-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fp/YSGhqzXWnevX7gQxNm1xAWSZZqfCLpwo7Ab68Wc2KeJ3stmOEKR9einUYSN1x 9b1fYQ+NzqM5UI9aLNGdCw== 0000893877-96-000311.txt : 19960918 0000893877-96-000311.hdr.sgml : 19960918 ACCESSION NUMBER: 0000893877-96-000311 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960917 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRM COPY CENTERS CORP CENTRAL INDEX KEY: 0000749254 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 930809419 STATE OF INCORPORATION: OR FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19657 FILM NUMBER: 96631139 BUSINESS ADDRESS: STREET 1: 5208 N E 122ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97230-1074 BUSINESS PHONE: 5032578766 10-K 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________ COMMISSION FILE NUMBER 0-19657 ---------- TRM COPY CENTERS CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0809419 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation) 5208 N.E. 122ND AVENUE PORTLAND, OREGON 97230-1074 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 257-8766 ---------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock (Title of each class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of July 31, 1996 the aggregate market value of the Registrant's Common Stock held by non affiliates of the Registrant was $58.3 million. Solely for purposes of this calculation, the Registrant has treated its Board of Directors and Executive Officers as affiliates. As of July 31, 1996, the number of shares of the Registrant's Common Stock outstanding was 6,486,291. DOCUMENTS INCORPORATED BY REFERENCE: Parts of Registrant's 1996 Annual Report to Shareholders are incorporated by reference into Part II of this Report, and parts of Registrant's Proxy Statement for the annual meeting of shareholders on October 22, 1996 are incorporated by reference into Part III of this Report. ================================================================================ PART I ITEM 1. BUSINESS GENERAL As of August 1996, TRM Copy Centers Corporation owned and maintained over 32,000 self-service photocopiers in retail establishments such as pharmacies, stationery stores, hardware stores and gift shops in 66 metropolitan areas: 46 in the U.S., five in Canada, 14 in the U.K., and one in France. TRM installs, maintains and supplies its photocopiers and regularly monitors their usage. Each retail business collects payment from its customers, shares in the revenue generated by the Copy Center and benefits from any increase in walk-in traffic. The Company invoices and collects payment from each retailer monthly. TRM has had in place about 400 full-color copiers since 1992. While the Company does not intend to substantially expand the number of Color Copy Centers during fiscal 1997, it is likely that the color program will be expanded at some point further in the future. Each Copy Center consists of a photocopier, a machine stand and advertising signs. Copy Centers are identified by the Company's trapezoidal yellow and black "TRM Copies" signs. TRM became the leading provider in self-service photocopying in many of the metropolitan areas it serves by focusing on service and convenience. The Company strives to conveniently locate high numbers of TRM Centers throughout its service areas. Operations by geographic area are presented in Note 10 to the Consolidated Financial Statements included in the Annual Report to Shareholders. The Company services its TRM Centers and provides all necessary supplies. The retail business supplies space and electrical power for the TRM Center and supervises its use. Consumers report the number of uses of the TRM Center to the retail business cashier, who collects payment. Each month, the retail business pays TRM a percentage of the TRM Center revenue, which generally is based on a sliding scale related to usage, as recorded by the TRM Center's tamper-proof internal counter. All training, purchasing, billing and collection functions, as well as coordination of customer service, are centralized in the Company's offices in Portland, Oregon. Generally, the only personnel outside the Portland offices are service and sales personnel. TRM minimizes costs by buying large quantities of new and used photocopiers, by rebuilding used photocopiers and by centrally purchasing large quantities of parts, paper and toner. The Company believes that its centralized operating systems and standardized operating procedures enable it to efficiently open new geographies and to install and service thousands of TRM Centers. The Company began business in 1981. From the end of fiscal 1991 through June 30, 1996, TRM opened operations in 20 U.S., five Canadian, 14 U.K., and one French metropolitan areas. As used in this Annual Report, the terms "the Company" and "TRM" refer to TRM Copy Centers Corporation and its subsidiaries, unless the context requires otherwise. LOCATIONS TRM has focused its sales efforts on a large number of small retail businesses so that no retail business accounts for a significant portion of revenues or profits. Further, TRM has diversified geographically to avoid dependence on one or more market areas. The Company does not believe that the presence of significant competition in any single geographic market would have a material adverse effect on the Company. The Company has established a local Service Center in all its 48 major metropolitan areas. Each of these Service Centers consists of leased premises generally staffed by a service manager and one or more service technicians and salespeople. TRM locates its Service Centers in sites convenient to the TRM Centers. Service Centers include a small warehouse for the storage of photocopiers, other components, spare parts, paper and toner. The Company also has four small Service Centers where the service manager is the only technician. These small Service Centers are based in the managers' homes. Further, 13 of the most recently opened metropolitan areas (called "satellites") were opened with resources from existing Service Centers nearby and do not have stand-alone facilities. 2 EXPANSION TRM installed 12,127 additional TRM Centers, net of replacements and removals, from July 1, 1993 to June 30, 1996. In addition to installing 2,724 net TRM Centers in fiscal 1996, the Company focused on improving the profit performance of the installed base of machines. During fiscal 1997, the Company plans to add between 3,000 and 4,000 additional TRM Centers in existing market areas and in new areas, and to continue to actively manage its installed base. The Company's planned expansion will require an increase in the number of installed photocopiers, Service Centers, service technicians, salespeople and customers. TRM uses both new and used photocopiers, and as of July 31, 1996, had over 5,000 uninstalled photocopiers in its system (see "Photocopiers"). The Company will open a new Service Center in each new geographic market as it is justified. The service technicians needed for the planned expansion will be trained at TRM's Technology Center in Portland. TRM sells the TRM Center concept to retail businesses through sales lead generation programs and local door-to-door solicitation using independent and Company sales representatives, and, beginning in 1996, service technicians. In January 1996, the Company began a program called "service selling" in selected North American cities. The program trains and rewards service technicians to sell the TRM program in their service areas. Coincident with the rollout of service selling, effective July 1, 1996, the Company streamlined field operations. Field sales responsibilities were moved into the field operations group under the Chief Operating Officer. This allows for the sharing of management teams across the expanse of North America and for a coordinated effort to grow our market share in established cities, particularly in North America. In actively managing the profit performance of the installed base, under-performing machines are removed and put back into stock to be redeployed at better sites. Machines under-priced for the supporting copy volume are repriced to higher levels. During fiscal 1996, machines were relocated and copy prices were raised at thousands of locations. The Company intends to continue to focus on its core photocopy business with controlled growth from new and existing U.S. market areas, from international expansion and from new products and services which can be delivered to the core customer base and similar customers. NEW PRODUCTS AND SERVICES UNDER DEVELOPMENT The Company is positioned to add other products or services to further optimize the use of its in-place network of sales, service, distribution and support as well as its growing installed customer base. Although sales generated from additional products currently represent less than 5% of the total sales, the Company is actively testing multiple new products and services. During 1996, investments were made in designing an add-on electronic and receipt printing module for the Company's photocopiers, which allows for stepped volume pricing (e.g., the first copy for 10(cent), copies 2-5 for 7(cent), etc.). This will be market tested in fiscal 1997. The Company is also testing retailer-serviced coin-operated convenience copying with large format chain stores, where TRM's service quality and worldwide infrastructure is a key advantage, but where host cashiering is not a desired benefit. Also in 1996, the Company expanded its initial trial for marketing prepaid telephone cards (to our base of retailers). Another example is the design-your-own instant business cards product, which is discussed under the caption "BisCard Corporation." TRM's intent is to invest in developing and market testing these and other new products and services to identify those that clearly deserve to become country or system-wide offerings. TRM has had in place about 400 full-color copiers since 1992. While the Company does not intend to substantially expand the number of Color Copy Centers during fiscal 1997, it is likely that the color program will be expanded at some point further in the future. COMPETITION A person seeking photocopy services has a variety of alternatives to a TRM Center. These alternatives include specialty full-service business centers and copy and print shops, coin-operated photocopiers and other photocopiers located within retail shops. Each of these alternatives may to some extent compete with the Company. The Company does not attempt to compete directly with most alternative suppliers of photocopy services. Instead, the Company seeks to distinguish itself by blanketing its service areas with large numbers of convenient photocopiers and by providing high quality service to those locations. 3 Full-service business centers and copy and print shops generally serve a market more interested in high volume and sophisticated copying than in convenience of location. Coin-operated photocopiers are sometimes located in smaller retail establishments similar to TRM's locations. While these coin-operated photocopiers provide an alternative to Copy Centers, the Company believes that they are less convenient to operate and do not pose a significant competitive threat to the majority of TRM's retailers. As indicated under the caption "New Products and Services Under Development," the Company is testing coin-operated copying with major large format chains and retail stores, which have not been targeted by TRM up to the present time. The Company is aware of several self-service non-coin-operated photocopier businesses using the retail business concept. To the Company's knowledge, each is limited to a relatively small geographic market and a relatively small number of photocopiers. Because of barriers to entry in the Company's business, such as developing operating systems, establishing sources of supply and achieving economies of scale, the Company does not believe any of these competitors currently represents a significant threat. Personal copiers provide a substitute for Copy Centers. While these photocopiers have been on the market for a number of years, the Company does not believe that they have had a significant adverse effect on its business. The Company is unable to predict whether a technological or price breakthrough might increase sales of personal copiers and reduce demand for the Company's copy services. Computers with printers allow convenient production of multiple copies. The Company does not believe that computer printing will have a significant adverse effect on its Copy Center business. At present, computer duplicating is primarily used only for a document which is electronically resident on that particular computer and not for other paper originals. Both computer printers and personal copiers currently have per copy costs to the user which are similar to or higher than TRM's retail copy prices so they are not, in general, a lower cost alternative. QUARTERLY SEASONALITY Historically, the Company has experienced slightly higher than average production per TRM Center in its third and fourth fiscal quarters and slightly lower than average production per TRM Center in its first fiscal quarter. PHOTOCOPIERS As of August 1996, TRM owned more than 37,000 new and used photocopiers. Over 32,000 were revenue-producing Copy Centers in the field, and over 5,000 were in the logistics pipeline, available for future installation or waiting to be rebuilt. The Company continues to investigate new and used photocopiers available for its use. Generally, new photocopiers are shipped direct from the manufacturer to a TRM Service Center. Used photocopiers are generally rebuilt at the Company's rebuilding facility in Portland, Oregon. The Company expects to continue to use both new and used photocopiers to expand its black and white copying business. Supply To date in North America, the Company has primarily used two similar discontinued models of used photocopiers originally manufactured by Ricoh Company, Ltd. and its affiliates. TRM bought these photocopiers from photocopier brokers and dealers. These two models of black and white photocopiers have not been manufactured since 1979 and 1982. During fiscal 1993, TRM developed a supply relationship with Mita Copystar America, Inc. (Mita), for black and white photocopiers and related products in North America. The resulting arrangement, as updated, contains no commitment to purchase any specific number of photocopiers. The Company continues to monitor and evaluate supplies and feature/functionality of new and used photocopiers available for its use. During fiscal 1992, the Company developed a supply relationship with Ricoh Corporation (Ricoh) for full-color photocopiers and related products. TRM is not currently adding to its inventory of full-color copiers. Ricoh ships related products directly to the appropriate TRM Service Center as directed by the Company. The Company will continue to monitor and evaluate models of full-color photocopiers available for its use. Also during fiscal 1992, a supply arrangement was entered into with Mita Europe B.V. for black and white photocopiers and related products in Europe. Under this arrangement, photocopiers and related products are shipped from Mita directly to the Company's European Service Centers. The Company continues to monitor and evaluate supplies of new and used photocopiers in Europe available for its use. 4 Few of TRM's photocopiers have ever become mechanically obsolete. Because of their simplicity, the Company believes that its photocopiers are more dependable than many other models. During fiscal 1997, the Company expects to buy and rebuild additional copiers. However, it also expects to satisfy a portion of its expansion plans with photocopiers on hand but not yet installed. Accordingly, the number of photocopiers not yet installed is expected to decrease during fiscal 1997. Parts The Company acquires a majority of the parts for its used photocopiers directly from various parts fabricators. Many parts are built to TRM's specifications. While TRM's strategy is to use multiple sources for its parts to reduce dependence on single sources, some parts are purchased from single sources. Temporary shortages, increased costs and quality control problems could result if parts from a single or limited source became unavailable. Currently, parts for the Mita photocopiers and the Ricoh full-color photocopiers are being supplied primarily by the photocopier manufacturers. The Company will continue to evaluate available sources of supply for parts. PAPER Photocopy paper is purchased centrally by the Company's corporate offices and then shipped directly from the mills to the Service Centers. A number of paper companies are capable of producing the paper usable by the Company. The Company believes that sufficient paper should be available to supply the Company's expanding business. As explained in Management's Discussion and Analysis in the Annual Report to Shareholders, the cost of paper rose significantly during fiscal 1996 compared to fiscal 1995, but, as of year end, costs were below the peak of the fall of 1995. TONER The Company currently purchases liquid toner for its North American black and white rebuilt photocopiers directly from one manufacturer. The Company believes that if another source of toner were needed, it could obtain suitable toner on reasonable terms from other manufacturers, although some start-up delays could occur. Currently, toner for the Mita photocopiers and the Ricoh full-color photocopiers is being supplied primarily by the photocopier manufacturers. The Company will continue to evaluate available sources of supply for toner. EMPLOYEES As of June 30, 1996, the Company had approximately 650 employees, most of which were full-time. Approximately 405 are in field service, 215 are in sales, marketing, customer service, purchasing, billing and administration, and 30 are in training, production and warehouse functions. None of the Company's employees are represented by unions. The Company believes it has good relations with its employees. The Company currently engages about 30 independent contractors to sell TRM Centers. SERVICE MARKS Most Copy Centers are identified by distinctive yellow and black trapezoidal signs bearing "TRM Copies" and "TRM Color Copies" and the program price. Most of TRM's signs are registered service marks. COPY CENTERS INVESTMENT GROUP, LTD. The Company serves as general partner of Copy Centers Investment Group, Ltd., an Oregon limited partnership. The partnership was formed in 1983 to acquire certain Copy Centers from the Company. The partnership owns 79 Copy Centers in the states of Oregon and Washington. The Company receives a management fee of 25% of the gross revenue from these 79 Copy Centers, plus $20 per month for each of the 79 locations for accounting and administrative functions. The Company also owns a 1% interest in the profits and losses of the partnership. The partnership will terminate December 31, 1998 according to the partnership agreement. The partnership's operations do not constitute a material part of the business of the Company. 5 BISCARD CORPORATION Biscard Corporation, which was formed in 1992, has developed a self-service, design-your-own, instant business card kiosk product. Until July 1996, BisCard was 80% owned by the Company and 20% owned by a minority shareholder. At that time, the Company purchased the 20% minority interest for $50,000 cash. Currently, the Company is in phase one of a two phase test market which calls for the placement of 500 business card kiosks in selected metropolitan areas. As of June 30, 1996, about 350 of the units had been placed. It is expected that this test market will continue through at least December 31, 1996. Research and development costs have not been significant to date. GOVERNMENTAL REGULATION The Company is not subject to significant governmental regulation. Local zoning and sign regulations occasionally prohibit a retail business from displaying the "TRM Copies" sign on an exterior wall or window. Local zoning and use restrictions may not allow opening a Copy Center in an otherwise desirable retail business. The Company does not expect such restrictions to have a material adverse effect on the Company's expansion plans. FORWARD-LOOKING STATEMENTS This Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to the Company's plans or expectations as to: future performance; growth opportunities; expansion; improvements in efficiencies and cost controls; new products and services; repricing machines; competition; paper costs and capital expenditures. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: business conditions in the market areas in which the Company operates; competitive factors; customer demand for the Company's services; the Company's ability to execute its plans successfully and the volatility of paper costs. Any forward-looking statements, including other written or oral forward-looking statements made by the Company or persons acting on its behalf, should be considered in light of these factors and other factors referred to from time to time in the Company's press releases, periodic reports or communications with shareholders. ITEM 2. PROPERTIES The Company leases approximately 25,750 square feet of office space for its corporate offices in Portland, Oregon. The lease expires in 2010, with an option to renew for an additional five years. The Company leases 31,500 square feet for training, rebuilding, warehousing, the Portland Service Center and other office space under a lease that also expires in 2010. This facility is located next to the corporate offices. The Company leases warehouse space for 47 Service Centers outside Portland, Oregon. A Service Center typically consists of approximately 2,000 to 7,000 square feet of non-custom warehouse space. The leases typically run for three to twelve years, some with extensions available upon exercise of renewal options. The Company does not anticipate any difficulty in locating or, if necessary, relocating Service Centers. ITEM 3. LEGAL PROCEEDINGS The Company is subject to various claims and legal proceedings from time to time in the ordinary course of its business. There are no pending or threatened matters which in the Company's opinion could have a material effect on the Company's operations or its financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 6 PART II The information required by Part II is incorporated herein by reference from the TRM Copy Centers Corporation 1996 Annual Report to Shareholders as indicated below. Except for such information, the 1996 Annual Report to Shareholders is not to be deemed filed as part of this Report. Annual Report Page No. -------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND Inside back RELATED STOCKHOLDER MATTERS cover ITEM 6. SELECTED FINANCIAL DATA 1 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 4-5 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA 1, 6-15 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III The information required by Part III is incorporated herein by reference from the indicated pages of the Company's definitive Proxy Statement dated September 16, 1996 for its 1996 annual meeting of shareholders. Proxy Statement Page No. -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 3-5 ITEM 11. EXECUTIVE COMPENSATION 6-10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 1-2 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. 7 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS (INCORPORATED BY REFERENCE Annual Report FROM THE COMPANY'S 1996 ANNUAL REPORT TO Page No. SHAREHOLDERS): -------- Consolidated Balance Sheets as of June 30, 1996 and 1995 6 Consolidated Statements of Operations for each of the three years in the period ended June 30, 1996 7 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended June 30, 1996 8 Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 1996 9 Notes to Consolidated Financial Statements 10-15 Independent Auditors' Report 15 Form 10-K Page No. -------- 2. FINANCIAL STATEMENT SCHEDULES: Consent and Independent Auditors' Report on Financial Statement Schedule S-1 VIII -- Valuation and Qualifying Accounts S-2 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 3. EXHIBITS: The exhibits listed in the Index to Exhibits, which appears on page 10 herein, are filed as part of this Annual Report. (b) NO REPORTS ON FORM 8-K WERE FILED BY THE COMPANY DURING THE LAST QUARTER OF FISCAL 1996. 