FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 1996
Continental Materials Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-3834 36-2274391
(State or other jurisdiction (Commission (IRS Employers
of incorporation) File Number) Identification No.)
225 West Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312-541-7200
INFORMATION TO BE INCLUDED IN REPORT
Item 2. Acquisition of Assets
On October 21, 1996, pursuant to an Acquisition
Agreement (Exhibit 2A hereto), Registrant
acquired the assets of Valco, Inc.'s ("Valco")
ready mix concrete and aggregates operation in
Pueblo, Colorado for a cash purchase price of
$5,148,000 net of $163,000 of accrued
liabilities assumed. The assets purchased
consist primarily of property, plant and
equipment of $3,559,000, receivables of $917,000
inventories of $335,000 and a covenant not to
compete of $500,000 (Exhibit 2B hereto).
In addition to the above, pursuant to a Fee Sand
and Gravel Lease (Exhibit 2C hereto), Registrant
concurrently entered into a long-term lease to
mine aggregates from properties in Pueblo owned
by Valco. The lease calls for Registrant to pay
Valco 37 cents per ton of aggregate mined with a
minimum annual royalty of $300,000. Both
amounts are subject to inflation adjustments.
The terms and conditions of this acquisition and
lease, including the consideration paid, were
reached as the result of arms-length
negotiations and bargaining between Registrant
and Valco. There was, and is, no material
relationship between the Registrant or any of
its affiliates, directors or officers, or any
associate of any director or officer and Valco.
The acquisition was financed by the proceeds of
the Amended and Restated Revolving Credit and
Term Loan Agreement (Exhibit 2D hereto) also
entered into on October 21, 1996 with the
Registrant's existing lending banks. The
purchased operations are involved in the
production and sale of ready-mix concrete and
other building materials as well as the
extraction and sale of sand and river rock.
Sales are restricted primarily to Pueblo County.
The purchased operations principal premises are
located at 5476 Route 96 West, Pueblo, Colorado.
An additional batch plant is located on East
Route 50 in Pueblo, Colorado.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
The acquisition does not meet the
"significance" test as detailed in Item 2
of Form 8-K under the 1934 Act and
Regulation S-X of the 1940 Act, therefore
no proforma financial information is
provided.
(c) Exhibits
See Exhibits Index, page 4 hereof.
2
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 hereunto duly authorized.
(Registrant) CONTINENTAL MATERIALS CORPORATION
(Signature) /S/Joseph J. Sum
Joseph J. Sum, Vice President - Finance
Date November 1, 1996
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EXHIBITS INDEX
Exhibit 2A Acquisition Agreement Between Valco Properties,
Ltd. and Continental Materials Corporation
Exhibit 2B Non-Competition and Non-Disclosure Agreement by
Valco, Inc. and Thomas E. Brubaker in favor of
Continental Materials Corporation.
Exhibit 2C Fee Sand and Gravel Lease Between Valco, Inc.
and Continental Materials Corporation
Exhibit 2D Amended and Restated Revolving Credit and Term
Loan Agreement Between Continental Materials
Corporation, The Northern Trust Company and
LaSalle National Bank
Omitted Exhibits
No exhibits to Exhibits 2A, 2C or 2D above are filed with this 8-K Report.
Registrant agrees to furnish supplementally with the
Commission a copy of any such omitted exhibit, upon the request
of the Commission.
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement") is made and
entered into this 21st day of October, 1996, between Valco Inc.,
a Colorado corporation ("Seller") Valco Properties, Ltd., a
Colorado limited partnership ("Subsidiary"), and Continental
Materials Corporation, a Delaware corporation ("Purchaser").
Recitals
Seller is presently engaged in the business (the
"Business") of mining, producing, selling and distributing sand,
gravel, ready-mix concrete and other aggregate materials and
products in and around Pueblo, Colorado. Subsidiary is
wholly-owned by Seller and is the owner of certain personal
property used by Seller in the business. Seller also is
presently engaged in similar activities outside of the area in
and around Pueblo, Colorado; the assets used for such other
activities, including assets used by Seller for its overall
business (including the Business), are not subject to this
Agreement.
