) Application of Certain Prepayments. Any prepayments made pursuant
to Section 2.6(c), and any amounts received by the Agent upon the NNS Note
Collateral pursuant to Section 5.13, shall in each case be applied in the
following order by the Agent to the Loans ratably to each Bank according to
its Revolving Commitment Percentage or Term Loan Percentage, as applicable:
(x) first, to the unpaid principal installments upon the Term Loan in
inverse order of their maturities, (y) second, to the unpaid principal
balance of the Revolving Loans (other than reimbursement obligations with
respect to letters of credit), and (z) third, to the Holding Account in the
amount of the aggregate face amount of the Letters of Credit.
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(e) Permanent Reduction and Conditional Increase of Revolving
Commitments. The Revolving Commitment Amounts that are from time to time in
effect shall be reduced ratably by any prepayments made by the Borrower
under Section 2.6(c) that are applied to the Revolving Loans or paid to the
Holding Account pursuant to Section 2.6(d). Further, if the Term Loan is
paid or prepaid under this Agreement so that the unpaid balance of the Term
Loan is not more than $5,000,000, then, so long as no Default or Event of
Default is then continuing, the Borrower shall have the one-time option
(exercisable upon 5 Business Days' written notice to the Banks given at any
time after the Term Loans have been so paid or prepaid) to increase ratably
the Revolving Commitment Amounts which are then in effect by $4,000,000.
Upon the effective date of an increase in the Revolving Commitment Amounts
in the manner set forth in this Section, the Agent shall deliver to the
Borrower and each Bank a revised Schedule 1.1B reflecting the increased
Revolving Commitment Amounts.
(f) Borrowing Base Deficiency. If at any time a Borrowing Base
Deficiency exists, the Borrower shall immediately pay on the principal of
the Revolving Loans an amount equal to such Borrowing Base Deficiency.
Amounts paid on the Revolving Loans under this Section 2.6(f) shall be for
the account of each Bank in proportion to its share of outstanding
Revolving Loans. If, after paying all outstanding Revolving Loans, a
Borrowing Base Deficiency still exists, the Borrower shall pay into the
Holding Account an amount equal to the amount of the remaining Borrowing
Base Deficiency.
SECTION 2.7 ISSUANCE AND RENEWAL OF LETTERS OF CREDIT; DRAWINGS;
REPAYMENTS; BANK PARTICIPATIONS.
(a) The Letters of Credit. Subject to Section 2.7(f) and the other
terms and conditions of this Agreement, the Agent agrees to issue Letters
of Credit for the account of the Borrower from time to time prior to the
Termination Date in such amounts as the Borrower shall request; provided,
however, that:
(i) No Letter of Credit will be issued in any amount which, after
giving effect to such issuance, would cause either (A) the Aggregate
Revolving Outstandings to exceed the Aggregate Revolving Commitment
Amounts or (ii) the sum of the Unpaid Drawings under the Letters of
Credit plus the aggregate amount available to be drawn under the
Letters of Credit (including such Letter of Credit) to exceed
$8,000,000;
(ii) No Letter of Credit shall have a stated available amount of
less than $50,000; and
(iii) Without the prior written consent of all of the Banks, no
Letter of Credit shall expire later than 365 days after the date of
issuance thereof.
(b) Repayment. In the event of any drawing on any Letter of Credit,
the Borrower shall reimburse U.S. Bank for such drawing by 12:00 noon
(Minneapolis time) on the day such drawing is honored by U.S. Bank. Any
amount by which the Borrower has failed to reimburse U.S. Bank for the full
amount of such drawing under the Letter of Credit by 12:00 noon
(Minneapolis time) on the date U.S. Bank honored such drawing, until
reimbursed from the proceeds of Unpaid Drawing Repayment Loans or out of
funds available in the Holding Account, is an "Unpaid Drawing."
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(c) Participations. Each Bank hereby purchases, and U.S. Bank hereby
sells to each Bank, an undivided fractional risk participation interest,
equal to such Bank's Revolving Percentage of each Letter of Credit, in all
drawings (including Unpaid Drawings) made and honored under each Letter of
Credit, in U.S. Bank's reimbursement rights with respect to drawings
(including Unpaid Drawings) made and honored under each Letter of Credit
(as set forth herein and in any letter of credit application and
reimbursement agreement form executed by the Borrower in favor of U.S. Bank
in connection with the issuance of each Letter of Credit). Upon receipt of
the notice given by the Agent pursuant to Section 2.2(b) hereof, each Bank
shall pay to U.S. Bank its pro rata share, based on its Revolving
Commitment Percentage, of any Unpaid Drawing, less the amount, if any, of
the Unpaid Drawing Repayment Loan made by such Bank with respect to such
Unpaid Drawing, by not later than 3:00 p.m. (Minneapolis time) on the day
on which such Bank received such notice (or, in the case of notices
received after 1:00 p.m., Minneapolis time, is deemed to have received such
notice). If U.S. Bank has not received such participation payment from such
Bank by the time required in the preceding sentence such Bank shall pay
interest to U.S. Bank at the Federal Funds Rate on the amount of such
participation payment from the date on which such notice was received or
was deemed to have been received, as the case may be, to the date such
participation payment is received by U.S. Bank, such interest to be payable
with the remittance of such participation payment by such Bank. If U.S.
Bank does not receive such participation payment from such Bank by the next
Business Day after the date such notice was given (or was deemed given) by
U.S. Bank to such Bank, U.S. Bank shall be entitled to receive interest on
such participation payment at the Federal Funds Rate, without prejudice to
U.S. Bank's rights against such Bank. The obligations of each Bank to make
payment to U.S. Bank of such Bank's participation payments with respect to
Unpaid Drawings pursuant to this Section 2.7(c), and U.S. Bank's right to
receive the same, shall be absolute and unconditional under any and all
circumstances and irrespective of any rights of setoff, counterclaim,
withholding, reduction or other defense to payment which any Bank may have
or have had against U.S. Bank, the Borrower or any other Person.
(d) Indemnification of U.S. Bank. To the extent that U.S. Bank is not
reimbursed or indemnified by the Borrower or to the extent that any amounts
so received by U.S. Bank are required to be returned to the Borrower or any
statutory representative of the Borrower for any reason whatsoever, each
other Bank will reimburse and indemnify U.S. Bank on demand for and against
its pro rata share, based on its Revolving Commitment Percentage, of the
amount of 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 upon, incurred by or asserted
against U.S. Bank in its capacity as such, acting pursuant hereto or in any
way relating to or arising out of this Agreement, any Letter of Credit, or
any action taken or omitted to be taken by U.S. Bank under this Agreement
or any Letter of Credit, including, without limitation, any amounts (herein
28
called "Disgorgement Amounts") received by U.S. Bank from or on behalf of
the Borrower in reimbursement of an Unpaid Drawing which are rescinded in
whole or in part or which U.S. Bank may be otherwise required to pay or
repay in whole or in part to the Borrower, any statutory representative of
the Borrower or creditors of the Borrower acting as such statutory
representative; provided, however, that except with respect to Disgorgement
Amounts, as to which the liability of each Bank to reimbursement and
indemnify U.S. Bank in accordance with its Revolving Commitment Percentage
shall be absolute and unconditional under all circumstances whatsoever, no
other Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from U.S. Bank's own gross negligence
or willful misconduct. The obligations of the Banks to U.S. Bank under this
Section 2.7(d) shall survive the termination of this Agreement and the
expiration of any Letter of Credit. Nothing in this Section 2.7(d) shall be
deemed to prejudice the right of any Bank to recover from U.S. Bank any
amounts paid by such Bank to U.S. Bank pursuant to this Section 2.7(d) in
the event that it is determined by a court of competent jurisdiction that
the payment with respect to any Letter of Credit by U.S. Bank, in respect
of which payment was made by such Bank, constituted gross negligence or
willful misconduct on the part of U.S. Bank.
(e) Obligations Absolute. The obligation of the Borrower under Section
2.7(b) to repay U.S. Bank for any amount drawn on any Letter of Credit and
to repay the Banks for any Unpaid Drawing Repayment Loans 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:
(i) Any lack of validity or enforceability of any Letter of
Credit;
(ii) 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 Agent or any Bank or any other Person, whether in
connection with any Letter of Credit, this Agreement, the transactions
contemplated hereby, or any unrelated transaction; or
(iii) 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 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 Agent and the Banks shall not be impaired by:
(A) 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;
29
(B) 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;
(C) The acceptance by the 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
(D) Any other action of the 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 U.S.
Bank, and U.S. Bank 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 U.S.
Bank's own willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms
thereof.