8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Portland, Oregon, on September 17, 1996. TRM COPY CENTERS CORPORATION By: ROBERT A. BRUCE -------------------------------- Robert A. Bruce Vice President, Finance and Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael D. Simon and Robert A. Bruce, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on September 17, 1996 on behalf of the Registrant and in the capacities indicated: Signature Title - ---------------------------------- ----------------------------------- MICHAEL D. SIMON President, Chief Executive Officer - ---------------------------------- and Director Michael D. Simon ROBERT A. BRUCE Chief Financial Officer - ---------------------------------- Vice President, Finance Robert A. Bruce Corporate Secretary FREDERICK O. PAULSELL Chairman of the Board and Director - ---------------------------------- Frederick O. Paulsell EDWIN S. CHAN Vice-Chairman of the Board and - ---------------------------------- Director Edwin S. Chan SHERMAN M. COE Director - ---------------------------------- Sherman M. Coe RALPH R. SHAW Director - ---------------------------------- Ralph R. Shaw DONALD L. VAN MAREN Director - ---------------------------------- Donald L. Van Maren 9 EXHIBIT INDEX Exhibit Exhibits Page No. - -------- -------- 3.1 Restated Articles of Incorporation (Incorporated herein by reference to Exhibit 3.1 of Form 10-K for the fiscal year ended June 30, 1992) 3.2 Restated Bylaws 4.1 Articles V, VI and VII of the Restated Articles of Incorporation (See Exhibit 3.1) 4.2 Articles I, II, V, VII and X of the Restated Bylaws, as amended (See Exhibit 3.2) 10.1 Indemnity Agreements with Registrant's directors and executive officers (those dated November 4, 1991 Incorporated herein by reference to Exhibit 10.2 of Form S-1 dated November 8, 1991 [No. 33-43829] and those executed in fiscal 1995 Incorporated herein by reference to Exhibit 10.1 of Form 10-K for the fiscal year ended June 30, 1995) 10.2 Loan Agreement with West One Bank, Oregon, dated February 7, 1996 10.3 Loan Agreement with West One Bank, Idaho, dated February 7, 1996 10.4 a) Lease dated October 14, 1991 between Pacific Realty Associates, L.P. and Registrant (for Registrant's training facility in Portland, Oregon) (Incorporated herein by reference to Exhibit 10.7 of Form S-1 dated November 8, 1991 [No. 33-43829]) b) Lease amendment dated February 7, 1994, between Pacific Realty Associates, L.P. and Registrant (Incorporated herein by reference to Exhibit 10.7 of Form 10-K for the fiscal year ended June 30, 1994) c) Lease amendment dated August 10, 1994, between Pacific Realty Associates, L.P. and Registrant (Incorporated herein by reference to Exhibit 10.5 of Form 10-K for the fiscal year ended June 30, 1995) d) Lease dated August 10, 1994 between Pacific Realty Associates, L.P. and Registrant (for the Registrant's corporate headquarters in Portland, Oregon) (Incorporated herein by reference to Exhibit 10.4 of Form 10-K for the fiscal year ended June 30, 1995) 10.6 Restated 1986 Stock Incentive Plan (Incorporated herein by reference to Exhibit 10.8 of Form 10-K for the fiscal year ended June 30, 1994) 10.7 Employee Stock Purchase Plan (Incorporated herein by reference to Exhibit 28.1 of Form S-8 dated December 7, 1992 [No. 33-55370]) 10.8 Form of Stock Option Agreements: a) For option grants before fiscal 1994 (Incorporated herein by reference to Exhibit 10.9 of Form S-1 dated November 8, 1991 [No. 33-43829]) b) For option grants during fiscal 1994 (Incorporated herein by reference to Exhibit 10.10 of Form 10-K for the fiscal year ended June 30, 1994) c) For option grants during fiscal 1995 (Incorporated herein by reference to Exhibit 10.8 of Form 10-K for the fiscal year ended June 30, 1995) 10.9 Employment Agreements: a) Employment Agreement dated January 17, 1995 with Michael D. Simon (Incorporated herein by reference to Exhibit 10.9 of Form 10-K for the fiscal year ended June 30, 1995) b) Employment Agreement dated April 25, 1996 with Michael D. Simon 10.10 Executive Supplemental Retirement Agreement with Edwin S. Chan dated January 9, 1995 (Incorporated herein by reference to Exhibit 10.9 of Form 10-K for the fiscal year ended June 30, 1995) 13.1 Portions of the 1996 Annual Report to Shareholders 21.1 Subsidiaries of the Registrant 23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors (see Page S-1) 24.1 Power of Attorney (see Signature page) 27.1 Financial Data Schedule 10 Consent and Independent Auditors' Report on Financial Statement Schedule ------------------------------- The Board of Directors TRM Copy Centers Corporation: The audits referred to in our report dated August 13, 1996 included the related financial statement schedule as of June 30, 1996 and for each year in the three-year period ended June 30, 1996, as listed in Item 14(a)(2) of Form 10-K of TRM Copy Centers Corporation. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to the incorporation by reference on Form S-8 (Nos. 33-55370 and 33-74354) of TRM Copy Centers Corporation of our reports dated August 13, 1996, relating to the consolidated balance sheets of TRM Copy Centers Corporation and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, cash flows, and related schedule for each of the years in the three-year period ended June 30, 1996, which reports appear in the June 30, 1996 annual report incorporated by reference in Form 10-K of TRM Copy Centers Corporation. KPMG PEAT MARWICK LLP Portland, Oregon September 10, 1996 S-1
TRM COPY CENTERS CORPORATION AND SUBSIDIARIES SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS Years ended June 30, 1994, 1995, and 1996 (In thousands) Balance at Charged to Charged to Balance at Beginning of costs and other End of Period expenses accounts Deductions Period ------ -------- -------- ---------- ------ Year ended June 30, 1994 --- Allowance for doubtful accounts..... $ 193 $ 192 $ -- $ (202) $ 183 ======= ======= ====== ======= ====== Year ended June 30, 1995 --- Allowance for doubtful accounts..... $ 183 $ 344 $ -- $ (261) $ 266 ======= ======= ====== ======= ====== Year ended June 30, 1996 --- Allowance for doubtful accounts..... $ 266 $ 700 $ -- $ (679) $ 287 ======= ======= ====== ======= ======
S-2 EX-3.2 2 RESTATED BYLAWS BYLAWS OF TRM COPY CENTERS CORPORATION ARTICLE I SHAREHOLDERS: MEETINGS AND VOTING Section 1. PLACE OF MEETINGS Meetings of the shareholders of TRM COPY CENTERS CORPORATION, an Oregon corporation (the "Corporation") will be held at the principal office of the Corporation, or any other place, either within or without the state of Oregon, selected by the Board of Directors. Section 2. ANNUAL MEETINGS (a) The annual meeting of the shareholders will be held on the fourth Tuesday of October of each year, if not a legal holiday, and if a legal holiday then on the next succeeding business day, at such time as may be prescribed by the Board of Directors and specified in the notice of the meeting. At the annual meeting, the shareholders will elect by vote a Board of Directors from the persons nominated pursuant to paragraph (c) below, provided that if pursuant to the Articles of Incorporation staggered terms for directors are in effect, then only such members whose terms expire at such meeting shall be elected. The shareholders shall also consider reports of the affairs of the Corporation and transact such other business as may properly be brought before the meeting. (b) At the annual meeting of the shareholders, only such matters as shall have been properly brought before the meeting shall be considered and acted upon. To be properly brought before an annual meeting, a matter must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) properly brought before the meeting by a shareholder. For any matter to be properly brought before the annual meeting by a shareholder, the shareholder must have given prior written notice to the Secretary of the Corporation which must be received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting. In the event that less than 30 days' notice of the date of the meeting is given or made to shareholders, notice by a shareholder shall be timely received if received not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting was mailed. A shareholder's notice to the Secretary in order to be valid must set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the matter proposed to be brought before the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in the matter. No matter shall be considered or acted upon at an annual meeting except in accordance with the procedures set forth in this Section 2. The presiding officer at any annual meeting shall determine whether any matter was properly brought before the meeting in accordance with the provisions of this section. If he shall determine that any matter has not been properly brought before the meeting, he shall so declare at the meeting and any such matter shall not be considered or acted upon. (c) At the annual meeting of shareholders, only those persons properly nominated shall be considered in the election for directors. To be properly nominated, a person must be (i) nominated by the Board of Directors or (ii) properly nominated by a shareholder. To be properly nominated by a shareholder, the shareholder must have given prior written notice of the nomination to the Secretary of the Corporation which must be received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting. In the event that less than 30 days' notice of the date of the meeting is given or made to shareholders, notice of the nomination by a shareholder shall be timely received if received not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting was mailed. A shareholder's notice of nomination to the Secretary in order to be valid must set forth as to each person the shareholder proposes to nominate to the Board of Directors (i) the information described by Items 401(a), (e) and (f) and Item 403(b) of Regulation S-K under the Securities Act of 1933, as amended, or successor provisions, (ii) the class and number of shares of the Corporation which are beneficially owned by the nominating shareholder, and (iii) any material interest of the shareholder or of the nominee in the Corporation. No nominee shall be considered for election as a director at an annual meeting except in accordance with the procedures set forth in this Section 2. The presiding officer at any annual meeting shall determine whether any nomination was properly brought before the meeting in accordance with the provisions of this section. If he shall determine that any person has not been properly nominated, he shall so declare at the meeting and any such nominee shall not be considered in the election. Section 3. SPECIAL MEETINGS (a) The Corporation will hold a special meeting of shareholders upon the call of the President or the Board of Directors, or if the holders of at least 10 percent of all votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the Secretary of the Corporation one or more written demands for the meeting describing the purpose or purposes for which it is to be held. (b) The circuit court of the county where the Corporation's principal office is located, or, if the principal office is not in Oregon, where the registered office of the Corporation is or was last located, may summarily order a special meeting to be held upon the application of a shareholder of the Corporation who signed a valid demand for a special meeting if notice of the special meeting was not given within 30 days after the date the demand was delivered to the Corporation's Secretary or if the special meeting was not held in accordance with the notice. Section 4. NOTICE OF MEETINGS (a) The Corporation will notify shareholders in writing of the date, time and place of each annual and special shareholders meeting not earlier than 60 days nor less than ten days before the meeting date. Unless Oregon law or the Articles of Incorporation require otherwise, the Corporation is required to give notice only to shareholders entitled to vote at the meeting. Such notice is effective when mailed if it is mailed postage prepaid and is correctly addressed to the shareholder's address shown in the Corporation's current record of shareholders. Unless required by law or by the Articles of Incorporation, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called. However, notice of a special meeting will include a description of the purpose or purposes for which the meeting is called. (b) If an annual or special shareholders meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment. However, if a new record date for the adjourned meeting is fixed, or is required by law to be fixed, notice of the adjourned meeting shall be given to persons who are shareholders as of the new record date. A determination of shareholders entitled to notice of or to vote at a shareholders meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. (c) A shareholder's attendance at a meeting waives objection to (i) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and (ii) consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS (a) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless otherwise required by law or by the Articles of Incorporation, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. (b) In the absence of a quorum, a majority of those present in person or represented by proxy may adjourn the meeting from time to time until a quorum exists. Any business that might have been transacted at the original meeting may be transacted at the adjourned meeting if a quorum exists. Section 6. VOTING RIGHTS (a) The persons entitled to receive notice of and to vote at any shareholders meeting will be determined from the records of the Corporation on the close of business on the day before the mailing of the notice or on such other date not more than 70 nor less than 10 days before such meeting, as will be fixed in advance by the Board of Directors. (b) Except as otherwise provided in the Articles of Incorporation or by law, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders meeting. Only issued and outstanding shares are entitled to vote. (c) Unless otherwise provided in the Articles of Incorporation or by law, if a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action. (d) Unless otherwise provided in the Articles of Incorporation, directors are elected by a plurality of the votes cast by holders of the shares entitled to vote in the election at a meeting at which a quorum is present. Section 7. VOTING OF SHARES BY CERTAIN HOLDERS (a) If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the Corporation, if acting in good faith, is entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of its shareholder, the Corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if: (i) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity; (ii) The name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (iii) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (iv) The name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the share-holder has been presented with respect to the vote, consent, waiver or proxy appointment; or (v) Two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. (b) Shares of the Corporation are not entitled to be voted if (i) they are owned, directly or indirectly, by another domestic or foreign corporation, and (ii) the Corporation owns, directly or indirectly, a majority of the shares entitled to be voted for directors of such other corporation. This paragraph does not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. (c) Redeemable shares are not entitled to be voted after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares. Section 8. PROXIES A shareholder may vote shares either in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by the shareholder's attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the Corporation authorized to tabulate votes. An appointment is valid for 11 months unless a longer period is expressly provided in the appointment form. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Section 9. SHAREHOLDER LISTS (a) After fixing a record date for a meeting, the Corporation will prepare an alphabetical list of the names of all of its shareholders who are entitled to notice of the meeting. The list must be arranged by voting group, and within each voting group, by class or series of shares and show the address of and the number of shares held by each shareholder. (b) The shareholder list must be available for inspection by any shareholder, beginning two business days after notice of the meeting for which the list was prepared is given and continuing through the meeting. Such list will be kept on file at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder, or the shareholder's agent or attorney, is entitled on written demand to inspect and, subject to the requirements of law, to copy the list during regular business hours and at the shareholder's expense during the period it is available for inspection. (c) The Corporation will make the shareholder list available at the meeting, and any shareholder, or the shareholder's agent or attorney, is entitled to inspect the list at any time during the meeting or any adjournment. (d) Refusal or failure to prepare or make available the shareholder list does not affect the validity of action taken at the meeting. ARTICLE II DIRECTORS: MANAGEMENT Section 1. POWERS The Corporation will have a Board of Directors. All corporate powers will be exercised by or under the authority of, and the business and affairs of the Corporation managed under the direction of, the Board of Directors, subject to any limitation set forth in the Articles of Incorporation. Section 2. NUMBER AND QUALIFICATIONS The Board of Directors will consist of six members, until the number has been changed by the Board of Directors by amendment of these Bylaws. In no event shall the number of directors be less than three. A decrease in the number of directors does not shorten an incumbent director's term. In the event the Board of Directors is divided into classes as set forth in Section 5 below, any increase in the number of directors shall be allocated by the Board of Directors among the three classes of directors so as to maintain equal classes to the extent possible. Without the unanimous consent of the existing Board of Directors, no more than two additional directors shall be added to the Board of Directors within any 12-month period. Without the unanimous consent of the Board of Directors, no person who is affiliated as an owner, director, officer or employee of a company or business deemed by the Board of Directors to be competitive with that of the Corporation shall be eligible to serve on the Board of Directors of the Corporation. Directors need not be residents of the state of Oregon or shareholders of the Corporation, unless required by the Articles of Incorporation. Section 3. ELECTION OF DIRECTORS The directors will be elected by ballot at the annual meeting of the shareholders. Section 4. TENURE OF OFFICE WITHOUT CLASSES If the Board of Directors consists of five or fewer members, the terms of all directors shall expire at the next annual shareholders meeting following their election. The term of a director elected to fill a vacancy expires at the next shareholders meeting at which directors are elected. Despite the expiration of a director's term, the director continues to serve until the director's successor is elected and qualifies or until there is a decrease in the number of directors. Subject to paragraph (c) of Section 6 of Article II, a director's term of office will begin immediately after election. SECTION 5. TENURE OF OFFICE WITH CLASSES 1. At any time when the Board of Directors shall consist of six or more members, in lieu of electing the entire number of directors annually, the Board of Directors of the Corporation shall be divided into three classes. The three classes shall consist of an equal number of directors to the extent possible. The initial designation of which current directors shall serve in which classes shall be made by the director then serving as Chairman of the Board. The classes shall be Class 1, Class 2 and Class 3. The term of office of directors of Class 1 shall expire at the first annual meeting of shareholders after their election, that of Class 2 shall expire at the second annual meeting after their election, and that of Class 3 shall expire at the third annual meeting after their election. When classification of directors is in effect, at each annual meeting of shareholders the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the third succeeding annual meeting. No classification of directors shall be effective in the event the authorized number of members of the Board is reduced to fewer than six. 2. If the Board of Directors is divided into classes and in the event of any increase or decrease in the authorized number of directors, then (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term, or upon his earlier resignation, removal from office or death; (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be allocated by the Board of Directors among the three classes of directors so as to maintain equal classes to the extent possible; and (iii) in the event such decrease in the authorized number of directors makes the total number of directors less than six, then the Board of Directors shall become declassified and the directors remaining in office shall continue their terms until the next annual meeting of shareholders, at which time all of said remaining directors shall be re-elected to one-year terms or until their successors are duly elected and qualified. Section 6. VACANCIES (a) A vacancy in the Board of Directors will exist upon the death, resignation or removal of any director or upon an increase in the number of directors. (b) Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the Board of Directors: (i) The shareholders may fill the vacancy, provided that the Board of Directors has not already done so; or (ii) The Board of Directors may fill the vacancy, provided the shareholders have not already done so. If the directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. (c) A vacancy that will occur at a specific later date, by reason of a resignation effective at the later date or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. Section 7. RESIGNATION OF DIRECTORS A director may resign at any time by delivering written notice to the Board of Directors, its chairperson or the Corporation. Unless the notice specifies a later effective date, a resignation is effective at the earliest of the following: (a) when received; (b) five days after its deposit in the United States mail, as evidenced by the postmark, if mailed postage prepaid and correctly addressed; or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested and the receipt is signed by or on behalf of the addressee. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors. Section 8. REMOVAL OF DIRECTORS A director may be removed only for cause by the affirmative vote of the holders of not less than 75 percent of the outstanding shares of Common Stock. A director may be removed by the shareholders only at a meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director. Section 9. MEETINGS (a) The Board of Directors may hold regular or special meetings in or out of the state of Oregon. (b) Annual meetings of the Board of Directors will be held without notice immediately following the adjournment of the annual meetings of the shareholders. (c) Unless the Articles of Incorporation provide otherwise, regular meetings of the Board of Directors may be held without notice of the date, time, place or purpose of the meeting. The Board of Directors may fix, by resolution, the time and place for the holding of regular meetings. (d) Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the President or any director. The person or persons who call a special meeting of the Board of Directors may fix the time and place of the special meeting. Section 10. NOTICE OF SPECIAL MEETINGS (a) Unless the Articles of Incorporation provide for a longer or shorter period, special meetings of the Board of Directors must be preceded by at least two days' notice of the date, time and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the Articles of Incorporation. The notice will be given orally, in person or by telephone, or delivered in writing either personally, by mail or by private carrier or by telegram. If in writing, such notice is effective at the earliest of the following: (a) when received; (b) five days after its deposit in the United States mail, as evidenced by the postmark, if it is mailed postage prepaid and is correctly addressed to the director's address shown in the Corporation's records; or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee. If given orally, such notice is effective when communicated. (b) A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon the director's arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. (c) Notice of the time and place of holding an adjourned meeting need not be given if such time and place are fixed at the meeting adjourned. Section 11. QUORUM AND VOTE (a) Unless the Articles of Incorporation provide otherwise, a majority of the directors in office will constitute a quorum for the transaction of business. A majority of the directors, in the absence of a quorum, may adjourn from time to time but may not transact any business. (b) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the Board of Directors unless the Articles of Incorporation require the vote of a greater number of directors. (c) A director of the Corporation who is present at a meeting of the Board of Directors, or is present at a meeting of a committee of the Board of Directors, when corporate action is taken, is deemed to have assented to the action taken unless (i) the director objects at the beginning of the meeting, or promptly upon the director's arrival, to holding the meeting or transacting business at the meeting, (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the director delivers written notice of dissent or abstention to the presiding officer of the meeting before its adjournment or to the Corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken. Section 12. COMPENSATION The Board of Directors may, by resolution, provide that the directors be paid their expenses, if any, of attendance at each meeting of the Board of Directors, and provide that directors be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment will preclude any director from serving the Corporation in any other capacity and receiving compensation for that service. ARTICLE III COMMITTEES (a) Subject to law, the provisions of the Articles of Incorporation and these Bylaws, the Board of Directors may appoint such committees as may be necessary from time to time, consisting of such number of its members and having such powers as it may designate. Each such committee will have two or more members, who serve at the pleasure of the Board of Directors. (b) All actions of a committee will be reflected in minutes to be kept of such meetings and reported to the Board of Directors at the next succeeding meeting thereof. The provisions of Article II of these Bylaws governing meetings, notice and waiver of notice, and quorum and voting requirements of the Board of Directors apply to committees and their members as well. (c) An executive committee may be appointed by the Board of Directors pursuant to the foregoing paragraphs. When appointed, the executive committee will have the power to exercise all authority of the Board of Directors except as may be expressly limited by law. (d) An audit committee shall be appointed by the Board of Directors. The audit committee shall have such members, duties and powers as may be necessary or appropriate to qualify such committee as an audit committee within the rules of the NASDAQ National Market System. ARTICLE IV OFFICERS Section 1. DESIGNATION; ELECTION; QUALIFICATION (a) The officers of the Corporation will be a President, a Secretary and such other officers and assistant officers as the Board of Directors will from time to time appoint, none of whom need be members of the Board of Directors. The officers will be elected by, and hold office at the pleasure of, the Board of Directors. A duly appointed officer may appoint one or more officers or assistant officers if such appointment is authorized by the Board of Directors. The same individual may simultaneously hold more than one office in the Corporation. (b) A vacancy in any office because of death, resignation, removal or any other cause will be filled in the manner prescribed in these Bylaws for regular appointments to such office. Section 2. COMPENSATION AND TERM OF OFFICE (a) The compensation and term of office of all the officers of the Corporation will be fixed by the Board of Directors. (b) The Board of Directors may remove any officer at any time, either with or without cause. (c) Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless the notice specifies a later effective date, a resignation is effective at the earliest of the following: (a) when received; (b) five days after its deposit in the United States mail, as evidenced by the postmark, if mailed postage prepaid and correctly addressed; or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested and the receipt is signed by or on behalf of the addressee. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date, if the Board of Directors provides that the successor will not take office until the effective date. (d) This section will not affect the rights of the Corporation or any officer under any express contract of employment. Section 3. CHAIRMAN OF THE BOARD If the Corporation elects a Chairman of the Board, he or she will preside at all meetings of the Board of Directors and, if requested by the President, at meetings of the shareholders. The Chairman of the Board shall perform such other duties as may be prescribed by the Board of Directors from time to time. Section 4. PRESIDENT The President will be the chief executive officer and chief operating officer of the Corporation. The President will have general supervision, direction and control of the business and affairs of the Corporation. In the absence of the Chairman of the Board, the President will perform the duties and responsibilities of the Chairman of the Board. The President will be ex officio a member of all the standing committees (including the executive committee, if any), will have the general powers and duties of management usually vested in the office of president of a corporation and will have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. Section 5. VICE PRESIDENTS The Vice Presidents, if any, will perform such duties as the Board of Directors prescribes. In the absence or disability of the President, the President's duties and powers will be performed and exercised by a senior Vice President, as designated by the Board of Directors. Section 6. SECRETARY (a) The Secretary will keep or cause to be kept at the principal office, or such other place as the Board of Directors may order, a book of minutes of all meetings of directors and shareholders showing the time and place of the meeting, whether it was regular or special and, if special, how authorized, the notice given, the names of those present at directors' meetings, the number of shares present or represented at shareholders meetings and the proceedings thereof. (b) The Secretary will keep or cause to be kept, at the principal office or at the office of the Corporation's transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for such shares and the number and date of cancellation of certificates surrendered for cancellation. (c) The Secretary will give or cause to be given such notice of the meetings of the shareholders and of the Board of Directors as is required by these Bylaws. The Secretary will keep the seal of the Corporation, if any, and affix it to all documents requiring a seal, and will have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws. Section 7. TREASURER The Treasurer, if any, will be responsible for the funds of the Corporation, and pay them out only on the checks of the Corporation signed in the manner authorized by the Board of Directors. Section 8. ASSISTANTS The Board of Directors may appoint or authorize the appointment of assistants to the Secretary or Treasurer, or both. Such assistants may exercise the powers of the Secretary or Treasurer, as the case may be, and will perform such duties as are prescribed by the Board of Directors. ARTICLE V CORPORATE RECORDS AND REPORTS - INSPECTION Section 1. RECORDS The Corporation will maintain all records required by law. All such records will be kept at its principal office, registered office or at any other place designated by the President of the Corporation, or as otherwise provided by law. Section 2. INSPECTION OF RECORDS All records of the Corporation will be open to inspection by the shareholders or the shareholders' agents or attorneys in the manner and to the extent required by law. Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, will be signed or endorsed by such person or persons and in such manner as will be determined from time to time by resolution of the Board of Directors. Section 4. EXECUTION OF DOCUMENTS The Board of Directors may, except as otherwise provided in these Bylaws, authorize any officer or agent of the Corporation to enter into any contract or execute any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no officer, agent or employee of the Corporation will have any power or authority to bind the Corporation by any contract or engagement outside of the ordinary course of business. ARTICLE VI CERTIFICATES AND TRANSFER OF SHARES Section 1. CERTIFICATES FOR SHARES (a) Certificates for shares will be in such form as the Board of Directors may designate, will designate the name of the Corporation and the state law under which the Corporation is organized, will state the name of the person to whom the shares represented by the certificate are issued, and will state the number and class of shares and the designation of the series, if any, the certificate represents. If the Corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class, the variations and rights, preferences and limitations determined for each series and the authority of the Board of Directors to determine variations for future series will be summarized on the front or back of each certificate, or each certificate may state conspicuously on its front or back that the Corporation will furnish shareholders with this information on request in writing and without charge. (b) Each certificate for shares must be signed, either manually or in facsimile, by the President or a Vice President and the Secretary or an Assistant Secretary of the Corporation. The certificates may bear the corporate seal or its facsimile. (c) If any officer who has signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid. (d) The Corporation will not issue certificates for fractional shares. Section 2. TRANSFER ON THE BOOKS Upon surrender to the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation will issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES In the event a certificate is represented to be lost, stolen or destroyed, a new certificate will be issued in place thereof upon such proof of the loss, theft or destruction and upon the giving of such bond or other security as may be required by the Board of Directors. Section 4. TRANSFER AGENTS AND REGISTRARS The Board of Directors may from time to time appoint one or more transfer agents and one or more registrars for the shares of the Corporation who will have such powers and duties as the Board of Directors will specify. Section 5. CLOSING STOCK TRANSFER BOOKS The Board of Directors may close the transfer books for a period not exceeding 70 days nor less than 10 days preceding any annual or special meeting of the shareholders or the day appointed for the payment of a dividend. ARTICLE VII GENERAL PROVISIONS Section 1. SEAL If the Corporation elects to have a corporate seal, such corporate seal will be circular in form and will have inscribed thereon the name of the Corporation and the state of its incorporation. Section 2. AMENDMENT OF BYLAWS (a) Except as otherwise provided by law or by the Articles of Incorporation, the Board of Directors may amend or repeal these Bylaws unless: (i) The Articles of Incorporation or Oregon law reserve this power exclusively to the shareholders in whole or in part; or (ii) The shareholders in amending or repealing a particular Bylaw provide expressly that the Board of Directors may not amend or repeal that Bylaw. (b) The Corporation's shareholders may amend or repeal these Bylaws even though these Bylaws may also be amended or repealed by the Board of Directors. (c) Whenever an amendment or new Bylaw is adopted, it will be copied in the minute book with the original Bylaws in the appropriate place. If any Bylaw is repealed, the fact of repeal and the date on which the repeal occurred will be stated in such book and place. Section 3. WAIVER OF NOTICE (a) A shareholder may at any time waive any notice required by law, the Articles of Incorporation or these Bylaws. Except as otherwise provided in paragraph (c) of Section 4 of Article I of these Bylaws, the waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the Corporation for inclusion in the minutes or filing with the corporate records. (b) A director may at any time waive any notice required by law, the Articles of Incorporation or these Bylaws. Except as otherwise provided in paragraph (b) of Section 8 of Article II of these Bylaws, the waiver must be in writing, must be signed by the director entitled to the notice, must specify the meeting for which notice is waived and must be filed with the minutes or appropriate records. Section 4. ACTION WITHOUT A MEETING (a) Action required or permitted by law to be taken at a shareholders meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Action taken under this Section 4 is effective when the last shareholder signs the consent, unless the consent specifies an earlier or later effective date. If not otherwise determined by law, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent. A consent signed under this Section 4 has the effect of a meeting vote and may be described as such in any document. (b) Unless the Articles of Incorporation or Bylaws provide otherwise, action required or permitted by law to be taken at a meeting of the Board of Directors, or at a meeting of a committee of the Board of Directors, may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one or more written consents describing the action taken, signed by each director and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this section is effective when the last director signs the consent, unless the consent specifies an earlier or later effective date. A consent signed under this section has the effect of a meeting vote and may be described as such in any document. Section 5. TELEPHONIC MEETINGS Unless the Articles of Incorporation provide otherwise, the Board of Directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through, use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. ARTICLE VIII INDEMNIFICATION (a) The Corporation will indemnify to the fullest extent permitted by law, any person who is made, or threatened to be made, a party to or witness in, or is otherwise involved in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative, or otherwise (including any action, suit or proceeding by or in the right of the Corporation) by reason of the fact that: (i) the person is or was a director or officer of the Corporation or any of its subsidiaries; (ii) the person is or was serving as a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the Corporation or any of its subsidiaries; or (iii) the person is or was serving, at the request of the Corporation or any of its subsidiaries, as a director or officer, or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise. (b) The Corporation may indemnify its employees and other agents to the fullest extent permitted by law. (c) The expenses incurred by a director or officer in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative, or otherwise, which the director or officer is made or threatened to be made a party to or witness in, or is otherwise involved in, will be paid by the Corporation in advance at the written request of the director or officer, if the director or officer: (i) furnishes the Corporation a written affirmation of his or her good faith belief that he or she is entitled to be indemnified by the Corporation; and (ii) furnishes the Corporation a written under-taking to repay such advance to the extent that it is ultimately determined by a court that he or she is not entitled to be indemnified by the Corporation. Such advances will be made without regard to the person's ability to repay such expenses and without regard to the person's ultimate entitlement to indemnification under this Article or otherwise. (d) The rights of indemnification provided in this Article VIII will be in addition to any rights to which a person may otherwise be entitled under any articles of incorporation, bylaw, agreement, statute, policy of insurance, vote of shareholders or Board of Directors, or otherwise; will continue as to a person who has ceased to be a director, officer, employee or agent of the Corporation; and will inure to the benefit of the heirs, executors and administrators of such person. (e) Any repeal of this Article VIII will be prospective only and no repeal or modification of this Article VIII will adversely affect any right or protection that is based upon this Article VIII and pertains to an act or omission that occurred prior to the time of such repeal or modification. ARTICLE IX TRANSACTIONS BETWEEN CORPORATION AND INTERESTED DIRECTORS (a) No transaction will be voidable by the Corporation solely because of a director's interest in the transaction if any one of the following is true: (i) The material facts of the transaction and the director's interest were disclosed or known to the Board of Directors or a committee of the Board of Directors, and the Board of Directors or committee authorized, approved or ratified the transaction; (ii) The material facts of the transaction and the director's interest were disclosed or known to the shareholders entitled to vote and the shareholders authorized, approved or ratified the transaction; or (iii) The transaction was fair to the Corporation. (b) For purposes of this Article IX, a director of the Corporation has an indirect interest in a transaction if: (i) Another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or (ii) Another entity of which the director is a director, officer or trustee is a party to the transaction and the transaction is or should be considered by the Board of Directors. (c) For purposes of paragraph (a)(i) of this Article IX, a conflict of interest transaction is authorized, approved or ratified if it receives the affirmative vote of a majority of the directors on the Board of Directors, or on the committee, who have no direct or indirect interest in the transaction. A transaction may not be authorized, approved or ratified under this Article IX by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve or ratify the transaction, a quorum is present for the purpose of taking action under this Article IX. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under paragraph (a)(i) of this Article IX if the transaction is otherwise authorized, approved or ratified as provided in paragraph (a) of this Article IX. (d) For purposes of paragraph (a)(ii) of this Article IX, a conflict of interest transaction is authorized, approved or ratified if it receives the vote of a majority of the shares entitled to be counted under this Article IX, voting as a single voting group. Shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in paragraph (b)(i) of this Article IX may be counted in a vote of shareholders to determine whether to authorize, approve or ratify a conflict of interest transaction under paragraph (a)(ii) of this Article IX. A majority of the shares, whether or not present, that are entitled to be counted in a vote on the transaction under this Article IX constitutes a quorum for the purpose of taking action under this Article IX. ARTICLE X LIMITATION OF DIRECTOR LIABILITY To the fullest extent permitted by law, no director of the Corporation will be personally liable to the Corporation or its shareholders for monetary damages for conduct as a director. For example, without limiting the generality of the foregoing, if the Oregon Revised Statutes are amended, after this Article X becomes effective, to authorize corporate action further eliminating or limiting the personal liability of directors of the Corporation, then the liability of directors of the Corporation will be eliminated or limited to the fullest extent permitted by the Oregon Revised Statutes, as so amended. No amendment or repeal of this Article X, nor the adoption of any provision of these Bylaws inconsistent with this Article X, nor a change in the law, will adversely affect any right or protection that is based upon this Article X and pertains to conduct that occurred prior to the time of such amendment, repeal, adoption or change. No change in the law will reduce or eliminate the rights and protections set forth in this Article X unless the change in the law specifically requires such reduction or elimination. As amended November 1995. EX-10.2 3 LOAN AGREEMENT WITH WEST ONE BANK, OREGON WEST ONE BANK BUSINESS LOAN AGREEMENT
- ------------------------------------------------------------------------------------------------------ PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $4,000,000.00 02-07-1996 12-31-1997 0001 30 0001 8933637 PC - ------------------------------------------------------------------------------------------------------ References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - ------------------------------------------------------------------------------------------------------
