<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MAY 31, 1996
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
NORTHWEST PIPE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OREGON 0-27140 93-0557988
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NO.) IDENTIFICATION NO.)
12005 N. BURGARD, PORTLAND, OREGON 97006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(503) 285-1400
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Exhibit Index on Page 5
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Item 2. Acquisition or Disposition of Assets
On May 31, 1996, Northwest Pipe Company (the "Company") acquired
Thompson Pipe and Steel Company ("Thompson"), a manufacturer of water
transmission pipe headquartered in Denver, Colorado. The acquisition (the
"Acquisition") was accomplished through the Company's purchase of all of the
issued and outstanding capital stock of Thompson from Inter-City Products
Corporation, a Canadian corporation based in Toronto, Canada, and its affiliates
("ICP").
The purchase price paid by the Company for the capital stock of
Thompson was approximately $3.0 million, subject to adjustment based on a
post-closing balance sheet to be completed by June 30, 1996. In addition, the
Company purchased from ICP certain indebtedness of Thompson to ICP in the amount
of approximately $4.8 million. The purchase price was determined through
arms-length negotiations between the Company and ICP. The funds used to pay the
purchase price were obtained pursuant to the terms of the Company's Amended and
Restated Financing Agreement with The CIT Group/Business Credit, Inc. dated as
of May 31, 1996.
The principal assets acquired by the Company in the Acquisition were
steel pipe manufacturing facilities located in Denver, Colorado and Princeton,
Kentucky. The Kentucky manufacturing facility was closed by Thompson in 1995.
The Company intends to continue operating the manufacturing facility in Denver,
Colorado, and intends to dispose of the manufacturing facility located in
Princeton, Kentucky.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the financial statements required under
this Item as of the date this Current Report on Form 8-K must be filed. The
required financial statements will be filed as an amendment to this Form 8-K as
soon as practicable, but not later than 60 days after the date this Current
Report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
It is impracticable to provide the pro forma financial information
required under this Item as of the date this Current Report on Form 8-K must be
filed. The required pro forma financial information will be filed as an
amendment to this Form 8-K as soon as practicable, but not later than 60 days
after the date this Current Report on Form 8-K must be filed.
(c) Exhibits.
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2.1 Stock Purchase Agreement dated as of May 8, 1996
among Northwest Pipe Company, Thompson Pipe and Steel
Company, CHL Holdings, Inc. and Inter-City Products
Corporation.
10.1 Amended and Restated Financing Agreement dated as of
May 31, 1996 among The CIT Group/Business Credit,
Inc., Northwest Pipe Company, Thompson Pipe and Steel
Company and Thompson Steel Pipe Company.
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SIGNATURES
Pursuant to the requirements 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.
NORTHWEST PIPE COMPANY
Date: June 14, 1996 By: /s/ Brian W. Dunham
________________________________
Brian W. Dunham
Executive Vice President
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
2.1 Stock Purchase Agreement dated as of May 8, 1996 among
Northwest Pipe Company, Thompson Pipe and Steel Company, CHL
Holdings, Inc. and Inter-City Products Corporation.
10.1 Amended and Restated Financing Agreement dated as of May 31,
1996 among The CIT Group/Business Credit, Inc., Northwest Pipe
Company, Thompson Pipe and Steel Company and Thompson Steel
Pipe Company.
</TABLE>
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STOCK PURCHASE AGREEMENT
DATED AS OF
MAY 8, 1996
AMONG
NORTHWEST PIPE COMPANY
THOMPSON PIPE AND STEEL COMPANY
CHL HOLDINGS, INC.
AND
INTER-CITY PRODUCTS CORPORATION
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TABLE OF CONTENTS
<TABLE>
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Page No.
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<S> <C>
ARTICLE 1 - DEFINITIONS AND PRINCIPLES OF INTERPRETATION........................................................ 1
1.1 Defined Terms...................................................................... 1
1.2 Other Defined Terms................................................................ 8
1.3 Certain Rules of Interpretation.................................................... 10
1.4 Exhibits and Schedules............................................................. 10
1.5 Accounting Principles.............................................................. 10
ARTICLE 2 - SALE AND PURCHASE OF SHARES AND PURCHASED
NET INTERCOMPANY INDEBTEDNESS; PURCHASE PRICE
ADJUSTMENT; PAYMENT OF THE PURCHASE PRICE........................................................... 11
2.1 Sale and Purchase.................................................................. 11
2.2 Purchase Price..................................................................... 11
2.3 Physical Inventory; Audit; Closing Balance Sheet................................... 11
2.4 Purchase Price Adjustment.......................................................... 13
2.5 Payments by Buyer.................................................................. 14
ARTICLE 3 - CLOSING............................................................................................. 15
3.1 Closing of Sale and Purchase....................................................... 15
3.2 Deliveries by Seller and the Company............................................... 15
3.3 Deliveries by Buyer................................................................ 16
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES ABOUT ICP AND CHL.................................................... 17
4.1 Organization and Qualification..................................................... 17
4.2 Authority Relative to this Agreement............................................... 17
4.3 No Broker, Etc..................................................................... 18
4.4 Title to Shares.................................................................... 18
4.5 Transfer of Title.................................................................. 18
4.6 Other Negotiations................................................................. 18
4.7 No Untrue Statement or Omission.................................................... 18
4.8 Responsibilities of Relevant Managers and Advisors................................. 19
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY.................................................... 19
5.1 Organization and Qualification..................................................... 19
5.2 Capitalization..................................................................... 19
5.3 Subsidiaries....................................................................... 20
5.4 Authority Relative to this Agreement............................................... 20
5.5 Financial Statements............................................................... 21
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<TABLE>
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5.6 Absence of Certain Changes or Events............................................... 22
5.7 Litigation......................................................................... 23
5.8 Taxes.............................................................................. 23
5.9 Compliance with Permits, Applicable Laws and
Agreements......................................................................... 25
5.10 Employee Plans and Benefit Arrangements............................................ 25
5.11 Employee Contracts and Non-Disclosure Agreements................................... 28
5.12 Real Property...................................................................... 28
5.13 Tangible Personal Property......................................................... 29
5.14 Intangible Property................................................................ 30
5.15 Title to Assets.................................................................... 31
5.16 Inventories and Receivables........................................................ 31
5.17 Contracts.......................................................................... 32
5.18 Suppliers and Customers............................................................ 32
5.19 Products; Product Warranties....................................................... 32
5.20 Environmental Matters.............................................................. 33
5.21 Intentionally Omitted. ............................................................ 34
5.22 Absence of Certain Payments........................................................ 34
5.23 Records............................................................................ 34
5.24 Insurance.......................................................................... 35
5.25 Bank Accounts...................................................................... 36
5.26 Directors, Officers and Salaried Employees......................................... 36
5.27 No Broker, Etc..................................................................... 36
5.28 Other Negotiations................................................................. 36
5.29 No Basis for Liabilities Not Reflected in Consolidated
Financial Statements............................................................... 36
5.30 No Untrue Statement or Omission.................................................... 36
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF BUYER............................................................. 37
6.1 Organization and Qualification..................................................... 37
6.2 Authority Relative to this Agreement............................................... 37
6.3 No Broker, Etc..................................................................... 38
6.4 Sufficient Funds Available......................................................... 38
6.5 Securities Act Representations..................................................... 38
6.6 No Untrue Statement or Omission.................................................... 38
ARTICLE 7 - TAX MATTERS......................................................................................... 39
7.1 Tax Payment and Tax Return Filing Responsibilities................................. 39
7.2 Tax Sharing and Indemnification.................................................... 40
7.3 Tax Sharing Agreements............................................................. 41
7.4 Net Operating Loss Carryforward.................................................... 41
7.5 Cooperation; Arbitration of Certain Disputes....................................... 41
ARTICLE 8 - ADDITIONAL AGREEMENTS AND COVENANTS................................................................. 41
8.1 Conduct of Business of the Company and Thompson
Sub................................................................................ 41
</TABLE>
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<TABLE>
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8.2 Notice of Breach................................................................... 43
8.3 Reasonable Efforts................................................................. 44
8.4 Other Transactions................................................................. 44
8.5 Delivery of Interim Financial Statements........................................... 44
8.6 Access to Information.............................................................. 45
8.7 Disposition of Thompson Sub's Inventory and Accounts
Receivable ........................................................................ 45
8.8 Access to Records and Personnel After Closing...................................... 45
8.9 Further Assurances................................................................. 46
8.10 Maintenance of Insurance and Enforcement of Rights................................. 46
8.11 Proprietary, Nondisclosure and
Noncompetition Agreements.......................................................... 46
8.12 Reimbursement of Congress Fee...................................................... 46
ARTICLE 9 - CONDITIONS PRECEDENT................................................................................ 47
9.1 Conditions to Obligations of Buyer................................................. 47
9.2 Conditions to Obligations of Seller and the Company................................ 49
ARTICLE 10 - RESTRICTIVE COVENANTS.............................................................................. 51
10.1 Noncompetition and Nonsolicitation................................................. 51
10.2 Confidentiality.................................................................... 52
10.3 Reasonableness of Limitations...................................................... 53
10.4 Remedies........................................................................... 53
ARTICLE 11 - TERMINATION, AMENDMENT AND WAIVER.................................................................. 53
11.1 Termination........................................................................ 53
11.2 Effect of Termination.............................................................. 54
11.3 Amendment.......................................................................... 55
11.4 Waiver............................................................................. 55
ARTICLE 12 - SURVIVAL AND INDEMNIFICATION....................................................................... 55
12.1 Survival of Representations, Warranties, Covenants and
Agreements......................................................................... 55
12.2 Indemnification by Seller and the Company.......................................... 56
12.3 Indemnification by Seller With Respect to Escrow
Liabilities........................................................................ 57
12.4 Indemnification by Buyer........................................................... 57
12.5 Indemnification Relating to Timothy G. Phillips.................................... 58
12.6 Notification and Defense of Claims or Actions...................................... 58
12.7 Use of Escrow Funds for Indemnification............................................ 60
12.8 Reliance........................................................................... 60
ARTICLE 13 - GENERAL PROVISIONS................................................................................. 60
13.1 Expenses........................................................................... 60
13.2 Public Announcements............................................................... 61
13.3 Notices, Etc....................................................................... 61
</TABLE>
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<TABLE>
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13.4 Attorneys' Fees.................................................................... 62
13.5 Severability....................................................................... 62
13.6 Remedies........................................................................... 62
13.7 No Third-Party Beneficiaries....................................................... 63
13.8 Jurisdiction....................................................................... 63
13.9 Governing Law...................................................................... 63
13.10 Assignment and Binding Effect...................................................... 63
13.11 Joint and Several Obligations...................................................... 64
13.12 Entire Agreement................................................................... 64
13.13 Counterparts....................................................................... 64
</TABLE>
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (hereinafter called "Agreement"), dated as of
May 8, 1996, among NORTHWEST PIPE COMPANY, an Oregon corporation ("Buyer"),
THOMPSON PIPE AND STEEL COMPANY, a Colorado corporation (the "Company"), CHL
HOLDINGS, INC., a Delaware corporation ("CHL"), and INTER-CITY PRODUCTS
CORPORATION, a corporation chartered under the laws of Canada ("ICP"):
RECITALS
A. ICP owns 100% of the outstanding shares of capital stock of CHL.
B. CHL owns 34,699 shares of the Company's common stock, which shares
constitute all of the issued and outstanding capital stock of the Company (the
"Shares"). ICP and CHL are together referred to in this Agreement as "Seller."
C. Buyer wishes to purchase the Shares from CHL, and CHL wishes to sell
the Shares to Buyer, in accordance with the terms and conditions of this
Agreement.
D. In connection with the sale of the Shares, Buyer wishes to purchase
from CHL and CHL wishes to sell to Buyer certain Net Intercompany Indebtedness
(defined below), in accordance with the terms and conditions of this Agreement.
E. The Company's Board of Directors has determined that the Transaction
is in the Company's best interest.
F. Buyer, Seller and the Company wish to make certain representations,
warranties, covenants and agreements in connection with the Transaction.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereby agree
as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINED TERMS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1 - STOCK PURCHASE AGREEMENT
<PAGE> 7
"1995 Financial Statements": The audited consolidated financial
statements of the Consolidated Group for the fiscal year ended December 31,
1995, consisting of the balance sheet, statements of income, stockholders'
equity and cash flows and all notes thereto.
"Accredited Investor": As defined in Regulation D of the Securities
Act.
"Affiliate": As to any Person, any other Person which, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
"Affiliated Group": An "affiliated group" as defined in Section
1504(a)(1) of the Code.
"Authorized Representative": As to any Person, such Person's officers,
directors, employees, counsel and accountants.
"Business Records": All books and records of the Consolidated Group,
including financial, corporate, operations and sales books, records, books of
accounts, sales and purchase records, lists of supplies and customers, formulae,
business reports, plans and projections and all other documents, files, records,
correspondence, and other data and information, financial or otherwise.
"Buyer's Accountants": Coopers & Lybrand LLP.
"Buyer's Disclosure Schedule": The disclosure schedule dated the date
of this Agreement, delivered by Buyer to Seller and the Company and attached
hereto.
"Claims Period": Except as otherwise specifically provided in Section
12.1, the period beginning on the Closing Date and ending on the second
anniversary of the Closing Date.
"Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Company Disclosure Schedule": The disclosure schedule dated the date
of this Agreement, delivered by the Company to Buyer and attached hereto.
"Confidentiality Agreement": The letter dated January 16, 1996 from Mr.
Cameron J. Turner, Senior Vice President of ICP, to Mr. Brian W. Dunham,
Executive Vice President and Chief Financial Officer of Buyer, signed by Mr.
Dunham February 15, 1996.
"Consolidated Group": The Company and Thompson Sub.
"Consent": Any consent, permission, approval or authorization of or by
any Person.
2 - STOCK PURCHASE AGREEMENT
<PAGE> 8
"Contract": Any written or oral contract, open order, lease and other
agreement in which any Member of the Consolidated Group is a party or by which
any Member of the Consolidated Group is bound (other than the Employee Contracts
and the Minor Contracts) including, without limitation, all distributor, sales
representative and dealer agreements, purchase and supply contracts, leases,
maintenance contracts, license and royalty agreements, government contracts,
partnering agreements, indebtedness instruments, letters of credit, performance
bonds, currency contracts, agreements with respect to guaranties, suretyships,
Liens, security interests, covenants not to compete, confidentiality or
indemnification, by or for the benefit of the Consolidated Group, or by which
any Member of the Consolidated Group is bound, purchase and sale orders and all
other contracts and agreements whatsoever, and all amendments relating to any of
the foregoing.
"Corporate Records": For each Member of the Consolidated Group, the
articles of incorporation (including all amendments thereto), bylaws (including
all amendments thereto), minutes, unanimous written consents, resolutions, stock
records, stock transfer ledger, canceled certificates and other documents
customarily contained in corporate minute books.
"Employee Contract": Any written or oral contract, agreement,
arrangement, policy, program, plan or practice (exclusive of any such contract
which is terminable within thirty (30) days without liability to any Member of
the Consolidated Group, directly or indirectly providing for or relating to any
employment, consulting, remuneration, compensation or benefit, severance or
other similar arrangement, insurance coverage (including any self-insured
arrangements), medical-surgical-hospital or other health benefits, workers'
compensation, disability benefits, supplemental employment benefits, vacation
benefits and other forms of paid or unpaid leave, retirement benefits, tuition
reimbursement, deferred compensation, savings or bonus plans, profit-sharing,
stock options, stock appreciation rights, or other forms of incentive
compensation or post-retirement compensation or benefit, employment guarantee or
security, or limitation on right to discipline or discharge, or relating to
confidentiality, nonsolicitation, ownership of inventions, noncompetition or the
like, which (i) is not an Employee Plan, (ii) has been entered into or
maintained, as the case may be, by any Member of the Consolidated Group and
(iii) covers any one or more Employee.
"Environmental Laws": All present federal, state and local laws
(whether under common law, statute, rule, regulation or otherwise), Permits, and
other requirements of Governmental Authorities relating to the protection of
human health or the environment or to any Hazardous Materials. Such laws
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act; Resource Conservation and Recovery Act; Clean
Water Act; Clean Air Act; Hazardous Materials Transportation Act; Toxic
Substances Control Act; Occupational Safety and Health Act; and their state and
local counterparts.
"Environmental Liability": Any Loss suffered or incurred by Buyer, the
Company or Thompson Sub after the Closing, to the extent caused by or resulting
from any of the conditions, circumstances or events described in Section 5.20 of
the Company Disclosure Schedule, except to the extent such conditions,
circumstances or events are aggravated by actions or
3 - STOCK PURCHASE AGREEMENT
<PAGE> 9
omissions of Buyer, the Company or Thompson Sub after the Closing Date. For
purposes of the preceding sentence, actions taken or omitted to be taken by
Buyer, the Company or Thompson Sub in compliance with Environmental Laws and/or
consistent with prudent business practices shall not be considered to have
aggravated any of the conditions, circumstances or events described in Section
5.20 of the Company Disclosure Schedule; provided that any failure of Buyer, the
Company or Thompson Sub to act, which failure to act is consistent with past
practices of Seller, the Company or Thompson Sub, shall be deemed to constitute
a prudent business practice.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder.
"ERISA Affiliates": Any trade or business, whether or not incorporated,
that is now or has at any time in the past been treated as a single employer
with any one or more Members of the Consolidated Group under Section 414(b) or
(c) of the Code and the Treasury Regulations thereunder.
"Escrow Agent": Norwest Bank Colorado, N.A.
"Escrow Funds": $1,125,000.
"Escrow Liabilities": The Environmental Liabilities and the Unknown
Contingent Liabilities.
"GAAP": United States generally accepted accounting principles
recommended from time to time by the Financial Accounting Standards Board,
except as such principles may be qualified or modified by the provisions of
Section 2.4.3 in connection with the preparation of the Closing Balance Sheet.
"Governmental Authority": Any United States federal, state or municipal
entity, any foreign government, and any political subdivision or other
executive, legislative, administrative, judicial, quasi-judicial or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign.
"Hazardous Materials": Materials that, because of their quantity,
concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when used,
treated, stored, disposed of, generated, manufactured, transported or otherwise
handled. "Hazardous Materials" shall include, but is not limited to, any and all
hazardous or toxic substances, materials or wastes as defined or listed under
any of the Environmental Laws. "Hazardous Materials" shall specifically include,
but not be limited to, petroleum or petroleum products, including crude oil and
any fraction thereof.
"Intangible Property": All intellectual property rights, including, but
not limited to, patents, patent applications, trademarks, trademark applications
and registrations, service marks, service mark applications and registrations,
tradenames, copyrights, licenses and customer lists, proprietary processes,
formulae, inventions, trade secrets, know-how, development tools and
4 - STOCK PURCHASE AGREEMENT
<PAGE> 10
other proprietary rights used by any Member of the Consolidated Group pertaining
to any product, software or service manufactured, marketed, licensed or sold by
any Member of the Consolidated Group in the conduct of its business or used,
employed or exploited, or available for use, in the development, licensing,
sale, marketing, distribution or maintenance thereof, and all documentation and
media constituting, describing or relating to the above, including, but not
limited to, manuals, memoranda, know-how, notebooks, software, records and
disclosures.
"Intercompany Indebtedness": Any advance, loan or credit provided to
the Company or Thompson Sub by ICP, CHL or any of their Affiliates (other than
the Company and Thompson Sub).
"Intercompany Receivables": Any advance, loan or credit provided by the
Company or Thompson Sub to ICP, CHL or any of their Affiliates (other than the
Company and Thompson Sub).
"Interim Financial Statements": The consolidated, unaudited balance
sheets for the Consolidated Group as of January 31, 1996, February 29, 1996,
March 31, 1996 and the last day of each subsequent month prior to Closing
(collectively, "Interim Financial Dates") and the consolidated unaudited
statements of income and cash flows for each month ending on an Interim
Financial Date.
"Knowledge": As to any Person, that which such Person actually knows or
should know after due inquiry and review and, in the case of the Warranting
Parties' Knowledge, that which the Relevant Managers and Advisors of the
Warranting Parties actually know or should know after due inquiry and review.
"Lien": Any mortgage, pledge, lien, charge, encumbrance, security
interest or claim of any kind.
"Loss": Any and all loss, damage, claim, obligation, liability, cost
and expense less insurance proceeds received on account of such loss, damage,
claim, obligation, liability, cost and expense (including, without limitation,
reasonable attorney and other professional fees and costs and expenses incurred
in investigating, preparing, defending against or prosecuting any Proceeding).
"Material Adverse Effect:" An effect on the business, properties,
assets, conditions (financial or otherwise), liabilities, or operations of the
Consolidated Group taken as a whole, (i) in an amount in excess of $100,000 if
the fact or circumstance giving rise to the effect has or would reasonably be
expected to have an impact on the past, current or future earnings of a Member
of the Consolidated Group; and (ii) in an amount in excess of $250,000 in all
other instances, in each case taking into consideration the insurance maintained
by or for the benefit of the Members of the Consolidated Group.
"Member," "Member of the Consolidated Group," or "Consolidated Group
Member": the Company, or any Subsidiary of the Company.
5 - STOCK PURCHASE AGREEMENT
<PAGE> 11
"Minor Contracts": Any blanket inventory purchase order by any Member
of the Consolidated Group in an aggregate amount of less than $50,000 annually
and of a duration of less than one year, any other purchase and sale order by
any Member of the Consolidated Group under $50,000, and any agreements relating
to office equipment, production support equipment, maintenance, security or
utilities, or other contracts and agreements which, in the aggregate for all
contracts and/or agreement with any one Person, result in the incurrence of
annual expenditures by any Member of the Consolidated Group of less than
$50,000.
"Net Intercompany Indebtedness": The aggregate amount of all
Intercompany Indebtedness minus the aggregate amount of all Intercompany
Receivables.
"Order": Any judgment, writ, injunction, order, directive, ruling or
decree of any arbitrator or any court or other Governmental Authority.
"Pending": As to any Proceeding or other circumstance, where (i) a
Proceeding has been commenced and Seller or any Member of the Consolidated Group
has received notice of such Proceeding, or (ii) where Seller or any Member of
the Consolidated Group has been informed in writing that a third party has
determined to commence a Proceeding against Seller or a Member of the
Consolidated Group and where applicable, has retained counsel for such purpose.
"Permit": Any permit, license, franchise, consent, variance, exemption,
or approval issued or granted by, or authorization of, expiration or termination
of any waiting period requirement by, or filing, registration, qualification,
declaration or designation with, any Governmental Authority, including without
limitation, any required pursuant to the Hart Scott Rodino Improvement Act of
1976, as amended.
"Person": Any individual or corporation, company, general partnership,
limited partnership, limited liability company, limited liability partnership,
trust, incorporated or unincorporated association, joint venture, Governmental
Authority or other entity of any kind.
"Proceeding": Any claim, suit, action, arbitration, investigation or
proceeding.
"Purchased Net Intercompany Indebtedness": The aggregate amount of all
Intercompany Indebtedness incurred subsequent to December 31, 1995 and
outstanding as of the Closing Date, minus the aggregate amount of all
Intercompany Receivables arising subsequent to December 31, 1995 and outstanding
as of the Closing Date.
"Real Property": All real property now or in the past owned, leased or
occupied by any Member of the Consolidated Group or any other Person to which
any Member of the Consolidated Group is or is deemed to be a successor in
interest, whether directly or indirectly (including, without limitation, by
merger, under applicable Environmental Laws or otherwise), or in which any
Member of the Consolidated Group or any such other Person has now or in the past
had any interest, together with (i) all buildings and improvements located
thereon and (ii) all rights, privileges, interests, easements, hereditaments and
appurtenances relating thereto.
6 - STOCK PURCHASE AGREEMENT
<PAGE> 12
"Release": Any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, migration, dumping or disposing into
the environment.
"Relevant Managers and Advisors":
In the case of ICP, the following individuals: Cameron Turner,
David Cain, Robert Henningson, Michael Clevy and Arindra Singh;
In the case of CHL, the following individuals: Cameron Turner,
David Cain, Robert Henningson, Michael Clevy and Arindra Singh;
In the case of the Company, the following individuals: Timothy
G., Phillips, Walter Mucha, Kenneth Koger, Fred Buchholz, Alberto Garcia, Paul
Molliconi, Richard Sheetz, Deborah Halbach, Linda Van Gorden and Mark Seevers.
In the case of Buyer, the following individuals: William R.
Tagmyer, Brian W. Dunham, Robert L. Mahoney and Charles L. Koenig.
"Retirement Liability": $-0-.
"Securities Act": The Securities Act of 1933, as amended.
"Seller Warranty": A representation or warranty made by all or any of
ICP, CHL and the Company in this Agreement, which representation or warranty is
not qualified by Seller's or the Warranting Parties' Knowledge.
"Seller's Accountants": Coopers & Lybrand LLP.
"Seller's Disclosure Schedule": The disclosure schedule dated the date
of this Agreement, delivered by Seller to Buyer and attached hereto.
"Severance Liability": $267,909.
"Subsidiary": As to any Person, any other Person of which at least the
majority of the equity or voting interests are owned, directly or indirectly, by
such first Person.
"Tangible Personal Property": All tangible personal property (other
than inventory) used to conduct the business of any Member of the Consolidated
Group including, without limitation, production and processing equipment,
warehouse equipment, computer hardware, furniture and fixtures, transportation
equipment, leasehold improvements, supplies and other tangible assets, together
with any transferable manufacturer or vendor warranties related thereto.
7 - STOCK PURCHASE AGREEMENT
<PAGE> 13
"Tax": Any income, excise, franchise, sales, use, transfer, gross
receipts, payroll, personal property, real property, occupancy or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest or penalty thereon, of any Governmental
Authority.
"Tax Affiliate": With respect to any Person, any other Person that is a
member of the same Affiliated Group as such Person.
"Tax Period" or "Taxable Period": Any period prescribed by any
Governmental Authority for which a Tax Return is required to be filed or a Tax
is required to be paid.
"Tax Return": Any type of return or report required to be filed as a
result of any Tax, and any return or informational report required to be filed
under the Code including, but not limited to, IRS forms 941, 1099 and 5500.
"Thompson Sub": Thompson Steel Pipe Company, a Delaware corporation.
"Title Representations": The representations and warranties contained
in Sections 4.4 and 4.5 of this Agreement.
"Transaction": The execution, delivery and performance of this
Agreement and the other agreements contemplated hereby, including the sale and
purchase of the Shares and the Purchased Net Intercompany Indebtedness and the
other actions required in connection therewith.
"Unknown Contingent Liability": Any Loss suffered or incurred by Buyer,
the Company or Thompson Sub after the Closing, (i) of which the Warranting
Parties did not have Knowledge immediately prior to the Closing, (ii) to the
extent caused by or arising as the result of, acts or omissions of ICP, CHL, the
Company and/or Thompson Sub (including their respective past and current
directors, officers, Employees and agents), prior to the Closing, (iii) which
does not result from facts or circumstances, the existence of which constitutes
a breach of a Seller Warranty, and (iv) which is not an Environmental Liability.
1.2 OTHER DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Date 5.8.1
Aggregate Potential Unknown 12.6.5
Contingent Liability Losses
Audit Procedures 2.3.2
Authorized Representatives 8.6
Benefit Arrangement 5.10.1
Business 10.1.1
Buyer Introductory Paragraph
</TABLE>
8 - STOCK PURCHASE AGREEMENT
<PAGE> 14
<TABLE>
<S> <C>
Buyer's Bring-Down Certificate 9.2.3
CHL Introductory Paragraph
CHL's Bring-Down Certificate 9.1.3(a)
Closing 3.1
Closing Balance Sheet 2.3
Closing Date 3.1
Closing Date Payment 2.5.1
COBRA 5.10.10
Company Introductory Paragraph
Company's Bring-Down Certificate 9.1.3(b)
Compete 10.1.3(a)
Confidential Information 10.2.1
Congress 8.12
Congress Termination 8.12
Congress Termination Notice 8.12
Consolidated Financial Statements 5.5.1
Current Real Property 5.12.1
Disclosing Party 12.7
Effective Time 3.1
Employee Plan 5.10.1
Employees 5.10.1
Environmental Liability Indemnity Amount 12.3.3
Escrow Agreement 3.2.2
Escrow Liability Indemnity Amount 12.3.3
Equity 2.4.2
ICP Introductory Paragraph
ICP's Bring-Down Certificate 9.1.3
Indemnified Party 12.6.1
Indemnity Obligor 12.6.1
Insurance 5.24
Material Permits 5.9.1
Objection Notice 2.3
Purchase Price 2.2
Purchase Price Adjustment 2.4.1
Registered Intangible Property 5.14.1
Restricted Territory 10.1.3(b)
Seller Recitals
Shares Recitals
Solicit 10.1.3(c)
Unknown Contingent Liability Indemnity Amount 12.3
Unknown Contingent Liability Deductible 12.3.2
Warranting Parties Article 5, first clause
</TABLE>
9 - STOCK PURCHASE AGREEMENT
<PAGE> 15
1.3 CERTAIN RULES OF INTERPRETATION
1.3.1 The name assigned to this Agreement and the section captions used
herein are for convenience of reference only and shall not affect the
interpretation or construction hereof. Unless otherwise specified, (a) the terms
"hereof," "herein" and similar terms refer to this Agreement as a whole and (b)
references herein to "Articles" or "Sections" refer to articles or sections of
this Agreement.
1.3.2 The use of words in the singular or plural, or with a particular
gender, shall not limit the scope or exclude the application of any provision of
this Agreement to such Person or Persons or circumstances as the context
otherwise permits.
1.3.3 Time is of the essence in the performance of the parties'
respective obligations.
1.3.4 Unless otherwise specified, all references to money amounts are
to U.S. currency.
1.4 EXHIBITS AND SCHEDULES
The exhibits and schedules to this Agreement, as listed below, are
incorporated by this reference into this Agreement:
Seller's Disclosure Schedule
Company Disclosure Schedule
Buyer's Disclosure Schedule
Schedule 2.4.3(ii) - Kentucky Assets Sold and/or
Contemplated to be Sold
Schedule 2.4.3(iii) - List of Kentucky Property, Plant
and Equipment
Schedule 8.3 - Guaranteed Obligations
Exhibit 3.2.2 - Form of Escrow Agreement
Exhibit 3.2.9 - Form of Opinion of ICP's Counsel
Exhibit 3.2.10 - Form of Opinion of CHL's Counsel
Exhibit 3.2.11 - Form of Opinion of the Company's Counsel
Exhibit 3.3.6 - Form of Opinion of Buyer's Counsel
Exhibit 9.1.11 - Form of Mutual Release and Separation
Agreement
1.5 ACCOUNTING PRINCIPLES
All references, if any, to generally accepted accounting principles
means to GAAP and all accounting terms, if any, not otherwise defined in this
Agreement have the meanings assigned to them in accordance with GAAP.
10 - STOCK PURCHASE AGREEMENT
<PAGE> 16
ARTICLE 2
SALE AND PURCHASE OF SHARES AND
PURCHASED NET INTERCOMPANY INDEBTEDNESS;
PURCHASE PRICE ADJUSTMENT;
PAYMENT OF THE PURCHASE PRICE
2.1 SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, on the Closing
Date, (i) CHL shall sell the Shares to Buyer and Buyer shall purchase the Shares
from CHL, and (ii) CHL shall sell the Purchased Net Intercompany Indebtedness to
Buyer, and Buyer shall purchase from CHL the Purchased Net Intercompany
Indebtedness.
2.2 PURCHASE PRICE
The term the "Purchase Price" means $4,478,000 plus the amount of the
Purchased Net Intercompany Indebtedness. The Purchase Price allocated to the
Shares shall be subject to adjustment by the Purchase Price Adjustment, if any.
2.3 PHYSICAL INVENTORY; AUDIT; CLOSING BALANCE SHEET
2.3.1 There shall be conducted by Seller and observed by Seller's
Accountants, Buyer and Buyer's Accountants a physical taking of the Company's
and Thompson Sub's inventory commencing at 8:00 A.M., local time, on the day
after the day in which the Effective Time occurs, at all of the Company's and
Thompson Sub's facilities, wherever located. With respect to any inventory of
the Company and Thompson Sub located at any premises not owned or leased by
either of them, Seller or Seller's Accountants shall obtain from an appropriate
representative of each Person who is in possession of any such off-site
inventory, written certification as to the amount of such off-site inventory as
of such date. The valuation of inventory will be computed by Seller's
Accountants in accordance with GAAP and with the practices and procedures and
other methods (including, without limitation, the method of computing overhead
and other indirect expenses to be applied to inventory) used in computing the
value of inventory for purposes of preparation of the Consolidated Financial
Statements (except to the extent inconsistent with GAAP).
2.3.2 As promptly as possible after the Closing, Seller shall cause
Seller's Accountants to conduct an audit (the "Audit") of the consolidated
balance sheet (the "Closing Balance Sheet") for the Consolidated Group, which
Closing Balance Sheet shall be prepared as of the Effective Time in accordance
with GAAP and on the assumption that the Company will carry on its business in
the ordinary course consistent with past practice, provided, however, that such
assumption shall in no way restrict Buyer or the Company in the operation of the
Company's business. For purposes of the Audit, the aggregate "materiality" level
shall be $200,000. Notwithstanding any materiality level, any and all
adjustments identified as a result of the Audit shall be recorded and reflected
in the Closing Balance Sheet.
11 - STOCK PURCHASE AGREEMENT
<PAGE> 17
2.3.3 Buyer shall pay Seller's Accountants for all expenses and fees of
Seller's Accountants in connection with the conduct of the physical inventory
and the Audit pursuant to this Section 2.3, and these expenses and fees shall
not be reflected in the calculation of Equity for the Closing Balance Sheet.
2.3.4 As promptly as reasonably practicable and, in any event, not
later than thirty (30) days after the Closing Date, the Company will deliver to
the Seller and Seller's Accountants a draft of the Closing Balance Sheet. As
promptly as possible thereafter and, in any event, not later than fifty (50)
days after the Closing Date Seller shall deliver to Buyer the Closing Balance
Sheet, together with the Seller's Accountants' report. The management
representations made by Seller in connection with the Audit shall by this
reference be deemed to have also been made to Buyer and are incorporated into
and made a part of this Agreement. The Closing Balance Sheet shall be
accompanied by a written representation of Seller that, to the Knowledge of ICP
and CHL, there is no basis for any liability or obligation (absolute, accrued,
contingent or otherwise) which is of a type that should be reflected in a
balance sheet prepared in accordance with GAAP and which is not reflected on the
Closing Balance Sheet. If Buyer does not object in writing to the Closing
Balance Sheet within ten (10) days after delivery to Buyer, such Closing Balance
Sheet shall automatically become final and conclusive for purposes of
calculation of the Purchase Price Adjustment; any such written objection (the
"Objection Notice") shall set out the reasons for Buyer's objection, the amount
in dispute (if determinable), and the basis for the calculation of such amount
(if determinable). In the event that Buyer properly objects in writing to the
Closing Balance Sheet within said 10-day review period, Seller and Buyer shall
promptly meet and endeavor to reach agreement as to the content of the Closing
Balance Sheet for purposes of calculation of the Purchase Price Adjustment. If
Seller and Buyer agree in writing on the content of the Closing Balance Sheet,
such Closing Balance Sheet shall become final and conclusive for purposes of
calculation of the Purchase Price Adjustment.
2.3.5 If Buyer and Seller are unable to settle any dispute with respect
to the Closing Balance Sheet within ten (10) days after the delivery by Buyer to
Seller of the Objection Notice, the dispute shall be referred to arbitration by
a single arbitrator, if such parties can agree upon one arbitrator, or otherwise
by three arbitrators, of whom one shall be appointed by Buyer and one shall be
appointed by Seller and the third shall be chosen by the first two named
arbitrators. The arbitration and the appointment of the arbitrator shall, except
to the extent provided for in this Section, be conducted in Denver, Colorado in
accordance with the Colorado Uniform Arbitration Act of 1975, C.R.S. 13.22-201,
et. seq. Buyer and Seller shall cooperate in completing any arbitration as
expeditiously as possible and the arbitrators may hire such experts as may
appear to be appropriate. If a single arbitrator is used, all of the costs and
expenses of the arbitration shall be borne equally by Buyer and Seller or in
such other manner as the arbitrator may determine to be appropriate. If three
arbitrators are used, the costs and expenses of the third arbitrator and any
experts engaged by such arbitrator shall be borne equally by Buyer and Seller
and each such party shall pay the costs and expenses of the arbitrator appointed
by it. Each arbitrator shall be an audit partner with a "Big Six" certified
public accounting firm other than Seller's Accountants or Buyer's Accountants.
Arbitration under this Section 2.3 shall be in substitution for and precludes
the bringing of any Proceeding in any court in connection with any objection
made by Buyer pursuant to this Section.