. Seller desires to Transfer (as defined in Section 1.1)
or lease to Purchaser, and Purchaser desires to purchase or lease
from Seller: (i) all of the rights, properties and assets owned
or held by Seller or used by Seller in connection with the
conduct of the Business, other than the Excluded Assets (as
defined in Section 1.3), and (ii) all of the partnership
interests in Subsidiary, on the terms and subject to the
conditions set forth in this Agreement.
. Seller desires to delegate to Purchaser, and Purchaser
is willing to assume from Seller, the Assumed Liabilities (as
defined in Section 3.1), on the terms and subject to the
conditions set forth in this Agreement.
Agreement
. The Acquisition
. Purchase and Sale of Assets. Subject to Section 1.3
regarding the Excluded Assets and except for properties to be
leased pursuant to Section 1.2, Seller sells, transfers, grants,
conveys, assigns and delivers ("Transfers") to Purchaser, and
Purchaser purchases and accepts from Seller, the rights,
properties and assets owned by Seller and used by Seller
primarily in connection with the conduct of the Business,
including the rights, properties and assets described in this
Section 1.1 (collectively the "Assets") free and clear of any
Liens (as defined in Section 4.1(g)(i) except Permitted Liens (as
defined in Section 4.1(g)(iii)):
() Real Property. The plants and plant sites listed
or described on Exhibit 1.1(a) (collectively, the "Plants To Be
Sold" and the "Plant Sites" respectively), will be conveyed to
Purchaser by special warranty deeds, which special warranty deeds
shall convey the Plants to Be Sold and the Plant Sites, together
with certain other land to be reconveyed by Purchaser to Seller
upon completion of the Resubdivisions (as defined in Section 5.2
of this Agreement) by Purchaser, and will contain a "possibility
of reverter" clause providing that title will revert to Seller
under the circumstances described in Section 5.2(g) of this
Agreement.
(b) Personal Property. All of the partnership
interests of Subsidiary, which is the owner of the fixtures,
furnishings, furniture, equipment, motor vehicles, tools,
supplies, spare parts, computers, printers and copies of all
files, books and records reasonably necessary for the continued
conduct of the Business by Purchaser, and all other tangible
personal property owned and used by Seller primarily in
connection with the conduct of the Business, including those
items listed or described on Exhibit 1.1(b) (collectively, the
"Owned Tangible Property");
(c) Inventory All raw materials, work-in progress of
Seller relating to the Business and finished goods inventories
relating to the Business, including those items to be described
on Exhibit 1.1(c) (collectively, the "Inventory") (which Exhibit
shall include quantity and cost information for the Inventory);
(d) Contract Rights. As they relate to the Business,
all rights and incidents of interest of Seller in, to or under
all leases, licenses, agreements, purchase orders, and contracts
(including product warranty claims, rebates and indemnity or
other rights of action against any person arising out of acts,
omissions or occurrences before the Closing) (collectively, the
"Contracts"), all of which Contracts are listed or described on
Exhibit 1.1(d);
(e) Governmental Licenses, Permits and Approvals. To
the extent Transferable, all rights and incidents of interest of
Seller in, to or under all licenses, permits and authorizations
(collectively, the "Licenses") issued or requested to be issued
by any United States, state, local or other governmental entity
or municipality or any subdivision thereof or any authority,
department, commission, board, bureau, agency, court, arbitration
panel or instrumentality (collectively, "Governmental Entities")
used in connection with the conduct of the Business, including
the licenses, permits and authorizations listed or described on
Exhibit 1.1(e);
(f) Accounts Receivable. All accounts receivable
arising from the conduct of the Business, including the accounts
receivable to be listed on Exhibit 1.1(f) (the "Accounts
Receivable") (which Exhibit shall include an aging of the
Accounts Receivable); and
(g) Water Rights. All water rights (including related
stock) held in connection with the Real Property (as defined in
Section 4.1(h)(i)), including those water rights set forth on
Exhibit 1.1(g), which will be conveyed on a fee-simple
conditional basis, providing that title to such water rights will
revert to Seller under the circumstances described in Section
5.2(g).
(h) Personal Property Leases. The personal property
leases identified on the attached Exhibit 1.1(h) relating to
motor vehicles used in connection with the Business.
