SIXTH AMENDMENT TO
TERM LOAN AND CREDIT AGREEMENT
THIS SIXTH AMENDMENT is made as of the 31st day of July, 1995, and is by and
between Varitronic Systems, Inc., a Minnesota corporation (the "Borrower"), and
Norwest Bank Minnesota, National Association, a national banking association
(the "Bank").
REFERENCE IS HEREBY MADE to that certain Revolving Credit Agreement dated as of
January 31, 1992, as amended by a First Amendment dated September 17, 1992, by a
Second Amendment dated April 19, 1993, by a Third Amendment dated January 24,
1994, by a Fourth Amendment dated September 7, 1994, and by a Fifth Amendment
dated December 31, 1994 (as amended, the "Credit Agreement"), made between the
Borrower and the Bank. Capitalized terms not otherwise defined herein shall have
the respective meanings ascribed to them in the Credit Agreement.
WHEREAS, the Borrower has requested the Bank to reduce the Credit from
$10,000,000.00 to $6,000,000.00 and to have $4,000,000.00 of the outstanding
principal of the Credit become a term loan to the Borrower (the "Loan") to be
evidenced by a Term Note by the Borrower to the Bank (the "Term Note") and
subject to the terms and conditions of the Credit Agreement; and,
WHEREAS, the Bank is willing to grant the Borrower's requests, subject to the
provisions of this Sixth Amendment;
NOW, THEREFORE, in consideration of the premises and for other valuable
consideration received, it is agreed as follows:
1. All references in the Credit Agreement to the Note shall refer to the
Promissory Note a copy of which is attached to this Sixth Amendment as
Exhibit A.
2. The definition of "Interest Period" set forth in Article I, Definitions of
the Credit Agreement is amended in its entirety as follows:
"Interest Period" means with respect to a CD Rate quotation, a period of
30, 60, 90 or 180 days beginning on a Domestic Business Day as elected by
the Borrower, or, with respect to a LIBO Rate quotation for an Advance
under the Revolving Loans, a period of one to six months beginning on a
Eurodollar Business Day as elected by the Borrower; provided, however, that
no Interest Period for an Advance under the Revolving Loans shall end after
December 31, 1996. In addition Interest Period means with respect to a LIBO
Rate Quotation for the Term Loan, a period of 90 to 360 days beginning on a
Eurodollar Business Day as elected by the Borrower, or, with respect to a
Cost of Funds Rate quotation for the Term Loan, a period of one year or
more from the date the quotation is requested; provided, however, that no
Interest Period for the Term Loan shall end after July 31, 1999.
3. The definition of "Loan Documents" set forth in Article I, Definitions of
the Credit Agreement is amended in its entirety as follows:
"Loan Documents" means this Agreement, the Note, the Term Note, the Master
Agreement for Documentary Letters of Credit, the Master Agreement for
Standby Letters of Credit and all Applications for Letters of Credit.
4. The definition of "Revolving Advance Commitment" in Article I, Definitions
of the Credit Agreement is amended by deleting the amount of "$10,000,000"
and substituting the amount of "$6,000,000".
5. Article I, Definitions of the Credit Agreement is amended by the addition
of the following:
"Cost of Funds Rate" means the rate determined by the Bank to represent the
Bank's direct and indirect cost of acquiring funds with a term equal to the
applicable Interest Period for the Cost of Funds in an amount equal to the
outstanding principal amount of the Term Loan.
"Term Note" has the meaning Specified in Section 2.15.
"Notes" means the Note and the Term Note.
6. Section 2.05 Revolving Advance Commitment Fees of Article II of the Credit
Agreement is amended in its entirety as follows:
Section 2.05 Revolving Advance Commitment Fees. The Borrower agrees to pay
to the Bank a commitment fee at the rate of .125% per annum on the amount
of the Revolving Advance Commitment from the date hereof to and including
the Commitment Termination Date, payable quarterly in arrears on the last
day of each September, December, March and June during the term of the
Revolving Advance Commitment, commencing September 30, 1995, provided that
the commitment fee remaining unpaid shall be due and payable on the
Commitment Termination Date.
7. Article II Amount and Terms of the Revolving Loans of the Credit Agreement
is amended by the addition of the following:
Section 2.15 Term Loan Amount. The Bank agrees to provide a term loan to
the Borrower in the amount of Four Million and No/100 Dollars
($4,000,000.00) (the "Term Loan"). The Borrower's obligation to repay
outstandings under the Term Loan will be evidenced by a promissory note
(the "Term Note") dated as of July 31, 1995, in the form of Exhibit B which
is attached to this Sixth Amendment and made a part hereof.
