CONFORMED COPY
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 27, 1994 Commission File Number 0-6365
------------------- ----------
APOGEE ENTERPRISES, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Minnesota 41-0919654
-------------------------- ------------------------
(State of Incorporation) (IRS Employer ID No.)
7900 Xerxes Avenue South, Suite 1800, Minneapolis, Minnesota 55431
-------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number (612) 835-1874
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at September 27, 1994
- - ---------------------------------- -----------------------------------
Common Stock, $.33-1/3 Par Value 13,417,081
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED AUGUST 27, 1994
Description Page
----------- ----
PART I
- - ------
Item 1. Financial Statements
Consolidated Balance Sheets as of August 27, 1994
and February 26, 1994 3
Consolidated Results of Operations for the
Three Months and Six Months Ended
August 27, 1994 and August 28, 1993 4
Consolidated Statements of Cash Flows for
the Six Months Ended August 27, 1994 and August 28, 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II Other Information
- - -------
Item 6. Exhibits 11
-2-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
August 27, February 26,
1994 1994
---------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 9,992 $ 10,824
Receivables, net of allowance for doubtful accounts 142,198 144,597
Inventories 59,989 52,732
Deferred income taxes 9,054 8,454
Other current assets 4,199 4,679
-------- --------
Total current assets 225,432 221,286
-------- --------
Property, plant and equipment, net 69,518 64,917
Intangible assets, at cost less
accumulated amortization 1,954 1,972
Investments in and advances to
affiliated companies 11,681 11,826
Deferred income taxes 4,126 3,526
Other assets 2,396 2,661
-------- --------
Total assets $315,107 $306,188
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 36,933 $ 51,488
Accrued expenses 44,370 40,916
Billings in excess of costs and earnings
on uncompleted contracts 18,238 15,911
Accrued income taxes 6,362 4,524
Notes payable 18,500 23,850
Current installments of long-term debt 4,081 4,157
-------- --------
Total current liabilities 128,484 140,846
-------- --------
Long-term debt 50,341 35,688
Other long-term liabilities 14,772 14,260
Minority interest 1,203 1,331
Shareholders' equity
Common stock, $.33-1/3 par value;
authorized 50,000,000 shares; issued
and outstanding 13,417,000 and
13,312,000 shares, respectively 4,472 4,437
Additional paid-in capital 19,039 17,718
Retained earnings 96,796 91,908
-------- --------
Total shareholders' equity 120,307 114,063
-------- --------
Total liabilities and shareholders' equity $315,107 $306,188
======== ========
See accompanying notes to consolidated financial statements.
-3-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
AUGUST 27, 1994 AND AUGUST 28, 1993
(Thousands of Dollars Except Share and Per Share Amounts)
Three Months Ended Six Months Ended
-------------------------- --------------------------
August 27, August 28, August 27, August 28,
1994 1993 1994 1993
------------ ------------ ------------ ------------
Net sales $ 185,971 $ 175,568 $ 364,898 $ 324,320
Cost of sales 156,731 153,475 310,270 282,280
----------- ----------- ----------- -----------
Gross profit 29,240 22,093 54,628 42,040
Selling, general and
administrative expenses 21,765 17,741 42,435 36,539
Equity in net earnings of
affiliated companies (294) (330) (471) (1,194)
----------- ----------- ----------- -----------
Operating income 7,769 4,682 12,664 6,695
Interest expense, net 821 776 1,383 1,320
----------- ----------- ----------- -----------
Earnings before income taxes
and other items below 6,948 3,906 11,281 5,375
Income taxes 2,779 1,465 4,512 2,016
Minority interest (125) -- (125) --
----------- ----------- ----------- -----------
Net earnings before
cumulative effect of change
in accounting for income taxes 4,294 2,441 6,894 3,359
Cumulative effect of change in
accounting for income taxes -- -- -- 525
----------- ----------- ----------- -----------
Net earnings $ 4,294 $ 2,441 $ 6,894 $ 3,884
=========== =========== =========== ===========
Earnings per share:
Earnings per share before
cumulative effect of change
in accounting for income taxes $ .32 $ .18 $ .51 $ .25
Cumulative effect of change in
accounting for income taxes -- -- -- .04
----------- ----------- ----------- -----------
Earnings per share $ .32 $ .18 $ .51 $ .29
=========== =========== =========== ===========
Weighted average number of
common shares and common share
equivalents outstanding 13,447,000 13,268,000 13,412,000 13,240,000
=========== =========== =========== ===========
Cash dividends per common share $ .075 $ .070 $ .15 $ .14
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
-4-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 27, 1994 AND AUGUST 28, 1993
(Thousands of Dollars)
1994 1993
--------- ---------
OPERATING ACTIVITIES
Net earnings 6,894 3,884
Adjustments to reconcile net earnings to net
cash used in operating activities:
Cumulative effect of change in accounting for income taxes -- (525)
Depreciation and amortization 7,649 7,344
Provision for losses on accounts receivable 1,037 1,175
Noncurrent deferred income taxes (600) (600)
Equity in net earnings of affiliated
companies (471) (1,194)
Minority interest in net earnings (125) --
Other, net 315 70
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivables 1,406 (32,056)
Inventories (7,247) (5,514)
Other current assets 480 (1,891)
Accounts payable and accrued expenses (11,101) 5,858
Billings in excess of costs and earnings
on uncompleted contracts 2,327 3,099
Accrued and current deferred income taxes 1,238 (1,761)
Other long-term liabilities 512 228
-------- --------
Net cash provided by (used in) operating activities 2,314 (21,883)
-------- --------
INVESTING ACTIVITIES
Capital expenditures (11,909) (5,417)
Acquisition of businesses, net of cash acquired (272) (3,834)
Investments in and advances to affiliated companies 613 87
Other, net (156) (432)
-------- --------
Net cash used in investing activities (11,724) (9,596)
-------- --------
FINANCING ACTIVITIES
(Decrease)/increase in notes payable (5,350) 14,300
Proceeds from issuance of long-term debt 15,000 14,100
Payments on long-term debt (423) (520)
Proceeds from issuance of common stock 1,356 554
Dividends paid (2,005) (1,852)
-------- --------
Net cash provided by financing activities 8,578 26,582
-------- --------
Decrease in cash (832) (4,897)
Cash and cash equivalents at beginning of period 10,824 8,908
-------- --------
Cash and cash equivalents at end of period $ 9,992 $ 4,011
======== ========
See accompanying notes to consolidated financial statements.
-5-
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
August 27, 1994 and February 26, 1994, and the results of operations for the
three months and six months ended August 27, 1994 and August 28, 1993 and
cash flows for the six months ended August 27, 1994 and August 28, 1993.
The financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the Company's annual
consolidated financial statements and related notes.
The results of operations for the six-month period ended August 27, 1994 and
August 28, 1993 are not necessarily indicative of the results to be expected
for the full year.
Accounting period
-----------------
The Company's fiscal year ends on the Saturday closest to February 28. Each
interim quarter ends on the Saturday closest to the end of the months of
May, August and November.
2. Inventories
Inventories consist of the following:
August 27, February 26,
1994 1994
---------- ------------
[S] [C] [C]
Raw materials and supplies $11,405 $ 9,994
In process 4,106 3,413
Finished goods 30,267 29,565
Costs in excess of billings 14,211 9,760
------- -------
$59,989 $52,732
======= =======
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES AND EARNINGS
- - ------------------
Second quarter net earnings of $4.3 million, or 32 cents per share, were 76%
greater than last year's $2.4 million, or 18 cents a share. Revenues rose 6% to
$186 million from $176 million a year ago. Year-to-date net sales and earnings
were 13% and 105% ahead of last year's results, before the $525,000 gain from a
change in accounting principle recorded in the first quarter last year.
Including the effect of the accounting change, net earnings for the first six
months of fiscal 1995 were 77% greater than a year ago.
Improved revenues at our architectural glass and replacement auto glass
businesses accounted for most of the sales gain. A reduction in the commercial
construction division's operating loss and improved profitability at our
architectural glass and wholesale replacement auto glass operations combined to
produce higher net earnings for both the second quarter and six months.
The following table presents the percentage change in sales and operating income
for the Company's four divisions and on a consolidated basis, for three and six
months when compared to the corresponding periods a year ago. Divisional
results were mixed and are explained below.
Percentage Change
------------------------------------------
Three Months Ended Six Months Ended
August 27, 1994 August 27, 1994
------------------ ------------------
Operating Operating
Division Sales Income Sales Income
- - -------- ----- ------ ----- ------
Commercial Construction (1) -5 - (1) 8 - (1)
Window Fabrication 7 -12 8 - (2)
Glass Fabrication 19 20 20 34
Installation and Distribution 12 7 12 12
Consolidated 6 66 13 89
(1) CCD's operating losses for the three-month and six-month periods were
reduced by 30% and 39% as compared to its operating losses for the same
periods in fiscal 1994.
(2) WFD had operating income for the first six months of fiscal 1995 as compared
to an operating loss for the same period of fiscal 1994.
Commercial Construction
- - -----------------------
Revenues for the Commercial Construction Division (CCD) declined slightly when
compared to a year ago, as higher detention/security activity was more than
offset by lower domestic new construction revenue, which was due primarily to
fewer active contract offices and delayed starts on some projects. Though 30%
lower than a year ago, CCD recorded an operating loss for the quarter,
reflecting high international overhead and the completion of several low margin
projects. CCD's detention/security segment reported strong revenue and earnings
gains. The
-7-
division continued efforts to improve its organizational structure and
procedures, including project bidding and project management functions.
CCD's backlog stood at $348 million on August 27, 1994, a 3% increase over the
end of the first quarter and a year ago. The increase was due to new European
and Asian projects, offsetting reductions in both domestic and
detention/security backlogs. Overall the Company's consolidated backlog
decreased 3% from year end, to $394 million at the end of the second quarter,
but up 5% from twelve months earlier.
Window Fabrication
- - ------------------
The Window Fabrication Division (WFD) showed an increase in sales, but depressed
margins at the division's window coverings group caused the division to show a
slight decrease in operating income for the quarter. The architectural group
continued to operate on slim margins, but was able to reduce its operating loss
compared to a year earlier with stronger volume and earnings at the group's
finishing units. The window coverings units had a fine quarter, reporting
revenue gains and good earnings, though operating income was lower due to higher
material costs and stiffening competition.
Glass Fabrication
- - -----------------
The Glass Fabrication Division (GFD) produced continuing sales and earnings
growth in the second quarter. Such gains were principally attributable to strong
demand for fabricated architectural and automotive glass. Viracon, GFD's
architectural glass unit, reported record revenues and operating income for the
quarter, the result of robust export sales and improved pricing on domestic
business. Marcon Coatings, a 50%-owned glass coating joint venture, also had
good results, benefitting from Viracon's strong sales. Both Viracon's and
Marcon's expansion of productive capacity were proceeding on schedule.
Curvlite, GFD's automotive replacement glass manufacturer, reported solid sales
and earnings as it ran near capacity. This unit also was undertaking efforts to
improve its capacity. Despite some price discounting by competitors, Tru Vue,
GFD's picture framing glass unit, reported another quarter of solid results. Tru
Vue's matboard unit, Miller Artboard, has completed its relocation to Chicago,
adjacent to Tru Vue.
The division's businesses continued to report strong order rates. Accordingly,
GFD expects to report solid operating results for the latter half of the year.
Installation and Distribution
- - -----------------------------
The Installation and Distribution Division (IDD) once again achieved strong
sales and earnings. Strong demand and firmer pricing for replacement auto glass
favorably affected division results. Wholesale operations accounted for most of
the sales and earnings gain. The Harmon Glass Network, which subcontracts auto
glass repair/replacement sales nationwide, reported 4% unit growth over the same
period a year ago. Operating income improvement was reduced by IDD's ongoing
expenditures to overhaul its information and communications systems. Based on
current industry trends, IDD anticipates sales and earnings comparisons to
remain positive for the latter half of the year, during which activity is
traditionally slower.
The division opened 6 distribution centers and 7 retail shops in the first six
months of the fiscal year bringing its total to 51 distribution facilities and
238 stores.
-8-
Viratec Thin Films
- - ------------------
Viratec Thin Films (Viratec), a 50%-owned optical-grade glass coating joint
venture, reported stronger sales but lower operating income than a year ago.
Profitability was affected by higher research and development expenditures on
future products and process improvements. Technical problems with Viratec's main
coater, noted in the first quarter, were corrected. Viratec's order backlog was
down 19% from year end, but was 17% higher than a year ago.
Consolidated
- - ------------
The following table compares quarterly results with year ago results, as a
percentage of sales, for each caption.
Three Months Six Months
Ended Ended
------------------- -------------------
Aug. 27, Aug. 28, Aug. 27, Aug. 28,
1994 1993 1994 1993
------------------- -------------------
Net sales 100.0 100.0 100.0 100.0
Cost of sales 84.3 87.4 85.0 87.0
---- ---- ---- ----
Gross profit 15.7 12.6 15.0 13.0
Selling, general and administrative
expenses 11.7 10.1 11.6 11.3
Equity in net earnings of
affiliated companies (0.2) (0.2) (0.1) (0.4)
---- ---- ---- ----
Operating income 4.2 2.7 3.5 2.1
Interest expense, net 0.4 0.4 0.4 0.4
---- ---- ---- ----
Earnings before income taxes and
other items below 3.7 2.2 3.1 1.7
Income taxes 1.5 0.8 1.2 0.6
Minority interest (0.1) -- -- --
---- ---- ---- ----
Net earnings before cumulative
effect of change in accounting
for income taxes 2.3 1.4 1.9 1.0
Cumulative effect of change in
accounting for income taxes -- -- -- 0.2
---- ---- ---- ----
Net earnings 2.3 1.4 1.9 1.2
==== ==== ==== ====
Income tax rate 40.0% 37.5% 40.0% 37.5%
On a consolidated basis for the three-month and six-month periods, gross profit,
as a percentage of net sales, improved as firmer pricing at GFD and IDD and
stronger margins at CCD's detention/security units led to improved gross
profits. Selling, general and administrative expenses (SG & A) increased as
items such as commissions, bonus, profit sharing and bad
-9-
debt expense rose due to higher activity and performance levels. As noted,
significant expenditures were made at IDD on information and communication
systems improvements.