1.2 Lease. At the Closing, Seller, as lessor, will lease
to Purchaser, as lessee, and Purchaser will lease from Seller,
the real property described on Exhibit 1.2A (the "Mining
Properties") pursuant to a lease in the form of Exhibit 1.2B (the
"Lease").
1.3 Excluded Assets. Notwithstanding anything contained in
this Agreement to the contrary, the following rights, properties
and assets (collectively, the "Excluded Assets") will not be
included in the Assets:
(a) Cash. Cash;
(b) Property To Be Leased. The fee simple title
to the Mining Properties;
(c) Software. Any and all computer software
owned by the Business; and
(d) Other Specified Assets. Any right, property
or asset, including any asset leased by Seller pursuant to a
Contract, which is listed or described on Exhibit 1.3(d).
II. Purchase Price
2.1 Unadjusted Purchase Price. In addition to assuming the
Assumed Liabilities (as defined in Section 3.1), Purchaser will
pay for the Assets and the noncompetition covenants described in
Section 6.1(a)(viii) (the "Noncompetition Covenants") a purchase
price in the amount of (i) $5,000,000, plus (if such number is a
positive number) and minus (if such number is a negative number)
(ii) the difference between (A) the sum of the book value of the
Accounts Receivable and Inventory as of the Closing Date (as
defined in Section 6.1(a)), and (B) $720,000, subject to
adjustment as provided in Section 2.2 and as further provided in
Exhibit 2.1, as adjusted, the "Purchase Price"). For purposes of
this Section 2.1, Inventory will include only those items
normally carried as inventory by Seller under its normal,
consistently applied accounting practices.
2.2 Ad Valorem Tax Adjustment. All ad valorem, property
and real estate Taxes (as defined in Section 4.1(n)(iii)) imposed
by any taxing authority upon the Plants To Be Sold and the Plant
Sites (as defined in Section 1.1(a)) or any of the other Total
Assets (as defined in Section 3.2) will be prorated between
Seller and Purchaser as of the Closing Date based on the most
current available tax bills (such prorations to be adjusted when
final tax bills are issued by the applicable taxing authority).
All such Taxes attributable to the period up to the Closing Date,
which remain unpaid as of the Closing Date, shall be deducted
from the Purchase Price. An amount equal to the aggregate amount
of such Taxes, if any, which are attributable to the period
following the Closing Date and which have been paid by the Seller
prior to the Closing Date shall be added to the Purchase Price.
All adjustments to the Purchase Price will be calculated as of
close of business on October 20, 1996. After the Closing, Seller
shall continue to be responsible for and pay all ad valorem,
property and real estate Taxes imposed by any taxing authority
upon the Mining Properties, provided that Purchaser shall pay any
mineral production tax attributable to Purchaser's operations and
any ad valorem, property and real estate Taxes assessed against
the personal property, improvements or fixtures placed on the
Mining Properties by Purchaser during the term of the Lease.
2.3 Allocation of Purchase Price.
(a) Allocation To Assets Based Upon Relative Fair
Market Values. The aggregate Purchase Price (which shall
include, for purposes of this Section 2.3, any liabilities
assumed by the Purchaser in connection with the transactions
contemplated by this Agreement) shall be allocated among the
Assets and the Noncompetition Agreement (as defined in Section
6.1(b)(viii)) in accordance with their respective fair market
values and otherwise in accordance with the provisions of Section
1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). For those purposes, the parties agree to value the
Noncompetition Agreement at $500,000 and to allocate the Purchase
Price thereto in accordance with the provisions of this
paragraph. The allocation contemplated hereby shall be based
upon the fair market value allocations agreed upon by the parties
and set forth on Exhibit 2.3. Within 90 days after the Closing
Date, the Purchaser shall prepare and provide to the Seller
copies of Internal Revenue Service Form 8594 (together with all
exhibits and attachments thereto) (the "Asset Acquisition
Statement") which shall set forth an allocation consistent with
the values set forth on Exhibit 2.3. The Asset Acquisition
Statement shall be deemed accurate in the absence of manifest
error. If, after the Closing, events occur which, and based upon
applicable provisions of Section 1064 of the Code, require
adjustments to the Asset Acquisition Statement, the Purchaser
shall prepare and submit to the Seller as quickly as practicable
thereafter, an adjusted Asset Acquisition Statement (each an
"Adjusted Statement") which sets forth the applicable adjustments
consistent with the applicable events. The Purchaser and the
Seller expressly covenant and agree that they shall file all tax
returns and reports, including, without limitation, all U.S.
federal income tax returns, based upon and consistent with the
allocations set forth in the Asset Acquisition Statement and any
Adjusted Statement.