(f) Procedures for Letters of Credit. Each request for an Letter of
Credit shall be made by the Borrower in writing, by facsimile transmission
or electronic conveyance received by the Agent by 2:00 P.M., 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 an 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 Agent may require that such request be
made on such letter of credit application and reimbursement agreement form
as the Agent may from time to time specify, along with satisfactory
evidence of the authority and incumbency of the officers of the Borrower
making such request. The 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 an Letter of Credit the Agent shall send notice to the
other Banks of such issuance, accompanied by a copy of the Additional
Letter or Letters of Credit so issued. Letters of Credit shall be issued in
support of obligations of the Borrower and the Subsidiaries under
performance and surety bond incurred in the ordinary course of business.
SECTION 2.8 OPTIONAL REDUCTION OF REVOLVING COMMITMENT AMOUNTS OR
TERMINATION OF REVOLVING COMMITMENTS. The Borrower may, at any time, upon not
less than three Business Days prior written notice to the Banks, reduce the
Revolving Commitment Amounts, ratably, with any such reduction in a minimum
aggregate amount for all the Banks of $1,000,000, 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 Aggregate Revolving
Outstandings. The Borrower may, at any time when no Letters of Credit is
outstanding, upon not less than three Business Days prior written notice to the
Banks, terminate the Revolving Commitments in their entirety. Upon termination
of the Revolving Commitments pursuant to this Section, the Borrower shall pay to
the Agent for the account of the Banks the full amount of all outstanding
Advances, all accrued and unpaid interest thereon, all unpaid Unused Revolving
Commitment Fees accrued to the date of such termination, and all other unpaid
obligations of the Borrower to the Agent and the Banks hereunder and shall pay
into the Holding Account an amount equal to the aggregate face amount of the
Letters of Credit.
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SECTION 2.9 UNUSED REVOLVING COMMITMENT FEES. The Borrower shall pay to the
Agent for the account of each Bank, in arrears at the end of each fiscal quarter
of the Borrower, fees (the "Unused Revolving Commitment Fees") in an equal to
the Applicable Margin for Unused Revolving Commitment Fees (on a per annum
basis) of the average daily Unused Revolving Commitment of such Bank for the
period from the Closing Date to the Termination Date. Such Unused Revolving
Commitment Fees are payable fiscal quarterly in arrears on each January 31,
April 30, July 31 and October 31 and on the Termination Date.
SECTION 2.10 LETTER OF CREDIT FEES.
(a) For each Letter of Credit issued, the Borrower shall pay to the
Agent for the account of the Banks, in advance on the date of issuance, a
fee (a "Letter of Credit Fee") in an amount determined by applying a per
annum rate of equal to the Applicable Margin for Eurodollar Rate Advance in
effect on such date 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. Notwithstanding the forgoing, if any Letter of
Credit is cancelled, or is drawn, prior to the earlier of the Termination
Date or expiration date thereof (and any such draw does not give rise to an
Unpaid Draw that is not satisfied with the proceeds of a Revolving Loan),
then, so long as no Event of Default is then continuing, each Bank shall
severally refund to the Borrower a portion of the Letter of Credit Fee
previously paid to such Bank by the Borrower with respect to such Letter of
Credit equal to the product of (i) the amount of the Letter of Credit Fee
paid to such Bank with respect to such Letter of Credit multiplied by (ii)
a fraction, the numerator of which is the number of days between (but not
including) the day the such Letter of Credit is cancelled or so drawn and
the scheduled expiration date of such Letter of Credit and the denominator
of which is the number of days between (but not including) the date of the
issuance of such Letter of Credit and the scheduled expiration date of such
Letter of Credit. Each Bank may set off any refund of the Letter of Credit
Fees contemplated by the forgoing sentence against any amounts due and
payable to such Bank on the date such refund is payable.
(b) In addition to the Letter of Credit Fee, the Borrower shall pay to
U.S. Bank (i) upon issuance of each Letter of Credit issued from and after
the Closing Date, for the account of U.S. Bank a "fronting fee" in the
amount of 0.125% times the amount available to be drawn upon such Letter of
Credit and (ii) for the account of U.S. Bank, on demand, all issuance,
amendment, drawing and other fees regularly charged by the U.S. Bank to its
letter of credit customers and all out-of-pocket expenses incurred by U.S.
Bank in connection with the issuance, amendment, administration or payment
of any Letter of Credit.
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SECTION 2.11 COMPUTATION. Unused Revolving Commitment Fees and interest on
Loans shall be computed on the basis of actual days elapsed and a year of 360
days.
SECTION 2.12 FEE LETTER. The Borrower shall pay to the Agent fees in
accordance with the terms of a letter agreement between the Borrower and the
Agent concerning such fees. The Agent may separately agree with any Bank to pay
a portion of such fees to such Bank, but shall not be obligated to pay such
portion to such Bank unless and until the same is received from the Borrower.
SECTION 2.13 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under this
Agreement payable to the Agent or the Banks shall be made without setoff or
counterclaim in Immediately Available Funds not later than 1:00 P.M.
(Minneapolis time) on the dates called for under this Agreement and the Notes to
the 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
Agent will promptly distribute in like funds to each Bank its ratable share of
each such payment of principal, interest, Unused Revolving Commitment Fees and
Letter of Credit Fees received by the Agent for the account of the Banks.
Whenever any payment to be made hereunder or on the Revolving Notes or Term
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 2.14 REVOLVING COMMITMENT ENDING DATE. The "Revolving Commitment
Ending Date" is June 28, 2004.
SECTION 2.15 USE OF LOAN PROCEEDS. The Term Loan shall continue a portion
(equal to the principal amount of such Loan) of the Borrower's Existing Loans
outstanding under the Existing Credit Agreement. The initial Revolving Loans
shall be used to refinance the Existing Loans and to pay the fees, costs and
expenses of the Agent and the Banks payable pursuant to this Agreement. The
proceeds of any subsequent Revolving Loans shall be used for (i) repayment to
U.S. Bank of Unpaid Drawings (any such Revolving Loan being also referred to
herein as an "Unpaid Drawing Repayment Loan") and (ii) other general corporate
purposes of the Borrower. No part of the proceeds of any Loans shall be used,
directly or indirectly, to purchase or carry any margin stock (as defined in
Regulation U of the Board) or to extend credit to others for the purpose of
purchasing or carrying such margin stock.
SECTION 2.16 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 Money Market Rate or the Adjusted Eurodollar Rate, as
the case may be, will not adequately and fairly reflect the cost to such
Bank of funding or maintaining Eurodollar Rate Advances for such Interest
Period,
32
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 Advances shall be suspended until
such Bank notifies the Borrower and the Agent that the circumstances giving rise
to such suspension no longer exist. While any such suspension continues, all
further Advances by such Bank shall be made with an interest rate option to
which such suspension does not apply. No such suspension shall affect the
interest rate then in effect during the applicable Interest Period for any
Eurodollar Rate Advance outstanding at the time such suspension is imposed.
SECTION 2.17 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
Notes 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 or similar requirement (including, without limitation, any such
requirement imposed by the Board, but excluding 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 against Letters of Credit
issued by the Agent or shall impose on any Bank (or its Applicable Lending
Office) or on the United States market for certificates of deposit or the
interbank Eurodollar market any other condition affecting its Eurodollar
Rate Advances, its Notes or its obligation to make Eurodollar Rate Advances
or affecting any Letter of Credit;
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 issuing or maintaining any Letter of Credit, 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 Notes, then, within 30 days after
demand by such Bank (with a copy to the 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
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. A certificate
of any Bank claiming compensation 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.
33
SECTION 2.18 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 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 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, as the case may be, to the end of the applicable
Interest Periods, all of the affected Advances shall be automatically converted
to Prime 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
2.20.
SECTION 2.19 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 Commitments and/or its Loans and/or any
Letters of Credit or any Bank's obligations to make Advances to cover Letters of
Credit 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 30 days after written notice and
demand from such Bank to the Borrower (with a copy to the Agent), pay to such
Bank additional amounts sufficient to compensate such Bank or its parent
corporation for such reduction. 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 manifest error.
SECTION 2.20 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower shall
compensate each Bank, upon its written request to the Borrower, 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 there for in the Borrower's request
or notice as to such Advance under Section 2.2, 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 2.18, 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.
34
SECTION 2.21 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 2.20) shall be made as if such Bank had actually
funded and maintained each Eurodollar Rate Advance during the Interest Period
for such Advance through the issuance of its certificates of deposit, or 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, as
the case may be, for such Interest Period.