Year-to-date, equity in earnings of affiliated companies decreased, as first
quarter earnings at the Viratec joint venture significantly trailed last year's
strong results.
Despite higher borrowing levels, net interest expense rose just marginally from
a year ago, as higher-rate long-term debt has been replaced with lower-rate
borrowings.
Our effective income tax rate of 40% remained higher than last year's effective
rate, when a significant portion of Apogee's earnings were derived from our
equity in the net earnings of affiliated companies.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
At August 27, 1994, Apogee's working capital (current assets less current
liabilities) stood at $96.9 million, up $16.5 million, or 21%, from year end. A
reduction in accounts payable, an increase in costs in excess of billings on
uncompleted contracts and a decrease in current bank debt accounted for the
working capital growth. Despite the sales gains of the first six months of
fiscal 1995, accounts receivable fell slightly as our days' sales outstanding
improved, reflecting in part a change in receivables mix towards operations with
shorter payment cycles.
Additions to property, plant and equipment totaled $11.9 million for the first
half of the fiscal year. Major components of these additions included
expenditures for manufacturing facilities and equipment at GFD and information
and communications systems throughout the company, particularly at IDD.
Earnings from operations, as well as use of our credit facilities, provided the
funding for the working capital growth, capital spending and dividend payments.
Subsequent to the end of the quarter, we entered into another revolving credit
agreement for $15 million with a credit term ending in March 1996. Accordingly,
an additional $15 million of our bank borrowings were classified as long-term
debt at August 27, 1994. The company believes that cash flow from operations and
its existing credit capacity will be sufficient to meet the company's current
cash requirements.
-10-
PART II
OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
Apogee Enterprises, Inc. Annual Meeting of Shareholders was held on June 21,
1994. The total number of outstanding shares on the record date for the Annual
Meeting was 13,313,131. Eighty-four percent of the total outstanding shares
were represented in person or by proxy at the meeting.
The candidates for election as Class II, Directors listed in the proxy
statement were elected to serve three-year terms, expiring at the 1997 annual
meeting. The proposal to ratify the appointment of KPMG Peat Marwick as
independent auditors for the Company was also approved. The results of these
matters voted upon by shareholders are listed below.
Number of Shares
----------------
In Favor Withheld
-------- --------
Election of Class II
Directors:
Anthony L. Andersen 11,097,359 57,367
Harry A. Hammerly 11,099,452 55,275
Laurence J. Niederhofer 11,081,590 73,137
In Favor Withheld Abstained
-------- -------- ---------
Ratification of appointment
of KPMG Peat Marwick as
independent auditors 10,256,591 13,550 884,587
ITEM 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
Exhibit 10. Credit Agreement between Apogee Enterprises, Inc. and Credit Lyonnais
Chicago Branch and Credit Lyonnais Cayman Isand Branch. Dated
August 30, 1994.
Exhibit 11. Statement of Determination of Common Shares and Common Share
Equivalents.
Exhibit 27. Financial Data Schedule.
(b) The Company did not file any reports on Form 8-K during the quarter for which this
report is filed.
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APOGEE ENTERPRISES, INC.
Date: September 27, 1994 Donald W. Goldfus
---------------------------- ---------------------------------------
Donald W. Goldfus
Chairman of the Board and
Chief Executive Officer
Date: September 27, 1994 William G. Gardner
----------------------------- ---------------------------------------
William G. Gardner
Treasurer, Chief Financial Officer
and Secretary
-12-
CREDIT AGREEMENT
between
APOGEE ENTERPRISES, INC.
and
CREDIT LYONNAIS CHICAGO BRANCH
and
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
Dated as of August 30, 1994
TABLE OF CONTENTS
(Not Part of Credit Agreement)
Page
----
SECTION 1. DEFINITIONS
1.1 Accounting Terms 1
1.2 Other Defined Terms 1
SECTION 2. COMMITTED FACILITIES
2.1 The Revolving Credit Facility 11
(a) Revolving Credit Commitments 11
(b) Borrowing Procedure 11
(c) The Revolving Credit Notes 12
2.2 Provisions Applicable to Revolving Credit Loans and Term Loans 12
(a) Interest on Loans; Computation 12
(b) Voluntary Prepayment 13
(c) Interest Payments 13
(d) Conversions and Continuations 13
(e) Inability to Determine CD Rate or LIBO Rate 14
(f) Illegality 14
(g) Funding 15
(h) Number of Reference Loans, CD Loans and LIBOR
Loan Outstanding 15
SECTION 3. THE CREDIT FACILITIES IN GENERAL
3.1 Payments; Remission of Funds 15
3.2 Interest on Overdue Payments 16
3.3 Adjustments of Commitment Amount 16
3.4 Extension of Revolving Credit Commitments 16
3.5 Mandatory Prepayments 16
3.6 Increased Capital Requirements 17
3.7 Indemnification 17
3.8 Changes; Legal Restrictions 18
3.9 Fees 19
3.10 Telephonic Notices 19
3.11 Setoff 19
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Subsidiaries 20
4.2 Existence and Power 20
4.3 Authority 20
4.4 Binding Agreement 20
4.5 Litigation 21
4.6 No Conflicting Agreements 21
4.7 Taxes 21
4.8 Financial Statements 22
4.9 Compliance with Applicable
Laws 22
4.10 Governmental Regulations 23
4.11 Property 23
4.12 Federal Reserve Regulations 23
4.13 No Misrepresentation 23
4.14 ERISA 24
4.15 Investment Company Act 24
4.16 Public Utility Holding
Company Act 24
4.17 Indebtedness 24
4.18 Retirement Benefits 24
SECTION 5. CONDITIONS PRECEDENT -- INITIAL CREDIT EXTENSIONS
5.1 Evidence of Corporate
Action 25
5.2 Opinion of Company Counsel 25
5.3 Privity Letter 25
5.4 Other Instruments and
Documents 26
SECTION 6. CONDITIONS PRECEDENT -- ALL CREDIT EXTENSIONS
6.1 Loans 26
6.2 All Credit Extensions 26
SECTION 7. AFFIRMATIVE COVENANTS
7.1 Preservation of Corporate
Existence, Etc. 27
7.2 Taxes 27
7.3 Insurance 27
7.4 Maintenance of Properties 27
7.5 Compliance with Laws, etc. 27
7.6 Financial Statements and
Other Information 27
7.7 Inspection 29
7.8 Books and Records 29
7.9 Use of Proceeds 29
7.10 ERISA 29
7.11 Litigation 30
7.12 Subsidiaries 30
7.13 Environmental Matters; Reporting 30
SECTION 8. NEGATIVE COVENANTS
8.1 Current Ratio 31
8.2 Minimum Consolidated Tangible Net Worth 31
8.3 Fixed Charge Coverage Ratio 31
8.4 Ratio of Interest-Bearing Debt to Tangible Net Worth 31
8.5 Restricted Payment Limitations 31
8.6 Nature of Business 32
8.7 Liens 32
8.8 Merger and Consolidation; Sales
of Assets 33
8.9 Obligations as Lessee 33
8.10 Investments, Loans, Etc. 33
8.11 Transactions with Affiliates 35
8.12 Subsidiary Indebtedness 35
8.13 Other Agreements 35
SECTION 9. DEFAULT
9.1 Events of Default 36
9.2 Remedies 39
9.3 Waiver of Defaults 39
SECTION 10. MISCELLANEOUS
10.1 Waiver 40
10.2 Accounting 40
10.3 Notices 40
10.4 Expenses 41
10.5 Amendments, Etc. 41
10.6 Successors and Assigns; Disposition of Loans;
Transferees 41
10.7 Survival 42
10.8 Counterparts 42
10.9 Governing Law 42
10.10 Highest Lawful Rate 43
10.11 Environmental Indemnity 43
10.12 Marshalling; Payments Set Aside 43
10.13 Headings; Plurals 44
CREDIT AGREEMENT
CREDIT AGREEMENT (this "Agreement"), dated as of August 30, 1994,
between APOGEE ENTERPRISES, INC. (the "Company"), a Minnesota corporation and
CREDIT LYONNAIS CHICAGO BRANCH ("CL Chicago") in the case of CD Loans (defined
below) and Reference Rate (defined below) loans and CREDIT LYONNAIS CAYMAN
ISLAND BRANCH ("CLCI") in the case of LIBOR Loans (defined below) (CL Chicago
and CLCI sometimes hereinafter referred to individually and collectively as the
"Bank").
The Company desires that the Bank make certain credit facilities
available to the Company in an aggregate amount not exceeding $15,000,000 at any
time outstanding, and the Bank is prepared to make such credit facilities
available to the Company upon the terms and subject to the conditions hereof.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
1.1. Accounting Terms. All accounting terms not otherwise
specifically defined herein shall be construed in accordance with Generally
Accepted Accounting Principles. When used herein, the term "financial
statements" shall include the notes and schedules thereto.
1.2. Other Defined Terms. As used herein and in the exhibits hereto,
the following terms shall have the following respective meanings (such terms to
be equally applicable to both the singular and plural forms of the terms
defined):
"Adjusted CD Rate" shall mean with respect to any CD Loan for the
applicable Interest Period, the rate per annum (rounded upward, if necessary, to
the next higher 1/100th of 1%) calculated in accordance with the following
formula:
Adjusted CD Rate = CD + AR + BF
--------
1-CRP
where
CD = CD Rate
CRP = CD Reserve Percentage
AR = Assessment Rate
BF = Brokerage Fee
1
"Adjusted LIBO Rate" shall mean with respect to any LIBOR Loan for the
applicable Interest Period, the rate per annum (rounded upward, if necessary, to
the next higher 1/100th of 1%) calculated in accordance with the following
formula:
Adjusted LIBO Rate = LR
-------
1-LRP
where
LR = LIBO Rate
LRP = LIBOR Reserve Percentage
provided, that the Adjusted LIBO Rate for any applicable Interest Period shall
be adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Percentage.
"Affiliate" shall mean, with respect to any Person, another Person
which directly or indirectly controls, is controlled by, or is under common
control with, such other Person. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Aggregate Outstandings" shall mean at the time of any determination
the sum of the aggregate unpaid principal balance of all Loans made by the Bank.
"Aggregate Unused Commitment Amount" shall mean, at the time of any
determination, the amount by which the Commitment Amount exceeds Aggregate
Outstandings.
"Anniversary Date" shall mean the anniversary of the date of this
Agreement in each calendar year subsequent to the calendar year in which the
date of this Agreement falls.
"Applicable Margin" shall mean, with respect to:
(a) Reference Rate Loans --0%;
(b) LIBOR Loans --0.5%; and
(c) CD Loans --0.5%.
"Assessment Rate" shall mean for any Interest Period for a CD Loan,
the rate per annum (expressed as a percentage) determined by the Bank to be the
net annual assessment rate in effect on the first day of such Interest Period
for calculating the assessment payable by the Bank to the Federal Deposit
Insurance Corporation or any successor ("FDIC") for FDIC's
2
insuring time deposits at offices of the Bank in the United States.
"Borrowing Date" shall mean a Business Day or Eurodollar Business Day
on which the making of a Loan occurs or is proposed to occur.
"Borrowing Request" shall have the meaning set forth in Section 6.1.
"Brokerage Fee" shall mean the customary brokerage fee incurred by the
Bank or, if applicable, Credit Lyonnais New York Branch ("CLNY") in obtaining
funds by the sale of its negotiable certificates of deposit.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Minneapolis, Minnesota or Chicago,
Illinois are authorized or required by law or other governmental action to
close.
"Capital Expenditures" shall mean for any period, the sum of all
amounts that would, in accordance with Generally Accepted Accounting Principles,
be included as additions to property, plant and equipment on a consolidated
statement of cash flows for the Company during such period, in respect of (a)
the acquisition, construction, improvement, replacement or betterment of land,
building, 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 property chargeable to repairs or maintenance in
accordance with Generally Accepted Accounting Principles, and (c) other capital
expenditures and other uses recorded as capital expenditures or similar terms
having substantially the same effect.
"CD Loans" shall mean all Revolving Credit Loans or portions of the
Term Loans bearing interest at a rate equal to the Adjusted CD Rate plus the
Applicable Margin.
"CD Rate" shall mean for any Interest Period for a CD Loan (a) the
rate per annum for negotiable certificates of deposit having a maturity
comparable to the Interest Period for the related CD Loan as such rate is
released by the Board of Governors of the Federal Reserve System as reported on
page 120 (or other applicable page) of the Telerate Systems, Inc. screen under
the heading "Certs of Deposit" on the first day of such Interest Period; but if
by 3:00 p.m. (Central time) on such day no such rate is reported, then (b) the
arithmetic average per annum dealer bid rate (rounded upward, if necessary, to
the next higher one hundredth of one percent) determined by the Bank or CLNY, as
the case may be, without mark-up on the basis of quotations received by the Bank
or CLNY, as the case may be, from three certificate-of-deposit dealers of
recognized standing (or if such quotations are unavailable, then on the basis of
3
other sources reasonably selected by the Bank or CLNY, as the case may be) as of
such day for the purchase at face value of negotiable certificates of deposit of
the Bank or CLNY, as the case may be, denominated in Dollars having a maturity
comparable to such Interest Period and in an amount approximately equal to the
CD Loan to which such Interest Period is to apply.
"CD Reserve Percentage" shall mean the percentage, expressed as a
decimal, which the Bank determines will be applicable on the first day of the
relevant Interest Period for a requested CD Loan, for determining the applicable
reserve requirement (including, without limitation, any basic, supplemental or
emergency reserves) for the Bank or CLNY, as the case may be, in respect of new
non-personal time deposits in Dollars having a maturity comparable to the
requested CD Loan and in an amount equal to or exceeding $100,000.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, together with all presently effective and future rules and
regulations promulgated thereunder.
