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EXHIBIT 10(L)(1)
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT is dated as of March 20, 1998
("this Amendment") by and among NORSTAN, INC., a Minnesota corporation (the
"Borrower"), the banks which are signatories hereto (each individually, a
"Bank," and collectively, the "Banks"), and FIRST BANK NATIONAL ASSOCIATION, a
national banking association, one of the Banks, as agent for the Banks (in such
capacity, the "Agent").
RECITALS
A. The Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of July 23, 1996, as amended by a First Amendment dated as
of October 11, 1996, and a Second Amendment dated as of September 26, 1997 (as
so amended, the "Credit Agreement").
B. The parties hereto desire to amend the Credit Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein, but which are defined in the Credit Agreement, shall
have the meanings ascribed to such terms in the Credit Agreement unless the
context otherwise requires.
Section 2. Amendments to Credit Agreement. Subject to Section 6
hereof, the Credit Agreement is hereby amended as follows:
(a) The definition of "Guarantors" set forth in Recital B of the
Credit Agreement is amended to include "Xxxxxx, Inc., a North Carolina
corporation, d/b/a PRIMA Consulting Inc. ("PRIMA")," "Norstan International,
Inc., a Minnesota corporation ("Norstan International")" and
Norstan-UK, Limited, a corporation incorporated in London, England
("Norstan - UK")."
(b) The definitions of "Adjusted Leverage Ratio," "Applicable Margin,"
"Cash Flow Leverage Ratio," "Interest Coverage Ratio" and "Tangible Net Worth"
set forth in Section 1.1 of the Credit Agreement are amended in their
entireties to read as follows:
(i) "Adjusted Leverage Ratio": At the time of any determination, the
ratio of (a) Total Indebtedness less Indebtedness of NFS to (b) Tangible Net
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Worth, all as determined in accordance with GAAP (but determined using the
equity method of accounting with respect to NFS).
(ii) "Applicable Margin": With respect to:
Pricing Level IV: (a) Reference Rate Advances: 0.05%
(b) CD Rate Advances: 1.25%
(c) Eurodollar Rate Advances: 1.25%
Pricing Level III: (a) Reference Rate Advances: 0.25%
(b) CD Rate Advances: 1.0%
(c) Eurodollar Rate Advances: 1.0%
Pricing Level II: (a) Reference Rate Advances: 0.0%
(b) CD Rate Advances: 0.75%
(c) Eurodollar Rate Advances: 0.75%
Pricing Level I: (a) Reference Rate Advances: 0.0%
(b) CD Rate Advances: 0.50%
(c) Eurodollar Rate Advances: 0.50%
(iii) "Cash Flow Leverage Ratio": As of the last day of any fiscal
quarter, the ratio of (a) the sum (without duplication) of the aggregate
principal amount of all outstanding Capitalized Lease Obligations of the
Borrower and the Subsidiaries and that portion of Total Indebtedness bearing
interest determined as of that date, to (b) EBITDA for the four consecutive
fiscal quarters ending on that date, all as determined in accordance with GAAP
(but determined using the equity method of accounting with respect to NFS).
(iv) "Interest Coverage Ratio": As of the last day of any fiscal
quarter, the ratio of (a) EBITDA for the four consecutive fiscal quarters
ending on that date, to (b) Interest Expense, in each case determined for said
period in accordance with GAAP (but determined using the equity method of
accounting with respect to NFS).
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(v) "Tangible Net Worth": As of any date of determination,
the sum of the amounts set forth on the consolidated balance sheet of
the Borrower as the sum of the common stock, preferred stock,
additional paid-in capital, retained earnings, unamortized cost of
stock and foreign currency translation adjustments of the Borrower
(excluding treasury stock), less the book value of all assets of the
Borrower and its Subsidiaries that would be treated as intangibles
under GAAP, including all such items as goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses, unamortized debt
discount and expenses and the excess of the purchase price of the
assets of any business acquired by the Borrower or any of its
Subsidiaries over the book value of such assets.
(c) Section 1.1 of the Credit Agreement is amended by
inserting therein the following definitions of "Net Proceeds" and "Pricing
Level" in appropriate alphabetical order:
"Net Proceeds": With respect to the sale or disposition of
property, sale of capital stock and offering of debt securities by the
Borrower, or other non-recurring event, an amount equal to (a) the cash
(including deferred cash proceeds) and other consideration received by
the Borrower in connection with such transaction or event, minus (b)
the sum of (i) the unpaid principal-balance on the date of any such
sale or offering of any Indebtedness that is secured by a Lien not
proscribed by Section 6.12 and affecting such property, and which is
required to be repaid on the date of such sale or offering, (ii) any
closing costs or selling costs arising in connection with such sale or
offering, and (iii) any sales or income tax paid or payable by the
Borrower in connection with such transaction or event (excluding any
tax for which the Borrower is reimbursed by the purchaser).