12 - STOCK PURCHASE AGREEMENT
<PAGE> 18
2.3.6 The determination of the arbitrator(s) shall be made within
thirty (30) days after the date on which the dispute was referred to arbitration
and the determination of the arbitrator(s) shall be final and binding on all
parties. The Closing Balance Sheet and the Purchase Price shall be adjusted in
accordance with the determination of the arbitrator(s).
2.3.7 In addition to other adjustments to the Closing Balance Sheet
made pursuant to this Section 2.3, subject to Section 2.4.3(iv)(2), the parties
agree that the Closing Balance Sheet shall be adjusted by Sellers' Accountants
upon the reasonable request of Buyer provided that the adjustment is consistent
with GAAP and does not have an adverse effect on Seller.
2.4 PURCHASE PRICE ADJUSTMENT
2.4.1 The Purchase Price set out in Section 2.2 shall be increased or
decreased (the "Purchase Price Adjustment") on a dollar-for-dollar basis by an
amount equal to the increase or decrease, if any, in Equity from December 31,
1995 (as reflected in the 1995 Financial Statements) to the Effective Time (as
reflected in the Closing Balance Sheet).
2.4.2 Subject to Section 2.4.3 (ii) and (iii) below, the term "Equity"
means the sum of the following, in each case determined as of the relevant date
on a consolidated basis for the Consolidated Group:
(i) Shareholders' equity, determined in accordance
with GAAP, plus
(ii) Net Intercompany Indebtedness other than the
Purchased Net Intercompany Indebtedness.
2.4.3 The parties further agree that:
(i) "Equity" as of December 31, 1995 based upon the
1995 Financial Statements was $8,863,000, consisting of $2,274,000 in
shareholders' equity and $6,589,000 in Net Intercompany Indebtedness;
(ii) Any change in "Equity" resulting from the sale
or contemplated sale of the assets of Thompson Sub as described in
Schedule 2.4.3(ii) shall be disregarded in determining the Purchase
Price Adjustment; and
(iii) Any change in "Equity" resulting from
write-downs with respect to property, plant and equipment located at
Thompson Sub's Princeton, Kentucky facility, consisting of the land,
buildings, tape coating line, propane tank line and other property,
plant and equipment located at such facility, all as set forth in
Schedule 2.4.3(iii), shall be disregarded in determining the Purchase
Price Adjustment.
13 - STOCK PURCHASE AGREEMENT
<PAGE> 19
(iv) Any change in Equity from December 31, 1995 to
the Effective Time, resulting from any of the following shall be
disregarded in determining the Purchase Price Adjustment:
(1) The amortization of the deferred
financing fee for the Congress Financial Corporation credit facilities.
(2) Any change in Equity resulting from an
adjustment to the Closing Balance Sheet requested by Buyer pursuant to
Section 2.3.7.
(3) Any increases in the recorded value of
any intangible asset.
2.4.4 Notwithstanding Section 2.3.2, the Purchase Price shall not be
increased by the amount of any net tax asset recorded on the Closing Balance
Sheet or by the amount of any tax benefits of Losses or expenses suffered or
incurred by a Member of the Consolidated Group.
2.5 PAYMENTS BY BUYER
Buyer shall pay the Purchase Price and the Purchase Price Adjustment as
follows:
2.5.1 On the Closing Date, Buyer shall pay to Seller an amount equal to
the Purchase Price minus the sum of (i) $1,500,000 and (ii) the Escrow Funds,
(the "Closing Date Payment"). The Closing Date Payment shall be paid by wire
transfer to an account designated by Seller to Buyer in writing not less than
three (3) days prior to the Closing Date.
2.5.2 On the Closing Date, Buyer shall deposit the Escrow Funds with
the Escrow Agent to be held and disbursed pursuant to the terms of the Escrow
Agreement.
2.5.3 Within five (5) days after the completion of the Closing Balance
Sheet, Seller or Buyer, as the case may be, shall pay to the other the amount by
which the Purchase Price, as adjusted by the Purchase Price Adjustment, is
greater or less than the sum of the Closing Date Payment and the Escrow Funds.
If the Purchase Price, as adjusted by the Purchase Price Adjustment, is greater
than the sum of the Closing Date Payment and the Escrow Funds, Buyer shall pay
such difference to Seller, with interest from the Closing Date at the rate of
eight and one-quarter percent (8.25%) per annum, (without recourse to the Escrow
Funds) by wire transfer to an account designated by Seller to Buyer in writing,
on or before the Closing Date. If the Purchase Price, as adjusted by the
Purchase Price Adjustment, is less than the sum of the Closing Date Payment and
the Escrow Funds, Seller shall pay such difference to Buyer, with interest from
the Closing Date at the rate of eight and one-quarter percent (8.25%) per annum,
by wire transfer to an account designated by Buyer to Seller in writing on or
before the Closing Date.
14 - STOCK PURCHASE AGREEMENT
<PAGE> 20
ARTICLE 3
CLOSING
3.1 CLOSING OF SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, the closing of
the sale and purchase of the Shares and the Purchased Net Intercompany
Indebtedness pursuant to Article 2 hereof (the "Closing") shall take place at
the Company's offices in Denver, Colorado, at 8:00 a.m. on the date three (3)
business days following the satisfaction of all of the conditions set forth in
Article 9, or such earlier or later date as the parties may mutually agree upon
in writing (the "Closing Date"). Closing shall be effective as of 11:59 p.m., on
the Closing Date (the "Effective Time").
3.2 DELIVERIES BY SELLER AND THE COMPANY
At Closing, Seller and the Company shall, as applicable, deliver to
Buyer (and in the case of the Escrow Agreement referenced below, to the Escrow
Agent) the following:
3.2.1 The certificate or certificates representing the Shares, duly
endorsed in blank or with duly executed stock powers attached;
3.2.2 Duly executed originals or counterparts of an Escrow Agreement in
substantially the form set forth in Exhibit 3.2.2 (the "Escrow Agreement");
3.2.3 ICP's Bring-Down Certificate;
3.2.4 CHL's Bring-Down Certificate;
3.2.5 The Company's Bring-Down Certificate;
3.2.6 A certified copy of the resolutions duly adopted by the Board of
Directors, (or a committee thereof) of ICP authorizing the Transaction, and in
the case of a resolution adopted by a committee of the Board of Directors, a
certified copy of the resolution(s) duly adopted by the Board of Directors of
ICP appointing such committee, naming its members, and duly authorizing such
committee;
3.2.7 A certified copy of the resolutions duly adopted by the Board of
Directors of CHL authorizing the Transaction;
3.2.8 A certified copy of the resolution duly adopted by the Board of
Directors of the Company authorizing the Transaction;
15 - STOCK PURCHASE AGREEMENT
<PAGE> 21
3.2.9 An opinion of Osler, Hoskin & Harcourt, counsel for ICP, dated as
of the Closing Date, to the effect and substantially in the form set forth in
Exhibit 3.2.9;
3.2.10 An opinion of Lichtenfels, Pansing & Miller, P.C., counsel for
CHL, dated as of the Closing Date, to the effect and substantially in the form
set forth in Exhibit 3.2.10;
3.2.11 An opinion of Lichtenfels, Pansing & Miller, P.C., counsel for
the Company, dated as of the Closing Date, to the effect and substantially in
the form set forth in Exhibit 3.2.11;
3.2.12 Good standing certificates as of a date not more than five (5)
days prior to the Closing Date issued by the Secretary of State (or other
appropriate Governmental Authority) of the state of incorporation of each Member
of the Consolidated Group, and of each state in which each Member of the
Consolidated Group is qualified to do business;
3.2.13 An affidavit executed by CHL to the effect that CHL is not a
"foreign person" within the meaning of Section 1445 of the Code;
3.2.14 The original Corporate Records of each Member of the
Consolidated Group; and
3.2.15 Such other agreements and documents, Buyer's receipt of which is
specified in Article 9 as a condition to Buyer's closing obligations, and such
other certificates and instruments as Buyer may reasonably request.
3.3 DELIVERIES BY BUYER
At the Closing, Buyer shall deliver the following:
3.3.1 To Seller, the amount due Seller in accordance with Section
2.5.1;
3.3.2 To the Escrow Agent, the Escrow Funds due the Escrow Agent in
accordance with Section 2.5.2;
3.3.3 To Seller and the Escrow Agent, duly executed originals or
counterparts of the Escrow Agreement;
3.3.4 To Seller, Buyer's Bring-Down Certificate;
3.3.5 To Seller, a certified copy of the resolutions duly adopted by
the Board of Directors of Buyer authorizing the Transaction;
16 - STOCK PURCHASE AGREEMENT
<PAGE> 22
3.3.6 To Seller, an opinion of Ater Wynne Hewitt Dodson & Skerritt,
counsel for Buyer, dated as of the Closing Date, to the effect and substantially
in the form set forth in Exhibit 3.3.6; and
3.3.7 To Seller, such agreements and documents, the delivery of which
is specified in Article 9 as a condition to Seller's and the Company's closing
obligations, and such other certificates and instruments as Seller may
reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES ABOUT ICP AND CHL
Seller represents and warrants to Buyer that, except as set forth in
Seller's Disclosure Schedule:
4.1 ORGANIZATION AND QUALIFICATION
ICP is a corporation duly organized, validly existing and in good
standing under the laws of Canada and has the corporate power to carry on its
business as it is now being conducted. CHL is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has the
corporate power to carry on its business as it is now being conducted.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT
4.2.1 Each of ICP and CHL has the corporate power to enter into this
Agreement and to carry out its obligations hereunder.
4.2.2 The Transaction has been duly authorized by the Board of
Directors of ICP and the Board of Directors of CHL. No other corporate
proceedings on the part of either ICP or CHL are necessary to authorize the
Transaction.
4.2.3 This Agreement constitutes a valid and binding obligation of each
of ICP and CHL, enforceable against each of them in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court in which any such Proceeding therefor may
be brought.
4.2.4 Neither ICP nor CHL is subject to or obligated under (i) any
charter or bylaw, or (ii) any indenture, loan document provision or any other
contract, Permit, Order, lease, instrument, statute, law, ordinance, rule or
regulation applicable to either ICP or CHL or their respective properties or
assets which would be breached or violated, or under which
17 - STOCK PURCHASE AGREEMENT
<PAGE> 23
there would be a default (with or without notice or lapse of time, or both), as
a result of any aspect of the Transaction.
4.2.5 No Permit or Consent is necessary or required for the
consummation by ICP or CHL of the Transaction.
4.3 NO BROKER, ETC.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission which may be claimed against the Company,
Thompson Sub or Buyer in connection with the Transaction based upon arrangements
made by or on behalf of Seller.
4.4 TITLE TO SHARES
CHL is, and on the Closing Date will be, the lawful owner of the
Shares. CHL has, and on the Closing Date CHL will have, good, valid and
marketable title to the Shares, free and clear of all Liens, with full right and
lawful authority to sell and transfer the Shares (subject to compliance with the
Securities Act).
4.5 TRANSFER OF TITLE
Upon payment for the Shares as provided in Section 2.5, Buyer will
acquire good, valid and marketable title thereto, free and clear of all Liens.
4.6 OTHER NEGOTIATIONS
Except for the Transaction, there is no existing commitment or offer by
Seller to sell or exchange all or any of the Shares or to sell, transfer or
assign all or any of the Purchased Net Intercompany Indebtedness or to merge or
consolidate the Company and/or its Subsidiaries with or into any other Person,
and there are no pending negotiations for any such sale, exchange, merger or
consolidation.
4.7 NO UNTRUE STATEMENT OR OMISSION
To Seller's Knowledge, no representation or warranty made by Seller
contained in this Agreement and no statement by Seller and/or an Authorized
Representative of ICP or CHL contained in any certificate, list, exhibit or
other instrument specified in this Agreement, including without limitation
Seller's Disclosure Schedule, contains (or will contain when made) any untrue
statement of a material fact or omits (or will omit when made) to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were (or will be made), not misleading.
18 - STOCK PURCHASE AGREEMENT
<PAGE> 24
4.8 RESPONSIBILITIES OF RELEVANT MANAGERS AND ADVISORS
The Relevant Managers and Advisors of ICP and CHL are, collectively,
the only representatives of ICP and/or CHL who have direct supervisory
responsibility within ICP and CHL for the activities of the Company and Thompson
Sub and for the matters relating to the Company and Thompson Sub addressed in
Article 5.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY
Seller and the Company (collectively, the "Warranting Parties") jointly and
severally represent and warrant to Buyer that, except as otherwise disclosed in
this Agreement, including the Company Disclosure Schedule:
5.1 ORGANIZATION AND QUALIFICATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado and has the corporate
power to carry on its business as it is now being conducted and currently
proposed to be conducted. The Company is qualified to conduct business and is in
good standing in the states, countries and territories listed in Section 5.1 of
the Company Disclosure Schedule. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect.
5.2 CAPITALIZATION
The authorized capital stock of the Company consists of 37,803 shares
of common stock, $10.00 par value, of which only the Shares are outstanding as
of the date hereof. The Shares were duly authorized, validly issued, fully paid
and nonassessable. No shares of the Company's capital stock are held in the
Company's treasury. As of the date hereof, there are no bonds, debentures, notes
or other evidences of indebtedness having the right to vote on any matters on
which the Company's shareholders may vote issued or outstanding. There are no
subscriptions, options, warrants, calls or other rights, agreements or
commitments outstanding which obligate the Company to issue, deliver, sell or
otherwise cause to become outstanding any of its capital stock or debt
securities, or which obligate the Company to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company.
19 - STOCK PURCHASE AGREEMENT
<PAGE> 25
5.3 SUBSIDIARIES
5.3.1 Except for Thompson Sub, the Company has no Subsidiaries, and has
no equity investment or other interest in and has not made advances to, any
Person. The Company Disclosure Schedule sets forth (a) the authorized capital
stock of Thompson Sub and the percentage of the outstanding capital stock of
Thompson Sub owned by the Company and any other Person owning stock in Thompson
Sub, and (b) the nature and amount of any such equity investment, other interest
or advance. All of such shares of capital stock owned by the Company have been
duly authorized and validly issued and are outstanding, fully paid and
nonassessable. The Company owns all such shares of capital stock of Thompson Sub
free and clear of all Liens.
5.3.2 Thompson Sub is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation as listed in
the Company Disclosure Schedule attached hereto, and has the full and
unrestricted power and authority, corporate and otherwise, to own, operate and
lease its properties and to carry on its business as currently conducted.
Thompson Sub is qualified to conduct business and is in good standing in the
states, countries and territories listed in Section 5.3 of the Company
Disclosure Schedule. Thompson Sub is not qualified to conduct business in any
other jurisdictions, and neither the nature of its business nor the character of
the properties owned or leased by it makes any such qualification necessary.
5.4 AUTHORITY RELATIVE TO THIS AGREEMENT
5.4.1 The Company has the corporate power to enter into this Agreement
and to carry out its obligations hereunder.
5.4.2 The Transaction has been duly authorized by the Company's Board
of Directors. No other corporate proceedings on the part of the Company are
necessary to authorize the Transaction.
5.4.3 This Agreement constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court in which any such Proceeding may be brought.
5.4.4 No Member of the Consolidated Group is subject to or obligated
under (i) any charter or bylaw, or (ii) indenture, loan document provision or
other Contract, Permit, or to the Warranting Parties' Knowledge, any Order,
statute, law, ordinance, rule or regulation applicable to any such Consolidated
Group Member or its properties or assets which would be breached or violated, or
under which there would be a default (with or without notice or lapse of time,
20 - STOCK PURCHASE AGREEMENT
<PAGE> 26
or both), or under which there would arise a right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit, as a result
of any aspect of the Transaction.
5.4.5 No Permit or Consent is necessary or required for the
consummation by the Company of the Transaction.
5.5 FINANCIAL STATEMENTS
5.5.1 The Company has previously furnished Buyer with true and complete
copies of the (i) consolidated audited balance sheets of the Consolidated Group
as of December 31, 1991, 1992, 1993 and 1994; (ii) related consolidated audited
statements of income, stockholders' equity and cash flows for the periods ending
December 31, 1991, 1992, 1993 and 1994 (including all audit opinions and all
notes accompanying such statements); (iii) the 1995 Financial Statements; and
(iv) the Interim Financial Statements for January 31, 1996, February 29, 1996,
and March 31, 1996. As used herein, "Consolidated Financial Statements" means
(a) the consolidated audited balance sheet of the Consolidated Group as of, and
the related consolidated statements of income, stockholders' equity and cash
flows for the period ending, December 31, 1994; (b) the 1995 Financial
Statements; and (c) the Interim Financial Statements.
5.5.2 The Consolidated Financial Statements are in accordance with the
books and records of the Members of the Consolidated Group and fairly present,
in all material respects, the consolidated financial position, results of
operations and cash flows of the Members of the Consolidated Group as of the
dates and for the periods indicated, in each case in conformity with GAAP
consistently applied, except as otherwise indicated in such Consolidated
Financial Statements, and in the case of unaudited Consolidated Financial
Statements, subject to normal year-end adjustments, the absence of footnotes and
other disclosures associated with audited financial statements. The 1995
Financial Statements and the Interim Financial Statements accurately reflect,
consistent with past practice, the allocation of revenues and expenses between
the Company and Thompson Sub.
5.5.3 To the Warranting Parties' Knowledge, the Consolidated Group does
not have any liabilities or obligations (absolute, accrued, contingent or
otherwise), which are material to the Consolidated Group and which are not
disclosed or provided for in the Consolidated Financial Statements (including,
but not limited to, liabilities and obligations arising out of or relating to
the cessation of operations by the Company and Thompson Sub at their facilities
in Princeton, Kentucky), except: (i) liabilities and obligations incurred
between March 31, 1996 and the date hereof in the ordinary course of the
business of the Company, consistent with past practice, (ii) in the case of the
Interim Financial Statements, items which would be the subject of normal
year-end adjustments, footnotes and disclosures associated with audited
financial statements, (iii) as otherwise disclosed in this Agreement, including
the Company Disclosure Schedule, and (iv) for liabilities and obligations which
would not be reflected in a Financial Statement prepared in accordance with
GAAP.
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5.5.4 The transactions which resulted in the incurrence of all
Intercompany Indebtedness incurred by the Company and/or Thompson Sub from
December 31, 1995 to the date of this Agreement occurred on the dates and were
in the amounts set forth in Schedule 5.5.4, and the proceeds of all such
Intercompany Indebtedness were applied in the manner set forth in Schedule
5.5.4.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since December 31, 1995, there has not been:
5.6.1 to the Warranting Parties' Knowledge, any material adverse change
in the business, financial condition, liabilities (net of any corresponding
increase in assets), or results of operations of the Consolidated Group or any
Member thereof, other than changes in laws or regulations of general
applicability;
5.6.2 to the Warranting Parties' Knowledge, any damage, destruction or
loss, whether covered by insurance or not, materially and adversely affecting
the assets, properties or businesses of the Consolidated Group or any Member
thereof;
5.6.3 any declaration, payment or setting aside for payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of any Member of the Consolidated Group or any direct or
indirect redemption, purchase or other acquisition of any shares of capital
stock of any Member of the Consolidated Group;
5.6.4 any increase in the compensation of or granting of bonuses
payable or to become payable by any Member of the Consolidated Group to any
officer or Employee whose 1995 calendar-year compensation (salary plus bonus)
exceeded $50,000, other than annual increases or bonuses consistent with the
past practices of the Company or the relevant Subsidiary or pursuant to the
terms and provisions of the Employee Contracts and not exceeding, for any such
officer or Employee, ten percent (10%) of such officer's or Employee's 1995
calendar-year compensation;
5.6.5 any sale or transfer by any Member of the Consolidated Group of
any material tangible or intangible asset, any granting of a Lien relating to
any such material asset, any lease of real property or equipment, or any
cancellation of any debt or claim, except in the ordinary course of business;
5.6.6 any material change in accounting methods or principles or any
increase in the value at which any of the assets of any Member of the
Consolidated Group are recorded in the Business Records of such Members of the
Consolidated Group (including, without limitation, any change in depreciation or
amortization policies or rates);
5.6.7 to the Warranting Parties' Knowledge, any amendment or
termination of any Contract or Permit to which any Member of the Consolidated
Group is a party, except in the ordinary course of business;
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5.6.8 any loan by any Member of the Consolidated Group to any Person or
guaranty by any Member of the Consolidated Group of any loan, other than
inter-company advances among Members of the Consolidated Group made in the
ordinary course of business and of an amount and frequency consistent with past
practices and which are reflected in the Consolidated Financial Statements;
5.6.9 any waiver or release of any material right or claim of any
Member of the Consolidated Group, except in the ordinary course of business;
5.6.10 to the Warranting Parties' Knowledge, any labor trouble or claim
of wrongful discharge or other unlawful labor practice or action involving any
Member of the Consolidated Group.
5.7 LITIGATION
There is no Proceeding Pending or, to the Warranting Parties'
Knowledge, threatened against any Member of the Consolidated Group which, either
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, nor is there any Order outstanding against any Member of the
Consolidated Group having, or which in the future could reasonably be expected
to have, either alone or in the aggregate, any Material Adverse Effect.
5.8 TAXES
5.8.1 At all relevant times since CHL acquired a controlling interest
in the Company (the "Acquisition Date"), each of the Company and Thompson Sub
has been a member of an Affiliated Group, whose common parent has been, and is,
CHL.
5.8.2 For all Tax Periods since the Acquisition Date, CHL has duly
filed with the proper Governmental Authority a consolidated federal income Tax
Return which includes the Company and Thompson Sub, and all such Tax Returns
were correct and complete in all material respects.
5.8.3 The Company has duly filed all Tax Returns (other than those
described in Section 5.8.1 and 5.8.2) with the proper Governmental Authority,
and all such Tax Returns were correct and complete in all material respects.
5.8.4 CHL, the Company and Thompson Sub have paid in full all Taxes
required to be paid by the Company and Thompson Sub for Tax Periods occurring
since January 1, 1986; no deficiencies in excess of $5,000 have been or, to the
Warranting Parties' Knowledge, will be assessed with respect thereto for any
such period through December 31, 1995; and no notice of deficiency or assessment
with respect to the Company or Thompson Sub has been received.
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5.8.5 All Taxes which the Company or Thompson Sub has been required to
collect or withhold have been duly collected or withheld and, to the extent
required when due, have been or will be duly paid to the proper Governmental
Authority.
5.8.6 None of the Tax Returns which include or should have included the
Company or Thompson Sub have been examined by any Governmental Authority; there
are no Pending audits of such Tax Returns; there are no claims which have been
or, to the Warranting Parties' Knowledge, may be asserted relating to such Tax
Returns; and no notice of audit or examination with respect to such Tax Returns
has been received.
5.8.7 The Company and Thompson Sub are parties to the Tax sharing
agreement set forth in the Company Disclosure Schedule but are not parties to
any other Tax sharing agreement or similar arrangement with any other party.
5.8.8 There are no federal, state, local or foreign Tax Liens upon any
of the properties or assets of the Company or Thompson Sub, and there are no
unpaid Taxes which are or could become a Lien on the properties or assets of the
Company or Thompson Sub, except for current Taxes not yet due and payable.
5.8.9 There have been no waivers or extensions of any statute of
limitations by the Company with respect to any Governmental Authority
responsible for assessing or collecting Taxes.
5.8.10 Correct and complete copies of all Tax Returns which include the
Company or Thompson Sub since January 1, 1986, which have been requested by
Buyer or any Authorized Representative have been provided to Buyer.
5.8.11 Neither CHL, the Company or Thompson Sub have agreed or been
required to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise, except for adjustments under Section
481(a) which have been fully recognized on or before the Closing Date.
5.8.12 Neither the Company nor Thompson Sub has participated in, or
will prior to Closing participate in, an international boycott within the
meaning of Section 999 of the Code.
5.8.13 Neither CHL, the Company or Thompson Sub is a foreign person as
defined in Section 1445 of the Code.
5.8.14 Neither the Company nor Thompson Sub has, and neither has had, a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
5.8.15 Neither the Company nor Thompson Sub has any income from any
joint venture, partnership or other arrangement or contract that could be
treated as a partnership for
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federal income Tax purposes, on which either of them would be required to report
and pay Taxes.
5.9 COMPLIANCE WITH PERMITS, APPLICABLE LAWS AND AGREEMENTS
5.9.1 To the Warranting Parties' Knowledge, each Member of the
Consolidated Group holds all Permits, the failure of which to hold would have a
Material Adverse Effect (the "Material Permits"). The Company Disclosure
Schedule sets forth a true and complete list of all Material Permits. Each
Member of the Consolidated Group is in compliance with the terms of the Material
Permits, except for such failures to comply which, individually or in the
aggregate, would not have a Material Adverse Effect.
5.9.2 To the Warranting Parties' Knowledge, the business of each Member
of the Consolidated Group is being conducted in compliance with all laws,
ordinances and regulations of all Governmental Authorities, except for possible
violations which individually or in the aggregate do not and would not have a
Material Adverse Effect.
5.9.3 To the Warranting Parties' Knowledge, no Member of the
Consolidated Group is in default (and not in a circumstance which, with notice
or lapse of time, or both, would constitute a default) under any agreement or
instrument to which such Member is a party, whether or not such default has been
waived, except for any such default which, alone or in the aggregate with other
such defaults, would not have a Material Adverse Effect.
5.9.4 The provisions of this Section shall not be construed or applied
to narrow or otherwise restrict the scope of any other representations and
warranties in this Article 5.
5.10 EMPLOYEE PLANS AND BENEFIT ARRANGEMENTS
5.10.1 The Company Disclosure Schedule sets forth a true and complete
list of all the following: (i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA (each an "Employee Plan"), and (ii) each other
plan, program, policy, contract or arrangement providing for bonuses, pensions,
deferred compensation, stock or stock-related awards, severance pay, salary
continuation or similar benefits, hospitalization, medical, dental or disability
benefits, life insurance or other employee benefits, or compensation to or for
any current or former officers, directors, employees, agents, or independent
contractors of any Member of the Consolidated Group ("Employees") or any
beneficiaries or dependents of any Employee, whether or not insured or funded,
(A) pursuant to which any Member of the Consolidated Group has any material
liability or (B) constituting an employment or severance agreement or
arrangement with any officer or director of any Member of the Consolidated Group
(each, a "Benefit Arrangement"). The Company has used its reasonable efforts to
provide to Buyer with respect to each Employee Plan and Benefit Arrangement: (i)
a true and complete copy of all written documents, including amendments,
comprising such Employee Plan or Benefit Arrangement or, if there is no such
written document, an accurate and complete description of such Employee Plan or
Benefit Arrangement; (ii) all Form 5500s or
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Form 5500-Cs (including all schedules thereto), if applicable; (iii) the most
recent financial statements and actuarial reports, if any; (iv) the summary plan
description currently in effect and all material modifications thereof, if any;
and (v) the most recent IRS determination letter, if any; and (vi) filings with
the Department of Labor, including, but not necessarily limited to, "top hat"
filings pursuant to Department of Labor Regulation Section 2520.104-23, if any.
Any such Employee Plans and Benefit Arrangements not so provided are not in the
aggregate material to any Member of the Consolidated Group.
5.10.2 (i) To the Warranting Parties' Knowledge, the Consolidated Group
has established and maintained in all material respects each Employee Plan and
Benefit Arrangement in accordance with its terms and in material compliance with
all applicable laws, including, but not limited to, ERISA and the Code; and (ii)
to the Warranting Parties' Knowledge, any third party trustee has complied in
all material respects in the maintenance of each Employee Plan and Benefit
Arrangement with all applicable laws and requirements. To the Warranting
Parties' Knowledge, no Member of the Consolidated Group nor any of its
Employees, nor any other disqualified Person or party-in-interest with respect
to any Employee Plan, has engaged directly or indirectly in any "prohibited
transaction," as such term is defined in Section 4975 of the Code or Section 406
of ERISA, with respect to which any Member of the Consolidated Group could have
or has any material liability.
5.10.3 The Consolidated Group has no Employee Plan that is subject to
Title IV of ERISA and has had no ERISA Affiliate at any time since the later of
the oldest Consolidated Group Member's inception or September 2, 1974.
5.10.4 There are no Pending or, to the Warranting Parties' Knowledge,
threatened Proceedings by any Employees or plan participants or the
beneficiaries, spouses or representatives of any of them, against any Employee
Plan or Benefit Arrangement, the assets held thereunder, the trustee of any such
assets, or any Member of the Consolidated Group relating to any of the Employee
Plans, other than ordinary and usual claims for benefits by participants or
beneficiaries. Furthermore, there are no Pending, or to the Warranting Parties'
Knowledge, threatened Proceedings by any Governmental Authority of or against
any Employee Plan or Benefit Arrangement, the trustee of any assets held
thereunder, or any Member of the Consolidated Group relating to any of the
Employee Plans or Benefit Arrangements.
5.10.5 No Employee Plan has been the subject of an IRS or Department of
Labor audit. There are no Pending Proceedings or, to the Warranting Parties'
Knowledge, threatened Proceedings in which the "qualified" status of any
Employee Plan is at issue and in which revocation of the determination letter
has been threatened. Each such Employee Plan has not been amended or operated,
since the receipt of the most recent determination letter, in a manner that
would materially adversely affect the "qualified" status of the Employee Plan.
No distributions have been made from any of the Employee Plans that would
violate in any material respect the restrictions under Treas. Reg. Section
1.401(a)(4)-5(b), and none will have been made by the Closing Date. To the
Warranting Parties' Knowledge, there has been no
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termination, partial or otherwise, as defined in Section 411(d) of the Code and
the regulations thereunder, of any Employee Plan.
5.10.6 Each Member of the Consolidated Group has made all required
contributions under each Employee Plan on a timely basis or, if not yet due,
adequate accruals therefore have been provided for in the Consolidated Financial
Statements.
5.10.7 The Transaction (either alone or together with any additional or
subsequent events) does not constitute an event under any Employee Plan, Benefit
Arrangement or individual Employee Contract, that may result in any payment
(whether of severance pay or otherwise), restriction or limitation upon the
assets of any Employee Plan or Benefit Agreement, acceleration of payment or
vesting, increase in benefits or compensation, or required funding, with respect
to any Employee, or the forgiveness of any loan or other commitment of any
Employee.
5.10.8 To the Warranting Parties' Knowledge, no amounts paid or payable
by any Member of the Consolidated Group to or with respect to any Employee will
fail to be deductible for federal income tax purposes by reason of Section 280G
of the Code.
5.10.9 No Employees and no beneficiaries or dependents of Employees are
or may become entitled under any Employee Plan or Benefit Arrangement to
post-employment welfare benefits of any kind, including, without limitation,
death or medical benefits, other than coverage mandated by Section 4980B of the
Code.
5.10.10 The Employee Plans that are group health plans (as defined for
the purposes of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA, and all regulations thereunder, (such provisions of law and regulations
are hereinafter referred to as "COBRA")) have complied in all material respects
at all times during the past three (3) years with requirements of COBRA to
provide health care continuation coverage to qualified beneficiaries who have
elected, or may elect to have, such coverage. The Consolidated Group Members and
their agents who administer any of the Employee Plans or Benefit Arrangements,
have complied in all material respects at all times during the past three (3)
years and will continue to comply in all material respects through the Effective
Time, with the notification and written notice requirements of COBRA. There are
no Pending or, to the Warranting Parties' Knowledge, threatened Proceedings by
any current Employee, former Employee, participants or by the beneficiary,
dependent or representative of any such person, involving the failure of any
Employee Plan or Benefit Arrangement or of any other group health plan ever
maintained by any Member of the Consolidated Group to comply with the health
care continuation coverage requirements of COBRA.
5.10.11 There are no agreements with, or Pending petitions for
recognition of, a labor union or an association as the exclusive bargaining
agent for any of the Employees of any Member of the Consolidated Group; no such
petitions have been pending at any time within two years of the date of this
Agreement, and, to the Warranting Parties' Knowledge, there has not
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been any organizing effort by any union or other group seeking to represent any
Employees of any Member of the Consolidated Group as their exclusive bargaining
agent at any time within two years of the date of this Agreement. There are no
labor strikes, work stoppages or other labor troubles, other than routine
grievance matters, now Pending or, to the Warranting Parties' Knowledge,
threatened against any Member of the Consolidated Group.
5.11 EMPLOYEE CONTRACTS AND NON-DISCLOSURE AGREEMENTS
The Company Disclosure Schedules contains a true complete and correct
list of all written Employee Contracts and a summary of all oral Employee
Contracts of which the Warranting Parties have Knowledge. All of the Employees
are "at-will" employees, and no Employees have oral or written employment
agreements with any Member of the Consolidated Group.
5.12 REAL PROPERTY
5.12.1 The Company Disclosure Schedule contains a true, complete and
correct list of the Real Property. As applicable (i) each Member of the
Consolidated Group has title to the Real Property currently owned by it, (ii)
each Member of the Consolidated Group enjoys peaceful and undisturbed possession
of the Real Property currently leased by it, (iii) the interests of the Members
of the Consolidated Group in the Real Property currently owned or leased by any
Member of the Consolidated Group ("Current Real Property") are not subject to
any commitment for sale or use by any Person other than the Consolidated Group,
(iv) the interests of the Members of the Consolidated Group in the Current Real
Property are not subject to any Lien which in any material respect interferes
with or impairs the value, transferability or present and continued use thereof
in the usual and normal conduct of each such Member's business, (v) to the
Warranting Parties' Knowledge, the Consolidated Group Members' use of the
Current Real Property is in compliance in all material respects with all
applicable zoning laws, and (vi) to the Warranting Parties' Knowledge, the
Current Real Property, and each user thereof, is in compliance in all material
respects with all applicable building code and other laws (other than zoning
laws).
5.12.2 There are no condemnation or eminent domain Proceedings Pending
or, to the Knowledge of the Warranting Parties, contemplated or threatened,
against the Current Real Property or any part thereof, and the Warranting
Parties have no Knowledge of any intention of any Governmental Authority to take
or use the Current Real Property or any part thereof. There are no existing or,
to the Warranting Parties' Knowledge, contemplated or threatened, general or
special assessments affecting the Consolidated Group Members' interests in the
Current Real Property or any portion thereof. No Member of the Consolidated
Group has received notice of any Pending or threatened Proceeding before any
Governmental Authority which relates to the ownership, maintenance, use or
operation of such Member's interest in the Real Property, nor do the Warranting
Parties have Knowledge of any fact which might give rise to any such Proceeding.
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5.12.3 The buildings and improvements on the Current Real Property
(including, without limitation, the heating, air conditioning, mechanical,
electrical and other systems used in connection therewith) are in a reasonable
state of repair. The only repairs and/or replacements of such buildings and
improvements currently planned or to the Warranting Parties' Knowledge, required
in order to keep such buildings and improvements in a reasonable state of repair
are those, the expense of which is included in the capital budget of the
Consolidated Group for 1996, which budget is included in the Company Disclosure
Schedule.
5.12.4 To the Warranting Parties' Knowledge, the buildings, structures
and improvements on each parcel of the Current Real Property lie entirely within
the boundaries of such Real Property as specified in the applicable legal
description set forth in the Company Disclosure Schedule, and no structures of
any kind encroach on such Real Property.
5.12.5 To the Warranting Parties' Knowledge, each parcel of the Current
Real Property has direct and unobstructed access to adequate electric, gas,
water, sewer and telephone lines.
5.13 TANGIBLE PERSONAL PROPERTY
5.13.1 The Company Disclosure Schedule lists, by each Member of the
Consolidated Group, each item of Tangible Personal Property owned by such Member
having a net book value in excess of $10,000, and the Company Disclosure
Schedule lists, by each Member of the Consolidated Group, each item of Tangible
Personal Property leased by such Member (other than individual leases of office
equipment having an annual rental of less than $10,000).
5.13.2 The Tangible Personal Property constitutes substantially all
tangible personal property necessary to conduct the business of the Members of
the Consolidated Group. All of the Tangible Personal Property is located at the
Current Real Property and there is no Tangible Personal Property located at any
of the Current Real Property which is not owned or leased by a Member of the
Consolidated Group.
5.13.3 To the Warranting Parties' Knowledge, the Tangible Personal
Property is, in all material respects, in reasonable working order and adequate
for its intended use, ordinary wear and tear excepted. The only repairs and/or
replacements of Tangible Personal Property currently planned or, to the
Warranting Parties' Knowledge, required in order to keep the Tangible Personal
Property in a reasonable state of repair are those, the expense of which is
reflected in the capital budget of the Consolidated Group for 1996, which budget
is included in the Company Disclosure Schedule.
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5.14 INTANGIBLE PROPERTY
5.14.1 The Company Disclosure Schedule contains a true, correct and
complete list, according to each Member of the Consolidated Group, of: (i)
United States federal, state and foreign grants, registrations and applications
existing or outstanding with respect to the Intangible Property owned by the
Member, including, without limitation, all applicable grants, registration,
application or serial numbers and other filing or recording information and all
expiration dates pertaining thereto (the "Registered Intangible Property"); (ii)
all license agreements relating to Intangible Property to which any Member is a
party; and (iii) all other trademarks, tradenames and service marks which
constitute Intangible Property.