SECTION 2.22 REPLACEMENT OF CERTAIN BANKS. If any Bank shall become
affected by any of the changes or events described in Section 2.16, 2.17, 2.18,
2.19 or 2.20 (any such Bank hereinafter referred to as a "Subject Bank") and
shall give notice to the Borrower of any of the changes or events thereunder,
the Borrower may, so long as no Default or Event of Default has occurred and is
continuing, upon at least five (5) Business Days' notice to the Agent and such
Subject Bank by the Borrower, designate a replacement lender (a "Replacement
Bank") acceptable to the Agent, to which such Subject Bank shall, subject to its
receipt (unless a later date for the remittance thereof shall be agreed upon by
Borrower and the Subject Bank) of all amounts due and owing to such Subject Bank
under Section 2.16, 2.17, 2.18, 2.19 or 2.20 assign all (but not less than all)
of its rights, obligations, Loans, Revolving Commitment and Term Loan Commitment
pursuant to an Assignment Agreement in the form of Exhibit E; provided, that all
amounts owed to such Subject Bank by the Borrower (except liabilities which by
the terms hereof survive the payment in full of the Loans and termination of
this Agreement) shall be paid in full as of the date of such assignment. Upon
any assignment by any Bank pursuant to this Section becoming effective, the
Replacement Bank shall thereupon be deemed to be a "Bank" for all purposes of
this Agreement and such Subject Bank shall thereupon cease to be a "Bank" for
all purposes of this Agreement and shall have no further rights or obligations
hereunder (other than pursuant to Sections 2.16, 2.17, 2.18, 2.19 or 2.20 while
such Subject Bank was a Bank).
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS OF INITIAL LOANS. The making of the initial
Revolving Loans and the Term Loans shall be subject to the prior or simultaneous
fulfillment of the following conditions:
(a) Documents. The Agent shall have received the following, in form
and substance acceptable to the Agent, in sufficient counterparts (except
for the Notes and the fee letter):
(i) A Revolving Note and a Term Note, drawn to the order of each
Bank in the appropriate amount, executed by a duly authorized officer
(or officers) of the Borrower and dated the Closing Date.
(ii) A Consent and Agreement of Guarantors in the form prescribed
by the Banks and dated the Closing Date, executed by a duly authorized
officer of such Guarantor.
35
(iii) Separate Amended and Restated Security Agreements, each in
the form prescribed by the Agent and dated the Closing Date and
executed by a duly authorized officer of the Borrower and each
Guarantor.
(iv) Separate Amended and Restated Pledge Agreements, each in the
form prescribed by the Agent and dated the Closing Date, executed by a
duly authorized officer of the Borrower, Norstan Canada, NCI and
Norstan International, Inc.
(v) 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.
(vi) 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 Revolving Loans
hereunder, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Borrower
(vii) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date
acceptable to the Agent.
(viii) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation, and in the other states identified
on Schedule 4.22 for which the Borrower was in good standing on the
Closing Date, certified by the appropriate governmental officials as
of a date acceptable to the Banks.
(ix) A copy of the bylaws of the Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(x) A copy of the corporate resolution of each Guarantor
authorizing the execution, delivery and performance of the Guarantor's
Consent.
(xi) An incumbency certificate for each Guarantor showing the
names and titles and bearing the signatures of the officers of such
Guarantor authorized to execute the Guarantor's Consent, certified as
of the Closing Date by the Secretary or an Assistant Secretary of such
Guarantor.
(xii) A copy of the Articles of Incorporation of each Guarantor
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date
acceptable to the Agent.
(xiii) A certificate of good standing for each Guarantor in the
jurisdiction of its incorporation, and in the other states identified
on Schedule 4.22 for which such Guarantor was in good standing on the
Closing Date, certified by the appropriate governmental officials as
of a date acceptable to the Agent.
36
(xiv) A copy of the bylaws of each Guarantor, certified as of the
Closing Date by the Secretary or an Assistant Secretary of such
Guarantor.
(xv) Insurance certificates in form and substance acceptable to
the Agent and listing the Agent as loss payee thereon and as
additional insured, indicating that the Borrower and each Subsidiary
has obtained insurance of the type specified in this Agreement and in
the Security Agreements.
(xvi) An initial Borrowing Base Certificate, completed as of the
Closing Date and otherwise in form and substance acceptable to the
Agent.
(xvii) A fee letter in favor of the Agent setting forth the fees
contemplated by Section 2.12, duly executed by the Borrower.
(xviii) Completed UCC searches for the Borrower and the
Subsidiaries in such jurisdications deemed appropriate by the Banks
and otherwise satisfactory to the Banks demonstrating that there are
no Liens superior to the Liens of the Banks in the property of the
Borrower.
(xix) An Acknowledgment of Exiting Lender, substantially in the
form of Exhibit D hereto, duly executed by the applicable Exiting
Lender.
(xx) A written confirmation calculating of all Obligations owing
to each Bank (other than the Exiting Banks) under the Existing Credit
Agreement as of the Closing Date prepared by such Bank's business
group responsible for administering the Existing Loans.
(xxi) The Banks shall have received draft audited consolidated
financial statements of the Borrower of type specified in Section
5.1(a) for the fiscal year ending April 30, 2002.
(xxii) The Agent shall have received the original Promissory Note
given by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in favor of the Borrower in the amount of
$1,000,000, duly endorsed in blank to the Agent pursuant to an
endorsement in the form prescribed by the Agent.
(xxiii) The Agent shall have received a reaffirmation of the
Fleet Intercreditor Agreement in the form prescribed by the Agent,
duly executed by Fleet.
(xxiv) The Agent shall have received a subordination agreement in
the form prescribed by the Agent, duly executed by Norstan Canada,
Ltd.
(xxv) The Agent shall have confirmed that, upon the funding of
the Loans including the initial Revolving Loans, all accrued and
unpaid interest upon the Existing Loans under the Existing Credit
Agreement shall be paid in full on the Closing Date, either from the
proceeds of such Loans or from cash furnished by the Borrower at
Closing Date.
37
(b) Certain Fees. The Borrower shall have paid to the Agent the fees
payable in accordance with the fee letter set forth in Section 2.12.
(c) Opinion. The Borrower shall have requested Maslon, Edelman ▇▇▇▇▇▇
& Brand, its counsel, to prepare a written opinion, addressed to the Banks
and dated the Closing Date, covering matters acceptable to the Banks and
their counsel, and such opinion shall have been delivered to the Agent in
sufficient counterparts for each Bank.
(d) 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.
(e) Other Matters. All corporate and legal proceedings relating to the
Borrower and the 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 Agent, the Banks and their
special counsel, and the Agent shall have received all information and
copies of all documents, including records of corporate proceedings, as any
Bank or such special counsel may reasonably have requested in connection
therewith, such documents where appropriate to be certified by proper
corporate or governmental authorities.
(f) Fees and Expenses. The Agent shall have received all fees and
other amounts due and payable by the Borrower on or prior to the Closing
Date, including the fees and expenses of the Agent or counsel to the Agent
payable pursuant to Section 9.2.
SECTION 3.2 CONDITIONS PRECEDENT TO ALL LOANS. The making hereunder of any
Revolving Loans (including the initial Revolving Loans), Term Loans and the
issuance of any Letter of Credit shall be subject to the fulfillment of the
following conditions:
(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 the issuance of
any Letter of Credit, with the same force and effect as if made on such
date.
(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 the issuance of any Letter of Credit or will exist after giving
effect to the Revolving Loans made on such date or the date any Letter of
Credit is issued.
(c) Notices and Requests. In the case of Revolving Loans the Agent
shall have received the Borrower's request for such Revolving Loans as
required under Section 2.2 (except as otherwise provided in Section 2.2
(b)).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement, to grant the
Revolving Commitments and to make the Loans hereunder, and to induce U.S. Bank
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 Notes and to perform its obligations under the
Borrower Loan Documents. Each Subsidiary 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 the Loan Documents to which it is a
party and to perform its obligations under such Loan Documents. 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 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 and each Subsidiary of the Loan Documents to which
it is a party have been duly authorized by all necessary corporate action by the
Borrower or such Subsidiary, and this Agreement constitutes, and the Notes and
other Loan Documents when executed will constitute, the legal, valid and binding
obligations of the Borrower or each Subsidiary party thereto, enforceable
against the Borrower or such Subsidiary in accordance with their respective
terms, subject to limitations as to enforceability which might result from
bankruptcy, insolvency, moratorium and other similar laws affecting creditors'
rights generally and subject to limitations on the availability of equitable
remedies.
SECTION 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrower or any Subsidiary of the Loan Documents to which it
is a party will not (a) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Borrower or such Subsidiary, (b) violate or contravene any
provision of the Articles of Incorporation, bylaws or other organizational
documents of the Borrower or such Subsidiary, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Borrower or such Subsidiary 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 (except as
provided in the forgoing sentence) 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.
39
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 or any Subsidiary to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents to which it is
a party.
SECTION 4.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's audited
consolidated financial statements as at April 30, 2001 and its unaudited
financial statements as at April 30, 2002 as heretofore furnished to the Banks,
have been prepared in accordance with GAAP on a consistent basis (except for
year-end audit adjustments as to the interim statements) and fairly present the
financial condition of the Borrower 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. Other than as
may have been previously disclosed to the Banks in writing, since April 30, 2002
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.
SECTION 4.6 LITIGATION. Except as disclosed in Schedule 4.6 hereto, 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. Except as disclosed on
Schedule 4.7, 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. Except as disclosed on Schedule 4.7, 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.
40
SECTION 4.8 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans' benefits guaranteed under Title IV of
ERISA does not exceed the current value of the Plans' assets allocable to such
benefits.