(b) Section 754 Election. Seller expressly
acknowledges and agrees that it has caused Subsidiary to make an
election under Code Section 754 to adjust the basis of
Subsidiary's assets in accordance with the provisions of Code
Sections 743(b). All such adjustments shall be made in
accordance with the provisions of Code Section 755 and the
applicable Treasury Regulations thereunder. The allocation
contemplated hereby shall be based upon the fair market values
agreed upon by the parties and set forth on Exhibit 2.3. Within
90 days following the Closing Date, the Purchaser shall prepare
and provide to the Seller copies of a schedule setting forth in
reasonable detail the allocations described hereunder (the
"Partnership Allocation Schedule") which allocations shall be
based upon values set forth on Exhibit 2.3. The Purchaser and
the Seller expressly covenant and agree that they shall file all
tax returns and reports, including, without limitation, all U.S.
federal income tax returns, based upon and consistent with the
allocations set forth in the Partnership Allocation Schedule.
III. Assumption of Liabilities
3.1 Assumed Liabilities. On the terms and subject to the
conditions of this Agreement, as of the Closing, Purchaser will
assume and thereafter in due course pay, perform and discharge
the following, and only the following, liabilities and
obligations of Seller (the "Assumed Liabilities"):
Liabilities under Assumed Contracts. All liabilities
and obligations of Seller arising under the terms of the
Contracts that are included in the Assets and listed or
specifically described on Exhibit 4.1(l)(i) or that, in
accordance with Section 4.1(m), are not required to be listed or
described on Exhibit 4.1(l)(i) (collectively, the "Assumed
Contracts"), but only to the extent such liabilities and
obligations arise, accrue or first become due after the Closing
Date under the terms of such Contracts; provided, however, that
Purchaser will not assume or be responsible for any such
liabilities or obligations which arise under or in relation to
any insurance policy or contract, any Employee Plan (as defined
in Section 4.1(m)(i)) or from any Contract which is not an
Assumed Contract or from any breach or default by Seller arising
prior to the Closing Date under any Contract, all of which
liabilities and obligations will constitute Retained Liabilities
(as defined in Section 3.2). Notwithstanding anything to the
contrary contained in this Agreement or any document delivered in
connection with it, Purchaser's obligations with respect to the
Assumed Liabilities will not extend beyond the extent to which
Seller was obligated with respect to them and will be subject to
Purchaser's right to contest in good faith the nature and extent
of any liability or obligation.
3.2 Retained Liabilities. Except as provided in Section
3.1 and except as provided in the Lease, Seller will retain, and
Purchaser will not assume, or be responsible or liable with
respect to, any liabilities or obligations of Seller or its
Affiliates (as defined in Section 8.14) or their respective
predecessors-in-interest, whether or not arising out of or
relating to the conduct of the Business or associated with or
arising from any of the Assets or the Mining Properties
(collectively, the "Total Assets") or any other rights,
properties or assets used in or associated with the Business at
any time, and whether fixed or contingent or known or unknown
including, by way of example and without limitation, liabilities
arising from the items on Exhibit 4.1(o), 4.1(e), 4.1(h)(vi),
4.1(k)(i), 4.1(k)(ii) and 4.1(p) (collectively "Retained
Liabilities").
IV. Representations and Warranties
4.1 Representations and Warranties of Seller. Seller
represents and warrants to Purchaser as of the date hereof as
follows:
(a) Corporate Matters. Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Colorado and has the requisite corporate power
and authority to own, lease or otherwise hold the Total Assets
and to conduct the Business as presently conducted by it. Seller
is duly qualified to conduct business as a foreign corporation in
each other jurisdiction in which its ownership or lease of
property or conduct of the Business requires such qualification
under applicable law. Seller owns the Total Assets except the
Owned Tangible Property and conducts the Business directly, and
not through any other corporation, partnership or other entity.
