Exhibit 10.19
XXXXXXXX, INC.
NOTE PURCHASE AGREEMENT
Dated as of August 31, 1995
TO NORTHERN LIFE INSURANCE COMPANY:
Dear Sirs:
The undersigned, Xxxxxxxx, Inc., a Minnesota corporation (herein called the
"Company"), hereby confirms its agreements set forth below with Northern Life
Insurance Company (herein called the "Purchaser"). Reference is made to
paragraph 15 hereof for definitions of capitalized terms used herein and not
otherwise defined.
1. Purchase and Sale of Notes.
(a) The Notes. Subject to the terms and conditions herein, the Company
will sell to the Purchaser on such date on or prior to September 1, 1995, as may
be fixed by the Purchaser on at least three days' prior written notice to the
Company, or as may be mutually agreed upon with the Purchaser (the date of sale
being herein called the "Closing Date"), and the Purchaser will purchase from
the Company on the Closing Date, at 100% of the principal amount thereof, a
promissory note of the Company (which, together with any note or notes issued in
substitution therefor, are herein collectively called the "Notes" and
individually a "Note"), in the principal amount of $5,700,000, dated the Closing
Date. The principal amount of and interest on the Notes shall be due in eighty-
three (83) consecutive, combined monthly installments of principal and interest
(at the rate hereinafter set forth), each in an aggregate amount equal to
$52,293.16, payable on the first day of each month, commencing October 1, 1995
(each such installment to be applied first to the payment of accrued interest on
the unpaid principal amount of the Notes and the remainder to be applied to
principal), with a final installment on September 1, 2002, in an amount equal to
the unpaid principal amount of the Notes, plus accrued interest thereon. The
Notes shall bear interest from the Closing Date until payment in full of the
principal amount thereof at the rate of 8.32% per annum (provided that solely
for the purposes of determining the portion of annual interest allocable to any
interest payment period, it shall be assumed that a year is comprised of 360
days and 12 30-day months), subject to adjustment as set forth in paragraph
1(b). The Notes shall be subject to optional prepayment as hereinafter
provided, shall in all respects be subject to the terms of this Agreement, and
shall be substantially in the form of Exhibit A hereto.
(b) Adjustment of Interest Rate. The interest rate on the Notes shall be
reduced by .25% upon satisfaction of all of the following conditions:
(i) The Company is rated NAIC 2 or higher;
(ii) the Company raises at least $10,000,000 of Net Equity Proceeds
after the Closing Date; and
(iii) on or prior to December 31, 1999, the Company's Net Income for
the period from January 1, 1995 to the date of determination,
determined on a cumulative basis, exceeds 80% of the projected
Net Income of the Company for such period, determined on a
cumulative basis, as set forth in the projections dated January
31, 1995 delivered to the Purchaser and attached hereto as
Exhibit B.
Any such interest rate adjustment shall become effective as of the first
principal and interest payment date occurring after the satisfaction of all of
the foregoing conditions. The aggregate amount of each remaining combined
monthly installment of principal and interest shall be recalculated accordingly
to provide for the payment of all principal of and interest on the Notes in
level monthly installments, with the final installment on September 1, 2002.
The Company and the holders of the Notes shall execute an addendum to each
outstanding Note or, at the request of the holder of any Note, the Company shall
issue a new Note in exchange for the Notes held by such noteholder, reflecting
the principal and interest payable on the Notes following adjustment of the
interest rate.
(c) Security. Payment of the Notes shall be secured by a deed of trust, in
substantially the form of Exhibit C hereto (the "Deed of Trust"), subject to no
other liens or encumbrances other than Permitted Encumbrances (as defined in the
Deed of Trust), on the real property described in Exhibit D hereto, together
with all improvements now or hereafter located thereon (the "Mortgaged
Property").
(d) Late Payments. Any payment of principal or (to the extent permitted by
applicable law) interest on the Notes not paid within ten (10) days after the
date when such payment was due, whether by regular installment, upon prepayment,
by acceleration, at maturity or otherwise, shall thereafter bear interest at a
rate per annum equal to the greater of (i) 2% in excess of the rate then
applicable to the Notes or (ii) the prime rate as publicly announced by Norwest
Bank Minnesota, National Association, provided that in no event shall such rate
exceed the maximum rate permitted by applicable law.
(e) Manner of Payment. The Purchaser will pay the purchase price of the
Notes by wire transfer of immediately available Federal funds to such accounts
as shall be specified by the Company, or in such other funds or in such other
manner as may be mutually agreed upon by the Purchasers and the Company, against
delivery to the Purchasers of the Notes.
(f) Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
holiday for banks under the laws of the State of Minnesota, such payment may be
made on the next succeeding business day.
2. Prepayments of the Notes.
(a) Voluntary Prepayments With Premium. The Company may, at its option, on
any interest payment date, prepay the Notes in whole or in part (but if in part
only in the aggregate amount of $100,000 or integral multiples thereof), upon 30
days' prior written notice to the holders of the Notes, and upon payment of a
prepayment premium equal to the excess, if any, of (i) the amount equal to the
present value of all installments of principal and interest which are avoided by
such prepayment, determined by discounting such payments of principal and
interest at a rate per
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annum equal to .50% plus the Treasury Yield Percentage, over (ii) the principal
amount to be prepaid. In no event shall such prepayment premium be less than
zero.
(b) Manner of Effecting Voluntary Prepayment. In the event the Company
shall give notice of any prepayment in accordance with paragraph 2(a) above,
such notice shall specify the principal amount of the Notes to be prepaid and
the date of proposed prepayment, and thereupon such principal amount, together
with accrued and unpaid interest thereon to the prepayment date and together
with the applicable premium, if any, shall become due and payable on the
prepayment date. In the event any prepayment shall be less than the entire
unpaid principal amount of the Notes, the amount of such prepayment shall be
applied pro rata on all Notes on the last maturing required installment or
installments of principal in inverse order of their maturity. The amount of all
other remaining installments of principal and interest shall not be changed, but
the portions of each installment applicable to principal and to interest shall
be recalculated based upon the remaining unpaid principal amount of the Notes.
(c) Mandatory Prepayment. The Notes are subject to mandatory prepayment at
par (plus all accrued and unpaid interest) in accordance with paragraphs 9 and
10 of this Agreement, as applicable, subject to the terms and conditions set
forth therein.
3. Representations and Warranties. The Company represents and warrants
to the Purchaser as follows:
(a) Corporate Organization. The Company and its Subsidiaries are
corporations organized and existing and in good standing under the laws of the
States of their incorporation, and are duly qualified to do business and are in
good standing under the laws of each State where the nature of the business done
or property owned require such qualification. The Company is organized under
the laws of the State of Minnesota. Exhibit E hereto correctly sets forth the
name of each Subsidiary, its state of incorporation and the percentage of the
outstanding capital stock of such Subsidiary owned by the Company or another
Subsidiary. Except as set forth on Exhibits E and G, the Company does not own,
directly or indirectly, more than 1% of the total outstanding capital stock of
any class of any other corporation.
(b) Conflicting Agreements and Other Matters. Neither the execution and
delivery by the Company of this Agreement, the Notes and the Deed of Trust, nor
the performance or observance by the Company or any Subsidiary of any of the
terms or conditions of this Agreement, the Notes or the Deed of Trust, will (i)
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any lien upon any of the properties or assets of the Company or any
Subsidiary pursuant to, the Articles of Incorporation or Bylaws of the Company
or any Subsidiary, any award of any arbitrator, or any indenture, contract or
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law rule or regulation to which the Company or any
Subsidiary is subject, or (ii) require any registration or filing with, or any
consent or approval of, any Federal, state or local governmental agency or
authority.
(c) Due Authorization. The execution and delivery of this Agreement, and
of the Notes and of the Deed of Trust have been duly authorized by all necessary
corporate action of the Company and its Subsidiaries.
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(d) Legal Proceedings. There are no actions, suits, or proceedings pending
or, to the best knowledge of the Company, threatened against the Company or any
of its Subsidiaries or any property of the Company or any of its Subsidiaries
in any court or before any federal, state, municipal or other governmental
agency, which, if decided adversely to the Company or any of its Subsidiaries,
would have a materially adverse effect upon the Company or any of its
Subsidiaries or upon the business or properties of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is in default with
respect to any order of any court or governmental agency.