Section 2.16 Term Loan Availability Period. The Term Loan shall consist of
the amount outstanding under the Note as of July 31, 1995 up to a maximum
amount of $4,000,000.00 or, if there is less than $4,000,000.00 outstanding
under the Note on July 31, 1995, the amount outstanding under the Note and
an amount disbursed by the Bank to the Borrower so that the total principal
amount outstanding under the Term Note equals $4,000,000.00.
Section 2.17 Optional Interest Rates for the Term Loan.
(a) Floating Rate. Unless the Borrower elects the LIBO Rate Option or
the Cost of Funds Rate Option pursuant to this Section, the outstanding
principal balance of the Term Loan shall bear interest at the Floating Rate
from time to time in effect plus one-half of one percent (.50%), each
change in the interest rate to become effective on the day the
corresponding change in the Floating Rate becomes effective. According to
the terms of the Term Note, the Borrower may elect interest rates based on
the LIBO Rate Option or Bank's Cost of Funds Rate Option. The following
terms and conditions must be satisfied to elect these options.
(b) LIBO Rate Option and Cost of Funds Rate Option. At the election of
the Borrower, which may be exercised from time to time, the Borrower may
request in writing or by telephone that the Bank quote the Cost of Funds
Rate or LIBO Rate which would be applicable for the principal balance
outstanding of the Term Loan and for the Interest Period indicated by the
Borrower in its quotation request; provided, however, that the Borrower may
not request a Cost of Funds Rate or LIBO Rate quotation at any time that a
Default or Event of Default has occurred and is continuing. A request for a
Cost of Funds Rate quotation must be received by the Bank before 11:00 a.m.
(Minneapolis time) on the Domestic Business Day before the first day of the
proposed Interest Period and a request for a LIBO Rate quotation must be
received by the Bank before 10:00 a.m. (Minneapolis time) on the day two
Eurodollar Business Days before the first day of the proposed Interest
Period. The Borrower shall immediately either accept or reject the
quotation by telephone. If the Borrower does not immediately accept either
the LIBO Rate or the Cost of Funds quotation, the quotation shall be deemed
to have been rejected. Upon acceptance of either the LIBO Rate or Cost of
Funds Rate quotation, the quoted rate shall be the interest rate applicable
for the proposed Interest Period to the outstanding principal balance of
the Term Loan. At the termination of such Interest Period, the interest
rate applicable to the principal balance of the Term Loan shall revert to
the Floating Rate plus .50% unless a new Cost of Funds Rate or LIBO Rate
quotation is accepted by the Borrower. Notwithstanding anything contained
in this Section to the contrary, the Bank shall have no obligation to quote
a LIBO Rate for any Interest Period if the Bank, in its sole discretion,
determines that deposits in amounts equal to the amount for which the
quotation has been requested and maturing at the end of the proposed
Interest Period are not readily available to the Bank from major banks in
the London interbank market.
Section 2.18 Payments. All principal, interest and fees due under the Term
Note will be paid to the Bank by the direct debit of available funds on
deposit in the Borrower's account with the Bank. The Bank will debit the
account on the dates the payments become due. If a due date does not fall
on a day on which the Bank is open for substantially all of its business (a
"Banking Day", except as otherwise provided), the Bank will debit the
account on the next Banking Day, and interest will continue to accrue
during the extended period. If there are insufficient funds in the account
on the day the Bank enters any debit authorized by this Agreement, the
debit will be reversed and the payment will be due immediately without
necessity of demand by direct remittance of immediately available funds.
For amounts bearing interest at the LIBO Rate (if any) a Banking Day is a
day on which the Bank is open for business and on which dealings in U.S.
dollar deposits are carried on in the London interbank market.
8. The first paragraph of Article V Affirmative Covenants of the Credit
Agreement is amended by deleting the term "Note" and substituting the term
"Notes".
9. Section 5.10 Current Ratio of Article V of the Credit Agreement is deleted
and substituted therefor is the following:
Section 5.10 Quick Ratio The Borrower will at all times maintain the ratio
of its Consolidated Current Assets less consolidated inventories to
Consolidated Current Liabilities at not less than 1.0 to 1.0.
10. Section 5.11 Tangible Net Worth of Article V of the Credit Agreement is
amended in its entirety as follows:
Section 5.11 Tangible Net Worth The Borrower will at all times maintain
Consolidated Tangible Net Worth at an amount not less than $18,000,000 plus
50% of cumulative annual net income of the Borrower for fiscal year ending
July 31, 1996 and 75% of cumulative annual net income of the Borrower
annually thereafter. Cumulative annual net income shall be net of maximum
stock repurchases of $2,500,000 over the term of the Agreement. For
purposes of this Section 5.11, a loss in any fiscal year of the Borrower
will be included as zero for purposes of the calculation hereunder.