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 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). None of such properties owned by
the Borrower or any Subsidiary is subject to a Lien, except as allowed under
Section 6.12. Neither the Borrower nor any Subsidiary 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 material 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. 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.
41
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.
SECTION 4.14 FORCE MAJEURE. Since the date of the most recent 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. Under Statement of Financial Accounting
Standard No. 106 of the Financial Accounting Standards Board and the accounting
rules with respect thereto, the present value of the expected cost to the
Borrower and the Subsidiaries of post-retirement medical and insurance benefits
with respect to employees, as estimated by the Borrower in accordance with GAAP
is not material.
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. Schedule 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 owned beneficially or of record by
the Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary. Except as otherwise indicated in Schedule 4.19, all shares of
each Subsidiary owned by the Borrower or by any other Subsidiary are validly
issued and fully paid and nonassessable.
SECTION 4.20 REGISTERED INTELLECTUAL PROPERTY. Schedule 4.20 hereto lists
all patents, trademarks and copyrights owned by the Borrower or any Guarantor as
of the Closing Date and recorded with the U.S. Office of Patents and Trademarks
or U.S. Office of Copyrights, as applicable.
42
Section 4.21 DORMANT SUBSIDIARIES. None of the Dormant Subsidiaries has any
business operations or any liabilities or assets having a book value in excess
of $50,000.
Section 4.22 HIGH REVENUE STATES. Schedule 4.22 hereto lists, for the Borrower
and each Guarantor, each state in which such Borrower's or such Guarantor's
business operations generated 5% or more of the Borrower's consolidated gross
revenues as of the Closing Date.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans, and any
obligation of U.S. Bank to issue the Letters of Credit shall have expired or
been terminated and the Notes and all of the other Obligations have been paid in
full, and no amount is available to be drawn under the under the Letters of
Credit, unless the Majority Banks shall otherwise consent in writing:
SECTION 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will furnish to
the Banks:
(a) As soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, (i) the consolidated financial
statements of the Borrower and the Subsidiaries consisting of at least
statements of operations, cash flows and shareholders' 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, and with respect to the consolidated statements, certified
without qualification by Deloitte & Touche or other independent certified
public accountants of recognized national standing selected by the Borrower
and acceptable to the Agent and (ii) a statement of the Borrower's
Contingent Obligations as at the end of such fiscal year.
(b) Together with the audited financial statements required under
Section 5.1 (a)(i), 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.
(c) As soon as available and in any event within 30 days after the end
of each calendar month (or 45 days in the case of the last month of any
fiscal quarter), (i) unaudited consolidated statements of operations for
the Borrower and the Subsidiaries for such month and for the year to date
and statements of cash flows for the period from the beginning of such
fiscal year to the end of such month and a consolidated balance sheet of
the Borrower and the Subsidiaries as at the end of such month, setting
forth in comparative form (i) figures for the corresponding period for the
preceding fiscal year and (ii) figures for the corresponding period
appearing in the budgeted financial statements furnished by the Borrower to
the Banks as of the Closing Date, each 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.
43
(d) As soon as practicable and in any event within 45 days after the
end of each fiscal quarter of the Borrower (or, with respect to its fiscal
quarter ended on or about April 20, 2002, by July 31, 2002), a Compliance
Certificate in the form of Exhibit E hereto signed by the chief financial
officer of the Borrower demonstrating in reasonable detail compliance (or
noncompliance, as the case may be) with Sections 6.13, 6.14, 6.15, 6.16,
6.17 and 6.18 as at the end of such fiscal quarter and stating that as at
the end of such fiscal 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.
(e) As soon as practicable and in any event within 60 days after the
beginning of each fiscal year of the Borrower, statements of forecasted
consolidated income for the Borrower and the Subsidiaries for each fiscal
quarter in such fiscal year and a forecasted consolidated balance sheet of
the Borrower and the Subsidiaries, together with supporting assumptions, as
at the end of each fiscal quarter, all in reasonable detail and reasonably
satisfactory in scope to Majority Banks.
(f) Within one Business Day of 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.
(g) Within one Business Day of 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.
(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.
(i) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any
Subsidiary shall have sent to its stockholders.
(j) Promptly after the sending or filing thereof, copies of all
regular and periodic financial reports (including all Form 10-K and Form
10-Q reports) which the Borrower or any Subsidiary shall file with the
Securities and Exchange Commission or any national securities exchange.
(k) As soon as practicable and in any event within 30 days after the
end of each month, a Borrowing Base Certificate signed by an appropriate
financial officer of the Borrower, reporting the Borrowing Base as of the
last day of the month just ended, and on the first Business Day of each
week updated information with respect to the gross amount of Accounts
together with a calculation of the amount available for borrowing,
certified by an appropriate financial officer of the Borrower.
44
(l) From time to time, such other information regarding the business,
operation and financial condition of the Borrower and the Subsidiaries as
any Bank may reasonably request.
SECTION 5.2 CORPORATE EXISTENCE. The Borrower will maintain, and cause each
Subsidiary to maintain, its corporate existence in good standing under the laws
of its jurisdiction of incorporation 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.
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 Agent or any Bank 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 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 Agent or such Bank
may designate. So long as no Event of Default exists, such visits, inspections,
audits and examinations shall be at the expense of the Agent and the Banks, but
any such visits, inspections, audits and examinations shall be at the expense of
the Borrower if such visits, inspections, audits and examinations (a) are made
while any Event of Default is continuing, or (b) constitute the semi-annual
collateral audit to be conducted by the Agent.
45
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, to the extent and 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 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 requirements
of ERISA and of the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and of the Code 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 $100,000 or (c) fail to make any payments in an
aggregate amount exceeding $100,000 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.
46
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 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.
SECTION 5.12 LANDLORD WAIVERS. Upon the written request of the Agent, the
Borrower shall undertake its commercially reasonable best efforts to obtain, and
to cause its Subsidiaries that have granted security interests to the Agent to
obtain, the execution of landlord waivers in form and substance acceptable to
the Agent by the lessor with respect to any of the Borrower's or such
Subsidiaries' business premises (each, a "Lessor"), whereby each such Lessor
would, among other things, acknowledge the security interest in favor of the
Agent and the Banks in the Borrower's or such Subsidiaries' assets and agree to
allow the Agent and the Banks to have access to the leased premises in order to
enforce such security interest or protect such collateral. The foregoing
obligations of the Borrower are in addition to its obligations under the
Security Agreements.
SECTION 5.13 NNS NOTE COLLATERAL.
(i) The Borrower acknowledges and confirms that, upon the execution
and delivery to the Borrower thereof by the obligors thereon, the NNS Note
Collateral constitutes "Collateral" under and within the meaning of the
Borrower's Security Agreement. Except as the Agent may otherwise agree, the
Borrower shall cause all certificates, instruments and other agreements
representing or evidencing NNS Note Collateral received by the Borrower or
any Subsidiary to be delivered to the Agent promptly upon receipt thereof.
All such certificates, instruments and agreements shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. After the execution and delivery thereof,
neither the Borrower nor any Subsidiary shall forgive, cancel, compromise,
modify, amend or extend the time for payment of, or waive any default
under, any of the NNS Note Collateral, or modify or amend, or waive any
default under, any agreement with respect to the NNS Note Collateral, or
consent to or acquiesce in any of the foregoing, without in each case the
prior written consent of the Banks.
(ii) Notwithstanding whether an Event of Default has occurred, any and
all cash paid, payable or otherwise distributed in respect of principal of,
or in exchange for, any NNS Note Collateral shall be immediately paid to
the Agent to apply, to the Obligations in the manner set forth Section
2.6(d). Such proceeds of NNS Note Collateral shall, if received by the
Borrower or any Subsidiary, be received in trust for the benefit of the
Agent, be segregated from the other property or funds of the Borrower or
such Subsidiary, and be forthwith delivered to the Agent in the same form
as so received (with any necessary endorsement or assignment).
47
SECTION 5.14 PLEDGE OF ASSETS IN PERMITTED ACQUISITIONS. Unless otherwise
agreed by the Majority Banks, immediately upon the closing of a Permitted
Acquisition, the Borrower, any Subsidiary and any Person acquired in such
Permitted Acquisition shall execute and deliver to the Agent documents and
instruments in the form reasonably prescribed by the Agent (i) to pledge to the
Agent for the benefit of the Banks the stock or other equity interests of any
Person acquired in such Permitted Acquisition and the assets of such Person, in
each case as security for the Obligations and (ii) whereunder any Person
acquired in such Acquisition shall absolutely and unconditionally guaranty the
Obligations.
SECTION 5.15 PLEDGE OF ASSETS IN AND GUARANTY OF NORSTAN CANADA. Upon the
occurrence of any Event of Default, at the request of the Majority Banks, the
Borrower will cause Norstan Canada to execute and deliver to the Agent documents
and instruments in the form reasonably prescribed by the Agent (i) to pledge to
the Agent for the benefit of the Banks the assets of such Person as security for
the Obligations and (ii) whereunder such Person shall absolutely and
unconditionally guaranty the Obligations.