(e) Financial Statements. The Company has furnished to the Purchaser a
consolidated balance sheet, statement of income and retained earnings and
statement of cash flows of the Company and its Subsidiaries for the fiscal year
ended September 2, 1994, certified by Xxxxxx Xxxxxxxx LLP, independent certified
public accountants, and unaudited consolidated balance sheets, statements of
income and retained earnings and statements of cash flows of the Company and its
Subsidiaries for the nine months ended June 2, 1995. Said financial statements
fairly present the financial condition of the Company and its Subsidiaries at
the date(s) thereof and the results of operations of the Company and its
Subsidiaries for the period(s) indicated, all in conformity with generally
accepted accounting principles consistently followed through the period(s)
involved. There have been no material adverse changes in the condition,
financial or otherwise, of the Company and its Subsidiaries since the latest
balance sheet referred to.
(f) Title to Assets. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good title to all
personal property they purport to own, including (except as they have been
affected by transactions in the ordinary course of business) all properties and
assets reflected in the most recent balance sheet referred to in paragraph 3(e)
hereof. In the case of property used in their trades or businesses but not
owned by them, the Company and its Subsidiaries have a valid, binding and
enforceable right to use such property pursuant to a written lease, license or
other agreement. All of the assets of the Company and its Subsidiaries are free
and clear of all mortgages, liens, pledges, charges and encumbrances (other than
liens permitted by paragraph 5(i) hereof).
(g) Securities Matters. Neither the Company nor any of its Subsidiaries
nor any agent acting on the behalf of the Company or any of its Subsidiaries has
offered the Notes, or any part thereof, or any similar obligation for sale to,
or solicited any offers to buy such Notes, or any part thereof, or any similar
obligation from, any person or persons so as to bring the issue or sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933, as
amended, and neither the Company nor any of its Subsidiaries will sell or offer
for sale any note or any similar obligation of the Company or any Subsidiary to,
or solicit any offer to buy any similar obligation of the Company or any
Subsidiary from, any person or persons so as to bring the issue or sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933, as
amended.
(h) Licenses and Permits. The Company and its Subsidiaries have procured
and are now in possession of all material licenses or permits required by
federal, state or local laws for the operation of the business of the Company
and its Subsidiaries in each jurisdiction wherein the Company or any Subsidiary
is now conducting or proposes to conduct business.
(i) No Defaults on Indebtedness. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest on any
indebtedness for borrowed money nor is in default under any instrument or
agreement under and subject to which any indebtedness for
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borrowed money has been issued, and no event has occurred under the provisions
of any such instrument or agreement which with or without the passing of time or
the giving of notice, or both, constitutes or would constitute an event of
default thereunder.
(j) Tax Returns. The Company and its Subsidiaries have filed all federal
and state income tax returns which, to the knowledge of the officers of the
Company, are required to be filed, and have paid all taxes shown on said returns
and all assessments received by them to the extent that they have become due.
The federal income tax returns of the Company have been finally determined by
the Internal Revenue Service to be satisfactory (or have been closed by the
applicable statute of limitations) for all years prior to and including the year
ended 1988. No claims have been asserted against the Company in respect of
Federal income tax returns for any subsequent year.
(k) No Margin Stock. Neither the Company nor any of its Subsidiaries owns
any Margin Stock and none of the proceeds received by the Company or any
Subsidiary from the sale of the Notes will be used for the purpose of purchasing
or carrying a Margin Stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase a Margin Stock or for any
other purpose not permitted by Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System, as amended from time to time.
(l) ERISA Matters. Each Plan of the Company and each ERISA Affiliate in
which any employees of the Company or any ERISA Affiliate participate that is
subject to any provisions of ERISA is being administered substantially in
accordance with the documents and instruments governing such Plan, and such
documents and instruments are consistent with those provisions of ERISA and the
Internal Revenue Code which have become effective and operative with respect to
such Plan as of the date of this Agreement. No such Plan has incurred any
material accumulated funding deficiency within the meaning of Section 302 of
ERISA (whether or not waived), and neither the Company nor any ERISA Affiliate
has incurred any material liability (including any material contingent
liability) to the PBGC in connection with any such Plan. No such Plan nor any
trust created thereunder nor any trustee or administrator thereof has engaged in
a "prohibited transaction" within the meaning of ERISA or Section 4975 of the
Internal Revenue Code and the issuance and sale of the Notes as contemplated
hereby will not constitute a "prohibited transaction". No such Plan nor any
trust created thereunder has been terminated, nor have there been any
"reportable events" within the meaning of Section 4043 of ERISA with respect to
any such Plan. Neither the Company nor any ERISA Affiliate contributes to or
has any employees who are covered by any "multiemployer plan," as such term is
defined in Section 3(37) of ERISA, and neither the Company nor any ERISA
Affiliate has incurred any withdrawal liability with respect to any such
multiemployer plan.
(m) Brokers and Finders. Neither the Company, any agent acting on its
behalf nor any person controlling, controlled by or under common control with
the Company has taken any action the effect of which would be to cause the
Purchaser to be liable for any broker's, finder's or agent's fee or commission
in connection with the placement of the Notes or any other transactions
contemplated by this Agreement. The Company has retained United Mortgage
Company as its agent for placement of the Notes and is solely responsible for
any fees and expenses payable to such agent.
(n) Use of Proceeds. The Company will use the proceeds of the Notes to
repay the existing Deed of Trust loan used to pay a portion of the costs
associated with construction of the Mortgaged Property and for general corporate
purposes.
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(o) Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
(p) Full Disclosure. Neither this Agreement, the financial statements
referred to in paragraph 3(e) hereof, nor any other document, certificate or
instrument delivered to the Purchaser on behalf of the Company or any Subsidiary
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein not misleading.
4. Affirmative Covenants. The Company covenants and agrees that, so long
as any amount shall remain unpaid on any of the Notes, it will:
(a) Payment. Duly and punctually pay or cause to be paid the principal of
and interest on the Notes and will duly and punctually perform or cause to be
performed all things on its part or on the part of any Subsidiary to be done or
performed under this Agreement and the Deed of Trust.
(b) Maintenance of Books and Records. At all times keep and cause each
Subsidiary to keep proper books of record and account in which full, true and
correct entries will be made of their transactions in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(c) Inspection of Books and Records. At all reasonable times and upon
reasonable notice permit and cause each Subsidiary to permit Washington Square
Capital, Inc. ("WSC"), as representative of the holders of the Notes, at the
expense of the holders of the Notes, to inspect its books and records and to
make extracts therefrom and to inspect its properties and operations; provided,
however, that if an Event of Default occurs and is continuing, the Company shall
pay all fees and expenses of WSC in connection with such examination of its and
its Subsidiaries' books and records.
(d) Financial Information. From time to time furnish and cause each
Subsidiary to furnish the holders of the Notes with such information and
statements as the holders of the Notes may reasonably request concerning
performance by it of the covenants and agreements contained in this Agreement
and the Deed of Trust, and with copies of all financial statements and reports
that it shall send or make available to its stockholders; and in the event that
written notice of the occurrence of an Event of Default shall have been given to
the Company, and the Company shall have notified the holders of the Notes that
such Event of Default has been corrected, the Company shall, upon request of the
holders of at least 66-2/3% of the unpaid principal amount of the Notes at the
time outstanding, for the purpose of showing that such Event of Default has been
corrected, furnish to the holders of the Notes a signed copy of an audit report
or, if such matter may be covered in a special report, a special report prepared
and certified by an independent certified public accountant selected by the
Company and satisfactory to the holders of the Notes, confirming that such Event
of Default has been corrected. All expenses incurred in connection with such
report shall be borne by the Company. Nothing in this paragraph 4(d), however,
shall diminish, defer, postpone or otherwise limit the right of the holders of
the Notes to take any action permitted by paragraph 7 hereof.
(e) Quarterly Financial Statements. Furnish to the holders of the Notes,
within 45 days after the close of each of the first three quarterly fiscal
periods in each fiscal year of the Company and its Subsidiaries, consolidated
balance sheets and consolidated statements of income and retained
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earnings and consolidated statements of cash flows reflecting the financial
condition of the Company and its Subsidiaries at the end of each such quarterly
period and the results of operations during such period in accordance with
generally accepted accounting principles, all in reasonable detail, and setting
forth comparable figures for the same accounting period in the preceding fiscal
year.