BORROWER: TRM COPY CENTERS LENDER: WEST ONE BANK, OREGON CORPORATION EAST METRO COMMERCIAL 5208 N.E. 122ND AVENUE BANKING CENTER PORTLAND, OR 97230 COMMERCIAL LOAN OPS/#ORW-504 234 S.W. BROADWAY - P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ THIS BUSINESS LOAN AGREEMENT BETWEEN TRM COPY CENTERS CORPORATION ("BORROWER") AND WEST ONE BANK, OREGON ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT. TERM. This Agreement shall be effective as of FEBRUARY 7, 1996, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parties terminate this Agreement in writing. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. BORROWER. The word "Borrower" means TRM COPY CENTERS CORPORATION. The word "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. COLLATERAL. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. ERISA. The word "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. EVENT OF DEFAULT. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." GRANTOR. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the Indebtedness, including without limitation all Borrowers granting such a Security Interest. GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness. INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. LENDER. The word "Lender" means WEST ONE BANK, OREGON, its successors and assigns. LOAN. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. NOTE. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security interests securing indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. SECURITY AGREEMENT. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. SECURITY INTEREST. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Loan Advance and each subsequent Loan Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to Lender the following documents for the Loan: (a) the Note, (b) Security Agreements granting to Lender security interests in the Collateral, (c) Financing Statements perfecting Lender's Security Interests; (d) evidence of insurance as required below; and (e) any other documents required under this Agreement or by Lender or its counsel. BORROWER'S AUTHORIZATION. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents, and such other authorizations and other documents and instruments as Lender or its counsel, in their sole discretion, may require. PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct. 02-07-1996 BUSINESS LOAN AGREEMENT PAGE 2 LOAN NO 0001 (CONTINUED) ================================================================================ NO EVENT OF DEFAULT. There shall not exist at the time of any advance a condition which would constitute an Event of Default under this Agreement. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: ORGANIZATION. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the State of Oregon and is validly existing and in good standing in all states in which the Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. AUTHORIZATION. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower. FINANCIAL INFORMATION. Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. PROPERTIES. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financial statement under, any other name for at least the last five (5) years. HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing or intended to protect human health or the environment ("Environmental Laws"). Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, about or from any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation Environmental Laws. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrowers' due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Borrower's ownership or interest in the properties, whether or not the same was or should have been known to Borrower, or as a result of a violation of any Environmental Laws. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the properties, whether by foreclosure or otherwise. LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. TAXES. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing. LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or Borrower's Chief executive office, if Borrower has more than one place of business, is located at 5208 N.E. 122nd AVENUE, PORTLAND, OR 97230. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. INFORMATION. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: LITIGATION. Promptly inform Lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. FINANCIAL RECORDS. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender, and, as soon as available, but in no event later than forty five (45) days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower's chief financial officer or other officer or person acceptable to Lender. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis. ADDITIONAL INFORMATION. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as 02-07-1996 BUSINESS LOAN AGREEMENT PAGE 3 LOAN NO 0001 (CONTINUED) ================================================================================ Lender may request from time to time. INSURANCE. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. PERFORMANCE. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents. OPERATIONS. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefits plans. INSPECTION. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's accounts, except to Lender. CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. ADDENDUM TO EVENTS OF DEFAULT/EVENTS AFFECTING GUARANTOR. Any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender. FINANCIAL COVENANTS AND RATIOS. (1) Borrower shall maintain a ratio of Total Liabilities to Tangible Net Worth not to exceed 1.00 to 1.00 (2) Borrower shall maintain a Tangible net worth of not less than $30,000,000.00 plus fifty percent (50%) of the cumulative net income after taxes each fiscal year beginning after June 30, 1995. (3) Borrower shall maintain a ratio of Current Assets to Current Liabilities of at least 1.50 to 1.00 (4) Borrower shall maintain a minimum Debt Coverage Ratio of 1.25 to 1.00, calculated on the basis of the most recent four quarters. (5) All covenants to be measured quarterly. ADDENDUM TO DEFINITIONS. (1) Debt Coverage Ratio means net profit after taxes plus depreciation and non-cash expenses divided by $5,250,000 for the fiscal quarters ending September 30, 1995 and December 31, 1995 and $6,500,000 thereafter. (2) Current Assets means the total assets of the Borrower that may properly be classified as current assets in accordance with GAAP, but excluding 02-07-1996 BUSINESS LOAN AGREEMENT PAGE 4 LOAN NO 0001 (CONTINUED) ================================================================================ all loans to and notes and receivables from officers, employees, directors, shareholders, partners and members of the Borrower. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on the Loans. OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. INSOLVENCY. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. CREDITOR OF FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor or Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, levy on or of any of Borrower's deposit accounts with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower or Grantor, as the case may be, as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding, and if Borrower or Grantor gives Lender written notice of the creditor or forfeiture proceeding and furnishes reserves or a surety bond for the creditor or forfeiture proceeding satisfactory to Lender. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure the Event of Default. CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. ADVERSE CHANGE. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender, in good faith, deems itself insecure. RIGHT TO CURE. If any default, other than a Default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured (and no Event of Default will have occurred) if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (a) cures the default within twenty (20) days; or (b) if the cure requires more than twenty (20) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF OREGON. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MULTNOMAH COUNTY, THE STATE OF OREGON. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON. ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; foreclosing by notice and sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's expenses, including without limitation attorneys' fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a 02-07-1996 BUSINESS LOAN AGREEMENT PAGE 5 LOAN NO 0001 (CONTINUED) ================================================================================ lawsuit, including attorneys' fees or bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. NOTICES. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower's current address(es). SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. SURVIVAL. All warranties, representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. WAIVER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER) AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF FEBRUARY 7, 1996. BORROWER: TRM COPY CENTERS CORPORATION BY: MICHAEL D. SIMON ----------------------------------- MICHAEL D. SIMON, PRESIDENT LENDER: WEST ONE BANK, OREGON BY: MALVERN F. HAWLEY ----------------------------------- AUTHORIZED OFFICER ================================================================================ WEST ONE BANK PROMISSORY NOTE
- ------------------------------------------------------------------------------------------------------ PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $4,000,000.00 02-07-1996 12-31-1997 0001 30 0001 8933637 PC - ------------------------------------------------------------------------------------------------------ References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - ------------------------------------------------------------------------------------------------------
BORROWER: TRM COPY CENTERS LENDER: WEST ONE BANK, OREGON CORPORATION EAST METRO COMMERCIAL 5208 N.E. 122ND AVENUE BANKING CENTER PORTLAND, OR 97230 COMMERCIAL LOAN OPS/#ORW-504 234 S.W. BROADWAY - P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ PRINCIPAL AMOUNT: INITIAL RATE: DATE OF NOTE: $4,000,000.00 8.250% FEBRUARY 7, 1996 PROMISE TO PAY. TRM COPY CENTERS CORPORATION ("BORROWER") PROMISES TO PAY TO WEST ONE BANK, OREGON ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FOUR MILLION & 00/100 DOLLARS ($4,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE. PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN ACCORDANCE WITH THE FOLLOWING PAYMENT SCHEDULE: BORROWER WILL MAKE MONTHLY PAYMENTS OF INTEREST COMMENCING MARCH 1, 1996, AND ON THAT DAY FOR EACH MONTH THEREAFTER, WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCE AT A VARIABLE RATE OF INTEREST EQUAL TO THAT RATE THAT THE BANK SHALL ANNOUNCE AS THE WEST ONE BANK, OREGON REFERENCE RATE (THE "REFERENCE RATE") AS IT MAY CHANGE FROM TIME TO TIME, WHICH RATE SHALL BE CALCULATED ON THE BASIS OF YEAR OF 365 OR 366 DAYS FOR THE ACTUAL NUMBER OF DAYS ELAPSED. NOTWITHSTANDING THE ABOVE, BORROWER MAY REQUEST OF LENDER IN WRITING TO APPLY AS TO ADVANCES OF NOT LESS THAN FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00) UNDER THE TERMS OF THIS NOTE, A RATE OF INTEREST BASED ON THE LONDON INTERBANK OFFERED RATE ("LIBOR") PLUS ONE AND THREE-TENTHS PERCENT (1.3%) PER ANNUM, WHICH RATE SHALL APPLY TO SUCH ADVANCES FOR TERMS OF SEVEN (7), THIRTY (30), SIXTY (60), NINETY (90) OR ONE HUNDRED EIGHTY (180) DAYS AS TO EACH ADVANCE AS REQUESTED BY BORROWER AT THE TIME THE ADVANCE IS MADE. LIBOR SHALL BE BASED ON THE ASKING PRICE PER ANNUM FOR U.S. DOLLAR DEPOSITS IN THE LONDON INTERBANK MARKET AS SUCH RATE OF INTEREST IS COMMUNICATED TO THE BANK THROUGH TELERATE OR A SIMILAR QUOTE REPORTING SERVICE. INTEREST UNDER THIS LIBOR RATE SHALL BE CALCULATED ON THE BASIS OF YEAR OF 360 DAYS FOR THE ACTUAL NUMBER OF DAYS ELAPSED. THE BORROWER SHALL BE ASSESSED A PREPAYMENT PENALTY FOR ANY AMOUNTS BORROWED UNDER THE LIBOR OPTION THAT ARE PREPAID PRIOR TO THE MATURITY OF AN INDIVIDUAL TERM. BORROWER'S FINAL PAYMENT DUE DECEMBER 31, 1997 WILL BE FOR ALL PRINCIPAL, AND ALL ACCRUED INTEREST, TOGETHER WITH ANY OTHER AMOUNTS DUE UNDER THIS NOTE. Interest on this Note is computed on a 365/365 simple interest basis; that is, by applying the ratio of the annual interest rate over the number of days in a year (366 during leap years), multiplied by the outstanding principal balance, multiplied by the actual number of days the principle balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the WEST ONE BANK, OREGON REFERENCE RATE (the "Index").* The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each DAY. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250% PER ANNUM. PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 15 DAYS OR MORE LATE, Borrower will be charged 5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the Related Documents. (d) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (g) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Note. (h) A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the indebtedness is impaired. (i) Lender in good faith deems itself insecure. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default: (a) cures the default within twenty (20) days; or (b) if the cure requires more than twenty (20) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon default, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 5.000 percentage points over the Index. The interest rate will not exceed the maximum rate permitted by applicable law. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF OREGON. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MULTNOMAH COUNTY, THE STATE OF OREGON. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested orally by Borrower or by an authorized person. All oral requests shall be confirmed in writing on the day of the request. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: MICHAEL D. SIMON, PRESIDENT; ROBERT A. BRUCE, VICE PRESIDENT/CFO; ROSEMARY EVANS, TREASURER; AND LINDA HAAS, CONTROLLER. Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender, regardless of the fact that persons other than those authorized to borrow have authority to draw against the accounts. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify * If applicable, LIBOR (collectively, the "Index") 02-07-1996 PROMISSORY NOTE Page 2 Loan No 0001 (CONTINUED) ================================================================================ or revoke such guarantor's guarantee of this Note or any other loan with Lender; (d) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (e) Lender in good faith deems itself insecure under this Note or any other agreement between Lender and Borrower. ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any collateral securing this Note shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; foreclosing by notice and sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any collateral securing this Note, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Promissory Note. GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender's right to declare payment of this Note on its demand. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER) AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: TRM COPY CENTERS CORPORATION BY: MICHAEL D. SIMON ----------------------------------- MICHAEL D. SIMON, PRESIDENT LENDER: WEST ONE BANK, OREGON BY: MALVERN F. HAWLEY ----------------------------------- AUTHORIZED OFFICER ================================================================================ CORPORATE RESOLUTION TO BORROW
- --------------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $4,000,000.00 02-07-1996 12-31-1997 0001 30 0001 8933637 PC - --------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - ---------------------------------------------------------------------------------------------------------
BORROWER: TRM COPY CENTERS LENDER: WEST ONE BANK, OREGON CORPORATION EAST METRO COMMERCIAL 5208 N.E. 122ND AVENUE BANKING CENTER PORTLAND, OR 97230 COMMERCIAL LOAN OPS/#ORW-504 234 S.W. BROADWAY - P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF TRM COPY CENTERS CORPORATION (THE "CORPORATION"), HEREBY CERTIFY THAT the Corporation is organized and existing under and by virtue of the laws of the State of Oregon as a corporation for profit, with its principal office at 5208 N.E. 122nd AVENUE, PORTLAND, OR 97230, and is duly authorized to transact business in the State of Oregon. I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly called and held ON JUNE 17, 1994, at which a quorum was present and voting, or by other duly authorized corporate action in lieu of a meeting, the following resolutions were adopted: BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below: NAME POSITION ACTUAL SIGNATURE ---- -------- ---------------- MICHAEL D. SIMON PRESIDENT X MICHAEL D. SIMON ---------------------- acting for and on behalf of the Corporation and as its act and deed be, and he or she hereby is, authorized and empowered: BORROW MONEY. To borrow from time to time from WEST ONE BANK, OREGON ("Lender"), on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as in his or her judgment should be borrowed; however, not exceeding at any one time the amount of THIRTY MILLION & 00/100 DOLLARS ($30,000,000.00), in addition to such sum or sums of money as may be currently borrowed by the Corporation from Lender. EXECUTE NOTES. To execute and deliver to Lender the promissory note or notes, or other evidence of credit accommodations of the Corporation, on Lender's forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any indebtedness of the Corporation to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, any portion of the notes, or any other evidence of credit accommodations. GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender, as security for the payment of any loans or credit accommodations so obtained, any promissory notes so executed (including any amendments to or modifications, renewals, and extensions of such promissory notes), or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced, any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all real property and all personal property (tangible or intangible) of the Corporation. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered. EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which may be submitted by Lender, and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which he or she may in his or her discretion deem reasonably necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Lender, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable. FURTHER ACTS. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements, INCLUDING AGREEMENTS REQUIRING DISPUTES WITH LENDER TO BE SUBMITTED TO BINDING ARBITRATION FOR FINAL RESOLUTION AND WAIVING THE RIGHT TO A TRIAL BY JURY, as he or she may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions. The following person or persons currently are authorized to request advances and authorize payments under the line of credit until Lender receives written notice of revocation of their authority: MICHAEL D. SIMON, PRESIDENT; ROBERT A. BRUCE, VICE PRESIDENT/CFO; ROSEMARY EVANS, TREASURER; and LINDA HAAS, CONTROLLER. BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these Resolutions and performed prior to the passage of these Resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Lender may rely on these Resolutions until written notice of his or her revocation shall have been delivered to and received by Lender. Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time to time) prior to any (a) change in the name of the Corporation, (b) change in the assumed business name(s) of the Corporation, (c) change in the management of the Corporation, (d) change in the authorized signer(s) or (e) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the name of the Corporation will take effect until after Lender has been notified. I FURTHER CERTIFY that the officer, employee, or agent named above is duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupies the position set opposite the name; that the foregoing Resolutions now stand or record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever. The Corporation has no corporate seal, and therefore, no seal is affixed to this certificate. IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON FEBRUARY 7, 1996 AND ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE SIGNATURES. CERTIFIED TO AND ATTESTED BY: X ROBERT A. BRUCE ------------------------------- X ------------------------------- NOTE: In case the Secretary or other certifying officer is designated by the foregoing resolutions as one of the signing officers, it is advisable to have this certificate signed by a second Officer or Director of the Corporation. ================================================================================ WEST ONE BANK DISBURSEMENT REQUEST AND AUTHORIZATION
- ------------------------------------------------------------------------------------------------------ PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS $4,000,000.00 02-07-1996 12-31-1997 0001 30 0001 8933637 PC - ------------------------------------------------------------------------------------------------------ References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. - ------------------------------------------------------------------------------------------------------
BORROWER: TRM COPY CENTERS LENDER: WEST ONE BANK, OREGON CORPORATION EAST METRO COMMERCIAL 5208 N.E. 122ND AVENUE BANKING CENTER PORTLAND, OR 97230 COMMERCIAL LOAN OPS/#ORW-504 234 S.W. BROADWAY - P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ LOAN TYPE. This is a Variable Rate (at WEST ONE BANK, OREGON REFERENCE RATE, making an initial rate of 8.250%), Revolving Line of Credit Loan to a Corporation for $4,000,000.00 due on December 31, 1997. PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for: / / PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT. / X / BUSINESS (INCLUDING REAL ESTATE INVESTMENT). SPECIFIC PURPOSE. The specific purpose of this loan is: Revolving line of credit utilized for working capital and letters of credit. DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Lender's conditions for making the loan have been satisfied. Please disburse the loan proceeds of $4,000,000.00 as follows: AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF: $4,000,000.00 $4,000,000.00 LINE OF CREDIT: DISBURSE AS REQUESTED ------------- NOTE PRINCIPAL: $4,000,000.00 FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED FEBRUARY 7, 1996. BORROWER: TRM COPY CENTERS CORPORATION BY: MICHAEL D. SIMON ----------------------------------- MICHAEL D. SIMON, PRESIDENT ================================================================================ EX-10.3 4 LOAN AGREEMENT WITH WEST ONE BANK, IDAHO LOAN AGREEMENT Dated as of: February 7, 1996 Parties: TRM Copy Centers Corporation (USA) ("BORROWER") TRM Copy Centers Corporation ("GUARANTOR") And: WEST ONE BANK, IDAHO ("LENDER") ARTICLE I CERTAIN DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: "Access Laws" means the American With Disabilities Act of 1990; the Fair Housing Amendments Act of 1988; all other federal, state and local laws or ordinances related to disabled access; and all statutes; rules, regulations, ordinances, orders of governmental bodies and regulatory agencies and orders and decrees of any court adopted, enacted or issued with respect thereto; all as now existing or hereafter amended or adopted. "Borrower" means TRM Copy Centers (USA) Corporation, an Oregon corporation. "Debt Coverage Ratio" means net profit after taxes plus depreciation and non-cash expenses divided by $6,500,000.00. "Default" means any Event of Default or any event which with the giving of notice or the passage of time, or both, would constitute an Event of Default. "Default Rate" means a rate of interest 2% above the rate of interest stated on the Note. "Environmental Laws" means all local, state or federal laws, rules, regulations, or ordinances pertaining to Hazardous Substances and environmental regulation, contamination or clean-up including, without limitation, the federal statutes commonly known as CERCLA and RCRA and all other federal or state lien or environmental clean-up statutes, all as now existing or hereafter amended or adopted. "GAAP" means generally accepted accounting principles consistently applied. The definition of any accounting term used in this Agreement that is not specifically defined shall be the GAAP definition therefor. "Guarantor" means TRM Copy Centers Corporation. "Guaranty" means each guaranty of any obligations of Borrower to Lender heretofore, contemporaneously herewith or hereafter executed by any Guarantor or any other Person. "Hazardous Substances" means (a) any substance or material defined or designated as hazardous or toxic waste, hazardous or toxic material, or a hazardous, toxic or radioactive substance (or designated by any similar term) by or for purposes of any applicable Environmental Law; (b) asbestos and any substance or compound containing asbestos; and (c) any other hazardous, toxic or dangerous waste, substance or material, including but not limited to gasoline, crude oil, fuel oil, diesel oil, and any other related petroleum products. "Loan Documents" means this Agreement the Notes, the Guaranty and all other documents and instruments attached hereto, referred to herein or heretofore, contemporaneously herewith or hereafter executed or delivered to Lender by any Person in connection with any indebtedness of Borrower to Lender. "Loan Party" means each party hereto other than Lender. "Maximum Term Loan Amount" means $26,000,000.00. "Maximum Revolving Loan Amount" means $26,000,000.00. "Note(s)" means any one or more of the Revolving Note or the Term Note. "Person" means an individual or entity, including without limitation a corporation, general or limited partnership, limited liability company, trust, unincorporated association, government or government agency. "Revolving Loan Review Date" means the earlier of January 1, 1998 and the date Lender demands payment in full of the then outstanding balance of the Revolving Note. "Tangible Net Worth" means for any Person the net book value of (a) all of such Person's assets exclusive of patents, trademarks, licenses, goodwill and other intangibles and of loans to and notes and receivables from officers, employees, directors, shareholders, partners and members of such Person minus (b) all of such Person's liabilities determined in accordance with GAAP. "Term Loan Maturity Date" means January 1, 2002. LOAN AGREEMENT - February 5, 1996 - Page 2 ARTICLE II REVOLVING LOANS 2.1 MAXIMUM AMOUNT. Subject to the terms and conditions of this Agreement, Lender agrees to make loans to Borrower from time to time on a revolving credit basis (each a "Revolving Advance", collectively, "Revolving Loans"), provided that the aggregate principal amount of outstanding Revolving Loans shall at no time exceed the Maximum Revolving Loan Amount. The availability of Revolving Advances shall terminate on the Revolving Loan Review Date. 2.2 USE OF PROCEEDS. Borrower shall use the proceeds of the Revolving Loans for carrying accounts receivable and Inventory, paying trade payables, taking discounts where appropriate and financing the installation of copy centers at selected locations. 