SECTION 5.16 GOOD STANDING CERTIFICATES. Within 30 days after the Closing
Date, the Borrower will furnish to the Agent good standing certificates or the
equivalent for each Borrower and each Guarantor in each state identified on
Schedule 4.22 hereof for which the Borrower did not furnish to the Agent a good
standing certificate or the equivalent on the Closing Date.
SECTION 5.17 REGISTERED INTELLECTUAL PROPERTY. Within 30 days of any
request therefor by the Agent, the Borrower will execute, or cause to be
executed, and deliver to the Agent, collateral assignment documents in form and
substance acceptable to the Agent sufficient to cover all patents, trademarks
and copyrights listed on Schedule 4.22 hereto that are not subject to an
existing collateral assignment document in favor of the Agent.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans, and any
obligation of U.S. Bank to issue the Letters of Credit shall have expired or
been terminated and the Notes and all of the other Obligations have been paid in
full, and no amount is available to be drawn under the under the Letters of
Credit, unless the Majority Banks shall otherwise consent in writing:
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, (a) any Subsidiary
may be merged with or liquidated into the Borrower or any Guarantor (if the
Borrower or such Guarantor is the surviving corporation) and (b) any Person
acquired in a Permitted Acquisition may be merged or liquidated into the
Borrower or any Guarantor (if the Borrower or such Guarantor is the surviving
corporation).
48
SECTION 6.2 SALE OF ASSETS. The Borrower will not, and will not permit any
Subsidiary to, sell, transfer, lease or otherwise convey all or any substantial
part of its assets except for:
(a) sales and leases of Inventory in the ordinary course of business
or ordinary course sales of obsolete or worn-out equipment;
(b) sales or transfers by a Subsidiary to the Borrower or a Guarantor;
(c) other sales or transfers of assets by the Borrower or a Subsidiary
so long as (i) such sales or transfers do not exceed $1,000,000 in the
aggregate in any fiscal year and (ii) no Default or Event of Default is
then continuing or would arise therefrom.
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 the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $100,000.
SECTION 6.4 CHANGE IN NATURE OF BUSINESS. The Borrower will not, and will
not permit any Subsidiary to, make any material change in the nature of the
business of the Borrower or such Subsidiary, as carried on at the date hereof,
except for changes in business related to and necessitated by changes in the
communications and information technology industries generally.
SECTION 6.5 SUBSIDIARIES. Except for Subsidiaries acquired in Permitted
Acquisitions, after the date of this Agreement, the Borrower will not, and will
not permit any Subsidiary to, form or acquire any corporation or limited
liability company which would thereby become a Subsidiary.
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 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 (except as
may be provided in any documents evidencing or securing Indebtedness existing on
the date hereof secured by NFS Lease Accounts or Norstan Canada Lease Accounts
and related leases, equipment and servicing arrangements). 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 (b) make loans or other
cash payments to the Borrower.
SECTION 6.7 RESTRICTED PAYMENTS. The Borrower will not make any Restricted
Payments.
49
SECTION 6.8 SUBORDINATED DEBT. The Borrower will not, and will not permit
any Subsidiary to, (a) make any scheduled payment of the principal of or
interest on any Subordinated Debt which would be prohibited by the terms of such
Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory); (c) amend
or cancel the subordination provisions applicable to any Subordinated Debt; (d)
take or omit to take any action if as a result of such action or omission the
subordination of such Subordinated Debt, or any part thereof, to the Obligations
might be terminated, impaired or adversely affected; or (e) omit to give the
Agent prompt notice of any notice received from any holder of Subordinated Debt,
or any trustee therefor, or of any default under any agreement or instrument
relating to any Subordinated Debt by reason whereof such Subordinated Debt might
become or be declared to be due or payable.
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:
(a) Investments existing on the date of this Agreement and listed in
Schedule 6.9 hereto, but not any renewal or extension thereof (except for
renewals or extensions of Investments reasonably determined by the Borrower
to be not material in amount).
(b) Travel advances to management personnel and employees in the
ordinary course of business.
(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.
(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 Agent.
(e) Commercial paper given the highest or next to highest rating by a
nationally recognized rating service.
(f) Repurchase agreements relating to securities issued or guaranteed
as to principal and interest by the United States of America.
(g) Other readily marketable Investments in debt securities and money
market funds which are reasonably acceptable to the Majority Banks.
(h) Any Investment by the Borrower or any Subsidiary in the stock of
any Subsidiary.
(i) Loans and advances by the Borrower to any Guarantor made in the
ordinary course of business to finance the normal operations of such
Guarantor, provided that no Event of Default is then continuing or would
result therefrom.
(j) Loans and advances by the Borrower to Norstan Canada made in the
ordinary course of business to finance the normal operations of Norstan
Canada, provided that (i) no Event of Default is then continuing or would
result therefrom and (ii) the principal amount of such loans and advances
does not exceed $2,000,000 at any time.
50
(k) Loans and advances by Norstan Canada to the Borrower made in the
ordinary course of business, provided that (i) no Event of Default is then
continuing or would arise therefrom and (ii) such loans and advances have
been subordinated to the Obligations pursuant to the Subordination
Agreement (Norstan Canada).
(l) Indebtedness of any Subsidiary to the Borrower on account of
unpaid dividends owed by that Subsidiary to the Borrower.
(m) Indebtedness of employees to the Borrower arising under the
Borrower's employee personal computer purchase program in the ordinary
course of business, so long as the aggregate amount of such Indebtedness
outstanding at any one time does not exceed $50,000.
(n) Advances in the form of progress payments, prepaid rent or
security deposits, each in the ordinary course of business.
(o) The NNS Note Collateral and other promissory notes or other
amounts payable to the Borrower or any Subsidiary by a Person other than
the Borrower or a Subsidiary and in existence on the date hereof.
(p) Permitted Acquisitions.
(q) Other Investments in an aggregate amount not exceeding $1,000,000
outstanding at any time.
provided, however, that any Investments under clauses (c), (d), (e) or (f) above
shall mature within one year of the acquisition thereof by the Borrower or a
Subsidiary.
SECTION 6.10 INDEBTEDNESS. The Borrower will not, and will not permit any
Subsidiary to, incur, create, issue, assume or suffer to exist any Indebtedness,
except:
(a) The Obligations.
(b) Indebtedness existing on the date of this Agreement (other than
Indebtedness of the type specified in Section 6.10(c)) and disclosed on
Schedule 6.10(a) hereto, but not including any extension or refinancing
thereof.
(c) Indebtedness existing on the date hereof secured by NFS Lease
Accounts or Norstan Canada Lease Accounts and related leases, equipment and
servicing arrangements and disclosed on Schedule 6.10(b), but not including
any extension or refinancing thereof.
(d) Indebtedness secured by Liens permitted under Section 6.11(g)
hereof, provided that the principal amount of Indebtedness secured by Liens
permitted by Section 6.11(g) shall not exceed (i) $3,000,000 at any time on
or before April 30, 2003 and (ii) $5,000,000 at any time after April 30,
2003.
51
(e) Indebtedness of the Borrower under lines of credit for foreign
exchange transactions and for wire transfers and daylight overdrafts.
(f) Subordinated Indebtedness and renewals thereof.
(g) Contingent Obligations permitted under Section 6.12.
(h) Indebtedness incurred as seller financing of Permitted
Acquisitions, provided, that (i) such Indebtedness is unsecured, and (ii)
such Indebtedness is Subordinated Debt.
(i) Current liabilities, other than for borrowed money, incurred in
the ordinary course of business and calculated in accordance with GAAP.
(j) Intercompany Indebtedness of the type specified in Sections
6.9(i), (j), (k) and (l).
(k) Other unsecured Indebtedness in an aggregate principal amount not
exceeding $1,000,000 outstanding at any time.
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:
(a) Liens existing on the date of this Agreement and disclosed on
Schedule 6.11 hereto.
(b) Deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of business of the Borrower or a
Subsidiary.
(c) 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.
(d) 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.
(e) Liens incurred or deposits or pledges made or given in connection
with, or to secure payment of, indemnity, performance or other similar
bonds.
52
(f) 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.
(g) The interest of any lessor under any Capitalized Lease entered
into after the Closing Date or purchase money Liens on property acquired
after the Closing Date; provided, that, (i) the Indebtedness secured
thereby is otherwise permitted by this Agreement and (ii) such Liens are
limited to the property acquired and do not secure Indebtedness other than
the related Capitalized Lease Obligations or the purchase price of such
property.
(h) Liens arising out of a judgment or judgments against the Borrower
or any Subsidiary for the payment of money in an aggregate amount not
exceeding $300,000 with respect to which an appeal is being prosecuted and
a stay of execution pending such appeal has been secured.
