EXHIBIT 10.2
LOAN AGREEMENT (BROKER-DEALER ARS FACILITY)
     THIS LOAN AGREEMENT (BROKER-DEALER ARS FACILITY) (this “Agreement”) is made
and entered into as of February 19, 2008, by and between: PIPER JAFFRAY & CO., a
Delaware corporation (“Borrower”); and U.S. BANK NATIONAL ASSOCIATION, a
national banking association (“Lender”); and has reference to the following
facts and circumstances:
     A. Borrower has applied for a revolving line of credit from Lender in the
principal amount of up to $200,000,000.00 which shall be secured by certain
auction rate securities.
     B. Lender is willing to make said revolving line of credit available to
Borrower upon, and subject to, the terms, provisions and conditions hereinafter
set forth.
     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender covenant and agree as follows:
     1. Definitions. As used in this Agreement, the following terms shall have
the following respective meanings (and such meanings shall be equally applicable
to both the singular and plural form of the terms defined, as the context may
require):
     Advance shall mean each loan advance made hereunder by Lender to Borrower.
     Applicable Margin shall mean Two and 5/10 Percent (2.5%).
     Auction Rate Securities shall mean the auction rate securities described in
Exhibit B-1 attached hereto and incorporated by reference. The list of auction
rate securities described in Exhibit B-1 shall be amended upon the mutual
agreement of Borrower and Lender.
     Banking Day shall mean any day on which Lender is open for business at its
principal offices in St. Louis, Missouri and Minneapolis, Minnesota.
     Borrowing Base shall mean the total value of the Pledged Securities on
Borrower’s books as determined in accordance with generally accepted accounting
principles, multiplied by Ninety Percent (90%).
     Collateral Pledge Agreement shall have the meaning set forth in
Section 8(c).
     Collateral Summary shall have the meaning set forth in Section 8(a).
     Credit Documents shall have the meaning set forth in Section 9(a).
     Event of Default shall have the meaning set forth in Section 10.
     Facility Amount shall mean Two Hundred Million Dollars ($200,000,000.00).
     Guarantor shall mean Piper Jaffray Companies, a Delaware corporation.
     Guaranty shall mean the Guaranty dated as of the date hereof, executed by
Guarantor in favor of Lender.
     New York Banking Day means any day (other than a Saturday or Sunday) on
which commercial banks are open for business in New York, New York.
     Note shall mean the Revolving Credit Note (Broker-Dealer ARS Facility)
dated the date hereof, executed by Borrower and payable to the order of Lender
in the principal amount of up to $200,000,000.00, in the form attached hereto
and incorporated by reference as Exhibit A.

 

