SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT is dated as of May
31, 1999, but is effective as of April 30, 1999 ("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 U.S. BANK NATIONAL ASSOCIATION (formerly known as 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, a Second Amendment dated as of September 26, 1997,
a Third Amendment dated as of March 20, 1998, a Fourth Amendment dated as of
July 23, 1998, a Fifth Amendment dated as of September 28, 1998 and a Sixth
Amendment dated as of October 21, 1998 (as so amended, the "Credit Agreement").
B. The parties hereto desire to amend the Credit Agreement in
certain respects and to waive certain Events of Default.
C. The Borrower has formed or acquired three new Subsidiaries,
namely, Norstan Consulting Holding Company, Norstan Consulting, Inc. and Norstan
Canada, Ltd., each of which Subsidiaries is required by the terms of the Credit
Agreement to become a Guarantor of the Borrower's obligations under the Credit
Agreement.
D. Effective, January 1, 1999, Connect Computer Corporation,
Xxxxxx, Inc. d/b/a Prima Consulting, Inc. and Wordlink, Inc. were merged with
and into Norstan Consulting, Inc.
E. The operations of Norstan Canada, Inc. ceased as of April
30, 1999 and the assets thereof were transferred to Norstan Canada, Ltd. as of
May 1, 1999.
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
5 hereof, the Credit Agreement is hereby amended as follows:
(a) Article IV thereof is amended by adding thereto the
following new Section 4.20:
Section 4.20 YEAR 2000. The Borrower has reviewed and assessed
its business operations and computer systems and applications to
address the "year 2000 problem" (that is, that computer applications
and equipment used by the Borrower, directly or indirectly through
third parties, may be unable to properly perform date-sensitive
functions before, during and after January 1, 2000). The Borrower
reasonably believes that the year 2000 problem will not result in a
material adverse change in the Borrower's business condition (financial
or otherwise), operations, properties or prospects or ability to repay
the Bank. The Borrower is in the process of implementing a plan to
remediate year 2000 problems and will complete implementation of such
plan with respect to any material year 2000 problems, and testing
thereof, by September 30, 1999. The Borrower agrees that this
representation will be true and correct on and shall be deemed made by
the Borrower on each date the Borrower requests any Advance under this
Agreement or the Note or delivers any information to the Bank. The
Borrower will promptly deliver to the Bank such information relating to
this representation and covenant as the Bank may request from time to
time.
(b) Section 6.5 thereof is amended to read as follows:
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 forth in Section
6.10(l); provided, however, that Norstan Communications, Inc. shall be
permitted to acquire the initial 75% of the membership interest in
Connaissance contemplated by the Connaissance Agreement and on May 1,
2001, to acquire the remaining 25% of the membership interest in
Connaissance in accordance with the Connaissance Agreement and to
invest an additional $200,000 in Connaissance for the sole purpose of
acquiring certain assets of ASP Consulting; and provided, further, that
the Borrower shall be permitted to acquire 100% of the issued and
outstanding capital stock of Wordlink, Inc. notwithstanding the
Borrower's failure to comply with clauses (iii) and (iv) of Section
6.10(l) at the time of such acquisition.
(c) Section 6.8 thereof is amended 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, plus (c) Capital
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Expenditures attributable to the acquisition of membership interests in
Connaissance pursuant to the Connaissance Agreement and the $200,000
Investment in Connaissance for the purpose of acquiring certain assets
of ASP Consulting, as permitted under Section 6.5.
(d) Section 6.10(k) thereof is amended to read as follows:
6.10(k) Loans and advances (i) by the Borrower to Norstan
Communications, Inc., Norstan Network Services, Inc., Norstan
Consulting, Inc. (with respect to Connect Computer Company, PRIMA and
Wordlink, Inc., all of which were merged with and into Norstan
Consulting, Inc. effective January 1, 1999), Norstan-UK, Norstan
International and Connaissance and (for purposes other than to finance
lease account receivables, as specified in 6.10(j) above) to Norstan
Canada, and (ii) by Norstan Communications, Inc. to Connaissance as
contemplated by the Connaissance Agreement, provided that, prior to the
Borrower's acquisition of the remaining 25% membership interest in
Connaissance pursuant to the Connaissance Agreement, the aggregate
amount of such loans and advances to Connaissance shall not exceed
$4,000,000 at any time outstanding prior to April 30, 2000 and
$3,000,000 at any time outstanding on or after April 30, 2000.
(e) Section 6.16 thereof is amended to read as follows:
Section 6.16 MINIMUM EBITDA. The Borrower will not permit
EBITDA to be less than (a) $9,000,000 for the period of one fiscal
quarter ending Xxxxx 00, 0000, (x) $16,000,000 for the period of two
consecutive fiscal quarters ending July 31, 1999, (c) $26,000,000 for
the period of three consecutive fiscal quarters ending October 31,
1999, (d) $35,000,000 for the period of four consecutive fiscal
quarters ending January 31, 2000 and (e) $40,000,000 for each period of
four consecutive fiscal quarters ending on or after April 30, 2000.