"Commitment Amount" shall mean initially $15,000,000, as such amount
may be reduced pursuant to the terms hereof.
"Consolidated Current Assets" shall mean, as of the date of any
determination, the total of all assets of the Company and its Consolidated
Subsidiaries, on a consolidated basis, that may properly be classified as
current assets in accordance with Generally Accepted Accounting Principles after
eliminating all inter-company items.
"Consolidated Current Liabilities" shall mean, as of the date of any
determination, the total of all liabilities of the Company and its Consolidated
Subsidiaries, on a consolidated basis, that may properly be classified as
current liabilities in accordance with Generally Accepted Accounting Principles
after eliminating all inter-company items.
"Consolidated Fixed Charges" shall mean, for any period, the sum of
(a) interest expense of the Company and its Consolidated Subsidiaries, plus (b)
all mandatory principal payments made on Interest-Bearing Debt of the Company or
any Consolidated Subsidiary (including lease payments under capital leases of
the Company or any Consolidated Subsidiary less the portion of such lease
payments expensed as interest) all determined for the Company and its
Consolidated Subsidiaries on a consolidated basis in accordance with Generally
Accepted Accounting Principles consistently applied.
"Consolidated Interest-Bearing Debt" shall mean, as of the date of any
determination, the total of all Interest-Bearing Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis in accordance with
Generally
4
Accepted Accounting Principles, after eliminating all inter-company
items.
"Consolidated Net Income" shall mean, for any period, the balance
remaining after deducting from the gross revenues of the Company and its
Consolidated Subsidiaries (i) all expenses and other proper charges (including
taxes on income and interest expense), and (ii) the net earnings of any business
other than a Consolidated Subsidiary in which the Company or any Consolidated
Subsidiary has an ownership interest except to the extent such earnings shall
have been received by the Company or a Consolidated Subsidiary in the form of
cash distributions, all determined on a consolidated basis in accordance with
Generally Accepted Accounting Principles consistently applied.
"Consolidated Subsidiary" shall mean, as of the date of any
determination, any Subsidiary of the Company included in the financial
statements of the Company and its Subsidiaries prepared on a consolidated basis
in accordance with Generally Accepted Accounting Principles; provided, however,
that any Subsidiary that was a Consolidated Subsidiary in the Financial
Statements described in Section 4.8 (a) shall remain a Consolidated Subsidiary
unless such Subsidiary is sold by the Company or ceases to be a Subsidiary in
accordance with the terms of this Agreement.
"Consolidated Tangible Net Worth" shall mean, as of the date of any
determination, the sum of the amounts set forth on the consolidated balance
sheet of the Company and its Consolidated Subsidiaries as the sum of the common
stock, preferred stock, additional paid-in capital and retained earnings of the
Company and its Consolidated Subsidiaries (excluding treasury stock), less (i)
the book value of equity investments of the Company and its Consolidated
Subsidiaries in businesses that are not Subsidiaries and (ii) the book value of
all assets of the Company and its Consolidated Subsidiaries that would be
treated as intangibles under Generally Accepted Accounting Principles,
including, without limitation, 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 over the book value of the
assets of any business acquired by the Company or any Consolidated Subsidiary.
"Credit Documents" shall mean the Notes, and all other agreements,
documents and instruments at any time executed and/or delivered by the Company
or any Subsidiary pursuant to or in connection with this Agreement.
"Credit Extensions" shall mean the Revolving Credit Loans.
5
"Default" shall mean an event, act or occurrence which, with the
giving of notices, the lapse of time or both, would become an Event of Default.
"Dollars" or "$" shall mean lawful currency of the United States of
America.
"Earnings Available to Cover Fixed Charges" shall mean for any period
of determination, Consolidated Net Income for such period plus interest expense,
depreciation expense and amortization of the Company and its Consolidated
Subsidiaries for such period to the extent deducted in determining Consolidated
Net Income, and excluding therefrom, for such period, (i) all dividends and
direct distributions paid in cash on account of shares of any class of stock of
the Company or any Consolidated Subsidiary, (ii) non-operating gains and losses
of the Company and its Consolidated Subsidiaries, and (iii) fifty percent (50%)
of Capital Expenditures.
"Effective Date" shall mean the date on or after the execution and
delivery of this Agreement on which all of the conditions precedent set forth in
Section 5 shall have been satisfied.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is under common control with the Company (or otherwise
treated as a single employer of the Company) within the meaning of the
regulations promulgated under Section 414 of the Code, including, without
limitation, all Subsidiaries.
"Eurodollar Business Day" shall mean a Business Day upon which
commercial banks in London, England are open for domestic and international
business.
"Event of Default" shall mean any event set forth in Section 9.1.
"Financial Statements" shall have the meaning set forth
in Section 4.8.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles as in effect in the United States of America from
time to time, including, without limitation, applicable statements, bulletins
and interpretations by the Financial Accounting Standards Board and applicable
bulletins, opinions and interpretations issued by the American Institute of
Certified Public Accountants or its committees, subject to the provisions of
Section 10.2 hereof.
6
"Governmental Body" shall mean any court or any federal, state or
municipal department, commission, board, bureau, agency, public authority or
instrumentality.
"Immediately Available Funds" shall mean funds with good value on the
day and in the city in which payment is received.
"Indebtedness" shall mean, with respect to any Person and as of the
date of determination, (a) all items (except items of capital stock or of
surplus or minority interests in Subsidiaries of such Person) which in
accordance with Generally Accepted Accounting Principles applied in the
preparation of the financial statements of such Person would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person; (b) all liabilities secured by any Lien on any property or asset
owned by such Person, whether or not the indebtedness secured thereby shall have
been assumed; and (c) without duplication, all liabilities of others with
respect to which such Person is directly or indirectly liable; and (d) all net
obligations of such Person under any interest rate financial hedging
arrangement, none of which are included above.
"Interest-Bearing Debt" shall mean, with respect to any Person and as
of the date of determination, (a) that portion of Indebtedness of such Person
consisting of Indebtedness for borrowed money, (b) the principal portion of
lease obligations of such Person required to be reported as a liability in
accordance with Generally Accepted Accounting Principles, (c) the principal
portion (determined in accordance with Generally Accepted Accounting Principles)
of any conditional sale contract or similar arrangement for deferring the
purchase price of goods or services under which such Person is liable, (d) all
Indebtedness of the types described in clauses (a), (b) and (c) above secured by
a Lien on any property or asset owned by such Person, whether or not such
Indebtedness has been assumed, and (e) all Indebtedness of others of the types
described in clauses (a), (b) and (c) above with respect to which such Person is
directly or indirectly liable.
"Interest Period" shall mean, with respect to any CD Loan or LIBOR
Loan, the period beginning on the Borrowing Date for such Loan or the date the
previous Interest Period with respect to such Loan expires, and ending (i) with
respect to a LIBOR Loan, 1, 2, 3 or 6 months thereafter, as selected by the
Company in its Borrowing Request or most recent Notice of Continuation or
Conversion for such Loan, and (ii) with respect to a CD Loan on a date 30, 60,
90 or 180 days thereafter, as selected by the Company in its Borrowing Request
or most recent Notice of Continuation or Conversion for such Loan, subject in
all cases to the following:
7
(a) (i) if any Interest Period with respect to a CD Loan would
otherwise end on a day which is not a Business Day, that Interest Period
shall be extended to the next succeeding Business Day; and (ii) if any
Interest Period with respect to a LIBOR Loan would otherwise end on a day
which is not a Eurodollar Business Day, that Interest Period shall be
extended to the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in the next succeeding calendar month, in
which event such Interest Period shall end on the immediately preceding
Eurodollar Business Day;
(b) no Interest Period with respect to Revolving Credit Loans
shall extend beyond the Revolving Credit Termination Date.
"Invoked Event of Default" shall mean an Event of Default which either
(a) has resulted in the automatic termination of the Commitments and the
automatic acceleration of the maturity of the Credit Documents pursuant to
Section 9.2 or (b) on account of which the Bank has declared the Commitments
terminated and has declared the obligations of the Company under the Credit
Documents immediately due and payable.
"LIBO Rate" shall mean for any Interest Period for a LIBOR Loan, the
rate per annum (rounded upward, if necessary, to the nearest whole 1/100th of
1%) at which the principal office of Credit Lyonnais in London, England is
offered Dollar deposits in the London inter-bank Eurodollar market at
approximately 11:00 a.m. (London time) two Eurodollar Business Days prior to the
first day of the proposed Interest Period for such LIBOR Loan, for delivery on
the first day of such Interest Period in Immediately Available Funds, in an
amount comparable to the amount of, and having a maturity comparable to the
Interest Period for, such LIBOR Loan.
"LIBOR Loans" shall mean all Revolving Credit Loans or portions of the
Term Loans bearing interest at a rate equal to the LIBO Rate plus the Applicable
Margin.
"LIBOR Reserve Percentage" shall mean the percentage, expressed as a
decimal, which the Bank determines will be applicable on the first day of the
relevant Interest Period for a LIBOR Loan for determining the maximum applicable
reserve requirement (including, without limitation, any basic, supplemental or
emergency reserves) that the Bank is required to maintain against "Eurocurrency
liabilities" (as such term is defined in Regulation D of the Board of Governors
of the Federal Reserve System).
"Lien" shall mean any mortgage, pledge, lien, security interest,
conditional sale, title retention agreement or other similar arrangement.
8
"Loans" shall mean, prior to the Revolving Credit Termination Date,
the Revolving Credit Loans. "Loan" means a single such loan made by the Bank.
"Multiemployer Plan" shall mean each Multiemployer plan, as such term
is defined in Section 4001(a)(3) of ERISA, that is now or at any time hereafter
or was within the last five years maintained for employees of the Company or an
ERISA Affiliate of the Company.
"Nonfinanced Capital Expenditures" shall mean the Capital
Expenditures of the Company and its Consolidated Subsidiaries excluding (i)
Capital Expenditures specifically financed, and (ii) Capital Expenditures made
with respect to the acquisition of a business.
"Notes" shall mean, collectively and severally, the Revolving Credit
Note.
"Notice of Continuation or Conversion" shall have the meaning set
forth in Section 2.3(d).
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA, or any Governmental Body succeeding to the functions
thereof.
"Person" shall mean a corporation, an association, a partnership, a
trust, a joint venture, an unincorporated organization, a business, an
individual, a government or a political subdivision thereof or a governmental
agency.
"Plan" shall mean each employee benefit plan (whether now in existence
or hereafter instituted), as such term is defined in Section 3 of ERISA,
maintained for the benefit of employees, officers or directors of the Company or
of any ERISA Affiliate.
"Property" shall mean all types of real, personal, tangible,
intangible or mixed property.
"Rate Notice" shall have the meaning set forth in Section 2.2(e).
"Reference Loans" shall mean all Revolving Credit Loans and bearing
interest at a rate equal to the Reference Rate plus the Applicable Margin.
"Reference Rate" shall mean, "Base Rate" meaning, as determined by
CLNY on a daily basis, the higher of (x) the rate per annum established by CLNY
from time to time as the reference rate for short-term commercial loans in
United States dollars to domestic corporate borrowers (which the Company
acknowledges is not necessarily CLNY's lowest rate) or (y) the overnight cost of
funds of CLNY as determined by CLNY in its sole discretion plus 1/4 of 1% per
annum.
9
"Restricted Payment" shall mean (i) any dividend or other
distribution, direct or indirect, whether in cash or in property (other than
dividends paid in shares of the capital stock of the Company), on account of
shares of any class of stock of the Company or any Subsidiary now or hereafter
outstanding or (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, whether in cash or
in property (other than in shares of the capital stock of the Company), of any
shares of any class of stock of the Company or any Subsidiary, or of any
warrants, options or other rights to acquire any such shares of stock, now or
hereafter outstanding.
"Revolving Credit Borrowing Date" shall have the meaning set forth in
Section 2.1(b)(i).
"Revolving Credit Commitment" shall mean the Bank's undertaking to
make Revolving Credit Loans to the Company pursuant to Section 2, subject to the
terms and conditions hereof, in an aggregate principal amount outstanding at
anytime not to exceed the Commitment Amount.
"Revolving Credit Loan" shall have the meaning set forth in Section
2.1(a).
"Revolving Credit Note" shall have the meaning set forth in Section
2.1(c).
"Revolving Credit Period" shall mean the period from the Effective
Date to the Business Day preceding the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean the earlier of (i)
February 26, 1996, or such later date to which the Revolving Credit Commitments
are extended pursuant to Section 3.4, (ii) the date on which the Revolving
Credit Commitments are terminated pursuant to Section 9.2 or (iii) such earlier
date on which the Company requests that the Revolving Credit Commitments be
reduced to zero pursuant to Section 3.3 or otherwise.
"Subsidiary" shall mean any corporation, association, partnership,
joint venture or other business entity of which the Company and/or any
subsidiary of the Company either (a) in respect of a corporation, owns more than
50% of the outstanding stock having ordinary voting power to elect a majority of
the board of directors or similar managing body, irrespective of whether or not
at the time the stock of any class or classes shall or might have voting power
by reason of the happening of any contingency, or (b) in respect of an
association, partnership, joint venture or other business entity, is the sole
general partner or is entitled to share in more than 50% of the profits, however
determined.
10
"Transferee" and "Transferred Interest" shall have the meanings given
such terms in Section 10.6.
SECTION 2. COMMITTED FACILITIES.
--------------------
2.1. The Revolving Credit Facility.
-----------------------------
(a) Revolving Credit Commitments. Upon the terms and subject to
the conditions hereof, the Bank agrees to make loans (each a "Revolving
Credit Loan" and, collectively, the "Revolving Credit Loans") to the
Company pursuant to this Section 2.1 on a revolving basis at any time and
from time to time during the Revolving Credit Period, during which Period
the Company may borrow, repay and reborrow in accordance with the
provisions hereof; provided, that the Aggregate Outstandings shall not at
any time exceed the Commitment Amount. The Revolving Credit Loans may be
maintained, at the election of the Company as provided herein, as Reference
Loans, CD Loans, LIBOR Loans or any combination thereof. The principal
amount of all Revolving Credit Loans shall be payable in full on the
Revolving Credit Termination Date.