11. Section 5.12 Ratio of Earnings to Debt Service of Article V of the Credit
Agreement is amended in its entirety as follows:
Section 5.12 Ratio of Earnings to Debt Service. The Borrower will at all
times maintain the ratio of (i) its net income before interest expense and
income tax, plus (A) depreciation and, plus (B) all lease payments in
respect of capital and operating leases which have a term in excess of one
year, to (ii) the sum of its interest expenses, plus (A) all lease payments
in respect of capital and operating leases and, plus (B) the current
portion of any Long-Term Debt, all determined on the basis of the four
preceding fiscal quarters of the Borrower, at not less than 1.30 to 1.00.
For purposes of this Section 5.12, twenty percent (20%) of the outstanding
principal balance of the Advances will at all times be included in the
current portion of Long-Term Debt.
12. The first paragraph of Article VI Negative Covenants of the Credit
Agreement is amended by deleting the term "Note" and substituting the term
"Notes".
13. Section 7.01(a) under Events of Default of Article VII of the Credit
Agreement is amended in its entirety as follows:
(a) Default in the payment of any principal of or interest on either of
the Notes when such payment becomes due and payable; or
14. Section 7.02 of the Rights and Remedies of the Credit Agreement is amended
so that each time the term "Note" is used it is deleted and the term
"Notes" is substituted.
15. Simultaneously with the execution of this Sixth Amendment, the Borrower
shall deliver to the Bank upon request, a Norwest Corporate Certificate of
Authority, in form and content acceptable to the Bank; and,
16. The Borrower hereby represents and warrants to the Bank as follows:
A. The Credit Agreement constitutes a valid, legal and binding obligation
owed by the Borrower to the Bank, subject to no counterclaim, defense,
offset, abatement or recoupment.
B. As of the date of this Sixth Amendment, (i) all of the representations
and warranties contained in the Credit Agreement are true, and (ii)
there exists no Event of Default and no event which, with the giving
of notice or the passage of time, or both, could become an Event of
Default.
C. The execution, delivery and performance of this Sixth Amendment by the
Borrower are within its corporate powers, have been duly authorized,
and are not in contravention of law or the terms of the Borrower's
Articles of Incorporation or By-laws, or of any undertaking to which
the Borrower is a party or by which it is bound.
E. All financial statements delivered to the Bank by or on behalf of the
Borrower, including any schedules and notes pertaining thereto, have
been prepared in accordance with Generally Accepted Accounting
Principles consistently applied, and fully and fairly present the
financial condition of the Borrower at the dates thereof and the
results of operations for the periods covered thereby, and there have
been no material adverse changes in the financial condition or
business of the Borrower from April 30, 1995 to the date hereof.
17. Except as modified by this Sixth Amendment, the Credit Agreement remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Sixth Amendment
as of the date first written above.
NORWEST BANK MINNESOTA,
VARITRONIC SYSTEMS, INC. NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxx Xxxxxxxxxx
Its: Vice President Its:
EXHIBIT B
[GRAPHIC OMMITTED - NORWEST LOGO]
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION TERM NOTE
$4,000,000.00 Minneapolis, Minnesota
FOR VALUE RECEIVED, Varitronic Systems, Inc. (the "Borrower") promises to pay to
the order of Norwest Bank Minnesota, National Association (the "Bank"), at its
principal office or such other address as the Bank or holder may designate from
time to time, the principal sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00), or the amount shown on the Bank's records to be outstanding,
plus interest (calculated on the basis of actual days elapsed in a 360-day year)
accruing on the unpaid balance at the annual rate of interest defined below.
Absent manifest error the Bank's records will be conclusive evidence of the
principal and accrued interest owing hereunder.
This Term Note is issued pursuant to a Revolving Credit Agreement dated January
31, 1992 as amended of even date herewith between the Bank and the Borrower (the
"Agreement"). The Agreement, and any amendments or substitutions thereto,
contain additional terms and conditions including default and acceleration
provisions. The terms of the Agreement are incorporated into this Term Note by
reference. Capitalized terms not expressly defined herein shall have the
meanings given them in the Agreement.
INTEREST RATE.
BASE RATE OPTION. Unless the Borrower chooses the Cost of Funds Option or the
LIBO Rate Option defined below, the principal balance outstanding under this
Term Note will bear interest at an annual rate equal to the Base Rate, floating
plus .50% (the "Floating Rate Option"). The Floating Rate is the "base" or
"prime" rate of interest established by the Bank from time to time at its
principal office in Minneapolis, Minnesota.
COST OF FUNDS OPTION. Subject to the terms and conditions of the Agreement, the
Borrower may elect that all of the principal balance of this Term Note bear
interest at the Bank's cost of funds plus 2.15% (the "Cost of Funds Option").
The Bank's Cost of Funds is the rate determined by the Bank to represent the
Bank's direct and indirect cost of acquiring funds with a term equal to the
applicable Cost of Funds Interest Period, in an amount equal to the principal
balance outstanding of this Term Note.