(f) Annual Financial Statements. Furnish to the holders of the Notes, as
soon as available, but in any event within 120 days after the close of each
fiscal year of the Company, signed copies of an audit report prepared and
certified (without qualification as to the scope of the audit) by Xxxxxx
Xxxxxxxx LLP or another firm of independent certified public accountants of
national standing selected by the Company and reasonably satisfactory to the
holders of the Notes, which report shall include a consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year and consolidated
statements of income and retained earnings of the Company and its Subsidiaries
and consolidated statements of cash flows of the Company and its Subsidiaries
reflecting the operations during said year, all in reasonable detail and setting
forth comparable figures for the preceding fiscal year, which report shall be
accompanied by a statement by such accounting firm certifying that in making the
examination upon which such report was based, no information came to its
attention which to its knowledge indicated a default under this Agreement had
occurred or specifying any such default.
(g) Financial Certification. At the time of the delivery to the holders of
the Notes of the reports referred to in paragraphs 4(e) and 4(f) hereof, deliver
to the holders of the Notes a certificate signed by its chief financial officer,
certifying that he has reviewed the provisions of this Agreement and stating, in
his opinion, if such be the fact, that the Company and its Subsidiaries have not
been and are not in default as to any of the provisions contained in this
Agreement, or, in the event the Company or any Subsidiary is or was in default,
setting forth the details of such default. Such certificate shall set forth the
computations upon which such officer based the conclusion that the Company and
its Subsidiaries are and have been in compliance with paragraphs 4(o), (p), (q)
and (r), and 5(a), (b), (c), (e), (i), (j) and (k) hereof.
(h) Copies of Management Letters, Etc. Furnish to the holders of the Notes,
promptly after the receipt thereof by the Company, copies of all management
letters or similar documents submitted to the Company, if any, by independent
certified public accountants in connection with each annual audit and any
interim audit, if any, of the accounts of the Company or any of its
Subsidiaries.
(i) Copies of Regulatory Reports. Furnish to the holders of the Notes,
within fifteen (15) days after transmittal or filing thereof by the Company,
copies of all proxy statements, notices and reports as it shall send to its
stockholders, copies of all registration statements (without exhibits) and all
reports which it files with the Securities and Exchange Commission or any other
regulatory agency, other than routine reports filed with respect to employee
benefit plans (excepting those annual reports with respect to each such plan
requested by the holders of the Notes in writing pursuant to paragraph 4(v)
hereof).
(j) Corporate Existence. Maintain and cause each Subsidiary to maintain
its corporate existence in good standing (except that the corporate existence
of any Subsidiary may be terminated pursuant to a merger or consolidation
permitted under paragraph 5(f) of this Agreement), maintain all licenses and
permits necessary for the conduct of their business and comply with all
applicable
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laws, rules and regulations of the United States and of each state thereof and
of each political subdivision thereof and of any and all other governmental
authorities.
(k) Payment of Taxes and Claims. Pay and cause each Subsidiary to pay
before they become delinquent (a) all taxes, assessments and governmental
charges or levies imposed on the Company, any Subsidiary or upon the property of
the Company or any Subsidiary, (b) all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons which, if
unpaid, might result in the creation of a lien or charge upon any property of
the Company or any Subsidiary; and (c) all claims, assessments or levies
required to be paid by the Company or any Subsidiary pursuant to any agreement,
contract, law, ordinance or governmental rule or regulation governing any
pension, retirement, profit-sharing or any similar plan of the Company or any
Subsidiary; provided, however, that the Company or such Subsidiary shall have
the right to contest in good faith, by appropriate proceedings promptly
initiated and diligently conducted which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, the validity, amount or
imposition of any of the foregoing and upon such good faith contest to delay or
refuse payment thereof, if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall have been
made therefor and if such claim would not have a material adverse effect on the
Company or its Subsidiaries.
(l) Maintenance of Properties. Maintain and cause each Subsidiary to
maintain and keep its properties in good repair, working order and condition
(subject to normal wear and tear and other customary exceptions), and from time
to time make all needful and proper repairs, renewals and replacements so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.
(m) Insurance. In addition to the insurance required to be maintained
under paragraph 8 hereof, maintain and cause each Subsidiary to maintain, in
insurance companies of recognized standing, insurance of types and in amounts as
may be consistent with sound business practices.
(n) Remuneration. Pay and cause each Subsidiary to pay compensation,
whether by way of salaries, bonuses, participations in pension or profit sharing
plans, fees under management contracts or for professional services, to any of
its officers, directors, employees or stockholders only in amounts which are not
in excess of reasonable compensation paid for similar services by similar
businesses.
(o) Minimum Consolidated Tangible Net Worth. Maintain during each period
designated below Consolidated Tangible Net Worth, calculated as at the end of
each fiscal month of the Company, at or above the level set forth opposite each
such period:
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Fiscal Year Minimum Consolidated Tangible
----------- -----------------------------
Net Worth
---------
==============================================================
1995 35,500,000
==============================================================
1996 39,500,000
==============================================================
1997 44,500,000
==============================================================
1998 and thereafter 50,500,000
==============================================================
provided, however, that each amount specified in the right hand column above
shall be increased by the aggregate of all increases in the Company's
Consolidated Tangible Net Worth resulting from Net Equity Proceeds.
(p) Maximum Consolidated Debt to Consolidated Tangible Net Worth Ratio.
Maintain during each period designated below the ratio of Consolidated Debt to
Consolidated Tangible Net Worth, calculated as at the end of each fiscal month
of the Company, at not more than the ratio set forth below opposite each such
period:
Fiscal Year Maximum Consolidated Debt to
----------- ----------------------------
Consolidated Tangible Net Worth
-------------------------------
==============================================================
1995 1.75 to 1.00
==============================================================
1996 1.70 to 1.00
==============================================================
1997 1.50 to 1.00
==============================================================
1998 and thereafter 1.25 to 1.00
==============================================================
(q) Minimum Consolidated Interest and Rent Coverage Ratio. Maintain at all
times its Consolidated Interest and Rent Coverage Ratio, calculated as at the
end of each fiscal quarter of the Company and based upon the previous four
fiscal quarters (including such fiscal quarter), at not less than 1.5 to 1.0 in
fiscal year 1995, and 2.0 to 1.0 in each fiscal year thereafter.
(r) Minimum Consolidated Fixed Charge Coverage Ratio. Maintain its
Consolidated Fixed Charge Coverage Ratio, calculated as at the end of each
fiscal quarter of the Company and based upon the cumulative Cash Flow available
for Fixed Charges and cumulative Debt Service (including such fiscal quarter) at
not less than 1.00 to 1.00.
(s) Notice of Default. Give the holders of the Notes prompt notice in
writing of any condition or event which constitutes an Event of Default under
paragraph 7 hereof, or which, after notice or lapse of time, or both, would
constitute such an Event of Default.
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(t) Exchange of Notes. At any time, upon written request of the holder of
a Note and surrender of the Note for such purpose, issue new Notes in exchange
therefor in such denominations of at least $250,000 as shall be specified by the
holder of such Note, in an aggregate principal amount equal to the then unpaid
principal amount of the Note surrendered and substantially in the form of
Exhibit A, with appropriate insertions and variations, and bearing interest from
the date to which interest has been paid on the Note surrendered. The Company
will not charge the holders of the Notes for any costs or expenses incurred by
the Company in connection with the issuance of any new Notes.
(u) Maintenance of Deed of Trust. Take all action necessary in order to
perfect and to protect and maintain the lien of the Deed of Trust.
(v) Qualified Retirement Plans. Cause each Plan of the Company and any
ERISA Affiliate in which any employees of the Company or any ERISA Affiliate
participant that is subject to the provisions of ERISA or the Internal Revenue
Code and the documents and instruments governing each such Plan to be conformed
to when necessary, and to be administered in a manner consistent with those
provisions of ERISA or the Internal Revenue Code which may, from time to time,
become effective and operative with respect to such Plans; if requested by the
holders of the Notes in writing from time to time, furnish to the holders of the
Notes a copy of any annual report with respect to each such plan that the
Company files with the Internal Revenue Service pursuant to ERISA. The Company
will not, and will not permit any ERISA Affiliate to (i) engage in any
"prohibited transaction," (ii) incur any "accumulated funding deficiency,"
whether or not waived, (iii) terminate any Plan in a manner which could result
in the imposition of a lien on any property of the Company or any ERISA
Affiliate, or (iv) incur any withdrawal liability in connection with any
"multiemployer plan."