5.14.2 (i) The Registered Intangible Property is owned exclusively by
the Consolidated Group and, to the Warranting Parties' Knowledge, is used
exclusively by one or more Members of the Consolidated Group, (ii) the
Registered Intangible Property is free and clear of all Liens other than Liens
arising in the ordinary course of business, (iii) there is no Pending or, to the
Warranting Parties' Knowledge, threatened Proceeding by or before any
Governmental Authority alleging, any infringement or other violation of any
right of any third Person in or to the Intangible Property, (iv) there is not
now, and there has not been during the past five years, any asserted claim of
infringement or other violation of any other intellectual property right of any
third Person resulting from the conduct of any Member of the Consolidated Group,
and the Warranting Parties' Knowledge that such infringement or violation exists
or will be alleged, (v) the Warranting Parties' Knowledge of activity by any
third Person which does or might constitute an infringement or other violation
of the Company's rights in or to any Intangible Property, (vi) no Member of the
Consolidated Group has entered into any license, consent, indemnification,
forbearance to sue, settlement agreement or cross-licensing arrangement with any
Person relating to the Intangible Property or any intellectual property right of
any third Person, (vii) there are no agreements relating to and materially
affecting any Intangible Property of any Member of the Consolidated Group or the
use or ownership thereof, including, without limitation, license agreements,
confidentiality and non-disclosure agreements, assignments or agreements to
assign, development agreements, settlement agreements and other related
agreements; and (viii) the Warranting Parties are unaware of any information
which would or might materially adversely affect any of the Intangible Property
or render any of the Intangible Property invalid or unenforceable.
5.14.3 The Intangible Property identified in the Company Disclosure
Schedule constitutes all intangible property necessary and sufficient to operate
the business of each Member of the Consolidated Group as conducted during the
past three (3) years. The consummation of the transactions contemplated hereby
will not result in the loss or impairment of any Consolidated Group Member's
rights in the Intangible Property. No shareholder or Employee of any Member of
the Consolidated Group owns, directly or indirectly, in whole or in part, any
rights in any of the Intangible Property. Each Member of the Consolidated Group
has the right to use its corporate name and, each tradename or assumed name
under which it conducts its business. No Person has asserted to any Member of
the Consolidated Group or, to the Warranting Parties' Knowledge, threatened to
assert to any Member of the Consolidated
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<PAGE> 36
Group, any claim or made any demand to the right to any such Member's corporate
name or any such tradename or assumed name or the right to use any such name,
and no Proceeding is pending or threatened, which challenges the right of such
member with respect thereto. No other Person is using any such names as a
corporate name, tradename or assumed name.
5.15 TITLE TO ASSETS
Each Member of the Consolidated Group has good and marketable title to
all of its assets as described in the most recent balance sheet contained in the
Consolidated Financial Statements and in the Company Disclosure Schedule, free
and clear of all Liens, except as otherwise set forth in the Company Disclosure
Schedule and other than the following: (a) mechanic's, materialmen's, and
similar Liens, (b) Liens for taxes not yet due and payable or for taxes that the
Company or Thompson Sub is contesting in good faith or through appropriate
proceedings, (c) purchase money Liens and Liens securing rental payments under
capital lease arrangements, and (d) other Liens arising in the ordinary course
of business and not incurred in connection with the borrowing of money. The
Warranting Parties have no Knowledge of the existence of any Liens of the type
described in clauses (a), (b), (c) and (d) of the preceding sentence.
5.16 INVENTORIES AND RECEIVABLES
5.16.1 For purposes of this Section 5.16 only, the term "Consolidated
Financial Statements" does not include the December 31, 1994 Consolidated
Financial Statements of the Company and Thompson Sub referenced in Section
5.5.1. All inventories, as presented in the Consolidated Financial Statements
and the inventories acquired by each Member of the Consolidated Group subsequent
to the date of the most recent Consolidated Financial Statement, consist of
items of a quality and quantity usable and salable in the normal course of each
such Member's business, except as disclosed in or provided for in the
Consolidated Financial Statements. The values of obsolete materials and
materials below standard quality have been written down on the Consolidated
Financial Statements to realizable market value, or adequate reserves have been
provided therefor, in accordance with GAAP. All items included in such
inventories are owned by each such Consolidated Group Member, except for such
items which have been sold subsequent to the date of the most recent
Consolidated Financial Statement in the ordinary course of business, for all of
which either the purchaser has made full payment of the sales price or the
purchaser is obligated to make full payment of the sales price and such
obligation is an asset of the Consolidated Group in accordance with GAAP. All
inventories of raw materials and finished goods are presented in the
Consolidated Financial Statements and are carried on the books at the lower of
cost (weighted average method), or market.
5.16.2 All receivables of the Members of the Consolidated Group shown
on the Consolidated Financial Statements are carried at values determined in
accordance with GAAP consistently applied. The Members of the Consolidated Group
have established reserves for doubtful accounts in accordance with GAAP; all
such reserves are fully reflected in the Consolidated Financial Statements.
Except as disclosed in the Consolidated Financial Statements, (i) none of the
receivables of the Consolidated Group is subject to any stated claim
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of offset, recoupment, setoff or counterclaim, and the Warranting Parties have
no Knowledge of any facts or circumstances that would give rise to any such
claim, (ii) no receivables are contingent upon the performance by any Member of
the Consolidated Group of any obligation or contract, and (iii) no agreement for
deduction or discount has been made with respect to any of such receivables.
5.16.3 No agreement or commitment has been made to any customer by any
Member of the Consolidated Group to provide concessions with respect to price or
payment terms with respect to any sale or sales to such customer in the future.
5.17 CONTRACTS
5.17.1 The Company Disclosure Schedule contains a true and correct list
of the Contracts. True and correct copies of all of the Contracts have been
delivered to Buyer. To the Warranting Parties' Knowledge, each of the Contracts
is valid, binding and enforceable by each Member of the Consolidated Group which
is a party to such Contract in accordance with its terms. Each of the Contracts
was entered into in the ordinary course of business and is not subject to
termination except in accordance with its terms or except as provided by
applicable law.
5.17.2 To the Warranting Parties' Knowledge, each of the Contracts is
in full force and effect, all fees, rents, royalties and other payments due
thereunder are current, no Member of the Consolidated Group nor any other party
is in material default thereunder or in material breach thereof. To the
Warranting Parties' Knowledge, there exists no event or occurrence, condition or
act which constitutes or, with the giving of notice, the lapse of time or the
happening of any future event or condition, would become, a material default by
any Member of the Consolidated Group or any other party under any of the
Contracts. The Warranting Parties have no Knowledge of any threatened default
under any of the Contracts.
5.18 SUPPLIERS AND CUSTOMERS
To the Warranting Parties' Knowledge, no substantial supplier or
customer (who accounted for more than 5% of aggregate 1995 annual purchases or
more than 5% of aggregate 1995 annual revenues, as the case may be, of any
Consolidated Group Member) intends to terminate its relationship with such
Member; nor do any of the Warranting Parties have Knowledge that any material
problem or dispute with any supplier or customer exists.
5.19 PRODUCTS; PRODUCT WARRANTIES
5.19.1 A form of each product warranty relating to products
manufactured or sold by each Member of the Consolidated Group (other than
products manufactured and sold to original equipment manufacturers for which
negotiated product warranties may have been given) at any time during the
five-year period preceding the date of this Agreement is attached to or set
forth in the Company Disclosure Schedule.
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5.19.2 The Company Disclosure Schedule sets forth, by Consolidated
Group Member, a true and complete list, of (i) all products manufactured,
marketed or sold by the Consolidated Group that have been recalled or withdrawn
(whether voluntarily or otherwise) at any time during the past five (5) years
(for purposes of this paragraph, a product shall have been recalled or withdrawn
if all or a significant number of products in a product line were recalled or
withdrawn) and (ii) to the Warranting Parties' Knowledge, all Proceedings
(whether completed or pending) at any time during the past five (5) years
seeking the recall, withdrawal, suspension or seizure of any product sold by any
Consolidated Group Member.
5.19.3 The Warranting Parties have no Knowledge of any material defect
in design, materials, manufacture or otherwise in any products manufactured,
distributed or sold by any Consolidated Group Member during the past five (5)
years, or any defect in repair to, or replacement of, any such products, which
defect could give rise to any Material Adverse Effect.
5.19.4 Except as provided in any of the standard product warranties
described in this Section, no Member of Consolidated Group has sold any products
or services which are subject to an extended warranty of any such Member beyond
twelve (12) months and which warranty has not yet expired.
5.20 ENVIRONMENTAL MATTERS
5.20.1 To the Warranting Parties' Knowledge, each Member of the
Consolidated Group, and each of such Member's assets, properties and operations
are now and at all times have been in compliance in all material respects with
all applicable Environmental Laws, except for instances of non-compliance which
have been fully rectified or remediated. To the Warranting Parties' Knowledge,
there has been and is no Release or threatened Release of any Hazardous Material
at, on, under, in, to or from any of the Real Property which relates to any
Consolidated Group Member's operations and activities at the Real Property or
otherwise, except for such Releases which are in compliance in all material
respects with all applicable Environmental Laws and such Releases which were not
in compliance but have been fully rectified or remediated. No Member of the
Consolidated Group has received any notice of alleged, actual or potential
responsibility for, or any Proceeding regarding, the presence, Release or
threatened Release of any Hazardous Material at any location, whether at the
Real Property or otherwise, which Hazardous Materials were allegedly
manufactured, used, generated, processed, treated, stored, disposed or otherwise
handled at or transported from the Real Property or otherwise, except for
notices regarding Releases which have been fully rectified or remediated.
5.20.2 No Member of the Consolidated Group has received any notice of
any Proceeding by any Person alleging any actual or threatened injury or damage
to any Person, property, natural resource or the environment arising from or
relating to the presence, Release or threatened Release of any Hazardous
Materials at, on, under, in, to or from the Real Property or in connection with
any operations or activities thereat, or at, on, under, in, to or from any other
property, except for notices regarding Releases which have been fully rectified
or
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remediated. To the Knowledge of the Warranting Parties, neither the Real
Property nor any operations or activities thereat is or has been subject to any
Proceeding, Order or Lien relating to any applicable Environmental Laws, except
in respect of instances of non-compliance with applicable Environmental Laws
which have been fully rectified or remediated.
5.20.3 To the Knowledge of the Warranting Parties: (i) there are no
underground storage tanks presently located at the Real Property and there have
been no Releases of any Hazardous Materials from any underground storage tanks
or related piping at the Real Property, except for Releases which have been
fully rectified or remediated; (ii) there are no PCBs located at, on or in the
Real Property; and (iii) there is no asbestos or asbestos-containing material
located at, on or in the Real Property.
5.21 INTENTIONALLY OMITTED.
5.22 ABSENCE OF CERTAIN PAYMENTS
To the Warranting Parties' Knowledge, no Member of the Consolidated
Group nor any of its Employees or other Persons acting on behalf of any such
Member, or any Affiliate of any of the foregoing, have with respect to any
Consolidated Group Member's business, (i) engaged in any activity, prohibited by
the United States Foreign Corrupt Practices Act of 1977 or any other similar
law, regulation or Order of any Governmental Authority or (ii) without limiting
the generality of the preceding clause (i), used any corporate or other funds
for unlawful contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity to officials of any
Governmental Authority. To the Knowledge of the Warranting Parties, none of the
Members of the Consolidated Group or any of such Member's shareholders,
Employees or other Persons acting on behalf of any of them, or any Affiliate of
any of the foregoing, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
5.23 RECORDS
5.23.1 All Business Records of the Consolidated Group have been made
available to Buyer. Such Business Records fairly and correctly set out and
disclose in all material respects the financial position of the Consolidated
Group and all material financial transactions have been accurately recorded in
such Business Records. The Consolidated Group has taken all reasonable steps to
preserve and maintain its Business Records.
5.23.2 Complete and correct copies of the Corporate Records of each
Member of the Consolidated Group have been delivered to Buyer. The minutes of
each such Member contain a complete and accurate record of those meetings and
significant actions of shareholders and directors, and of any executive
committee or other committee of the shareholders or board of directors, for
which minutes were prepared or for which actions were approved by unanimous
written consent and for which no meetings were held. The stock records of each
Member of
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the Consolidated Group are complete and accurate and contain a complete and
accurate record of all share transactions for each such Member from the date of
its incorporation.
5.24 INSURANCE
5.24.1 The Company Disclosure Schedule contains a complete and accurate
list of (i) all current policies or binders of fire, product liability,
automobile liability, general liability, worker's compensation and other forms
of insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums, deductibles, whether
coverage is "occurrence" or "claims made" and a general description of the type
of coverage provided and policy exclusions) maintained by any Member of the
Consolidated Group and relating to each Consolidated Group Member's properties
and assets or personnel (collectively, the "Insurance") and (ii) all other
"occurrence" basis insurance policies maintained by any Member of the
Consolidated Group at any time during the past five (5) years with respect to
the business.
5.24.2 To the Warranting Parties' Knowledge, all of the Insurance is,
and from the date of this Agreement to the Effective Time will be, sufficient
for compliance in all material respects with all requirements of applicable law
and of all contracts to which the Members of the Consolidated Group are parties.
No Member of the Consolidated Group is in default in any material respect under
any of the Insurance, and no Member of the Consolidated Group has failed to give
any notice or to present any claim under any of the Insurance in a due and
timely fashion. To the Warranting Parties' Knowledge, there are no facts upon
which any insurer might be justified in reducing coverage or increasing premiums
more than is normal or customary on any of the existing Insurance. No notice of
cancellation, termination, reduction in coverage or increase in premium (other
than reductions in coverage or increases in premiums in the ordinary course) has
been received with respect to any of the Insurance, and all premiums with
respect to any of the Insurance have been, and will from the date of this
Agreement through the Closing Date be, timely paid.
5.24.3 No Member of the Consolidated Group has experienced claims in
excess of current Insurance coverage, and the Insurance is in full force and
effect and will be kept in full force and effect through the Closing Date.
Except as disclosed in this Agreement, including the Company's Disclosure
Schedule, under the terms of the Insurance, no carrier is allowed to impose
retrospective premiums or other charges. To the Warranting Parties' Knowledge,
there will be no retrospective insurance premiums or charges on or with respect
to any of the Insurance for any period or occurrence through the date of this
Agreement.
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5.25 BANK ACCOUNTS
The Company Disclosure Schedule contains (i) a true, complete and
correct list of all bank accounts and safe deposit boxes maintained by each
Member of the Consolidated Group and all persons entitled to draw thereon, to
withdraw therefrom or with access thereto, (ii) a description of all lock box
arrangements for each Member of the Consolidated Group, (iii) a true, complete
and correct list of all powers of attorney executed by each Member of the
Consolidated Group.
5.26 DIRECTORS, OFFICERS AND SALARIED EMPLOYEES
The Company Disclosure Schedule lists all directors, officers and
salaried employees of each Member of the Consolidated Group, showing their
names, positions, current annual base compensation, current fringe benefits and,
for the most recently completed fiscal year, bonuses.
5.27 NO BROKER, ETC.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission which may be claimed against the Company,
Thompson Sub or Buyer in connection with the Transaction based upon arrangements
made by or on behalf of any Member of the Consolidated Group.
5.28 OTHER NEGOTIATIONS
Except for the Transaction, there is no existing commitment or offer by
any Member of the Consolidated Group to sell all or a significant part of the
assets of any Member of the Consolidated Group, and there are no pending
negotiations for the sale of all or a substantial part of the assets of any
Member of the Consolidated Group.
5.29 NO BASIS FOR LIABILITIES NOT REFLECTED IN CONSOLIDATED FINANCIAL
STATEMENTS
To the Warranting Parties' Knowledge, there is no liability or
obligation of any Member of the Consolidated Group, whether absolute, accrued,
contingent or otherwise, which is or would have a Material Adverse Effect, not
reflected in the Consolidated Financial Statements or otherwise disclosed in the
Agreement.
5.30 NO UNTRUE STATEMENT OR OMISSION
To the Warranting Parties' Knowledge, no representation or warranty
made by the Company contained in this Agreement and no statement by the Company
and/or any Authorized Representatives of the Company contained in any
certificate, list, exhibit or other instrument specified in this Agreement,
including without limitation the Company Disclosure Schedule, contains (or will
contain when made) any untrue statement of a material fact or omits (or will
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omit when made) to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were (or will
be made), not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Seller and the Company that, except as
set forth in Buyer's Disclosure Schedule:
6.1 ORGANIZATION AND QUALIFICATION
Buyer is a corporation duly organized and validly existing under the
laws of the State of Oregon and has the corporate power to carry on its business
as it is now being conducted.
6.2 AUTHORITY RELATIVE TO THIS AGREEMENT
6.2.1 Buyer has the corporate power to enter into this Agreement and to
carry out its obligations hereunder.
6.2.2 The Transaction has been duly authorized by Buyer's Board of
Directors. No other corporate proceedings on the part of Buyer are necessary to
authorize the Transaction.
6.2.3 This Agreement constitutes a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court in which any such Proceeding may be brought.
6.2.4 Buyer is not subject to or obligated under (i) any charter or
bylaw, or (ii) any indenture, loan document provision or any other contract,
lease, instrument, Permit, or to Buyer's Knowledge, any Order, statute, law,
ordinance, rule or regulation applicable to Buyer or its properties or assets
which would be breached or violated, or under which there would be a default
(with or without notice or lapse of time, or both) as a result of any aspect of
the Transaction.
6.2.5 No Permit or Consent is necessary or required for the
consummation by Buyer of the Transaction.
6.3 NO BROKER, ETC.
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No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission which may be claimed against Seller or the
Company in connection with the Transaction based upon arrangements made by or on
behalf of Buyer.
6.4 SUFFICIENT FUNDS AVAILABLE
Buyer has available to it all funds necessary to satisfy its
obligations pursuant to this Agreement.
6.5 SECURITIES ACT REPRESENTATIONS
Buyer (i) understands that the Shares have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Shares
solely for its own account for investment purposes, and not with a view to the
distribution thereof, (iii) is a sophisticated investor with knowledge and
experience in business and financial matters, (iv) has received certain
information concerning the Company and Thompson Sub and has had the opportunity
to obtain additional information as desired in order to evaluate the merits and
the risks inherent in holding the Shares, (v) is able to bear the economic risk
and lack of liquidity inherent in holding the Shares, and (vi) is an Accredited
Investor.
6.6 NO UNTRUE STATEMENT OR OMISSION
To the Warranting Parties' Knowledge, no representation or warranty
made by Buyer contained in this Agreement and no statement of Buyer and/or any
Authorized Representative of Buyer contained in any certificate, list, exhibit
or other instrument specified in this Agreement, including without limitation
Buyer's Disclosure Schedule, contains (or will contain when made) any untrue
statement of a material fact or omits (or will omit when made) to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were (or will be made), not misleading.
6.7 NO BREACH
On the date of execution of this Agreement, the Relevant Managers and
Advisors of Buyer have no actual, conscious awareness of any fact or
circumstance which constitutes a breach by ICP, CHL or any Member of the
Consolidated Group of any such parties' representations and warranties contained
in this Agreement, including the Seller Disclosure Schedule and Company
Disclosure Schedule.
ARTICLE 7
TAX MATTERS
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7.1 TAX PAYMENT AND TAX RETURN FILING RESPONSIBILITIES
7.1.1 Taxes on Sale
Seller shall be solely responsible for, and shall timely pay, all Taxes
related to the ownership of the Shares and the sale of the Shares and the
Purchased Net Intercompany Indebtedness to Buyer, including, without limitation,
applicable interest and penalties.
7.1.2 Buyer's Tax Return Filing Responsibilities
(a) Buyer shall be responsible for, and shall timely file, all
Tax Returns of the Company that are required to be filed after the Closing Date
(taking into account extensions) other than the Tax Returns for which Seller is
responsible under Section 7.1.3(a).
(b) With respect to any Tax Return to be filed by Buyer for a
Taxable Period beginning on or before the Closing Date, Buyer or the Company
shall deliver, at least 10 days prior to the due date for filing of such Tax
Return (including extensions), to Seller a statement setting forth the amount of
Tax for which Seller is responsible pursuant to this Agreement, and copies of
such Tax Return. Seller shall have the right to review such Tax Return and, in
the case of Tax Returns that relate to periods ending on or before the Closing
Date, to direct Buyer to make any changes to such Tax Returns for which there is
a reasonable basis.
7.1.3 Seller's Tax Return Filing Responsibilities
(a) Seller shall be responsible for, shall prepare or cause to
be prepared, and shall timely file or cause to be timely filed, all Tax Returns
of the Company that are required to be filed for Taxable Periods ending on or
before the Closing Date (taking into account extensions).
(b) To the extent permitted by law and consistent with the
prior year's practice, Seller shall include, or cause to be included, the
Company in CHL's United States consolidated federal income Tax Return and all
other consolidated, combined or unitary Tax Returns for all Taxable Periods
ending on or prior to the Closing Date.
(c) Seller shall deliver to Buyer a copy of each Tax Return
prepared by or on behalf of the Company for which Seller is responsible to file
under this Section 7.1.3 within 10 days prior to the earlier of the actual
filing date or the due date for filing such Tax Return (including extensions),
except for CHL's consolidated, combined or unitary Tax Returns. Buyer shall have
the right to review each such Tax Return and to direct Seller to make any
changes to each such Tax Return for which there is a reasonable basis.
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(d) In the case of Seller's consolidated, combined or unitary
Tax Returns with respect to the Company, Buyer shall deliver to Seller, at
Seller's request and expense, after Closing the information in the possession of
Buyer and necessary for Seller to prepare such Tax Returns.
7.2 TAX SHARING AND INDEMNIFICATION
7.2.1 Taxable Periods Ending on or Before the Closing Date
Seller shall be liable for, shall pay or cause to be paid, and shall
indemnify and hold the Company, Thompson Sub and Buyer's Tax Affiliates, and all
of their respective directors, officers, employees and agents, harmless from:
(a) any unaccrued Taxes with respect to the Company for any Tax Period ending on
or before the Closing Date; (b) that portion of Seller's liability determined
under Section 7.2.3; and (c) the Company's inclusion in any consolidated,
combined, or unitary Tax Return (including but not limited to any liability of
any Tax Affiliate pursuant to Treasury Regulation Section 1.1502-6(a) for any
Tax Period ending on or before the Closing Date).
7.2.2 Taxable Periods Commencing after the Closing Date
Buyer shall be liable for, shall pay or cause to be paid, and shall
indemnify and hold Seller, all Tax Affiliates of Seller, and their respective
directors, officers, employees and agents, harmless from: (a) Taxes with respect
to the Company for any Taxable Period commencing after the Closing Date; and (b)
that portion of Buyer's liability determined under Section 7.2.3.
7.2.3 Taxable Periods Commencing before the Closing Date and Ending
After the Closing Date
The Company shall close their books and records as of the Effective
Time. Seller and Buyer will, to the extent permitted by applicable law, elect
with the relevant Governmental Authority to close the Taxable Periods of the
Company and Thompson Sub as of the Effective Time. In any case where applicable
law does not permit the Company and Thompson Sub to close their Taxable Period
as of the Effective Time, Taxes for such Taxable Periods shall be allocated
between Seller and Buyer as follows: (a) with respect to Taxes based on income,
in accordance with taxable income and losses of the Company or Thompson Sub, as
applicable, for such portions of such period as determined from the Company's
and Thompson Sub's books and records, (b) with respect to Taxes based on sales
or similar transactions, in accordance with the ownership of the assets on the
date of the transaction, determined in accordance with applicable tax law, (c)
with respect to ad valorem Taxes, based on the number of days in the applicable
Tax Period that the asset was owned by the Company or Thompson Sub, as
applicable, before the Effective Time and after the Effective Time and (d) with
respect to any other Taxes not described in (a), (b) or (c) above, based on a
method mutually acceptable to Seller and Buyer.
7.3 TAX SHARING AGREEMENTS
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All Tax sharing agreements and similar agreements (other than the
provisions of this Agreement) between the Company and/or Thompson Sub, on the
one hand, and Seller and/or Seller's Tax Affiliates (other than the Company
and/or Thompson Sub), on the other hand, shall be terminated as of the Closing
Date, and there will be no liability to the Company, Thompson Sub or Buyer under
any such agreement following the Closing Date.
7.4 NET OPERATING LOSS CARRYFORWARD
Any net operating losses of the Company not utilized by CHL in filing
its consolidated federal income tax return for any Taxable Periods ending on or
before the Closing Date shall be retained by the Company. Seller shall deliver
to Buyer prior to the Closing Date all relevant schedules and worksheets which
calculate any net operating losses attributable to the Company during any Period
for which CHL has filed a consolidated tax return which included the Company.
7.5 COOPERATION; ARBITRATION OF CERTAIN DISPUTES
Seller and Buyer shall reasonably cooperate, and shall cause their
respective Tax Affiliates, officers, employees, agents, auditors, and
representatives reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all Taxable Periods
relating to Taxes. All disputes between the parties under Section 7.1.2(b),
Section 7.1.3 or Section 7.2.3(d) shall be resolved by arbitration in accordance
with the procedure set out in Section 2.3.
ARTICLE 8
ADDITIONAL AGREEMENTS AND COVENANTS
8.1 CONDUCT OF BUSINESS OF THE COMPANY AND THOMPSON SUB
During the period from the date of this Agreement to the Closing Date,
the Company will comply fully with each of the covenants set forth in this
Section 8.1 and will cause Thompson Sub to fully comply therewith, and Seller
will cause the Company and Thompson Sub to so comply:
8.1.1 Each of the Company and Thompson Sub will: (i) conduct its
operations in compliance with all applicable laws and regulations and according
to its ordinary course of business consistent with past practice, (ii) not enter
into any material transaction other than in the ordinary course of business
consistent with past practice, and (iii) with no less diligence and effort than
would be applied in the absence of this Agreement, seek to preserve intact its
assets and current business organizations, keep available the service of its
current officers and
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employees and preserve its relationships with customers, suppliers and others
having business dealings with it with the objective that their goodwill and
ongoing businesses shall be unimpaired at the Closing Date.
8.1.2 Except as otherwise permitted in this Agreement, prior to the
Closing Date, neither the Company nor Thompson Sub will, without the prior
written consent of Buyer:
(i) Issue, deliver, sell, dispose or, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale, disposition or
pledge or other encumbrance of (a) any additional shares of its capital stock of
any class (including the Shares), or any securities or rights convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock, or any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of its capital
stock or any securities or rights convertible, into, exchangeable for or
evidencing the right to subscribe for any shares of its capital stock or (b) any
other securities in respect of, in lieu of or in substitution for any shares of
its capital stock (including the Shares) outstanding on the date hereof;
(ii) Redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding securities
(including the Shares);
(iii) Split, combine, subdivide or reclassify any shares of
its capital stock or declare, set aside for payment or pay any dividend, or make
any other actual, constructive or deemed distribution in respect of any shares
of its capital stock or otherwise make any payments to shareholders in their
capacity as such;
(iv) (a) Grant any material increases in the compensation of
any of its directors, officers or key Employees, except in the ordinary course
of business consistent with past practice, (b) pay or agree to pay any pension,
retirement allowance or other material employee benefit not required or
contemplated by any Employee Plan or Benefit Arrangement as in effect on the
date hereof to any such director, officer or key Employee, whether past or
present, (c) enter into any new or materially amend any existing employment
agreement with any such director, officer or key Employee, (d) enter into any
new or materially amend any existing severance agreement with any such director,
officer or key Employee or (e) except as may be required to comply with
applicable law, amend any existing, or become obligated under any new, Employee
Plan or Benefit Arrangement;
(v) Dispose of, or grant Liens on, any of its assets outside
the ordinary course of its business consistent with past practice, or adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the
Transaction);
(vi) Make any acquisition, by means of merger, consolidation
or otherwise, of (i) any direct or indirect ownership interest in, or assets
comprising, any business
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enterprise or operation, or (ii) except in the ordinary course and consistent
with past practice, any other assets;
(vii) Adopt any amendments to its articles of incorporation or
bylaws;
(viii) Other than borrowings under existing credit facilities
or other borrowings in the ordinary course (but in all cases only in the
aggregate at any time outstanding up to $50,000 of additional borrowings after
the date hereof on a Consolidated Group basis), incur any indebtedness for
borrowed money or guarantee any such indebtedness or, except in the ordinary
course of business consistent with past practice, make any loans, advances or
capital contributions to, or investments in, any other Person;
(ix) Engage in the conduct of any business, the nature of
which is materially different than the business such entity is currently engaged
in;
(x) Enter into any agreement providing for acceleration of
payment or performance or other consequence as a result of a change of control
of the Company or its Subsidiaries;
(xi) Enter into any contract, arrangement or understanding
requiring the purchase of equipment, materials, supplies, products or services
over a period greater than 12 months or for the expenditure of greater than
$25,000 per year on a Consolidated Group basis, which is not cancelable without
penalty on 30 days' or less notice, except in the ordinary course of business
for the distribution of products or the production of inventory; or
(xii) Authorize or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
8.2 NOTICE OF BREACH
Each party to this Agreement shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its Knowledge,
impending or threatened occurrence, of any event which would cause any of its
representations or warranties to be untrue on the Closing Date or cause a breach
of any covenant contained or referenced in this Agreement and will use its best
reasonable efforts to prevent or promptly remedy the same. Any such notification
shall not be deemed an amendment of Seller's Disclosure, the Company Disclosure
Schedule or Buyer's Disclosure Schedule.
8.3 REASONABLE EFFORTS
8.3.1 Each party shall, and shall use all reasonable efforts to, cause
their respective Subsidiaries to: (a) obtain all Permits and Consents required
with respect to the Transaction, and the parties will cooperate with each other
with respect thereto; (b) promptly take, or cause to be taken, all other actions
(including but not limited to the execution, delivery and filing of
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documents) and do, or cause to be done, all other things necessary, proper or
appropriate to satisfy the conditions set forth in Article 9 and to consummate
and make effective the Transaction on the terms and conditions set forth herein;
and (c) not take any action which might reasonably be expected to impair the
ability of the parties to consummate the Transaction (regardless of whether such
action would otherwise be permitted or not prohibited hereunder).
8.3.2 The parties acknowledge that ICP and/or certain Affiliates of ICP
have guaranteed certain obligations of the Company and/or Thompson Sub as set
forth on Schedule 8.3. Seller agrees to exercise its reasonable best efforts to
obtain the release of such parties from such obligations without such releases
being conditioned upon any undertaking or assumption by Buyer, provided,
however, that such reasonable best efforts shall not include payment of funds by
Seller or the Company in excess of $125,000 in the aggregate for all such
payments. If Seller is unable to obtain such release, Buyer agrees to assume
such obligations, provided, however that (i) Buyer shall not be required to pay
any fees or expenses in connection therewith, and (ii) the release of ICP and/or
the Affiliates of ICP and the assumption by Buyer shall not result in any change
in the terms of the underlying obligations.
8.4 OTHER TRANSACTIONS
Prior to the Closing, except as specifically described in the Company
Disclosure Schedule with respect to the sale of certain assets of Thompson Sub,
neither Seller nor the Company or any of their respective officers, employees,
representatives, agents or Affiliates will, directly or indirectly, encourage,
solicit or engage in discussions or negotiations with any Person (other than
Buyer) concerning any merger, consolidation, share exchange or similar
transaction involving the Company or Thompson Sub, or any purchase of all or a
significant portion of the assets of or stock in the Company or Thompson Sub, or
any other transaction that would involve the transfer or potential transfer of
control of the Company, other than the Transaction. Seller and the Company will
notify Buyer immediately of any inquiries or proposals with respect to any such
transaction that are received by, or any such negotiations or discussions that
are sought to be initiated with, Seller, the Company or Thompson Sub.
8.5 DELIVERY OF INTERIM FINANCIAL STATEMENTS
Within twenty (20) days after the end of each month after the execution
of this Agreement and prior to the Closing Date, Seller shall deliver or cause
to be delivered to Buyer monthly and year-to-date Interim Financial Statements.
Upon delivery, such Interim Financial Statements shall automatically become and
be deemed to be Consolidated Financial Statements for purposes of this
Agreement.
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8.6 ACCESS TO INFORMATION
Subject to currently existing contractual and legal restrictions
applicable to Seller, the Company and Thompson Sub (which Seller and the Company
represent and warrant are not material) and upon reasonable notice, each of
Seller, the Company and Thompson Sub shall during normal business hours
throughout the period prior to the Closing Date or until this Agreement is
terminated (a) afford to Buyer's Authorized Representatives access to the
properties, books and records (including, without limitation, the work papers of
independent accountants of the Company and Thompson Sub); and (b) furnish
promptly to Buyer's Authorized Representatives all information concerning its
business, properties and personnel as may reasonably be requested, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any of the respective representations or warranties made by Seller or the
Company. The use and protection of all information provided by one party to
another pursuant to this Section shall be governed by the Confidentiality
Agreement.
8.7 DISPOSITION OF THOMPSON SUB'S INVENTORY AND ACCOUNTS RECEIVABLE
Buyer agrees not to cause or permit any commercially unreasonable
disposition of any of Thompson Sub's inventory or accounts receivable during the
first sixty (60) days after the Closing Date.
8.8 ACCESS TO RECORDS AND PERSONNEL AFTER CLOSING
8.8.1 For a period of six (6) years after the Closing Date, Seller and
Seller's Authorized Representatives shall have reasonable access to all books
and records of the Company and Thompson Sub, and to all Employees having
knowledge with respect thereto, to the extent that such access may reasonably be
required in connection with matters relating to matters as to which Seller is
required to provide indemnification under this Agreement. Such access shall be
afforded by Buyer, the Company and Thompson Sub upon receipt of reasonable
advance notice and during normal business hours, provided such access does not
unduly disrupt such parties' normal business operations. Seller shall be solely
responsible for any costs or expenses incurred by Seller pursuant to this
Section. If Buyer, the Company or Thompson Sub shall desire to dispose of any of
such books and records prior to the expiration of such six-year period, such
party shall, prior to such disposition, give Seller a reasonable opportunity, at
its expense, to segregate and remove such books and records as Seller may
select.
8.8.2 For a period of six (6) years after the Closing Date, Buyer and
its Authorized Representatives shall have reasonable access to all of Seller's
books and records relating to the Company and Thompson Sub which Seller, or any
of its Authorized Representatives, may retain after the Closing Date. Such
access shall be afforded by Seller and its Authorized Representatives upon
receipt of reasonable advance notice and during normal business hours. Buyer
shall be solely responsible for any costs and expenses incurred by it pursuant
to this Section. If Seller shall desire to dispose of any of such books and
records prior to the expiration of such six-year period, Seller shall, prior to
such disposition, give Buyer a reasonable
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opportunity, at Buyer's expense to segregate and remove such books and records
as Buyer may select.
8.9 FURTHER ASSURANCES
Both before and after the Closing Date, each party will cooperate in
good faith with each other party and will take all appropriate action and
execute any agreement, instrument or other writing of any kind which may be
reasonably necessary or advisable to carry out and confirm the transactions
contemplated by this Agreement (including, but not limited to, obtaining
Consents from any Person from whom a Consent is not obtained on or before the
Closing).
8.10 MAINTENANCE OF INSURANCE AND ENFORCEMENT OF RIGHTS
From and after the Closing Date until expiration of the Claims Period,
Buyer shall (i) cause to be maintained insurance coverage on the Company's and
Thompson Sub's properties, assets and personnel which will be generally
equivalent to the insurance coverage currently maintained by Buyer in respect of
its properties, assets and personnel as set forth in Buyer's Disclosure
Schedule, and (ii) will use or will cause each of the Company and Thompson Sub
to use its reasonable best efforts to pursue and obtain payment of insurance
proceeds payable to Buyer, the Company or Thompson Sub, as applicable, for any
matter for which Seller could be liable as an Indemnity Obligor.
8.11 PROPRIETARY, NONDISCLOSURE AND NONCOMPETITION AGREEMENTS
Seller shall use its reasonable best efforts to obtain from each
employee specified in writing by Buyer at least ten (10) days prior to Closing,
duly executed proprietary information, nondisclosure and/or noncompetition
agreements, each in a form reasonably acceptable to Buyer. In no event shall
Seller or the Company be required or permitted to pay or furnish any monetary or
other consideration to any of such employees for their execution of such
agreements, except with the prior written consent of Buyer specifying the amount
to be paid or the consideration to be furnished. Any amount paid by Seller
pursuant to this Section and specified by Buyer in writing shall not be a charge
against income for purposes of the calculation of Equity.
8.12 REIMBURSEMENT OF CONGRESS FEE
On or after the Closing, Buyer may cause the Company to terminate its
credit arrangements with Congress Financial Corporation ("Congress"). The
parties acknowledge that the written agreements between the Company and Congress
purport to entitle Congress to charge early termination fees of up to $185,000
in the event of such a termination ("Congress Termination"). Buyer agrees to
give written notice to Seller promptly upon the occurrence of a Congress
Termination (the "Congress Termination Notice"). The Congress Termination Notice
shall be accompanied by written evidence of the actual amount of Congress'
termination fee. If the amount of such fee is less than $185,000, the Congress
Termination Notice shall be
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accompanied by a payment by Buyer to Seller of an amount equal to two-thirds
(2/3) of the difference between $185,000 and the actual amount of Congress'
termination fee.