(b) Borrowing Procedure.
-------------------
(i) The Company shall give to the Bank prior notice (by
telex or telecopier, or by telephone (confirmed in writing promptly
thereafter)) of its intention to borrow under this Section 2.1, by
delivery to the Bank of a Borrowing Request specifying: (A) the
proposed date of such borrowing (each a "Revolving Credit Borrowing
Date"), which date shall be a Business Day in the case of Reference
Loans and CD Loans or a Eurodollar Business Day in the case of LIBOR
Loans, (B) the aggregate principal amount of the Revolving Credit
Loans to be made on such date, of which each CD Loan and each LIBOR
Loan shall be in the minimum amount of $1,000,000 or an integral
multiple thereof, (C) whether such Revolving Credit Loans are to be
funded as CD Loans, LIBOR Loans, or Reference Loans, and (D) in the
case of CD Loans and LIBOR Loans, the initial Interest Period
therefor.
(ii) A Borrowing Request shall be given by 11:30 a.m.
(Central time) not less than two Eurodollar Business Days prior to the
proposed Revolving Credit Borrowing Date if such Revolving Credit
Loans are to be LIBOR Loans, by 11:30 a.m. not less than one Business
Day prior to the proposed Revolving Credit Borrowing Date if such
Revolving Credit Loans are to be CD Loans, and by 10:00 a.m. on the
proposed Revolving Credit Borrowing Date if such Revolving Credit
Loans are to be Reference Loans. Subject to
11
Sections 2.3(e) and 2.3(f), a Borrowing Request hereunder shall
be irrevocable upon receipt thereof by the Bank.
(iii) On the date the Bank receives such Borrowing Request,
unless the applicable conditions precedent to the making of such
Revolving Credit Loans set forth in Sections 5 and 6 have not been
satisfied (in which event the Bank shall endeavor to promptly notify
the Company; provided that the failure by the Bank to give such
notice, other than in bad faith, shall not give rise to any liability
of the Bank to the Company), the Bank shall make available to the
Company in Minneapolis, Minnesota not later than 3:00 p.m.
(Minneapolis time) on each Revolving Credit Borrowing Date the amount
of such requested funds in Immediately Available Funds.
(c) The Revolving Credit Notes. On or before the date of the
initial Revolving Credit Loan hereunder, the Company shall duly issue and
deliver to CL Chicago a promissory note substantially in the form of
Exhibit A and to CLCI a promissory note substantially in the form of
Exhibit A hereto (each a "Revolving Credit Note"), dated the day of
delivery thereof and appropriately completed, payable to the order of the
Bank in the principal amount of the Commitment Amount. The Bank is hereby
authorized by the Company to enter on a schedule attached to the Revolving
Credit Note the amount of each Revolving Credit Loan made by it hereunder,
each payment thereon and the other information provided for on such
schedule, and the Bank shall enter such information on its ledgers and
computer records; provided, however, that the failure by the Bank to make
any such entry or any error in making such entry with respect to any
Revolving Credit Loan or payment shall not limit or otherwise affect the
obligation of the Company hereunder or under the Revolving Credit Note,
and, in all events, the principal amount owing by the Company in respect of
the Revolving Credit Note shall be the aggregate amount of all Revolving
Credit Loans made by the Bank less all payments of principal thereof made
by the Company.
2.2. Provisions Applicable to Revolving Credit Loans.
-----------------------------------------------
(a) Interest on Loans; Computation. Except as provided in
Section 3.2, the Loans shall bear interest on the unpaid principal amount
thereof as follows: (i) for Reference Loans, at a fluctuating rate per
annum equal to the Reference Rate plus the Applicable Margin, (ii) for CD
Loans, at a fixed rate per annum equal to the Adjusted CD Rate for the
applicable Interest Period plus the Applicable Margin, and (iii) for LIBOR
Loans, at a fixed rate per annum equal to the Adjusted LIBO Rate for the
applicable Interest Period plus the Applicable Margin. All interest
12
payable on Loans shall be computed on the basis of a year of 360 days for
actual days elapsed.
(b) Voluntary Prepayment. Upon at least two Business Days
irrevocable prior written notice to the Bank specifying the amount and the
date of prepayment, the Company shall have the right to prepay the Loans,
in whole at any time or in part from time to time in aggregate principal
amounts equal to at least $1,000,000 or integral multiples thereof, with
accrued interest on the amount being prepaid to the date of such prepayment
and subject to any required payments pursuant to Section 3.7. All
prepayments on the Loans shall be applied by the Bank in a manner that
minimizes the payments required under Section 3.7.
(c) Interest Payments. Interest on the Reference Loans shall be
payable in arrears, (i) on the first Business Day of each month, (ii) on
the Revolving Credit Termination Date, and (iii) on such other date on
which such Loans are paid or prepaid in full or in part (in the case of a
partial prepayment, on the part prepaid). Interest on the CD Loans and
LIBOR Loans shall be payable in arrears on the last day of the applicable
Interest Period or such other date as such Loans are paid in full;
provided, however, that accrued interest on CD Loans or LIBOR Loans with an
Interest Period exceeding 90 days or three months, respectively, shall also
be payable on each 90th day or the end of each third month, as the case may
be, of such Interest Period.
(d) Conversions and Continuations. Subject to the terms and
conditions of this Agreement, the Company shall also have the option at any
time to convert all or any portion of the Loans (in integral multiples, as
to the aggregate amount of the Loans of all Banks so converted, of
$1,000,000) into a Reference Loan, CD Loan or LIBOR Loan, or to continue a
CD Loan or LIBOR Loan as such; provided, however, that (i) CD Loans and
LIBOR Loans may be converted or continued only on the last day of their
applicable Interest Period and (ii) no Loan may be converted into or
continued as a LIBOR Loan or CD Loan if a Default or Event of Default has
occurred and is continuing on the proposed date of conversion or
continuation. The Company shall provide the Bank with a Notice of
Continuation or Conversion in the form attached hereto as Exhibit E (a
"Notice of Continuation or Conversion"), not less than two Eurodollar
Business Days in advance (in the case of conversion to or continuation as a
LIBOR Loan), not less than one Business day in advance (in the case of a
conversion into or continuation as a CD Loan) or on the date thereof (in
the case of a conversion into a Reference Loan) of each proposed conversion
or continuation, which notice shall set forth the proposed date therefor
(which shall be a Business Day in the case of a conversion into or
13
a continuation as a CD Loan or a conversion into a Reference Loan and a
Eurodollar Business Day in the case of a conversion into or continuation as
a LIBOR Loan) and the duration of the Interest Period therefor (in the case
of conversions into or continuations as CD Loans or LIBOR Loans). Subject
to Sections 2.2(e) and 2.2(f), any notice given by the Company under this
Section 2.2(d) shall be irrevocable. If the Company shall fail to notify
the Bank in the manner provided in this Section 2.2(d) of a conversion or
continuation of a CD Loan or LIBOR Loan prior to the last day of the then
applicable Interest Period, such CD Loan or LIBOR Loan shall automatically
be converted on such day into a Reference Loan of equal principal amount.
(e) Inability to Determine CD Rate or LIBO Rate. If the Bank
determines (which determination shall be made in good faith and shall be
conclusive and binding upon the Company in the absence of manifest error)
that (A) by reason of circumstances then affecting the secondary market for
the purchase of certificates of deposit or inter-bank Eurodollar markets,
adequate and reasonable means do not or will not exist for ascertaining the
CD Rate or the LIBO Rate applicable to any requested CD Loan or LIBOR Loan,
(B) secondary market bid rates are not available to the Bank for
certificates of deposit of relevant amounts and for the relevant Interest
Period of a requested CD Loan, (C) Dollar deposits in the relevant amounts
and for the relevant Interest Period of a requested LIBOR Loan are not
available to the Bank in the inter-bank Eurodollar markets, or (D) the CD
Rate or LIBO Rate will not adequately and fairly reflect the cost to the
Bank of maintaining or funding its requested CD Loans or LIBOR Loans for
the relevant Interest Period, then the Bank shall forthwith give notice (a
"Rate Notice") of such determination to the Company, whereupon, until the
Bank shall notify the Company that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make CD Loans or
LIBOR Loans, as appropriate, shall be suspended.
(f) Illegality. Notwithstanding any other provisions herein,
if, after the date of this Agreement, the introduction of or any change in
any applicable law, rule or regulation or in the interpretation or
administration thereof by any Governmental Body charged with the
interpretation or administration thereof or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority shall make it unlawful or impracticable, in the reasonable
judgment of the Bank, for the Bank to make, maintain or fund CD Loans or
LIBOR Loans as contemplated by this Agreement, (i) the obligations of the
Bank hereunder to make CD Loans or LIBOR Loans shall forthwith be
cancelled, (ii) Loans which would otherwise be made by the Bank as CD Loans
or LIBOR Loans shall be made instead as
14
Reference Loans, and (iii) the Company shall pay in full the then
outstanding principal amount of all CD Loans or LIBOR Loans made by the
Bank together with accrued interest, on either (A) the last day of the then
current Interest Period if the Bank may lawfully continue to fund and
maintain such CD Loans or LIBOR Loans to such day or (B) immediately if the
Bank may not lawfully continue to fund and maintain such CD Loans or LIBOR
Loans to such day. Such CD Loans or LIBOR Loans shall be deemed to have
been paid, and a Reference Loan in the amount thereof shall be deemed to
have been made, as of the date provided in the preceding sentence. If
circumstances subsequently change so that the Bank is not further affected,
the Bank shall so notify the Company of such change and the Bank's
obligation to make and continue CD Loans or LIBOR Loans shall be reinstated
upon written request of the Company.
(g) Funding. The Bank shall be entitled to fund all or any
portion of the Loans in any manner it may determine in its reasonable
discretion, including, without limitation, in the Grand Cayman inter-bank
market, the London inter-bank market and within the United States, but all
calculations and transactions hereunder shall be conducted as though the
Bank actually funds all LIBOR Loans through the purchase in London of
offshore dollar deposits in the amount of the relevant LIBOR Loan in
maturities corresponding to the applicable Interest Period and actually
funds CD Loans through the sale of certificates of deposit in the secondary
market in New York City in the amount of the relevant CD Loan with
maturities corresponding to the applicable Interest Period.
(h) Number of Reference Loans, CD Loans and LIBOR Loans
Outstanding. The total number of Reference Loans, CD Loans and LIBOR Loans
payable to the Bank outstanding at any time shall not exceed ten.
SECTION 3. THE CREDIT FACILITIES IN GENERAL.
--------------------------------
3.1. Payments; Remission of Funds. Each payment (including any
prepayment) to be made hereunder by the Company to the Bank shall be made, in
the absence of instructions from the Bank to the contrary, to CL Chicago for the
account of itself or CLCI, as the case may be at its office in Chicago, Illinois
by wire transfer of Immediately Available Funds not later than 12:00 noon
(Central time) on the due date of such payment. Funds not received by such hour
shall be deemed to have been received by the Bank on the next Business Day. The
Company hereby irrevocably authorizes the Bank to charge the Company's account
maintained with the Bank, if any, on the due date of any such payment in an
amount equal to such payment, and the Bank will endeavor to promptly give the
Company advice of such charges by telephone, confirmed as soon as practicable in
writing; provided that the failure by the Bank to give such
15
notice, other than in bad faith, shall not give rise to any liability of the
Bank to the Company. Each remission of funds to be made by the Bank hereunder to
the Company shall be made, in the absence of instructions from the Company to
the contrary, to the Company in Immediately Available Funds by depositing such
funds in Account Number 160232519183 maintained by the Company with First Bank
National Association at its main office in Minneapolis, Minnesota. If any
payment of principal or interest becomes due and payable on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of
interest on such principal amount.
3.2. Interest on Overdue Payments. If all or any portion of the
principal of any Loan shall not be paid when due, such past due amount, to the
extent permitted by applicable law, shall bear interest from the due date
thereof until paid at a floating rate 2% above the interest rate from time to
time in effect with respect to Reference Loans. Such interest shall be payable
upon demand.
3.3. Adjustments of Commitment Amount. Upon at least five Business
Days irrevocable prior written notice to the Bank, the Company may permanently
reduce the Commitment Amount, in whole or in part, without premium or penalty;
provided, that (a) each partial reduction of the Commitment Amount shall be in
an aggregate amount equal to at least $5,000,000, or an integral multiple
thereof, (b) each reduction shall be accompanied by payment of the amount, if
any, by which Aggregate Outstandings exceed the Commitment Amount as so reduced,
together with accrued interest on the amount being prepaid to the date of such
prepayment, and (c) any prepayment under clause (b) above shall be subject to
Section 3.8.
3.4. Extension of Revolving Credit Commitment. At the request of the
Company, but subject to the approval, in its sole and absolute discretion, of
the Bank, the Revolving Credit Termination Date (and Bank's Revolving Credit
Commitment) may be extended. Any request by the Company to extend the Revolving
Credit Termination Date shall be received by the Bank at least 60 but not more
than 90 days prior to the Revolving Credit Termination Date. The Bank shall
promptly inform the Company of the Bank's decision whether to extend the
Revolving Credit Termination Date.
3.5. Mandatory Prepayments. If at any time Aggregate Outstandings
exceed the Commitment Amount, the Company shall promptly make a prepayment of
amounts outstanding hereunder in an amount equal to such excess and accrued,
unpaid interest thereon, which prepayment shall be applied by the Bank in a
manner that minimizes the payments required under Section 3.7.