(i) Liens against the NFS Lease Accounts, Norstan Canada Lease
Accounts and related leases, equipment and servicing arrangements securing
any financing permitted under Section 6.10(c).
SECTION 6.12 CONTINGENT OBLIGATIONS. The Borrower will not, and will not
permit any Subsidiary to, be or become liable on any Contingent Obligations
except:
(a) Contingent Obligations (other than Guaranties set forth in Section
6.12(b) hereof) existing on the date of this Agreement and described on
Schedule 6.12(a) hereto.
(b) Guaranties by the Borrower guaranties existing on the date of this
Agreement with respect to the Indebtedness permitted by Section 6.10(c) and
described on Schedule 6.12(b) hereto.
(c) normal product warranties and indemnities in favor of suppliers
and customers entered into in the ordinary course of business and relating
to inventory sold by the Borrower or a Subsidiary.
SECTION 6.13 OPERATING LEASES. The Borrower will not, and will not permit
any Subsidiary to become liable for, whether directly or by assignment, for rent
or other amounts (exclusive of customary reimbursements for taxes, insurance or
maintenance expenses) under any Operating Leases in an amount exceeding, on a
consolidated basis, $9,000,000 in any fiscal year.
SECTION 6.14 CAPITAL EXPENDITURES. The Borrower will not, and will not
permit any Subsidiary to, make Capital Expenditures in an amount exceeding, on a
consolidated basis in the following amounts for the following periods: (a)
$10,000,000 during the fiscal year ending on or about ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇)
$11,000,000 during the fiscal year ending on or about April 30, 2004 and (c)
$12,000,000 during the fiscal year ending on or about April 30, 2005.
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SECTION 6.15 TANGIBLE NET WORTH. The Borrower will not permit the Tangible
Net Worth to be less than:
(i) as of the last day of any fiscal quarter during the fiscal year
ending April 30, 2003, $12,500,000;
(ii) as of the last day of any fiscal quarter during the fiscal year
ending April 30, 2004 and each fiscal year thereafter, the greater of (A)
the Tangible Net Worth required to be maintained by the Borrower to be in
compliance with this Section 6.15 as of the last day of the preceding
fiscal year and (B) 95 percent (95%) of the Borrower's Tangible Net Worth
as at the last day of the preceding fiscal year,
provided that, the minimum amount of Tangible Net Worth required to be
maintained pursuant to this Section shall be automatically and permanently
increased by the amount of the Net Proceeds received by the Borrower in
connection with the issuance of any equity securities of the Borrower from and
after the Closing Date.
SECTION 6.16 QUARTERLY EARNINGS. The Borrower shall not permit EBT,
calculated on a cumulative basis for the two preceding fiscal quarters, to be
less than $0.00 as of the last day of any fiscal quarter (commencing with the
last day of the fiscal quarter ending on or about October 31, 2002).
SECTION 6.17 FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the
Fixed Charge Coverage Ratio to be less than (a) 1.20 to 1.00 as of the last day
of the Borrower's fiscal quarters ending on or about January 31, 2003 and April
30, 2003 and (b) 1.30 to 1.00 as of the last day of each other fiscal quarter of
the Borrower.
SECTION 6.18 CASH FLOW LEVERAGE RATIO. The Borrower will not permit the
Cash Flow Leverage Ratio at any time to be more than: (i) 2.25 to 1.00 as of the
last day of the Borrower's fiscal quarters ending on or about July 31, 2002 and
October 31, 2002, (ii) 2.00 to 1.00 as of the last day of the Borrower's fiscal
quarter ending on or about January 31, 2003, and (iii) 1.75 to 1.00 as of the
last day of the Borrower's fiscal quarter ending on or about April 30, 2003 and
each fiscal quarter ending thereafter.
SECTION 6.19 LOAN PROCEEDS. The Borrower will not, and will not permit any
Subsidiary to, use any part of the proceeds of any Loan 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 6.20 INVENTORY VALUE. As of any date of determination, the Borrower
will not, and will not permit any Subsidiary to, permit any Inventory of the
Borrower or any Subsidiary having an aggregate value at cost in excess of 30% of
the aggregate value at cost of all of the Inventory of the Borrower and the
Subsidiaries to be stored at a location other than the Primary Distribution
Facilities.
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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:
(a) The Borrower shall fail to make when due, whether by acceleration
or otherwise, any payment of principal of or interest on any Note or any
other Obligation required to be made to the Agent or any Bank pursuant to
this Agreement.
(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 Agent pursuant to this Agreement or
any other Loan Document shall prove to have been false or misleading in any
material respect on the date as of which the facts set forth are stated or
certified.
(c) The Borrower shall fail to comply with Sections 2.6, 5.2, 5.3,
5.12, 5.13 or 5.14 hereof, or any Section of Article VI hereof.
(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 30 calendar days 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
Agent or any Bank gives notice of such failure to the Borrower.
(e) 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 30 days, or the Borrower, any Subsidiary or a
Guarantor shall make an assignment for the benefit of creditors.
(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, a Subsidiary or any Guarantor, and, if instituted
against the Borrower, a 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 30 days, or an order for relief
shall have been entered against the Borrower, such Subsidiary or such
Guarantor.
(g) 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.
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(h) A judgment or judgments for the payment of money in excess of the
sum of $1,000,000 in the aggregate shall be rendered against the Borrower
or a Subsidiary and the Borrower or such Subsidiary shall not discharge the
same or provide for its discharge in accordance with its terms, or procure
a stay of execution thereof, prior to any execution on such judgment by
such judgment creditor, within 30 days from the date of entry thereof, and
within said period of 30 days, or such longer period during which execution
of such judgment shall be stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(i) The maturity of any material Indebtedness of the Borrower or a
Subsidiary shall be accelerated by reason of default, 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
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. For purposes of this Section, Indebtedness of the Borrower or a
Subsidiary shall be deemed "material" if it exceeds $1,000,000 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(i) has
occurred.
(j) 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.
(k) Any Guarantor shall repudiate or purport to revoke its 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.
(l) 50% or more of any class of the capital stock of the Borrower
shall come to be owned by a single Person, or by two or more Persons acting
together in holding such stock for a common purpose.
(m) The Borrower or a Subsidiary shall cease to be the sole
shareholder of the stock of any Guarantor or of Norstan Canada.
(n) Any Security Document shall, at any time, cease to be in full
force and effect or shall be judicially declared null and void, or the
validity or the enforceability thereof shall be contested by the Borrower
or any Guarantor.
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(o) Any default or event of default (however denominated) shall occur
under any Security Document.
SECTION 7.2 REMEDIES. If (a) any Event of Default described in Sections
7.1(e), (f) or (g) shall occur with respect to the Borrower, the Revolving
Commitments shall automatically terminate (except as provided in Section 2.2(b))
and the Notes and all other Obligations shall automatically become immediately
due and payable, the Borrower shall without demand pay into the Holding Account
an amount equal to the aggregate face amount of each Letter of Credit; or (b)
any other Event of Default shall occur and be continuing, then, upon receipt by
the Agent of a request in writing from the Majority Banks, the Agent shall (i)
declare the Revolving Commitments terminated, whereupon the Revolving
Commitments shall terminate (except as provided in Section 2.2(b)), (ii) declare
the outstanding unpaid principal balance of the Notes, the accrued and unpaid
interest thereon and all other Obligations to be forthwith due and payable,
whereupon the Notes, all accrued and unpaid interest thereon and all such
Obligations shall immediately become due and payable, in each case without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding, (iii) demand that the Borrower pay into the Holding
Account an amount equal to the aggregate face amount of each Letter of Credit,
whereupon the Borrower shall pay such amount, (v) exercise all rights and
remedies under any of the Loan Documents, and (vi) enforce all rights and
remedies under any applicable law.
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 AGENT
The following provisions shall govern the relationship of the Agent with
the Banks.
SECTION 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the 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 Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. Neither the 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 Agent shall act as an independent contractor in
performing its obligations as Agent hereunder and nothing herein contained shall
be deemed to create any fiduciary relationship among or between the Agent, the
Borrower or the Banks.
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SECTION 8.2 NOTE HOLDERS. The Agent may treat the payee of any 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 Agent.
SECTION 8.3 CONSULTATION WITH COUNSEL. The Agent may consult with legal
counsel selected by it with reasonable care 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 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 Agent shall be entitled to assume that the same are valid, effective and
genuine and what they purport to be.
SECTION 8.5 U.S. BANK AND AFFILIATES. With respect to its Revolving
Commitment and the Loans made by it, U.S. 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 Agent consistent with the terms thereof, and U.S. Bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower as if it were not the Agent.
SECTION 8.6 ACTION BY AGENT. Except as may otherwise be expressly stated in
this Agreement, the 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
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
Notes; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to the
Loan Documents or applicable law. The 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
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, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
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SECTION 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event that the Agent
shall have acquired actual knowledge of any Event of Default or Default, the
Agent shall promptly give notice thereof to the Banks.