Subsidiary owns the Owned Tangible Property. Subsidiary conducts
no business and has no liabilities.
(b) Authorization and Effect of Agreement. Seller and
Subsidiary have the requisite corporate or partnership (as
applicable) power to execute and deliver this Agreement and to
perform the transactions contemplated by this Agreement to be
performed by Seller and Subsidiary. The execution and delivery
by Seller and Subsidiary of this Agreement and the performance by
Seller and Subsidiary of the transactions contemplated by this
Agreement to be performed by Seller and Subsidiary have been duly
authorized by all necessary action on the part of Seller and
Subsidiary, Seller's and Subsidiary's board of directors,
stockholders and partners, as applicable, and, if applicable,
holders of Seller's indebtedness. This Agreement has been duly
executed and delivered by Seller and Subsidiary and, assuming the
due execution and delivery of this Agreement by Purchaser,
constitutes a valid and binding obligation of Seller and
Subsidiary enforceable in accordance with its terms.
(c) No Restrictions Against Sale of the Assets.
Except as listed or described on Exhibit 4.1(c), the execution
and delivery of this Agreement by Seller and Subsidiary does not,
and the performance by Seller and Subsidiary of the transactions
contemplated by this Agreement to be performed by them will not,
conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit
under, (i) the articles of incorporation or bylaws of Seller or
the partnership agreement of Subsidiary, (ii) any law, statute,
rule, regulation, zoning or other ordinance, order, code,
arbitration award, judgment, decree, permit or other legal
requirement of any Governmental Entity (each a "Law") and
collectively, "Laws") to which Seller, Subsidiary or any of the
Total Assets is subject, (iii) any of the Contracts or any
document or instrument to which Seller or Subsidiary or any of
the Total Assets is subject, or (iv) any of the Licenses. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required
to be obtained or made by or with respect to Seller or Subsidiary
under any applicable Law in connection with the execution and
delivery of this Agreement by Seller or Subsidiary or the
performance by Seller or Subsidiary of the transactions
contemplated by this Agreement to be performed by Seller and
Subsidiary, as applicable.
(d) Financial Statements. Attached as Exhibit 4.1(d)
are the statements of divisional operating profit and loss for
the Pueblo Division of Seller for the three years ended December
31, 1995, and for the nine month period ended September 30, 1996.
Such statements are kept by Seller for its own internal purposes,
consistently with the internal accounting practices of Seller,
are used by Seller for evaluating the operating costs of the
Pueblo Division and fairly present the divisional operating
profit and loss of the Pueblo Division consistent with the
accounting practices of Seller.
(e) Compliance with Laws. Except as described on
Exhibit 4.1(e), Seller is in compliance with all Laws in all
material respects. No fact, circumstance, condition or situation
exists which, after notice or lapse of time or both, would
constitute material noncompliance by Seller or give rise to any
material future liability of Seller with respect to any Law
heretofore or currently in effect. Except as set forth on
Exhibit 4.1(e), Seller is not required to obtain any licenses or
permits, or file any notices, applications or reports under
regulations related to any matters referred to in this Section
4.1(e) that have not been properly obtained or filed. Except as
set forth on Exhibit 4.1(e), Seller has not received notice of
any violation of any Law, or any potential liability under any
Law, relating to the operation of the Business or to any of the
Total Assets, nor, to the best of Seller's knowledge, does there
exist any such violation or potential liability. To the best of
Seller's knowledge, there does not exist any present requirement
of any applicable Law which is due to be imposed on Seller with
respect to the Business that is reasonably likely to increase in
any material respect the cost of complying with such Law.
(f) Accounts Receivable. Except as set forth on
Exhibit 4.1(f), all of the Accounts Receivable are ordinary trade
receivables that have arisen from bona fide transactions in the
ordinary course, and no payor of any Account Receivable has
provided notice to Seller concerning any claim of a defense to
payment of such Account Receivable. All of the collectible
Accounts Receivable as of the date of this Agreement are
disclosed on Exhibit 1.1(f), which Exhibit also sets forth an
accurate aging of such Accounts Receivable. Seller and Purchaser
have jointly prepared the notice to customers (with procedures to
remit amounts to Purchaser), the form of which is included in
Exhibit 4.1(f). Upon Seller's receipt of any full or partial
payments of any of the Accounts Receivable, Seller shall remit
such funds to Purchaser. Seller and Purchaser shall develop such
other procedures relating to the Accounts Receivable consistent
with normal business practices.