16
3.6. Increased Capital Requirements.
------------------------------
(a) In the event that compliance by the Bank with any present or
future applicable law or governmental rule, requirement, regulation,
guideline or order (whether or not having the force of law) regarding
capital adequacy has the effect of reducing the rate of return on the
Bank's capital as a consequence of its commitment to make, or the making or
maintaining of, any Credit Extensions hereunder to a level below that which
the Bank would have achieved but for such compliance (taking into
consideration the Bank's policies with respect to capital adequacy), then
from time to time the Company shall pay to the Bank such additional amount
or amounts as will compensate the Bank for such reduction. A certificate
as to the amount of any such reduction (including calculations in
reasonable detail showing how the Bank computed such reduction) shall be
furnished promptly by the Bank to the Company.
(b) If the Bank shall notify the Company that it is required to
pay any amount to the Bank under Section 3.6(a), then the Company may,
provided no Event of Default or Default has occurred and is continuing,
require that the Bank assign its rights and obligations under this
Agreement to one or more other financial institutions selected by the
Company that have agreed to accept such rights and be bound by such
obligations. The assignee in any assignment under the preceding sentence
shall purchase the rights and assume the obligations of the assignor under
this Agreement, without recourse to or warranty from the assignor, for an
amount equal to the outstanding principal amount of and accrued, unpaid
interest on all outstanding Loans made by the assignor plus all accrued,
unpaid facility fees payable to the assignor plus all other amounts payable
to the assignor hereunder on the date of such assignment. The Company
shall be responsible for all reasonable costs and expenses (including,
without limitation, attorneys' fees and expenses) incurred by the Bank
involved in any such assignment in connection with such assignment. Upon
any such assignment and acceptance, the assignee shall be deemed to be the
Bank," and the assignor shall cease to be the Bank," for purposes of this
Agreement; provided, however, that the assignor shall retain its rights
under Sections 3.7, 3.8, 10.4 and 10.11 in connection with events or
conditions occurring or existing at the time of or prior to such
assignment. The Company shall execute all documents or instruments,
including replacement Notes, that the Bank or any assignee may reasonably
request in connection with such assignment.
3.7. Indemnification. The Company hereby agrees to indemnify and
hold the Bank free and harmless from all reasonable losses, costs and expenses
(including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired
17
by the Bank to fund or maintain any CD Loans or LIBOR Loans, which the Bank may
incur, to the extent not otherwise compensated for under this Agreement and not
mitigated by the redeployment of such deposits or other funds, as a result of
(i) a default by the Company in payment when due of the principal of or interest
on any CD Loan or LIBOR Loan, (ii) the Company's failure (other than a failure
attributable to a default by the Bank) to make a borrowing, conversion or
refunding with respect to a CD Loan or LIBOR Loan after making a request
therefor in accordance with the terms of this Agreement, (iii) a prepayment
(whether mandatory or otherwise, but excluding a prepayment under Section
2.2(f)) of a CD Loan or LIBOR Loan before the expiration of the related Interest
Period, and (iv) any Event of Default by the Company under this Agreement and a
demand for payment of a CD Loan or LIBOR Loan by the Bank before the expiration
of the related Interest Period. A certificate as to any such loss, cost or
expense (including calculations, in reasonable detail, showing how the Bank
computed such loss, cost or expense) shall be submitted by the Bank to the
Company together with the Bank's request for indemnification (which request
shall set forth the basis for requesting such amounts) and shall, in the absence
of manifest error or error proven by the Company, be conclusive and binding as
to the amount thereof.
3.8. Changes; Legal Restrictions. If any present or future
applicable law, rule or regulation or any change therein or in the
interpretation or administration thereof by any Governmental Body, central bank
or comparable agency charged with the interpretation or administration thereof
or compliance by the Bank with any request or directive of any such authority,
central bank or comparable agency, whether or not having the force of law:
(a) shall subject the Bank to any tax, duty or other charge with
respect to its obligation to make Credit Extensions hereunder, or shall
change the basis of the taxation of payments to the Bank hereunder (except
for taxes based upon or measured by the net income, net worth or
shareholders' capital of the Bank); or
(b) shall impose, modify or deem applicable reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit, compulsory loan or similar requirements
in connection with any of the Loans, or against assets, deposits or other
liabilities of, credit extended by, or any acquisition of funds by any
office of the Bank, or shall impose on the Bank any other condition
affecting its obligations to make Credit Extensions hereunder;
and the result of any of the foregoing would in the reasonable judgment of the
Bank increase the cost to the Bank of making, renewing or maintaining its Credit
Extensions hereunder, or reduce the amount of any sum receivable by the Bank
under this
18
Agreement, then, upon demand by the Bank, the Company agrees to pay
to the Bank such additional amount or amounts as would compensate the Bank for
such increased cost or reduction.
3.9. Fees. The Company agrees to pay to the Bank a facility fee
equal to three-sixteenths of one percent (0.1875%) per annum of the average
amount of the Bank's Revolving Credit Commitment (whether used or unused) for
the period from the Effective Date to and including the Revolving Credit
Termination Date. Such facility fees shall be payable quarterly in arrears on
the first Business Day of each January, April, July and October, commencing on
the first Business Day of October, 1994 and on the Revolving Credit Termination
Date (pro rated in the event that the period is less than one quarter).
3.10. Telephonic Notices. The Company acknowledges that the
agreement of the Bank herein to receive and give certain notices specified
herein by telephone is for the convenience of the Company. The Bank shall be
entitled to rely on the authority of the person purporting to be the person
authorized by the Company to give any notice hereunder, and the Bank shall have
no liability to the Company on account of any action taken by the Bank in
reliance upon such telephonic notice, other than due to the gross negligence or
willful misconduct of the Bank. The obligation of the Company to repay the
Credit Extensions shall not be affected in any way or to any extent by any
failure by the Bank to receive written confirmation of any telephone notice or
the receipt by the Bank of a confirmation which is at variance with the terms
understood by the Bank to be contained in the telephonic notice.
3.11. Setoff. If the unpaid principal amount of any Credit
Extension, interest accrued thereon or any other amount owing by the Company
hereunder shall have become due and payable (by demand, acceleration or
otherwise), the Bank shall have the right, in addition to all other rights and
remedies available to it, without notice to the Company, to set off against, and
to appropriate and apply to such due and payable amounts any debt owing to, and
any other funds held in any manner for the account of, the Company, including,
without limitation, all funds in all deposit accounts (whether time or demand,
general or special, provisionally credited or finally credited, or otherwise)
now or hereafter maintained with the Bank. Such right shall exist whether or
not the Bank shall have made any demand hereunder or under any Credit Document,
whether or not such debt owing to or funds held for the account of the Company
is or are matured or unmatured, and regardless of the existence or adequacy of
any right or remedy available to the Bank. Such right shall exist regardless of
the currency in which such debt owing to or such funds held for the account of
the Company is expressed. The Bank agrees that, as promptly as is reasonably
possible after the exercise of any such setoff right, the Bank shall notify the
Company of its exercise of such setoff right; provided, however, that the
failure of the Bank to provide such notice shall not affect the validity of the
exercise of such setoff rights.
19
Nothing in this Agreement shall be deemed a waiver or prohibition of or
restriction on the Bank to all rights of banker's lien, setoff and counterclaim
available pursuant to law.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Bank to enter into this Agreement and to make the Credit Extensions contemplated
in Section 2, the Company hereby makes the following representations and
warranties to the Bank:
4.1. Subsidiaries. As of the Effective Date, the Company has only
the Subsidiaries set forth in Exhibit B hereto. As of the Effective Date,
except as set forth in said Exhibit B, all of the shares of all classes of the
stock of each Subsidiary are owned by the Company, are free and clear of any
Liens and are validly issued, fully paid for and nonassessable, and there are no
outstanding rights, options, warrants or shareholder agreements, with respect to
any such shares.
4.2. Existence and Power. The Company and each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has all requisite power and
authority to own its Property and to carry on its business as now conducted, and
(with respect to jurisdictions in the United States) is in good standing and
authorized to do business in each jurisdiction in which the character of the
Property owned and leased by it or the transaction of its business makes such
qualification necessary, except for such jurisdictions where the failure to be
in good standing and so authorized will not materially adversely affect the
financial condition, business or operations of the Company and its Consolidated
Subsidiaries, taken as a whole, or prevent the enforcement of contracts entered
into.
4.3. Authority. The Company has full power and authority to enter
into, execute, deliver and carry out the terms of this Agreement, to make the
borrowings contemplated hereby, to execute, deliver and carry out the terms of
the Credit Documents, and to incur the obligations provided for herein and
therein. The execution, delivery and performance of this Agreement and the
Credit Documents have been duly authorized by all necessary corporate action of
the Company. No consent or approval of, or exemption by, any Governmental Body
is required to authorize, or is required in connection with the execution and
delivery of, and performance by the Company of its obligations under, this
Agreement or the Credit Documents or is required as a condition to the validity
or enforceability of this Agreement or the Credit Documents.
4.4. Binding Agreement. This Agreement constitutes, and each of the
Credit Documents when issued and delivered pursuant hereto will constitute, the
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
20
4.5. Litigation. There are no actions, suits or arbitration
proceedings (whether or not purportedly on behalf of the Company or any
Subsidiary) pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary, or maintained by the Company or any Subsidiary, in
law or in equity before any Governmental Body which individually or in the
aggregate are likely (to the extent not covered by insurance) to result in a
material adverse change in the consolidated financial condition of the Company
and its Consolidated Subsidiaries, except as disclosed in the Financial
Statements. There are no proceedings pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which call into
question the validity or enforceability of this Agreement or any of the Credit
Documents or any document delivered in connection herewith or therewith, or any
action to be taken in connection with the transactions contemplated hereby or
thereby.
4.6. No Conflicting Agreements. Neither the Company nor any
Subsidiary is in default under any agreement to which it is a party or by which
it or any of its Property is bound the effect of which could be a material
adverse effect on the business or operations of the Company and its Consolidated
Subsidiaries taken as a whole. No provision of (a) the articles of
incorporation or bylaws of the Company or any Subsidiary, (b) any existing
mortgage or indenture, (c) any other contract or agreement (which is,
individually or in the aggregate, material to the financial condition, business
or operations of the Company and its Consolidated Subsidiaries), (d) any statute
(including, without limitation, any applicable usury or similar law), rule or
regulation, or (e) any judgment, decree or order (which is, individually or in
the aggregate, material to the financial condition, business or operations of
the Company and its Consolidated Subsidiaries), in each case binding on the
Company or any Subsidiary or affecting the Property of the Company or any
Subsidiary, conflicts with, or requires any consent under, or would in any way
prevent the execution, delivery or performance of, this Agreement or any Credit
Document, and the taking of any such action will not constitute a default under,
or result in the creation or imposition of, or obligation to create, any Lien
upon the Property of the Company or any Subsidiary pursuant to the terms of any
such mortgage, indenture, contract, or agreement (other than any right of setoff
or banker's lien or attachment that the Bank or other holder of a Credit
Document may have hereunder or under applicable law).
4.7. Taxes. The Company and each Consolidated Subsidiary has filed
or caused to be filed all state and federal tax returns required to be filed,
and all other tax returns required to be filed known by the Company, and has
paid, or has made adequate provision for the payment of, all such taxes shown to
be due and payable on said returns or in any assessments made against it, and no
tax liens have been filed and no claims are being asserted with respect to such
taxes. The charges,
21
accruals and reserves on the books of the Company and each Consolidated
Subsidiary with respect to all federal, state, local and other such taxes are
adequate, and the Company knows of no unpaid assessment which is due and payable
against the Company or any Consolidated Subsidiary, except those not yet
delinquent and those being contested in good faith and by appropriate
proceedings diligently conducted.
4.8. Financial Statements. The Company has heretofore delivered to
the Bank (a) copies of the consolidated balance sheets of the Company as of
February 26, 1994, and the related consolidated statements of operations,
stockholder's equity and a statement of cash flows for the year then ended, and
(b) copies of the consolidated balance sheets of the Company as of May 28, 1994,
and the related consolidated statements of operations and changes in financial
position for the three months ending on said date (the statements in (a) and (b)
above being sometimes referred to herein as the "Financial Statements"). The
Financial Statements described in clause (a) above were audited and reported on
by KPMG Peat Marwick. The Financial Statements fairly present the consolidated
financial condition and the consolidated results of operations of the Company as
of the dates and for the periods indicated therein, and have been prepared in
conformity with Generally Accepted Accounting Principles. As of the Effective
Date, except as reflected in the Financial Statements, neither the Company nor
any Subsidiary has any obligation or liability of any kind (whether fixed,
accrued, contingent, unmatured or otherwise) which is material to the Company
and the Consolidated Subsidiaries on a consolidated basis other than those
incurred in the ordinary course of their respective businesses since the date of
such Financial Statements. Since the date of the Financial Statements described
in clause (a) above, (i) the Company and each Subsidiary has conducted its
business only in the ordinary course, and (ii) there has been no adverse change
in the financial condition of the Company and its Subsidiaries taken as a whole
which is material to the Company and its Consolidated Subsidiaries on a
consolidated basis. There has been no material adverse change in the
consolidated financial condition of the Company and its Consolidated
Subsidiaries since the date of the most recent consolidated financial statements
of the Company and its Consolidated Subsidiaries which have been furnished to
the Bank pursuant to this Agreement.
4.9. Compliance with Applicable Laws. Neither the Company nor any
Subsidiary is in default with respect to any judgment, order, writ, injunction,
decree or decision of any Governmental Body which default could reasonably be
expected to have a material adverse effect on the business, properties, assets,
operations or condition (financial or otherwise) of the Company and its
Consolidated Subsidiaries taken as a whole. The Company and each Subsidiary is
complying in all respects with all applicable statutes and regulations,
including ERISA and applicable environmental, occupational, safety and health
and other labor laws, of all Governmental Bodies, if noncompliance
22
could reasonably be expected to have a material adverse effect on the business,
properties, assets, operations or condition (financial or otherwise) of the
Company and its Consolidated Subsidiaries taken as a whole. Neither the Company
nor any Subsidiary has received any notice to the effect that its Property or
operations are not in compliance with the requirements of applicable federal,
state and local environmental, health and safety statutes and regulations, or
are the subject of any investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment, if any such non-compliance or remedial action could reasonably
be expected to have a material adverse effect on the business, properties,
assets, operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
4.10. Governmental Regulations. Neither the Company nor any
Subsidiary is subject to any statute or regulation which regulates the incurring
by the Company or such Subsidiary of indebtedness for borrowed money, except for
statutes or regulations of jurisdictions outside the United States affecting
only Subsidiaries organized in jurisdictions outside the United States that do
not affect the ability of the Company to enter into this Agreement or any Credit
Document or borrow money hereunder or thereunder.