(f) Section 6.19 thereof is amended to read as follows:
Section 6.19 INTEREST COVERAGE RATIO. The Borrower will not
permit the Interest Coverage Ratio to be less than (a) 6.0 to 1.0 as of
April 30, 1999, July 31, 1999 and October 31, 1999 and (b) 8.0 to 1.0
as of January 31, 2000 and as of the last day of any fiscal quarter
ending thereafter.
Section 3. WAIVER. The Borrower has informed the Banks that it
was not in compliance with its covenant under Section 6.10(k)(ii) hereof as
constituted prior to the date hereof, in that the aggregate outstanding
principal of loans and advances from Norstan Communications, Inc. to
Connaissance was in excess of $2,000,000, and that it was not in compliance with
its covenant under Section 6.16 of the Credit Agreement for the period ended
January 31, 1999, in that its actual EBITDA for the period of four consecutive
fiscal quarters ended on that date was less than $35,000,000. Each such instance
of noncompliance constitutes an Event of Default under the Credit Agreement.
Upon satisfaction of the conditions set forth in
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Section 5 of this Amendment, the Banks hereby waive the Events of Default
under the Credit Agreement described in the preceding sentences. 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 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 has been duly authorized, executed and
delivered by it and this Amendment constitutes the legal, valid and
binding obligation of the Borrower enforceable against the 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;
(b) the Credit Agreement, as amended by this Amendment,
constitutes the legal, valid and binding obligation of the Borrower
enforceable against the 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 (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
Article IV 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.
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Section 5. 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) the Agent shall have received executed counterparts of
this Amendment, duly executed by the Borrower and each of the Banks;
(b) the Agent shall have received from the Guarantors a
Consent and Agreement of Guarantors in the form of Exhibit A hereto
(the "Guarantor Agreements") duly completed and executed by each
Guarantor;
(c) the Agent shall have received from each of Norstan
Consulting Holding Company, Norstan Consulting, Inc. and Norstan
Canada, Ltd. a Guaranty substantially in the same form as the
Guaranties heretofore executed by the other Guarantors, duly executed
by each such Subsidiary;
(d) 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; and
(e) the Agent shall have received the favorable opinion of
counsel to the Borrower covering the matters set forth in Exhibit B
hereto, which opinion shall be in form and substance satisfactory to
the Agent.
Upon receipt of all of the foregoing, the Agent shall notify the Borrower and
the Banks that this Amendment has become effective (but the failure of the Agent
to give such notice shall not affect the validity of this Amendment or prevent
it from becoming effective), whereupon this Amendment shall be retroactively
effective as of April 30, 1999.
Section 6. AFFIRMATION; REAFFIRMATION. Each party hereto
affirms and acknowledges that (a) the Credit Agreement as amended by this
Amendment remains in full force and effect in accordance with its terms and (b)
all references to the "Credit Agreement" or any similar term contained in any
other Loan Document shall be deemed to be references to the Credit Agreement as
amended hereby. The Borrower hereby confirms, ratifies, approves and reaffirms
each of the Loan Documents and agrees that each of the Loan Documents, as
amended hereby, remains in full force and effect.
Section 7. GENERAL.
(a) The Borrower agrees to reimburse the Agent upon demand for
all reasonable expenses (including reasonable attorneys fees and legal
expenses) incurred by
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the Agent in the preparation, negotiation and execution of this
Amendment and any other document required to be furnished herewith, and
to pay and save the Agent harmless from all liability for any stamp or
other taxes which may be payable with respect to the execution or
delivery of this Amendment, which obligations of the Borrower shall
survive any termination of the Credit Agreement.
(b) This Amendment may be executed in as many counterparts as
may be deemed necessary or convenient, and by the different parties
hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but
one and the same instrument.
(c) Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining portions hereof or affecting the
validity or enforceability of such provisions in any other
jurisdiction.
(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.
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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: /s/ Xxxxxx X. Xxxx
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Its: Treasurer
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U.S. BANK NATIONAL ASSOCIATION,
as a Bank and as Agent
By: /s/ Xxxxx Xxxxxxx
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Its: Assistant Vice President
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XXXXXX TRUST AND SAVINGS BANK
By: /s/ Xxxxxx X. Xxxxxxxx
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Its: Managing Director
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M&I XXXXXXXX & ILSLEY BANK
By: /s/ Xxxxxxx X. Xxxxxx
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Its: Vice President
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By: /s/ Xxxxxx X. Xxxxxxx
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Its: Assistant Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Its: Assistant Vice President
[Signature Page to Seventh Amendment to Credit Agreement]
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