ARTICLE 9
CONDITIONS PRECEDENT
9.1 CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the Transaction is subject to the
fulfillment at or prior to the Closing Date of each of the following conditions,
any or all of which may be waived in whole or part by Buyer to the extent
permitted by applicable law.
9.1.1 Representations and Warranties True
The representations and warranties of Seller and the Company contained
in Articles 4 and 5 and Section 8.6 shall have been true in all material
respects when made and shall be true in all material respects on and as of the
Closing Date as if made on and as of such date (except to the extent they relate
to the date of this Agreement or any other particular date or to the extent they
are rendered inaccurate solely as a result of actions which are necessary to
fulfill an obligation or satisfy a condition precedent expressly set forth in
this Agreement), provided, however, that this condition shall have been
satisfied notwithstanding the existence of such an inaccuracy to the extent that
(i) prior to Closing such inaccuracy is identified and the parties have agreed
in writing on how it will be reflected in the Closing Balance Sheet in
accordance with GAAP or (ii) it is reflected in Section 6.7 of Buyer's
Disclosure Schedule.
9.1.2 Performance
Seller and the Company shall have each performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by each such party prior to or at the time of
Closing, including, but not limited to, execution and/or delivery of the
documents specified in Section 3.2.
9.1.3 Bring-Down Certificates
ICP shall have delivered to Buyer a certificate, dated the Closing
Date, signed by ICP's President, certifying as to the fulfillment of the
conditions specified in Sections 9.1.1 and 9.1.2 as they relate to ICP ("ICP's
Bring-Down Certificate"), (a) CHL shall have delivered to Buyer a certificate,
dated the Closing Date, signed by CHL's President, certifying as to the
fulfillment of the conditions specified in Sections 9.1.1 and 9.1.2 as they
relate to CHL ("CHL's Bring-Down Certificate"), and (b) the Company shall have
delivered to Buyer a certificate, dated the Closing Date, signed by the
President of the Company, certifying as to the fulfillment of the conditions
specified in Sections 9.1.1 and 9.1.2 as they relate to the Company (the
"Company's Bring-Down Certificate).
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9.1.4 No Order or Proceeding
No Order shall be outstanding, and no Proceeding shall be pending,
threatened or anticipated against Buyer or Seller which would prohibit,
invalidate or attempt to enjoin, or materially adversely affect, the
Transaction.
9.1.5 Permits and Consents
(a) All Permits and Consents, if any, described in Seller's
Disclosure Schedule with reference to Section 4.2.5, in the Company Disclosure
Schedule with reference to Section 5.4.5 and in Buyer's Disclosure Schedule
shall have been obtained including, but not limited to, (i) an estoppel
certificate and Consent from Congress in form and substance satisfactory to
Buyer, (ii) an estoppel certificate and Consent, each in form and substance
satisfactory to Buyer, from each of (A) Kentucky Rural Economic Development
Authority, (B) Central Bank Denver, N.A. as Trustee, (C) CoreState Bank, and (D)
Caldwell County, Kentucky, or, in lieu of such estoppel certificates and
Consents, an opinion of Holland & Hart, which opinion shall be in form and
substance satisfactory to Buyer and the fees for which shall be paid by Seller,
and (iii) any required Consent and accompanying release of Lien from Emerson
Electric Co.
(b) All other Permits and Consents necessary or required for
the consummation of the Transaction, the failure of which to obtain would have a
Material Adverse Effect, if any, shall have been obtained.
9.1.6 No Material Adverse Change
There shall have been no changes since the date of this Agreement in
the business, operations, condition (financial or otherwise), properties, assets
or liabilities of the Company or Thompson Sub (regardless of whether or not such
events or changes are inconsistent with the representations and warranties given
herein by the Warranting Parties), except changes contemplated by this Agreement
and changes which would not be considered to have, either individually or in the
aggregate, Material Adverse Effect, provided, however, that this condition shall
have been satisfied notwithstanding the existence of such change to the extent
that prior to Closing such change is identified and the parties have agreed in
writing on how it will be reflected in the Closing Balance Sheet in accordance
with GAAP.
9.1.7 Elimination of Intercompany Indebtedness and Intercompany
Receivables
Unless otherwise agreed in writing by all parties hereto, all
Intercompany Indebtedness and all Intercompany Receivables shall be offset, each
Lien with respect to Intercompany Indebtedness other than the Purchased Net
Intercompany Indebtedness shall be released by the holder of such Lien, and such
Net Intercompany Indebtedness shall be converted to shareholders' equity on the
Closing Balance Sheet. At Closing, ICP and CHL shall assign to Buyer the
Purchased Net Intercompany Indebtedness and shall surrender and endorse to Buyer
any
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promissory note or other documentation made or entered into in connection with
any obligation that constitutes Purchased Net Intercompany Indebtedness.
9.1.8 Termination of All Agreements Between Seller and the Consolidated
Group
Except as otherwise agreed in writing by all parties hereto, all
agreements between or among Seller and its Affiliates (other than the Company
and/or Thompson Sub), on the one hand, and the Company and/or Thompson Sub, on
the other hand, shall have been terminated, and there will be no liability to
any party under any such agreements following the Effective Time.
9.1.9 Escrow Agreement
Buyer shall have received from Seller and the Escrow Agent duly
executed originals or counterparts of the Escrow Agreement.
9.1.10 Opinions of Counsel
Buyer shall have received the opinions of counsel described in Section
3.2.
9.1.11 Resignations and Releases
The Company and Thompson Sub shall have received the written
resignations of all of the current officers and members of the Board of
Directors of each of the Company and Thompson Sub (other than Timothy G.
Phillips, Fred Buchholz and Walter Mucha) and, from each such officer and Board
member, an executed counterpart of a Mutual Release and Separation Agreement in
the form attached hereto as Exhibit 9.1.11.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER AND THE COMPANY
The obligations of Seller and the Company to consummate the Transaction
are subject to the fulfillment at or prior to the Closing Date of each of the
following conditions, any or all of which may be waived in whole or in part by
Seller and the Company to the extent permitted by applicable law.
9.2.1 Representations and Warranties True
The representations and warranties of Buyer contained in Article 6
shall have been true in all material respects when made and shall be true in all
material respects on and as of the Closing Date as if made on and as of such
date (except to the extent they relate to the date of this Agreement or any
other particular date or to the extent they are rendered inaccurate solely as a
result of actions which are necessary to fulfill an obligation or satisfy a
condition precedent expressly set forth in this Agreement).
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9.2.2 Performance
Buyer shall have performed or complied in all material respects with
all agreements and conditions contained herein required to be performed or
complied with by Buyer prior to or at the time of the Closing including, but not
limited to, execution and/or delivery of the documents and funds specified in
Section 3.3.
9.2.3 Buyer's Bring-Down Certificate
Buyer shall have delivered to Seller and the Company a certificate,
dated the Closing Date, signed by the President of Buyer certifying as to the
fulfillment by Buyer of the conditions specified in Sections 9.2.1 and 9.2.2
("Buyer's Bring-Down Certificate").
9.2.4 No Order or Proceeding
No Order shall be outstanding, and no Proceeding shall be pending,
threatened or anticipated against Buyer or Seller which would prohibit,
invalidate or attempt to enjoin, or materially adversely affect, the
Transaction.
9.2.5 Permits and Consents
(a) All Permits and Consents, if any, described in Seller's
Disclosure Schedule with reference to Section 4.2.5, in the Company Disclosure
Schedule with reference to Section 5.4.5 and in Buyer's Disclosure Schedule
shall have been obtained including, but not limited to, (i) an estoppel
certificate and Consent from Congress in form and substance satisfactory to
Seller from Congress (ii) an estoppel certificate and Consent, each in form and
substance satisfactory to Seller from each of (A) Kentucky Rural Economic
Development Authority, (B) Central Bank Denver, N.A. as Trustee, (C) CoreState
Bank, and (D) Caldwell County, Kentucky, or, in lieu of such estoppel
certificates and Consents, an opinion of Holland & Hart, which opinion shall be
in form and substance satisfactory to Seller and (iii) any required Consent and
accompanying release of Lien from Emerson Electric Co.
(b) All other Permits and Consents necessary or required for
the consummation of the Transaction, the failure of which to obtain would have a
Material Adverse Effect, if any, shall have been obtained.
9.2.6 Escrow Agreement
Seller shall have received from Buyer and the Escrow Agent duly
executed originals or counterparts of the Escrow Agreement.
9.2.7 Opinion of Counsel
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The Company shall have received the opinion of counsel described in
Section 3.3.
9.2.8 Releases of ICP.
ICP and any Affiliate of ICP liable for an obligation described on
Schedule 8.3 shall have been released from such liability.
9.2.9 Releases of Officers and Directors
The Company and Thompson Sub shall have executed and delivered a Mutual
Release and Separation Agreement in the form set forth as Exhibit 9.1.11 in
favor of each of the individuals identified in Section 9.1.11 as parties
thereto.
ARTICLE 10
RESTRICTIVE COVENANTS
10.1 NONCOMPETITION AND NONSOLICITATION
10.1.1 Seller acknowledges that, on and after the Closing Date, Buyer
will continue to conduct the business previously conducted by the Company and
Thompson Sub consisting of the manufacture, distribution and sale of steel pipe
and other water transmission products (the "Business"). Seller has had access to
the Company and Thompson Sub and has gained knowledge with respect to the
Business. In order to protect Buyer and the Company, and Buyer's investment in
the Company, it is necessary that Seller refrain from direct or indirect
competition with the Company and Thompson Sub.
10.1.2 Seller agrees that, for a period of three (3) years from the
Closing Date, Seller shall not, and Seller shall cause its Affiliates not to,
(a) Compete with Buyer, the Company or Thompson Sub in the Restricted Territory;
(b) employ or Solicit the employment of any Person who is employed by the
Company, Thompson Sub or Buyer at the date of this Agreement or who was employed
by the Company or Thompson Sub within the past twelve (12) months; (c) directly
or indirectly canvass or Solicit business in competition with the Business from
any Person who during the past three years shall have been a customer of the
Company or Thompson Sub, or from any Person which Seller has reason to believe
might in the future become a customer of the Company or Thompson Sub as a result
of marketing efforts, contacts or other facts and circumstances of which Seller
has Knowledge; (d) willfully dissuade or discourage any Person from using,
employing or conducting business with the Company or Thompson Sub; (e) use or
disclose to any Person, directly or indirectly, any information concerning the
names, addresses and telephone numbers of the employees, suppliers or customers
of the Company or Thompson Sub; (f) Solicit or in any manner attempt to induce
or encourage any Person to leave the employment of the Company or Thompson Sub
or cease or reduce their business or commercial relationship with the Company or
Thompson Sub; (g) disrupt or interfere with, or seek to disrupt or interfere
with, the business or contractual
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relationship between the Company or Thompson Sub and any supplier who during the
past three years shall have supplied components, materials or services to the
Company or Thompson Sub; and (h) aid any other Person in doing anything
described in this Section.
10.1.3 As used in this Article 10:
(a) the term "Compete" means to engage or attempt to engage in the
Business or any other business activity which is the same as, or substantially
similar to or directly or indirectly competitive with, the Business, or to
directly or indirectly:
(i) have any financial interest in;
(ii) join, operate, control or participate in, or be connected
as an agent, trustee, independent contractor, partner, shareholder or
other equity owner (except as holder of not more than one percent of
the outstanding partnership units, stock or other equity of any class
of a limited partnership, corporation or other Person, the units, stock
or other equity of which is actively publicly traded);
(iii) provide services in any capacity to those participating
in the ownership, management, operation or control of; or
(iv) act as a consultant or subcontractor to any Person
engaged or attempting to engage in the Business or any other business
activity which is the same as, or substantially similar to or directly
or indirectly competitive with, the Business;
(b) the term "Restricted Territory" means the United States and Canada;
and
(c) the term "Solicit" includes without limitation, (1) responding to
requests for proposals and invitations for bids; (2) initiating contacts with
customers or prospects of the Company for the purpose of advising them that the
Person making the solicitation is available for business which is competitive
with the Business, and (3) participating in joint ventures or teaming agreements
or acting as a consultant or subcontractor or employee of others who directly
solicit business prohibited by this Section 10.1.
10.2 CONFIDENTIALITY
10.2.1 Seller has had access to, and has gained knowledge with respect
to the Company and Thompson Sub, and their trade secrets, financial results and
information, processes and techniques, plans, research, designs, concepts,
methods of doing business and information concerning customers and suppliers,
and other valuable and confidential information, which is not generally known to
the public (the "Confidential Information"). The parties acknowledge that
unauthorized disclosure or misuse of the Confidential Information following the
date of this Agreement may cause irreparable damage to Buyer, the Company and/or
Thompson Sub. The parties also agree that covenants by Seller not to make
unauthorized
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disclosures of the Confidential Information are essential to the growth and
stability of the Company and Thompson Sub. Accordingly, Seller agrees that
Seller shall not use or disclose directly or indirectly or cause or permit to be
used or disclosed any Confidential Information obtained by Seller while it was
an Affiliate of the Company.
10.2.2 Nothing in Section 10.2.1 shall prevent Seller from using or
disclosing any such Confidential Information as counsel to Seller advises must
be used or disclosed in connection with ongoing litigation or pursuant to
applicable law or in the course of a defense of a claim assumed by the Seller as
an Indemnity Obligor pursuant to Section 12.5, notice of which disclosure shall
be promptly delivered to Buyer.
10.3 REASONABLENESS OF LIMITATIONS
Seller agrees that the territorial, time and other limitations
contained in this Article 10 are reasonable and properly required for the
adequate protection of the business and affairs of Buyer, the Company and
Thompson Sub, and in the event that any one or more of such territorial, time or
other limitations is found to be unreasonable by a court of competent
jurisdiction, Seller agrees to submit to the reduction of these territorial,
time or other limitations to such an area, period or otherwise as the court may
determine to be reasonable. In the event that any limitation under this Article
is found to be unreasonable or otherwise invalid in any jurisdiction, in whole
or in part, Seller acknowledges and agrees that such limitation shall remain and
be valid in all other jurisdictions.
10.4 REMEDIES
Seller acknowledges that Buyer, the Company and/or Thompson Sub may
suffer damages incapable of ascertainment in the event the provisions of this
Article are breached and that they may be irreparably damaged in the event that
the provisions of this Article are not enforced. Therefore, should any dispute
arise with respect to the breach or threatened breach of any provision of this
Article 10, Seller agrees and consents that, in addition to any and all other
remedies available to Buyer, the Company and/or Thompson Sub, an injunction or
restraining order or other equitable relief may be issued or ordered by a court
of competent jurisdiction restraining any breach or threatened breach of any
provision of this Article.
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION
This Agreement may be terminated at any time prior to the Closing Date:
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11.1.1 By mutual consent of the Board of Directors of Buyer and the
Board of Directors of Seller;
11.1.2 By either Buyer or the Seller if Closing of the Transaction
shall not have occurred on or before May 29, 1996 (provided the terminating
party is not otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
11.1.3 By Buyer if any of the conditions specified in Section 9.1 has
not been met or waived by Buyer at such time as such condition is no longer
capable of satisfaction (provided Buyer is not otherwise in material breach of
its representations, warranties, covenants or agreements under this Agreement,
which breach is the direct and proximate cause of the failed condition);
11.1.4 By Seller if any of the conditions specified in Section 9.2 has
not been met or waived by Seller at such time as such condition is no longer
capable of satisfaction (provided neither Seller nor the Company is otherwise in
material breach of its respective representations, warranties covenants or
agreements under this Agreement, which breach is the direct and proximate cause
of the failed condition);
11.1.5 By Buyer if there has been a material breach on the part of
Seller or the Company of any representation, warranty, covenant or agreement by
Seller or the Company set forth in this Agreement, which breach, if capable of
cure, has not been cured within fifteen (15) business days following receipt by
Seller of written notice of such breach;
11.1.6 By Seller if there has been a material breach on the part of
Buyer of any representation, warranty, covenant or agreement by Buyer set forth
in this Agreement, which breach, if capable of cure, has not been cured within
fifteen (15) business days following receipt by Buyer of written notice of such
breach;
11.1.7 By either Buyer or Seller upon written notice given in
compliance with Section 13.3 below if any Governmental Authority of competent
jurisdiction shall have issued a final permanent Order enjoining or otherwise
prohibiting the consummation of the Transaction and, in any such case the time
for appeal or petition for reconsideration of such Order shall have expired
without such appeal or petition being granted.
11.2 EFFECT OF TERMINATION
In the event of termination of this Agreement by either Buyer or Seller
as provided above, this Agreement shall forthwith become void and, except for
termination pursuant to Section 11.1.5 or 11.1.6, there shall be no liability on
the part of Buyer, Seller or the Company or their respective officers or
directors; provided that Sections 4.3, 5.27, and 6.3, the last sentence of
Section 8.6, this Section 11.2 and the provisions of Article 13 shall survive
the termination.
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11.3 AMENDMENT
This Agreement may not be amended except with the approval of the
parties' respective Board of Directors and only by an instrument in writing
signed on behalf of each of the parties hereto.
11.4 WAIVER
At any time prior to the Closing Date, the parties hereto may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any documents delivered
pursuant hereto by any other party and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Any such extension or
waiver shall be effective only in the particular instance in which it is given.
ARTICLE 12
SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
12.1.1 All representations and warranties by Seller and the Company
contained in this Agreement (i) shall survive the endorsement and delivery of
the Shares, (ii) shall not be diminished or affected by the doctrine of merger,
and (iii) shall survive the Closing Date for the duration of the Claims Period,
except that the representations and warranties in the following Sections shall
survive until the expiration of the applicable statue of limitations or for two
(2) years from the Closing Date, whichever is longer: 4.1, 4.2, 4.4, 4.5, 4.8,
5.1, 5.2, 5.3, 5.4, 5.7, 5.8, 5.10, 5.19 and 5.20.
12.1.2 All covenants and agreements by Seller and the Company contained
in this Agreement including, without limitation, the indemnification obligations
contained in this Article, shall survive the Closing Date until fully performed
or discharged, except that the indemnification obligations of Seller and the
Company under Section 12.3 below shall survive only until December 31, 1997.
12.1.3 All representations and warranties by Buyer contained in this
Agreement shall survive the Closing Date for the duration of the Claims Period,
except that the representations and warranties in the following Sections shall
survive until the expiration of the applicable statute of limitations or for two
(2) years from the Closing Date, whichever is longer: 6.1, 6.2, 6.5 and 6.7.
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12.1.4 All covenants and agreements by Buyer contained in this
Agreement including, without limitation, the indemnification obligations
contained in this Article, shall survive the Closing Date until fully performed
or discharged.
12.1.5 Any claim by Seller, Buyer or the Company with respect to
representations, warranties, covenants and agreements must be initiated during
the Claims Period or such other applicable period as is specified above in this
Section 12.1 by submission of a written demand in accordance with the provisions
of Section 12.6.1.
12.1.6 Any claim or series of related claims for indemnification under
this Article 12 by a party for any inaccuracy in or breach of any representation
or warranty (other than a Title Representation) must be for a minimum aggregate
amount of $2,000, and any claim or series of related claims which is an Escrow
Liability must be for a minimum aggregate amount of $1,000.
12.1.7 Except for any remedy of specific performance or any other
equitable remedy to which any party may be entitled, and except in the case of
fraud, following the Closing the indemnification provisions set forth in this
Article 12 are the sole and exclusive theory of recovery under which a party to
this Agreement may assert a claim against another party with respect to any and
all breaches of any representation or warranty made to the party asserting the
claim and any and all breaches of covenants made to such party under this
Agreement.
12.1.8 Notwithstanding any other provision of this Article 12, the
aggregate amount payable by the Seller as indemnification pursuant to Section
12.2 shall be limited to $7,000,000, provided, however, the foregoing limitation
shall not apply to any claim for indemnification in respect to any Loss suffered
or incurred by Buyer by reason of a breach of a Title Representation or a claim
for indemnification under Section 12.5.
12.2 INDEMNIFICATION BY SELLER AND THE COMPANY
Seller and the Company, jointly and severally, hereby agree to defend,
indemnify and hold harmless Buyer (before and after the Closing) from, against
and in respect to any Loss suffered or incurred by Buyer (before or after the
Closing) by reason of (i) a breach of any representation or warranty by Seller
or the Company contained in this Agreement including but not limited to any
breach identified in Section 6.7 of the Buyer's Disclosure Schedule), or (ii)
the nonfulfillment of any covenant or agreement by Seller or the Company
contained in this Agreement, and (iii) all Proceedings incident to any of the
foregoing. Notwithstanding the foregoing, (i) this Section 12.2 shall only apply
to require Seller and the Company to indemnify the Buyer for Losses to the
extent they are not accrued for in the Closing Balance Sheet or do not
constitute Escrow Liabilities and (ii) the execution and delivery of this
Agreement by Seller and the Company shall not constitute an admission of
liability with respect to any breach alleged to exist in Section 6.7 of the
Buyer's Disclosure Schedule.
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<PAGE> 62
12.3 INDEMNIFICATION BY SELLER WITH RESPECT TO ESCROW LIABILITIES
12.3.1 Effective upon the Closing of the Transaction but only in such
event, and subject to Sections 12.3.2 through 12.3.4, Seller hereby agrees to
defend, indemnify and hold harmless Buyer and the Company (after the Closing)
from, against and in respect of any Loss suffered or incurred by Buyer or the
Company (after the Closing) with respect to (i) all Escrow Liabilities and (ii)
all Proceedings incident thereto. Notwithstanding the foregoing, this Section
12.3.1 shall only apply to require Seller to indemnify Buyer and the Company for
Losses arising out of or relating to Environmental Liabilities and Proceedings
incident thereto to the extent they are not accrued for in the Closing Balance
Sheet.
12.3.2 With regard to Unknown Contingent Liabilities and all
Proceedings incident thereto, (i) Seller shall be liable for Losses arising
therefrom or relating thereto only to the extent that such Losses exceed, in the
aggregate $1,000,000 ("Unknown Contingent Liability Deductible") and (ii) the
total liability of Seller for indemnification of Buyer for such Losses shall be
limited to $1,125,000 ("Unknown Contingent Liability Indemnity Amount").
12.3.3 With regard to Environmental Liabilities, (i) the total
liability of Seller for indemnification of Buyer for Losses arising therefrom or
relating thereto shall be limited to $1,125,000 ("Environmental Liability
Indemnity Amount") and (ii) except as provided in Section 12.1.6, there shall be
no requirement that such Losses total or exceed any minimal amount for Seller to
be liable therefor.
12.3.4 Notwithstanding Sections 12.3.2 and 12.3.3, the total liability
of Seller for all Losses arising out of or relating to Escrow Liabilities and
all Proceedings incident thereto, shall be $1,125,000 ("Escrow Liability
Indemnity Amount").
12.3.5 The parties agree that, for purposes of indemnification claims
arising under this Section, Buyer shall be authorized to act on behalf of the
Company. Buyer shall provide Seller with a written report (i) on or before
January 31, 1997, for the period beginning on the Closing Date and ending
December 31, 1996, (ii) on or before July 31, 1997, for the period beginning
January 1, 1996 and ending June 30, 1997, (iii) on or before January 31, 1998,
for the period beginning July 1, 1997 and ending December 31, 1997, and (iv), so
long as any portion of the Escrow Funds remains subject to the Escrow Agreement,
on or before each July 31 and January 31 date thereafter for the July 1 -
December 31 and January 1 - June 30 periods, respectively; each such report
shall, for the relevant period, set forth all Losses suffered or incurred by
Buyer and the Company during such period with respect to Escrow Liabilities and
Proceedings incident thereto.
12.4 INDEMNIFICATION BY BUYER
Buyer hereby agrees to defend, indemnify and hold harmless Seller after
the Closing from, against and in respect of any Loss suffered or incurred by
Seller after the Closing by reason of (i) a breach of any representation or
warranty by Buyer contained in this Agreement, or (ii) the nonfulfillment of any
covenant or agreement by Buyer contained in this Agreement, and (iii) all
Proceedings incident to any of the foregoing. Buyer hereby agrees to indemnify,
57 - STOCK PURCHASE AGREEMENT
<PAGE> 63
but not to defend, Seller from any Loss suffered or incurred by Seller after the
Closing by reason of the operations of the Company and Thompson Sub after
Closing, other than operations in compliance with Environmental Laws and other
applicable laws.
12.5 INDEMNIFICATION RELATING TO TIMOTHY G. PHILLIPS
Seller hereby agrees to defend, indemnify and hold harmless Buyer, the
Company, Thompson Sub, and their respective officers, directors, employees and
agents from, against and in respect of any Loss suffered or incurred by any of
them by reason of any claim by or on behalf of Timothy G. Phillips (i) arising
out of his relationship to Seller, the Company and/or Thompson Sub as an
officer, director, employee or in any other capacity prior to Closing, and/or
(ii) relating to or arising out of a termination of such relationship, and all
Proceedings incident to any of the foregoing, to the extent that such Losses
exceed the Severance Liability and the Retirement Liability.
12.6 NOTIFICATION AND DEFENSE OF CLAIMS OR ACTIONS
12.6.1 As used in this Section, any party seeking indemnification
pursuant to this Article 12 is referred to as an "Indemnified Party" and any
party from whom indemnification is sought pursuant to this Section is referred
to as an "Indemnity Obligor." An Indemnified Party which proposes to assert (i)
the right to be indemnified under this Article 12, or (ii) that a claim is, or
could give rise to, an Escrow Liability for purposes of Section 12.3 shall,
pursuant to the notice provisions of this Agreement, submit a written demand for
indemnification setting forth in summary form the facts as then known which form
the basis for the claim for indemnification, including, if relevant to the
rights of the Indemnified Party under this Article 12, the basis for determining
that a Loss was within the Knowledge of any party.
12.6.2 With respect to claims based on actions by third parties, an
Indemnified Party shall, within twenty (20) days after the receipt of notice of
the commencement of any Proceeding against it in respect of which a claim for
indemnification is to be made against an Indemnity Obligor or which the
Indemnified Party proposes to assert is an Escrow Liability, notify the
Indemnity Obligor in writing of the commencement of such Proceeding, enclosing a
copy of all papers served; provided, however, that the failure to so notify the
Indemnity Obligor of any such Proceeding shall not relieve the Indemnity Obligor
from any liability which it may have to the Indemnified Party, except to the
extent that the Indemnity Obligor is prejudiced thereby. Thereafter, the
Indemnified Party shall deliver to the Indemnity Obligor, within ten (10) days
after receipt by the Indemnified Party, copies of all further notices relating
to such claim.
12.6.3 If a third-party claim is made for which an Indemnified Party is
entitled to indemnification pursuant to Sections 12.2, 12.4 or 12.5, the
Indemnity Obligor will be entitled to participate in the defense of such claim.
If the Indemnity Obligor so chooses, and provided that it acknowledges in
writing its obligation to indemnify the Indemnified Party, the Indemnity Obligor
may assume primary responsibility for the defense of such claim with counsel
selected by the Indemnity Obligor and not reasonably objected to by the
Indemnified Party. Should the
58 - STOCK PURCHASE AGREEMENT
<PAGE> 64
Indemnity Obligor assume primary responsibility for the defense of any such
claim, the Indemnity Obligor will not be liable to the Indemnified Party for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense of such claim.
12.6.4 If the Indemnity Obligor assumes the defense of a third-party
claim as set forth in Section 12.6.3, then (i) in no event will an Indemnified
Party admit any liability with respect to, or settle, compromise or discharge,
any such claim without the Indemnity Obligor's prior written consent and (ii)
each Indemnified Party shall be entitled to participate in, but not control, the
defense of such claim with its own counsel at its own expense. If the Indemnity
Obligor does not assume the defense of any such claim, an Indemnified Party may
defend such claim in a manner as it may deem appropriate (including, but not
limited to, settling such claim, after giving twenty (20) days prior written
notice of such settlement to the Indemnity Obligor, on such terms as the
Indemnified Party may deem appropriate).
12.6.5 If a third-party claim is made which is, or could give rise to,
an Escrow Liability, then the following shall apply:
(a) In the case of a third-party claim which is or could give
rise to an Unknown Contingent Liability:
(i) if the amount of such claim plus the sum of (A)
all prior Losses suffered or incurred by Buyer and the Company with
respect to Unknown Contingent Liabilities, and (B) the amount of all
other claims then Pending which are, or could give rise to, Unknown
Contingent Liabilities (collectively, "Aggregate Potential Unknown
Contingent Liability Losses"), is wholly within the Unknown Contingent
Liability Indemnity Deductible, Buyer shall be primarily responsible
for the defense of such claim, Seller will be entitled, but not
obligated, to participate in the defense of such claim and Buyer will
not settle the claim without Seller's prior written consent, which
consent shall not be unreasonably withheld or delayed.
(ii) If the amount of such claim plus all Aggregate
Potential Unknown Contingent Liability Losses, is greater than the
Unknown Contingent Liability Indemnity Deductible, so long as there
remain Escrow Funds subject to the Escrow Agreement, Seller will be
entitled, but not obligated, to assume joint responsibility with Buyer
for the defense of the claim. Neither party will settle such a claim
without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed.
(b) In the case of a third-party claim which is or could give
rise to an Environmental Liability, so long as there remain Escrow Funds subject
to the Escrow Agreement, Seller will be entitled, but not obligated, to assume
joint responsibility with Buyer for the defense of the claim. Neither party will
settle such a claim without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
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<PAGE> 65
12.6.6 In the event that any claim for indemnification is made with
respect to any third-party claim pursuant to this Article, (i) the party
assuming primary responsibility for the defense of such claim shall at all times
keep the other party informed as to the status of such claim and (ii) the party
not primarily responsible for the defense of such claim shall cooperate fully
with the other party in connection with such defense.
12.7 USE OF ESCROW FUNDS FOR INDEMNIFICATION
12.7.1 In the event that Buyer is entitled to indemnification from
Seller pursuant to Section 12.3, Seller's obligations shall be satisfied solely
out of the Escrow Funds in accordance with the terms and conditions of the
Escrow Agreement.
12.7.2 In the event that Buyer is entitled to indemnification from
Seller pursuant to Section 12.2, Buyer shall be entitled to payment from, but
shall not be required to obtain payment from, available Escrow Funds in
accordance with the terms and conditions of the Escrow Agreement.
12.8 RELIANCE
No disclosure by any party ("Disclosing Party") to this Agreement nor
any investigation made by or on behalf of another party with respect to the
Disclosing Party shall be deemed to affect the other party's reliance on the
respective representations and-warranties contained in this Agreement and no
such disclosure shall constitute a waiver of that party's rights to indemnity as
herein provided for the breach of any of said representations and warranties;
provided, however, to the extent that as a result of any such investigation, an
officer or director of the non-Disclosing Party has actual knowledge that any
representation or warranty is untrue and the Disclosing Party does not have
Knowledge that such representation or warranty is untrue, the Disclosing Party
shall have no liability with respect to such breach of representation or
warranty.
ARTICLE 13
GENERAL PROVISIONS
13.1 EXPENSES
Seller shall bear all expenses incurred by Seller or the Company in
connection with the Transaction, including the fees and expenses of any
attorneys, accountants, investment bankers, brokers, finders or other
intermediaries or other Persons engaged by Seller or the Company. Buyer shall
bear all expenses incurred by Buyer in connection with the Transaction,
including the fees and expenses of any attorneys, accountants, investment
bankers, brokers, finders or other intermediaries or other Persons engaged by
Buyer.
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<PAGE> 66
13.2 PUBLIC ANNOUNCEMENTS
The parties will agree upon the timing and content of the initial press
release to be issued describing the Transaction and will not make any public
announcement thereof prior to reaching such agreement unless required to do so
by applicable law or regulations (in which event, however, the party so required
to make such announcement will endeavor in advance to inform the other party
regarding the reason for and content of such required announcement). To the
extent reasonably requested by any party, each party will hereafter consult with
and provide reasonable cooperation to the others in connection with the issuance
of further press releases or other public documents describing the Transaction.
13.3 NOTICES, ETC.
All notices, requests, demands or other communications required by or
otherwise with respect to this Agreement shall be in writing and shall be deemed
to have been duly given to any party when delivered personally (by courier
service or otherwise), when delivered by facsimile and confirmed by return
facsimile, or seven days after being mailed by first-class mail, postage prepaid
and return receipt requested in each case to the applicable addresses set forth
below:
IF TO SELLER, ICP OR CHL,
OR IF TO THE COMPANY ON OR BEFORE
THE CLOSING DATE: WITH A COPY TO:
David P. Cain John Stevens
Senior Vice President Osler Hoskin & Harcourt
General Counsel and Secretary 30 W 280 Park Avenue
Inter-City Products New York, NY 10017
Corporation (USA) Telephone: (212) 867-5800
650 Heil-Quaker Avenue Facsimile: (212) 867-5802
Lewisburg, TN 37091
Telephone: (615) 270-4136
Facsimile: (615) 270-4220
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<PAGE> 67
IF TO BUYER,
OR IF TO THE COMPANY AFTER
THE CLOSING DATE: WITH A COPY TO:
Brian W. Dunham Jonathan A. Ater
Executive Vice President Ater Wynne Hewitt Dodson & Skerritt
and Chief Financial 222 S.W. Columbia, Suite 1800
Officer Portland, OR 97201
Northwest Pipe Company Telephone: (503) 226-1191
12005 N. Burgard Facsimile: (503) 226-0079
PO Box 83149
Portland, OR 97283-0149
Telephone: (503) 285-1400
Facsimile: (503) 285-6615
or to such other address as such party shall have designated by notice so given
to each other party.
13.4 ATTORNEYS' FEES
If a Proceeding is filed by any party to enforce this Agreement or
otherwise with respect to the subject matter of this Agreement, the prevailing
party or parties shall be entitled to recover reasonable attorneys' fees
incurred in connection with such Proceeding as fixed by the trial court, and if
any appeal is taken from the decision of the trial court, reasonable attorneys'
fees as fixed by the appellate court.
13.5 SEVERABILITY
If any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall not be in any
way impaired. The foregoing shall be construed to supplement, and not in any way
limit, the provisions of Section 10.3.
13.6 REMEDIES
13.6.1 In addition to any other remedies which Buyer may have at law or
in equity, including money damages, Seller and the Company hereby agree that
Buyer shall have the right to have all obligations, undertakings, agreements,
covenants and other provisions of this Agreement specifically performed by
Seller or the Company, as the case may be, and that subject to any provisions of
this Agreement relating to venue, Buyer shall have the right to obtain an order
or decree of such specific performance in any of the courts of the United States
or of any state or other political subdivision thereof.
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<PAGE> 68
13.6.2 Except as provided in Section 2.3 or Section 7.4 or as otherwise
expressly provided herein, all rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any right, power of remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
13.6.3 The foregoing provisions of this Section 13.6 shall be construed
to supplement, and not in any way limit, the provisions of Section 10.4.
13.7 NO THIRD-PARTY BENEFICIARIES
Subject to Section 13.10.3 below, this Agreement is not intended to be
for the benefit of and shall not be enforceable by any Person who or which is
not a party hereto other than Thompson Sub, which shall have the right to
enforce the provisions of Article 10 as if it was a party hereto.
13.8 JURISDICTION
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the District of Oregon or, if such court
does not have jurisdiction over such matter, to the applicable state court in
Multnomah County, Oregon, in any Proceeding arising in connection with this
Agreement and agrees that, except as otherwise provided in Section 2.3 and
Section 7.4, any such Proceeding shall be brought only in such court (and waives
any objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this Section and shall not be deemed to be a general
submission to the jurisdiction of said courts or the State of Oregon other than
for such purpose. Each party hereto consents to service of process in any
Proceeding through the procedures provided for notice in this Agreement.
13.9 GOVERNING LAW
This Agreement and all disputes hereunder shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Colorado, without regard to principles of conflict of laws.
13.10 ASSIGNMENT AND BINDING EFFECT
13.10.1 Buyer shall have the right to assign this Agreement, in whole
or in part, to any Affiliate of Buyer or to designate any of its Affiliates (to
the extent permitted by law) to receive directly the Shares and/or the Purchased
Net Intercompany Indebtedness or to exercise any of the rights of Buyer, or to
perform any of its obligations. Except as provided in the preceding sentence,
Seller, the Company and Buyer shall not assign this Agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of the
63 - STOCK PURCHASE AGREEMENT
<PAGE> 69
other parties hereto, and any such assignment contrary to the terms hereof shall
be null and void and of no force and effect. In no event shall the assignment by
Seller, the Company or Buyer of its respective rights or obligations under this
Agreement, whether before or after the Closing, release Seller, the Company or
Buyer from its respective liabilities and obligations hereunder.