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     Pledged Securities shall mean, collectively, at any time, all Auction Rate
Securities and Variable Rate Demand Notes described in any Collateral
Summary(ies) or in which a security interest is otherwise granted to Lender
under any provision of the Collateral Pledge Agreement.
     Termination Date shall mean the earlier of August 19, 2008, or the date on
which this Agreement is terminated pursuant to Section 10.
     Variable Rate Demand Notes shall mean the variable rate demand notes
described in Exhibit B-2 attached hereto and incorporated by reference. The list
of variable rate demand notes described in Exhibit B-2 shall be amended upon the
mutual agreement of Borrower and Lender.
     2. Discretionary Credit Facility. Borrower may request Advances and Lender
may (in its sole and unlimited discretion) make the Advances so requested, from
time to time during the period from the date hereof until the Termination Date.
This Agreement is not a commitment to lend but rather sets forth the procedures
to be used in connection with any requests for Advances that Borrower may make
and, in the event that Lender makes any such Advances, Borrower’s obligations to
Lender with respect to such Advances. Any Advance requested under this Agreement
will be made, if at all, in the sole and unlimited discretion of Lender, and
nothing contained in this Agreement shall be interpreted as a promise to make
any one or more Advances, even if Borrower satisfies all conditions contained in
this Agreement. Interest shall accrue on each Advance as described in Section 6
below. Without limiting its discretion to elect whether or not to make a
requested Advance, Lender will refuse to make any requested Advance to Borrower:
(a) that would cause the aggregate amount of all Advances outstanding hereunder
to exceed the Facility Amount; or (b) that would cause the aggregate principal
amount of the Advances to exceed the limits set forth the Borrowing Base;
provided, that in no instance shall the amount of the Advances exceed the amount
permitted under any applicable law, regulation, rule or direction of any
applicable regulatory authority.
     3. Procedures for Advances. The following provisions shall govern certain
aspects of any Advance that Borrower may request under this Agreement:
     (a) Requests for Advances. Borrower may request an Advance by written
notice or by telephonic, facsimile or electronic notice. All requests for
Advances shall be directed to the individuals designated for such purpose by
Lender from time to time. Each request by Borrower for an Advance shall be
accompanied by further documents or information as required by Lender, including
but not limited to, documents that evidence that the applicable Pledged
Securities have been assigned or transferred to Borrower and that Borrower is
the current owner of such Pledged Securities, and that such Pledged Securities
have been transferred to Lender’s account at The Depository Trust Company.
     (b) Authorized Persons. Upon request, Borrower shall provide Lender with
the names, titles and signatures of all individuals designated by Borrower to
request Advances under this Agreement Borrower shall immediately notify Lender
if any designated individuals of Borrower are no longer employed by Borrower, or
are no longer authorized to request Advances under this Agreement; and if any
new and/or additional individuals are designated by Borrower to request Advances
under this Agreement.
     (c) Disbursements. If Lender elects to make any Advance requested by
Borrower, Lender shall disburse the amount of the Advance by crediting the
amount of that Advance to deposit account no. 150250032516 maintained by
Borrower at Lender or by the transfer of immediately available funds, or
otherwise, all as instructed by Borrower in its request for the Advance.
     4. The Note. Borrower’s obligation to repay all Advances shall be evidenced
by the Note which shall be duly executed by Borrower and delivered to Lender.
     5. Termination Date; Prepayments. The unpaid principal balance of the Note
shall be due and payable in full on the Termination Date. Borrower may prepay
all or any part of the Note at any time, without premium or penalty, but any
voluntary prepayment must include interest on the amount prepaid.
     6. Interest. Borrower shall pay interest to Lender on the aggregate unpaid
principal amount of all Advances from time to time outstanding at an annual rate
equal to the Applicable Margin plus the one-month LIBOR rate quoted by Lender
from Reuters Screen LIBOR01 Page or any successor thereto, which shall be that
one-month LIBOR rate in effect and reset each New York Banking Day, adjusted for
any reserve requirement and

 

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any subsequent costs arising from a change in government regulation. Lender’s
internal records of applicable interest rates shall be determinative in the
absence of manifest error. The amount of interest accrued on the Note in each
month shall be payable on the first Banking Day of the next month and also on
the Termination Date. After the Termination Date or during the continuance of an
Event of Default, Borrower shall pay interest to Lender on the aggregate and
unpaid principal amount of all Advances from time to time outstanding at an
annual rate equal to Two Percent (2%) over the applicable quoted rate(s).
Borrower agrees to pay to Lender as additional interest hereunder, upon demand,
the amount of any increased cost or reduced rate of return applicable to the
Advances resulting from change or change in application to Lender of any law,
rule, regulation or direction of any regulatory agency, including without
limitation tax, duty, reserve (including, without limitation, any such item
imposed by the Board of Governors of the Federal Reserve System) or similar
requirement imposed on Lender, its assets or any deposits or credit extended by
or to Lender.
     7. Payments. All payments under the Note shall be made in immediately
available funds, by debiting a deposit account of Borrower at Lender, by wire
transfer or otherwise. All payments by Borrower and all proceeds of any Pledged
Securities that are foreclosed on by Lender shall be applied first to costs of
collection, next to any other amounts owed under Section 11 below, next to
accrued interest on the Note and finally to the principal balance of the Note.
If any payment of principal of or interest on the Note, or any amount payable
under Section 11 below, becomes due and payable on a day which is not a Banking
Day, such payment shall be made on the next succeeding Banking Day and such
extension of time shall in such case be included in computing interest in
connection with such payment.
     8. Security.
     (a) Upon any request for an Advance, Borrower will simultaneously deliver
to Lender a summary of the Pledged Securities in form and substance satisfactory
to Lender (a “Collateral Summary”), which shall identify the Pledged Securities,
shall include the values of such Pledged Securities (as initially determined by
Borrower), shall be sufficient to enable Lender to objectively determine the
identity of the Pledged Securities, and with respect to any Pledged Securities
that are Auction Rate Securities shall summarize Borrower’s plan to restructure
such Pledged Securities. The total value of the Pledged Securities as summarized
shall be such that the aggregate principal amount of the Advances, before and
after giving effect to the requested Advance, shall not exceed the Borrowing
Base. By requesting an Advance, Borrower shall be deemed to represent and
covenant that the summarized Pledged Securities are held by Borrower, free and
clear of any lien, claim or encumbrance other than any security interest in
favor of Lender.
     (b) Borrower agrees that in all instances the total value of the Pledged
Securities will be sufficient to support the outstanding Advances. If a change
in market conditions or the status of an issuer reduces the total value of any
Pledged Securities below the level necessary to collateralize the Advances,
Borrower shall either (i) pledge additional Auction Rate Securities and/or
Variable Rate Demand Notes sufficient to restore the total value of such Pledged
Securities to a level such that the Borrowing Base equals or exceeds the
aggregate amount of outstanding Advances, or (ii) pay the Advances to the extent
required to reduce the aggregate amount of outstanding Advances to an amount not
in excess of the Borrowing Base.
     (c) The security interests granted by Borrower to Lender and Borrower’s
duties with respect thereto are set forth in more detail in the Collateral
Pledge Agreement (Broker-Dealer ARS Facility) dated as of the date hereof (the
“Collateral Pledge Agreement”).
     9. Conditions Precedent to Advances. In addition to requirements for the
making of any Advance set forth elsewhere in this Agreement, and without
limiting the discretion of Lender to make or refuse to make any Advance, Lender
shall not make any Advance hereunder unless and until Lender has received all of
the following, in form and substance satisfactory to Lender:
     (a) This Agreement, the Note, the Collateral Pledge Agreement, the
Guaranty, and an Article 9 Certificate (collectively, along with the UCC
Financing Statement referred to below, the “Credit Documents”), all properly
executed;
     (b) A Uniform Commercial Code Financing Statement in a form acceptable for
filing with the Delaware Secretary of State;