4.11. Property. The Company and each Subsidiary has good and valid
title to, or good and valid leasehold interests in, all of its Property, subject
only to Liens permitted by the terms of this Agreement.
4.12. Federal Reserve Regulations. The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended. No part of the proceeds of the Loans, Bid Loans or Acceptances will
be used, directly or indirectly, for a purpose which violates any law, rule or
regulation of any Governmental Body, including, without limitation, the
provisions of Regulations G, T, U, or X of said Board, as amended.
4.13. No Misrepresentation. No representation or warranty contained
herein or in any document to be executed and delivered in connection herewith
and no certificate or report furnished or to be furnished by the Company or any
Subsidiary in connection with the transactions contemplated hereby, contains or
will contain a misstatement of material fact, or omits or will omit to state a
material fact required to be stated in order to make the statements herein or
therein contained (taken as a whole) not misleading in the light of the
circumstances under which made.
23
4.14. ERISA. Each Plan maintained by the Company and by each ERISA
Affiliate complies with all material requirements of ERISA and of the Code and
with all material rulings and regulations issued under the provisions of ERISA
and the Code setting forth those requirements. No reportable event (as defined
in Section 4043(b), subdivision (5) or (6) of ERISA or in 29 C.F.R. Sections
2615.21, 2615.22 or 2615.23) has occurred with respect to any Plan which is
subject to Title IV of ERISA. Neither the Company nor any ERISA Affiliate has
engaged in any material prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) (i) which has not been corrected within the
correction period applicable to it under Section 502(i) of ERISA or Section
4963(e) of the Code or (ii) for which an exemption is not applicable or has not
been obtained under Section 408 of ERISA or Section 4975 of the Code. The
Company and all ERISA Affiliates have satisfied all of the funding standards
applicable to such Plans under Section 302 of ERISA and Section 412 of the Code,
and the PBGC has not instituted any proceedings, and there exists no event or
condition which would constitute grounds for the institution of proceedings by
PBGC, to terminate any Plan under Section 4042 of ERISA. The present value of
accumulated benefits under each Plan maintained by the Company or any ERISA
Affiliate does not exceed the aggregate current value of assets of such Plan
allocable to the Plans' benefits guaranteed under Title IV of ERISA. There have
been no material adverse changes in any Plan since the date of the most recent
actuarial valuation of such Plan.
4.15. Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.16. Public Utility Holding Company Act. The Company is not 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.
4.17. Indebtedness. As of the date of this Agreement neither the
Company nor any Subsidiary has any outstanding Indebtedness except Indebtedness
described in Exhibit C hereto. No default exists under any of such
Indebtedness.
4.18. Retirement Benefits. Under the accounting rules currently
proposed by the Financial Accounting Standards Board with respect thereto, the
present value of the expected cost to the Company and its Subsidiaries of post-
retirement medical and insurance benefits to their employees, as estimated by
the Company in accordance with procedures for assumptions deemed reasonable by
the Bank, does not exceed $25,000.
24
SECTION 5. CONDITIONS PRECEDENT --INITIAL CREDIT EXTENSIONS. In
addition to the applicable requirements set forth in Section 7, the obligation
of the Bank to make its initial Credit Extension hereunder shall be subject to
the fulfillment of the following conditions precedent:
5.1. Evidence of Corporate Action.
----------------------------
(a) The Company shall have duly executed and delivered to the
Bank for the account of the Bank the Revolving Credit Note, appropriately
completed.
(b) The Bank shall have received (i) a copy of the Articles of
Incorporation of the Company and each amendment, if any, thereto, certified
by the Secretary of State of the State of Minnesota (as of a date
reasonably near the date of the initial Credit Extension hereunder) as
being true and correct copies of such documents on file in her office, and
(ii) certificates of good standing for the Company from the Secretaries of
State of the state of its incorporation and each state where it conducts
operations, except any such state where failure to so qualify would not
permanently preclude the Company from enforcing its rights with respect to
any material assets or expose the Company to any material liability,
certifying that the Company is in good standing in such states, such
certificates to be dated reasonably near the date of the initial Credit
Extensions hereunder.
(c) The Bank shall have received the signed certificate of the
Secretary of the Company, dated the Effective Date, certifying as to (i) a
true and correct copy of the by-laws of the Company as in effect on such
date, and (ii) the incumbency and specimen signatures of officers of the
Company executing or authorized to execute this Agreement, the Credit
Documents and any other documents delivered to the Bank in connection with
this Section 5.
5.2. Opinion of Company Counsel. The Bank shall have received the
signed opinion of Dorsey & Whitney, counsel to the Company, and given upon its
express instructions dated the Effective Date, covering the matters set forth on
Exhibit D hereto, and as to such other matters as the Bank may reasonably
request.
5.3 Privity Letter. The Bank shall have received a letter from the
accountants auditing and reporting on the audited financial statements referred
to in Section 4.8(a) acknowledging the Banks reliance on past and future
financial statements of the Company.
25
5.4. Other Instruments and Documents. The Bank shall have received
such other instruments and documents as the Bank may reasonably request on or
before the Effective Date.
SECTION 6. CONDITIONS PRECEDENT --ALL CREDIT EXTENSIONS.
--------------------------------------------
6.1. Loans. The obligation of the Bank to make Loans (including the
initial Loans but excluding a conversion or refunding of Loans pursuant to the
last sentence of Section 2.2(d)) is subject to the fulfillment of the condition
precedent that the Bank shall have received a borrowing request in the form of
Exhibit E hereto (each, a "Borrowing Request").
6.2. All Credit Extensions.
---------------------
The obligation of the Bank to make any Credit Extension and the right
of the Company to convert any Loan to or continue any Loan as a CD Loan or a
LIBOR Loan are subject to the fulfillment of the following conditions precedent:
(a) On each Borrowing Date and conversion or continuation date,
after giving effect to the Credit Extensions to be made on such date, (i)
there shall exist no Default or Event of Default and (ii) the
representations and warranties contained in this Agreement (except, with
respect to any Credit Extension, continuation or conversion that does not
increase the Aggregate Outstandings, those set forth in Section 4.5 and the
final sentence of Section 4.8) shall be true, correct and complete in all
material respects on and as of such date as though made on and as of such
date, except with respect to any representation or warranty which
specifically refers to an earlier date.
(b) All documents required by the provisions of this Agreement
to be executed or delivered to the Bank on or before the applicable
Borrowing Date or conversion or continuation date shall have been executed
and shall have been delivered to the Bank as provided herein on or before
such Date.
(c) Following the requested Credit Extension, the Aggregate
Outstandings will not exceed the Commitment Amount.
SECTION 7. AFFIRMATIVE COVENANTS. The Company covenants and agrees
that, on and after the Effective Date, unless otherwise expressly provided in
this Section 7 or consented to by the Bank in writing, and until the payment in
full of all of the Company's obligations under each Credit Document, the
termination of the Revolving Credit Commitments and performance of all other
obligations of the Company hereunder, the Company will:
26
7.1. Preservation of Corporate Existence, Etc. Maintain, and cause
each Subsidiary to maintain, (a) its corporate existence in good standing under
the laws of the jurisdiction of its incorporation and (b) its right to transact
business in each jurisdiction in which the character of the properties owned or
leased by it or the business conducted by it makes such qualification necessary
and the failure to so qualify would permanently preclude the Company from
enforcing its rights with respect to any material assets or expose the Company
to any material liability.
7.2. Taxes. Pay, or provide for the payment of, and cause each
Subsidiary to pay or provide for the payment of, all taxes and assessments
payable by it which become due, other than those not yet delinquent and other
than those not substantial in aggregate amount or being contested in good faith.
7.3. Insurance. Maintain, and cause each Subsidiary to maintain,
insurance with reputable insurance carriers on its Property against such risks
and in such amounts as is customarily maintained by similar businesses of
similar size with respect to Properties of similar character.
7.4. Maintenance of Properties. Cause all Properties used or useful
in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment, and cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
7.5. Compliance with Laws, etc. Comply, and cause all of its
Subsidiaries to comply, with all laws, rules, regulations, or governmental
orders, including, without limitation, those relating to environmental and
occupational safety and health standards, to which it is subject, if non-
compliance could reasonably be expected to have a material and adverse effect on
the business, properties, assets, operations or condition (financial or
otherwise) of the Company and its Consolidated Subsidiaries taken as a whole.
7.6. Financial Statements and Other Information. Furnish to the
Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, the consolidated financial
statements of the Company and the Consolidated Subsidiaries consisting of
at least statements of income, retained earnings and statements of cash
flow of the Company and the Subsidiaries for such year, and a balance sheet
as of the end of such year, setting forth in each case, in comparative
form,
27
corresponding figures for the previous fiscal year and at the end of the
preceding fiscal year, certified by KPMG Peat Marwick or other independent
certified public accountants of recognized standing selected by the Company
and reasonably acceptable to the Bank, whose certificate shall be
satisfactory to the Bank, and accompanied by (i) a letter from such
accounting firm addressed to the Bank acknowledging that the Bank is
extending credit in reliance on such financial statements and authorizing
such reliance and (ii) at the request of the Bank, any supplementary
comments and reports to the Company submitted by such accounting firm;
(b) as soon as available and in any event within 45 days after
the end of each month of the Company's fiscal year, a copy of the Company's
unaudited consolidated financial statements prepared in a manner similar to
its annual audited consolidated report, consisting of at least a statement
of income of the Company and the Subsidiaries for such month and for the
period from the beginning of the then current fiscal year to the end of
such month and a balance sheet as of the end of such month, setting forth,
in each case, in comparative form, figures for the corresponding periods in
the preceding fiscal year and as of a date one year earlier, certified as
accurate by the chief financial officer of the Company, subject to changes
resulting from normal year-end adjustments;
(c) within 45 days after the end of each fiscal quarter of each
fiscal year of the Company, a certificate signed by the chief financial
officer of the Company, in the form of Exhibit G hereto, stating (i) that
there exists no Default or Event of Default, or, if such Default or Event
of Default exists, stating the nature thereof, the period of existence
thereof, and what action the Company proposes to take with respect thereto
and (ii) that the Company is in compliance with all the covenants contained
in Sections 7 and 8, and a copy of the calculations made to determine
compliance with Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.8, 8.9 and 8.10;
(d) as soon as any Default or any Event of Default becomes known
to any officer of the Company, a notice of such Default or Event of Default
and the nature and status thereof;
(e) promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by the
Company to its shareholders;
(f) as soon as possible and in any event within 10 days after
receipt by the Company or any Subsidiary, a copy of (i) any notice or claim
to the effect that the Company or any Subsidiary is or may have any
material
28
liability to any Person as a result of the release by the Company,
any of its Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, (ii) any notice alleging any
violation of any federal, state or local environmental, health or safety
law or regulation by the Company or any Subsidiary if such violation could
result in any material liability to, or material adverse effect on, the
Company or any Subsidiary, and (iii) any notice that the Company, any
Subsidiary or any of their Properties or operations are the subject of any
investigation evaluating whether any remedial action is needed to respond
to a release of any toxic or hazardous waste or substance into the
environment if such investigation could result in any material liability
to, or material adverse effect on, the Company or any Subsidiary; and
(g) from time to time such other information regarding the
business, affairs and financial condition of the Company and the
Subsidiaries as the Bank may reasonably request.
7.7 Inspection. Permit any Person designated by the Bank to visit
and inspect any of the properties, corporate books and financial records of the
Company and the Subsidiaries and discuss the affairs and finances of the Company
and the Subsidiaries with the officers and employees of the Company or any
Subsidiary, all at such times as the Bank shall reasonably request.
7.8. Books and Records. Maintain, and cause each of its Subsidiaries
to maintain, a system of accounting established and administered in accordance
with Generally Accepted Accounting Principles applied on a consistent basis, and
set aside, and cause each of its Subsidiaries to set aside, on its books all
such proper reserves as shall be required by Generally Accepted Accounting
Principles.
7.9. Use of Proceeds. Use the proceeds of the Credit Extensions
hereunder for working capital and general corporate purposes not otherwise
inconsistent with the provisions of this Agreement.
7.10. ERISA At all times maintain, and cause each ERISA Affiliate to
maintain, each of its Plans in compliance with all material requirements of
ERISA and of the Code and with all material rulings and regulations issued under
the provisions of ERISA and the Code and not, and not permit any of its ERISA
Affiliates to, (a) engage in any transaction in connection with which the
Company or any of its 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, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Company or any of its
29
ERISA Affiliates is required to pay as contributions thereto, (c) 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, or (d) fail to make any payments to any Multiemployer Plan that the
Company or any of its ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
7.11 Litigation. Notify the Bank in writing of all litigation and of
all proceedings before any Governmental Body affecting the Company or any
Subsidiary, except litigation or proceedings which, if adversely determined,
would not materially affect the consolidated financial condition of the Company
and the Consolidated Subsidiaries.
7.12 Subsidiaries. Give prompt notice to the Bank of the creation or
acquisition of any Subsidiary and, upon the creation of or acquisition of any
Subsidiary, (a) if such Subsidiary is a Consolidated Subsidiary, cause the
financial statements furnished pursuant to Section 7.6 to be furnished on a
consolidated basis with such Subsidiary, and (b) cause each such Subsidiary to
comply with the provisions of Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.7, 7.8, 7.10,
7.11, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11 and 8.12; provided, that nothing herein
shall be construed to permit the creation or acquisition of any Subsidiary if
such creation or acquisition is prohibited by application of any other provision
of this Agreement.