(w) Rule 144A. Upon the request of the holder of any Note, the Company
will provide such holder such financial and other information as such holder may
reasonably determine to be necessary to be delivered to a qualified
institutional buyer in order to permit compliance with the information
requirements of Rule 144A(d)(4) under the Securities Act of 1933, as amended, in
connection with the resale of the Notes.
5. Negative Covenants. The Company covenants and agrees that so long as
any amount shall remain unpaid on the Notes, it will not and will not permit any
Subsidiary to:
(a) Limitation on Funded Debt. Create, assume, incur, guarantee or
otherwise be or become liable for any Funded Debt other than (i) the Notes, (ii)
Funded Debt outstanding pursuant to the Norwest Bank Agreement, and any
extensions, renewals or replacements thereof in an aggregate principal amount
not to exceed $35,000,000, (iii) other existing Funded Debt of the Company as
set forth in Exhibit F hereto, provided that all such Funded Debt shall be
repaid in accordance with its terms and the schedule set forth in Exhibit F with
no extension, renewal or other modification, and (iv) Funded Debt of the Company
incurred after the date hereof, provided that after giving effect to the
incurrence of such Funded Debt and the application of the proceeds thereof, the
aggregate unpaid principal amount of all Funded Debt of the Company does not
exceed the Applicable Percentage of Total Capitalization.
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(b) Limitation on Subsidiary Debt. Permit its Subsidiaries to create,
assume, incur, guarantee or otherwise become liable for any Debt, except for
trade accounts payable arising in the ordinary course of business.
(c) Permitted Investments. Purchase, or permit to exist investments in,
stock or securities of, or make or permit to exist loans or advances to, or
other investments in, or guarantee, endorse or otherwise become contingently
liable for the obligations of any Person (including investments in or loans or
advances to any corporation proposed to be acquired or created as a Subsidiary),
except:
(i) investments in direct obligations of the United States
government maturing within one year from the date of issue
thereof and repurchase agreements of commercial banks having
capital stock and surplus aggregating not less than
$100,000,000 to repurchase any such obligations within 90 days
of the acquisition thereof;
(ii) certificates of deposit issued by banks having capital and
surplus aggregating not less than $100,000,000;
(iii) commercial paper rated A-1 or A-2 or P-1 or P-2 by recognized
rating services;
(iv) if so permitted by law, savings deposits in national banks and
federal savings and loan associations having capital stock and
surplus aggregating not less than $100,000,000, provided that
the aggregate of all such savings deposits at any one bank or
savings and loan association shall not exceed $150,000 at any
time;
(v) existing equity investments in Subsidiaries;
(vi) travel and expense advances of the Company and its Subsidiaries
to their respective officers and employees in the ordinary
course of business;
(vii) the endorsement of negotiable instruments by the Company for
deposit or collection or similar transactions in the ordinary
course of business;
(viii) existing investments, guaranties, endorsements and other
direct or contingent liabilities in connection with the
obligations of other Persons in existence on the date hereof
and listed in Exhibit G hereto; and
(ix) other loans, advances or investments not otherwise permitted by
this paragraph 5(c) made after the Closing Date, provided that
the aggregate amount of all such investments at any time
outstanding shall not exceed 5% of Consolidated Tangible Net
Worth.
(d) Subordination of Claims. Subordinate or permit to be subordinated any
claim against, or obligation of another person, firm or corporation held or
owned by it to any other claim against, or obligation of, such other person,
firm or corporation.
11
(e) Sale of Assets. Sell, lease or otherwise dispose of all or any part of
its assets, provided that (i) any Subsidiary may sell, lease or otherwise
dispose of all or any part of its assets to the Company or other Subsidiary,
(ii) the Company and any Subsidiary may sell inventory in the ordinary course of
business, (iii) the Company and any Subsidiary may sell or otherwise dispose of
assets which are obsolete, worn out or no longer useful in the conduct of their
respective businesses, and (iv) the Company and any Subsidiary may sell or
otherwise dispose of assets provided that the aggregate book value of all such
assets sold or otherwise disposed of in any fiscal year of the Company shall not
exceed 5% of the consolidated total assets of the Company and its Subsidiaries
as of the end of the immediately proceeding fiscal year.
(f) Merger and Consolidation. Merge or consolidate with any corporation,
provided that any Subsidiary may be merged or consolidated with the Company (if
the Company is the surviving corporation) or with another Subsidiary. The
Company shall not sell, transfer or otherwise dispose of, or permit any
Subsidiary to sell, transfer or otherwise dispose of, the shares of any
Subsidiary to any person other than another Subsidiary, provided, however, that
the Company or any Subsidiary may sell, transfer or otherwise dispose of the
shares of any Subsidiary if the book value of such sale, transfer or disposition
would be permitted pursuant to clause (iv) of paragraph 5(e) hereof.
(g) Maintenance of Present Business. Engage in any business, if as a
result, when taken as a whole, the effect would be substantially to alter the
nature of the business in which it is presently engaged, nor purchase or invest,
directly or indirectly, in any substantial amount of assets or property other
than assets or property useful and to be used in its business as presently
conducted.
(h) Transactions with Affiliates. Except on terms no less favorable to the
Company than would be obtainable in a comparable arms' length transaction,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, loan or advance money to, or otherwise deal with (i) any director,
officer or employee of the Company or any Subsidiary or (ii) any person who,
directly or indirectly either individually or together with his spouse, his
lineal descendants and ascendants and brothers and sisters by blood or adoption
or spouses of such descendants, ascendants, brothers and sisters, beneficially
owns 5% or more of the voting stock of the Company or (iii) any spouse, lineal
descendant or ascendant, brother or sister, by blood, adoption or marriage, of
any person listed in clause (i) or (ii) above, and spouses of such ascendants,
descendants, brothers and sisters or (iv) any company in which any person
described in clause (i), (ii) or (iii) above owns a 5% or greater equity
interest.
(i) Permitted Liens. Create, assume, or suffer to exist any mortgage,
pledge, encumbrance, lien, security interest or charge of any kind whether
presently effective, springing, conditional or contingent (including any charge
upon property purchased under conditional sales contracts, title retention
agreements or other purchase money security interests or under leases which
constitute Capitalized Lease Obligations) upon any of its property or assets,
whether now owned or hereafter acquired, except liens securing the Notes, and:
(i) presently existing liens described in Exhibit F securing existing
indebtedness permitted by paragraph 5(a)(ii) and (iii) hereof;
(ii) liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings promptly initiated and
diligently conducted in accordance with paragraph 4(k) hereof;
12
(iii) other liens, charges, or encumbrances incidental to the conduct
of its business or the ownership of its property which were not
incurred in connection with borrowing of money or the obtaining
of advances or credit and which do not in the aggregate
materially detract from the value of its property or materially
impair the use thereof in the operation of the business;
(iv) liens imposed by law in favor of mechanics, repairmen, carriers
or warehousemen for sums not yet due or which are being
contested in good faith by appropriate proceedings promptly
initiated and diligently conducted, if such reserve or other
appropriate provision, if any, as required by generally accepted
accounting principles shall been made therefor;
(v) encumbrances in the nature of zoning restrictions, easements,
and rights and restrictions on the use of real property, none of
which materially impairs the use by the Company or any
Subsidiary of the property subject thereto;
(vi) liens existing on property at the time of its acquisition by the
Company or any Subsidiary or on the property of any corporation
at the time such corporation becomes a Subsidiary, and
extensions, renewals or replacements of any of the foregoing;
provided that the (a) incurrence of Debt secured by any such
lien is not prohibited by any other covenant or limitation of
this Agreement, and (b) such lien does not extend to any other
property of the Company or its Subsidiaries; and
(vii) liens securing Purchase Money Obligations or Capitalized Lease
Obligations provided that (A) the Debt secured by any such lien
does not exceed 100% of the cost of the property acquired
subject thereto, (B) such liens shall not encumber any other
property of the Company or its Subsidiaries other than the
property acquired subject thereto, and (C) the incurrence of the
Debt secured by any such lien is not prohibited by any other
covenant or limitation of this Agreement.
(j) Dividend Restrictions. Pay Dividends, except that any Subsidiary may
pay Dividends to the Company or another Subsidiary.