"Pricing Level": Shall mean that level of pricing in effect
for any fiscal quarter determined in accordance with the following:
Pricing Level IV: Shall be in effect during any fiscal quarter
if the Cash Flow Leverage Ratio as of the last day of the most recently
completed fiscal quarter was greater than or equal to 2.75 to 1.0.
Pricing Level III: Shall be in effect during any fiscal
quarter if the Cash Flow Leverage Ratio as of the last day of the most
recently completed fiscal quarter was no less than 2.0 to 1.0 and no
greater than 2.74 to 1.0.
Pricing Level II: Shall be in effect during any fiscal quarter
if the Cash Flow Leverage Ratio as of the last day of the most recently
completed fiscal quarter was no less than 1.0 to 1.0 and no greater
than 1.99 to 1.0.
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Pricing Level I: Shall be in effect during any fiscal quarter
if the Cash Flow Leverage Ratio as of the last day of the most recently
completed fiscal quarter was less than 1.0 to 1.0.
(d) Section 2.5 of the Credit Agreement is amended by adding
thereto the following subsection 2.5(f) at the end thereof:
2.5(f) Subject to the last two sentences of this Section
2.5(f), any change in the interest rate applicable to an Advance due to
a change in the Pricing Level shall, for CD Rate Advances and
Eurodollar Rate Advances, be effective on the first day after delivery
of the financial statements described in Section 5.1(c) and shall
continue until the day on which such statements are delivered for the
following fiscal quarter. Notwithstanding the foregoing, if the
Borrower has not furnished the quarterly financial statements and
reports required under Sections 5.1(c) and 5.1(d) for any fiscal
quarter by the sixtieth day after the end of such fiscal quarter, the
Applicable Margin shall be calculated as if the Cash Flow Leverage
Ratio for such fiscal quarter was greater than or equal to 2.75 to 1.0
for the period from the sixty-first day after the end of such fiscal
quarter until such date on which such financial statements and reports
are delivered.
(e) Section 2.7 of the Credit Agreement is amended in its
entirety to read as follows:
Section 2.7 Prepayment of the Revolving Commitment.
2.7(i) Mandatory Prepayment. On the date of the occurrence
of any of the following events, the Borrower shall prepay the
Revolving Loans in an aggregate amount of 100% of the Net
Proceeds received in cash by the Borrower as a result of any of
the following events: (A) sales of assets of the Borrower,
other than sales of inventory, in excess of $1,000,000 in the
aggregate during any fiscal year of the Borrower, to the extent
the resulting Net Proceeds are not used to purchase similar
assets within one year from the date of such sales, and (B) any
public or private sale or offering by the Borrower of its
capital stock or debt securities.
2.7(ii) Optional Prepayments. The Borrower may prepay
Reference Rate Advances, in whole or in part, at any time,
without premium or penalty. Except upon an acceleration
following an Event of Default or upon termination of the
Revolving Commitments in whole, the Borrower may pay Eurodollar
Rate Advances and CD Rate Advances only on the last day of the
Interest Period applicable thereto. Any such prepayment must,
in the case of a Eurodollar Rate Advance or a CD Rate Advance,
be accompanied by accrued and unpaid interest
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on the amount prepaid. Each prepayment shall be in an aggregate
amount for all the Banks of $300,000 ($200,000, in the case of a
Reference Rate Advance) or an integral multiple of $100,000 in excess
thereof. Amounts paid (unless following an acceleration or upon
termination of the Revolving Commitments in whole) or prepaid on
Advances under this Section 2.7 may be reborrowed upon the terms and
subject to the conditions and limitations of this Agreement. Amounts
paid or prepaid on the Advances under this Section 2.7 shall be for
the account of each Bank in proportion to its share of outstanding
Revolving Loans.