7.13 Environmental Matters; Reporting. The Company 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 Company and the Subsidiaries taken as a whole.
The Company will give the Bank prompt written notice of any violation as to any
environmental matter by the Company 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 Company or any Subsidiary which are material to the
operations of the Company or such Subsidiary, or (b) which will or threatens to
impose a material liability on the Company or such Subsidiary to any Person or
which will require a material expenditure by the Company or such Subsidiary to
cure any alleged problem or violation.
30
SECTION 8. NEGATIVE COVENANTS. The Company covenants and agrees
that, on and after the Effective Date, unless otherwise expressly provided in
this Section 8 or consented to by the Bank in writing, and until the payment in
full of all of the Company's obligations under this Agreement and each Credit
Document, the termination of the Revolving Credit Commitments and the
performance of all other obligations of the Company hereunder, the Company will
not:
8.1. Current Ratio. Permit, at any time, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities to be less than 1.50 to 1.00.
8.2. Minimum Consolidated Tangible Net Worth. Permit, at any time,
its Consolidated Tangible Net Worth to be less than the sum of (a) $95,000,000
plus (b) fifty percent of the sum of Consolidated Net Income for each fiscal
quarter of the Company ending after February 27, 1993 in which Consolidated Net
Earnings is positive, through the most recently ended fiscal quarter, plus (c)
fifty percent of proceeds received from the sale of capital stock of the Company
after the date of this Agreement, net of any amounts used to retire outstanding
capital stock of the Company in connection with such sale.
8.3. Fixed Charge Coverage Ratio. Permit, as of the last day of each
fiscal quarter, the ratio of (a) Earnings Available to Cover Fixed Charges to
(b) Consolidated Fixed Charges for the four fiscal quarters ended on such date,
to be less than the 1.45 to 1.00:
8.4. Ratio of Interest-Bearing Debt to Tangible Net Worth. Permit,
at any time, the ratio of Consolidated Interest-Bearing Debt to Consolidated
Tangible Net Worth to exceed 1.00 to 1.00.
8.5. Restricted Payment Limitations.
------------------------------
(a) Either: (i) declare or make any Restricted Payment if such
Restricted Payment, when added to all Restricted Payments made after
February 27, 1993, would exceed the sum (x) $2,000,000, plus (y) 50% of
Consolidated Net Income for the period (taken as one accounting period)
commencing on February 28, 1993 and ending on the last day of the most
recently concluded fiscal quarter before the date of the proposed
Restricted Payment, plus (z) total proceeds received on and after May 18,
1992, upon issuance of stock to the extent that such proceeds do not exceed
payments made by the Company for redemptions and repurchases of the
Company's stock on and after May 18, 1992 or (ii) permit any Subsidiary
other than a wholly-owned Subsidiary to make any Restricted Payment unless
such Restricted Payment is made ratably on all stock of such Subsidiary.
31
(b) Repurchase any class of stock of the Company or a Subsidiary
or make any other Restricted Payment described in clause (ii) of the
definition of Restricted Payment in an aggregate amount exceeding $5
million in any fiscal year of the Company.
8.6. Nature of Business. Engage, or permit any Consolidated
Subsidiary to engage, in any business that would substantially change the
general nature of the business conducted by the Company or such Consolidated
Subsidiary on the date of this Agreement.
8.7. Liens. Create, incur, assume or suffer to exist, or permit any
Subsidiary to make, 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
Company or any Subsidiary, except:
(a) Liens existing on the date of this Agreement as described in
Exhibit F hereto and liens on the same assets securing renewals and
extensions of the Indebtedness secured by such Liens on the date of this
Agreement;
(b) Liens in connection with 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 Company and the Subsidiaries;
(c) Liens for taxes, fees, assessments and governmental charges
not delinquent or which are being contested in good faith by appropriate
proceedings;
(d) Liens arising in the ordinary course of business for sums
not due, and Liens arising in the ordinary course of business for sums
which are due (including judgment Liens) provided such Liens are being
contested in good faith by appropriate proceedings, excluding in all such
cases (except as permitted in clause (f) below) Liens to secure money
borrowed or the deferred purchase price of property or services;
(e) Minor title defects, minor survey exceptions, easements,
zoning and other restrictions as to the use of real property, which
defects, exceptions, easements and restrictions do not in the aggregate
materially detract from the value of the property subject thereto or
materially impair its use in the operation of the business of the Company
or the Subsidiaries; and
32
(f) Liens on real property, improvements and equipment acquired
by the Company or a Subsidiary after the date of this Agreement and (i)
existing at the time of acquisition of the underlying property, (ii)
securing payment of all or a part of the purchase price for the acquired
property or (iii) securing Indebtedness incurred solely for the purpose of
financing the acquisition of such property, provided any such Liens
described in clauses (ii) or (iii) above attach to the property subject
thereto within six months after such property is acquired, and Liens
securing any refinancing of such purchase price or such other Indebtedness;
provided that such Liens attach only to the property acquired and that the
amount of the Indebtedness so secured plus the amount of Indebtedness
secured by Liens described in paragraph (a) of this Section 8.7 does not at
any time exceed $10,000,000 in the aggregate.
8.8 Merger and Consolidation; Sales of Assets. (i) Merge or
consolidate or enter into any analogous reorganization or transaction with any
other Person, or permit any Subsidiary to do any of the foregoing, except that
any Subsidiary may merge or consolidate with any wholly-owned Subsidiary or with
the Company, provided that the Company or a wholly-owned Subsidiary is the
surviving entity, and (ii) sell (including sales with a view to the concurrent
or subsequent acquisition by lease), transfer, lease (or enter into any
commitment to do so) all or any part of its assets (whether in one or a series
of transactions) other than inventory in the ordinary course of business, or
permit any Subsidiary to do any of the foregoing, except that the Company and
the Subsidiaries may sell or lease, as lessor, any of their assets, if, after
giving effect to any such sale or lease, the aggregate book value of all such
assets sold or leased by the Company and its Subsidiaries during any fiscal
year, does not exceed an amount equal to 5% of the total of all assets of the
Company and its Consolidated Subsidiaries.
8.9. Obligations as Lessee. Enter into or suffer to exist any lease
of Property under which the Company is the lessee, other than capitalized
leases, for a term in excess of one year (including any renewal terms at the
option of the lessor), or permit any Consolidated Subsidiary so to do, if, after
giving effect thereto, the aggregate of all such rental payments payable by the
Company and its Consolidated Subsidiaries for any four consecutive fiscal
quarters commencing thereafter will exceed $12,000,000.
8.10. Investments, Loans, Etc. (w) Make or permit to remain
outstanding any loan or advance to any other Person, (x) directly or indirectly
guarantee, endorse, be or become contingently liable for or enter into any
contract which is, in economic effect, substantially equivalent to a guaranty of
the obligation of any other Person, (y) own, purchase or make any commitment to
purchase the securities of any corporation or own, purchase or make any
commitment to purchase for cash or any
33
consideration, any obligations, other securities, the business or integral part
of the business of any other Person or enter into a joint venture or partnership
with any other Person, or (z) permit any Subsidiary to do any of the foregoing,
except:
(a) by the endorsement of negotiable instruments for deposit or
collection (or similar transactions) in the ordinary course of business;
(b) travel, moving or similar advances in the ordinary course
of business to officers and employees;
(c) investments in, loans to, and guaranties of the obligations
of, wholly-owned Subsidiaries;
(d) investments in, loans to, and guaranties of the obligations
of, (i) Subsidiaries other than wholly-owned Subsidiaries and (ii) Marcon
Coatings, Inc., which either (A) are in existence on the date of this
Agreement or (B) in the case of guaranties are incurred in the ordinary
course of business; such investments may be increased as a result of the
earnings of such Subsidiaries and Marcon Coatings, Inc.;
(e) investments in commercial paper maturing in 270 days or less
from the date of issuance which, at the time of acquisition, is accorded
the highest rating by Standard & Poor's Corporation, Moody's Investors
Services, Inc. or other nationally recognized credit rating agency of
similar standing;
(f) investments in direct obligations of the United States of
America, or any agency thereof, or obligations unconditionally guaranteed
by the United States of America maturing, in each case, in twelve months or
less from the date of acquisition thereof;
(g) investments in certificates of deposit maturing within one
year from the date of origin, issued by a bank or trust company organized
or licensed under the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating at least $100,000,000;
(h) receivables arising from the sale of goods and services in
the ordinary course of business and constituting current assets;
(i) investments in tax exempt bonds maturing in 365 days or less
from date of issuance which, at the time of acquisition, are accorded a
rating of AA or AAA by Standard & Poor's Corporation or a similar rating by
Moody's Investor Services, Inc. or other nationally recognized credit
rating agency of similar standing;
34
(j) advances made in the ordinary course of business under a
contract for a particular project to subcontractors of the Company or a
Subsidiary in connection with projects on which the Company or a Subsidiary
is a general contractor or subcontractor, provided such advances are made
out of funds advanced or expected to be advanced to the Company or a
Subsidiary by a Person other than an Affiliate in connection with such
project;
(k) obligations incurred under joint construction arrangements in
connection with construction projects outside the United States, provided
that (i) the obligations incurred in connection with any project do not
differ materially from the obligations that the Company or its Subsidiaries
would incur as a general contractor or subcontractor on such project if
such project were located in the United States and (ii) the aggregate
amount of such obligations outstanding at any time do not exceed
$50,000,000; and
(l) other investments, loans and guaranties (excluding those
permitted by the foregoing provisions), provided that the aggregate amount
of all such other investments, loans and guaranties by the Company and its
Subsidiaries at any time outstanding shall not exceed fifteen percent (15%)
of Consolidated Tangible Net Worth.
In valuing investments, loans and guaranties permitted by clause (l) above, such
investments, loans and guaranties shall be taken at the original cost or face
amount thereof, without allowance for any subsequent write-offs or appreciation
or depreciation thereof, but less any amount repaid or recovered on account of
capital or principal.
8.11. Transactions with Affiliates. Enter into, or permit any
Subsidiary to enter into, any material transaction with any Affiliate of the
Company other than a wholly-owned Subsidiary on any terms more favorable to such
Affiliate than those that would be obtained in an arm's length transaction.
8.12 Subsidiary Indebtedness. Permit any Subsidiary to (i) incur or
suffer to exist Interest-Bearing Debt other than Indebtedness described on
Exhibit C hereto and refinancings thereof in an amount not to exceed the amount
of the indebtedness so refinanced, and Indebtedness secured by Liens permitted
pursuant to Section 8.7(f) of this Agreement, or (ii) enter into any agreement
restricting the ability of such Subsidiary to make or pay to the Company any
dividend or other distribution on account of shares of any class of stock of
such Subsidiary.
8.13 Other Agreements. Enter into, or permit any Subsidiary to enter
into, any other bank agreement for borrowed
35
money containing more stringent terms and conditions than those set forth herein
without first giving the Bank notice thereof and the opportunity to provide for
similar terms and conditions herein.
SECTION 9. DEFAULT.
-------
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Company shall fail to make when due, whether by
acceleration of maturity or otherwise, any payment of principal on any
Credit Document; or
(b) The Company shall fail to make within five days after the
same comes due, whether by acceleration or otherwise, any payment of
interest on any Credit Document or any fee or other amount required to be
paid to the Bank pursuant to this Agreement; or
(c) Any representation or warranty made by the Company in this
Agreement or in any certificate, statement, report or document furnished to
the Bank pursuant to or in connection with this Agreement shall be untrue
or misleading in any material respect on the date as of which the facts set
forth are stated or certified; or
(d) The Company shall fail to comply with any agreement,
covenant, condition, provision or term contained in Sections 7.1, 7.12,
8.1, 8.2, 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10 or 8.12; or
(e) The Company shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement or any
Credit Document (other than those hereinabove set forth in this Section
9.1) and such failure to comply is not remedied within 30 days after the
Bank notifies the Company thereof; or
(f) Any creditor or representative of any creditor of the
Company or any Subsidiary shall become entitled to declare any Indebtedness
in an amount equal to or exceeding $500,000 owing on any bond, debenture,
note or other evidence of Interest-Bearing Debt to be due and payable prior
to its expressed maturity, whether or not such Indebtedness is actually
declared to be immediately due and payable, or any such Indebtedness
becomes due and payable prior to its expressed maturity by reason of any
default by the Company or any Subsidiary in the performance or observance
of any obligation or condition and such default shall not have been cured
within any grace period allowed therefor or shall not have been effectively
waived,
36
or any such Indebtedness shall have become due by its terms and
shall not have been promptly paid or extended; or
(g) The Company or any Subsidiary shall become insolvent or
shall fail generally to 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 thereof 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 Company or any
Subsidiary or for a substantial part of the property thereof, or the
Company shall make an assignment for the benefit of creditors; or
(h) The Company or any Subsidiary shall be voluntarily or
involuntarily dissolved or shall be the subject of any bankruptcy,
reorganization, debt arrangement or other proceedings under any bankruptcy
or insolvency law; or any dissolution or liquidation proceeding shall be
instituted by or against the Company or any Subsidiary and, if instituted
against the Company or any Subsidiary or shall be consented to or
acquiesced in by the Company or such Subsidiary, or shall not have been
dismissed within 60 days, or an order for relief shall have been entered
against the Company or such Subsidiary; or
(i) There shall be entered against the Company or any Subsidiary
one or more judgments or decrees in an aggregate amount as to the Company
and all the Subsidiaries at any one time outstanding in excess of $500,000,
excluding those judgments or decrees that shall have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the entry
thereof, and excluding judgments and decrees to the extent the Person
against which any such judgment or decree shall have been entered is
insured and the insurer has admitted in writing its liability therefor; or
(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Company 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, except for executions or
attachments affecting only property outside the United States that is not a
material part of the property of the Company and its Subsidiaries taken as
a whole; or
(k) (i) A reportable event as defined in Section 4043(b),
subdivision (4), of ERISA shall have occurred with respect to any Plan
and the PBGC shall have determined that said event constitutes or
requires a termination of the Plan under Title IV of ERISA and the
insured benefits payable under such Plan
37
exceed the value of the assets of such Plan by more
than $250,000; or
(ii) A reportable event as defined in Section 4043(b),
subdivision (5), of ERISA shall have occurred with respect to any Plan
and a waiver of the failure to meet minimum funding standards under
Section 412 of the Code shall not have been obtained; or
(iii) A reportable event as defined in Section 4043(b),
subdivision (6), of ERISA shall have occurred with respect to any
Plan; or
(iv) The Company or any Subsidiary shall have engaged in
any prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code) and either (1) the prohibited transaction
shall not have been corrected within the correction period applicable
to it under Section 502(i) of ERISA or Section 4975(b) of the Code, or
(2) an exemption shall not be applicable or have been obtained under
Section 408 of ERISA or Section 4975 of the Code; or
(v) The PBGC shall have terminated any Plan under Title IV
of ERISA or the Company or any Subsidiary shall have received notice
from the PBGC of the intention of the PBGC to terminate any Plan or to
appoint a Trustee to administer any Plan, which notice shall not have
been withdrawn within 30 days of the date thereof; or
(vi) The maximum amount of liability that could be asserted
against the Company or any Subsidiary under Sections 4062, 4063 or
4064 of ERISA with respect to any Plan if such Plan terminated or with
respect to any Plan terminated prior to the date hereof, shall exceed
the value of the assets of such Plan allocable to such liability by
more than $1,000,000 in the aggregate as to the Company and the
Subsidiaries; or
(vii) The Company determines to voluntarily terminate or
withdraw from any Plan at a time when the accrued liabilities to the
Company exceed the value of the assets allocable to said liabilities
by more than $250,000; or
(viii) The Company, or any of its ERISA Affiliates, as an
employer under a Multiemployer Plan, shall have made a complete or
partial withdrawal from such Multiemployer Plan and the plan sponsor
of such Multiemployer Plan shall have notified such withdrawing
employer that such employer has incurred a
38
withdrawal liability in an annual amount exceeding
$250,000; or
(l) the Company or any Subsidiary shall be the subject of (i)
any proceeding or investigation pertaining to the release by the Company,
any Subsidiary or any other Person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal, state or
local environmental, health or safety law or regulation, or (ii) any
Property of the Company or any Subsidiary is the subject of any remedial
action needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which could, in either case, have a
material adverse effect upon the operations of the Company and the
Subsidiaries taken as a whole.