(k) Capital Expenditures. Expend or contract to expend Capital
Expenditures in excess of (i) the Capital Expenditure Annual Limit during any
fiscal year of the Company, or (ii) together with all Capital Expenditures from
and after August 28, 1993, the Capital Expenditure Cumulative Limit.
6. Conditions Precedent. The obligation of the Purchaser to purchase the
Notes, as provided in paragraph 1 hereof, shall be subject to the satisfaction,
on or before the Closing Date, of the following conditions.
(a) The representations and warranties contained in paragraph 3 hereof
shall be true and correct as of the Closing Date; the Company shall not be in
default with respect to any of the provisions hereof, and there shall exist no
event which, with the passage of time or the giving of
13
notice, or both, would constitute such a default; and the Company shall have
delivered to the Purchaser a certificate signed by a responsible officer of the
Company to such effects.
(b) The Purchaser shall have received from Xxxxxxxxx & Xxxxxx, counsel for
the Company, a favorable opinion in form and substance satisfactory to the
Purchaser as to all matters specified in Exhibit H hereto and such other matters
incident to the transaction herein contemplated as the Purchaser may reasonably
request.
(c) The Purchaser shall have received from its special counsel, Faegre &
Xxxxxx, a favorable opinion in form and substance satisfactory to the Purchaser,
as to such matters incident to the transaction herein contemplated as the
Purchaser may reasonably request.
(d) The Company shall have provided to the Purchaser a commitment by an
insurer satisfactory to the Purchaser to issue a mortgagee's policy of title
insurance on 1970 ALTA Loan Policy Form B in an amount not less than the
aggregate principal amount of the Notes covering each parcel of Mortgaged
Property, provided that such commitment or the latest endorsement thereof shall
show the status of title to the Mortgaged Property as of the Closing Date, and
provided further that in no event shall such commitment for title insurance (i)
reflect any easements, restrictions, claims, encumbrances or title defects other
than encumbrances permitted by paragraph 5(i), (ii) contain any proration or
coinsurance clause which has the effect of reducing the actual amount of
coverage as a result of the amount of coverage being less than the principal
amount of the secured debt, or (iii) except from coverage of the policy any (A)
lien, or right to a lien for services, labor or material furnished on or to the
Mortgaged Property (regardless of whether such lien has been recorded prior to
the date of issuance of the title insurance policy), (B) easements, restrictions
or other encumbrances which a survey would show or (C) rights of parties in
possession.
(e) The Company shall have provided to the Purchaser a survey of the
Mortgaged Property, including real estate owned in fee and all appurtenant
easements, certified to the Purchaser within thirty days prior to the Closing
Date by a surveyor or land engineer licensed in Colorado, showing the location
of all points and lines referred to in the legal description, the location of
any existing improvements in compliance with all set back requirements, and the
location of all utilities and easements, which survey shall reflect no
easements, restrictions, claims, encumbrances or title defects other than
encumbrances permitted by paragraph 5(i).
(f) The Company shall have provided to the Purchaser a Phase I
environmental report for the Mortgaged Property prepared in accordance with ASTM
standards by an environmental consultant reasonably acceptable to the Purchaser,
which report shall disclose no recognized environmental conditions.
(g) The Purchaser shall have received Uniform Commercial Code, tax and
judgment lien searches against the Company and its Subsidiaries from the States
of Minnesota and Colorado and every other state as the Purchaser may request, as
of a date no more than fifteen days prior to the Closing Date, certified by a
reporting service satisfactory to the Purchaser, and disclosing no security
interests other than those permitted under paragraph 5(i) of this Agreement.
(h) Neither the Company nor any Subsidiary shall have suffered a material
adverse change in financial condition, nor shall there exist any material
action, suit or proceeding pending, or to the knowledge of the Company
threatened, against the Company nor any of its Subsidiaries.
14
(i) All proceedings to be taken in connection with the transaction
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in form and substance to the Purchaser and its counsel and the
Purchaser shall have received copies of all documents which the Purchaser may
reasonably request.
7. Defaults.
(a) Events of Default. Any one or more of the following shall constitute
an Event of Default as such term is used herein:
(i) default shall have been made in the punctual payment of the
principal of, premium, if any, or any interest on any of the
Notes when due, whether by regular installment, upon prepayment,
by acceleration, at maturity or otherwise, and such default
shall have continued for a period of ten (10) business days; or
(ii) the Company or any Subsidiary defaults in any payment of
principal of or interest on any other obligation for borrowed
money beyond any period of grace provided with respect thereto
or in the performance of any other agreement, term or condition
contained in any agreement under which any such obligation is
created if the effect of such default is to cause, or permit the
holder or holders of any obligation or obligations of the
Company in excess of $500,000 in the aggregate (or a trustee on
behalf of such holder or holders) to cause, such obligation or
obligations to become due prior to their stated maturity; or
(iii) an order for relief shall be entered in any Federal Bankruptcy
proceeding in which the Company or any Subsidiary is the debtor;
or bankruptcy, receivership, insolvency, reorganization, relief,
dissolution, liquidation or other similar proceedings shall be
instituted by or against the Company or any Subsidiary or all or
any part of the property of the Company or any Subsidiary under
the Federal Bankruptcy Code or any other law of the United
States or any bankruptcy or insolvency law of any state of
competent jurisdiction unless, if such proceedings are
instituted against the Company or any Subsidiary, such
proceedings are dismissed or discharged within 60 days after
they are instituted; or
(iv) the Company or any Subsidiary shall have become insolvent or
unable to pay its debts as they mature, cease doing business as
a going concern, make an assignment for the benefit of
creditors, admit in writing its inability to pay its debts as
they become due, or if a trustee, receiver or liquidator shall
be appointed for the Company or any Subsidiary or for any
substantial portion of the assets of the Company or any
Subsidiary and such appointment shall not be vacated within 60
days; or
(v) default shall be made in the performance or observance of any
other of the terms, covenants or conditions of this Agreement
and such default shall
15
continue for a period of thirty days after written notice
thereof shall have been given by the holders of Notes to the
Company; or
(vi) final judgments or orders for the payment of money in excess of
$300,000 in the aggregate shall be rendered against the Company
or any Subsidiary and such judgments or orders shall remain
unsatisfied, unstayed and unbonded for a period of 60 days after
the date such judgments or orders are required to be paid; or
(vii) there shall occur any Event of Default under the Deed of Trust;
or
(viii) if any representation or warranty contained in this Agreement
or in any other document supplied to the holders of Notes by the
Company in connection with this transaction proves to be false
in any material respect as of the time this Agreement was made.
(b) Acceleration of Maturities. When any Event of Default described in
clause (i) of paragraph 7(a) has occurred and is continuing, any holder of a
Note may, by notice to the Company, declare the entire principal and all
interest accrued on the Notes held by such holder to be, and the Notes held by
such holder shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. In addition to and not in limitation of the foregoing,
when any Event of Default described in clauses (i), (ii), (v), (vi), (vii) or
(viii) of said paragraph 7(a) has occurred and is continuing, the holder or
holders of more than 50% of the principal amount of Notes at the time
outstanding may, by notice to the Company, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in clauses (iii) or (iv) of paragraph 7(a) has occurred, then
all outstanding Notes shall immediately become due and payable without
presentment, demand or notice of any kind. Upon any Notes becoming due and
payable as a result of any Event of Default as aforesaid, the Company will
forthwith pay to the holders of the Notes then due and payable the entire
principal and interest accrued on the Notes and, to the extent not prohibited by
applicable law, an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the premium specified in
paragraph 2(a) hereof, if any, determined as of the date on which the Notes
shall so become due and payable. No course of dealing on the part of the holder
or holders of the Notes nor any delay or failure on the part of any holder to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further
agrees, to the extent permitted by law, to pay to the holder or holders of the
Notes all costs and expenses incurred by them in the collection of any Notes
upon any default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith.
(c) Rescission of Acceleration. The provisions of paragraph 7(b) are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in clauses (i), (ii), (v),
(vi), (vii) or (viii) of paragraph 7(a), the holders of 68% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Company, rescind
16
and annul such declaration and the consequences thereof, provided that at the
time such declaration is annulled and rescinded:
(i) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(ii) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due
and payable solely by reason of such declaration under paragraph
7(b)) shall have been duly paid; and
(iii) each and every other Event of Default shall have been made
good, cured or waived pursuant to paragraph 13(c);
and provided, further, that no such rescission and annulment shall extend to or
affect any subsequent Event of Default or impair any right consequent thereto.