(g) Tangible Personal Property; Assets.
(i) The Owned Tangible Personal Property constitutes
in all material respects, all of the tangible property, other
than the Excluded Assets, used by Seller in connection with the
conduct of the Business. Subsidiary has good, marketable and
exclusive title to the Owned Tangible Personal Property, and
the Owned Tangible Personal Property is free and clear of all
liens, mortgages, claims, charges, security interests, options,
preemptive purchase rights or other encumbrances of any kind or
nature whatsoever (collectively, "Liens"). Seller (and Thomas
E. Brubaker, as to a one percent (1%) limited partnership
interest) owns or controls all of the partnership interests of
Subsidiary free and clear of any and all Liens and has the
valid and enforceable power and unqualified right to Transfer
or cause to be transferred such partnership interests to
Purchaser
(ii) Exhibit 1.1(c) contains an accurate list of the
Inventory. Except as described in Exhibit 1.1(c), all of the
Inventory is, to the best of Seller's knowledge, usable or
saleable in the ordinary course for its intended purpose.
(iii) The delivery to Purchaser at the Closing of
the instruments of Transfer contemplated by this Agreement will
vest in Purchaser good, marketable and exclusive title to all
the partnership interests of Subsidiary and the other Assets,
free and clear of all Liens, except for (A) Liens for current
property Taxes or governmental charges or levies which are not
yet due and payable and (B) Liens listed or described on
Exhibit 4.1(g)(iii) (Liens described in the foregoing clauses
(A) and (B) being collectively referred to as "Permitted
Liens").
(h) Real Property
(i) The Plants To Be Sold, the Plant Sites and the
Mining Properties (collectively, the "Real Property")
constitute all of the real property used by Seller primarily or
exclusively in connection with the conduct of the Business.
(ii) Seller owns a good, marketable and valid fee
simple interest in the Real Property subject only to the
Permitted Exceptions (as defined in Section 6.1(a)(ii)(A)).
(iii) Except to the extent set forth on Exhibit
4.1(h)(iii), Seller has not leased or sublet, as lessor or
sublessor, and no third party is in possession of,or has the
right to use or occupy, any portion of the Real Property. The
items set forth in Exhibit 4.1(h)(iii) have not interfered with
the operations of the Business.
(iv) To the best of Seller's knowledge, the
buildings, structures, improvements, fixtures and facilities
included in the Real Property and all components thereof,
including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, water, waste water, storm water, paving and
parking equipment, systems and facilities included therein, are
adequate and sufficient for the uses to which they are put in
the conduct of the Business, but Seller makes no other warranty
or representation regarding such matters, the agreement being
that except as expressly provided herein, Purchaser will accept
such matters "as is" without warranty express or implied.
(v) To the best of Seller's knowledge, Seller has
provided to Purchaser all material information of which Seller
has possession (or which is possessed on behalf of Seller)
concerning the sand and gravel reserves of the Mining
Properties (the "Reserves").
(vi) Except as set forth in Exhibit 4.1(h)(vi),
there are no pending or, to Seller's knowledge, threatened
condemnation proceedings, lawsuits or administrative actions
relating to any parcel of Real Property (including without
limitation zoning or other land use proceedings or actions) or
other matters materially and adversely affecting the current
use, occupancy or value thereof;
(vii) The buildings and improvements located on each
parcel of Real Property are located within the boundary lines
of such parcel of Real Property;
(viii) All facilities and improvements serving or
located on the Real Property have, to Seller's knowledge,
received all material approvals of Governmental Entities
(including all material Licenses) required in connection with
the ownership or operation thereof and have been operated and
maintained in substantial accordance with all applicable Laws
including, without limitation, all applicable building codes,
zoning, subdivision and land use Laws;
(ix) There are no outstanding options or rights of
first refusal to purchase any parcel of Real Property, or any
portion thereof or interest therein;
(x) Except as described in Exhibit 4.1(h)(x), there
are no parties (other than Seller) in possession of any parcel
of Real Property;
(xi) Seller has delivered or made available to
Purchaser copies of any inspection, soil, engineering,
environmental or architectural notices, studies, reports or
plans in Seller's possession or control which relate to the
physical condition or operation of the Real Property or
recommended improvements with respect thereto; and
(xii) None of the Permitted Liens on the Real
Property will individually or in combination with any other or
others prevent or materially and adversely affect the ability
of Purchaser or any successor, assignee or transferee of
Purchaser to use and operate the affected parcel of Real
Property (including, without limitation, the extraction,
whether through surface, subsurface, or open-pit mining of the
Reserves located thereon) in the manner and scope in which such
parcel of Real Property is now being used and operated or for
the extraction, whether through surface, subsurface or open pit
mining of the Reserves located therein.