9.2 Remedies. If (x) any Event of Default described in Sections
9.1(g) or (h) shall occur, the Revolving Credit Commitments shall automatically
terminate and the outstanding principal of the Notes, the accrued interest
thereon and all other obligations of the Company to the Bank under this
Agreement and the Credit Documents, shall automatically become immediately due
and payable or (y) any other Event of Default shall occur and be continuing,
then, the Bank may do all of the following: (i) declare the Revolving Credit
Commitments terminated, whereupon the Revolving Credit Commitments shall be
terminated and (ii) declare the outstanding principal of the Notes, the accrued
interest thereon and all other obligations of the Company to the Bank under this
Agreement and the Credit Documents to be forthwith due and payable, whereupon
the Notes, all accrued interest thereon and all such other 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 the Notes to the contrary notwithstanding. In the
event any CD Loan or LIBOR Loan is paid prior to the last day of the Interest
Period applicable thereto by reason of the acceleration of the Notes pursuant to
this Section 9.2, the Company shall indemnify the Bank as provided in Section
3.7.
If the obligations of the Company under all of the Credit Documents
shall have become, or been declared to be, due and payable pursuant to the
provisions of Section 9.1, the Bank may proceed to enforce its rights hereunder
and under the Credit Documents by suit in equity, action at law and/or other
appropriate proceedings, whether for payment or the specific performance of any
covenant or agreement contained in this Agreement or the Credit Documents.
9.3. Waiver of Defaults. Except as otherwise specifically provided
by the provisions hereof, the Bank may, by written notice to the Company at any
time and from time to time, waive in whole or in part, and absolutely or
conditionally, any Default or Event of Default which shall have occurred
hereunder
39
or under the Credit Documents. Any such waiver shall be for such
period and subject to such conditions or limitations as shall be specified in
any such notice. In the case of any such waiver, the rights of the Company and
the Bank under this Agreement and the Credit Documents shall be otherwise
unaffected, and any Default or Event of Default so waived shall be deemed to be
cured and not continuing to the extent and on the conditions or limitations set
forth in such waiver, but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right, remedy or power consequent
thereupon. The Company may take any action prohibited, or omit to perform any
act required to be performed, under this Agreement and the Credit Documents if
it shall have obtained the written waiver with respect thereto signed by the
Bank and containing a representation therein that such waiver has been
authorized in accordance with the provisions of this Section 9.3 and Section
10.5.
Section 10. MISCELLANEOUS.
-------------
10.1 Waiver. No failure on the part of the Bank to exercise, no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement or any of the Credit Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or any of the Credit Documents preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein and in the Credit Documents are
cumulative and not exclusive of any remedies provided by law.
10.2 Accounting. Except as the Bank may otherwise consent in
writing, all financial statements furnished to the Bank under this Agreement and
all computations and determinations required to be made pursuant to this
Agreement shall be made in accordance with Generally Accepted Accounting
Principles, applied on a basis consistent with the audited financial statement
referred to in Section 4.8. To the extent any change in Generally Accepted
Accounting Principles 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 Generally Accepted Accounting Principles had not occurred
unless the Company and the Bank agree in writing on an adjustment to such
computation or determination to account for such change in Generally Accepted
Accounting Principles.
10.3 Notices. Except as otherwise specifically provided for herein,
all notices and other communications provided for herein shall be by in writing
and telexed, telecopied, telegraphed, cabled, mailed or delivered to the
intended recipient at the address specified below its name on the signature
pages hereof; or, as to any party, at such other address as shall be designated
by such party in a notice to the other parties. All notices and other
communications hereunder
40
shall be deemed to have been duly given when transmitted by telex or telecopier,
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, upon receipt thereof as conclusively evidenced by the
signed receipt therefor, in each case given or addressed as aforesaid; provided,
however, that any notice required to be given pursuant to Sections 2.1(b) and
2.2(d) shall only be effective upon receipt.
10.4 Expenses. The Company agrees to pay: (a) the reasonable costs
and expenses of the Bank, including, without limitation, the fees, costs and
expenses of counsel to the Bank, in connection with the preparation, execution
and delivery of this Agreement and the Credit Documents and the making of the
Loans hereunder, (b) the reasonable costs and expenses of the Bank, including,
without limitation, the fees, costs and expenses of counsel to the Bank, in
connection with any amendment, modification or waiver of any of the terms of
this Agreement or any of the Credit Documents and (c) all reasonable costs and
expenses of the Bank (including reasonable fees of counsel) in connection with
the enforcement of this Agreement and any of the Credit Documents. The Company
hereby agrees to indemnify the Bank and its directors, officers, agents and
employees from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them arising out of
or by reason of any investigation, litigation or other proceedings related to
any use made or proposed to be made by the Company of the proceeds of the Loans,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
10.5 Amendments, Etc. Any provision of this Agreement or any Credit
Document may be amended or modified only by an instrument or instruments in
writing signed by the Company and the Bank. No waiver of any provision of this
Agreement or any Credit Document or consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given.
10.6 Successors and Assigns; Disposition of Loans; Transferees. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Company may not
assign its rights or obligations hereunder or under any Credit Document without
the prior consent of the Bank. The Bank may at any time sell, assign, transfer,
grant participations in, or otherwise dispose of all or any portion of the Loans
(each such interest so disposed of being herein called a "Transferred Interest")
to banks or other financial institutions ("Transferees"), provided
41
that any such sale, assignment, transfer or participation that would result in
the Bank being released from its obligations hereunder may only be made to (a)
any Affiliate of the Bank, (b) other financial institution having capital,
surplus and undivided profits aggregating at least $ 100,000,000, and (c) other
banks or financial institutions reasonably acceptable to the Company. Without in
any way limiting the rights of Transferees hereunder, the Company agrees that
each Transferee shall be entitled to the benefits of Sections 2.2(f), 2.2(g),
3.6, 3.7 and 3.8 to the extent of its Transferred Interest as if it were the
"Bank" holding a "Credit Extension" in the amount of such Transferred Interest;
provided, that such Transferee shall have assumed the obligations of the Bank to
the extent such obligations relate thereto, and provided, further that no
Transferee that does not directly assume the obligations of its transferor Bank
to the Company under this Agreement shall be entitled to compensation under
Section 3.6, 3.7 or 3.8 in excess of the amount its transferor Bank would have
been entitled to receive under such Section in respect of the amount of the
Transferred Interest had no such transfer occurred. No Transferee that does not
directly assume the obligations of its transferor Bank to the Company under this
Agreement shall be entitled to control or vote upon the actions taken by the
transferor Bank hereunder and under the Credit Documents except to the extent
such actions (i) reduce the principal of or rates of interest on any Credit
Extension, (ii) postpone the date fixed for any payment hereunder or under any
Credit Document, or (iii) change the amount of the transferor Bank's Revolving
Credit Commitment. The Company agrees that each Transferee may exercise any and
all rights of banker's lien, setoff and counterclaim available pursuant to law
with respect to its Transferred Interest as fully as if such Transferee were a
direct lender to the Company. The Company authorizes the Bank to disclose to any
Transferee or prospective Transferee any and all financial information in the
possession of the Bank concerning the Company which has been delivered to the
Bank by the Company pursuant to this Agreement or in connection with the credit
evaluation of the Company by the Bank prior to entering into this Agreement.
10.7 Survival. The obligations of the Company under Sections 3.6,
3.7, 3.8, 10.4, 10.11 and 10.12 shall survive the repayment of the Loans and the
termination of the Revolving Credit Commitments.
10.8 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.
10.9 Governing Law. This Agreement and the Credit Documents shall be
governed by, and construed in accordance with, the internal law, and not the law
of conflicts, of the State of Minnesota. Whenever possible, each provision of
this Agreement, the Credit Documents and any other statement,
42
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 Credit
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 Credit
Documents and any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
10.10 Highest Lawful Rate. Anything herein to the contrary
notwithstanding, the obligations of the Company on the Credit Extensions payable
to the Bank shall be subject to the limitation that payments of interest shall
not be required, for any period for which interest is computed hereunder, to the
extent that contracting for or receipt thereof would be contrary to provisions
of any law applicable to the Bank limiting the highest rate of interest which
may be lawfully contracted for, charged or received by the Bank.
10.11 Environmental Indemnity. The Company hereby agrees to defend,
indemnify, and hold the Bank harmless from and against any and all liens,
demands, claims, actions, suits, proceedings, disbursements, liabilities,
losses, damages, judgments, penalties, costs and expenses (including, without
limitation, attorneys', consultants' and experts' fees) paid, incurred, or
asserted against the Bank for, with respect to, or as a direct or indirect
result of the release by the Company, any Subsidiary or, with respect to their
Property, any other Person of any toxic or hazardous waste or substance into the
environment, any violation of any federal, state or local environmental, health
or safety law or regulation, or any remedial action needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
10.12 Marshalling; Payments Set Aside. The Bank shall be under no
obligation to marshall any assets in favor of the Company or any other Person or
against or in payment of any or all of the Indebtedness of the Company under
this Agreement or any Credit Document. To the extent that the Company makes a
payment or payments to the Bank or the Bank exercises its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
43
10.13. Headings; Plurals. Section headings have been inserted herein
for convenience only and shall not be construed to be a part hereof or thereof.
Unless the context otherwise requires, words in the singular number include the
plural, and words in the plural include the singular.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
APOGEE ENTERPRISES, INC.
By /s/ William G. Gardner
-------------------------------------
Its Treasurer and Chief Financial Officer
---------------------------------------
7900 Xerxes Avenue South
Minneapolis, MN 55431
Attn: William G. Gardner
Telephone: (612) 835-1874
Telecopier: (612) 835-3196
44
CREDIT LYONNAIS CHICAGO BRANCH CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Francois Valla By /s/ Francois Valla
------------------------------ ----------------------------
Its First Vice Pres./Branch Mgr. Its Authorized Signature
----------------------------- ---------------------------
45
EXHIBIT 11
STATEMENT OF DETERMINATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
------------------------------------------------------------------------
Average No. of Common Average No. of Common
Shares & Common Share Shares & Common Share
Equivalents Assumed to Equivalents Assumed to
be Outstanding During be Outstanding During
the Three Months Ended the Six Months Ended
---------------------- ----------------------
August 27, August 28, August 27, August 28,
1994 1993 1994 1993
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding (a) 13,364,988 13,224,992 13,339,016 13,208,035
Common share equivalents
resulting from the assumed
exercise of stock options (b) 82,408 42,805 72,551 31,669
---------- ---------- ---------- ----------
Total primary common shares
and common share equivalents 13,447,396 13,267,797 13,411,567 13,239,704
========== ========== ========== ==========
(a) Beginning balance of common stock adjusted for changes in amount
outstanding, weighted by the elapsed portion of the period during which the
shares were outstanding.
(b) Common share equivalents computed by the "treasury" method. Share amounts
represent the dilutive effect of outstanding stock options which have an
option value below the average market value for the current period.
5
1,000
U.S. Dollars
6-MOS
FEB-25-1995
MAY-29-1994
AUG-27-1994
1
9,992
0
150,687
8,489
59,989
225,432
152,401
82,883
315,107
128,484
50,341
4,472
0
0
115,835
315,107
364,898
364,898
310,270
42,435
0
0
1,383
11,281
4,512
6,894
0
0
0
6,894
.51
.51