 

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     (c) The following organizational information of Borrower: (i) a copy of the
resolutions adopted by the board of directors of Borrower, authorizing the
execution, delivery and performance of the Credit Documents and certified by the
Secretary of Borrower; (ii) copies of the Certificate of Incorporation and
By-Laws of Borrower, certified by its Secretary as being true and correct copies
thereof; (iii) a certificate signed by the Secretary of Borrower as to the
incumbency and signature of the person or persons authorized to execute and
deliver the Credit Documents and all other documents referred to in this
Agreement and make requests for advances hereunder; and (iv) a certificate of
good standing issued by the Delaware Secretary of State;
     (d) The following organizational information of Guarantor: (i) a copy of
the resolutions adopted by the board of directors of Guarantor, authorizing the
execution, delivery and performance of the Guaranty and certified by the
Secretary of Guarantor; (ii) copies of the Certificate of Incorporation and
By-Laws of Guarantor, certified by its Secretary as being true and correct
copies thereof; (iii) a certificate signed by the Secretary of Guarantor as to
the incumbency and signature of the person or persons authorized to execute and
deliver the Credit Documents and all other documents referred to in this
Agreement and make requests for advances hereunder; and (iv) a certificate of
good standing issued by the Delaware Secretary of State;
     (e) UCC search results for Borrower from the Delaware Secretary of State;
     (f) An opinion of counsel from Faegre & Benson LLP, counsel for Borrower
and Guarantor;
     (g) Payment of a closing fee in the amount of $250,000.00; and
     (h) Such other documents and information as reasonably requested by Lender.
     10. Events of Default; Remedies. The occurrence of any one of the following
shall constitute a default (each an “Event of Default”) by Borrower under this
Agreement: (a) if Borrower shall fail to pay any (i) principal amount of any
Advance, when due and payable, or declared due and payable, or (ii) interest on
any Advance within five (5) days after the date on which such payment of
interest shall become due and payable, or declared due and payable; (b) if
Borrower shall fail to pledge additional Auction Rate Securities and/or Variable
Rate Demand Notes as required under Section 8(b) above; (c) if Borrower or
Guarantor shall default in the performance or observance of any other of their
obligations under this Agreement or any of the other Credit Documents, and such
default shall remain uncured for a period of fifteen (15) days after notice from
Lender; (d) if any representation, warranty, statement, report or certificate
made or delivered by Borrower or Guarantor, or any of their officers, employees
or agents, to Lender is not true and correct in any material respect when made
or deemed made; (e) If Borrower or Guarantor shall (i) become insolvent,
(ii) not be paying its debts generally as such debts become due, (iii) make an
assignment for the benefit of creditors or cause or suffer any of their
respective assets to come within the possession of any receiver, trustee or
custodian, (iv) have a petition filed by or against Borrower or Guarantor under
the Bankruptcy Reform Act of 1978, as amended, or any similar law or regulation,
(v) have any of its assets attached, seized or levied upon, or (vi) otherwise
become the subject of any insolvency or creditor enforcement proceedings,
provided however, that any involuntary petition or other proceeding against
Borrower or Guarantor shall not be an Event of Default unless an order for
relief is entered or such proceeding remains undismissed for at least sixty
(60) days; (f) if Borrower or Guarantor shall default in the payment, when due,
whether by acceleration or otherwise, of any indebtedness of Borrower in excess
of $1,000,000, and such default is declared and is not cured within the time, if
any, specified there for in any agreement governing the same, or any event or
condition shall occur which results in the acceleration of the maturity of any
such Indebtedness of Borrower; (g) if one or more judgments or decrees shall be
entered against Borrower or Guarantor involving, individually, or in the
aggregate, a liability of $1,000,000 or more and such judgments or decrees shall
not have been satisfied, vacated, discharged or stayed pending appeal within
thirty (30) days after the entry thereof; or (h) if this Agreement, the Note, or
any other Credit Documents executed by Borrower or Guarantor at any time after
their respective execution and delivery, shall cease to be in full force and
effect, shall be declared null and void, shall be revoked or terminated or shall
be subject to any contest by Borrower or Guarantor as to their validity and/or
enforceability, for any reason, or if Borrower or Guarantor shall for any reason
deny any further liability to Lender hereunder and thereunder. Upon the
occurrence and during the continuance of any Event of Default, Borrower may not
request any Advance under this Agreement, Lender may then forthwith cease making
Advances to or for the benefit of Borrower under this Agreement without any
notice to Borrower, and Lender may terminate this Agreement; provided that this
Agreement shall automatically terminate, and all amounts Borrower owes Lender
hereunder and under the Note shall become due, without any notice should an
order for relief be entered with respect to Borrower under the United States
Bankruptcy Code. Upon an Event of Default, with notice by Lender to or demand by
Lender of Borrower, Lender may declare all