(i) Intellectual Property. There is no unresolved claim
or demand asserting a conflict with, and Seller is not
infringing on, the rights of others in connection with Seller's
use of any patents, copyrights, trademarks, trade names,
service marks, trade secrets, know-how and other proprietary
rights, whether registered or unregistered, including
applications for any of the foregoing (collectively, the
"Intellectual Property Rights"). To the best of Seller's
knowledge, no person or entity is infringing on or improperly
using the Intellectual Property Rights of Seller.
(j) Licenses and Permits.
(i) Exhibit 1.1(e) contains a true and complete list
and brief description of all of the Licenses required to
permit, in accordance with the rules and regulations of any
Governmental Entity, the continued conduct of the Business as
now conducted (or proposed to be conducted under existing
agreements), and Seller is the authorized legal holder of the
Licenses. Each of the Licenses is valid and in full force and
effect, and Seller is in compliance with all the provisions of
the Licenses in all material respects. To the best of Seller's
knowledge, no Governmental Entity has instituted any
proceedings for the cancellation, non-renewal or modification
of any of the Licenses; and Seller has no knowledge of any
reason why any of such Licenses will, upon their scheduled
expiration or as a result of the Closing, not be renewable or
reissuable in the ordinary course or will be issuable or
reissuable only with the imposition of a material condition.
(ii) Except as set forth in Exhibit 4.1(j)(ii),
Seller has no knowledge of any reason why any of the Licenses
is not assignable or will not become available to Purchaser
upon the Closing on the same terms and conditions set forth in
the existing Licenses (whether by assignment, cancellation and
reissuance, or renewal), or why any of such Licenses that are
assignable will not be Transferred to Purchaser by Seller's
delivery to Purchaser at the Closing of the instruments of
Transfer contemplated by this Agreement, and to the extent they
are assignable, will not remain effective as of the
consummation of the transactions contemplated by this
Agreement.
(k) Litigation; Decrees; Warranty Claims.
(i) Except as listed or described on Exhibit
4.1(k)(i), there are no pending or, to the best of Seller's
knowledge, threatened lawsuits, claims, administrative or other
proceedings or investigations against Seller arising out of or
relating to this Agreement or the transactions contemplated by
this Agreement or the conduct of the Business, or otherwise
pertaining to or affecting the Total Assets, and, to the best
of Seller's knowledge, there do not exist any facts or
circumstances that could reasonably be expected to give rise to
any such lawsuits, claims, proceedings or investigations.
Seller is not in default under any judgment, order or decree of
any Government Entity applicable to it or to the conduct of the
Business or the ownership or use of the Total Assets.
(ii) All claims, whether in contract or tort, for
defective or allegedly defective products or workmanship
pending or threatened against Seller and any facts and
circumstances relating to any such claim, are listed or
described on Exhibit 4.1(k)(ii).
(l) Contract Rights.
(i) Exhibit 4.1(l)(i) contains a true and complete
list of all of the Contracts relating to the Business to which
Seller is a party or by which Seller is bound or to which any
of the Total Assets are subject, other than (A) any of the
Contracts entered into with unaffiliated third parties in the
ordinary course which are not material to the conduct of the
Business, which are terminable without payment of premium or
penalty at will or upon not more than 30 days' notice, which
impose monetary obligations not in excess of $5,000 and which
impose no material non-monetary obligations and (B) Employee
Plans (as defined in Section 4.1(m)(i) on Exhibit 4.1(m)(i)).