SECTION 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the Agent, as
Agent (to the extent not reimbursed by the Borrower), ratably according to such
Bank's share of the Aggregate Revolving Commitment Amounts 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 Agent in any way relating
to or arising out of the Loan Documents or any action taken or omitted by the
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 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 Agent in
respect of any payments made by the Borrower on the Term Notes shall be
distributed forthwith by the Agent among the Banks, in like currency and funds
as received, ratably according to each Bank's Term Loan Percentage. All funds
received by the Agent in respect of (a) any payments made by the Borrower on the
Revolving Notes, (b) any reimbursement payments made by the Borrower with
respect to Unpaid Drawings that were funded by Unpaid Drawing Repayment Loans
and/or participation payments made by the Banks under Section 2.7(b), and (c)
any payments by the Bank of Revolving Commitment Fees, shall be distributed
forthwith by the Agent among the Banks, in like currency and funds as received,
ratably according to each Bank's Revolving Outstandings Percentage. All funds
received by the Agent in respect of any payments made by the Borrower for Letter
of Credit Fees shall be distributed forthwith by the Agent among the Banks, in
like currency and funds as received, ratably according to each Bank's Revolving
Commitment. After any Event of Default has occurred, all funds received by the
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 Agent in the following order: (a) first to the Agent or any
Bank who has incurred unreimbursed costs of collection with respect to any
Obligations hereunder, ratably to the Agent and each Bank in the proportion that
the costs incurred by the Agent or such Bank bear to the total of all such costs
incurred by the Agent and all Banks; (b) next to the Agent for the account of
the Banks (in accordance with their respective Revolving Percentages) for
application on the Notes and Unpaid Drawings; (c) next to the Agent for the
account of the Banks (in accordance with their respective Revolving Outstandings
Percentages) for any unpaid Revolving Commitment Fees owing by the Borrower
hereunder; (d) next to the Agent for the account of the Banks (in accordance
with their respective Revolving Commitment Percentages) for any unpaid Letter of
Credit Fees owing by the Borrower; and (e) last to the Agent to be held in the
Holding Account to cover the Letters of Credit. The provisions of this Section
8.10 shall not apply to payments of the issuance, amendment, drawing and other
fees and out-of-pocket expenses of U.S. Bank under Section 2.10, and the fees
set forth in the fee letter under Section 2.12, respectively.
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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 the Obligations owing to such
Bank under this Agreement or the Notes in excess of such Bank's share, as
determined under this Agreement, of the Obligations then due and payable to the
Banks 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 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 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 Obligations of the Borrower arising under or pursuant to
this Agreement, and only then to any other Obligations of the Borrower to such
Bank.
SECTION 8.12 ADVICE TO BANKS. The Agent shall forward to the Banks copies
of all notices, financial reports and other communications received hereunder
from the Borrower by it as 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 U.S. 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 Agent under this Agreement, such
resignation to be effective upon the appointment of a successor 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 Agent.
SECTION 8.14 DEFAULTING BANK.
(a) Remedies Against a Defaulting Bank. In addition to the rights and
remedies that may be available to the Agent or the Borrower under this
Agreement or applicable law, if at any time a Bank is a Defaulting
Bank such Defaulting Bank's right to participate in the administration
of the Loans, this Agreement and the other Loan Documents, including
without limitation, any right to vote in respect of, to consent to or
to direct any action or inaction of the Agent or to be taken into
account in the calculation of the Majority Banks, shall be suspended
while such Bank remains a Defaulting Bank. If a Bank is a Defaulting
Bank because it has failed to make timely payment to the Agent of any
amount required to be paid to the Agent hereunder (without giving
effect to any notice or cure periods), in addition to other rights and
remedies which the Agent or the Borrower may have under the
immediately preceding provisions or otherwise, the Agent shall be
entitled (i) to collect interest from such Defaulting Bank on such
delinquent payment for the period from the date on which the payment
was due until the date on which the payment is made at the Federal
Funds Rate, (ii) to withhold or setoff and to apply in satisfaction of
the defaulted payment and any related interest, any amounts otherwise
payable to such Defaulting Bank under this Agreement or any other Loan
Document until such defaulted payment and related interest has been
paid in full and such default no longer exists and (iii) to bring an
action or suit against such Defaulting Bank in a court of competent
jurisdiction to recover the defaulted amount and any related interest.
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Any amounts received by the Agent in respect of a Defaulting Bank's
Loans shall not be paid to such Defaulting Bank and shall be held
uninvested by the Agent and either applied against the purchase price
of such Loans under the following subsection (b) or paid to such
Defaulting Bank upon the default of such Defaulting Bank being cured.
(b) Purchase from Defaulting Bank. Any Bank that is not a
Defaulting Bank shall have the right, but not the obligation, in its
sole discretion, to acquire all of a Defaulting Bank's Commitments. If
more than one Bank exercises such right, each such Bank shall have the
right to acquire such proportion of such Defaulting Bank's Commitments
on a pro rata basis. Upon any such purchase, the Defaulting Bank's
interest in its Loans and its rights hereunder (but not its liability
in respect thereof or under the Loan Documents or this Agreement to
the extent the same relate to the period prior to the effective date
of the purchase) shall terminate on the date of purchase, and the
Defaulting Bank shall promptly execute all documents reasonably
requested to surrender and transfer such interest to the purchaser.
The purchase price for the Commitments of a Defaulting Bank shall be
equal to the amount of the principal balance of the Loans outstanding
and owed by the Borrower to the Defaulting Bank. The purchaser shall
pay to the Defaulting Bank in Immediately Available Funds on the date
of such purchase the principal of and accrued and unpaid interest and
fees on the Loans made by such Defaulting Bank hereunder (it being
understood that such accrued and unpaid interest and fees may be paid
pro rata to the purchasing Bank and the Defaulting Bank by the Agent
at a subsequent date upon receipt of payment of such amounts from the
Borrower). Prior to payment of such purchase price to a Defaulting
Bank, the Agent shall apply against such purchase price any amounts
retained by the Agent pursuant to the last sentence of the immediately
preceding subsection (a). The Defaulting Bank shall be entitled to
receive amounts owed to it by the Borrower under the Loan Documents
which accrued prior to the date of the default by the Defaulting Bank,
to the extent the same are received by the Agent from or on behalf of
the Borrower. There shall be no recourse against any Bank or the Agent
for the payment of such sums except to the extent of the receipt of
payments from any other party or in respect of the Loans.
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 the specific instance and for the purpose for which given. Notwithstanding
the foregoing, no such amendment, modification, waiver or consent shall:
(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 Note with respect to the payment or repayment thereof,
without the consent of the holder of each Note so affected; or
61
(b) Increase the amount or extend the time of any Revolving Commitment
of any Bank, without the consent of such Bank; or
(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
(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
(e) Amend any of Article 2 or any of the foregoing Sections 9.1 (a)
through (d) or this Section 9.1 (e) without the consent of all the Banks;
or
(f) Amend any provision of this Agreement relating to the Agent in its
capacity as Agent without the consent of the Agent; or
(g) Amend any provision of this Agreement relating to the Letters of
Credit without the consent of U.S. Bank; or
(h) Release any Guarantor from its obligations under its Guaranty; or
(i) Except as may otherwise be expressly provided in any of the other
Loan Documents, release any material portion of collateral securing all or
any part of the Obligations 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 Agent upon demand for all
reasonable out-of-pocket expenses paid or incurred by the Agent (including
filing and recording costs and fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to
the Agent), in connection with the negotiation, preparation, approval, review,
execution, delivery, amendment, modification and interpretation of this
Agreement and the other Loan Documents and any commitment letters, letters of
intent, financial analyses or term sheets relating thereto. The Borrower shall
also reimburse the Agent and, after the occurrence of an Event of Default, each
Bank upon demand for all reasonable out-of-pocket expenses (including expenses
of legal counsel) paid or incurred by the Agent or any Bank in connection with
the collection and 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 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.
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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 Agent or any Bank under Article II hereof shall be deemed to
have been given only when received by the Agent or such Bank.
SECTION 9.5 TAXES. The Borrower agrees to pay, and save the 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 Revolving Notes, which obligation of the Borrower shall survive
the termination of this Agreement.