13.10.2 Buyer shall notify Seller and the Company at least three (3)
business days prior to the Closing in whose name the certificates representing
the Shares are to be transferred, if other than Buyer. Prior to or upon delivery
of such certificates, such Affiliate shall execute and deliver to Buyer, Seller
and the Company representations, warranties and covenants substantially to the
effect as set forth in Section 6.5 hereof.
13.10.3 Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
13.11 JOINT AND SEVERAL OBLIGATIONS
Each of the obligations and liabilities of ICP and CHL as "Seller"
under this Agreement shall be joint and several and each of the obligations and
liabilities of ICP, CHL and the Company as "Warranting Parties" under this
Agreement shall be joint and several.
13.12 ENTIRE AGREEMENT
This Agreement (including the exhibits and schedules hereto and the
documents and instruments referred to herein), together with a confidential
letter agreement of even date herewith between ICP and Buyer, constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof (other than as provided in the Confidentiality Agreement).
13.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies,
each signed by less than all, but together signed by all, the parties hereto.
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<PAGE> 70
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties set forth below.
BUYER: NORTHWEST PIPE COMPANY
By /s/ William R. Tagmyer
--------------------------------------------
William R. Tagmyer, President and CEO
ICP: INTER-CITY PRODUCTS CORPORATION
By /s/ Cameron Turner
--------------------------------------------
Cameron Turner, Senior Vice President
CHL: CHL HOLDINGS, INC.
By /s/ Arindra Singh
--------------------------------------------
Printed Name: Arindra Singh
-------------------------------
Title: Senior Vice President
-------------------------------------
THE COMPANY: THOMPSON PIPE AND STEEL COMPANY
By /s/ Arindra Singh
--------------------------------------------
Printed Name: Arindra Singh
-------------------------------
Title: Senior Vice President
-------------------------------------
65 - STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
NORTHWEST PIPE COMPANY,
THOMPSON PIPE AND STEEL COMPANY
AND
THOMPSON STEEL PIPE COMPANY
(AS BORROWERS)
DATED: MAY 31, 1996
<PAGE> 2
TABLE OF CONTENTS
Section Page
SECTION 1. Definitions......................................... 1
SECTION 2. Conditions Precedent................................ 20
SECTION 3. Revolving Loans..................................... 27
SECTION 4. Capital Expenditure Term Loans...................... 31
SECTION 5. Letters of Credit................................... 34
SECTION 6. Collateral.......................................... 38
SECTION 7. Representations, Warranties and Covenants........... 42
SECTION 8. Interest, Fees and Expenses......................... 55
SECTION 9. Powers.............................................. 61
SECTION 10. Events of Default and Remedies..................... 62
SECTION 11. Guaranty of Obligations............................ 66
SECTION 12. Termination........................................ 70
SECTION 13. Miscellaneous...................................... 71
i
<PAGE> 3
EXHIBITS
Exhibit A - Form of Promissory Note (Capex Loan)
Exhibit B - Intentionally Omitted
Exhibit C - Form of Promissory Note (Revolving Loan)
Exhibit D - Form of Perfection Certificate
Exhibit E - Congress Indemnification
Schedule 1 - List of Inventory Locations
Schedule 2 - Trade Names
Schedule 3 - Patents, Trademarks and Copyrights
Schedule 4 - Permitted Encumbrances
Schedule 5 - Litigation Schedule
Schedule 6 - Pledged Stock
ii
<PAGE> 4
AMENDED AND RESTATED FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 300 South Grand Avenue, Los
Angeles, CA 90071, is pleased to confirm the terms and conditions under which
CITBC shall make capital expenditure term loans, revolving loans, advances and
other financial accommodations to NORTHWEST PIPE COMPANY ("Northwest Pipe"), an
Oregon corporation with a principal place of business at 12005 N. Burgard,
Portland, Oregon 97283, THOMPSON PIPE AND STEEL COMPANY ("Thompson Pipe"), a
Colorado corporation with a principal place of business at 6030 N. Washington
Street, Denver, Colorado 80217, and THOMPSON STEEL PIPE COMPANY ("Thompson
Steel"), a Delaware corporation with a principal place of business at 100
Thompson Pipe Road, Princeton, Kentucky 42445. Northwest Pipe, Thompson Pipe and
Thompson Steel are sometimes referred to herein, individually, as a "Company"
and, collectively, as the "Companies". This Amended and Restated Financing
Agreement (this "Financing Agreement") amends and restates in full that certain
Financing Agreement dated August 17, 1994 between CITBC and Northwest Pipe, as
amended.
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Companies' now existing and future: (a) accounts
receivable, (whether or not specifically listed on schedules furnished to
CITBC), and any and all instruments, documents, contract rights, chattel paper,
general intangibles, including, without limitation, all accounts created by or
arising from all of the Companies' sales of goods or rendition of services to
its customers (including without limitation from the lease or rental of goods),
and all accounts arising from sales or rendition of services (including without
limitation from the lease or rental of goods) made under any of the Companies'
trade names or styles, or through any of the Companies' divisions; (b) unpaid
seller's or lessor's rights
<PAGE> 5
(including rescission, replevin, reclamation and stoppage in transit) relating
to the foregoing or arising therefrom; (c) rights to any goods represented by
any of the foregoing, including rights to returned or repossessed goods; (d)
reserves and credit balances arising hereunder; (e) guarantees or collateral for
any of the foregoing; (f) insurance policies or rights relating to any of the
foregoing; and (g) cash and non-cash proceeds of any and all the foregoing.
ANNIVERSARY DATE shall mean the date occurring one (1) year from April 30, 1996
and the same date in every year thereafter.
AVAILABILITY shall mean the aggregate of Northwest Pipe Availability and
Thompson Pipe Availability.
AVAILABILITY RESERVE shall mean (i) a three (3) month reserve for unpaid rental
or similar charges for any facility for which a Company fails to obtain a
landlord's waiver or mortgagee's waiver in form and substance satisfactory to
CITBC (described in Section 2(p)), and (ii) any reserve which CITBC may require
from time to time pursuant to the explicit terms of this Financing Agreement,
including without limitation for Letters of Credit pursuant to Paragraph 5.1 of
Section 5 hereof.
BUSINESS DAY shall mean (a) for all purposes other than those covered by clause
(b) below, any day that CITBC and Chemical Bank are open for business excluding
Saturday, Sunday and any day that either is a legal holiday under the laws of
the State of New York or the State of California or is a day on which banking
institutions located in such state are closed and (b) with respect to all
notices, determinations, fundings and payments in connection with Libor, any
date that is a Business Day as described in clause (a) above that is also a day
for trading by and between banks in dollar deposits in the applicable interbank
Libor market.
2
<PAGE> 6
CAPEX AVAILABILITY shall mean, at any time of determination, the excess of the
Capex Line over the outstanding aggregate amount of Capex Loans.
CAPEX LINE shall mean the commitment of CITBC to extend one or more Capex Loans
to the Companies pursuant to Section 4 of this Financing Agreement in the
aggregate amount of up to $12,000,000.00; provided, however, that CITBC is not
obligated to make a requested Capex Loan at a time when the amount of the
requested Capex Loan, when added to the aggregate amount of Capex Loans,
Revolving Loans and Letters of Credit then outstanding, would exceed
$32,000,000. The Capex Line shall be automatically and permanently reduced
dollar-for-dollar by the amount of any and all principal repayments on
outstanding Capex Loans. In addition, as of each Calculation Date (as defined
below), in the event the Companies do not borrow one or more Capex Loans in the
aggregate amount equal to or exceeding the Target Amount (as defined below) as
of such date, the Capex Line shall be automatically and permanently reduced
dollar-for-dollar by the positive difference between the Target Amount as of the
relevant Calculation Date and the aggregate amount of all Capex Loans made by
CITBC to the Companies as of such Calculation Date. As used herein, "Calculation
Date" shall mean each June 30th and December 31st of each year, commencing with
December 31, 1996 ("Initial Calculation Date"). The "Target Amount" shall mean
the amount of $1,200,000.00 multiplied by the number of six month periods
elapsed as of the relevant Calculation Date (e.g., as of the Initial Calculation
Date, the Target Amount shall be equal to $1,200,000.00 multiplied by 1; as of
the next succeeding Calculation Date, the Target Amount shall be equal to
$1,200,000.00 multiplied by 2).
CAPEX LOANS shall mean the capital expenditure term loans which may be made by
CITBC to the Companies within the Capex Line pursuant to the request of the
Companies as set forth in Section 4 of this Financing Agreement.
3
<PAGE> 7
CAPEX LOANS CHEMICAL RATE MARGIN shall mean the percentage determined in
accordance with this definition. As of the date of an interest rate
determination, if i) the Companies' latest financial statements reflecting the
most recently ended fiscal quarter (the "Relevant Financial Statements") have
been timely delivered in accordance with paragraph 7.8 of Section 7 of this
Financing Agreement and CITBC has had reasonable time to review such financial
statements to its satisfaction ("Financial Statement Test") and ii) the
Companies' Leverage Ratio for the most recently ended fiscal quarter did not
exceed 1.5 to 1 ("Leverage Ratio Test") and iii) from and after the quarter
ending September 30, 1996, the Companies maintained a Fixed Charge Coverage
Ratio for the most recently ended fiscal quarter of at least 2.0 to 1 ("Fixed
Charge Coverage Ratio Test"), the Capex Loans Chemical Rate Margin shall be
equal to one-quarter of one percent (1/4 of 1%). If, as of the date of an
interest rate determination, the Companies do not satisfy the Financial
Statement Test, the Leverage Ratio Test, and, if applicable, the Fixed Charge
Coverage Ratio Test, the Capex Loans Chemical Rate Margin shall be equal to
one-half of one percent (1/2 of 1%). The Capex Loans Chemical Rate Margin
determined as of any date shall remain in effect until such time as the
Companies' satisfaction of the Financial Statement Test, the Leverage Ratio
Test, and the Fixed Charge Coverage Ratio Test can be determined for the next
succeeding fiscal quarter. Any change in the Capex Loans Chemical Rate Margin
shall be effective on the first day of the month following the date that the
relevant Financial Statement Test has been completed. If the Companies fail to
timely deliver to CITBC the Relevant Financial Statements, the Capex Loans
Chemical Rate Margin shall be equal to one-half of one percent (1/2 of 1%) until
such time that the Relevant Financial Statements are delivered to CITBC and the
Capex Loan Chemical Rate Margin can be determined in accordance with the
preceding provisions of this definition.
CAPEX LOANS LIBOR MARGIN shall mean the percentage determined in accordance with
this definition. As of the date of an interest
4
<PAGE> 8
rate determination, if i) the Companies' latest financial statements reflecting
the most recently ended fiscal quarter (the "Relevant Financial Statements")
have been timely delivered in accordance with paragraph 7.8 of Section 7 of this
Financing Agreement and CITBC has had reasonable time to review such financial
statements to its satisfaction ("Financial Statement Test") and ii) the
Companies' Leverage Ratio for the most recently ended fiscal quarter did not
exceed 1.5 to 1 ("Leverage Ratio Test") and iii) from and after the quarter
ending September 30, 1996, the Companies maintained a Fixed Charge Coverage
Ratio for the most recently ended fiscal quarter of at least 2.0 to 1 ("Fixed
Charge Coverage Ratio Test"), the Capex Loans Libor Margin shall be equal to two
and one-half percent (2 1/2%). If, as of the date of an interest rate
determination, the Companies do not satisfy the Financial Statement Test, the
Leverage Ratio Test, and, if applicable, the Fixed Charge Coverage Ratio Test,
the Capex Loans Libor Margin shall be equal to three percent (3%). Each Capex
Loans Libor Margin as determined in accordance with this definition for a
particular Libor Loan shall remain in effect during the entire Libor Period
therefor.
CAPEX PROMISSORY NOTE shall mean the note, in the form of Exhibit A attached
hereto, delivered by either Northwest Pipe or Thompson Pipe to CITBC, to
evidence each Capex Loan made pursuant to, and which are repayable in accordance
with, the provisions of Section 4 of this Financing Agreement.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Companies.
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CHEMICAL BANK RATE shall mean the rate of interest per annum announced by
Chemical Bank from time to time as its prime rate in effect at its principal
office in the City of New York. (The prime rate is not intended to be the lowest
rate of interest charged by Chemical Bank to its borrowers).
CHEMICAL RATE LOANS shall mean all or any portion of the Revolving Loans and/or
Capex Loans for which the Chemical Bank Rate is used for interest rate
calculations together with the applicable Chemical Rate Margin.
CHEMICAL RATE MARGIN shall mean, depending on the context, the Revolving Loan
Chemical Rate Margin or the Capex Loans Chemical Rate Margin.
CLOSING DATE shall mean the date on which each of the conditions precedent in
Section 2 hereof have been satisfied, as determined by CITBC in its reasonable
business judgment.
COLLATERAL shall have the meaning given to that term in paragraph 6.1 of Section
6 of this Financing Agreement.
COLLATERAL MANAGEMENT FEE shall mean the sum of $50,000.00 which shall be paid
to CITBC in accordance with paragraph 8.8 of Section 8 hereof to offset the
expenses and costs of CITBC in connection with record keeping, periodic
examinations, analyzing and evaluating the Collateral.
CONGRESS INDEMNIFICATION shall mean that certain Letter of Credit Indemnity
Agreement given by CITBC in favor of Congress Financial Corporation, a copy of
which is attached hereto as Exhibit E.
CONSOLIDATED BALANCE SHEET shall mean a Consolidated Balance Sheet for Northwest
Pipe and its consolidated subsidiaries, eliminating all inter-company
transactions and prepared in accordance with GAAP.
CONTRACT RATE shall mean, as to a particular loan, advance, or accommodation
made pursuant to Section 3, 4, or 5 hereunder, the rate(s) of interest computed
as applicable and set forth in Section 8 of this Financing Agreement.
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<PAGE> 10
CURRENT ASSETS shall mean, wherever used throughout this Financing Agreement,
those assets of the Companies which in accordance with GAAP, are classified as
"current".
CURRENT LIABILITIES shall mean, wherever used throughout this Financing
Agreement, those liabilities of the Companies which in accordance with GAAP, are
classified as "current", provided, however, that notwithstanding GAAP, the
Revolving Loans and the current portion of Permitted Indebtedness shall be
considered "Current Liabilities".
CUSTOMARILY PERMITTED LIENS shall mean:
(a) liens of local or state authorities for franchise or
other like taxes (excluding real property taxes) provided the aggregate amounts
of such liens shall not exceed $100,000.00 in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other like liens imposed by law,
created in the ordinary course of business and for amounts not yet due (or which
are being contested in good faith by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such
liens) and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary
course of business (including, without limitation, security deposits for leases,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to secure
the performance of tenders, bids contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; and
(d) easements (including, without limitation, reciprocal
easement agreements and utility agreements), encroachments, minor defects or
irregularities in title,
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<PAGE> 11
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate and which are listed in Schedule B of the
title insurance policy delivered to CITBC as provided herein.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of i) three percent (3%) and ii) the Contract Rate.
DOCUMENTATION FEE shall mean, CITBC's standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral with
respect to this Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future warehouse receipts, bills
of lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
Financing Agreement or the Line of Credit which date is prior to the third
Anniversary Date.
EARLY TERMINATION FEE shall: i) mean the fee CITBC is entitled to charge the
Companies in the event the Companies terminate the Line of Credit or this
Financing Agreement on a date prior to the third Anniversary Date (on and after
the third Anniversary Date, no Early Termination Fee shall be payable hereunder)
and ii) be determined by calculating the aggregate average daily balances
outstanding under the Revolving Loans, Capex Loans and Letters of Credit for the
period from the Original Closing Date to the Early Termination Date and
multiplying that number by a) one percent (1%) if the Early Termination Date is
prior to the first Anniversary Date and b) one-half of one percent (.50%) if the
Early Termination Date is on or after the first Anniversary Date but prior to
the third Anniversary Date. Notwithstanding
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<PAGE> 12
anything herein to the contrary, after the first Anniversary Date, this
Financing Agreement may be terminated without penalty, upon the sale of fifty
percent (50%) or more of the outstanding common stock of Northwest Pipe to an
unrelated person, entity or corporation (for purposes hereof, any such
corporation or entity shall be deemed "unrelated" if it is not an affiliate of
the Companies and if none of the shareholders, officers, or directors of any of
the Companies have any equity or interest in any such entity or corporation).
EBIT shall mean, for any period, all earnings of the Companies before all
interest and tax obligations of the Companies for said period, determined in
accordance with GAAP.
EBITDA shall mean, EBIT for any period plus i) depreciation for said period, and
ii) amortization for said period, all in accordance with GAAP.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean, collectively, Eligible Northwest Pipe
Accounts Receivable and Eligible Thompson Pipe Accounts Receivable.
ELIGIBLE INVENTORY shall mean, collectively, Eligible Northwest Pipe Accounts
Receivable and Eligible Thompson Pipe Accounts Receivable.
ELIGIBLE NORTHWEST PIPE ACCOUNTS RECEIVABLE shall mean the gross amount of
Northwest Pipe's Accounts that conform to the warranties contained herein and at
all times continue to be acceptable to CITBC in the exercise of its reasonable
business judgment, less, without duplication, the sum of a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and b) reserves for: i) sales, services or leases to the
United States of America or Canada or to any agency, department or division
thereof, except for any such sales for which Northwest Pipe has complied with
the Assignment of Claims Act or the applicable Canadian federal or provincial
statutes concerning assignment, to CITBC's reasonable satisfaction; ii) foreign
sales, services or leases, other than sales, services or leases (y) to customers
residing in Canada, provided such transactions otherwise comply with all of the
other criteria for eligibility hereunder, and such transactions do not
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<PAGE> 13
exceed $4,000,000.00 in U.S. Dollars in the aggregate with Thompson Pipe at any
one time, and (z) secured by stand-by letters of credit (in form and substance
satisfactory to CITBC) issued or confirmed by, and payable at, banks having a
place of business in the United States of America and payable in United States
currency; iii) Accounts that remain unpaid more than ninety (90) days from
invoice date or sixty (60) days from the due date thereof; iv) contras; v)
sales, services or leases to any subsidiary of Northwest Pipe, or to any company
affiliated with Northwest Pipe in any way; vi) consignment sales; vii) sales,
services or leases to any customer which is A) insolvent, B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, C) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts
or D) financially unacceptable to CITBC or has a credit rating unacceptable to
CITBC in the exercise of its reasonable business judgment; viii) all sales,
services or leases to any customer if fifty percent (50%) or more of the
aggregate dollar amount of all outstanding invoices from such customer, are
unpaid more than ninety (90) days from invoice date; ix) any other reasons
deemed necessary by CITBC in its reasonable business judgment and which are
customary either in the commercial finance industry or in the lending practices
of CITBC; x) an amount representing, historically, returns, discounts, claims,
credits and allowances; xi) any Accounts arising from the sale, lease or rental
of goods for which a customer shall have objected to the quality or quantity of
goods or services of Northwest Pipe, or where such customer shall have rejected,
returned or refused to accept such goods or services; xii) advance deposits,
pre-billed receivables and receivables arising from progress billing (excluding
receivables arising from requirements contracts for which Northwest Pipe has
delivered Inventory or for Inventory which is "complete in the yard or storage",
if applicable, and issued an applicable invoice therefor, and the underlying
agreement with the account debtor is otherwise satisfactory to CITBC in its
reasonable business judgement); and xiii) bill and hold or deferred shipment
sales, provided that bill and hold sales shall be deemed eligible if they arise
from bona fide agreements whose sale terms provide that such sales are
consummated when the purchased inventory is "complete in yard or storage," and
provided that (A) such sale is made in the ordinary
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course of business of Northwest Pipe, (B) any such sale shall be documented in
form and substance satisfactory to CITBC, (C) the underlying Inventory is in the
exclusive possession of Northwest Pipe and located on Northwest Pipe's fee
premises or Portland, Oregon facility or at a facility for which CITBC has
received a waiver of lien letter in form and substance satisfactory to CITBC,
(D) the advance rate for any such bill and hold or deferred shipment sales shall
be based on the provisions of paragraph 3.1(a)(i), (E) the underlying Inventory
shall be segregated from Northwest Pipe's other Inventory, and (F) such Accounts
are paid within sixty (60) days of the invoice date.
ELIGIBLE NORTHWEST PIPE INVENTORY shall mean the gross amount of Northwest
Pipe's Inventory, provided that all such Inventory conforms to the warranties
contained herein, and which at all times continues to be acceptable to CITBC in
the exercise of its reasonable business judgment, less any work-in-process,
supplies (other than raw material), goods not present in the United States of
America, goods returned or rejected by Northwest Pipe's customers other than
goods that are undamaged and resalable in the normal course of business, goods
to be returned to Northwest Pipe's suppliers, goods in transit to third parties
(other than Northwest Pipe's agents or warehouses) and less any reserves
required by CITBC in its reasonable discretion for special order goods, market
value declines and/or consignment sales.
ELIGIBLE THOMPSON PIPE ACCOUNTS RECEIVABLE shall mean the gross amount of
Thompson Pipe's Accounts that conform to the warranties contained herein and at
all times continue to be acceptable to CITBC in the exercise of its reasonable
business judgment, less, without duplication, the sum of a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and b) reserves for: i) sales, services or leases to the
United States of America or Canada or to any agency, department or division
thereof, except for any such sales for which Thompson Pipe has complied with the
Assignment of Claims Act or the applicable Canadian federal or provincial
statutes concerning assignment, to CITBC's reasonable satisfaction; ii) foreign
sales, services or leases, other than sales, services or leases (y) to customers
residing in Canada, provided such transactions otherwise comply with all of the
other criteria for eligibility hereunder, and such transactions do not
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<PAGE> 15
exceed $4,000,000.00 in U.S. Dollars in the aggregate with Northwest Pipe at any
one time, and (z) secured by stand-by letters of credit (in form and substance
satisfactory to CITBC) issued or confirmed by, and payable at, banks having a
place of business in the United States of America and payable in United States
currency; iii) Accounts that remain unpaid more than ninety (90) days from
invoice date or sixty (60) days from the due date thereof; iv) contras; v)
sales, services or leases to any subsidiary of Thompson Pipe, or to any company
affiliated with Thompson Pipe in any way; vi) consignment sales; vii) sales,
services or leases to any customer which is A) insolvent, B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, C) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts
or D) financially unacceptable to CITBC or has a credit rating unacceptable to
CITBC in the exercise of its reasonable business judgment; viii) all sales,
services or leases to any customer if fifty percent (50%) or more of the
aggregate dollar amount of all outstanding invoices from such customer, are
unpaid more than ninety (90) days from invoice date; ix) any other reasons
deemed necessary by CITBC in its reasonable business judgment and which are
customary either in the commercial finance industry or in the lending practices
of CITBC; x) an amount representing, historically, returns, discounts, claims,
credits and allowances; xi) any Accounts arising from the sale, lease or rental
of goods for which a customer shall have objected to the quality or quantity of
goods or services of Thompson Pipe, or where such customer shall have rejected,
returned or refused to accept such goods or services; xii) advance deposits,
pre-billed receivables and receivables arising from progress billing (excluding
receivables arising from requirements contracts for which Thompson Pipe has
delivered Inventory or for Inventory which is "complete in the yard or storage",
if applicable, and issued an applicable invoice therefor, and the underlying
agreement with the account debtor is otherwise satisfactory to CITBC in its
reasonable business judgement); and xiii) bill and hold or deferred shipment
sales, provided that bill and hold sales shall be deemed eligible if they arise
from bona fide agreements whose sale terms provide that such sales are
consummated when the purchased inventory is "complete in yard or storage," and
provided that (A) such sale is made in the ordinary
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course of business of Thompson Pipe, (B) any such sale shall be documented in
form and substance satisfactory to CITBC, (C) the underlying Inventory is in the
exclusive possession of Thompson Pipe and located at Thompson Pipe's Denver,
Colorado facility or at a facility for which CITBC has received a waiver of lien
letter in form and substance satisfactory to CITBC, (D) the advance rate for any
such bill and hold or deferred shipment
sales shall be based on the provisions of paragraph 3.1(b)(i), (E) the
underlying Inventory shall be segregated from Thompson Pipe's other Inventory,
and (F) such Accounts are paid within sixty (60) days of the invoice date.
ELIGIBLE THOMPSON PIPE INVENTORY shall mean the gross amount of Thompson Pipe's
Inventory, provided that all such Inventory conforms to the warranties contained
herein, and which at all times continues to be acceptable to CITBC in the
exercise of its reasonable business judgment, less any work-in-process, supplies
(other than raw material), goods not present in the United States of America,
goods returned or rejected by Thompson Pipe's customers other than goods that
are undamaged and resalable in the normal course of business, goods to be
returned to Thompson Pipe's suppliers, goods in transit to third parties (other
than Thompson Pipe's agents or warehouses) and less any reserves required by
CITBC in its reasonable discretion for special order goods, market value
declines and/or consignment sales.
EQUIPMENT shall mean all of the Companies' present and hereafter acquired
machinery, equipment, furnishings and fixtures, and all additions, substitutions
and replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds of whatever sort.
EQUITY RIGHTS shall mean, with respect to any person, any outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including any stockholders' or voting trust agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such person.
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ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
FIXED CHARGE COVERAGE RATIO shall mean EBITDA divided by Fixed Charges. (For the
purposes hereof, "Fixed Charges" shall mean Interest Expense, plus principal
payments on Capex Loans plus principal payments on Permitted Indebtedness plus
non-financed Capital Expenditures).
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Companies
modify their accounting procedures as applied as of the Closing Date, the
Companies shall provide such statements of reconciliation as shall be in form
and substance acceptable to CITBC. Notwithstanding the foregoing, Borrowers and
CITBC agree that, upon any change in GAAP affecting the computations used in
determining compliance with the financial covenants herein, Borrowers and CITBC
will reset such financial covenants so as to make the required performance of
the Companies consistent with the required performance prior to such change in
GAAP.
GENERAL INTANGIBLES shall have the meaning set forth in the Uniform Commercial
Code as in effect in the State of California and shall include, without
limitation, (i) all present and future right, title and interest in and to all
trade names, trademarks (together with the goodwill associated therewith),
copyrights, patents, licenses, customer lists, distribution agreements, supply
agreements and tax refunds, together with all monies and claims for monies now
or hereafter due and payable in connection with any of the foregoing or
otherwise, and all cash and non-cash proceeds thereof, including without
limitation the proceeds of any licensing agreements between any Company and any
licensee of any of such Company's General Intangibles, and (ii) all rights,
remedies, indemnities and other benefits of the Companies under the Stock
Purchase Agreement, including, but not limited to, all general intangibles for
money due or to become due.
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INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise due or owing to third parties) or for the deferred
purchase price of property, services or assets, other than Inventory, or (b)
lease obligations which, in accordance with GAAP, have been or should be
capitalized.
INTEREST EXPENSE shall mean total interest obligations (paid or accrued) of the
Companies, determined in accordance with GAAP on a basis consistent with the
latest audited statements of the Companies.
INVENTORY shall mean all of the Companies' present and hereafter acquired
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods wherever
located, and materials used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all proceeds thereof of whatever sort.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Companies and any other
Letters of Credit for which CITBC has agreed to issue a Letter of Credit
Guaranty. Letters of Credit shall include, for so long as they are in effect,
the letters of credit which are the subject of the Congress Indemnification.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CITBC to the
Issuing Bank of a Company's reimbursement obligation under the Issuing Bank's
reimbursement agreement, Application for Letter of Credit or other like
document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC shall charge the
Companies under paragraph 8.11 of Section 8 of this Financing Agreement for: i)
issuing Letter of Credit Guaranties or ii) otherwise aiding the Companies in
obtaining Letters of Credit pursuant to section 5 hereof.
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LEVERAGE RATIO shall mean the ratio determined by dividing Total Liabilities by
Net Worth.
LIBOR or LIBOR RATE shall mean, at any time of determination for each applicable
Libor Period, the then highest prevailing London Interbank Offered Rate paid in
London on one (1) month, two (2) month, three (3) month or six (6) month dollar
deposits from other banks as (x) quoted by Chemical Bank, (y) published two (2)
days prior to the commencement of the applicable Libor Period under "Money Rate"
in the New York City edition of The Wall Street Journal or, if there is no such
publication or statement therein as to a Libor, then in any publication used in
the New York City financial community which was published two (2) days prior to
the commencement of the applicable Libor Period, or (z) determined by CITBC
based on information presented on Telerate Systems at Page 3750 as of 11:00 A.M.
London time.
LIBOR LOANS shall mean all or any portion of the Revolving Loans and/or Capex
Loans for which the Libor Rate is used for interest rate calculations together
with the applicable Libor Margin.
LIBOR MARGIN shall mean, depending on the context, the Revolving Loans Libor
Margin or the Capex Loans Libor Margin.
LIBOR PERIOD shall mean the one (1) month, two (2) month, three (3) month or six
(6) month Libor Period with respect to Libor Loans, as selected by the Companies
pursuant to Section 8 of this Financing Agreement.
LIBOR PREPAYMENT PENALTY shall mean, for any payment of principal of any Libor
Loan prior to the end of an applicable Libor Period, an amount computed pursuant
to the following formula:
(R - T) x P x D
---------------
360
R = interest rate applicable to the Libor Loan
T = effective interest rate per annum at which
any readily marketable bonds or other
obligations of the United States,
selected at CITBC's discretion using
reasonable business judgment, maturing
on or near the
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last day of the then
applicable Libor Period and in
approximately the same principal amount
as such Libor Loan can be purchased by
CITBC on the day of such prepayment of
principal
P = the amount of principal prepaid
D = the number of days remaining in the Libor
Period as of the date of such prepayment
The Companies shall pay such amount within five (5) Business
Days of presentation by CITBC to the Companies of a
statement setting forth the amount and CITBC's calculation
thereof pursuant hereto, which statement shall be conclusive
on the Companies absent manifest error.
LIBOR TRANCHE shall mean the whole or any portion of the Revolving Loans and/or
Capex Loans for which a Libor selection, continuation, or conversion from a
Chemical Rate Loan was made by the Companies.
LINE OF CREDIT shall mean the aggregate commitment of CITBC to make loans and
advances to the Companies pursuant to Sections 3, 4 and 5 of this Financing
Agreement in the aggregate amount of $32,000,000.00.
LINE OF CREDIT FEE shall mean the fee due CITBC at the end of each month for the
Line of Credit and shall be calculated by: multiplying (a) the difference
between (i) the Revolving Line of Credit, and (ii) the sum of (A) the average
daily Revolving Loans for said month plus (B) the average daily balance of
outstanding Letters of Credit of the Companies for said month; times (b)
one-quarter of one percent (1/4 of 1%) per annum for the number of days in said
month based on a 360 day year.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, the
Congress Indemnification, the mortgages and/or deeds of trust, any other
documents and the ancillary loan and security agreements executed from time to
time in connection with this Financing Agreement, as the same may be renewed,
amended, extended, increased or supplemented from time to time.
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NET WORTH shall mean, at any date of determination, an amount equal to (a) the
Total Assets of the Companies minus (b) Total Liabilities of the Companies.
NORTHWEST PIPE AVAILABILITY shall mean at any time the difference, if positive,
between: (a) the sum of i) Eligible Northwest Pipe Accounts Receivable
multiplied by the percentage provided for in paragraph 3.1(a)(i) of Section 3 of
this Financing Agreement, ii) Northwest Pipe Unbilled Accounts Receivables
multiplied by the percentage provided for in paragraph 3.1(a)(ii) of Section 3
of this Financing Agreement; and iii) Eligible Northwest Pipe Inventory
multiplied by the percentage provided for in paragraph 3.1(a)(iii) of Section 3
of this Financing Agreement; less (b) the sum of, without duplication i) the
outstanding aggregate amount of all Obligations (excluding the Capex Loans) of
Northwest Pipe, ii) the portion of the Availability Reserve applicable to
Northwest Pipe, and iii) the amount of any overadvance to Thompson Pipe.
OBLIGATIONS shall mean all loans and advances made or to be made by CITBC to the
Companies or to others for the Companies' account; any and all indebtedness and
obligations which may at any time be owing by the Companies to CITBC howsoever
arising, whether now in existence or incurred by the Companies from time to time
hereafter, including without limitation, the Congress Indemnification; whether
secured by pledge, lien upon or security interest in any of the Companies'
assets or property or the assets or property of any other person, firm, entity
or corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Companies are
liable to CITBC for such indebtedness as principal, surety, endorser, guarantor
or otherwise. Obligations shall also include indebtedness owing to CITBC by the
Companies under this Financing Agreement, any other Loan Documents or under any
other agreement or arrangement now or hereafter entered into between any Company
and CITBC; indebtedness or obligations incurred by, or imposed on, CITBC as a
result of environmental claims (other than as a result of actions of CITBC)
arising out of the Companies' operation, premises or waste disposal practices or
sites; the Companies' liability to CITBC as maker or endorser on any promissory
note or other instrument for the payment of money; the Companies'
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liability to CITBC under any instrument of guaranty or indemnity, or arising
under any guaranty, endorsement or undertaking which CITBC may make or issue to
others for the Companies' account, including any accommodation extended with
respect to applications for Letters of Credit, CITBC's acceptance of drafts or
CITBC's endorsement of notes or other instruments for the Companies' account and
benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
ORIGINAL CLOSING DATE shall mean August 17, 1994.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and future
out-of-pocket expenses incurred relative to this Financing Agreement or any
other Loan Documents, whether incurred heretofore or hereafter, which expenses
shall include, without being limited to, the cost of record searches, all costs
and expenses incurred by CITBC in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges imposed on CITBC due to
"insufficient funds" of deposited checks and CITBC's standard fee relating
thereto, any amounts paid by CITBC, incurred by or charged to CITBC by the
Issuing Bank under a Letter of Credit Guaranty or a Company's reimbursement
agreement, application for Letter of Credit or other like document which pertain
either directly or indirectly to such Letters of Credit, and CITBC's standard
fees relating to the Letters of Credit and any drafts thereunder, any reasonable
outside counsel fees and disbursements, title insurance premiums, real estate
survey costs, fees and taxes relative to the filing of financing statements,
costs of preparing and recording mortgages/deeds of trust against the Real
Estate and all expenses, costs and fees set forth in paragraph 10.3 of Section
10 of this Financing Agreement.
PERFECTION CERTIFICATE shall mean the certificate in the form of Exhibit D,
signed by each Company in connection with this Financing Agreement and delivered
to CITBC, in form and substance satisfactory to CITBC.
PERMITTED ENCUMBRANCES shall mean: i) liens set forth on Schedule 4 as of the
Closing Date and any other liens expressly
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permitted, or consented to in writing, by CITBC; ii) Purchase Money Liens; iii)
Customarily Permitted Liens; iv) liens granted CITBC by the Companies; v) liens
of judgment creditors provided such liens do not exceed, in the aggregate, at
any time, $100,000.00 (other than liens bonded or insured to the reasonable
satisfaction of CITBC); vi) the liens granted to GECC, Standard Insurance and
CITEF, as in effect as of the Original Closing Date; vii) the first lien on
Equipment and Real Estate of Thompson Steel in Princeton, Kentucky, created in
connection with the Bonds (defined below), and viii) liens for taxes not yet due
and payable or which are being diligently contested in good faith by the
Companies by appropriate proceedings and which liens are not x) other than with
respect to Real Estate, senior to the liens of CITBC or y) for taxes due the
United States of America or any state thereof having similar priority statutes.
PERMITTED INDEBTEDNESS shall mean: i) current Indebtedness maturing in less than
one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; ii) the indebtedness secured by
the Purchase Money Liens; iii) Indebtedness of the Companies which is
subordinated to the prior payment and satisfaction of the Companies' Obligations
to CITBC by means of a subordination agreement in form and substance
satisfactory to CITBC; iv) Indebtedness arising under the Letters of Credit and
this Financing Agreement; v) deferred taxes and other expenses incurred in the
ordinary course of business; vi) the indebtedness due GECC, Standard Insurance
and CITEF, as in effect as of the Original Closing Date; and vii) any other
indebtedness existing on the date of execution of this Financing Agreement and
listed in the most recent financial statement delivered to CITBC or otherwise
disclosed to CITBC in writing prior to the Closing Date.
PURCHASE MONEY LIENS shall mean liens on any item of equipment acquired after
the Original Closing Date, provided that i) each such lien shall attach only to
the property to be acquired, ii) a description of the property so acquired is
furnished to CITBC, and iii) the debt incurred in connection with such
acquisitions shall not exceed in the aggregate $750,000.00 in any fiscal year,
without CITBC's prior written approval, which approval or disapproval shall not
be unreasonably delayed.