 

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Advances to be immediately due and payable. Lender, in its sole discretion, upon
the occurrence of and during the continuance of an Event of Default may exercise
one or more of the rights and remedies accruing to Lender under this Agreement
or the other Credit Documents, and/or applicable law upon default by Borrower,
including, without limitation, the right to set off and/or reduce to cash and
apply to the payment of any of Borrower’s obligations, any monies, reserves,
deposits, certificates of deposit, deposit accounts and interest and dividends
thereon, securities, investment property, cash and other property in the
possession of or under the control of Lender or any of Lender’s affiliates.
     11. Fees and Expenses. Borrower agrees, whether or not any Advance is made
under this Agreement, to pay Lender upon demand for (a) all out-of-pocket costs
and expenses and all reasonable attorneys’ fees incurred by Lender in connection
with the preparation, documentation, negotiation and/or execution of this
Agreement and the other Credit Documents, (b) all recording, filing and search
fees and expenses incurred by Lender in connection with this Agreement and the
other Credit Documents, (c) all out-of-pocket costs and expenses and all
reasonable attorneys’ fees incurred by Lender in connection with (i) the
preparation, documentation, negotiation and execution of any amendment,
modification, extension, renewal or restatement of this Agreement and/or any
other Credit Document, and (ii) the preparation of any waiver or consent under
this Agreement and/or under any other Credit Document, and (d) if an Event of
Default occurs, all out-of-pocket costs and expenses and all reasonable
attorneys’ fees incurred by Lender in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom. Borrower’s
obligations under this Section 11 shall survive the Termination Date.
     12. Reporting Requirements and Inspections. Until the Termination Date and
thereafter until the Note and all other obligations of Borrower under this
Agreement are paid in full, in addition to the Collateral Summaries and other
information described in Section 8 above, Borrower will provide to Lender (a) at
Lender’s request, an updated, detailed list of the Pledged Securities, and
(b) from time to time such other information and reports as Lender may
reasonably request, including but not limited to quarterly and annual financial
statements of Borrower and Guarantor. Borrower shall, at all times, maintain
accurate books and records covering all collateral subject to the Collateral
Pledge Agreement, and Lender shall have the right by or through any of its
representatives, attorneys or accountants to audit those books and records, upon
reasonable notice to Borrower.
     13. Miscellaneous. The following provisions shall also be applicable to
Borrower’s obligations to Lender under this Agreement and the Note:
     (a) Amendments; Waivers. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender and
Borrower, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
on Lender’s part to exercise, and no delay in Lender’s exercising, any right
under this Agreement, the Note, the Collateral Pledge Agreement or any other
Credit Document shall operate as a waiver thereof; nor shall any single or any
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies provided in this
Agreement are cumulative and not exclusive of any remedies provided by law.
     (b) Governing Law; Binding Effect. This Agreement shall be deemed to be
made under and shall be governed by and construed in accordance with the
internal law, and not the law of conflicts, of the State of Minnesota. This
Agreement shall be binding on Borrower, its representatives, successors and
assigns, and shall inure to the benefit of, and be enforceable by, Lender, its
successors, transferees and assigns. Notwithstanding the foregoing, Borrower may
not assign or otherwise transfer any of its rights or delegate any of its
obligations or duties under this Agreement without the prior written consent of
Lender.
     (c) Lender Records. Lender shall maintain records as to advances and
payments made, and interest accrued on, the Note, and said records shall be
presumed accurate until the contrary shall have been established.
     (d) Captions. The captions or headings in this Agreement are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Agreement.
     (e) Regulations T and U. Borrower is subject to the provisions of
Regulation T promulgated by the Board of Governors of the Federal Reserve System
and does not extend or maintain credit to or for customers except in accordance
with the provisions of such Regulation T. Borrower is an “exempted borrower” as
defined