8. Insurance.
(a) Risks to be Insured. In addition to the insurance required to be
maintained under paragraph 4(m) of this Agreement, the Company will at its
expense maintain with insurers satisfactory to the holders of Notes (i)
insurance with respect to the Mortgaged Property against physical loss
(including without limitation loss resulting from fire, lightning, wind and
hail, sprinkler leakage, explosion and smoke), written on an "all risks"
replacement cost basis, in amounts sufficient to prevent the holders of Notes or
the Company from becoming a co-insurer of any partial loss under the applicable
policies, (ii) public liability, including personal injury and property damage,
insurance applicable to the Mortgaged Property in such amounts as are usually
carried by persons operating similar properties in the same general locality but
in any event with a combined single limit of not less than $3,000,000 per
occurrence and $5,000,000 in the aggregate, (iii) appropriate workers'
compensation insurance with respect to any work on or about the Mortgaged
Property to the extent required by the law of the states in which the Mortgaged
Property is located and to the extent necessary to protect the Company or the
Purchaser against workers' compensation claims, (iv) at any time when the
improvements portion of any parcel of Mortgaged Property is being constructed,
repaired, replaced, rebuilt or restored, builder's risk insurance (in completed
value nonreporting form) in an amount not less than the actual replacement value
of such improvements, exclusive of foundations and excavations, (v) business
interruption insurance covering a period not less than six months and (vi) such
other insurance, in such amounts and against such risks, as is commonly obtained
in the case of property similar to the Mortgaged Property and located in the
states in which the Mortgaged Property or the is located, or is reasonably
requested by the holders of the Notes. The Company will comply with such other
requirements as the holders of Notes may reasonably request for the protection
by insurance of their interest. Such insurance shall be written by companies of
nationally recognized financial standing legally qualified to issue insurance
and reasonably acceptable to the holders of the Notes.
(b) Policy Provisions. All insurance maintained by the Company pursuant to
subparagraphs (a)(i), (a)(ii), (a)(iv), (a)(v) and (a)(vi) of this paragraph 8
shall (i) name the Company and the holders of Notes as insured, as their
respective interests may appear, (ii) provide, except in the case of public
liability insurance, that all insurance proceeds for losses of less than
$250,000 shall be
17
adjusted with and payable to the Company and that all insurance proceeds for
losses of $250,000 or more shall be adjusted with the Company and the holders of
Notes jointly, but shall be payable to the holders of Notes, (iii) include
effective waivers by the insurer of all claims for insurance premiums against
the holders of Notes, (iv) provide that any losses shall be payable
notwithstanding (A) any act of negligence of the holders of Notes or the
Company, (B) any foreclosure or other proceedings or notice of sale relating to
the Mortgaged Property, or (C) any change in the title to or ownership of the
Mortgaged Property, (v) provide that no cancellation thereof shall be effective
until at least 30 days after receipt by the holders of Notes of written notice
thereof, and (vi) be reasonably satisfactory to the holders of Notes in all
other respects.
(c) Delivery of Insurance Certificates. The Company will deliver to the
holders of Notes certificates evidencing the existence of all insurance policies
with respect to the Mortgaged Property which the Company is required to maintain
or cause to be maintained pursuant to subparagraph (a) hereof together with
evidence as to the payment of all premiums then due thereon.
9. Damage to or Destruction of Mortgaged Property.
(a) Notice. In case of any material damage to or destruction of the
Mortgaged Property or any part thereof, the Company will promptly give written
notice thereof to the holders of Notes, generally describing the nature and
extent of such damage or destruction.
(b) Restoration. Except as otherwise provided in paragraph 9(d) hereof, in
case of any damage to or destruction of the Mortgaged Property or any part
thereof, the Company, whether or not the insurance proceeds, if any, on account
of such damage or destruction shall be sufficient for the purpose, at its
expense, will promptly commence and complete the repair, replacement, rebuilding
or restoration of the Mortgaged Property as nearly as possible to its value,
condition and character, immediately prior to such damage or destruction, with
such alterations and additions as may be made at the Company's election.
(c) Application of Insurance Proceeds in the Event of Restoration. Except
as otherwise provided in paragraph 9(d), all insurance proceeds received by or
payable to the holders of Notes on account of any damage to or destruction of
all or any part of the Mortgaged Property (less the actual cost, fees and
expenses incurred in the collection thereof) shall be applied or dealt with by
the holders of Notes as follows:
(i) All such proceeds actually received by the holders of Notes on
account of any such damage or destruction shall, unless there is
an uncured Event of Default or event which with the passing of
time or the giving of notice, or both, would constitute such an
Event of Default, be made available for purposes of repairing,
replacing, rebuilding or restoring the Mortgaged Property,
subject to deposit by the Company with the holders of Notes of
the amount in excess of insurance proceeds necessary to effect
the restoration.
(ii) The holders of the Notes shall permit the application of the net
proceeds to payment of the costs of repair, replacement,
rebuilding or restoration upon request made by the Company to the
holders of Notes no more often than monthly accompanied by lien
waivers through the last previous request. If the net proceeds
are not sufficient to pay such costs in full, the Company will
18
nonetheless complete the same and will pay the portion of the
cost thereof in excess of the amount of the net proceeds. So
long as there is no Event of Default or event which with the
passing of time or the giving of notice, or both, would
constitute such an Event of Default, any balance of net proceeds
remaining after payment of all costs of any repair, rebuilding,
replacement or restoration shall be remitted to the Company
within 5 days after evidence is given by the Company to the
holders of the Notes of complete and full payment of such costs.
(d) Prepayment in the Event the Mortgaged Property is Not Restored. In
case all or any part of the Mortgaged Property is destroyed or damaged (A) so as
to render such property, in the reasonable judgment of the holders of Notes,
incapable of being repaired, replaced, rebuilt or restored for purposes of
normal operation of the Company's business on the property within six months
after its damage or destruction, or (B) to such an extent that the Company
determines that it is uneconomic to repair, replace, rebuild or restore; then in
either such event the Company shall have no obligation to repair, replace,
rebuild or restore the Mortgaged Property and no right to have the net proceeds
of the insurance claim applied to such repair, replacement, rebuilding or
restoration, and whether or not the net proceeds of any applicable insurance
claim are sufficient for such purpose, the Company shall, on the first interest
payment date occurring at least 30 days after such damage or destruction, in
addition to making the regular payment on the Notes due on such date, prepay the
Notes, without premium, in an amount equal to the then unpaid principal amount
of the Notes, plus accrued interest thereon. Any such prepayment shall be
applied on the last maturing required installment or installments of principal
in inverse order of their maturity. The net proceeds of any insurance claim
shall be applied to any such prepayment. So long as there is no Event of
Default or event which with the passing of time or the giving of notice, or
both, would constitute such an Event of Default, any insurance proceeds
remaining after prepayment pursuant to this paragraph 9(d) shall be remitted by
the holder of the Note to the Company within five days after such prepayment.
10. Taking of Mortgaged Property.
(a) Notice; Assignment of Awards. In case of a taking as a result of or in
lieu of or in anticipation of the exercise of the right of condemnation or
eminent domain of all or any part of the Mortgaged Property, or the commencement
of any proceedings or negotiations that might result in any such taking, the
Company will promptly give written notice thereof to the holders of Notes,
generally describing the nature and extent of such taking or the nature of such
proceedings or negotiations and the nature and extent of the taking that might
result therefrom, as the case may be. The Company hereby irrevocably assigns,
transfers and sets over to the holders of Notes all its rights to any award or
payment on account of any taking of the Mortgaged Property (excluding any award
for relocation expenses). The Company will in good faith and with due diligence
file and prosecute what would otherwise be its claims for any such award or
payment and cause the same to be collected and paid over to the holders of
Notes, and irrevocably authorizes and empowers the holders of Notes, in the name
of the Company, to collect and to receipt for any such award or payment and, in
the event the Company fails so to act or is otherwise in default hereunder, to
file and prosecute such claim. The Company will pay all costs, fees and
expenses reasonably incurred by the holders of the Notes in connection with any
taking and seeking and obtaining any award or payment on account thereof.