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REAL ESTATE shall mean the Companies' fee and/or leasehold interests in the real
property which has been, or will be, encumbered, mortgaged, pledged or assigned
to CITBC or its designee, including (i) a first and exclusive security interest
in Northwest Pipe's property in Atchison, KS and Adelanto, CA, and a second
security interest in Northwest Pipe's premises in Portland, OR, (ii) a first and
exclusive security interest in Thompson Pipe's property in Denver, CO, and (iii)
a second security interest in Thompson Steel's property in Princeton, KY.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of CITBC to make
loans and advances pursuant to Section 3 of this Financing Agreement and issue
Letter of Credit Guaranties pursuant to Section 5 hereof to the Companies, in
the aggregate amount of $32,000,000 less the aggregate amount of Capex Loans
outstanding.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Companies by CITBC pursuant to Section 3 of this
Financing Agreement.
REVOLVING LOANS CHEMICAL RATE MARGIN shall mean the percentage determined in
accordance with this definition. As of the date of an interest rate
determination, if i) the Companies' latest financial statements reflecting the
most recently ended fiscal quarter (the "Relevant Financial Statements") have
been timely delivered in accordance with paragraph 7.8 of Section 7 of this
Financing Agreement and CITBC has had reasonable time to review such financial
statements to its satisfaction ("Financial Statement Test") and ii) the
Companies' Leverage Ratio for the most recently ended fiscal quarter did not
exceed 1.5 to 1 ("Leverage Ratio Test") and iii) from and after the quarter
ending September 30, 1996, the Companies maintained a Fixed Charge Coverage
Ratio for the most recently ended fiscal quarter of at least 2.0 to 1 ("Fixed
Charge Coverage Ratio Test"), the Revolving Loans Chemical Rate Margin shall be
equal to zero percent (0%). If, as of the date of an interest rate
determination, the Companies do not satisfy the Financial Statement Test, the
Leverage Ratio Test, and, if applicable, the Fixed Charge Coverage Ratio Test,
the Revolving Loans Chemical Rate Margin shall be equal to one-quarter of one
percent (1/4 of 1%). The Revolving Loans Chemical Rate Margin determined as of
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any date shall remain in effect until such time as the Companies' satisfaction
of the Financial Statement Test, the Leverage Ratio Test, and the Fixed Charge
Coverage Ratio Test can be determined for the next succeeding fiscal quarter.
Any change in the Revolving Loans Chemical Rate Margin shall be effective on the
first day of the month following the date that the relevant Financial Statement
Test has been completed. If the Companies fail to timely deliver to CITBC the
Relevant Financial Statements, the Revolving Loans Chemical Rate Margin shall be
equal to one-quarter of one percent (1/4 of 1%) until such time that the
Relevant Financial Statements are delivered to CITBC and the Revolving Loan
Chemical Rate Margin can be determined in accordance with the preceding
provisions of this definition.
REVOLVING LOANS LIBOR MARGIN shall mean the percentage determined in accordance
with this definition. As of the date of an interest rate determination, (the
"Relevant Financial Statements") if i) the Companies' latest financial
statements reflecting the most recently ended fiscal quarter have been timely
delivered in accordance with paragraph 7.8 of Section 7 of this Financing
Agreement and CITBC has had reasonable time to review such financial statements
to its satisfaction ("Financial Statement Test") and ii) the Companies' Leverage
Ratio for the most recently ended fiscal quarter did not exceed 1.5 to 1
("Leverage Ratio Test") and iii) from and after the quarter ending September 30,
1996, the Companies maintained a Fixed Charge Coverage Ratio for the most
recently ended fiscal quarter of at least 2.0 to 1 ("Fixed Charge Coverage Ratio
Test"), the Revolving Loans Libor Margin shall be equal to two and one-quarter
percent (2 1/4%). If the Companies do not satisfy the Financial Statement Test,
the Leverage Ratio Test, and, if applicable, the Fixed Charge Coverage Ratio
Test, the Revolving Loans Libor Margin shall be equal to two and three quarters
percent (2 3/4%). Each Revolving Loans Libor Margin as determined in accordance
with this definition for a particular Libor Loan shall remain in effect during
the entire Libor Period therefor.
STOCK COLLATERAL means (i) all of the shares of capital stock of Thompson Pipe
and Thompson Steel represented by the respective certificates identified on
Schedule 6 hereto, and all other shares of capital stock of whatever class of
Thompson Pipe and
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Thompson Steel, now owned or hereafter acquired by Northwest Pipe or Thompson
Pipe, together with in each case the certificates representing the same
("Pledged Stock"), (ii) all shares, securities, moneys or property representing
a dividend on, or a distribution or return of capital in respect of any of the
Pledged Stock, or resulting from a split-up, revision, reclassification or other
like change of any of the Pledged Stock, or otherwise received in exchange for
the Pledged Stock, and all Equity Rights issued to the holders of, or otherwise
in respect of, any of the Pledged Stock, (iii) to the extent related to all or
any part of the foregoing, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of Northwest Pipe or Thompson Pipe or any
computer bureau or service company from time to time acting for Northwest Pipe
or Thompson Pipe, and (iv) all proceeds in whatever form of all or any part of
the foregoing.
STOCK PURCHASE AGREEMENT shall mean that certain Stock Purchase Agreement dated
as of May 8, 1996 among Northwest Pipe, Thompson Pipe, CHL Holdings, Inc.
("CHL") and Inter-City Products Corporation ("ICPC"), as the same may be amended
from time to time.
TOTAL ASSETS shall mean the Companies' total assets determined in accordance
with GAAP, on a basis consistent with the latest audited statements of the
Companies.
TOTAL LIABILITIES shall mean total liabilities of the Companies determined in
accordance with GAAP, on a basis consistent with the latest audited statements
of the Companies.
THOMPSON PIPE AVAILABILITY shall mean at any time the difference, if positive,
between: (a) the sum of i) Eligible Thompson Pipe Accounts Receivable multiplied
by the percentage provided for in paragraph 3.1(b)(i) of Section 3 of this
Financing Agreement, ii) Thompson Pipe Unbilled Accounts Receivables multiplied
by the percentage provided for in paragraph 3.1(b)(ii) of Section 3 of this
Financing Agreement; and iii) Eligible Thompson Pipe Inventory multiplied by the
percentage provided for in paragraph 3.1(b)(iii) of Section 3 of this Financing
Agreement; less (b) the sum of, without duplication i) the outstanding aggregate
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amount of all Obligations (excluding the Capex Loans) of Thompson Pipe, ii) the
portion of the Availability Reserve applicable to Thompson Pipe, and iii) the
amount of any overadvance to Northwest Pipe.
UNBILLED ACCOUNTS RECEIVABLE shall mean costs and estimated earnings in excess
of billings on uncompleted contracts as governed by the percentage of completion
method of accounting under GAAP, provided that, if applicable, such Unbilled
Accounts Receivable are supported by documentation between Northwest Pipe or
Thompson Pipe, as applicable, and the account debtor, which documentation must
be satisfactory to CITBC and copies of which will be delivered to CITBC upon
CITBC's request.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities,
determined in accordance with GAAP on a basis consistent with the latest audited
statements.
SECTION 2. CONDITIONS PRECEDENT
2.1 CONDITIONS TO CLOSING. The obligation of CITBC to amend
and restate the August 17, 1994 Financing Agreement as provided herein, and to
make the initial loans hereunder, is subject to the satisfaction of, or waiver
of, immediately prior to or concurrently with such amendment and restatement and
the making of such loans, the following conditions precedent:
A) LIEN SEARCHES - CITBC shall have received tax, judgment
and Uniform Commercial Code searches satisfactory to CITBC for all locations
presently occupied or used by the Companies.
B) CASUALTY INSURANCE - The Companies shall have delivered to
CITBC evidence satisfactory to CITBC that casualty insurance policies listing
CITBC as loss payee or mortgagee, as the case may be, are in full force and
effect, all as set forth in Section 7, paragraph 7.5 of this Financing
Agreement.
C) UCC FILINGS - Any documents (including without limitation,
financing statements) required to be filed in order to create in favor of CITBC,
subject to the Permitted
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Encumbrances, a first and exclusive perfected security interest in the
Collateral with respect to which a security interest may be perfected by a
filing under the Uniform Commercial Code shall have been properly filed in each
office in each jurisdiction required in order to create in favor of CITBC a
perfected lien on the Collateral. CITBC shall have received acknowledgement
copies of all such filings (or, in lieu thereof, CITBC shall have received other
evidence satisfactory to CITBC that all such filings have been made); and CITBC
shall have received evidence that all necessary filing fees and all taxes or
other expenses related to such filings have been paid in full.
D) EXAMINATION & VERIFICATION - CITBC shall have completed to
the satisfaction of CITBC an examination and verification of the Accounts,
Inventory, Equipment, books and records of the Companies.
E) OPINIONS - CITBC shall have received the following
opinions of counsel:
(1) an opinion from counsel for the Companies
opining, inter alia, that, subject to i) the filing,
priority and remedies provisions of the Uniform Commercial
Code, ii) the provisions of the Bankruptcy Code, insolvency
statutes or other like laws, iii) the equity powers of a
court of law and iv) such other matters as may be agreed
upon with CITBC, the Loan Documents, including without
limitation this Financing Agreement, are x) valid, binding
and enforceable against the Companies according to their
terms, y) are duly authorized, executed and delivered by the
Companies and z) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of
any Company or, to the best knowledge of such counsel, of
any loan agreement, mortgage, deed of trust, note, security
or pledge agreement or indenture to which any Company is a
signatory or by which any Company or its assets are bound.
(2) an opinion from counsel for ICPC and CHL
opining, inter alia, that, (A) the purchase and sale
transaction contemplated by the Stock Purchase
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Agreement has closed in accordance with its terms, and (B)
subject to such matters as may be agreed upon with CITBC,
the Stock Purchase Agreement is x) valid, binding and
enforceable against ICPC and CHL according to its terms, y)
is duly authorized, executed and delivered by ICPC and CHL,
and z) does not violate any terms, provisions,
representations or covenants in the charter or by-laws of
ICPC or CHL or, to the best knowledge of such counsel, of
any loan agreement, mortgage, deed of trust, note, security
or pledge agreement or indenture to which ICPC or CHL is a
signatory or by which ICPC or CHL or their respective assets
are bound. CITBC agrees that an otherwise acceptable opinion
from counsel for ICPC and CHL in favor of Northwest Pipe
shall satisfy this condition if CITBC is specifically
entitled to rely on such opinion as an additional addressee
or by way of an acceptable reliance letter.
(3) an opinion from counsel for the Companies
opining, inter alia, that, (A) the purchase and sale
transaction contemplated by the Stock Purchase Agreement has
closed in accordance with its terms, and (B) subject to such
matters as may be agreed upon with CITBC, the Stock Purchase
Agreement is x) valid, binding and enforceable against
Northwest Pipe and Thompson Pipe according to its terms, y)
is duly authorized, executed and delivered by Northwest Pipe
and Thompson Pipe, and z) does not violate any terms,
provisions, representations or covenants in the charter or
by-laws of Northwest Pipe or Thompson Pipe or, to the best
knowledge of such counsel, of any loan agreement, mortgage,
deed of trust, note, security or pledge agreement or
indenture to which Northwest Pipe or Thompson Pipe is a
signatory or by which Northwest Pipe or Thompson Pipe or
their respective assets are bound.
F) ADDITIONAL DOCUMENTS - The Companies shall have executed
and delivered to CITBC all loan documents necessary to consummate the lending
arrangement contemplated between the Companies and CITBC.
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G) ENVIRONMENTAL REPORT - CITBC shall have received
environmental audit reports on i) all of Thompson Pipe's and Thompson Steel's
leasehold and fee interests, and ii) Thompson Pipe's and Thompson Steel's waste
disposal practices. The reports must x) be satisfactory to CITBC and y) not
disclose or indicate any material liability (real or potential) stemming from
either such Company's premises, its operations, its waste disposal practices or
waste disposal sites used by such Company. To the extent that additional
compliance is suggested pursuant to such reports, such Company shall provide
CITBC a written plan for reasonable response thereto within 120 days of the
Closing Date, which plan and response shall be mutually satisfactory to such
Company and CITBC, provided that if such agreement is not reached within said
period it shall be deemed an Event of Default hereunder.
H) BOARD RESOLUTION - CITBC shall have received copies of
each of the following:
(1) resolutions of the Board of Directors of each
Company authorizing the execution, delivery and performance
of (i) this Financing Agreement, (ii) any related agreements,
and (iii) if applicable, the Stock Purchase Agreement, in
each case certified by the Secretary or Assistant Secretary
of such Company as of the date hereof, and together with a
certificate of the Secretary or Assistant Secretary of such
Company as to the incumbency and signature of the officers of
such Company executing the Stock Purchase Agreement (if
applicable), this Financing Agreement and any certificate or
other documents to be delivered by it pursuant hereto,
together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(2) resolutions of the Board of Directors of CHL and
ICPC authorizing the execution, delivery and performance of
the Stock Purchase Agreement, in each case certified by the
Secretary or Assistant Secretary of such company as of the
date hereof, and together with a certificate of the Secretary
or Assistant Secretary of such company as to the incumbency
and signature of the officers of such company executing
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the Stock Purchase Agreement, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
I) CORPORATE ORGANIZATION - CITBC shall have received (i) a
copy of the Articles or Certificate of Incorporation of each Company certified
by the Secretary of State of its state of incorporation, and (ii) a copy of the
By-Laws (as amended through the date hereof) of each Company and certified by
the Secretary or Assistant Secretary of such Company.
J) OFFICER'S CERTIFICATE - CITBC shall have received an
executed Officer's Certificate of each Company, satisfactory in form and
substance to CITBC, certifying that (i) the representations and warranties
contained herein are true and correct in all material respects on and as of the
date hereof; (ii) the Companies are in compliance with all of the terms and
provisions set forth herein; and (iii) no 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, has occurred.
K) ABSENCE OF DEFAULT - No Default, Event of Default or
material adverse change in the financial condition, business, prospects,
profits, operations or assets of any Company shall have occurred, and no Default
or Event of Default shall exist under the August 17, 1994 Financing Agreement.
L) LEGAL RESTRAINTS/LITIGATION - At the date of execution of
this Financing Agreement there shall be no outstanding suits or actions naming
any Company as a defendant other than with respect of those matters listed on
Schedule 5 hereto, provided further that, there shall be no x) litigation,
investigation or proceeding (judicial or administrative) pending or threatened
against any Company or its assets, by any agency, division or department of any
county, city, state or Federal government arising out of this Financing
Agreement, y) injunction, writ or restraining order restraining or prohibiting
the consummation of the financing arrangements contemplated under this Financing
Agreement, or z) to the best knowledge of the Companies, suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against any Company or its assets, which, in the opinion of CITBC, if adversely
determined,
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could have a material adverse effect on the business, operation, assets,
financial condition or Collateral of such Company.
M) DISBURSEMENT AUTHORIZATION - The Companies shall have
delivered to CITBC all information necessary for CITBC to issue wire transfer
instructions on behalf of the Companies for the initial and subsequent loans
and/or advances to be made under this Financing Agreement including, but not
limited to, disbursement authorizations in form acceptable to CITBC.
N) LOCK BOX AGREEMENTS - As of the Closing Date, the
Northwest Pipe lock box agreement(s) for its collection account(s) shall be in
full force and effect.
O) DEPOSITORY ACCOUNT - One or more concentration accounts
shall have been established in form and substance satisfactory to CITBC and
shall provide, without limitation, that the proceeds of any Canadian Accounts
shall first be converted from Canadian Dollars to U.S. Dollars prior to deposit
of any such proceeds in said account.
P) THIRD PARTY WAIVERS - The Companies shall provide
applicable third party documents to CITBC so that CITBC has a first and
exclusive lien on Eligible Accounts Receivable, Eligible Inventory, Chattel
Paper and any Equipment at locations which any Company uses, leases or occupies,
all in form and substance reasonably satisfactory to CITBC. Inventory located in
any facility which is not owned by a Company, including at any leased premises,
third party processor or warehouse, for which CITBC has not received a waiver,
in form and substance satisfactory to CITBC as of the Closing Date, shall be
deemed ineligible and CITBC may establish an Availability Reserve for up to
three (3) months rent or processing charges for any such premises.
Notwithstanding anything to the contrary herein, for purposes of Section 3 and 6
hereof, this condition precedent shall not terminate as of the Closing Date.
Q) MINIMUM CLOSING AVAILABILITY - Based upon CITBC's
completion of an updated examination of Northwest Pipe's and Thompson Pipe's
Accounts and Inventory, after giving effect to any Revolving Loans, Letters of
Credit, Capex Loans and any other extensions of credit made or continued by
CITBC on the Closing
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Date, (i) Northwest Pipe Availability for further Revolving Loans shall be not
less than $3,000,000, and (ii) Thompson Pipe Availability for further Revolving
Loans shall be not less than $1,000,000, in each case without regard to the
$32,000,000 limit on the aggregate Revolving Line of Credit. The foregoing shall
be evidenced by estimated borrowing base certificates delivered by the Companies
to CITBC on the Closing Date, and the Companies shall deliver final borrowing
base certificates for the month ended May 31, 1996 within 21 days after the
Closing Date confirming such Availabilities.
It is understood that such requirement contemplates that all of the Companies'
debts and obligations are current to the reasonable satisfaction of CITBC and
that all payables are being handled in the normal course of the Companies'
business and consistent with its past practice.
R) INSURANCE - The Companies shall have delivered to CITBC a
certificate from each of their insurance carriers in form and substance
satisfactory to CITBC evidencing that the coverage required by Section 7,
paragraph 7.5, hereof, and the endorsements thereof, in form and substance
satisfactory to CITBC, listing CITBC as loss payee or mortgagee, as the case may
be, are in full force and effect, all as set forth in Section 7 of this
Financing Agreement.
S) FEES AND EXPENSES - On the Closing Date, the Companies
shall have reimbursed CITBC for all Out-of-Pocket Expenses for which a request
for payment shall have been made at or prior to the Closing Date.
T) ABSENCE OF MATERIAL ADVERSE CHANGE - No material adverse
change shall have occurred in the financial condition, business, prospects,
profitability, assets (including without limitation the Collateral) or
operations of any Company or its subsidiaries.
U) PERFECTION CERTIFICATE - CITBC shall have received a
Perfection Certificate from each Company in form and substance acceptable to
CITBC.
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V) EXECUTION AND DELIVERY OF LOAN DOCUMENTS - CITBC shall
have received signed Promissory Notes and the other Loan Documents.
W) QUALIFICATION - Each of the Companies shall be qualified
to do business and in good standing in each state where the failure to so
qualify could have a material adverse effect on such Company, and shall be in
good standing in its state of incorporation.
X) DELIVERY OF PLEDGED STOCK - Northwest Pipe and Thompson
Pipe shall have delivered to CITBC all of the Pledged Stock, along with undated
stock powers in blank for each certificate.
Y) STOCK PURCHASE AGREEMENT - Prior to or concurrently with
the closing hereof, the purchase and sale transaction contemplated by the Stock
Purchase Agreement shall close in accordance with its terms, and the "Effective
Time" as defined therein shall have passed.
Z) RELEASE OF COMPANIES, LIENS - Concurrently with the
closing hereof, Congress Financial Corporation shall be repaid in full and (i)
shall give a general release of the Companies, (ii) shall release or assign in
favor of CITBC any and all liens it may have on the assets of the Companies,
including by way of UCC terminations and assignments and, with respect to the
Real Estate, reconveyances and assignments, and (iii) shall have no recourse
against the Companies.
2.2 CONDITIONS TO EACH EXTENSION OF CREDIT
Except to the extent expressly set forth in this Financing
Agreement, the agreement of CITBC to make any extension of credit requested to
be made by it to any Company on any date (including without limitation, the
extensions of credit on the Closing Date) is subject to the satisfaction of the
following conditions precedent:
A) REPRESENTATIONS AND WARRANTIES - Each of the
representations and warranties made by the Companies in or pursuant to this
Financing Agreement shall be true and correct in
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all material respects on and as of such date as if made on and as of such date.
B) NO DEFAULT - No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the extension
of credit requested to be made on such date.
C) NORTHWEST PIPE BORROWING BASE - Except as may be
otherwise agreed to from time to time by CITBC and the Companies in writing,
after giving effect to any extension of credit requested to be made by Northwest
Pipe on such date, i) the aggregate outstanding Revolving Loans and Letters of
Credit owing by the Companies will not exceed the Revolving Line of Credit, ii)
the aggregate outstanding Capex Loans will not exceed the Capex Line, and iii)
the extension of credit requested on such date shall be within Northwest Pipe's
Availability then applicable to Northwest Pipe.
D) THOMPSON PIPE BORROWING BASE - Except as may be otherwise
agreed to from time to time by CITBC and the Companies in writing, after giving
effect to any extension of credit requested to be made by Thompson Pipe on such
date, i) the aggregate outstanding Revolving Loans and Letters of Credit owing
by the Companies will not exceed the Revolving Line of Credit, ii) the aggregate
outstanding Capex Loans will not exceed the Capex Line, and iii) the extension
of credit requested on such date shall be within Thompson Pipe's Availability
then applicable to Thompson Pipe.
E) ADDITIONAL MATTERS - All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Financing Agreement and the other Loan
Documents shall be reasonably satisfactory in form and substance to CITBC and
(to the extent that such proceedings documents, instruments and other matters
relate to the Collateral or CITBC) CITBC shall have received such other
documents and legal opinions in respect of any aspect or consequence of the
transactions contemplated hereby or thereby, as CITBC shall reasonably request.
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Each borrowing by the Companies hereunder shall constitute a representation and
warranty by the Companies as of the date of such loan or advance that each of
the representations, warranties and covenants contained in this Financing
Agreement have been satisfied and are true and correct, except as the Companies
and CITBC shall otherwise agree herein or in a separate writing.
SECTION 3. REVOLVING LOANS
3.1 (A) CITBC agrees, subject to the terms and conditions of
this Financing Agreement from time to time, and within x) the Northwest Pipe
Availability and y) in the aggregate with Revolving Loans to Thompson Pipe, the
Revolving Line of Credit, but subject to CITBC's right to make "overadvances"
(defined below), to make loans and advances to Northwest Pipe on a revolving
basis (i.e. subject to the limitations set forth herein, Northwest Pipe may
borrow, repay and re-borrow Revolving Loans). Such loans and advances shall be
in amounts up to the sum of: (i) eighty-five percent (85%) of the outstanding
Eligible Northwest Pipe Accounts Receivable (including bill-and-hold Accounts),
(ii) fifty percent (50%) of the outstanding Unbilled Accounts Receivable of
Northwest Pipe and (iii) sixty percent (60%) of the aggregate value of Eligible
Northwest Pipe Inventory as determined at the lower of cost or market.
(B) CITBC agrees, subject to the terms and conditions of this
Financing Agreement from time to time, and within x) the Thompson Pipe
Availability and y) in the aggregate with Revolving Loans to Northwest Pipe, the
Revolving Line of Credit, but subject to CITBC's right to make "overadvances"
(defined below), to make loans and advances to Thompson Pipe on a revolving
basis (i.e. subject to the limitations set forth herein, Thompson Pipe may
borrow, repay and re-borrow Revolving Loans). Such loans and advances shall be
in amounts up to the sum of: (i) eighty-five percent (85%) of the outstanding
Eligible Thompson Pipe Accounts Receivable (including bill-and-hold Accounts),
(ii) fifty percent (50%) of the outstanding Unbilled Accounts Receivable of
Thompson Pipe and (iii) sixty percent (60%) of the aggregate value of Eligible
Thompson Pipe Inventory as determined at the lower of cost or market.
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(C) Notwithstanding the foregoing, (i) advances against total
Eligible Inventory and Unbilled Accounts Receivable shall not exceed $16,000,000
in the aggregate at any one time. All requests for loans and advances must be
received by an officer of CITBC no later than 2:00 p.m. New York time of the day
on which such loans and advances are required. Should CITBC for any reason honor
requests for advances in excess of the limitations set forth herein, such
advances shall be considered "overadvances" and shall be made in CITBC's sole
discretion, subject to any additional terms CITBC deems necessary.
(D) Unless otherwise agreed to in writing by CITBC, no
Revolving Loans shall be made to Thompson Steel.
3.2 (A) In furtherance of the continuing assignment and
security interest in the Companies' Accounts, the Companies will, upon the
creation of Accounts, execute and deliver to CITBC in such form and manner as
CITBC may reasonably require, solely for CITBC's convenience in maintaining
records of collateral, such confirmatory schedules of Accounts as CITBC may
reasonably request, and such other appropriate reports designating, identifying
and describing the Accounts as CITBC may reasonably require. In addition, upon
CITBC's request the Companies shall provide CITBC with copies of agreements
with, or purchase orders from, the Companies' customers, and copies of invoices
to customers, proof of shipment or delivery and such other documentation and
information relating to said Accounts and other collateral as CITBC may
reasonably require. Failure to provide CITBC with any of the foregoing shall in
no way affect, diminish, modify or otherwise limit the security interests
granted herein. The Companies hereby authorize CITBC to regard any Company's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of such Company's authorized
officers or agents.
(B) The obligation of the Companies to repay the principal
amount of the Revolving Loans made pursuant to this Section 3 and pursuant to
any Letter of Credit Guaranty issued pursuant to Section 5 by CITBC and to pay
interest thereon shall be evidenced in part by Promissory Notes in the form of
Exhibit C attached hereto. Each Company's outstanding Obligations applicable
thereto may be set forth in the balance column on the
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grid page attached to said note or on the separate ledgers maintained by CITBC.
All such advances, whether or not so recorded, shall be due as part of said
note. Promissory Notes executed by each of Northwest Pipe and Thompson Pipe
shall be delivered to CITBC on the Closing Date.
3.3 Each Company hereby represents and warrants that: each Account is
based on an actual and bona fide sale and delivery of goods or rendition of
services to customers, made by such Company in the ordinary course of its
business; the goods and inventory being sold and the Accounts created are the
exclusive property of such Company and are not and shall not be subject to any
lien, consignment arrangement, encumbrance, security interest or financing
statement whatsoever, other than the Permitted Encumbrances; the invoices
evidencing such Accounts are in the name of such Company; and the customers of
such Company have accepted the goods or services, owe and are obligated to pay
the full amounts stated in the invoices according to their terms, without
dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business of which such Company has
advised CITBC pursuant to paragraph 5 of this Section 3. Each Company confirms
to CITBC that any and all taxes or fees relating to its business, its sales, the
Accounts or goods relating thereto, are its sole responsibility and that same
will be paid by such Company when due and that none of said taxes or fees
represent a lien on or claim against the Accounts. Each Company also warrants
and represents that it is a duly and validly existing corporation and is
qualified in all states where the failure to so qualify would have an adverse
effect on the business of such Company or the ability of such Company to enforce
collection of Accounts due from customers residing in that state. Each Company
agrees to maintain such books and records regarding Accounts as CITBC may
reasonably require and agrees that the books and records of such Company will
reflect CITBC's interest in the Accounts. All of the books and records of the
Companies will be available to CITBC at normal business hours, including any
records handled or maintained for the Companies by any other company or entity.
3.4 Until CITBC has advised the Companies to the contrary after the
occurrence of an Event of Default, the
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Companies may and will enforce, collect and receive all amounts owing on the
Accounts for CITBC's benefit and on CITBC's behalf, but at the Companies'
expense; such privilege shall terminate automatically upon the institution by or
against any Company of any proceeding under any bankruptcy or insolvency law or,
at the election of CITBC, upon the occurrence of any other Event of Default and
until such Event of Default is waived or cured to CITBC's satisfaction. The
Companies shall direct all of their account debtors to deposit any and all
proceeds of Collateral into the Depository Account (as defined below), and any
checks, cash, notes, chattel paper or other instruments or property received by
the Companies with respect to any Accounts shall be held by the Companies in
trust for CITBC, separate from the Companies' own property and funds, and
immediately turned over to CITBC with proper assignments or endorsements by
deposit to the special depository accounts in CITBC's name designated by CITBC
for such purposes (the "Depository Accounts"). All amounts received by CITBC in
payment of Accounts will be credited to the applicable Company's accounts upon
CITBC's receipt of "collected funds" at CITBC's bank account in New York, New
York on the Business Day of receipt if received no later than 1:00 pm or on the
next succeeding Business Day if received after 1:00 pm. No checks, drafts or
other instrument received by CITBC shall constitute final payment to CITBC
unless and until such instruments have actually been collected.
3.5 The Companies agree to notify CITBC promptly of any matters
materially affecting the value, enforceability or collectibility of any Account
and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. The
Companies agree to issue credit memoranda promptly (with duplicates to CITBC
upon request after the occurrence of an Event of Default) upon accepting returns
or granting allowances, and may continue to do so until CITBC has notified the
Companies that an Event of Default has occurred and that all future credits or
allowances are to be made only after CITBC's prior written approval. Upon the
occurrence of an Event of Default and until such time as such Event of Default
is waived or cured to CITBC's satisfaction and on notice from CITBC, the
Companies agree that all returned, reclaimed or repossessed merchandise or goods
shall
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be set aside by the Companies, marked with CITBC's name (as secured party) and
held by the Companies for CITBC's account.
3.6 CITBC shall maintain separate accounts on its books in each
Company's name in which such Company will be charged with loans and advances
made by CITBC to it or for its account, and with any other Obligations,
including any and all costs, expenses and reasonable attorney's fees which CITBC
may incur in connection with the exercise by or for CITBC of any of the rights
or powers herein conferred upon CITBC, or in the prosecution or defense of any
action or proceeding to enforce or protect any rights of CITBC in connection
with this Financing Agreement, the other Loan Documents or the Collateral
assigned hereunder, or any Obligations owing to CITBC by the Companies. Each
Company will be credited with all amounts received by CITBC from such Company or
from others for such Company's account, including, as above set forth, all
amounts received by CITBC in payment of assigned Accounts and such amounts will
be applied to payment of the Obligations. In no event shall prior recourse to
any Accounts or other security granted to or by the Companies be a prerequisite
to CITBC's right to demand payment of any Obligation. Further, it is understood
that CITBC shall have no obligation whatsoever to perform in any respect any of
the Companies' contracts, lease agreements or obligations relating to the
Accounts.
3.7 After the end of each month, CITBC shall promptly send the
Companies one or more statements showing the accounting for the charges, loans,
advances and other transactions occurring between CITBC and each Company during
that month. The monthly statements shall be deemed correct and binding upon the
Companies and shall constitute an account stated between the Companies and CITBC
unless CITBC receives a written statement of the exceptions within thirty (30)
days of the date of the monthly statement.
SECTION 4. CAPITAL EXPENDITURE TERM LOANS
4.1 Northwest Pipe and Thompson Pipe have requested and CITBC has
agreed to provide Northwest Pipe and Thompson Pipe with one or more term loans
in an aggregate amount not to exceed the Capex Line for expenditures approved by
CITBC and made after the Closing Date. Upon receipt by CITBC of a Capex
Promissory
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Note in the form of Exhibit A attached hereto from Northwest Pipe or Thompson
Pipe, as applicable, CITBC will extend a Capex Loan to such Company, provided
all of the conditions listed below are fulfilled to the sole but reasonable
satisfaction of CITBC. The conditions are as follows:
a) Each requested Capex Loan must be within i) the Capex Line and
ii) the Capex Availability.
b) The aggregate amount of outstanding Capex Loans to Northwest
Pipe can at no time exceed the sum of x) eighty percent (80%) of
the orderly liquidation value of unencumbered Equipment owned by
Northwest Pipe, determined in accordance with appraisals
delivered to and reasonably satisfactory to CITBC; y) fifty
percent (50%) of the fair market value of unencumbered Real
Estate owned by Northwest Pipe, determined in accordance with
appraisals delivered to and reasonably satisfactory to CITBC,
and z) without duplication, seventy-five percent (75%) of the
purchase price of new Equipment purchased by Northwest Pipe,
provided that all loans made pursuant to clause y) above, in the
aggregate with loans made pursuant to clause (y) of paragraph
4.1(c) below, may not exceed $4,000,000.00 in the aggregate at
any time.
c) The aggregate amount of outstanding Capex Loans to Thompson Pipe
can at no time exceed the sum of x) eighty percent (80%) of the
orderly liquidation value of unencumbered Equipment owned by
Thompson Pipe, determined in accordance with appraisals
delivered to and reasonably satisfactory to CITBC; y) fifty
percent (50%) of the fair market value of unencumbered Real
Estate owned by Thompson Pipe, determined in accordance with
appraisals delivered to and reasonably satisfactory to CITBC,
and z) without duplication, seventy-five percent (75%) of the
purchase price of new Equipment purchased by
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Thompson Pipe, provided that all loans made pursuant to
clause y) above, in the aggregate with loans made pursuant to
clause (y) of paragraph 4.1(b) above, may not exceed
$4,000,000.00 in the aggregate at any time.
d) Northwest Pipe and Thompson Pipe must give CITBC at least thirty
(30) days' prior written notice of its intention to enter into a
Capex Loan;
e) Each funding of a Capex Loan shall be made only after CITBC
shall have received and approved to its satisfaction all
appraisals, invoices, purchase orders, and/or other contracts
and any additional information CITBC may request with respect to
the expenditure as herein set forth;
f) Northwest Pipe and Thompson Pipe shall (i) execute such
documents as CITBC may reasonably require to obtain a first lien
upon any assets purchased with proceeds from the Capex Loan and
(ii) provide such documents and information as CITBC shall
require, including a schedule which shall include copies of
invoices, purchases, or executed contracts for such purchase and
disbursements in connection therewith, with evidence of payment
thereon;
g) Capex Loans shall only be used by Northwest Pipe and Thompson
Pipe to purchase assets on which CITBC has a first lien
position, and such assets shall not constitute an attachment,
accessory, accession, replacement, substitution, addition or
improvement of any Equipment, fixture or line on which any other
creditor has a first lien position;
h) Capex Loans may only be requested by Northwest Pipe and Thompson
Pipe during the period commencing on the Closing Date and
expiring at 2:00 p.m. (New York City time) on the third
Anniversary Date.
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i) Each of Northwest Pipe and Thompson Pipe may request no more
than one (1) Capex Loan during any calendar quarter. Unless
otherwise agreed to in writing by CITBC, Thompson Steel may not
request Capex Loans.
j) Northwest Pipe and Thompson Pipe may request, and CITBC agrees
to make, any such Capex Loans as aforesaid absent the occurrence
of a Default which has not been waived in writing by CITBC or
cured to the satisfaction of CITBC or an Event of Default which
has not been waived in writing by CITBC.
4.2 Each Capex Loan will be repaid to CITBC by the applicable Company
in equal quarterly installments of principal computed on a five (5) year
amortization schedule, whereby the installments shall commence on the last day
of the first fiscal quarter following the advance of the Capex Loan, and shall
continue to be paid on the last day of each fiscal quarter thereafter until paid
in full.
4.3 To the extent repaid, Capex Loans may not be reborrowed under this
Financing Agreement.
4.4 All Capex Loans made by CITBC under this Section 4 and all payments
and prepayments made on account of the principal thereof shall be recorded by
CITBC in its internal records. Each Company authorizes CITBC to record on the
schedules to the Capex Promissory Note(s) or in its internal records (computer
or otherwise) the amount of each Capex Loan made by CITBC under this Section 4
and the amount of each repayment received by CITBC, provided that any failure by
CITBC to make any such entry shall not affect the obligations of the Companies
hereunder or under the Capex Promissory Note(s) or otherwise in respect of the
Capex Loan(s). All entries made by CITBC including notations on any schedule to
the Capex Promissory Note(s) or in the internal records of CITBC (computer or
otherwise) shall be deemed correct in the absence of manifest error.
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4.5 Each Company may prepay at its option, in whole or in part, the
Capex Loans; provided, that on each such prepayment, such Company shall pay x)
accrued interest on the principal so prepaid to the date of such prepayment and
y) the Libor Prepayment Penalty, if applicable.
4.6 Each voluntary and mandatory prepayment shall be applied to the
last maturing installments of principal of any Capex Loan designated by the
Companies until paid in full; provided, however, if the Companies do not so
designate a Capex Loan, then CITBC may apply such prepayment to a Capex Loan of
its choosing.
4.7 Each Company hereby authorizes CITBC to charge its Revolving Loan
Account with the amount of all principal, interest, fees and any other amounts
due under this Section 4 as such amounts become due. Each Company confirms that
any charges which CITBC may so make to its Revolving Loan Account as herein
provided will be made as an accommodation to such Company and solely at CITBC's
discretion.
4.8 In the event this Financing Agreement or the Line of Credit is
terminated by either CITBC or the Companies for any reason whatsoever, all Capex
Loans shall become due and payable on the effective date of such termination
notwithstanding any provision to the contrary in the Capex Promissory Notes or
this Financing Agreement.
SECTION 5. LETTERS OF CREDIT
In order to assist the Companies in establishing or opening standby
Letters of Credit with an Issuing Bank the Companies have requested CITBC to
join in the applications for such Letters of Credit, and/or guarantee payment or
performance of such Letters of Credit and any drafts or acceptances thereunder
through the issuance of the Letter of Credit Guaranties, thereby lending CITBC's
credit to the Companies, and CITBC has agreed to do so. These arrangements shall
be handled by CITBC subject to the terms and conditions set forth below.