 

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by Regulation U. Upon request, Borrower shall provide to Bank a Certificate
confirming that Borrower is in compliance with the provisions of Regulation T
and U.
     (f) Compliance With Other Regulations: Borrower shall at all times comply
with all present and future laws, rules and regulations applicable to it in the
operation of its business, including but not limited to all rules and
regulations of the Securities and Exchange Commission, the National Association
of Securities Dealers, the Securities Investor Protection Corporation and any
self-regulatory organization of which Borrower is a member. Borrower shall
deliver to Bank, immediately upon its receipt or transmission thereof, any
notices to or from any such organization that Borrower is in violation of any
applicable net capital rule, including but not limited to Rule 15c3-1 of the
Securities and Exchange Commission.
     (g) Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, e-mail, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify. Each such notice, request
or other communication shall be effective (a) if given by telecopier, when such
telecopier is transmitted to the telecopier number specified in this Section and
the appropriate answerback is received, (b) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (c) if given by any other means, when delivered at the
address specified in this Section.
     (h) Entire Agreement. The Credit Documents embody the entire agreement and
understanding between Lender and Borrower with respect to the subject matter
hereof, and supersede all prior agreements and understandings relating to the
subject matter hereof.
     14. Termination. Unless terminated sooner by Lender pursuant to Section 10
above, this Agreement will terminate on August 19, 2008.
     15. Consent to Jurisdiction; Waiver of Jury Trial. BORROWER HEREBY
IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY MINNESOTA STATE
COURT SITTING IN THE COUNTY OF HENNEPIN, OR ANY UNITED STATES OF AMERICA COURT
SITTING IN THE DISTRICT OF MINNESOTA, AS LENDER MAY ELECT, IN ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED LOAN
DOCUMENT, (b) AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR
PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS, (c) WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT, (d) WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM
AND (e) WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. BORROWER AND
LENDER HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
ACTION IN WHICH BORROWER AND LENDER ARE PARTIES RELATING TO OR ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED LOAN DOCUMENTS.
     IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be
duly executed by their duly authorized officers as of the date first written
hereinabove.
(SIGNATURES ON FOLLOWING PAGE)

 

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SIGNATURE PAGE-
LOAN AGREEMENT (BROKER-DEALER ARS FACILITY)

            Borrower:

PIPER JAFFRAY & CO.
      By:   /s/ Thomas P. Schnettler         Thomas P. Schnettler, Vice Chairman
and CFO        By:   /s/ Debbra L Schoneman         Debbra L. Schoneman,
Treasurer              100 S. 5th Street, #1075
Minneapolis, Minnesota 55402
Attention: Treasury
(612)                      (FAX)
firmfund@pjc.com (e-mail)
      Lender:

U.S. BANK NATIONAL ASSOCIATION
      By:   /s/ Katherine K. Miller         Katherine K. Miller, Senior Vice
President                One US Bank Plaza (Mail Code SL-TW-11SI)
St. Louis, Missouri 63101
Attention: Broker Dealer Division
(314) 418-8394 (FAX)
katherine.k.miller@usbank.com (e-mail)