2.3 REVOLVING NOTE. The Revolving Loans shall be evidenced by a promissory note executed by Borrower in the principal amount of $26,000,000.00 substantially in the form attached as Exhibit A ("Revolving Note"). The Revolving Loans shall be subject to all terms and conditions of the Revolving Note and of this Agreement. 2.4 INTEREST. Interest on the unpaid principal balance of the Revolving Note shall be due and payable at the times and at the rates set forth in the Revolving Note. 2.5 PRINCIPAL PAYMENTS. The principal balance of the Revolving Note shall be due and payable January 1, 1998. 2.6 ADDITIONAL PAYMENTS. In addition to the payments otherwise required on the Revolving Note, if at any time the outstanding principal balance of the Revolving Note exceeds the Maximum Revolving Loan Amount, Borrower shall pay to Lender on demand an amount equal to the amount by which such principal balance exceeds the Maximum Revolving Loan Amount. 2.7 REQUESTS FOR REVOLVING ADVANCES. Whenever Borrower wishes to request a Revolving Advance, Borrower shall give Lender notice thereof in accordance with the provisions of the Revolving Note. 2.8 REVOLVING LOAN NON-USAGE FEE. Borrower agrees to pay a non-usage fee to Lender in an amount equal to .2% of the average daily unused portion of the Revolving Loan which fee shall be payable quarterly in arrears. ARTICLE III TERM LOAN 3.1 TERM LOAN AMOUNT. Subject to the terms and conditions of this Agreement, Lender agrees to make a term loan to Borrower on January 1, 1998 in the principal amount of the lesser of: (a) the Revolving Loan principal balance on January 1, 1998, or (b) $26,000,000.00 ("Term Loan"). LOAN AGREEMENT - February 5, 1996 - Page 3 3.2 TERM NOTE. The Term Loan shall be evidenced by a promissory note to be executed by Borrower on January 1, 1998, or as soon thereafter as practicable, in the principal amount of $26,000,000.00 or the lesser amount of the Revolving Loan principal balance on January 1, 1998 ("Term Note"). The Term Loan shall be subject to all terms and conditions of the Term Note and of this Agreement. 3.3 INTEREST ON TERM LOAN. Interest on the unpaid principal balance of the Term Loan shall be due and payable at the times and at the rates set forth in the Term Note. 3.4 REPAYMENT OF TERM LOAN PRINCIPAL. The principal amount of the Term Loan shall be due and payable at the times and at the rates set forth in the Term Note. 3.5 USE OF PROCEEDS OF TERM LOAN: The proceeds of the Term Loan shall be used to pay in full the principal and interest amount of the Revolving Loan. ARTICLE IV ADDITIONAL TERMS APPLICABLE TO CERTAIN CREDIT FACILITIES 4.1 REPRESENTATION AND WARRANTY OF CREDIT AVAILABILITY. Each request by Borrower for a Revolving Advance shall be deemed to be its representation and warranty that (a) such Revolving Advance may be made without exceeding the applicable maximum amount determined in accordance with the provisions of this Agreement, (b) no Default has occurred, or will occur as a result of making such Revolving Advance and (c) all representations and warranties set forth in this Agreement are true, accurate and complete as of the date of such request. ARTICLE V GUARANTY AND RELATED MATTERS 5.1 GUARANTY. All present and future obligations of Borrower to Lender shall be guaranteed as set forth in the Current Guaranties and in this section. Concurrently with execution of this Agreement, Guarantor shall execute and deliver a guaranty to Lender. 5.2 NEGATIVE PLEDGE. 5.2.1 Without the prior written consent of Lender, Borrower shall not grant, create, assume or permit to exist any pledge, assignment for security purposes, encumbrance, mortgage, hypothecation, or any other security interest (including without limitation, any conditional sale or other title retention agreement and any financing or capital lease having substantially the same economic effect as any of the foregoing) in all or any portion of any real or personal property now owned or hereafter acquired by Borrower (collectively, "Property"). LOAN AGREEMENT - February 5, 1996 - Page 4 ARTICLE VI CONDITIONS PRECEDENT 6.1 INITIAL CONDITIONS PRECEDENT. The effectiveness of this Agreement is subject to satisfaction of each of the following conditions precedent concurrently with or prior to execution of this Agreement: 6.1.1 Lender shall have received executed originals of this Agreement, the Notes, and each other Loan Document required by Lender. 6.1.2 Lender shall have received all documents and information Lender may request relating to the authority for and validity of this Agreement and the other Loan Documents, and to any other related matters, each in form and substance satisfactory to Lender. 6.1.3 Lender shall have received such additional documents and information and each Loan Party shall have satisfied such additional requirements as Lender reasonably requires. 6.1.4 No Default shall have occurred or will occur as a result of Borrower's action or inaction. 6.1.5 The representations and warranties in this Agreement shall be true and correct as of such date. ARTICLE VII REPRESENTATIONS AND WARRANTIES Each Loan Party hereby represents and warrants: 7.1 EXISTENCE AND POWER. It is a duly organized and validly existing corporation, is duly qualified and in good standing in each jurisdiction where the conduct of its business or the ownership of its properties requires such qualification, and has full power, authority and legal right to carry on its business as presently conducted, to own and operate its properties and assets, and to execute, deliver and perform the Loan Documents and all other documents to be executed and delivered by it. 7.2 AUTHORIZATION. Its execution, delivery and performance of the Loan Documents and all documents to be executed, delivered or performed by it and any borrowing in connection therewith have been duly authorized by all necessary corporate action, do not contravene any law, regulation, rule or order binding on it or its articles of incorporation, and do not contravene the provisions of or constitute a default under any agreement or instrument to which it is a party or by which it may be bound or affected. 7.3 LITIGATION. There are no actions, proceedings, investigations, or claims pending against it, or to its knowledge, threatened against or affecting it, before any court or arbitrator or any LOAN AGREEMENT - February 5, 1996 - Page 5 governmental body or agency which would be likely to result in a judgment or order against it (in excess of insurance coverage) for more than $500,000 individually or in the aggregate. 7.4 FINANCIAL CONDITION. Its most recent balance sheet and related statements of income, retained earnings and changes in financial position heretofore delivered to Lender fairly present as of the date thereof its financial condition for the period then ended, all in accordance with GAAP. Since that date there have been no material adverse changes in its financial condition or operations, except as disclosed to Lender in writing. 7.5 TAXES. It has filed all tax returns and reports required of it, and has paid all taxes payable by it which have become due pursuant to such tax returns and all other taxes and assessments payable by it. 7.6 OTHER AGREEMENTS. It is not in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets, which such breach or default would have a material adverse effect on its financial condition or operations. 7.7 GOOD TITLE AND VALIDITY. It is the true and lawful owner of and has good title to all Property which it now owns and it will have good title to all such Property acquired hereafter, free of any security interests, liens or encumbrances. 7.8 COMPLIANCE WITH LAWS. It is in compliance with all applicable federal, state, regional and local laws, regulations and ordinances, including without limitation all environmental permits, Environmental Laws and Access Laws. 7.9 ERISA AND FLSA COMPLIANCE. Any employee pension benefit plan ("Plan") maintained for its employees which is subject to the Employment Retirement Income Security Act of 1974 and any regulations issued thereto complies in all material respects with ERISA and any other applicable laws and (a) such Plan has not incurred any material accumulated "funding deficiency" and (b) with respect to such Plan, no "reportable event" nor "prohibited transaction" has occurred. It is in full compliance with the Fair Labor Standards Act. 7.10 NO MATERIAL MISSTATEMENTS. No report, financial statement, representation or other information furnished by it to Lender contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 7.11 ENFORCEABILITY. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered to Lender will constitute a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms. LOAN AGREEMENT - February 5, 1996 - Page 6 ARTICLE VIII FINANCIAL COVENANTS AND INFORMATION 8.1 FINANCIAL COVENANTS. Until payment and performance in full of all obligations of each Loan Party under the Loan Documents each Loan Party agrees that: 8.1.1 DEBT TO WORTH RATIO. BORROWER shall maintain a debt to Tangible Net Worth ratio not to exceed 1.00 to 1.00. 8.1.2 Current Ratio. Borrower shall maintain a ratio of current assets to current liabilities of at least 1.50 to 1.00. As used herein "current assets" means the total assets of the Borrower that may properly be classified as current assets in accordance with GAAP, but excluding all loans to and notes and receivables from officers, employees, directors, shareholders, partners and members of the Borrower. 8.1.3 DEBT COVERAGE RATIO. Borrower shall maintain a minimum Debt Coverage Ratio of 1.25 to 1.00. 8.1.4 MINIMUM TANGIBLE NET WORTH. Borrower shall maintain a minimum Tangible Net Worth of not less than $30,000,000 plus fifty percent (50%) of the cumulative net, income after taxes for each fiscal year beginning after June 30, 1995. 8.2 FINANCIAL INFORMATION. 8.2.1 As soon as available and in any event within 90 days after the end of each of its fiscal years, shall deliver to Lender its CPA audited balance sheet as at the end of such fiscal year; related statements of income, retained earnings and changes in financial position for such year; and report, if any, to management by the accountant who prepared the financial statements, in each case certified by a certified public accountant acceptable to Lender. No document or report shall contain a disclaimer of opinion or adverse opinion except such as Lender in its sole discretion may determine to be immaterial. 8.2.2 As soon as available and in any event within 45 days after the end of each of its fiscal quarters, Borrower shall deliver to Lender its internally prepared balance sheet and related statements of income, retained earnings and changes in financial position as at the end of such quarter, and for the fiscal year to date. 8.2.3 From time to time, each Loan Party shall provide to Lender such information as Lender may reasonably request concerning the financial condition and business affairs of such Loan Party, or of any partners in such Loan Party. LOAN AGREEMENT - February 5, 1996 - Page 7 ARTICLE IX AFFIRMATIVE COVENANTS Until payment and performance in full of all obligations of each Loan Party under the Loan Documents, each Loan Party agrees that: 9.1 INSPECTION RIGHTS. At any reasonable time, and from time to time, it will permit Lender to examine and make copies of and abstracts from its records and books of account, to visit its properties and to discuss its affairs, finances and accounts with any of its officers or representatives. 9.2 KEEPING OF BOOKS AND RECORDS. It will keep adequate records and books of account in which complete entries will be made reflecting all material financial transactions, and except as otherwise specifically provided herein, will prepare all financial statements, computations and information required hereunder in accordance with GAAP. 9.3 OTHER OBLIGATIONS. It will pay and discharge before the same shall become delinquent all indebtedness, taxes and other obligations for which it is liable or to which its income or property is subject and all claims for labor and materials or supplies which, if unpaid, might become by law a lien upon its assets, unless it is contesting the indebtedness, taxes, or other obligations in good faith and provision has been made to the reasonable satisfaction of Lender for the payment thereof in the event any such contest is determined adversely to it. 9.4 INSURANCE. It will maintain insurance upon its properties and operations, carried with companies acceptable to Lender, in such form and amounts and covering such risks as Lender may require, and upon request of Lender, provide certificates therefor. 9.5 ERISA COMPLIANCE. It will cause each Plan to comply in all material respects with ERISA and any other applicable laws, will promptly make all contributions necessary to meet the minimum funding standards set forth in ERISA and will promptly notify Lender of the occurrence of any "reportable event" (as defined in ERISA) or any other event which might constitute grounds for termination of any ERISA Plan. It will not terminate any ERISA Plan nor permit to exist any "termination event" (as defined in ERISA). 9.6 COMPLIANCE WITH LAWS. It shall comply in all material respects with all federal, state, regional and local laws, regulations and ordinances (including but not limited to all Environmental Laws, Access Laws and the Fair Labor Standards Act) and promptly provide written notice to Lender of the receipt of any notice of violation thereof from any governmental authority which violation, alone or together with any other such violations, could reasonably be expected to have a material adverse effect on its business, assets, operations or condition, financial or otherwise. LOAN AGREEMENT - February 5, 1996 - Page 8 9.7 NOTIFICATION. Promptly after learning thereof, it will notify Lender in writing of: 9.7.1 The occurrence of any Default, and if such Default is then continuing, a certificate of its chief financial officer or other authorized officer setting forth the details thereof and the action which it is taking or proposes to take with respect thereto; 9.7.2 The occurrence of any release of any Hazardous Substances onto or affecting any of its property or any adjacent property, any Collateral, or any other environmental problem or liability with respect to any such property; and 9.7.3 The details of any claim, lien, litigation, administrative proceeding or judgment involving $500,000 or more individually or in the aggregate threatened, instituted or completed against any Loan Party, any Collateral or any assets of any Loan Party, including but not limited to any and all enforcement, cleanup, removal or other governmental or regulatory proceedings pursuant to any Environmental Laws. ARTICLE X NEGATIVE COVENANTS Until payment and performance in full of all obligations of each Loan Party under the Loan Documents, each Loan Party agrees that except with the written consent of Lender: 10.1 LIQUIDATION, MERGER. It shall not liquidate, dissolve or enter into any merger, consolidation or other combination. 10.2 SALE OF ASSETS. It shall not sell, lease or dispose of any portion of its business or assets except in the ordinary course of business. 10.3 GUARANTIES, ETC. It shall not assume, guarantee, endorse or otherwise become directly or contingently liable for, nor obligated to purchase, pay or provide funds for payment of, any obligation or indebtedness of any other Person. 10.4 LOANS AND INVESTMENTS. It shall not make or contract to make any loan to any Person or purchase or otherwise acquire the capital stock, or any interest in, any Person. 10.5 LIENS. It shall not at any time grant a security interest in any or all of its presently owned or hereafter acquired. Property. 10.6 TYPE OF BUSINESS. It shall not make any material change in the character of its business. 10.7 STRUCTURE. It shall not make any material change in its corporate structure. LOAN AGREEMENT - February 5, 1996 - Page 9 ARTICLE XI DEFAULT 11.1 EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an Event of Default under this Agreement and each of the Loan Documents: 11.1.1 Any default in the payment of any portion of any principal, interest, fees or any other amount when due under this Agreement, any Note or any other Loan Document. 11.1.2 Any other default in the performance of or compliance with any term of this Agreement, any other Loan Document, or any other agreement between Lender and any Loan Party. 11.1.3 Any indebtedness of any Loan Party under any note, indenture, agreement, undertaking or obligation of any kind to any Person, including Lender, becomes due by acceleration or otherwise and is not paid. 11.1.4 Any Guaranty shall cease to be, or shall be asserted by any Person not to be, in full force and effect. 11.1.5 Any warranty, representation, statement, or information made or furnished to Lender by or on behalf of any Loan Party proves to have been false or misleading in any material respect when made or furnished or when deemed made or furnished. 11.1.6 The commencement of any proceeding under any bankruptcy or insolvency laws by or against, appointment of a receiver for any part of the property of, insolvency or business failure of, or any attachment, seizure or levy on any property of, any Loan Party. 11.1.7 The death or incapacity of any individual Loan Party or partner in any Loan Party; or the dissolution or liquidation of any Loan Party which is a corporation, partnership, limited liability company or other type of entity. 11.1.8 The interruption or cessation of a material portion of any Loan Party's ordinary business operations. 11.1.9 Any judgment, writ of attachment or similar process in an amount in excess of $500,000 individually or in the aggregate shall be entered or filed against any Loan Party or any property of any Loan Party and remains unpaid, unvacated, unbonded or unstayed for a period of 30 days or more. 11.1.10 The failure of any Loan Party or partner in any Loan Party to provide Lender with financial information promptly when requested. LOAN AGREEMENT - February 5, 1996 - Page 10 11.1.11 Any material adverse change, as determined solely by Lender, in the financial condition or management of any Loan Party or Lender reasonably deems itself insecure with respect to the payment or performance of the obligations of any Loan Party to Lender. 11.2 CONSEQUENCES OF DEFAULT; LENDER'S RIGHTS AND REMEDIES. Time is of the essence of this Agreement. 11.2.1 Without prejudice to any right of Lender to require payment of any obligations of Borrower to Lender under any of the Loan Documents on demand, upon the occurrence of any Event of Default and at any time thereafter Lender may, at its sole option, do any one or more of the following: (a) Without notice to any Loan Party, declare the entire outstanding balance of principal and interest on the Notes and other Loan Documents immediately due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or other requirements of any kind, all of which are expressly waived by each Loan Party; and (b) Exercise any and all other rights and remedies provided in the Loan Documents and in any related agreements and documents, and as otherwise provided by law. 11.2.2 Notwithstanding any right to cure events of default provided in any Note or any of the other Loan Documents, each Loan Party agrees that such Loan Party shall have only such cure rights as may be set forth herein. ARTICLE XII ARBITRATION 12.1 ARBITRATION OF CLAIMS. Lender and each Loan Party agree that all disputes, claims and controversies between them, whether individual, joint, or class in nature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be subject to binding arbitration pursuant to the Rules of the American Arbitration Association, upon request of any party. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment of imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however, that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent LOAN AGREEMENT - February 5, 1996 - Page 11 jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. ARTICLE XIII MISCELLANEOUS 13.1 NO WAIVER BY LENDER. No failure or delay of Lender in exercising any right, power or remedy under this Agreement or any Loan Document shall operate as a waiver of such right, power or remedy of Lender or of any other right. A waiver of any provision of any Loan Document shall not constitute a waiver of or prejudice Lender's right otherwise to demand strict compliance with that provision or any other provision. Any waiver, permit, consent or approval of any kind or character on the part of Lender must be in writing and shall be effective only to the extent specifically set forth in such writing. 13.2 COSTS AND FEES. Without limiting any other provisions of this Agreement, Borrower hereby agrees to pay Lender on demand an amount equal to all costs and expenses incurred by Lender in connection with the negotiation, preparation, execution, administration and enforcement of the Loan Documents, including without limitation all recording costs, filing fees, costs of appraisals, collateral audits, costs of perfecting, maintaining and defending Lender's security interest in the Collateral and fees of in-house and outside counsel. 13.3 AGREEMENTS ENFORCEABLE. Each Loan Party reaffirms the representations and warranties in each of the existing Loan Documents and acknowledges that except as amended previously or herein, each such Loan Document remains in full force and effect and is and shall remain valid and enforceable in accordance with its terms. 13.4 NOTICES. Except as otherwise specifically set forth in any Loan Document, all notices, requests and demands hereunder shall be in writing, and shall be deemed to have been given when hand-delivered, when deposited in the mail as first class, registered or certified mail, postage prepaid, or when sent by telecopier, addressed as set forth below; provided, however, that any notice, request or demand by Borrower to Lender pursuant to Section 9.7 shall not be effective until received by Lender. Any party may at any time change its address for notices by giving notice of such change to the other parties. If to Lender: West One Bank, Idaho Attn: Portland Corporate Banking P.O. Box 2882 623 S.W. Oak Portland, Oregon 97208 LOAN AGREEMENT - February 5, 1996 - Page 12 If to Borrower: TRM Copy Centers (USA) Corporation 5208 NE 122nd Avenue Portland, Oregon 97230 13.5 COLLECTION COSTS AND ATTORNEY FEES. Whether or not litigation or arbitration is commenced, each Loan Party promises to pay all costs of collecting any amounts which may become due to Lender under any of the Loan Documents. Without limiting the foregoing, if litigation or arbitration is commenced to enforce or construe any term of any of the Loan Documents, the prevailing party shall be entitled to recover from the other party all costs thereof, including but not limited to such sums as the court or arbitrator(s) may adjudge reasonable as attorney fees at trial, in any appellate proceeding, proceeding under the bankruptcy code or receivership and post-judgment attorney fees incurred in enforcing any judgment. 13.6 INTEGRATION; CONFLICTING TERMS. This Agreement together with the other Loan Documents comprises the entire agreement of the parties on the subject matter hereof and supersedes and replaces all prior agreements, oral and written, on such subject matter. If any term of any of the other Loan Documents expressly conflicts with the provisions of this Agreement, the provisions of this Agreement shall control; provided, however, that the inclusion of supplemental rights and remedies of Lender in any of the other Loan Documents shall not be deemed a conflict with this Agreement. 