(f) Sections 2.14(a) and (b) of the Credit Agreement are amended in
their entireties to read as follows:
2.14(a) The Company shall pay quarterly in arrears on the last
day of each calendar quarter and on the Termination Date, a Letter of
Credit Fee in an amount determined by applying a rate per annum equal
to the Applicable Margin with respect to Eurodollar Rate Advances then
in effect to the average daily aggregate principal amount of Commercial
Paper Notes (Midwest) issued by the Borrower and outstanding under the
Commercial Paper Program, all as more specifically set forth in the
Commercial Paper Program Documents.
2.14(b) For each Standby Letter of Credit issued, the company
shall pay in advance, on the date of issuance thereof and on the date
of any extension thereof, a fee (a "Letter of Credit Fee") in an
amount determined by applying a rate per annum equal to the Applicable
Margin with respect to Eurodollar Rate Advances then in effect to the
original face amount of the Standby Letter of Credit for the period
from the date of issuance or extension to the scheduled expiration
date of such Letter of Credit.
(g) Section 2.18 of the Credit Agreement is amended by deleting
therefrom the date "July 31, 1999" and inserting in its place the date
"May 31, 2001".
(h) Section 6.4 of the Credit Agreement is amended in its
entirety to read as follows:
Section 6.4 Change in Nature of Business. The Borrower will
not, and will not permit any Subsidiary to, make any material change
in the nature of the business of the Borrower or such Subsidiary, as
carried on at the date hereof, except for changes in business related
to the communications and information technology industries.
(i) Section 6.5 of the Credit Agreement is amended in its
entirety to read as follows:
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Section 6.5 Subsidiaries. After the date of this Agreement,
the Borrower will not, and will not permit any Subsidiary to, form or
acquire any corporation which would thereby become a Subsidiary, unless
(a) 100% of the issued and outstanding capital stock of such Subsidiary
is owned by Norstan, Inc. or by a 100%-owned Subsidiary of
Norstan, Inc., (b) each line of business of such Subsidiary is within
the communications and information technology industries and (c) the
aggregate amount of the Borrower's Investment or Investments in all
such Subsidiaries shall not exceed the amounts set for in Section
6.10(1).
(j) Section 6.8 of the Credit Agreement is amended in its
entirety to read as follows:
Section 6.8 Capital Expenditures. The Borrower will not, and
will not permit any Subsidiary to, make Capital Expenditures in an
amount exceeding, on a consolidated basis in any fiscal year, an amount
equal to (a) seven percent (7%) of the consolidated revenues of the
Borrower and the Subsidiaries as reported in their consolidated
financial statements for the preceding fiscal year, plus (b) for the
fiscal year ending April 30, 1998 only, Capital Expenditures
attributable to the PRIMA Acquisition.
(k) Section 6.10(k) of the Credit Agreement is amended in its
entirety to read as follows:
6.10(k) Loans and advances by the Borrower to Norstan
Communications, Inc., Norstan Network Services, Inc., Connect Computer
Company, PRIMA, Norstan-UK and Norstan International and (for
purposes other than to finance lease account receivables, as specified
in 6.10(j) above) to Norstan Canada;
(l) Section 6.10(l) of the Credit Agreement is amended in its
entirety to read as follows:
6.10(l) Purchases or acquisitions by the Borrower of
substantially all of the real and personal property of, or the capital stock
of, another Person engaged in the communications and information technology
industries; provided that (i) the purchase price paid for such assets shall not
exceed, in the aggregate (including any contingent payments based on
profitability of the assets acquired) for any such purchase or acquisition,
$15,000,000; (ii) there shall be no more than three such separate purchases or
acquisitions during any consecutive twelve month period; (iii) no Default or
Event of Default has occurred or would occur as a result thereof; (iv) the
Borrower will deliver to the Lender pro forma financial statements
demonstrating in reasonable detail that the Borrower would have complied with
Sections 6.16, 6.17, 6.18, and 6.19 had such purchase or acquisition been
consummated prior to the end of the
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most recently completed fiscal quarter, and that based on the Borrower's
projections, the Borrower will comply with Sections 6.16, 6.17, 6.18 and
6.19 at the end of the current fiscal quarter after giving effect to such
purchase or acquisition; and (v) EBITDA for the Person so acquired was not
less than $1 for the four most recently completed fiscal quarters of such
Person prior to the date of such purchase or acquisition;
(m) Section 6.11(k) of the Credit Agreement is amended in its
entirety to read as follows:
6.11(k) Unsecured Indebtedness of the Borrower (other than as
permitted by other clauses of this Section 6.11); provided, however, that
the aggregate principal amount of such Indebtedness outstanding at any
time shall not exceed $10,000,000.