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 Agent, the Banks, all future holders of the 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 financial institutions ("Participants") participating
interests in a minimum aggregate amount of $3,000,000 in any Revolving Loan
or Term Loan or other Obligation owing to such Bank, any Revolving Note or
Term Note held by such Bank, and any Revolving Commitment or Term Loan
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 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 or Term Note for all
purposes under this Agreement, (iv) the Borrower and the 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
63
Participant. Each Borrower agrees that if amounts outstanding under this
Agreement, the Revolving Notes, the Term 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, Term 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 Term
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 Section
8.11. Each Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.16, 2.17, 2.18, 2.19, 2.20 and 9.2 with respect
to its participation in the Revolving Commitments, Term Loan Commitments,
Revolving Loans and Term 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 Agent
and the Borrower (neither of which consents shall be unreasonably withheld
or delayed; and if an Event of Default shall have occurred and be
continuing, then consent of the Borrower shall not be required), assign to
other lenders ("Assignees") all or part of its rights or obligations
hereunder or under any Loan Document in a minimum aggregate amount of
$3,000,000 evidenced by any Revolving Note then held by that Bank, together
with equivalent proportions of its Revolving Commitment, any Term Note then
held by that Bank, its Term Loan Commitment pursuant to written agreements
executed by such assigning Bank, such Assignee(s), the Borrower and the
Agent in substantially the form of Exhibit F, which agreements shall
specify in each instance the portion of the Obligations evidenced by the
Revolving Notes and Term Notes which is to be assigned to each Assignee and
the portion of the Revolving Commitment and Term Loan Commitment of such
Bank to be assumed by each Assignee (each, an "Assignment Agreement");
provided, however, that the assigning Bank must pay to the Agent a
processing and recordation fee of $3,500. Upon the execution of each
Assignment Agreement by the assigning Bank, the relevant Assignee, the
Borrower and the 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 pro rata share of the Revolving Commitment and a
Term Loan Commitment Amount 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 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 Agent the Revolving Note and Term Note a portion of
which is being assigned, and the Borrower shall execute and deliver a
Revolving Note and Term Note to the Assignee in the amount of its Revolving
Commitment and its Term Loan Commitment Amount, respectively, and a new
Revolving Note and Term Note to the assigning Bank in the amount of its
Revolving Commitment and Term Loan Commitment, respectively, after giving
effect to the reduction occasioned by such assignment, all such Notes to
constitute "Revolving Notes" and "Term Notes" for all purposes of this
Agreement and of the other Loan Documents.
64
(d) The Borrower shall not be liable for any costs incurred by the
Banks in effecting any participation under subparagraph (b) of this
subsection or by the Banks in effecting any assignment under subparagraph
(c) of this subsection except with respect to the Agent as provided in this
Section 9.6.
(e) 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 the Subsidiaries
which has been delivered to such Bank by or on behalf of the Borrower or
any of the Subsidiaries pursuant to this Agreement or which has been
delivered to such Bank by or on behalf of the Borrower or its Subsidiaries
in connection with such Bank's credit evaluation of such 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.
(f) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any note
held by it in favor of any federal reserve bank in accordance with
Regulation A of the Board or U. S. Treasury Regulation 31 CFR ss. 203.14,
and such Federal Reserve Bank may enforce such pledge or security interest
in any manner permitted under applicable law.
SECTION 9.7 CONFIDENTIALITY OF INFORMATION. The 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 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 Notes and the Guaranties 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, judicial process or legal
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.
65
SECTION 9.8 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS. 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 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 AGENT, THIS
AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, 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 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 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 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, 9.11 and 9.18 shall survive payment in full
of the Obligations and the termination of the Revolving Commitments.
SECTION 9.11 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the 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:
66
(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 ▇▇▇▇ 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 9.12 CAPTIONS. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
SECTION 9.13 ENTIRE AGREEMENT. This Agreement and the other Borrower Loan
Documents embody the entire agreement and understanding between the Borrower,
the 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 9.14 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 9.15 BORROWER ACKNOWLEDGEMENTS. The Borrower hereby acknowledges
that (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the other Loan Documents, (b) neither the 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 Agent or any Bank, and (d) neither the 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 Agent or any Bank is for the protection of the
Banks and neither the Borrower nor any third party is entitled to rely thereon.
67
SECTION 9.16 EFFECT OF EXISTING CREDIT AGREEMENT. This Agreement amends and
replaces in its entirety the Existing Credit Agreement, provided, that the
obligations of the Borrower incurred under the Existing Credit Agreement shall
continue under this Agreement, and shall not in any circumstance be terminated,
extinguished or discharged hereby but shall hereafter be governed by the terms
of this Agreement.
SECTION 9.17 REAFFIRMATION OF SECURITY DOCUMENTS AND WARRANT DOCUMENTS. The
Borrower confirms to and agrees with the Banks and the Agent that (a) the
Obligations are and continue to be secured by the security interest granted by
the Borrower in favor of the Agent under the Security Documents to which it is a
party, and all of the terms, conditions, provisions, agreements, requirements,
promises, obligations, duties, covenants and representations of the Borrower
under such documents and any and all other documents and agreements entered into
with respect to the Obligations are incorporated herein by reference and are
hereby ratified and affirmed in all respects by the Borrower and (b) each
reference to the "Credit Agreement" in each Security Document to which it is a
party shall be deemed to be a reference to this Agreement, as the same may be
amended, restated or modified from time to time.
SECTION 9.18 GENERAL RELEASE. The Borrower hereby releases and discharges
the Agent, each Bank, each Exiting Bank, and each of their officers, directors,
employees, agents and attorneys, from any and all claims, actions and
liabilities of any kind or nature that it or any one claiming through or under
the Borrower ever had or may now have, whether now known or hereafter
discovered, arising out of any acts or omissions occurring prior to the date of
this Agreement that relate to: (i) any lending relationship or loan commitment
between the Agent, the Banks, each Exiting Bank and the Borrower prior to the
date of this Agreement; (ii) the Existing Credit Agreement and the "Loan
Documents" (as defined in the Existing Credit Agreement"); or (iii) the
negotiations preceding the execution and delivery of this Agreement.
Notwithstanding anything to the contrary herein, the Borrower further confirms
to and agrees with the Banks and the Exiting Lenders that the Warrant Documents
(as defined in the Existing Credit Agreement) and the Registration Rights
Agreement relating thereto shall each remain in full force and effect and are
hereby ratified and affirmed in all respects by the Borrower.
SECTION 9.19 EXITING LENDERS. On the Closing Date, the aggregate unpaid
principal amount of the Existing Loans made by each Exiting Lender under the
Existing Credit Agreement and related Note issued to such Exiting Lender
thereunder, together with all interest and fees provided for in the Existing
Credit Agreement (as to any Exiting Lender, its "Payoff Amount"), shall be
repaid in full from the proceeds of Loans made by the Banks and other funds
provided by the Borrower, and the commitments of the Exiting Lenders under the
Existing Credit Agreement or hereunder, as the case may be, shall terminate. The
Borrower shall give the Agent notice with respect to such Payoff Amount with
respect to each Exiting Lender. The Agent shall distribute to each Exiting
Lender by not later than 5:00 P.M. (Minneapolis time) on the Exit Date out of
the proceeds of the Loans made for such purpose and from the other funds
provided by the Borrower, the amount required to pay such Exiting Lender's
Payoff Amount in full, whereupon: (a) such Exiting Lender shall no longer be a
party to the Existing Credit Agreement or this Agreement, as the case may be
(except to the extent provided in Section 9.10 thereof with respect to the
survival of certain provisions, which shall remain in effect as to the Exiting
Lenders); and (b) such Exiting Lenders shall not be deemed to be a "Bank"
hereunder (except for purposes of the forgoing clause (a).
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SECTION 9.20 RELEASE OF NORSTAN CANADA SECURITY DOCUMENTS. Upon and after
the Closing Date, (a) the Guaranty and Security Agreement (each as defined in
the Existing Credit Agreement) of Norstan Canada are hereby released and
discharged and (b) the Agent authorizes the Borrower to file with the
appropriate filing authorities financing statements and other appropriate
termination documents or notices (each in the form approved in advance by the
Agent's counsel in its reasonable discretion) terminating the financing
statements and Canadian lien perfection notices filed by the Agent with respect
to the Security Agreement of Norstan Canada.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
NORSTAN, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Its: EVP & CFO
Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
With copies to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &Brand
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Signature Page to Second Amended and Restated
Credit Agreement dated July 12, 2002
S-1
U.S. BANK NATIONAL
ASSOCIATION,
as Agent and as a Bank
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Its: Assistant Vice President
Address:
U.S. Bank Place
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier:612/973-0823
Signature Page to Second Amended and Restated
Credit Agreement dated July 12, 2002
S-2
M&I ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
BANK
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
-------------------------
Its: Senior Vice President
By: /s/ ▇▇▇▇ ▇▇▇▇
-------------------------
Its: Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ (Chip) ▇▇▇▇▇▇
Telecopier: 612/904-8015
Signature Page to Second Amended and Restated
Credit Agreement dated July 12, 2002
S-3
SCHEDULE 1.1B TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT
LENDING COMMITMENTS
--------------------------------------- ------------------------- --------------------------
Bank Revolving Term Loan
Commitment Commitment
Amount Amount
--------------------------------------- ------------------------- --------------------------
U.S. Bank National Association $14,000,000 $6,000,000
--------------------------------------- ------------------------- --------------------------
M&I ▇▇▇▇▇▇▇▇ &
Ilsley Bank $7,000,000 $3,000,000
--------------------------------------- ------------------------- --------------------------
Totals $21,000,000 $9,000,000
--------------------------------------- ------------------------- --------------------------