13.7 GOVERNING LAW. Except to the extent that Lender has greater rights and remedies under federal law, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Oregon without regard to conflicts of law principles. 13.8 ADDITIONAL ACTS. Upon request by Lender, each Loan Party will from time to time provide such information, execute such documents and do such acts as may reasonably be required by Lender in connection with any indebtedness or obligations of any of them to Lender. 13.9 DOCUMENTS SATISFACTORY TO LENDER. All information, documents and instruments required to be executed or delivered to Lender shall be in form and substance satisfactory to Lender. 13.10 JURY WAIVER. LENDER AND EACH LOAN PARTY HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR ANY LOAN PARTY AGAINST THE OTHER. 13.11 EXHIBITS. All Exhibits referred to herein are attached hereto and hereby incorporated by reference as if fully set forth herein. 13.12 RECITALS. The Recitals are hereby incorporated by reference as if fully set forth herein. 13.13 COMPUTATIONS. All interest rates and fees referred to herein shall be computed as set forth in the Revolving Note. LOAN AGREEMENT - February 5, 1996 - Page 13 13.14 REFERENCES. 13.14.1 References to any Loan Document shall mean such Loan Document as amended, modified, supplemented or extended from time to time and any number of substitutions, renewals and replacements thereof or therefor. 13.14.2 References to governmental laws, statutes, ordinances, rules and regulations shall be construed as including all amendments, consolidations and replacements thereof or therefor. 13.15 DISCLOSURE. UNDER OREGON LAW, MOST AGREEMENTS PROMISES AND COMMITMENTS MADE BY LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE. Each Loan Party acknowledges receipt of a copy of this Agreement. BORROWER LENDER TRM COPY CENTERS (USA) CORPORATION WEST ONE BANK, IDAHO By: MICHAEL D. SIMON By: MALVERN F. HAWLEY ------------------------------ ------------------------------ Title: PRESIDENT Title: VICE PRESIDENT GUARANTOR: TRM COPY CENTERS CORPORATION By: MICHAEL D. SIMON ------------------------------ Title: PRESIDENT LOAN AGREEMENT - February 5, 1996 - Page 14 PROMISSORY NOTE ================================================================================ BORROWER: TRM COPY CENTERS (USA) LENDER: WEST ONE BANK, IDAHO CORPORATION PORTLAND CORPORATE BANKING 5208 N.E. 122ND AVENUE DEPT. PORTLAND, OR 97230 623 S.W. OAK P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ PRINCIPAL AMOUNT: $26,000,000.00 DATE OF NOTE: FEBRUARY 7, 1996 PROMISE TO PAY. TRM COPY CENTERS (USA) CORPORATION ("BORROWER") PROMISES TO PAY TO WEST ONE BANK, IDAHO ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF TWENTY SIX MILLION & 00/100 DOLLARS ($26,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON EACH OF THE UNPAID OUTSTANDING PRINCIPAL BALANCES FROM THE DATE OF THE ADVANCE, UNTIL REPAYMENT OF THE ADVANCE OR MATURITY, WHICHEVER OCCURS FIRST. PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JANUARY 1, 1998. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING MARCH 1, 1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. IF BORROWER CHOOSES THE LIBOR OPTION (as defined below), Borrower will pay accrued interest on each LIBOR Option on the maturity date of each such LIBOR Option, rather than monthly on the first day of each month. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the West One Bank, Idaho Reference Rate (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each date a change occurs. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250% PER ANNUM. Interest accruing under the Index shall be computed on the basis of a year of 365 days for the actual days elapsed. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. LIBOR INTEREST RATE OPTION. As an alternative to the Index, the Borrower may request an alternative interest rate on all or part of the principal balance of this note for terms of 7, 30, 60, 90 or 180 days at a per annum fixed rate of interest equal to the asking price per annum for U.S. Dollar denominated deposits in the London, England interbank market as such price is presented to the Lender by Dow Jones & Company through its Dow Jones Telerate, Inc. subsidiary or a similar quote reporting service ("LIBOR") plus One and Thirty Hundredths (1.30%) ("the LIBOR Option"). Unless the Borrower specifically requests a LIBOR Option, interest will accrue at the Index. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Interest accruing under the LIBOR Option shall be computed on the basis of a year of 360 days. PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than it is due at any time except for amounts subject to a LIBOR Option which may be paid only on the expiration of a LIBOR Option term. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to perform promptly at the time and strictly in the manner provided in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect. (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (f) Any of the events described in this default section occurs with respect to any guarantor of this Note. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF OREGON. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MULTNOMAH COUNTY, THE STATE OF OREGON. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA, Keogh, and trust accounts. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized as provided in this paragraph to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: ROBERT A. BRUCE, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER; ROSEMARY H. EVANS, TREASURER; AND LINDA HAAS, CONTROLLER. ADVANCES MAY BE MADE AT THE WRITTEN OR ORAL REQUEST OF ANY ONE OF THE AUTHORIZED INDIVIDUALS. Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; or (b) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender. ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any collateral securing this Note shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any collateral securing this Note, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, 02-07-1996 PROMISSORY NOTE Page 2 (Continued) ================================================================================ interpretation, and enforcement of this arbitration provision. ADDITIONAL PROVISIONS. This Note, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Note. There are no unwritten oral agreements between the Parties. No alteration of or amendment to this Note shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. The written Loan Agreement may not be contradicted by evidence of any prior, contemporaneous, or subsequent oral agreements or understandings of the Parties. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Promissory Note. PRIOR NOTE. THIS NOTE IS A RENEWAL OF A NOTE DATED JUNE 16, 1994 IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,000,000.00. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER) AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: TRM COPY CENTERS (USA) CORPORATION By: MICHAEL D. SIMON -------------------------------------------------------- MICHAEL D. SIMON, President and Chief Executive Officer LENDER: WEST ONE BANK, IDAHO By: MALVERN F. HAWLEY -------------------------------------------------------- Authorized Officer ================================================================================ CORPORATE RESOLUTION TO BORROW ================================================================================ BORROWER: TRM COPY CENTERS (USA) LENDER: WEST ONE BANK, IDAHO CORPORATION PORTLAND CORPORATE BANKING 5208 N.E. 122ND AVENUE DEPARTMENT PORTLAND, OR 97230 623 S.W. OAK P.O. BOX 2882 PORTLAND, OR 97208 ================================================================================ I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF TRM COPY CENTERS (USA) CORPORATION (THE "CORPORATION"), HEREBY CERTIFY THAT the Corporation is organized and existing under and by virtue of the laws of the State of Oregon as a corporation for profit, with its principal office at 5208 N.E. 122ND AVENUE, PORTLAND, OR 97230, and is duly authorized to transact business in the State of Oregon. I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by other duly authorized corporate action in lieu of a meeting), duly called and held ON JUNE 17, 1994, at which a quorum was present and voting, the following resolutions were adopted: BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or agents of this Corporation, whose actual signature is shown below: NAME POSITION ACTUAL SIGNATURE ---- -------- ---------------- MICHAEL D. SIMON President and Chief X MICHAEL D. SIMON Executive Officer ---------------------- acting for and on behalf of this Corporation and as its act and deed be, and he or she hereby is, authorized and empowered: BORROW MONEY. To borrow from time to time from WEST ONE BANK, IDAHO ("Lender"), on such terms as may be agreed upon between officer, employee, or agent and Lender, such sum or sums of money as in his or her judgment should be borrowed, without limitation. EXECUTE NOTES. To execute and deliver to Lender the promissory note or notes of the Corporation, on Lender's forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any indebtedness of the Corporation to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, or any portion of the notes. GRANT SECURITY. To mortgage, pledge, hypothecate, or otherwise encumber and deliver to Lender, as security for the payment of any loans so obtained, any promissory notes so executed, or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced, any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all real property and all personal property of the Corporation. Such property may be mortgaged, pledged, hypothecated, or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, hypothecated, or encumbered. EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which may be submitted by Lender, and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which he or she may in his or her discretion deem reasonably necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Lender, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable. FURTHER ACTS. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements, INCLUDING AGREEMENTS WAIVING THE RIGHT TO A TRIAL BY JURY, as he or she may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions. The following person or persons are authorized, except as provided below, to request advances and authorize payments under the line of credit until Lender receives written notice of revocation of their authority: ROBERT A. BRUCE, Vice President and Chief Financial Officer; ROSEMARY H. EVANS, Treasurer; and LINDA HAAS, Controller. Advances may be made at the written or oral request of any one of the authorized individuals. BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Lender may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Lender. Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever. The Corporation has no corporate seal, and therefore, no seal is affixed to this certificate. IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON FEBRUARY 7, 1996 AND ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE SIGNATURES. CERTIFIED TO AND ATTESTED BY: X ROBERT A. BRUCE ------------------------------------------ *Secretary or Assistant Secretary X ------------------------------------------ * NOTE: In case the Secretary or other certifying officer is designated by the foregoing resolutions as one of the signing officers, this certificate should also be signed by a second Officer or Director of the Corporation. ================================================================================ CORPORATE RESOLUTION TO GUARANTEE/GRANT COLLATERAL ================================================================================ BORROWER: TRM COPY CENTERS (USA) LENDER: WEST ONE BANK, IDAHO CORPORATION PORTLAND CORPORATE BANKING 5208 N.E. 122ND AVENUE DEPARTMENT PORTLAND, OR 97230 623 S.W. OAK P.O. BOX 2882 PORTLAND, OR 97208 GUARANTOR: TRM COPY CENTERS CORPORATION 5208 N.E. 122ND AVENUE PORTLAND, OR 97230-1074 ================================================================================ I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF TRM COPY CENTERS CORPORATION (THE "CORPORATION"), HEREBY CERTIFY AS FOLLOWS: The Corporation is organized and existing under and by virtue of the laws of the State of Oregon. The Corporation has its principal office at 5208 N.E. 122ND AVENUE, PORTLAND, OR 97230-1074. I FURTHER CERTIFY that a meeting of the Directors of the Corporation (or by other duly authorized corporate action in lieu of a meeting), duly called and held ON JUNE 17, 1994, at which a quorum was present and voting, the following resolutions were adopted: BE IT RESOLVED, that ANY ONE (1) of the following named officers or employees of this Corporation, whose actual signature is shown below: NAME POSITION ACTUAL SIGNATURE MICHAEL D. SIMON PRESIDENT X MICHAEL D. SIMON ---------------------------- acting for and on behalf of this Corporation and as its act and deed be, and he or she hereby is, authorized and empowered in the name of the Corporation: GUARANTY. To guarantee or act as surety for loans or other financial accommodations to TRM COPY CENTERS (USA) CORPORATION from WEST ONE BANK, IDAHO ("Lender") on such guarantee or surety terms as may be agreed upon between the officers or employees of this Corporation and Lender and in such sum or sums of money as in his or her judgment should be guaranteed or assured, without limit (the "Guaranty"). GRANT SECURITY. To mortgage, pledge, hypothecate, or otherwise encumber and deliver to Lender, as security for the Guaranty, any property belonging to the Corporation or in which the Corporation may have an interest, real, personal or mixed. Such property may be mortgaged, pledged, hypothecated, or encumbered at the time such loans are made or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, hypothecated, or encumbered. The provisions of these Resolutions authorizing or relating to the pledge, mortgage, hypothecation, granting of a security interest in, or in any way encumbering, the assets of the Corporation shall include, without limitation, doing so in order to lend collateral security for the indebtedness, now or hereafter existing, and of any nature whatsoever, of TRM COPY CENTERS (USA) CORPORATION to Lender. The Corporation has considered the value to itself of lending collateral in support of such indebtedness, and the Corporation represents to Lender that the Corporation is benefited by doing so. EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the form of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which may be submitted by Lender, and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, of any kind or nature, which may be necessary or proper in connection with or pertaining to the giving of liens and encumbrances. FURTHER ACTS. To do and perform such other acts and things and to execute and deliver such other documents as may in his or her discretion be deemed reasonably necessary or proper in order to carry into effect any of the provisions of these Resolutions. BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Lender may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Lender. Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. I FURTHER CERTIFY that the person named above is a principal officer of the Corporation and occupies the position set opposite the name; that the foregoing Resolutions now stand of record on the books of the Corporation; and that they are in full force and effect and have not been modified or revoked in any manner whatsoever. IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON FEBRUARY 7, 1996 AND ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE SIGNATURES. CERTIFIED AND ATTESTED BY: X ROBERT A. BRUCE ------------------------------------ *Secretary or Assistant Secretary X ------------------------------------ *NOTE: In case the Secretary or other certifying officer is designated by the foregoing resolutions as one of the signing officers, this certificate should also be signed by a second Officer or Director of the Corporation. ================================================================================ COMMERCIAL GUARANTY ================================================================================ BORROWER: TRM COPY CENTERS (USA) LENDER: WEST ONE BANK, IDAHO CORPORATION PORTLAND CORPORATE BANKING 5208 N.E. 122ND AVENUE DEPARTMENT PORTLAND, OR 97230 623 S.W. OAK P.O. BOX 2882 PORTLAND, OR 97208 GUARANTOR: TRM COPY CENTERS CORPORATION 5208 N.E. 122ND AVENUE PORTLAND, OR 97230-1074 ================================================================================ AMOUNT OF GUARANTY. THE AMOUNT OF THIS GUARANTY IS UNLIMITED. CONTINUING UNLIMITED GUARANTY. FOR GOOD AND VALUABLE CONSIDERATION, TRM COPY CENTERS CORPORATION ("GUARANTOR") ABSOLUTELY AND UNCONDITIONALLY GUARANTEES AND PROMISES TO PAY TO WEST ONE BANK, IDAHO ("LENDER") OR ITS ORDER, IN LEGAL TENDER OF THE UNITED STATES OF AMERICA, THE INDEBTEDNESS (AS THAT TERM IS DEFINED BELOW) OF TRM COPY CENTERS (USA) CORPORATION ("BORROWER") TO LENDER ON THE TERMS AND CONDITIONS SET FORTH IN THIS GUARANTY. UNDER THIS GUARANTY, THE LIABILITY OF GUARANTOR IS UNLIMITED AND THE OBLIGATIONS OF GUARANTOR ARE CONTINUING. DEFINITIONS. The following words shall have the following meanings when used In this Guaranty: BORROWER. The word "Borrower" means TRM COPY CENTERS (USA) CORPORATION. GUARANTOR. The word "Guarantor" means TRM COPY CENTERS CORPORATION. GUARANTY. The word "Guaranty" means this Guaranty made by Guarantor for the benefit of Lender dated February 7, 1996. INDEBTEDNESS. The word "Indebtedness" is used in its most comprehensive sense and means and includes any and all of Borrower's liabilities, obligations, debts, and indebtedness to Lender, now existing or hereinafter incurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease obligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whether any such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery on the Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises from transactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise. LENDER. The word "Lender" means WEST ONE BANK, IDAHO, its successors and assigns. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force. Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Indebtedness. Accordingly, no payments made upon the Indebtedness will discharge or diminish the continuing liability of Guarantor In connection with any remaining portions of the Indebtedness or any of the Indebtedness which subsequently arises or is thereafter incurred or contracted. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written notice of revocation must be delivered to Lender at the address of Lender listed above or such other place as Lender may designate in writing. This Guaranty may be revoked only with respect to Indebtedness incurred or contracted by Borrower, or acquired by Lender thirty (30) days or more after the date on which written notice of revocation is actually received by Lender. No notice of revocation hereof shall be effective as to any Indebtedness: (a) existing at the date of receipt of such notice; (b) incurred or contracted by Borrower, or acquired by Lender, within thirty (30) days after receipt of such notice; (c) now existing or hereafter created pursuant to or evidenced by a loan agreement or commitment under which Borrower is or may become obligated to Lender; or (d) renewals, extensions, consolidations, substitutions, and refinancings of the foregoing. Any revocation of this Guaranty by less than all guarantors of the Indebtedness shall not affect the liability hereunder of the remaining guarantors as to any present or future transactions or Indebtedness. The death of any guarantor of the Indebtedness shall not operate as a revocation of liability hereunder of the estate of any such guarantor as to transactions entered into or Indebtedness created subsequent to such death until actual receipt by Lender of written notice of the death of such guarantor. Guarantor waives notice of revocation given by any other guarantor of the Indebtedness. Any payment by Guarantor with respect to the Indebtedness guaranteed shall not reduce the maximum obligation hereunder, unless written notice to that effect be actually received by Lender at or prior to the time of such payment. This Guaranty shall bind the estate of Guarantor as to Indebtedness created both before and after the death or incapacity of Guarantor, regardless of Lender's actual notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation received by Lender from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. IT IS ANTICIPATED THAT FLUCTUATIONS MAY OCCUR IN THE AGGREGATE AMOUNT OF INDEBTEDNESS COVERED BY THIS GUARANTY, AND IT IS SPECIFICALLY ACKNOWLEDGED AND AGREED BY GUARANTOR THAT REDUCTIONS IN THE AMOUNT OF INDEBTEDNESS, EVEN TO ZERO DOLLARS ($0.00), PRIOR TO WRITTEN REVOCATION OF THIS GUARANTY BY GUARANTOR SHALL NOT CONSTITUTE A TERMINATION OF THIS GUARANTY. THIS GUARANTY IS BINDING UPON GUARANTOR AND GUARANTOR'S HEIRS, SUCCESSORS AND ASSIGNS SO LONG ANY OF THE GUARANTEED INDEBTEDNESS REMAINS UNPAID AND EVEN THOUGH THE INDEBTEDNESS GUARANTEED MAY FROM TIME TO TIME BE ZERO DOLLARS ($0.00). GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, WITHOUT NOTICE OR DEMAND AND WITHOUT LESSENING GUARANTOR'S LIABILITY UNDER THIS GUARANTY, FROM TIME TO TIME: (A) PRIOR TO REVOCATION AS SET FORTH ABOVE, TO MAKE ONE OR MORE ADDITIONAL SECURED OR UNSECURED LOANS TO BORROWER, TO LEASE EQUIPMENT OR OTHER GOODS TO BORROWER, OR OTHERWISE TO EXTEND ADDITIONAL CREDIT TO BORROWER; (B) TO ALTER, COMPROMISE, RENEW, EXTEND, ACCELERATE, OR OTHERWISE CHANGE ONE OR MORE TIMES THE TIME FOR PAYMENT OR OTHER TERMS OF THE INDEBTEDNESS OR ANY PART OF THE INDEBTEDNESS, INCLUDING INCREASES AND DECREASES OF THE RATE OF INTEREST ON THE INDEBTEDNESS; EXTENSIONS MAY BE REPEATED AND MAY BE FOR LONGER THAN THE ORIGINAL LOAN TERM; (C) TO TAKE AND HOLD SECURITY FOR THE PAYMENT THIS GUARANTY OR THE INDEBTEDNESS, AND EXCHANGE, ENFORCE, WAIVE, FAIL OR DECIDE NOT TO PERFECT, AND RELEASE ANY SUCH SECURITY, WITH OR WITHOUT THE SUBSTITUTION OF NEW COLLATERAL; (D) TO RELEASE, SUBSTITUTE, AGREE NOT TO SUE, OR DEAL WITH ANY ONE OR MORE OF BORROWER'S SURETIES, ENDORSERS OR OTHER GUARANTORS ON ANY TERMS OR IN ANY MANNER LENDER MAY CHOOSE; (E) TO DETERMINE HOW, WHEN AND WHAT APPLICATION OF PAYMENTS AND CREDITS SHALL BE MADE ON THE INDEBTEDNESS; (F) TO APPLY SUCH SECURITY AND DIRECT THE ORDER OR MANNER OF SALE THEREOF, INCLUDING WITHOUT LIMITATION, ANY NONJUDICIAL SALE PERMITTED BY THE TERMS OF THE CONTROLLING SECURITY AGREEMENT OR DEED OF TRUST, AS LENDER IN ITS DISCRETION MAY DETERMINE; (G) TO SELL, TRANSFER, ASSIGN, OR GRANT PARTICIPATIONS IN ALL OR ANY PART OF THE INDEBTEDNESS; AND (H) TO ASSIGN OR TRANSFER THIS GUARANTY IN WHOLE OR IN PART. GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (a) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (b) this Guaranty is executed at Borrower's request and not at the request of Lender; (c) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein; (d) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; (e) upon Lender's request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information provided to Lender is true and correct in all material respects and fairly presents the financial condition of Guarantor as of the dates thereof, and no material adverse change has occurred in the financial condition of Guarantor since the date of the financial statements; and (f) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor's risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower. GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (a) to continue lending money or to extend other credit to Borrower; (b) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (c) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (d) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (e) to give notice of the terms, time, and place of any public or 02-07-1996 COMMERCIAL GUARANTY PAGE 2 (CONTINUED) ================================================================================ private sale of personal property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code; (f) to pursue any other remedy within Lender's power; or (g) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever. If now or hereafter (a) Borrower shall be or become insolvent, and (b) the Indebtedness shall not at all times until paid be fully secured by collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor of Lender and Borrower, and their respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any successor provision of the Federal bankruptcy laws. Guarantor also waives any and all rights or defenses arising by reason of (a) any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (b) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor's subrogation rights or Guarantor's rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (c) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower's liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (d) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (e) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced there is outstanding Indebtedness of Borrower to Lender which is not barred by any applicable statute of limitations; or (f) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of enforcement of this Guaranty. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both. GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff against the moneys, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's obligations to Lender under this Guaranty and to the extent permitted by law, a contractual possessory security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender. SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existing or hereafter created, shall be prior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by Lender in the State of Oregon. If there is a lawsuit, Guarantor agrees upon Lender's request to submit to the jurisdiction of the courts of Multnomah County, State of Oregon. Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Guarantor against the other. Subject to the provisions on arbitration, this Guaranty shall be governed by and construed in accordance with the laws of the State of Oregon. ARBITRATION. LENDER AND GUARANTOR AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS GUARANTY OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; foreclosing by notice and sale under any dead of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Guaranty shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. ATTORNEYS' FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court. NOTICES. Except for revocation notices by Guarantor, all notices required to be given by either party to the other under this Guaranty shall be in writing and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier, or when deposited in the United States mail, first class postage prepaid, addressed to the party to whom the notice is to be given at the address shown above or to such other addresses as either party may designate to the other in writing. All revocation notices by Guarantor shall be in writing and shall be effective only upon delivery to Lender as provided above in the section titled "DURATION OF GUARANTY." If there is more than one Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor's current address. INTERPRETATION. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words "Borrower" and "Guarantor" respectively shall mean all and any one or more of them. The words "Guarantor," "Borrower," and "Lender" include the heirs, successors, assigns, and transferees of each of them. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty. If a court of competent jurisdiction finds any provision of this Guaranty to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances, and all provisions of this Guaranty in all other respects shall remain valid and enforceable. If any one or more of Borrower or Guarantor are corporations or partnerships, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any Indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this 02-07-1996 COMMERCIAL GUARANTY PAGE 3 (CONTINUED) ================================================================================ Guaranty. WAIVER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute waiver of any of Lender's rights or of any of Guarantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. BANKRUPTCY PREFERENCE AND ADDITIONAL WAIVER. Guarantor hereby indemnifies Lender from any preference liability as well as the costs of defending a preference suit in a bankruptcy case involving Borrower. Guarantor also waives any right of indemnity, reimbursement, contribution, or subrogation from Borrower. ADDENDUM TO GUARANTOR'S WAIVERS SECTION. Guarantor further waives any and all rights or defenses including but not limited to, those arising by reason of failure of consideration, breach of warranty, fraud, payment, accord and satisfaction, strict foreclosure, statue of frauds, bankruptcy, infancy, lender liability and usury. EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED FEBRUARY 7,1996. GUARANTOR: TRM COPY CENTERS CORPORATION BY: MICHAEL D. SIMON ----------------------------------- MICHAEL D. SIMON, PRESIDENT - -------------------------------------------------------------------------------- CORPORATE ACKNOWLEDGMENT STATE OF OREGON ) ) ss COUNTY OF MULTNOMAH ) On this 22 day of February, 19 96 , before me, the undersigned Notary Public, personally appeared MICHAEL D. SIMON, PRESIDENT OF TRM COPY CENTERS CORPORATION, and known to me to be an authorized agent of the corporation that executed the Commercial Guaranty and acknowledged the Guaranty to be the free and voluntary act and deed of the corporation, by authority of its Bylaws or resolution of its board of directors, for the uses and purposes therein mentioned, and on oath stated that he or she is authorized to execute this Guaranty and in fact executed the Guaranty on behalf of the corporation. BY ROSMARY H. EVANS RESIDING AT Portland, Oregon ------------------------------ ---------------------------- NOTARY PUBLIC IN AND FOR THE MY COMMISSION EXPIRES: 12-29-96 STATE OF Oregon ----------------- ----------------------- ================================================================================ EX-10.9(B) 5 EMPLOYMENT AGREEMENT WITH MICHAEL D. SIMON To: Fred Paulsell , Ralph Shaw From: Michael Simon Subject: Employment Agreement As CEO - Extension beyond September 30, 1996 Thursday, April 25, 1996 Fred, Ralph, "thank you" for the time and energy spent to get the details of this agreement finalized. I appreciate that your strong commitment to best represent the interests of the shareholders made this effort personally challenging. That negotiation necessity understood, I especially appreciate your overall vote of confidence in me. This letter captures our agreement to extend my employment agreement as TRM's Chief Executive Officer, President and Director for two years, followed by three years in a capacity to be mutually agreed. The total term of this extension of our employment agreement is sixty months past September 30, 1996 which is the expiration date of the existing agreement. This letter documents our new agreement and, when signed, will append and extend (as appropriate) the prior agreements. 1. Effective on signature of this document my employment agreement with TRM is extended sixty months past September 30, 1996. to September 30, 2001. 2. Base compensation for this sixty month period is continued at the present level (annualized at $300,000.), but the present cash bonus formula will not extend past the next pay-out due on February 1, 1997. Cash bonuses paid for the period beyond February 1, 1997 will be at the discretion of the TRM B.O.D. 3. Three new stock options are granted as follows: a. Per our understanding at the close of the March 15, 1996 B.O.D. meeting, an option is granted within the plan currently approved by the shareholders, for 116,000 shares at an option price of $10.375 (which was the FMV on that date). It is our understanding that this share amount is available under the existing plan. A second option is granted for 19,000 shares also at an option price of 10.375, but as these shares are not currently available under the approved plan, they are granted subject to shareholder approval. b. Also per our understanding at the close of the March 15, 1996 B.O.D. meeting, a third option is granted for an additional 40,000 shares which are also currently not available within the plan approved by the shareholders. It is intended to price these options at FMV when approved shares become available or when shareholder approval is received for a new or amended plan which authorizes the needed additional shares. These options will be priced at FMV no later than on the date of the anticipated shareholder meeting in October 1996 or the next actual shareholders meeting, which ever comes first. c. The vesting schedule for all three options will be monthly over the five year extension period at the annualized rate of 40% of each option's total grant amount in the first year, 30% in the second year, 20% in the third year, 5% in the fourth year and the remaining 5% in the fifth year. d. Option agreements will allow exercise for a five year period beyond vesting dates. Vesting of all remaining options shall immediately accelerate under any of the conditions of: termination without cause, death, disability or change of control. A significant change in job responsibilities at TRM's request will be deemed a change of control. This letter is accepted and the terms are agreed to by: date: 4/25/96 date: May 7, 1996 MICHAEL D. SIMON FRED PAULSELL - ---------------------------------- ------------------------------------ Michael D. Simon Fred Paulsell, Chairman of the Board of Directors, TRM Corporation EX-13.1 6 PORTIONS OF THE 1996 ANNUAL REPORT CORPORATE DIRECTORY
BOARD OF DIRECTORS LEGAL COUNSEL FORM 10-K Frederick O. Paulsell Stoel Rives LLP A copy of the Company's Chairman of the Board Suite 2300 Annual Report on Form Partner, Olympic Capital 900 S.W. Fifth Avenue 10-K, as filed with the Partners, P.L.L.C. Portland, Oregon 97204 Securities and Exchange Telephone: (503) 224-3380 Commission, will be made Edwin S. Chan available without charge Vice Chairman INDEPENDENT AUDITORS upon written request to Retired President and KPMG Peat Marwick LLP Investor Relations, TRM Chief Executive Officer Suite 2000 Copy Centers Corporation, 1211 S.W. Fifth Avenue 5208 N.E. 122nd Avenue, Sherman M. Coe Portland, Oregon 97204 Portland, OR 97230-1074. Vice President, Gene Juarez Telephone: (503) 221-6500 Salons, Inc. COMMON STOCK CORPORATE OFFICES TRM Copy Centers Ralph R. Shaw TRM Copy Centers Corporation Corporation's common Co-Chairman 5208 N.E. 122nd Avenue stock, of which there are Shaw, Glasgow & Co., L.L.C. Portland, Oregon 97230-1074 approximately 3,000 Telephone: (503) 257-8766 beneficial owners, trades Michael D. Simon Facsimile: (503) 251-5473 on the Nasdaq National President and Market under the symbol Chief Executive Officer REGISTRAR AND "TRMM." The Company has TRANSFER AGENT not paid dividends on its Donald Van Maren U.S. Bank of Idaho common stock and has no Private Investor, 101 S. Capitol Boulevard plans to do so in the Retired Doctor of Optometry Boise, Idaho 83701 near future. Telephone: (208) 383-7098 EXECUTIVE OFFICERS STOCK PRICE HISTORY Michael D. Simon ANNUAL MEETING The following table sets President and The annual meeting of forth the high and low Chief Executive Officer stockholders of TRM sale prices for the last Copy Centers Corporation two fiscal years. Robert A. Bruce will be held at the Chief Financial Officer U.S. Bancorp Tower, High Low Vice President of Finance 41st Floor, John ---- --- Corporate Secretary Elorriaga Auditorium, Fiscal 1995: 111 S.W. Fifth Avenue, 1st Quarter $ 7 $ 5 James W. Perris Portland, Oregon 97204, 2nd Quarter 6 3 3/8 Chief Operating Officer on October 22, 1996, 3rd Quarter 7 1/4 4 3/4 and Vice President of at 9 a.m. 4th Quarter 7 3/4 5 7/8 Operations Fiscal 1996: Danial J. Tierney 1st Quarter $ 8 3/8 $ 6 1/4 Vice President of 2nd Quarter 11 3/8 7 3/8 Corporate Sales 3rd Quarter 11 1/2 10 4th Quarter 11 1/2 10 5/8
1
SELECTED FINANCIAL DATA (In thousands, except per share data) 1996 1995 1994 1993* 1992* ------- ------- ------- ------- ------- Year ended June 30: Sales $67,538 $60,544 $47,957 $38,774 $30,547 Net income 4,124 3,699 3,354 3,236 2,582 Net income per share 0.57 0.53 0.49 0.47 0.43 As of June 30: Working capital $ 8,860 $ 9,543 $ 8,523 $ 5,667 $ 9,097 Total assets 54,251 55,736 43,504 30,323 24,470 Long-term debt 8,128 14,238 9,500 850 40 Stockholders' equity 35,444 31,528 27,155 23,704 20,552 * In the first quarter of fiscal 1994, the Company retroactively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Accordingly, selected data for periods prior to fiscal 1994 described above as net income, net income per share and stockholders' equity have been adjusted retroactively.
SELECTED QUARTERLY FINANCIAL DATA 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter (In thousands, except per share data) 1996 1995 1996 1995 1996 1995 1996 1995 ------- ------- ------- ------- ------- ------- ------- -------- Sales $15,716 $13,179 $16,727 $14,789 $17,394 $16,089 $17,701 $16,487 Gross profit 5,788 4,968 6,263 5,486 6,659 5,949 7,170 6,146 Net income 844 822 910 874 1,077 963 1,293 1,040 Net income per share 0.12 0.12 0.13 0.13 0.15 0.14 0.18 0.15
2 MANAGEMENT'S DISCUSSION AND ANALYSIS TRM continues to expand in new and existing metropolitan areas. The number of metropolitan areas served has increased from 42 to 66 over the last three fiscal years and includes 46 in the United States, 5 in Canada, 14 in the United Kingdom and 1 in France. TRM Centers have increased 62 percent over the three year period, from 19,592 to 31,719. In addition to expanding, the Company is also focused on improving the profit performance of the installed base of TRM Centers. RESULTS OF OPERATIONS The percentage of change in dollar amounts and the percentage of sales represented by each item on the Consolidated Statements of Operations (page 7 of this Annual Report) follow:
Percentage Change As a Percentage of Sales -------------------- ------------------------------ 1995-96 1994-95 1996 1995 1994 ------- ------- ------ ------ ------ Sales 11.6% 26.2% 100.0% 100.0% 100.0% Sales discounts 5.3 17.7 17.4 18.4 19.7 Cost of sales 11.4 32.9 44.3 44.3 42.1 Selling, general and administrative 17.1 24.7 26.0 24.8 25.1 ------ ------ ------ ------ ------ Operating income 10.2 20.7 12.3 12.5 13.1 Interest expense, net 1.3 178.8 (1.4) (1.6) (0.7) Other, net (1.3) 29.5 (0.7) (0.8) (0.8) ------ ------ ------ ------ ------ Income before income taxes 12.4 10.5 10.2 10.1 11.6 Provision for income taxes 13.9 10.8 4.1 4.0 4.6 ------ ------ ------ ------ ------ Net income 11.5% 10.3% 6.1% 6.1% 7.0% ====== ====== ====== ====== ======
The 1996 sales growth of 11.6 percent was primarily due to an 8.9 percent increase in the number of billed units. Average sales per unit also increased 2.4 percent during the year. The number of billed units and average sales per unit were significantly affected by two factors: aggressive unit growth in Europe, where sales per unit are above Company averages, and active management of the installed base of accounts, through removals, redeployments and re-pricings to improve profitability, primarily in North America. Growth in Europe accounted for 84.3 percent of total sales growth for the year. In actively managing the profit performance of the installed base, under-performing machines are removed and put back into stock to be redeployed at better sites. Machines under-priced for the supporting copy volume are repriced to higher levels. The majority of the machines repriced during 1996 showed increased profits and lower sales per unit. The Company expects to continue to aggressively grow in Europe and to raise prices as appropriate. During 1995, billed unit growth was 26.3 percent while sales growth was 26.2 percent. The Company began actively removing, re-deploying and repricing its low-performing locations during the latter two quarters of 1995, affecting the number of billed units and average sales per unit growth during that period. Growth in Europe accounted for 59.2 percent of total sales growth in 1995. As indicated above, foreign sales, primarily in Europe, have accounted for more than half of the sales increases for the past two years. Foreign sales have grown from $7.9 million in 1994 to $15.7 million in 1995 to $22.0 million in 1996. 3 To date, sales from products not related to black and white photocopying have been insignificant, amounting to less than 5 percent of total sales. Sales discounts are the portion of revenue retained by retail customers. They generally vary at individual retail businesses depending on volume--the higher the volume the greater the discount and vice versa. The downward trend in sales discounts as a percentage of sales reflects changes made in business agreements with new customers over the periods. Cost of sales increased 11.4 percent from 1995 to 1996. Comparing 1995 and 1996, paper costs increased a significant 16.6 percent in total (23.0 percent in North America and 5.8 percent in Europe). The Company's active program to raise copy prices at thousands of locations, which had a decreasing influence on the number of copies made (due to expected demand elasticity), helped reduce the effect higher paper costs had on costs of sales. All told, the effects of overall company growth and the repricing program resulted in an increase in total copies made during the year of 0.8 percent to 1.3 billion. With year-end paper prices below their peak of the fall of 1995, it is expected that fiscal 1997 will not be adversely affected by paper costs when compared to 1996. The increase in cost of sales was also affected by higher field service and field sales payroll costs. Comparing 1995 to 1994, cost of sales increased 32.9 percent, primarily due to the 26.3 percent growth in the number of billed units. Also affecting this increase were higher consumables (paper, toner and parts) and depreciation costs in Europe, as compared to North America, and increased paper costs worldwide. Selling, general and administrative expense increased 17.1 percent in 1996. This exceeded the sales growth rate of 11.6 percent because of investments in people and systems. From mid 1995 to early 1996 key additions were made across all levels of the management team. Investments in our computerized management information systems were also made and are continuing. Comparing 1995 to 1994, selling, general and administrative expense increased 24.7 percent compared to sales growth of 26.2 percent for the same period. The lower rate of expense growth was due to the benefits of economies of scale, the focus on automation and lower start-up costs. Interest costs grew in 1994 and 1995 because the Company increased bank borrowings to help fund its aggressive unit expansion. In 1996, the Company was able to reduce bank borrowings resulting in interest expense near 1995's levels. In October 1995, the Financial Accounting Standards Board issued SFAS 123, "Accounting for Stock-Based Compensation," which is effective for fiscal years beginning after December 15, 1995. This Standard allows employers to adopt a fair value-based method of accounting to recognize compensation expense for employee stock compensation plans, and if not adopted, requires pro forma disclosures in the footnotes to the financial statements. The Company does not currently intend to adopt the fair value-based method of recognition under SFAS 123 and as such there will be no impact on the Company's financial position or results of operations. LIQUIDITY AND CAPITAL RESOURCES During 1996, cash flow from operations fully funded capital expenditures of $5.5 million and allowed for repayment of $6.1 million in bank borrowings. This level of capital expenditures was below the $13.3 and $13.4 million spent in 1995 and 1994, respectively, because the Company focused on removing and redeploying low-performing customer placements in North 4 America during 1996. The primary sources of capital for expansion in 1995 and 1994 were cash from operating activities and bank borrowings. As of June 30, 1996, no borrowings were outstanding under a $4.0 million unsecured bank line of credit. Letters of credit of approximately $179,000 were supported by this bank line at that time. This line expires in December 1997. The Company has an additional unsecured bank borrowing arrangement under which $26.0 million is available, and $8.1 million was borrowed as of June 30, 1996. Interest only is due until January 1, 1998, at which time no additional borrowings will be available, and the loan balance outstanding will convert into a fully amortizing term loan through January 1, 2002. Under these arrangements, the Company has interest rate alternatives to choose from, including the bank's reference rate and LIBOR-based rates. The Company currently anticipates capital expenditures of $7 to $10 million during fiscal 1997. The Company expects to finance these capital expenditures with cash generated from operations and with bank borrowings. The Company expects that these sources will provide adequate cash to fund its expansion through at least June 30, 1997. FORWARD-LOOKING STATEMENTS Information in "Management's Discussion and Analysis," the letter to shareholders and elsewhere in this Annual Report about the Company's goals, plans and expectations regarding: future performance; growth opportunities; expansion; improvements in efficiencies and cost controls; new products and services; repricing machines; paper costs and capital expenditures constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: business conditions in the market areas in which the Company operates, competitive factors, customer demand for the Company's services, the Company's ability to execute its plans successfully and the volatility of paper costs. Any forward-looking statements should be considered in light of these factors. 5
CONSOLIDATED BALANCE SHEETS June 30, (In thousands) 1996 1995 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 873 $ 755 Accounts receivable, net 7,264 6,735 Inventories (note 2) 5,253 6,545 Prepaid expenses and other 1,580 1,726 --------- --------- Total current assets 14,970 15,761 Equipment and vehicles, less accumulated depreciation (note 3) 39,172 39,823 Other assets 109 152 --------- --------- $ 54,251 $ 55,736 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Checks in transit $ 938 $ 1,422 Accounts payable 1,799 1,493 Accrued expenses (note 4) 3,373 3,303 --------- --------- Total current liabilities 6,110 6,218 Long-term debt (note 5) 8,128 14,238 Deferred income taxes (note 6) 4,569 3,752 --------- --------- Total liabilities 18,807 24,208 --------- --------- Commitments (notes 7 and 9) -- -- Stockholders' equity (notes 7 and 8): Preferred stock, no par value. Authorized 5,000 shares; no shares issued and outstanding -- -- Common stock, no par value. Authorized 10,000 shares; issued and outstanding 6,484 and 6,432 shares 16,214 15,940 Retained earnings 19,704 15,580 Cumulative translation adjustment (474) 8 --------- --------- Total stockholders' equity 35,444 31,528 --------- --------- $54,251 $55,736 ========= ========= See accompanying notes to consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal year ended June 30, (In thousands, except per share data) 1996 1995 1994 ------- ------- ------- Sales $67,538 $60,544 $47,957 Less discounts 11,728 11,138 9,462 ------- ------- ------- Net sales 55,810 49,406 38,495 Cost of sales 29,930 26,857 20,211 ------- ------- ------- Gross profit 25,880 22,549 18,284 Selling, general and administrative expense 17,569 15,006 12,036 ------- ------- ------- Operating income 8,311 7,543 6,248 Interest expense 957 945 339 Other expense, net 464 470 363 ------- ------- ------- Income before income taxes 6,890 6,128 5,546 Provision for income taxes (note 6) 2,766 2,429 2,192 ------- ------- ------- Net income $ 4,124 $ 3,699 $ 3,354 ======= ======= ======= Net income per share $ 0.57 $ 0.53 $ 0.49 ======= ======= ======= Weighted average common and common equivalent shares outstanding 7,262 6,934 6,882 ======= ======= ======= See accompanying notes to consolidated financial statements.