(n) Sections 6.15, 6.16, 6.17, 6.18, 6.19, 6.20 and 6.21 of the
Credit Agreement are amended in their entireties to read as follows:
Section 6.15 Intentionally Omitted.
Section 6.16 Minimum EBITDA. The Borrower will not permit EBITDA as
of the last day of any fiscal quarter for the four consecutive fiscal
quarters then ended to be less than (i) $35,000,000 from April 30, 1998
through April 29, 1999, (ii) $40,000,000 at the end of any fiscal quarter
ending on or after April 30, 1999 through April 29, 2000, and (iii)
$45,000,000 at the end of any fiscal quarter thereafter.
Section 6.17 Cash Flow Leverage Ratio. The Borrower will not permit
the Cash Flow Leverage Ratio, as of the last day of any fiscal quarter,
to be more than 3.00 to 1.0.
Section 6.18 Adjusted Leverage Ratio. The Borrower will not permit
the Adjusted Leverage Ratio to be more than 3.00 to 1.0 as of the end of
any fiscal quarter.
Section 6.19 Interest Coverage Ratio. The Borrower will not permit
the Interest Coverage Ratio, as of the last day of any fiscal quarter, to
be less than 8.0 to 1.0.
Section 6.20 Ratio of NFS Total Senior Debt to NFS Tangible Net
Worth. The Borrower will not permit the ratio of the NFS Total Senior
Debt to the NFS Tangible Net Worth to be more than 12.0 to 1.0 at any time.
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Section 6.21 NFS Total Reserve as Percentage of NFS Total Gross
Investment. The Borrower will not permit the NFS Total Reserve to be
less than 2.0% of the NFS Total Gross Investment at any time.
(o) Each reference to "ROLM Company" set forth in Section 7.1(n) of
the Credit Agreement shall mean a reference to "Siemens Business Communications
Systems, Inc."
(p) Exhibit 1.1A to the Credit Agreement is deleted and Exhibit 1.1A
to this Amendment is inserted in its place and Exhibit 1.1C to the Credit
Agreement is deleted and Exhibit 1.1C to this Amendment is inserted in its
place.
(q) Schedules 4.19, 6.10, 6.11, 6.12 and 6.13 to the Credit
Agreement are deleted and Schedules 4.19, 6.10, 6.11, 6.12 and 6.13 to this
Amendment are inserted in lieu therefor.
Section 3. Termination of PRIMA Bridge Loan Facility. On the effective
date of this Amendment the PRIMA Bridge Loan Facility and the Credit Agreement
dated as of September 26, 1997 and the Loan Documents as defined therein are
hereby terminated. As of such date, the outstanding principal balance of the
PRIMA Bridge Loan shall be deemed outstanding under the Credit Agreement as
amended hereby and shall bear interest and be repaid in accordance therewith.
All accrued and unpaid interest and unpaid Unused Revolving Commitment Fees (as
defined in the PRIMA Bridge Loan Facility Credit Agreement) on the PRIMA Bridge
Loan Facility shall be paid by the Borrower on such date. On the effective date
of this Amendment, the Banks shall pay such amounts to each other as required so
that each Bank's percentage of the Revolving Outstandings is equal to each
Bank's Revolving Commitment Percentage.
Section 4. Representations and Warranties of the Borrower. To induce
the Banks and the Agent to execute and deliver this Amendment (which
representations and warranties shall survive the execution and delivery of this
Amendment), the Borrower represents and warrants to the Agent and the Banks
that:
(a) this Amendment and the New Notes (as defined below in Section 6(b)
hereof) have been duly authorized, executed and delivered by it and this
Amendment and the New Notes constitute the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance
with their terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors' rights
generally;
(b) the Credit Agreement, as amended by this Amendment, constitutes the
legal, valid and binding obligation of the Borrower enforceable against the
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Borrower in accordance with its terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating
to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Borrower of the
Amendment and the New Notes (i) have been duly authorized by all
requisite corporate action and, if required, shareholder action, (ii) do
not require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law, statute,
rule or regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other agency or
government binding upon it, or (3) any provision of any material indenture,
agreement or other instrument to which it is a party or by which any of its
properties or assets are or may be bound, or (B) result in a breach of or
constitute (alone or with due notice or lapse of time or both) a default
under any indenture, agreement or other instrument referred to in clause
(iii)(A)(3) of this Section 4(c);
(d) as of the date hereof, no unwaived Default or Event of Default has
occurred which is continuing; and
(e) all the representations and warranties contained in Section 4 of
the Credit Agreement are true and correct in all material respects with the
same force and effect as if made by the Borrower on and as of the date
hereof.