LIBO RATE OPTION. Subject to the terms and conditions of the Agreement the
Borrower may elect that all of the principal balance of this Term Note bear
interest at the LIBO Rate plus 2.15% (the "LIBO Rate Option"). The LIBO Rate
will be computed in accordance with the terms of the Credit Agreement.
INTEREST AFTER MATURITY. The unpaid principal balance and interest due under
this Term Note after maturity (whether this Term Note matures by demand,
acceleration or lapse of time) shall bear interest until paid at the Base Rate
plus 2.15%, floating. The Base Rate is the "base" or "prime" rate of interest
established by the Bank from time to time at its principal office in
Minneapolis, Minnesota.
REPAYMENT TERMS
INTEREST. Interest will be payable quarterly in arrears on the last day of each
quarter, beginning October 31, 1995.
PRINCIPAL. Principal will be payable in 16 successive quarterly installments as
follows starting on October 31, 1995 and continuing on the last day of each
quarter thereafter until and including July 31, 1999 when all outstanding
principal and accrued but unpaid interest will be due and payable:
October 31, 1995 and January 31, 1996 $ 150,000.00
April 30, 1996 and July 31, 1996 $ 200,000.00
October 31, 1996 until and including January 31, 1998 $ 250,000.00
April 30, 1998 until and including July 31, 1999 $ 300,000.00
PREPAYMENT. While under the Floating Rate Option, the Borrower may prepay this
Term Note in full or in part at any time without penalty. Each prepayment of
this Term Note under the LIBO Rate Option or Cost of Funds Option, whether
voluntary or by reason of acceleration, will be accompanied by accrued interest
on the prepaid portion and a prepayment fee equal to the amount, if any, by
which:
(i) the additional interest that would have been payable on the amount
prepaid if it had not been paid until the last day of the interest period,
exceeds
(ii) the interest that would have been recoverable by the Bank by
reinvesting the amount prepaid from the prepayment date to the last day of the
relevant interest period in U.S. Government Securities.
Any prepayment will be applied to the most remote installment of principal due
under this Term Note.
ADDITIONAL TERMS AND CONDITIONS. The Borrower agrees to pay all costs of
collection, including reasonable attorneys' fees and legal expenses incurred by
the Bank in the event this Term Note is not duly paid. Demand, presentment,
protest and notice of nonpayment and dishonor of this Term Note are expressly
waived. This Term Note will be governed by the substantive laws of the State of
Minnesota.
VARITRONIC SYSTEMS, INC.
BY: /s/ Xxxxxxx X. Xxxxxx
ITS: Vice President
EXHIBIT A
PROMISSORY NOTE
$6,000,000.00 July 31, 1995
FOR VALUE RECEIVED, the undersigned, VARITRONIC SYSTEMS, INC., a Minnesota
corporation, promises to pay on December 31, 1996 to the order of Norwest Bank
Minnesota, National Association (the "Bank") at the Bank's St. Xxxx Office or at
any other place designated at any time by the holder hereof, in lawful money of
the United States of America and in immediately available funds, the principal
sum of SIX MILLION AND NO/100 DOLLARS ($6,000,000.00), or so much thereof as is
disbursed and remains outstanding hereunder as shown by the Bank's liability
record on the dates payments are due hereunder, together with interest on the
unpaid balance hereof from the date hereof until this Note is fully paid at the
rate or rates and times determined in accordance with the provisions of the
Credit Agreement described below. Interest on this Note shall be calculated on
the basis of actual number of days elapsed in a 360-day year.
This Note constitutes the Note issued pursuant to the provisions of that
certain Revolving Credit Agreement dated as of January 31, 1992, as amended by a
First Amendment dated as of September 17, 1992, by a Second Amendment dated
April 19, 1993, by a Third Amendment dated January 24, 1994, by a Fourth
Amendment dated September 7, 1994, by a Fifth Amendment dated December 31, 1994,
and by a Sixth Amendment of even date herewith (as amended, the "Credit
Agreement"), made between the undersigned and the Bank. Reference is hereby made
to the Credit Agreement for statements of the terms pursuant to which the
indebtedness evidenced hereby was created, may be prepaid voluntarily, may be
reborrowed and may be accelerated.
Unless prohibited by law, the undersigned agrees to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event this Note is not duly paid. The holder hereof may
change any terms of payment of this Note, including extensions of time and
renewals, and release any security for, or any party to, this Note, without
notifying or releasing any accommodation maker, endorser or guarantor from
liability in connection with this Note. Presentment or other demand for payment,
notice of dishonor and protest are hereby waived by the undersigned and each
endorser or guarantor. This Note shall be governed by the substantive laws of
the State of Minnesota.
VARITRONIC SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Its: Vice President