7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Cumulative Common Stock Retained Translation (In thousands) Shares Amount Earnings Adjustment Total -------- --------- --------- ------------ --------- Balances, June 30, 1993 6,339 $ 15,506 $ 8,527 $ (329) $23,704 Exercise of stock options 38 161 -- -- 161 Tax benefit of stock options -- 74 -- -- 74 Issuance of stock to employees 13 81 -- -- 81 Foreign currency translation adjustment -- -- -- (219) (219) Net income -- -- 3,354 -- 3,354 -------- --------- --------- -------- --------- Balances, June 30, 1994 6,390 15,822 11,881 (548) 27,155 Exercise of stock options 27 55 -- -- 55 Issuance of stock to employees 15 63 -- -- 63 Foreign currency translation adjustment -- -- -- 556 556 Net income -- -- 3,699 -- 3,699 -------- --------- --------- -------- --------- Balances, June 30, 1995 6,432 15,940 15,580 8 31,528 Exercise of stock options 36 137 -- -- 137 Tax benefit of stock options -- 26 -- -- 26 Issuance of stock to employees 16 111 -- -- 111 Foreign currency translation adjustment -- -- -- (482) (482) Net income -- -- 4,124 -- 4,124 -------- --------- --------- -------- --------- Balances, June 30, 1996 6,484 $ 16,214 $ 19,704 $ (474) $ 35,444 ======== ========= ========= ======== ========= See accompanying notes to consolidated financial statements.
8
CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal year ended June 30, (In thousands) 1996 1995 1994 ------- ------- ------- Operating activities: Net income $ 4,124 $ 3,699 $ 3,354 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,101 4,623 3,236 Loss on disposal of equipment and vehicles 40 18 27 Changes in items affecting operations: Accounts receivable (529) (1,789) (1,288) Inventories 1,292 (2,318) (601) Prepaid expenses and other 146 745 (756) Accounts payable 306 240 (151) Accrued expenses 70 1,161 196 Deferred income taxes 817 687 933 ------- ------- ------- Total operating activities 11,367 7,066 4,950 ------- ------- ------- Investing activities: Proceeds from sale of equipment 146 130 65 Capital expenditures (5,494) (13,259) (13,448) Other 44 (17) (39) ------- ------- ------- Total investing activities (5,304) (13,146) (13,422) ------- ------- ------- Financing activities: Change in checks in transit (484) 1,033 102 Principal payments on borrowings (9,636) (7,337) (660) Proceeds from borrowings 3,526 12,075 9,310 Net proceeds from issuance of common stock 274 118 316 ------- ------- ------- Total financing activities (6,320) 5,889 9,068 ------- ------- ------- Effect of exchange rate changes 375 283 (238) ------- ------- ------- Net increase in cash 118 92 358 Beginning cash and cash equivalents 755 663 305 ------- ------- ------- Ending cash and cash equivalents $ 873 $ 755 $ 663 ======= ======= ======= See accompanying notes to consolidated financial statements.
9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Description of Business TRM Copy Centers Corporation, headquartered in Portland, Oregon, as its primary business, owns, supplies and maintains more than 31,000 self-service photocopiers in pharmacies, stationery stores, hardware stores, convenience stores and other retail establishments in the United States, Canada, the United Kingdom and France. Each retail establishment collects payment from its customers, shares in the revenue of the photocopier and benefits from any increase in customer traffic within the store. Principles of Consolidation The consolidated financial statements include the accounts of the parent and its subsidiary companies (the Company). All significant intercompany accounts and profits have been eliminated. Assets and liabilities of foreign operations are translated into U.S. dollars at current exchange rates. Income and expense accounts are translated into U.S. dollars at average rates of exchange prevailing during the periods. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are taken directly to a separate component of stockholders' equity. Foreign currency transaction gains and losses are included in income and have been immaterial to date. Fair Value of Financial Instruments Financial instruments, including cash, accounts receivable, checks in transit and accounts payable, approximate fair market value because of the short maturity for these instruments. Fair value approximates carrying value of the Company's borrowings under its long-term debt arrangements based upon interest rates available for the same or similar loans. Revenue Recognition and Accounts Receivable A portion of each copy sale is retained by the retail business, generally depending on copy volume. The Company invoices each retailer via monthly billings based on usage at the program price per copy less the applicable discount (the amount retained by the retailer). Total sales activity and discount amounts are recorded separately in the accounting records and in the consolidated statements of operations to arrive at net sales. Accounts receivable are shown net of allowance for doubtful accounts of $287,000 and $266,000 at June 30, 1996 and 1995, respectively. Inventories Inventories are stated at the lower of FIFO cost or market. 10 Equipment and Vehicles Equipment and vehicles are recorded at cost. Depreciation begins when the asset is placed in service and is generally recorded using the straight-line method over the estimated remaining useful lives of the related assets as follows: Photocopiers and other centers 5-10 years Furniture and fixtures 5-7 years Computer equipment 5 years Vehicles 5 years Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Statements of Cash Flows Supplemental Information Income taxes paid were approximately $2,465,000, $1,075,000, and $1,477,000 for the fiscal years 1996, 1995 and 1994, respectively. Interest paid does not materially differ from interest expense. Net Income Per Share Net income per share is computed based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the periods. Common stock equivalents consist of options to purchase stock (using the treasury stock method). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVENTORIES: June 30, (In thousands) 1996 1995 ------- ------- Paper $ 1,505 $ 2,740 Toner and developer 828 1,533 Parts 2,920 2,272 ------- ------- $ 5,253 $ 6,545 ======= ======= 11 3. EQUIPMENT AND VEHICLES: June 30, (In thousands) 1996 1995 ------- ------- Photocopiers and other centers $47,918 $46,075 Furniture and fixtures 1,787 1,609 Computer equipment 1,392 1,075 Vehicles 5,950 4,813 ------- ------- 57,047 53,572 Accumulated depreciation 17,875 13,749 ------- ------- $39,172 $39,823 ------- ------- 4. ACCRUED EXPENSES: June 30, (In thousands) 1996 1995 ------- ------- Accrued payroll expenses $ 2,443 $ 1,839 Income taxes payable -- 488 Customer security deposits 276 415 Other accrued expenses 654 561 ------- ------- $ 3,373 $ 3,303 ------- ------- 5. BANK BORROWINGS: June 30, (In thousands) 1996 1995 ------- ------- Bank revolving line of credit, unsecured, due on demand, maximum limit of $4.0 million $ -- $ -- Bank revolving loan, unsecured, maximum limit of $26.0 million 8,128 14,238 ------- ------- $ 8,128 $14,238 ------- ------- The revolving line of credit calls for monthly payments of interest only until expiration on December 31, 1997, or as renegotiated. This $4.0 million line supported $179,000 in letters of credit as of June 30, 1996, leaving $3.8 million of the facility unused. The $26.0 million loan arrangement calls for monthly payments of interest only until January 1, 1998. At that time, no additional borrowings will be available, and the loan balance outstanding will convert into a fully amortizing term loan with principal payable in equal monthly installments through January 1, 2002. Both arrangements allow the Company to choose from identical interest rate alternatives during the interest only periods. These alternatives are based on the bank's reference rate or on LIBOR. Further, the $26.0 million loan arrangement makes available certain additional fixed interest rate options during the term loan period. This arrangement also calls for a fee on the unused loan commitment. The interest rates applicable to bank borrowings as of June 30, 1996, ranged from 6.68% to 6.86% The debt agreements contain certain restrictive covenants as to working capital, total liabilities and stockholders' equity. The Company is in compliance with the covenants. 12 Maturities of long-term debt are as follows: $847,000, $2,032,000, $2,032,000 and $2,032,000 for fiscal years 1998, 1999, 2000 and 2001, respectively; and $1,185,000 thereafter. 6. INCOME TAXES: Deferred income taxes arise primarily from different depreciation calculations used for financial statement and income tax purposes. The foreign jurisdiction component of income before income taxes is not significant. The components of income tax expense, pursuant to SFAS 109, are as follows: (In thousands) 1996 1995 1994 ------- ------- ------- Current: Federal $ 1,503 $ 1,341 $ 977 State 446 401 282 Deferred: Federal 623 585 803 State 194 102 130 ------- ------- ------- $ 2,766 $ 2,429 $ 2,192 ======= ======= ======= The effective tax rate differed from the federal statutory tax rate as follows: 1996 1995 1994 ---- ---- ---- Statutory federal rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 5.9 5.9 5.5 Other .2 (0.3) -- ---- ---- ---- 40.1% 39.6% 39.5% ==== ==== ==== 13 7. STOCKHOLDERS' EQUITY: The Company reserved 1,300,000 shares of common stock for issuance under an incentive and nonqualified stock option plan established in 1986. Under the plan, incentive stock options are granted at no less than 100% of the fair market value per share of the common stock, while nonqualified stock options are granted at prices determined by the Board of Directors. The options are exercisable over a period of ten years from the date of grant. Generally, the options vest over five years. In fiscal 1995, 300,000 option shares were granted at fair market value outside the Plan. During fiscal 1996, the Company made a commitment to grant options for 59,000 shares pending shareholder approval. These options vest over two to five years and are exercisable for seven to ten years after the date of grant. A summary of stock option activity follows:
Shares Under Option Price Range ------------ --------------------------- Balance, June 30, 1993 642,250 $ .25 - $ 6.00 Options granted 59,000 $ 6.25 Options exercised (37,850) $ .25 - $ 6.00 Options canceled (12,250) $ 2.00 - $ 6.00 ------------ --------------------------- Balance, June 30, 1994 651,150 $ .25 - $ 6.25 Options granted 639,500 $ 4.00 - $ 7.375 Options exercised (27,000) $ 2.00 - $ 4.125 Options canceled (26,000) $ 4.125 - $ 6.375 ------------ --------------------------- Balance, June 30, 1995 1,237,650 $ .25 - $ 7.375 Options granted 196,500 $ 6.375 - $ 10.625 Options exercised (36,100) $ .25 - $ 6.375 Options canceled (15,000) $ 4.125 - $ 6.375 ------------ --------------------------- Balance, June 30, 1996 ( 918,850 exercisable, -0- available for grant under the plan) 1,383,050 $ .25 - $ 10.625 ============ ===========================
8. BENEFIT PLANS: Profit Sharing Retirement Plan On January 1, 1990, the Company established a profit sharing retirement plan for eligible U.S. employees. The Plan has profit sharing and 401(k) components. The Company's contribution under the profit sharing portion of the Plan is discretionary. The Company accrued profit sharing contributions of $240,000 for fiscal 1996, $230,000 for fiscal 1995 and $210,000 for fiscal 1994. Under the 401(k) part of the Plan, each employee may contribute, on a pretax basis, up to 20% of the employee's gross earnings, subject to certain limitations. Employee Stock Purchase Plan The Company's Employee Stock Purchase Plan was approved by stockholders in October 1992, and became effective January 1, 1993. The Plan permits each eligible employee to purchase shares of common stock through payroll deductions, not to exceed 10% of the employee's compensation. The purchase price of the shares is the lower of 85% of the fair market value of the stock at the beginning of each six-month offering 14 period or 85% of the fair market value at the end of such period. Amounts accumulated through payroll deductions during the offering period are used to purchase shares on the last day of the offering period. Of the 100,000 shares authorized to be issued under the Plan, 47,262 shares have been purchased, and 52,738 shares remain available for purchase as of June 30, 1996. 9. LEASE COMMITMENTS: The Company leases vehicles, office and warehouse space in several locations under operating leases. Minimum lease payments are as follows: $1,760,000, $1,660,000, $1,487,000, $1,255,000 and $914,000 for fiscal years 1997, 1998, 1999, 2000 and 2001, respectively, and $5,191,000 thereafter. Rental expense for fiscal years 1996, 1995 and 1994 was $1,921,000, $1,757,000, and $1,319,000, respectively. 10. OPERATIONS BY GEOGRAPHIC AREAS: The Company operates in one industry segment as a service company maintaining and supporting its programs which have been developed and placed with retail establishments. Information about the Company's domestic and foreign operations are presented below:
Sales Operating Income (Loss) Assets ----------------------------- --------------------------- ----------------------------- (In thousands) 1996 1995 1994 1996 1995 1994 1996 1995 1994 ------- ------- ------- ------- ------- ------- ------- ------- ------- United States $45,559 $44,814 $40,019 $ 5,717 $ 6,779 $ 5,943 $31,527 $33,858 $31,544 Foreign: Europe 17,575 11,677 4,220 2,310 389 (134) 19,786 19,330 9,349 Other 4,404 4,053 3,718 284 375 439 2,938 2,548 2,611 ------- ------- ------- ------- ------- ------- ------- ------- ------- $67,538 $60,544 $47,957 $ 8,311 $ 7,543 $ 6,248 $54,251 $55,736 $43,504 ======= ======= ======= ======= ======= ======= ======= ======= =======
INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders TRM Copy Centers Corporation: We have audited the accompanying consolidated balance sheets of TRM Copy Centers Corporation and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended June 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TRM Copy Centers Corporation and subsidiaries at June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1996 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Portland, Oregon August 13, 1996 15 EX-21.1 7 SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1 Subsidiaries of TRM Copy Centers Corporation -------------------------------------------- State or Place Subsidiary of Incorporation - ---------- ---------------- TRM Copy Centers (USA) Corporation Oregon TRM Copy Centres (Canada) Ltd.* Canada TRM Copy Centres (U.K.) Ltd.* Oregon TRM France Ltd.* Oregon BisCard Corporation Oregon *TRM Copy Centres (Canada) Ltd., TRM Copy Centres (U.K.) Ltd. and TRM France Ltd. are subsidiaries of TRM Copy Centers (USA) Corporation. EX-27.1 8 FINANCIAL DATA SCHEDULES
5 1,000 YEAR JUN-30-1996 JUN-30-1996 873 0 7,551 287 5,253 14,970 57,047 17,875 54,251 6,110 8,128 0 0 16,214 0 54,251 55,810 55,810 29,930 29,930 464 0 957 6,890 2,766 4,124 0 0 0 4,124 .57 .57
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