Section 5. Waiver. The Borrower has informed the Banks that the
Adjusted Leverage Ratio for the period ended November 1, 1997 was 2.1 to 1.0
which is in excess of the maximum level of 2.0 to 1.0 allowed under Section
6.18 of the Credit Agreement. Upon satisfaction of the conditions set forth in
Section 6 of this Amendment, the Banks hereby waive Event of Default under the
Credit Agreement described in the immediately preceding sentence for the period
ended November 1, 1997. This waiver is limited to the express terms hereof and
shall not extend to any other Default, Event of Default or any other period.
This waiver shall not be and shall not be deemed to be a course of dealing upon
which the Borrower may rely with respect to any other Default, Event of Default
or request for a waiver and the Borrower hereby expressly waives any such
claim.
Section 6. Conditions to Effectiveness of this Amendment. This
Amendment shall not become effective until, and shall become effective when,
each and every one of the following conditions shall have been satisfied:
(a) executed counterparts of this Amendment, duly executed by the
Borrower and each of the Banks, shall have been delivered to the Agent;
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(b) executed Revolving Notes (the "New Notes") in the form of Exhibit
1.1C shall have been received by the Agent on behalf of each of the Banks.
(c) the Agent shall have received from each of the Guarantors, other
than PRIMA, Norstan International and Norstan-UK, a Consent and Agreement of
Guarantor in the form of Attachment 1 hereto (the "Guarantor Agreements")
duly completed and executed by such Guarantor;
(d) the Agent shall have received from each of PRIMA, Norstan
International and Norstan-UK a duly executed Guaranty in the form of
Exhibit A hereto;
(e) the Agent shall have received a copy of the resolutions of the
Board of Directors of the Borrower authorizing the execution, delivery
and performance by the Borrower of this Amendment, certified by its
Secretary or an Assistant Secretary, together with a certificate of the
Secretary or an Assistant Secretary of the Borrower certifying as to the
incumbency and the true signatures of the officers authorized to execute
this Amendment on behalf of the Borrower;
(f) a copy of the corporate resolution of each of PRIMA, Norstan
International and Norstan-UK authorizing the execution, delivery and
performance of its respective Guaranty;
(g) an incumbency certificate for each of PRIMA, Norstan International
and Norstan-UK showing the names and titles and bearing the signatures
of its officers authorized to execute its respective Guaranty, certified as
of the Closing Date by the Secretary or an Assistant Secretary of PRIMA,
Norstan International and Norstan-UK, respectively;
(h) a copy of the Articles of Incorporation of each of PRIMA, Norstan
International and Norstan-UK with all amendments thereto, certified by
the appropriate governmental official of the jurisdiction of its
incorporation as of a date not more than ten days prior to the date hereof;
(i) a certificate of good standing for each of PRIMA, Norstan
International and Norstan-UK in the jurisdiction of its incorporation,
certified by the appropriate governmental officials as of a date not more
than ten days prior to the date hereof;
(j) a copy of the bylaws of each of PRIMA, Norstan International and
Norstan-UK, certified as of the Closing Date by the Secretary or an
Assistant Secretary of PRIMA, Norstan International and Norstan-UK,
respectively; and
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(d) This Amendment shall be governed by, and construed in
accordance with, the internal law, and not the law of conflicts, of the
State of Minnesota, but giving effect to federal laws applicable to
national banks.
(e) This Amendment shall be binding upon the Borrower, the
Agent and the Banks and their respective successors and assigns, and
shall inure to the benefit of the Borrower, the Agent and the Banks
and the successors and assigns of the Agent and the Banks.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
NORSTAN, INC.
By Xxxxxx X. Xxxx
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Its Treasurer
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FIRST BANK NATIONAL ASSOCIATION,
as a Bank and as Agent
By Xxxxx Xxxxxxx
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Its Commercial Banking Officer
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XXXXXX TRUST AND SAVING BANK
By Xxxxxxxxx Xxxxxx
--------------------------------
Its Vice President
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THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By Xxxxxxx X. Xxxxxx
--------------------------------
Its Vice President
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By Xxxx X. Xxxxxx, Xx.
--------------------------------
Its Vice President & Manager
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[Signature Page to Third Amendment to Credit Agreement]
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