19
(b) Restoration. Except as provided in paragraph 10(d) hereof, in case of
a taking of the Mortgaged Property, the Company will, whether or not the awards
or payments, if any, on account of such taking shall be sufficient for the
purpose, at the Company's expense, promptly commence and complete restoration of
the Mortgaged Property as nearly as possible to its value, condition and
character immediately prior to such taking, except to the extent made impossible
or in the reasonable judgment of the Company uneconomical by any reduction in
area caused by such taking, provided that in case of a taking for temporary use
the Company shall not be required to effect restoration until such taking is
terminated.
(c) Application of Awards in the Event of Restoration. Except as otherwise
provided in paragraph 10(d) hereof, all awards and payments received by or
payable to the holders of Notes on account of a taking of all or any part of the
Mortgaged Property (less the actual costs, fees and expenses incurred in the
collection thereof) shall be applied to pay the cost of restoring of the portion
of the Mortgaged Property remaining after such taking, such application to be
effected substantially in the same manner and subject to the same conditions as
provided in paragraph 9(c)(ii) hereof with respect to insurance proceeds.
(d) Prepayment in the Event the Mortgaged Property is Not Restored. In the
event a parcel of Mortgaged Property is not restored pursuant to paragraph 10(b)
hereof the Company shall prepay the Notes, such prepayment to be effected
substantially in the same manner and subject to the same conditions as provided
in paragraph 9(d) hereof with respect to prepayment in the event of destruction
or damage of the Mortgaged Property. The net proceeds of any awards or payments
shall be applied to any such prepayment. So long as there is no Event of
Default or event which with the passing of time or the giving of notice, or
both, would constitute such an Event of Default, any proceeds remaining after
prepayment pursuant to this paragraph 10(d) shall be remitted by the holder of
the Note to the Company within five days after such prepayment.
11. Payments on and Registration and Transfer of Notes. The Company
agrees that it will make payment of the principal of, premium, if any and
interest on the Notes by wire transfer of immediately available federal funds
with sufficient information to identify the source and application of funds to
the Purchaser in accordance with the wire transfer instructions set forth in
Appendix I hereto, or to such other accounts or in such other manner as may from
time to time be designated by the holder of a Note, without presentment of the
Notes and without the rendering of any bills therefor. The Company shall keep
at its principal office a register in which the Company shall provide for the
registration of the Notes and of transfers of the Notes (the "Note Register").
Upon surrender of any Note for transfer at the office of the Company, the
Company shall execute and deliver, in the name of the designated transferee a
new Note in a principal amount equal to the unpaid principal amount of, and
dated the date to which interest has been paid on, the Note so surrendered.
When a Note shall be presented or surrendered for transfer it shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder thereof or his attorney duly authorized in writing. The Company
may treat the person in whose name the Note is registered on the Note Register
as the owner of the Note for the purpose of receiving payment of principal of
and interest on the Note and for all other purposes and the Company shall not be
affected by notice to the contrary.
12. Expenses. The Company agrees, whether or not the purchase of the
Notes herein contemplated shall be consummated, to pay and save the Purchaser
harmless against liability for the payment of all out-of-pocket expenses arising
in connection with this transaction including any
20
documentary stamp taxes (and including interest and penalties, if any), which
may be determined to be due and payable with respect to the execution and
delivery of the Notes, and the reasonable fees and expenses of counsel to the
Purchaser. The Company also agrees to pay, and to save the Purchaser harmless
against liability for the payment of, the reasonable fees and expenses of
counsel to the Purchaser in connection with any documentation and related
services arising after the Closing Date in connection with the preparation of
waivers or amendments of any provisions of this Agreement, the Notes or the Deed
of Trust. In addition, the Company agrees to pay, and to save the holders of the
Notes harmless against, all brokerage or finders fees incurred in the
transaction contemplated by this Agreement.
13. Delivery of Documents; Pro Rata Payments; Amendments and Consents.
(a) Delivery of Documents. All notices, certificates, requests, statements
and other documents required or permitted to be delivered to the Purchaser or
the holders of Notes by any provision hereof shall also be delivered to each
holder of a Note whose address has been provided to the Company, except that
financial statements and other documents provided for in paragraphs 4(e) and
4(f) need not be delivered to any holder, other than the Purchaser, holding less
than 10% of the aggregate principal amount of Notes from time to time
outstanding.
(b) Pro Rata Payments. All interest payments and payments or prepayments
of principal shall be made and applied pro rata on all Notes outstanding in
accordance with the respective unpaid principal amounts thereof.
(c) Amendments and Consents. The registered holder or holders of more than
fifty percent (50%) of the unpaid principal amount of the Notes at the time
outstanding may by agreement with the Company amend this Agreement, and any
consent, notice, request or demand required or permitted to be given by the
Purchaser or the holders of the Notes by any provision hereof shall be
sufficient if given by the holder or holders of more than fifty (50%) of the
unpaid principal amount of Notes at the time outstanding except that, without
the written consent of the holders of all Notes at the time outstanding, no
amendment to this Agreement shall extend the maturity of any Note, or alter the
rate of interest or any premium payable with respect to any Note, or affect the
amount or timing of any required payments or prepayments, or reduce the
proportion of the principal amount of the Notes required with respect to any
consent.
14. Investment Purpose. The Purchaser represents that the acquisition of
the Notes by it will be for investment and not with a view to resale in
connection with any distribution thereof, it being understood, however, that the
disposition of the property of the Purchaser shall at all times be within its
control.
15. Definitions. For purposes of this Agreement the following terms shall
have the following meanings:
"Applicable Percentage" shall mean (i) 55% at all times after the date of
this Agreement until the Company shall have completed a public offering of its
capital stock, and (ii) 50% at all times thereafter.
"Capital Expenditure" means an expenditure by the Company or any Subsidiary
for the lease, purchase or other acquisition of any capital asset; provided that
with respect to the lease of any
21
capital asset (whether pursuant to a capitalized lease or an operating lease),
the principal amount thereof shall be the fair market value of the capital asset
so leased.
"Capital Expenditure Annual Limit" means $41,000,000 for the fiscal year
ending September 1, 1995, $19,000,000 for the fiscal year ending August 30,
1996, $20,000,000 for the fiscal year ending August 29, 1997, and $10,000,000
for each fiscal year thereafter.
"Capital Expenditure Cumulative Limit" means, during the period commencing
on August 28, 1993 and ending on the date of determination, cumulative (A) Net
Income (or loss), plus (B) Non-Cash Charges, plus (C) Term Debt Proceeds, plus
(D) Net Equity Proceeds, less (E) scheduled principal payments on Funded Debt,
less (F) non-scheduled prepayments on Funded Debt, in each case of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Capitalized Lease Obligations" shall mean lease payment obligations under
leases that are required to be capitalized under generally accepted accounting
principles.
"Cash Flow Available for Fixed Charges" means, with respect to the
applicable period of computation, (i) Net Income of the Company and its
Subsidiaries, plus (ii) Interest Expense of the Company and its Subsidiaries,
plus (iii) Non-Cash Charges of the Company and its Subsidiaries, plus (iv) Term
Debt Proceeds of the Company and its Subsidiaries, plus (v) Net Equity Proceeds
of the Company and its Subsidiaries, less (vi) cash expenditures by the Company
and its Subsidiaries for the purchase of capital assets and less (vii) cash
expenditures by the Company and its Subsidiaries with respect to the principal
portion of any Capitalized Lease Obligation, all determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Cash Flow Available for Interest and Rent" of a Person shall mean, with
respect to the applicable period of computation, such Person's Pre-Tax Earnings,
plus Interest Expense, plus Rent Expense.
"Closing Date" shall have the meaning set forth in paragraph 1(a).
"Company" shall have the meaning set forth in the preamble.
"Consolidated Debt" shall mean all Debt of the Company and its Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Fixed Charge Coverage Ratio" shall mean, with respect to the
applicable period of computation, the ratio of the consolidated Cash Flow
Available for Fixed Charges of the Company and its Subsidiaries to the
consolidated Debt Service of the Company and its Subsidiaries.
"Consolidated Interest and Rent Coverage Ratio" shall mean, with respect to
the applicable period of determination, the ratio of (i) the Cash Flow Available
for Interest and Rent of the Company and its Subsidiaries to (ii) the sum of
Interest Expense and Rent Expense of the Company and its Subsidiaries.