5.1 The amount, purpose and extent of the standby Letters of Credit and
changes or modifications thereof by the
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Companies and/or the Issuing Bank of the terms and conditions thereof shall in
all respects be subject to the prior approval of CITBC in the exercise of its
reasonable discretion; provided however, that: a) in no event may the aggregate
amount of all such outstanding standby Letters of Credit exceed, in the
aggregate, at any one time $8,000,000.00; b) the Letters of Credit and all
documentation in connection therewith shall be in form and substance reasonably
satisfactory to the Companies, CITBC and the Issuing Bank; c) the Letter of
Credit line of credit shall be deemed to be a subline within the Revolving Line
of Credit and all Letters of Credit shall be reserved dollar for dollar from
Northwest Pipe Availability or Thompson Pipe Availability, as applicable, as an
Availability Reserve; and (d) except to the extent provided in paragraph 5.9
below, CITBC shall not assist Thompson Steel in establishing or opening letters
of credit as set forth in this Section 5.
5.2 CITBC shall have the right, without notice to the Companies, to
charge the applicable Company's account on CITBC's books with the amount of any
and all indebtedness, liability or obligation of any kind incurred by CITBC
under the Letter of Credit Guaranty at the earlier of a) payment by CITBC under
the Letter of Credit Guaranty, or b) the occurrence of an Event of Default. Any
amount charged to a Company's loan account shall be deemed a Revolving Loan
hereunder and shall incur interest at the rate provided in Section 8, paragraph
8.1 of this Financing Agreement.
5.3 Each Company unconditionally indemnifies CITBC and holds CITBC
harmless from any and all loss, claim or liability incurred by CITBC arising
from any transactions or occurrences relating to Letters of Credit established
or opened for such Company's account, the collateral relating thereto and any
drafts or acceptances thereunder, and all Obligations thereunder, including any
such loss or claim due to any action taken by any Issuing Bank, other than for
any such loss, claim or liability arising out of the gross negligence or willful
misconduct by CITBC under the Letter of Credit Guaranty. Each Company further
agrees to hold CITBC harmless from any errors or omission, negligence or
misconduct by the Issuing Bank, provided however that, the foregoing shall not
be deemed to be a waiver of or otherwise limit such Company's rights with
respect to the
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Issuing Bank. Each Company's unconditional obligation to CITBC hereunder shall
not be modified or diminished for any reason or in any manner whatsoever, other
than as a result of CITBC's gross negligence or willful misconduct. Each Company
agrees that any charges incurred by CITBC for such Company's account by the
Issuing Bank shall be conclusive on CITBC and may be charged to such Company's
account.
5.4 CITBC shall not be responsible for: the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; the validity, sufficiency or genuineness
of any documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and the Companies. Furthermore, without
being limited by the foregoing, CITBC shall not be responsible for any act or
omission with respect to or in connection with any Collateral imported pursuant
to any Letter of Credit.
5.5 Each Company agrees that any action taken by CITBC, if taken in
good faith, or any action taken by any Issuing Bank, under or in connection with
the Letters of Credit, the guarantees, the drafts or acceptances, or the
Collateral, shall be binding on such Company and shall not put CITBC in any
resulting liability to such Company. In furtherance thereof, CITBC shall have
the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery orders; to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents;
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and to agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CITBC's sole name, and the
Issuing Bank shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from CITBC, all without
any notice to or any consent from the Companies.
5.6 Without CITBC's express consent and endorsement in writing, each
Company agrees: a) not to execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by CITBC, not to i) clear and resolve any questions of
non-compliance of documents, or ii) give any instructions as to acceptance or
rejection of any documents or goods.
5.7 Each Company agrees that any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and full complied with; and any
certificates in that regard that CITBC may at any time request will be promptly
furnished. In this connection, each Company warrants and represents that all
shipments of Inventory pursuant to Letters of Credit opened pursuant hereto and
made under any such Letters of Credit are in accordance with the laws and
regulations of the countries in which the shipments originate and terminate, and
are not prohibited by any such laws and regulations. Each Company assumes all
risk, liability and responsibility for, and agrees to pay and discharge, all
present and future local, state, federal or foreign taxes, duties, or levies.
Any embargo, restriction, laws, customs or regulations of any country, state,
city, or other political subdivision,
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where the Collateral is or may be located, or wherein payments are to be made,
or wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely
the Companies' risk, liability and responsibility.
5.8 Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, CITBC shall acquire by subrogation, any rights, remedies,
duties or obligations granted or undertaken by the applicable Company to the
Issuing Bank in any application for Letters of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to have
been granted to CITBC and apply in all respects to CITBC and shall be in
addition to any rights, remedies, duties or obligations contained herein.
5.9 Thompson Steel has pledged certain assets in connection with the
issuance by the Kentucky Rural Economic Development Authority and the County of
Caldwell, Kentucky of Industrial Revenue Bonds having an aggregate original
principal value of $5,700,000 and $2,500,000, respectively (the "Bonds"). The
approximate outstanding balance owing to the holders of the Bonds on the date
hereof does not exceed $3,000,000. Congress Financial Corporation has issued
letters of credit for the account of Thompson Steel in connection with the
Bonds; and CITBC, concurrently herewith, has provided the Congress
Indemnification in favor of Congress Financial Corporation in the event draws
are made on such letters of credit. Northwest Pipe hereby agrees and confirms
that it shall be the primary obligation of Northwest Pipe, secured by the
Collateral pledged by Northwest Pipe hereunder, to pay to CITBC any amounts
required to be paid by CITBC based upon the Congress Indemnification, and
Northwest Pipe's Obligations therefor shall be jointly and severally guaranteed
by Thompson Pipe and Thompson Steel pursuant to Section 11 hereof. Thompson Pipe
and Thompson Steel hereby each agree and confirm that the Congress
Indemnification, and the undertaking of Northwest Pipe as described in this
paragraph 5.9, constitute valuable consideration to Thompson Pipe and Thompson
Steel, as they enhance the value of each such Companies thereby. Upon the sale
of any real or personal property assets pledged by Thompson Steel in connection
with the Bonds, the entire net proceeds of such sale be applied to the Bonds,
and any excess
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shall be applied to the Obligations in such order as CITBC shall reasonably
elect.
SECTION 6. COLLATERAL
6.1 As security for the prompt payment in full of all loans and
advances made and to be made to the Companies from time to time by CITBC
pursuant hereto, as well as to secure the payment in full of the other
Obligations, the Companies hereby jointly and severally pledge and grant to
CITBC a continuing general lien upon and security interest in all of the
following property and interests in property (collectively, "Collateral"):
(a) present and hereafter acquired Inventory;
(b) present and hereafter acquired Equipment;
(c) present and future Accounts;
(d) present and future Documents of Title;
(e) present and future General Intangibles;
(f) Real Estate;
(g) Stock Collateral; and
(h) the proceeds of any and all of the foregoing.
Notwithstanding the foregoing, the grant of security interest by Thompson Steel
in its Real Estate and Equipment located in Princeton, Kentucky shall become
effective when consents from the trustees for the holders of the Bonds referred
to in paragraph 7.9(a) of Section 7 hereof have been obtained.
6.2 The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is presently in existence and which is owned
by any Company or in which any Company has any interest, whether held by such
Company or others for its account, and, if any Collateral is Equipment, whether
such Company's
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interest in such Equipment is as owner or lessee or conditional vendee;
(b) All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CITBC or any Company from such
Company's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by any Company, or to the sale, promotion or
shipment thereof.
6.3 The Companies agree to safeguard, protect and hold all Inventory
for CITBC's account and make no disposition thereof, provided that the Companies
may sell and/or lease their Inventory in the ordinary course of the business of
the Companies as herein provided. Absent the occurrence of an Event of Default
and notice from CITBC to the Companies to the contrary, as provided for below,
any Inventory may be sold and shipped by the Companies to their customers in the
ordinary course of the Companies' business, on open account and on terms
currently being extended by the Companies to their customers, provided that all
proceeds of all sales (including cash, accounts receivable, checks, notes,
instruments for the payment of money and similar proceeds) are forthwith
transferred, endorsed, and turned over and delivered to CITBC in accordance with
paragraph 3.4 of Section 3 of this Financing Agreement. CITBC shall have the
right to withdraw this permission at any time upon the occurrence of an Event of
Default and until such time as such Event of Default is waived or cured to
CITBC's satisfaction, in which event no further disposition shall be made of the
Inventory by the Companies without CITBC's prior written approval. Cash sales or
sales of Inventory in which a lien upon, or security interest in, Inventory is
retained by the Companies (other than bill and hold sales and material man's
liens, as expressly permitted in
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this Financing Agreement) shall be made by the Companies only with the approval
of CITBC, and the proceeds of such sales or sales of inventory for cash shall
not be commingled with the Companies' other property, but shall be segregated,
held by the Companies in trust for CITBC as CITBC's exclusive property, and
shall be delivered immediately by the Companies to CITBC in the identical form
received by the Companies by deposit to the Depository Accounts. The Companies
shall not sell any of their Inventory on a consignment basis. Upon the sale,
exchange, or other disposition of Inventory, as herein provided, the security
interest in the Companies' Inventory provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, CITBC shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation.
6.4 The Companies agree at their own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Companies also agree to safeguard, protect and
hold all Equipment for CITBC's account and make no disposition thereof unless
the Companies first obtain the prior written approval of CITBC. Any sale,
exchange or other disposition of any Equipment shall only be made by the
Companies with the prior written approval of CITBC, and the proceeds of any such
sales shall not be commingled with the Companies' other property, but shall be
segregated, held by the Companies in trust for CITBC as CITBC's exclusive
property, and shall be delivered immediately by the Companies to CITBC in the
identical form received by the Companies by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable,
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contract rights, documents of title, shipping documents, chattel paper and all
other cash and non-cash proceeds of such sales, exchange or disposition. As to
any such sale, exchange or other disposition, CITBC shall have all of the rights
of an unpaid seller, including stoppage in transit, replevin, rescission and
reclamation. Notwithstanding anything hereinabove contained to the contrary, the
Companies may sell, exchange or otherwise dispose of obsolete Equipment or
Equipment no longer needed in the Companies' operations, provided, however, that
(a) the then book value of the Equipment so disposed of does not exceed $250,000
in the aggregate in any fiscal year and (b) the proceeds of such sales or
dispositions are delivered to CITBC in accordance with the foregoing provisions
of this paragraph, except that the Companies may retain and use such proceeds to
purchase forthwith replacement Equipment which the Companies determine in their
reasonable business judgment to have a collateral value at least equal to the
Equipment so disposed of or sold, provided, however, that the aforesaid right
shall automatically cease upon the occurrence of an Event of Default which is
not cured within any applicable grace period or waived.
6.5 The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the accounts maintained in the Companies'
names on the books of CITBC may from time to time be temporarily in a credit
position, until the final payment in full to CITBC of all Obligations and the
termination of this Financing Agreement. Any delay or omission by CITBC to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver shall be in writing and signed
by CITBC. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
6.6 To the extent that the Obligations are now or hereafter secured by
any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, then CITBC shall have the
right in its sole discretion to determine which rights, security, liens,
security interests or remedies CITBC shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action
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with respect to, without in any way modifying or affecting any of them, or any
of CITBC's rights hereunder.
6.7 Any reserves or balances to the credit of the Companies and any
other property or assets of the Companies in the possession of CITBC may be held
by CITBC as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest CITBC may have in any
other assets of the Companies, shall secure payment and performance of all now
existing and future Obligations. CITBC may in its discretion charge any or all
of the Obligations to the account of the Companies when due.
6.8 This Financing Agreement and the obligation of the Companies to
perform all of their covenants and obligations hereunder are further secured by
a mortgage, deed of trust or assignment on the Real Estate.
6.9 The Companies shall give to CITBC from time to time such mortgage,
deed of trust or assignment on the Real Estate or real estate acquired after the
date hereof as CITBC shall require to obtain a valid first lien (other than with
respect to CITBC's second lien on Northwest Pipe's Portland, Oregon facility and
Thompson Steel's Princeton, Kentucky facility) thereon subject only to those
exceptions of title as set forth in future title insurance policies that are
satisfactory to CITBC.
6.10 The Companies shall give to CITBC, and/or shall cause the
appropriate party to give to CITBC, from time to time such pledge or security
agreements with respect to General Intangibles (now or hereafter acquired) of
the Companies as CITBC shall require to obtain valid first liens thereon.
6.11 Without in any way limiting the right of CITBC to enforce rights
on behalf of the Companies as provided herein, the Companies shall diligently
pursue all rights, remedies, powers and privileges available to them under the
Stock Purchase Agreement.
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SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Each Company hereby warrants and represents and/or covenants that:
i) the fair value of such Company's assets exceeds the book value of such
Company's liabilities; ii) such Company is generally able to pay its debts as
they become due and payable; and iii) such Company does not have unreasonably
small capital to carry on its business as it is currently conducted absent
extraordinary and unforeseen circumstances. Each Company further warrants and
represents that a) except for the Permitted Encumbrances, the security interests
granted herein constitute and shall at all times constitute the first and only
liens on the Collateral; b) after filing of financing statements in the
applicable filing clerk's office in the states listed on the Perfection
Certificate, this Financing Agreement creates a valid, perfected, first priority
lien on the Collateral, that can be perfected by the filing of such financing
statements, except for the Permitted Encumbrances; c) except for the Permitted
Encumbrances, such Company is or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of others; d) such Company will at its
expense, until the Obligations are indefeasibly paid in full and CITBC shall
have no further commitment or obligation hereunder, warrant and, at CITBC's
request, defend the same from any and all claims and demands of any other person
other than the holders of the Permitted Encumbrances; e) such Company will not
grant, create or permit to exist, any lien upon or security interest in the
Collateral, or any proceeds thereof, in favor of any other person other than the
holders of the Permitted Encumbrances; f) the representations and warranties in
the Perfection Certificate are true and correct; g) the Equipment does not
comprise a part of the Inventory of such Company and that the Equipment is and
will only be used by such Company in its business and will not be held for sale
or lease (except as set forth in paragraph 7.10(d)), or removed from its
premises, or otherwise disposed of by such Company without the prior written
approval of CITBC except as otherwise permitted in paragraph 6.4 of Section 6 of
this Financing Agreement; (h) Schedule 1 hereto contains an accurate and
complete list as of the date hereof of all Inventory locations of the Companies;
(i) Schedule 2 hereto contains an
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accurate and complete list as of the date hereof of all trade names used by the
Companies; and (j) Schedule 3 hereto contains an accurate and complete list as
of the date hereof of all patents, trademarks and copyrights of the Companies.
7.2 Each Company agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as CITBC shall reasonably require.
Each Company agrees that CITBC or its agents may enter upon such Company's
premises at any time during normal business hours, and from time to time, for
the purpose of inspecting the Collateral, and any and all records pertaining
thereto. Each Company agrees to afford CITBC thirty (30) days prior written
notice of any change in the location of any Collateral, other than to locations,
that as of the date hereof, are known to CITBC and at which CITBC has filed
financing statements and otherwise fully perfected its liens thereon. The
Companies are also to advise CITBC promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to CITBC therein.
7.3 Each Company agrees to: execute and deliver to CITBC, from time to
time, solely for CITBC's convenience in maintaining a record of the Collateral,
such written statements, and schedules as CITBC may reasonably require,
designating, identifying or describing the Collateral pledged to CITBC
hereunder. Any Company's failure, however, to promptly give CITBC such
statements, or schedules shall not affect, diminish, modify or otherwise limit
CITBC's security interests in the Collateral.
7.4 Each Company agrees to comply with the requirements of all state
and federal laws in order to grant to CITBC valid and perfected first security
interests in the Collateral (except as otherwise provided herein) subject only
to the Permitted Encumbrances. CITBC is hereby authorized by the Companies to
file any financing statements covering the Collateral whether or not any
Company's signature appears thereon. The Companies agree to do whatever CITBC
may reasonably request, from time to time, by way of: searching records, filing
notices of liens, financing statements, amendments, renewals and continuations
thereof; cooperating with CITBC's custodians;
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keeping stock records; transferring proceeds of Collateral to CITBC's
possession; and performing such further acts as CITBC may reasonably require in
order to effect the purposes of this Financing Agreement.
7.5 (a) The Companies agree to maintain insurance on the Real Estate,
Equipment and Inventory (wherever located) under such policies of insurance,
with such insurance companies, in such reasonable amounts and covering such
insurable risks as are at all times reasonably satisfactory to CITBC. All
policies covering the Real Estate, Equipment and Inventory are, subject to the
rights of any holders of Permitted Encumbrances holding claims senior to CITBC,
to be made payable to CITBC, in case of loss, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as CITBC may require to fully protect CITBC's interest in the Real
Estate, Inventory and Equipment and to any payments to be made under such
policies. All original policies or true copies thereof are to be delivered to
CITBC, the premium paid when due and in the ordinary course of business, with
the loss payable endorsement in CITBC's favor, and shall provide for not less
than thirty (30) days' prior written notice to CITBC of the exercise of any
right of cancellation. At the Companies' request, or if the Companies fail to
maintain such insurance, CITBC may arrange for such insurance, but at the
Companies' expense and without any responsibility on CITBC's part for: obtaining
the insurance, the solvency of the insurance companies, the adequacy of the
coverage, or the collection of claims. Upon the occurrence of an Event of
Default which is not waived or cured to CITBC's satisfaction, CITBC shall,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to CITBC, have the sole right, in the name of CITBC or any Company, to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(b) (i) In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to
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Inventory shall first reduce the applicable Company's Revolving
Loan, then such Company's Capex Loans.
ii) In the event any part of the Companies' Real Estate or Equipment
is damaged by fire or other casualty and the insurance proceeds
for such damage or other casualty (the "Proceeds") is less than
or equal to $100,000.00, CITBC shall promptly apply such
Proceeds to reduce the applicable Company's outstanding balances
under the Revolving Loan account or, if there is no balance, to
such Obligations as CITBC may reasonably elect.
iii) As long as x) an Event of Default has not occurred (which is not
cured to CITBC's satisfaction), y) the Companies have sufficient
business interruption insurance to replace the lost profits of
any of the Companies' facilities, and z) the Proceeds are in
excess of $100,000.00, the Companies may elect (by delivering
written notice to CITBC) to replace, repair or restore such Real
Estate or Equipment to substantially the equivalent condition
prior to such fire or other casualty as set forth herein. If the
Companies do not, or cannot, elect to use the Proceeds as set
forth above, CITBC may, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CITBC, apply the
Proceeds to the payment of the Obligations in such manner and in
such order as CITBC may reasonably elect.
iv) If a Company elects to use the Proceeds for the repair,
replacement or restoration of any Real Estate or Equipment, and
there is then no Event of Default, i) proceeds of insurance on
Equipment and Real Estate in excess of $100,000.00 will be
applied to the reduction of the Revolving Loans of such Company
and ii) CITBC may set up a reserve against Availability for an
amount equal to the proceeds referred to in clause i) hereof.
The reserve will be reduced dollar-for-dollar upon receipt of
non-cancelable executed purchase orders, delivery receipts or
contracts for the replacement, repair or
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restoration of Equipment or the Real Estate and disbursements in
connection therewith. Prior to the commencement of any
restoration, repair or replacement of Real Estate, such Company
shall provide CITBC with a restoration plan and a total budget
certified by an independent third party experienced in
construction costing. If there are insufficient Proceeds to
cover the cost of restoration as so determined, such Company
shall be responsible for the amount of any such insufficiency,
prior to the commencement of restoration and shall demonstrate
evidence of such before the reserve will be reduced. Completion
of restoration shall be evidenced by a final, unqualified
certification of the design architect employed, if any; an
unconditional Certificate of Occupancy, if applicable; such
other certification as may be required by law; or if none of the
above is applicable, a written good faith determination of
completion by such Company (herein collectively the
"Completion"). Upon Completion, any remaining reserve as
established hereunder will be automatically released.
(v) The Companies agree to pay any reasonable costs, fees or
expenses which CITBC may reasonably incur in connection with
this paragraph 7.5.
7.6 The Companies agree to pay, when due, all taxes, assessments,
claims and other charges (herein "taxes") lawfully levied or assessed upon the
Companies or the Collateral and if such taxes remain unpaid after the date fixed
for the payment thereof unless: (i) such taxes are being diligently contested in
good faith by the Companies by appropriate proceedings, (ii) the Companies
establish such reserves as may be required by GAAP or, in the alternative or in
addition thereto, CITBC establishes an Availability Reserve in such amount as
CITBC may determined in its reasonable discretion, or (iii) if any lien shall be
claimed thereunder x) for taxes due the United States of America or any state
thereof having similar tax priority status, or y) which in CITBC's opinion might
create a valid obligation having priority over the rights granted to CITBC
herein, CITBC may, on the
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Companies' behalf, pay such taxes, and the amount thereof shall be an Obligation
secured hereby and due to CITBC on demand.
7.7 Each Company: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
such Company's business; provided that such Company may contest any acts, rules,
regulations, orders and directions of such bodies or officials in any reasonable
manner which will not, in CITBC's reasonable opinion, materially and adversely
effect CITBC's rights or priority in the Collateral; (b) agrees to comply with
all environmental statutes, acts, rules, regulations or orders as presently
existing or as adopted or amended in the future applicable to the ownership
and/or use of its real property and operation of its business which the failure
to comply with would have a material and adverse impact on the Collateral, or
any material part thereof, or on the operation of the business of such Company.
Each Company hereby indemnifies CITBC and agrees to defend and hold CITBC
harmless from and against any and all loss, damage, claim, liability, injury or
expense which CITBC may sustain or incur (other than solely as a result of the
physical actions of CITBC on the Companies' premises) in connection with: any
claim or expense asserted against CITBC as a result of any environmental
pollution, hazardous material or environmental clean-up of the Companies' real
property; or any claim or expense which results from the Companies' operations
(including, but not limited to, the Companies' off-site disposal practices); any
claim or expense relating to the Companies' Inventory and/or Equipment, and the
Companies further agree that this indemnification shall survive termination of
this Financing Agreement as well as the payment of all Obligations or amounts
payable hereunder; and (c) shall not be deemed to have breached any provision of
this paragraph 7.7 if (i) the failure to comply with the requirements of this
paragraph 7.7 resulted from good faith error or innocent omission, (ii) the
Companies promptly commence and diligently pursue a cure of such breach, (iii)
such failure is cured within fifteen (15) Business Days following the Companies'
receipt of notice of such failure, and (iv) such failure has not resulted in a
material adverse effect on the business, financial condition or operations of
the
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Companies or on the Collateral. Upon receipt by the Companies of any notice of
non-compliance with any applicable environmental rules or regulation, of any
required expenditures for compliance, any spill or omission or other regulated
"event", or any claim resulting from the Companies' business or practices or
relating to the Collateral, the Companies shall establish such reserves as may
be required by GAAP or, in the alternative or in addition thereto, CITBC may
establish an Availability Reserve in such amount as CITBC may require in its
reasonable discretion.
7.8 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
CITBC shall have otherwise consented in writing, the Companies will furnish to
CITBC: (a) within ninety (90) days after the end of each fiscal year of
Northwest Pipe, an audited Consolidated Balance Sheet and an audited
Consolidating Balance Sheet as at the close of such year, and statements of
profit and loss, cash flow and reconciliation of surplus of the Companies and
their subsidiaries for such year, audited by independent public accountants
selected by the Companies and satisfactory to CITBC in the exercise of its
reasonable business judgement; (b) within forty-five (45) days after the end of
each fiscal quarter of Northwest Pipe, a Consolidating Balance Sheet as at the
end of such period and statements of profit and loss, cash flow and surplus of
the Companies and their subsidiaries for such period, certified by an authorized
financial or accounting officer of Northwest Pipe; (c) within thirty (30) days
after the end of each month, a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Companies
and their subsidiaries for such period, certified by an authorized financial or
accounting officer of Northwest Pipe; and (d) from time to time, such further
information regarding the business affairs and financial condition of the
Companies as CITBC may reasonably request, including without limitation annual
cash flow projections in form satisfactory to CITBC. Each financial statement
which the Companies are required to submit hereunder must be accompanied by an
officer's certificate, signed by the President, Vice President, Controller, or
Treasurer of Northwest Pipe, pursuant to which any one such officer must certify
that: (i) the financial statement(s) fairly and accurately represent(s) the
Companies' financial condition at the
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end of the particular accounting period, as well as the Companies' operating
results during such accounting period, subject to year-end audit adjustments;
(ii) during the particular accounting period: (x) there has been no Default or
Event of Default under this Financing Agreement, provided, however, that if any
such officer has knowledge that any such Default or Event of Default, has
occurred during such period, the existence of and a detailed description of same
shall be set forth in such officer's certificate; and (y) no Company has
received any notice of cancellation with respect to its property insurance
policies; and (iii) the exhibits attached to such financial statement(s)
constitute detailed calculations showing compliance with all financial covenants
contained in this Financing Agreement.
7.9 The Companies shall cause each of the following to occur to CITBC's
reasonable satisfaction:
a) The Companies shall use their best efforts to obtain within thirty
(30) days after the Closing Date consents from the trustees for the holders of
the Bonds necessary to permit Thompson Steel to grant in favor of CITBC a lien
of not less than second priority on the Real Estate and Equipment of Thompson
Steel located in Princeton, Kentucky; and Thompson Steel shall, promptly after
receipt of such consents, execute and deliver to CITBC such mortgages, deeds of
trust and other documentation as CITBC may reasonably require to obtain a
perfected lien of not less than second priority on such Real Estate and
Equipment. The failure of Thompson Steel to obtain such consents and validly
grant such liens within ninety (90) days of the Closing Date shall constitute an
Event of Default hereunder.
b) Within thirty (30) days after the Closing Date, Thompson Pipe shall
have executed and delivered to CITBC such mortgages and deeds of trust as CITBC
may reasonably require to obtain a first lien on the Real Estate owned by
Thompson Pipe in Denver, Colorado.
c) Within ninety (90) days after the Closing Date, CITBC shall have
received, in respect of the mortgage or deed of trust required by clause a)
above, a mortgagee's title policy or marked-up unconditional binder for such
insurance. Within thirty
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(30) days after the Closing Date, CITBC shall have received, in respect of the
mortgage or deed of trust required by clause b) above, a mortgagee's title
policy or marked-up unconditional binder for such insurance. Each such policy
shall (i) be in the amount of $4,100,000 on the Denver, Colorado Real Estate,
and $2,400,000 on the Princeton, Kentucky Real Estate; (ii) insure that the
mortgage or deed of trust insured thereby creates a valid first lien on the
property covered by such mortgage or deed of trust (other than with respect to
CITBC's second lien on Thompson Steel's Princeton, Kentucky facility), free and
clear of all defects and encumbrances except those acceptable to CITBC; (iii)
name CITBC as the insured thereunder; and (iv) contain such endorsements and
effective coverage as CITBC may reasonably request, including without limitation
the revolving line of credit endorsement. CITBC shall also have received
evidence that all premiums in respect of such policies have been paid and that
all charges for mortgage recording taxes, if any, shall have been paid.
d) Within thirty (30) days after the Closing Date, CITBC and the title
insurance company issuing each policy referred to in the immediately preceding
paragraph (each, a "Title Insurance Company") shall have received maps or plats
of a perimeter or boundary of the site of each of the properties covered by the
mortgages or deeds of trust, dated a date satisfactory to CITBC and the relevant
Title Insurance Company and either: (a) prepared by an independent professional
licensed land surveyor satisfactory to CITBC and the relevant Title Insurance
Company, which maps or plats and the surveys on which they are based shall be
made in accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping; and, without limiting the
generality of the foregoing, there shall be surveyed and shown on the maps or
plats or surveys the following: (i) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines insofar as the foregoing affect the perimeter or boundary of such
property; (ii) the lines of streets abutting the sites and width thereof; (iii)
all access and other easements appurtenant to the sites or necessary or
desirable to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and
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overhanging projections and similar encumbrances affecting the sites, whether
recorded, apparent from a physical inspection of the sites or otherwise known to
the surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is designated as
being on a filed map, a legend relating the survey to said map. Further, the
survey shall A) be certified to CITBC and the Title Insurance Company and B)
contain a legend reciting as to whether or not the site is located in a flood
zone; or (b) the title report and policy for any such Real Estate shall omit any
title exception for surveys, in form and substance satisfactory to CITBC and its
counsel.
e) Within thirty (30) days after the Closing Date, Thompson Pipe shall
enter into one or more lock box agreement(s) in form and substance acceptable to
CITBC in its reasonable business judgment.
f) Within sixty (60) days after the Closing Date, the Companies shall
have prepared and delivered to CITBC (i) consolidating cash budget projections
for the Companies for the next consecutive twelve month period commencing on the
Closing Date, and (ii) the consolidating opening balance sheet of the Companies
as of the Closing Date, all of which shall be in form and substance satisfactory
to CITBC.
7.10 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, each Company agrees that, without
the prior written consent of CITBC (which consent shall be subject to its
reasonable business judgement), except as otherwise herein provided, such
Company will not:
a) Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as
a result of a purchase money or title retention transaction, or
other security interest, or otherwise) to exist on any of its
assets or goods, whether real, personal or mixed, whether now
owned or hereafter acquired, except for the Permitted
Encumbrances;
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b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
c) Borrow any money on the security of such Company's Collateral
from sources other than CITBC, except for Permitted
Indebtedness;
d) Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except the Equipment and Real Estate of Thompson
Steel held for sale, or as otherwise specifically permitted by
this Financing Agreement, or ii) either all or substantially all
of such Company's assets, which do not constitute Collateral;
e) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or
existence, or enter into or engage in any operation or activity
materially different from that presently being conducted by such
Company;
f) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except
by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business;
g) Declare or pay any dividend of any kind on, or purchase,
acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter
outstanding, except that Northwest Pipe may redeem capital stock
in an amount up to $3,000,000 in the aggregate if i) the
Companies are not then in breach or violation of this Financing
Agreement; ii) after giving effect to such redemption, no
Default or Event of Default will have occurred hereunder; iii)
all of the Companies' accounts payable are current in accordance
with their normal business practices;
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and iv) on the date of any such redemption, after giving effect
to such redemption and all outstanding Revolving Loans, Letters
of Credit, and any and all other extensions of credit to be made
by CITBC to the Companies on such date, the Companies shall have
a minimum additional Availability of at least $2,000,000.00;
h) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation; provided, however, that after
CITBC's receipt of the opening balance sheet of the Companies,
being delivered pursuant to paragraph 7.9(f)(ii) hereof,
(i) Northwest Pipe may make loans to Thompson Pipe in an
aggregate amount not to exceed $2,500,000 in excess of the
intercompany loans of Northwest Pipe to Thompson Pipe indicated
on such opening balance sheet, and (ii) Thompson Pipe may (a)
repay the loans held by Northwest Pipe to Thompson Pipe
indicated on such opening balance sheet up to an aggregate
amount not to exceed $1,800,000 (and to the extent such balance
sheet reflects intercompany loans of less than $1,800,000,
Thompson Pipe may make loans to Northwest Pipe), and (b) repay
loans made after the Closing Date by Northwest Pipe to Thompson
Pipe as permitted in clause (i), above; provided further,
however, that each officer's certificate delivered pursuant
to paragraph 7.8 of Section 7 hereof shall indicate the amount
of such loans outstanding; or
i) In any way modify or consent to the modification of the Stock
Purchase Agreement.
7.11 The Companies' consolidated Capital Expenditures may not exceed
(i) $4,500,000 for the fiscal year ending December 31, 1996 or (ii) $5,000,000
during any fiscal year thereafter.
7.12 The Companies shall maintain at all times a consolidated Net Worth
of not less than: (a) the consolidated Net
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Worth of the Companies indicated on the opening balance sheet to be delivered
pursuant to paragraph 7.9(f)(ii), less (b) $2,500,000. Thompson Pipe shall
maintain at all times a Net Worth of not less than: (a) the Net Worth of
Thompson Pipe indicated on the opening balance sheet to be delivered pursuant to
paragraph 7.9(f)(ii), less (b) $1,250,000.
7.13 The Companies shall maintain a consolidated Fixed Charge Coverage
Ratio of not less than 1.25 to 1.0 for each of the following periods: (i)
quarter ended September 30, 1996, (ii) two quarters ended December 31, 1996,
(iii) three quarters ended March 30, 1997, (iv) four quarters ended June 30,
1997, and (v) each quarter thereafter, on a rolling four-quarter basis.
7.14 The Companies shall maintain at all times consolidated Working
Capital of not less than: (a) the consolidated Working Capital of the Companies
indicated on the opening balance sheet to be delivered pursuant to paragraph
7.9(f)(ii), less (b) $5,000,000.
7.15 The Companies, on a consolidated basis, shall not sustain a net
loss for any fiscal year as determined in accordance with GAAP.
7.16 The Companies shall maintain at all times a consolidated Leverage
Ratio not to exceed 2.00 to 1.0.
7.17 The Companies agree to advise CITBC in writing of: a) all
expenditures (actual or anticipated) in excess of $100,000.00 for x)
environmental clean-up, y) environmental compliance or z) environmental testing
and the impact of said expenses on the Companies' Working Capital; b) any
notices the Companies receive from any local, state or federal authority
advising the Companies of any environmental liability (real or potential)
stemming from a Company's operations, its premises, its waste disposal
practices, or waste disposal sites used by a Company and to provide CITBC with
copies of all such notices if so required; and c) each Company hereby represents
and warrants that, as of the Closing Date, it has not received notice of any
material violation of any applicable environmental rules and regulations,
including without limitation pursuant to CERCLA, any
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other "super-fund" laws or regulations and/or notice that such Company is a
"PRP" in any pending action or investigation.
7.18 Without the prior written consent of CITBC, each Company agrees
that it will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary or
affiliate of any Company, except as specifically provided in paragraph 7.10(h).
7.19 The Companies shall: a) upon the acquisition after the date hereof
by the Companies of any Stock Collateral, promptly either (x) transfer and
deliver to CITBC all such Stock Collateral (together with the certificates
representing such Stock Collateral securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank) or (y) take such
other action as CITBC shall deem necessary or appropriate to perfect, and
establish the priority of, the liens granted by this Financing Agreement in such
Stock Collateral; and
b) give, execute, deliver, file or record any and all financing
statements, notices, contracts, agreements or other instruments, obtain any and
all governmental approvals or consents and take any and all steps that may be
necessary or as CITBC may request to create, perfect, establish the priority of,
or to preserve the validity, perfection or priority of, the liens granted by
this Financing Agreement or to enable CITBC to exercise and enforce its rights,
remedies, powers and privileges under this Financing Agreement with respect to
such liens, including causing any or all of the Stock Collateral to be
transferred of record into the name of CITBC or its nominee (and CITBC agrees
that if any Stock Collateral is transferred into its name or the name of its
nominee, CITBC will thereafter promptly give to the pledging Company copies of
any notices and communications received by it with respect to the Stock
Collateral pledged by such Company).
c) (i) cause the Stock Collateral to constitute at all times 100% of
the total number of shares of each class of capital stock of Thompson Pipe and
Thompson Steel then outstanding, (ii) cause all such shares to be duly
authorized, validly issued, fully paid and nonassessable and to be free of any
contractual restriction or any restriction under the charter or bylaws of
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this issuer of such Stock Collateral, upon the transfer of such Stock
Collateral.
7.20 So long as CITBC has not given notice to Northwest Pipe and
Thompson Pipe of CITBC's intention to exercise voting rights regarding the Stock
Collateral after the occurrence of an Event of Default, each Company shall have
the right to exercise all voting, consensual and other powers of ownership
pertaining to the Stock Collateral pledged by it, for all purposes not
inconsistent with the terms of any Loan Document, provided that each Company
agrees that it will not vote the Stock Collateral in any manner that is
inconsistent with the terms of any Loan Document; and CITBC shall, at the
Companies' expense, execute and deliver to the Companies or cause to be executed
and delivered to the Companies all such proxies, powers of attorney, dividend
and other orders and other instruments, without recourse, as the Companies may
reasonably request for the purpose of enabling the Companies to exercise the
rights and powers which they are entitled to exercise pursuant to this Section
7.20.
7.21 So long as no Event of Default shall have occurred and be
continuing, each Company shall be entitled to receive and retain any dividends
paid in cash out of earned surplus on the Stock Collateral pledged by it.
7.22 If an Event of Default shall have occurred and be continuing, and
whether or not CITBC exercises any available right to declare any of the
Obligations due and payable, or seeks or pursues any other right, remedy, power
or privilege available to it under applicable law, this Financing Agreement or
any other Loan Document, all dividends and other distributions on the Stock
Collateral shall be paid directly to CITBC and retained by it as part of the
Stock Collateral, subject to the terms of this Financing Agreement, and, if
CITBC shall so request, the Companies agree to execute and deliver to CITBC
appropriate additional dividend, distribution and other orders and instruments
to that end. Thompson Pipe and Thompson Steel acknowledge their obligations
hereunder and shall, during the continuance of an Event of Default, pay all
dividends and other distributions on the Stock Collateral directly to CITBC as
set forth above.
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7.23 If an Event of Default shall have occurred and be continuing and
CITBC shall have given notice to Northwest Pipe and Thompson Pipe of CITBC's
intention to exercise voting rights regarding the Stock Collateral, CITBC shall
have the right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral as
if CITBC were the sole and absolute owner of the Stock Collateral (and the
Companies agree to take all such action as may be appropriate to give effect to
such right).
7.24 No reference in this Financing Agreement to proceeds or to the
sale or other disposition of Stock Collateral shall authorize the Companies to
sell or otherwise dispose of any Stock Collateral.
7.25 The Companies represent and warrant that:
a) The Pledged Stock evidenced by the certificates identified on
Schedule 6 is duly authorized, validly existing, fully paid and nonassessable,
and none of such Pledged Stock is subject to any contractual restriction, or any
restriction under the charter or by-laws of the issuer of such Pledged Stock,
upon the transfer of such Pledged Stock.
b) The Pledged Stock evidenced by the certificates identified Schedule
6 constitutes (i) all of the issued and outstanding shares of capital stock of
any class of Thompson Steel beneficially owned by Thompson Pipe or any other
person, and (ii) all of the issued and outstanding shares of capital stock of
any class of Thompson Pipe beneficially owned by Northwest Pipe or any other
person; and Schedule 6 correctly identifies the respective class and par value
of the shares comprising such Pledged Stock and the respective number (and
registered owners) of the shares evidenced by each such certificate.
SECTION 8. INTEREST, FEES AND EXPENSES
8.1 The Revolving Loans shall bear a variable rate of interest, as
further described below, to be selected by the Companies in an irrevocable
written or facsimile notice
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("Revolving Loan Notice of Borrowing") effective upon receipt by CITBC, and
given no later than 2:00 p.m. (New York City time) on a) in the case of Chemical
Rate Loans, the date such borrowings are to be made and b) in the case of Libor
Loans, the fourth (4th) Business Day prior to the date such borrowings are to be
made. In the event a Company fails to timely select a variable interest rate,
the Revolving Loans shall be deemed Chemical Rate Loans until such Company
elects otherwise as herein provided. The Companies may elect either a) the
Chemical Bank Rate; b) the Libor Rate; or c) a combination of the Chemical Bank
Rate and the Libor Rate to be applied to different tranches of the Revolving
Loans.
x) In the event a Company elects the Chemical Bank Rate for all or
any part of its Revolving Loans, the Revolving Loan Notice of
Borrowing shall specify the amount of such loan. Interest
thereon shall be computed based on the Chemical Bank Rate plus
the Revolving Loans Chemical Rate Margin per annum. In the event
of any change in the Chemical Bank Rate, the interest rate with
respect to a Revolving Loan that is a Chemical Rate Loan shall
change, as of the first of the month following any change, so as
to remain an amount equal to the Revolving Loans Chemical Rate
Margin above the Chemical Bank Rate.
y) In the event a Company initially elects the Libor Rate for all
or any part of its Revolving Loans, the Revolving Loan Notice of
Borrowing shall specify a) the amount of such loan and b) the
initial Libor Period applicable thereto. Interest thereon shall
be computed based on i) the applicable Libor Rate for such Libor
Period plus the Revolving Loans Libor Margin.
8.2. Each Capex Loan(s) shall bear interest at a variable interest
rate, as further described below, to be selected by the Companies in an
irrevocable written or facsimile notice ("Capex Loan Notice of Borrowing"),
effective upon receipt by CITBC, and given no later than 2:00 P.M. (New York
City Time) on a) in the case of Chemical Rate Loans, the date such
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borrowings are to be made and b) in the case of Libor Loans, the fourth (4th)
Business Day prior to the date such borrowings are to be made. In the event a
Company fails to select a variable interest rate, the Capex Loan shall be deemed
a Chemical Rate Loan until such Company elects otherwise as herein provided. In
the event that a Company elects a variable rate of interest on a Capex Loan,
such Company may further elect a) the Chemical Bank Rate; b) the Libor Rate; or
c) a combination of the Chemical Bank Rate and the Libor Rate to be applied to
different tranches of the Capex Loans.
x) In the event a Company elects the Chemical Bank Rate for all or
any part of a Capex Loan, the Capex Loan Notice of Borrowing
shall specify the amount of such loan. Interest thereon shall be
computed based on the Chemical Bank Rate plus the Capex Loan
Chemical Rate Margin per annum. In the event of any change in
the Chemical Bank Rate, the interest rate with respect to a
Capex Loan that is a Chemical Rate Loan shall change, as of the
first of the month following any change, so as to remain an
amount equal to the Capex Loan Chemical Rate Margin above the
Chemical Bank Rate.
y) In the event a Company elects the Libor Rate for all or any part
of a Capex Loan, the Capex Loan Notice of Borrowing shall
specify a) the amount of such loan and b) the initial Libor
Period applicable thereto. Interest thereon shall be computed
based on the applicable Libor Rate for such Libor Period plus
the Capex Loan Libor Margin.
8.3 Provided that x) there is then no Default or Event of Default and
y) the applicable Company has given an irrevocable written or facsimile Notice
of Variable Interest Rate Conversion/Continuation (as described below) in
accordance with the provisions of this paragraph 8.3, such Company may I)
continue an outstanding Libor Loan for a subsequent Libor Period it selects
and/or II) convert all or any part of any outstanding variable interest rate on
the Revolving Loans and/or Capex Loans
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i) from a Chemical Bank Rate to a Libor Rate and/or ii) from a Libor Rate to a
Chemical Bank Rate, provided any such conversion is made in an integral multiple
of $100,000. Whenever a Company desires to either convert a variable interest
rate or to continue a Libor Rate for a subsequent Libor Period, such Company
must advise CITBC of its irrevocable election no later than a) four (4) Business
Days preceding the first day of the Libor Period if the conversion is from a
Chemical Bank Rate to a Libor Rate and b) one (1) Business Day prior to the end
of the then current Libor Period if the conversion is from a Libor Rate to a
Chemical Bank Rate. If no such election is timely made or can be made, CITBC
shall use the Chemical Bank Rate plus the appropriate Chemical Rate Margin to
compute any variable interest rate hereunder. Each written or facsimile Notice
of Variable Interest Rate Conversion/Continuation shall i) identify the loans to
be converted or continued, the aggregate outstanding principal balance thereof
and, in the case of Libor Loans to be continued, the last day of the Libor
Period therefor, (ii) specify the effective date of such conversion or
continuation provided, however, if the loans to be continued or converted are
Libor Loans, such continuation or conversion shall be effective only on the last
day of the then current Libor Period applicable to such loans (subject to
subparagraph (c) below of this paragraph 8.3), and (iii) specify the Libor
Period to be applicable to such converted or continued Libor Loan.
a) If a Company elects under this paragraph to either continue an
outstanding Libor Loan for a subsequent Libor Period or convert
all or any part of a Chemical Rate Loan to a Libor Loan, the
interest thereon shall be computed based on the applicable Libor
for such succeeding Libor Period plus the applicable Libor
Margin.
b) If a Company elects under this paragraph to convert all or any
part of a Libor Loan to a Chemical Rate Loan, the interest rate
thereon shall be computed based on the Chemical Bank Rate plus
the applicable Chemical Rate Margin.
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c) If the last day of a current Libor Period
with respect to a loan that is to be
continued as or converted to a Libor Loan
under this paragraph is not a Business Day,
then i) such continuation or conversion
shall be made on the next succeeding
Business Day and ii) during the period from
such last day of the current Libor Period to
such next succeeding Business Day, such loan
shall bear interest as if it were a Chemical
Rate Loan.
d) Any Libor Period pertaining to a Libor Loan
that begins on the last Business Day of a
calendar month (or on a day for which there
is no numerically corresponding day in the
calendar month at the end of such Libor
Period) shall end on the last Business Day
of the calendar month at the end of such
Libor Period.
e) No Libor Period shall end after the
scheduled maturity of this Financing
Agreement or any subsequent Anniversary Date
as to which the Companies or CITBC have the
right to terminate the Line of Credit or
this Financing Agreement by giving timely
notice pursuant to Section 12 hereof.
8.4 Any charges, fees, commissions, costs and expenses
charged to CITBC for the Companies' account by any Issuing Bank in connection
with or arising out of Letters of Credit issued pursuant to this Financing
Agreement or out of transactions relating thereto will be charged to the
Companies' account in full when charged to or paid by CITBC and when made by any
such Issuing Bank shall be conclusive on CITBC.
8.5 The Companies shall reimburse or pay CITBC, as the case
may be, for: i) all Out-of-Pocket Expenses of CITBC and b) any applicable
Documentation Fee.
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8.6 Upon the last Business Day of each month, commencing
immediately, the Companies shall pay CITBC the Line of Credit Fee.
8.7 Intentionally Omitted.
8.8 On April 30 of each year, commencing April 30, 1997, the
Companies shall pay to CITBC the Collateral Management Fee; provided, however,
that such fee shall not be payable on the scheduled termination date of this
Financing Agreement or any year thereafter if on such date (or within five (5)
days thereafter, provided timely notice of termination on such date was given)
this Financing Agreement is terminated in accordance with its terms, CITBC has
no further commitment or obligation hereunder, and all Obligations are paid in
full. The Collateral Management Fee shall be deemed earned when due and once
paid is non-refundable.
8.9 The Companies shall pay CITBC's standard charges for,
and the fees and expenses of, the CITBC personnel used by CITBC for reviewing
the books and records of the Companies and for verifying, testing protecting,
safeguarding, preserving or disposing of all or any part of the Collateral;
provided, however, that the foregoing shall not be payable until the occurrence
of an Event of Default if the Companies are paying a Collateral Management Fee.
8.10 The Companies hereby authorize CITBC to charge the
Companies' accounts with CITBC with the amount of all payments due hereunder as
such payments become due. The Companies confirm that any charges which CITBC may
so make to the Companies' accounts as herein provided will be made as an
accommodation to the Companies and solely at CITBC's discretion.
8.11 In consideration of the Letter of Credit Guaranties of
CITBC, the Companies shall pay CITBC the Letter of Credit Guaranty Fee which
shall be an amount equal to three-quarters of one percent (3/4 of 1%) per annum,
payable monthly beginning in the month in which the Letter of Credit Guaranty or
the Letter of Credit is first issued, on the outstanding amount of each Letter
of Credit less the amount of any and all amounts previously drawn under the
Letter of Credit.
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8.12 Notwithstanding anything to the contrary contained in
this Section 8, there shall not be more than seven (7) Libor Tranches
outstanding at any one time.
8.13 Calculation of all amounts payable to CITBC under this
Financing Agreement with regard to Libor Loans shall be made whether or not
CITBC had actually funded the Libor Loans through the purchase of deposits in
the relevant market and currency, as the case may be, bearing interest at the
rate applicable to such Libor Loans, in an amount equal to the amount of the
Libor Loans and having a maturity comparable to the relevant Libor Period
provided, however, that a) CITBC may fund each of the Libor Loans in any manner
as CITBC sees fit without affecting the Companies' election, conversion or
continuation of a Libor Loan and b) the foregoing assumption shall be used only
for calculation of amounts payable under this Financing Agreement.
8.14 Notwithstanding anything to the contrary contained
herein, if any Libor Loan made under this Financing Agreement is prepaid, by
acceleration or otherwise (except if a Libor Loan is converted to a Chemical
Rate Loan pursuant to paragraph 8.17 or 8.19 hereof), the Companies must pay to
CITBC the Libor Prepayment Penalty.
8.15 The determination by CITBC of the amount of any loss or
expense with respect to or arising out of Libor Loans entered into under this
Financing Agreement shall be conclusive on the Companies in the absence of
manifest error when such loss or expense is set forth in a written notice to the
Companies in reasonable detail.
8.16 Notwithstanding anything herein to the contrary, in the
event that a Default occurs that has not been cured to the satisfaction of CITBC
or waived in writing by CITBC or an Event of Default occurs that has not been
waived in writing by CITBC, at CITBC's sole discretion, all Libor Loans then
outstanding shall convert immediately to Chemical Rate Loans. Such Libor Loans
shall be so converted without any further action by the Companies. The principal
amount of such loans shall bear interest at a rate equal to the Chemical Bank
Rate plus the
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applicable Chemical Rate Margin (which may include any applicable default rate).
8.17 In the event that CITBC shall have determined in the
exercise of its reasonable business judgement (which determination shall be
conclusive and binding upon the Companies) that by reason of circumstances
affecting the interbank Eurodollar market, adequate and reasonable means do not
exist for ascertaining the Libor Rate applicable for any Libor Period with
respect to (a) a proposed loan that a Company has requested be made as a Libor
Loan, (b) a Libor Loan that will result from the requested conversion of a
Chemical Rate Loan into a Libor Loan, or (c) the continuation of a Libor Loan
beyond the expiration of the then current Libor Period with respect thereto,
CITBC shall give written notice of such determination to the Companies at least
one (1) day prior to, as the case may be, the requested borrowing date,
conversion date, or the last day of such Libor Period. If such notice is given
(i) any requested Libor Loan shall be made as a Chemical Rate Loan, (ii) any
Chemical Rate Loan that was to have been converted to a Libor Loan shall be
continued as a Chemical Rate Loan, and (iii) any outstanding Libor Loan shall be
converted, on the last day of then current Libor Period with respect thereto, to
a Chemical Rate Loan. Until such notice has been withdrawn by CITBC, no further
Libor Loans shall be made nor shall the Companies have the right to convert a
Chemical Rate Loan to a Libor Loan.
8.18 The applicable interest rate on Chemical Rate Loans
shall i) be calculated on the average of the portion of the net balances owing
by the applicable Company to CITBC in the Revolving Loan Account and/or on the
Capex Loan(s) as applicable, at the close of each day such loans are outstanding
during each month for which such Company has elected such Chemical Bank Rate and
ii) be prorated for the number of days of such month such loans are outstanding.
8.19 Notwithstanding any other provisions herein, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for CITBC to make
or maintain Libor Loans as contemplated herein, the then outstanding Libor
Loans, if any, shall be converted automatically to Chemical Rate Loans on the
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next succeeding interest payment date or within such earlier period as required
by law.
8.20 All interest, regardless of interest rate, shall be
payable monthly as of the end of each month, and shall be calculated based on a
360 day year. CITBC shall be entitled to charge the Companies' Revolving Loan
Accounts with the applicable interest rate(s) until all Obligations have been
paid in full.
8.21 The Companies hereby agree to indemnify CITBC and hold
CITBC harmless from any loss, cost or expense CITBC may sustain or incur as a
consequence of the failure by the Companies to complete any borrowing hereunder
at a Libor Rate after notice thereof has been given by the Companies to CITBC,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired by CITBC to
fund such borrowing when the applicable amount of the Revolving Loans and/or
Capex Loans, as result of such failure, is not made subject to such interest
rates on such date. CITBC shall certify the amount of its loss, cost or expense
to the Companies and such certification shall be final and conclusive absent
manifest error.
SECTION 9. POWERS
The Companies hereby constitute CITBC or any person or agent
CITBC may designate as their attorney-in-fact, at the Companies' cost and
expense, to exercise all of the following powers, which being coupled with an
interest, shall be irrevocable until all of the Companies' Obligations to CITBC
have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all
in the name of CITBC or any Company, any and all checks, notes, drafts, and
other documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to
any Company and to notify postal authorities to change the address for delivery
thereof to such address as CITBC may designate;
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(c) To request from customers indebted on Accounts at any
time, in the name of CITBC or any Company or that of CITBC's designee,
information concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of
CITBC's interest therein and to notify customers indebted on Accounts to make
payment directly to CITBC for the applicable Company's account; and
(e) To take or bring, in the name of CITBC or any Company,
all steps, actions, suits or proceedings deemed by CITBC necessary or desirable
to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the
contrary, the powers set forth in (b), (d) and (e) above may only be exercised
after the occurrence of an Event of Default and until such time as such Event of
Default is waived or cured to CITBC's satisfaction.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Notwithstanding anything hereinabove to the contrary,
CITBC may terminate this Financing Agreement immediately upon the occurrence of
any of the following (herein "Events of Default"):
a) cessation of the business of a Company or the
calling of a meeting of the creditors of a
Company for purposes of compromising the debts
and obligations of such Company;
b) the failure of a Company to generally meet debts
as they mature;
c) the commencement by or against a Company of any
bankruptcy, insolvency, arrangement,
reorganization, receivership or similar
proceedings under any federal or state law;
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d) breach by a Company of any warranty,
representation or covenant contained herein (other
than those referred to in sub-paragraph e below),
the Loan Documents or in any other written
agreement between the Companies or CITBC, provided
that such breach by a Company of any of the
warranties, representations or covenants referred
in this clause d shall not be deemed to be an
Event of Default unless and until such breach
shall remain unremedied to CITBC's satisfaction
for a period of fifteen (15) days from the date of
such breach;
e) breach by a Company of any warranty,
representation or covenant of Section 3,
Paragraphs 3.3 (other than the third sentence of
paragraph 3.3) and 3.4; Section 6, Paragraphs 6.3
and 6.4 (other than the first sentence of
paragraph 6.4); Section 7, Paragraphs 7.1, 7.5,
7.6, and 7.9 through 7.16;
f) failure of the Companies to pay any of the
Obligations within five (5) Business Days of the
due date of any installment of principal or
interest due hereunder, or as to any other
payment within five (5) Business Days of the due
date thereof and notice for payment thereof,
provided that nothing contained herein shall
prohibit CITBC from charging such amounts to the
Companies' account on the due date thereof;
g) Intentionally Omitted;
h) a Company shall i) engage in any "prohibited
transaction" as defined in ERISA, ii) have any
"accumulated funding deficiency" as defined in
ERISA, iii) have any Reportable Event as defined
in ERISA, iv) terminate any Plan, as defined in
ERISA or v) be engaged in any proceeding in
which the Pension Benefit Guaranty Corporation
shall seek appointment, or is appointed, as
trustee or administrator of any Plan, as defined
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in ERISA, and with respect to this sub-paragraph
h such event or condition x) remains uncured for
a period of thirty (30) days from date of
occurrence and y) could, in the reasonable
opinion of CITBC, subject a Company to any tax,
penalty or other liability material to the
business, operations or financial condition of
such Company; or
i) upon the occurrence of an event of default and
subsequent to any applicable written grace or cure
period in any such agreement, pursuant to (i) the
Portland Land Lease between Northwest Pipe and
Multnomah Land & Equipment Company ("MLE"), (ii)
Standard Insurance Company's agreements with MLE;
(iii) Northwest Pipe's agreements with Standard
Insurance Company, GECC or CITEF, or (iv) any
other document or agreement of the Companies
evidencing Indebtedness of the Companies in excess
of $100,000 and, solely as to this clause (iv),
acceleration of any such indebtedness and with
respect to trade debt, commencement of any action
or proceeding thereon.
10.2 Upon the occurrence of a Default and/or an Event of
Default, at the option of CITBC, all loans and advances provided for in
paragraph 3.1 of Section 3 of this Financing Agreement shall be thereafter in
CITBC's sole discretion, and the obligation of CITBC to make Revolving Loans
and/or open Letters of Credit and/or make Capex Loans shall cease unless such
Default or Event of Default is waived or cured to CITBC's satisfaction, and at
the option of CITBC upon the occurrence of an Event of Default: i) all
Obligations shall become immediately due and payable; ii) CITBC may charge the
Companies the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in paragraphs 8.1 and
8.2 of Section 8 of this Financing Agreement, provided that, for purposes of
this clause (ii), a) CITBC has given the Companies written notice of the Event
of Default, provided, however, that no notice is required if the Event of
Default is the Event listed in paragraph 10.1(c) of this Section 10 and b)
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the Companies have failed to cure the Event of Default within ten (10) days
after x) CITBC issues such notice pursuant to paragraph 13.6 hereof or y) the
occurrence of the Event of Default listed in paragraph 10.1(c) of this Section
10; and iii) CITBC may immediately terminate this Financing Agreement upon
notice to the Companies, provided, however, that no notice of termination is
required if the Event of Default is the Event listed in paragraph 10.1(c) of
this Section 10. The exercise of any option is not exclusive of any other option
which may be exercised at any time by CITBC.
10.3 Immediately upon the occurrence of any Event of
Default, CITBC may to the extent permitted by law: (a) remove from any premises
where same may be located any and all documents, instruments, files and records,
and any receptacles or cabinets containing same, relating to the Accounts, or
CITBC may use, at the Companies' expense, such of the Companies' personnel,
supplies or space at the Companies' places of business or otherwise, as may be
necessary to properly administer and control the Accounts or the handling of
collections and realizations thereon; (b) bring suit, in the name of any Company
or CITBC, and generally shall have all other rights respecting said Accounts,
including without limitation the right to: accelerate or extend the time of
payment, settle, compromise, release in whole or in part any amounts owing on
any Accounts and issue credits in the name of any Company or CITBC; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at CITBC's sole option and discretion, and CITBC may bid
or become a purchaser at any such sale, free from any right of redemption, which
right is hereby expressly waived by the Companies; (d) foreclose the security
interests created herein by any available judicial procedure, or to take
possession of any or all of the Inventory and Equipment without judicial
process, and to enter any premises where any Inventory and Equipment may be
located for the purpose of taking possession of or removing the same and (e)
exercise any other rights and remedies provided in law, in equity, by contract
or otherwise. CITBC shall have the right, without notice or advertisement, to
sell, lease, or otherwise dispose of all or any part of the Collateral whether
in its then condition or after further preparation or processing, in the name of
any Company or
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CITBC, or in the name of such other party as CITBC may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as CITBC in its sole discretion may deem advisable, and
CITBC shall have the right to purchase at any such sale. If any Inventory and
Equipment shall require rebuilding, repairing, maintenance or preparation, CITBC
shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such
saleable form as CITBC shall deem appropriate. The Companies agree, at the
request of CITBC, to assemble the Inventory and Equipment and to make it
available to CITBC at premises of the Companies or elsewhere and to make
available to CITBC the premises and facilities of the Companies for the purpose
of CITBC's taking possession of, removing or putting the Inventory and Equipment
in saleable form. However, if notice of intended disposition of any Collateral
is required by law, it is agreed that ten (10) days notice shall constitute
reasonable notification and full compliance with the law. The net cash proceeds
resulting from CITBC's exercise of any of the foregoing rights, (after deducting
all charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by CITBC to the payment of the Companies' Obligations, whether due or to
become due, in such order as CITBC may elect, and the Companies shall remain
liable to CITBC for any deficiencies, and CITBC in turn agrees to remit to the
Companies or their successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative. The mortgage, deed of trust or assignment on the
Real Estate shall govern the rights and remedies of CITBC with respect thereto.
10.4 CITBC may, at its election, with respect to any sale of
all or any part of the Stock Collateral, limit purchasers to those who will
agree, among other things, to acquire the Stock Collateral for their own
account, for investment and not with a view to distribution or resale. The
Companies acknowledge that any such private sales may be at prices and on terms
less favorable to CITBC than those obtainable through a public sale without such
restrictions and, notwithstanding such
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circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that CITBC shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Stock Collateral for the period of time necessary to permit the respective
issuer of such Stock Collateral to register it for public sale.
SECTION 11. GUARANTY OF OBLIGATIONS. In order to induce CITBC to enter into this
Financing Agreement and to make the Revolving Loans, Capex Loans and other loans
and credit accommodations to the Companies hereunder and to issue Letters of
Credit for the account of the Companies hereunder, each Company agrees as
follows:
11.1 GUARANTY Each Company unconditionally and irrevocably
guaranties, as primary obligor and not merely as a surety, the due and punctual
payment when due (whether by required prepayment, declaration, demand or
otherwise) (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
Section 362(a)) of all Obligations of the other Companies (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to the Companies would accrue on such Obligations). If any or all of the
Obligations becomes due and payable, such Company unconditionally, absolutely
and irrevocably promises to pay such Obligations to CITBC for application
thereto, on demand by CITBC, in lawful money of the United States of America and
in immediately available funds. Unpaid Obligations shall bear interest at the
Default Rate of Interest. For purposes of this Section 11, the obligations of
each Company under this Section 11 are referred to as such Company's "Guaranty."
11.2 TERMS OF GUARANTIES (a) Each Company agrees that the
Obligations of the other Companies may be extended or renewed, and the Revolving
Loans repaid and reborrowed in whole or in part, without notice or further
assent, and that it will remain bound upon its Guaranty notwithstanding any
extension, renewal or other alteration of any such Obligations or repayment and
reborrowing of the Revolving Loans.
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(b) Each Company waives presentation of, demand of, payment
from and protest of any Obligation of the other Companies and also waives notice
of protest for nonpayment. The obligations of each Company under this Guaranty
shall not be affected by, and each Company hereby waives its rights (to the
extent permitted by law) in connection with:
(i) the failure of CITBC to assert any claim or
demand or to enforce any right or remedy against the
Companies under the provisions of this Financing Agreement
or any other agreement or otherwise;
(ii) any extension or renewal of any provision
hereof or thereof;
(iii) any rescission, waiver, amendment or
modification of any of the terms or provisions of this
Financing Agreement or any instrument executed pursuant
hereto;
(iv) the release of any security held by CITBC for
the Obligations of any Company;
(v) the failure of CITBC to exercise any right or
remedy against any other guarantor of the Obligations of the
Companies;
(vi) CITBC taking and holding security or
collateral for the payment of a Company's Guaranty, any
other guaranties of the Obligations or other liabilities of
a Company or the Obligations guarantied hereby, and
exchanging, enforcing, waiving and releasing any such
security or collateral;
(vii) CITBC applying any such security or
collateral and directing the order or manner of sale thereof
as CITBC in its discretion may determine; or
(viii) CITBC settling, releasing, compromising,
collecting or otherwise liquidating the
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Obligations of any Company and any security or collateral
therefor in any manner determined by CITBC.
(c) Each Company waives any benefits such Company may
otherwise derive from Section 580a of the California Code of Civil Procedure or
any comparable provisions of the laws of any other jurisdiction. Without
limiting the foregoing, each Company expressly waives any right to a "fair
value" hearing following a judicial or nonjudicial foreclosure with respect to
any interest in real property or other collateral serving as security for all or
any part of the Obligations of the Companies.
(d) CITBC may, at its election, foreclose on any security
held by CITBC by one or more judicial or nonjudicial sales, or exercise any
other right or remedy CITBC may have against the Companies or any security
without affecting or impairing in any way the liability of each Company under
this Section 11, except to the extent the Obligations have been indefeasibly
paid.
(e) Each Company acknowledges that it has been made aware of
the provisions of California Civil Code section 2856, has read and understands
the provisions of that statute, has been advised by its counsel as to the scope,
purpose and effect of that statute, and based thereon, and without limiting the
foregoing waivers, such Company agrees to waive all suretyship rights and
defenses described in Civil Code sections 2856(a) and (b). Without limiting any
other waivers herein, each Company hereby gives the following waiver pursuant to
Section 2856(b) of the California Civil Code:
"The Company waives all rights and defenses arising out of
an election of remedies by CITBC, even though that election
of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed such
Company's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the
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California Code of Civil Procedure or otherwise."
(f) Each Company further agrees that this Guaranty
constitutes a guaranty of payment when due and not of collection, and waives any
right to require that any resort be had by CITBC or any other person to any
security held for payment of the Obligations of the Companies or to any balance
of any deposit or account or credit on the books of CITBC or any other person in
favor of the Companies or any other person.
(g) The obligations of each Company under this Guaranty
shall not be subject to any reduction, limitation, impairment or termination for
any reason, including, without limitation, any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of the Obligations, discharge of any
Company from the Obligations in a bankruptcy or similar proceeding or otherwise.
Without limiting the generality of the foregoing, the obligations of each
Company under this Guaranty shall not be discharged or impaired or otherwise
affected by the failure of CITBC to assert any claim or demand or to enforce any
remedy under this Financing Agreement, any Loan Document or any other agreement,
by any waiver or modification of any provision thereof, by any default, failure
or delay, willful or otherwise, in the performance of the Obligations of the
Companies, or by any other act or thing or omission or delay to do any other act
or thing that may or might in any manner or to any extent vary the risk of a
Company, or otherwise operate as a discharge of a Company as a matter of law or
equity.
(h) Each Company further agrees that this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
payments, or any part thereof, of principal of or interest on any Obligation of
any Company is rescinded or must otherwise be restored by CITBC upon the
bankruptcy or reorganization of such Company or otherwise.
(i) Each Company further agrees, in furtherance of the
foregoing and not in limitation of any other right that CITBC
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may have at law or in equity against such Company by virtue hereof, upon the
failure of a Company to pay any of its Obligations when and as the same shall
become due (whether by required prepayment, declaration, demand or otherwise),
such Company will forthwith pay, or cause to be paid, in cash, to CITBC an
amount equal to the sum of the unpaid principal amount of such Obligations,
accrued and unpaid interest on such Obligations and all other unpaid Obligations
to CITBC. The Collateral pledged by each Company pursuant this Financing
Agreement shall secure its obligations under this Section 11.
(j) Each Company hereby irrevocably waives (a) any right of
subrogation, contribution, indemnity or otherwise against the other Companies
that may arise out of or be caused by its Guaranty hereunder, (b) all rights
and/or claims against the other Companies which may arise by reason of such
Company's Guaranty, (c) any right to enforce any remedy that CITBC now has or
may hereafter have against the Companies, and (d) any benefit of, and any right
to participate in, any security now or hereafter held by CITBC.
(k) Any inter-Company Indebtedness now or hereafter created
is hereby subordinated in right of payment to the Obligations, and any such
inter-Company Indebtedness collected or received by any Company after an Event
of Default has occurred and while it is continuing shall be held in trust for
CITBC and shall forthwith be paid over to CITBC to be credited and applied to
the Obligations but without affecting, impairing or limiting in any manner the
liability of each Company under its Guaranty.
11.3 SEPARATE ACTION. CITBC may bring and prosecute a
separate action or actions against any Company whether or not any other Company,
any other guarantor or any other person is joined in any such action or a
separate action or actions are brought against any other Company, any other
guarantor, any other person, or any Collateral for all or any part of the
Obligations. The obligations of each Company under, and the effectiveness of,
this Section 11 are not conditioned upon the existence or continuation of any
other guarantee (including any letter of credit) of all or any part of the
Obligations.
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11.4 LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Company under this Section 11
would otherwise, taking into account the provisions of paragraph 11.3 of this
Section 11, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under this Section 11, then, notwithstanding any other provision
of this Section 11 to the contrary, the amount of such liability shall, without
any further action by such Company, CITBC or any other person, be automatically
limited and reduced to the highest amount which is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
SECTION 12. TERMINATION
Except as otherwise permitted herein, the Companies or CITBC
may terminate this Financing Agreement and the Line of Credit only as of the
fifth or any subsequent Anniversary Date and then only by giving the other at
least sixty (60) days prior written notice of termination. Notwithstanding the
foregoing, CITBC may terminate the Financing Agreement immediately upon the
occurrence of an Event of Default, provided, however, that if the Event of
Default is an event listed in paragraph 10.1(c) of Section 10 of this Financing
Agreement, CITBC may regard the Financing Agreement as terminated and notice to
that effect is not required. This Financing Agreement, unless terminated as
herein provided, shall automatically continue from Anniversary Date to
Anniversary Date. Notwithstanding the foregoing, the Companies may terminate
this Financing Agreement and the Line of Credit prior to the fifth Anniversary
Date upon sixty (60) days' prior written notice to CITBC, provided that the
Companies pay to CITBC immediately on demand, the Early Termination Fee and/or
the Libor Prepayment Penalty, if applicable. All Obligations shall become due
and payable as of any termination hereunder or under Section 10 hereof and,
pending a final accounting, CITBC may withhold any balances in the Companies'
accounts (unless supplied with an indemnity satisfactory to CITBC) to cover all
of the Companies' Obligations, whether absolute or contingent. All of
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CITBC's rights, liens and security interests shall continue after any
termination until all Obligations have been paid and satisfied in full.
SECTION 13. MISCELLANEOUS
13.1 Each Company hereby waives diligence, demand,
presentment and protest and any notices thereof as well as notice of nonpayment
(except notices expressly required pursuant to Section 10). No delay or omission
of CITBC or the Companies to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by CITBC of any right or remedy precludes
any other or further exercise thereof, or precludes any other right or remedy.
13.2 THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS
REFERENCED HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS AND
INDUCEMENTS, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, INCLUDING, WITHOUT
LIMITATION, THE AUGUST 17, 1994 FINANCING AGREEMENT. THIS WRITTEN AGREEMENT MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL OR
WRITTEN AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
13.3 In no event shall the Companies, upon demand by CITBC
for payment of any indebtedness relating hereto, by acceleration of the maturity
thereof, or otherwise, be obligated to pay interest and fees in excess of the
amount permitted by law. Regardless of any provision herein or in any agreement
made in connection herewith, CITBC shall never be entitled to receive, charge or
apply, as interest on any indebtedness relating hereto, any amount in excess of
the maximum amount of interest permissible under applicable law. It is the
intent of the Companies and CITBC to conform strictly to all applicable state
and federal usury laws. All agreements between the Companies and CITBC whether
now existing or hereafter arising and whether written or oral, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of the maturity hereof or otherwise, shall the
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amount contracted for, charged or received by CITBC for the use, forbearance, or
detention of the money loaned hereunder or otherwise, or for the payment or
performance of any covenant or obligation contained herein or in any other
document evidencing, securing or pertaining to the Obligations evidenced hereby
which may be legally deemed to be for the use, forbearance or detention of
money, exceed the maximum amount which the Companies are legally entitled to
contract for, charge or collect under applicable state or federal law. If from
any circumstance whatsoever fulfillment of any provision hereof or of such other
documents, at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, then the obligation to be
fulfilled shall be automatically reduced to the limit of such validity, and if
from any such circumstance CITBC shall ever receive as interest or otherwise an
amount in excess of the maximum that can be legally collected, then such amount
which would be excessive interest shall be applied to the reduction of the
principal indebtedness hereof and any other amounts due with respect to the
Obligations evidenced hereby, but not to the payment of interest and if such
amount which would be excessive interest exceeds the Obligations and all other
non interest indebtedness described above, then such additional amount shall be
refunded to the Companies. This paragraph shall control every other provision
hereof and of any other agreement made in connection herewith.
13.4 If any provision hereof or of any other agreement made
in connection herewith is held to be illegal or unenforceable, such provision
shall be fully severable, and the remaining provisions of the applicable
agreement shall remain in full force and effect and shall not be affected by
such provision's severance. Furthermore, in lieu of any such provision, there
shall be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
13.5 EACH COMPANY AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING
AGREEMENT. EACH COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED.
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13.6 Except as otherwise herein provided, any notice or
other communication required hereunder shall be in writing, and shall be deemed
to have been validly served, given or delivered when hand delivered or sent by
telegram or telex, or three days after deposit in the United State mails, with
proper first class postage prepaid and addressed to the party to be notified as
follows:
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(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
300 South Grand Avenue, 3rd Floor
Los Angeles, CA 90071
Attn: Regional Manager
Facsimile No. (213) 613-2588
(B) if to the Companies at:
c/o Northwest Pipe Company
12005 N. Burgard,
Portland, OR 973
Attn: Chief Financial Officer
Facsimile No. (503) 240-6615
or to such other address as any party may designate for itself by like notice.
13.7 All currently outstanding obligations of Northwest Pipe
to CITBC under the August 17, 1994 Financing Agreement shall constitute
Obligations of Northwest Pipe hereunder and shall be governed by the terms
hereof.
13.8 This Financing Agreement provides for loans and other
credit accommodations to made to each of the Companies as set forth herein. It
is the intention of the parties hereto that, pursuant to Section 11 of this
Financing Agreement, the Companies shall be jointly and severally liable as
primary obligors for all of the Obligations.
13.9 This Financing Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the successors and assigns of
the Companies and CITBC.
13.10 This Financing Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.
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13.11 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Financing Agreement to be executed and delivered by their proper and duly
authorized officers as of the date set forth above. This Financing Agreement
shall take effect as of the date set forth above after being accepted below by
an officer of CITBC after which, CITBC shall forward to the Companies a fully
executed original for its files.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ Guy Fuchs
----------------------------------------------
Vice President
Read and Agreed to:
NORTHWEST PIPE COMPANY
By: /s/ Brian W. Dunham
---------------------------------
Brian W. Dunham
Title: Secretary
------------------------------
THOMPSON PIPE AND STEEL COMPANY
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By: /s/ Brian W. Dunham
---------------------------------
Brian W. Dunham
Title: Secretary
------------------------------
THOMPSON STEEL PIPE COMPANY
By: /s/ Brian W. Dunham
---------------------------------
Brian W. Dunham
Title: Secretary
------------------------------
Executed and Accepted at
Los Angeles, California
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ Guy Fuchs
---------------------------
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Vice President
93