"Consolidated Tangible Net Worth" shall mean the aggregate amount of
stockholders' equity of the Company and its Subsidiaries on a consolidated basis
determined in accordance with generally
22
accepted accounting principles consistent with those followed in preparation of
the financial statements referred to in paragraph 3(e), less the purchase price
of acquired businesses in excess of the fair market value of tangible net
assets, other items of goodwill, patents, trademarks, trade names, copyrights,
organization expense, treasury stock, unamortized debt discount and expense, any
write-up of the value of any assets and other like intangibles, or any
securities or Debt of the Company or any Subsidiary or any other securities
unless the same are readily marketable in the United States of America or
entitled to be used as a credit against Federal income tax liabilities which (in
the aggregate) exceed $1,000,000, all determined on a consolidated basis in
accordance with generally accepted accounting principles consistent with those
followed in the preparation of the financial statements referred to in paragraph
3(e).
"Debt" of any Person shall mean (i) all items of indebtedness or liability
which in accordance with generally accepted accounting principles would be
included in determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined, (ii) the face amount of all letters of credit issued for the account
of any person and, without duplication all drafts thereunder, (iii) any
indebtedness for borrowed money or the deferred purchase price of property or
services secured by a lien on any property of any Person, whether or not such
indebtedness has been assumed, and (iv) guaranties or other contingent
obligations for any indebtedness described in clauses (i) through (iii).
"Debt Service" means, with respect to the applicable period of computation,
the aggregate of (i) all scheduled payments of principal on all Funded Debt,
(ii) Interest Expense, and (iii) all scheduled payments of rent under
Capitalized Lease Obligations (determined in accordance with generally accepted
accounting principles).
"Deed of Trust" shall have the meaning set forth in paragraph 1(c).
"Dividends" shall mean any payment in cash, property or other assets upon
or in respect of any shares of any class of capital stock including, without
limiting the foregoing, payments as dividends and payments for the purpose of
redeeming, purchasing, or otherwise acquiring any shares of any class of its
capital stock, including in the term "stock" any warrant or option or other
right to purchase such stock, or making any other distribution in respect of any
such shares of stock; excluding, however, any distribution which may be payable
solely in common stock of the corporation making the distribution.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and
the regulations adopted pursuant thereto.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with the Company, would be deemed to be a single
employer within the meaning of Section 4001(b)(1) of ERISA.
"Event of Default" shall have the meaning set forth in paragraph 7.
"Funded Debt" shall mean any obligation for borrowed money or for the
acquisition of property or any obligation evidenced by a promissory note or
similar instrument, payable more than one year from the date of its creation (or
which is renewable at the option of the obligor to a date more than one year
from the date of its creation), including the current portion thereof, which
under
23
generally accepted accounting principles is shown on the balance sheet as a
liability, including but not limited to the Notes and any Capitalized Lease
Obligations. Notwithstanding the foregoing sentence, the term "Funded Debt"
shall in any event include any obligation incurred under a revolving credit
facility or similar arrangement, whether or not payable on a date (or renewable
to a date) more than one year from the date of its creation.
"Interest Expense" shall mean, for any period, the total gross interest
expense during such period, and shall in any event include, without limitation,
(i) interest expensed (whether or not paid) on all Debt, (ii) the amortization
of debt discounts, (iii) the amortization of all fees payable in connection with
the incurrence of Debt to the extent included in interest expense, (iv) the
portion of any Capitalized Lease Obligation allocable to interest expense.
"Margin Stock" shall have the meaning ascribed to that term in Section
207.2(i) of Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve Board.
"Mortgaged Property" shall have the meaning set forth in paragraph 1(c).
"Net Equity Proceeds" shall mean the net cash proceeds actually received by
the Company from the sale of additional common or preferred stock in the Company
on or after November 24, 1993, including cash received from the exercise of
stock options.
"Net Income" of any person shall mean, with respect to the applicable
period of computation, such person's after tax Net Income determined in
accordance with generally accepted accounting principles, excluding any
extraordinary or non-recurring items.
"Non-Cash Charges" shall mean depreciation, amortization, deferred taxes
and other non-cash charges which have the effect of reducing the Pre-Tax
Earnings or Net Income, as the case may be, all as determined in accordance with
generally accepted accounting principles.
"Norwest Bank Agreement" shall mean that certain Amended and Restated
Credit and Security Agreement dated as of November 24, 1993, among the Company,
as borrower, Norwest Bank Minnesota, National Association and Xxxxxx Trust and
Savings Bank, as lenders, and Norwest Bank Minnesota, National Association, as
agent, as amended by the First Amendment dated as of December 2, 1993, the
Second Amendment dated as of May 12, 1994, and the Third Amendment dated as of
January 24, 1995.
"Note Register" shall have the meaning set forth in paragraph 8.
"Note" or "Notes" shall have the meaning set forth in paragraph 1(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan within the meaning of
Section 3(2) of ERISA.
24
"Pre-Tax Earnings" of a Person means, with respect to any applicable period
of computation, such Person's Net Income, plus any income taxes and
extraordinary or non-cash losses paid or incurred by such Person, less any
extraordinary or non-cash gains claimed or earned by such Person, all as
determined in accordance with generally accepted accounting principles.
"Purchase Money Obligations" shall mean Debt incurred in connection with
the acquisition of machinery and equipment, which Debt is secured by conditional
sales contracts, title retention agreements and other purchase money security
interests.
"Purchaser" shall have the meaning set forth in the preamble.
"Rent Expense" mean, with respect to the applicable period of computation,
all scheduled payments of rent under operating leases.
"Subsidiary" or "Subsidiaries" shall mean the corporations listed on
Exhibit D hereto, and any other corporation or corporations more than 50% of the
outstanding capital stock of every class of which is hereafter owned, directly
or indirectly, by the Company.
"Term Debt Proceeds" means all proceeds obtained by the Company from (i)
term advances under that certain Amended and Restated Credit and Security
Agreement dated as of November 24, 1993 between the Company and Norwest Bank
Minnesota, National Association and Xxxxxx Trust and Savings Bank, or (ii) other
term indebtedness permitted pursuant to paragraph 5(a).
"Total Capitalization" shall mean as of the date of any determination
thereof, the sum of (i) the aggregate principal amount of all outstanding Funded
Debt of the Company and its Subsidiaries, plus (ii) Consolidated Tangible Net
Worth.
"Treasury Yield Percentage" shall mean the yield, as reported by Bloomberg
Financial Markets, determined as of 10:00 a.m. Minneapolis, Minnesota time on
the second Business Day prior to the date fixed for prepayment, of those
actively traded "On The Run" United States Treasury securities having a then-
remaining maturity equal to the then-remaining maturity of an actively traded
"On The Run" United States Treasury security, such yield shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
yields, as reported by Bloomberg Financial Markets, of actively traded "On The
Run" Treasury securities having then-remaining maturities closest to the
remaining average life of the Notes. If such market data for any reason ceases
to be available through Bloomberg Financial Markets, the holders of the Notes
may, in their reasonable discretion, select any other publicly available source
of similar market data. For purposes hereof, "On The Run" United States
Treasury securities refers to those United States Treasury securities which are
most recently auctioned as of the date in question.
16. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Company in connection
herewith shall survive the execution and delivery of this Agreement and of the
Notes.
17. Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not.
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18. Notices. All communications provided for hereunder shall be sent by
first class mail and, if to the Purchasers, addressed to the Purchasers at the
notice address listed on Appendix I hereto, and if to the Company, addressed to
Sheldahl, Inc., 0000 Xxxxxxxx Xxxx, Xxxxxxxxxx, XX 00000, attention Chief
Financial Officer or to such other address with respect to any party as such
shall notify the other parties in writing.
19. Governing Law. This Agreement is being delivered and is intended to
be performed in the State of Minnesota, and shall be construed and enforced in
accordance with the laws of such State.
20. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
21. Captions. The captions in this Agreement are for convenience only and
shall not be considered in the interpretation of any of the provisions hereof.
26
If the Purchasers are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterpart of this letter and return the same to
the undersigned. Upon acceptance by all the Purchasers, this letter shall
become a binding agreement between the Purchasers and the undersigned.
Very truly yours,
XXXXXXXX, INC.
By /s/ Xxxx XxXxxxx
------------------------
Its Vice President Finance
The foregoing Agreement is accepted
as of the date first above written
NORTHERN LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxx
----------------------
Its Assistant Treasurer
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