Except as set forth on Exhibit 4.1.(l)(i), none of the
Contracts listed or described on Exhibit 4.1(l)(i) has been
amended. Seller heretofore has provided Purchaser with true,
complete and correct copies of each of the Contracts listed or
described on Exhibit 4.1(l)(i) that are written and, to the
best of Seller's knowledge, true, complete and correct written
summaries of the Contracts listed or described on Exhibit
4.1(l)(i) that are oral.
(ii) Except as set forth on Exhibit 4.1(l)(ii), (A)
Seller has performed all obligations required to be performed
by it to date under the Contracts, (B) neither Seller nor, to
the best of Seller's knowledge, any other party to any Contract
has improperly terminated or is in breach or default under such
Contract, (C) to the best of Seller's knowledge there exists no
condition or event which , after the giving of notice or lapse
of time or both, would constitute any such breach, termination
or default, (D) each of the Contracts is in full force and
effect and is a legal, binding and enforceable obligation of
Seller and, to the best of Seller's knowledge, each of the
other parties to the Contracts, (E) none of the Contracts is
presently being renegotiated, either in whole or in part and
(F) each of the Contracts, if performed by Purchaser, would not
result in a loss to Purchaser, based on Seller's actual
production costs for the twelve months ended on the date of
this Agreement and based on the quoted price set forth in, or
applicable to, the Contract.
(m) Employee Plans; Labor Relations.
(i) For purposes of this Agreement, the term
"Employee Plan" means each employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and any deferred compensation plans,
stock appreciation rights, phantom stock plans, stock option
plans and any excess benefit plans, other than a multiemployer
plan within the meaning of Section 3(37) of ERISA
("Multiemployer Plan"), sponsored or maintained by Seller, or
to which Seller contributes or is obligated to contribute, and
under which any person presently employed by Seller (an
"Employee") or formerly so employed by Seller or any of its
predecessors-in-interest (a "Former Employee") participates or
has accrued any rights, or under which Seller is liable in
respect of an Employee or a Former Employee. The terms
"Employee" and "Former Employee" include, where an Employee
Plan provides benefits for beneficiaries or dependents, the
beneficiaries and dependents of an Employee or a Former
Employee. Exhibit 4.1(m)(i) lists or describes all Employee
Plans other than Employee Plans existing or arising as a matter
of Law rather than by any of the Contracts. Seller is not
legally obligated to contribute to any Multiemployer Plan and
does not have any withdrawal liability whatsoever whether or
not yet assessed. Those Employee Plans that are employee
pension benefit plans (within the meaning of Section 3(2) of
ERISA) are intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986 ("Code"), have received a
favorable determination letter from the Internal Revenue
Service and remain qualified under the Code. Seller has not
maintained any Employee Plan in a manner that will result in
the imposition of a lien or encumbrance on any of the Total
Assets or in a liability of Purchaser with respect to such
maintenance during periods prior to the Closing Date, and
Seller does not have any direct or indirect liability
whatsoever under Title IV of ERISA (including being subject to
any statutory lien) regardless of whether as a "substantial
employer" or a "contribution sponsor" (as defined,
respectively, in Sections 4001(a)(2) and 4001 (a)(13) of ERISA.
(ii) Except as set forth on Exhibit 4.1(m)(ii), (A)
Seller is not party to or subject to any collective bargaining
agreements with respect to any Employee, (B) there is no
information or document showing any obligation to employ any
Employee after the Closing Date, or to pay any wages, benefits
or other compensation to any Employee, (C) there are no
controversies, disputes, complaints, charges, actions, suits,
or proceedings pending, or to the best of Seller's knowledge,
threatened, between Seller and any Employee (singly or
collectively) or labor union(s), (D) there have been no
judgments or other findings in the past three years relating to
any controversies, disputes, complaints, charges, actions,
suits, or proceedings between Seller and any Employee (singly
or collectively) or labor union(s), (E) no labor union or other
collective bargaining unit represents or claims to represent
any Employee, (F) to the best of Seller's knowledge, there is
no union campaign being conducted to solicit cards from
Employees to authorize a union to request a National Labor
Relations Board certification election with respect to any
Employee, (G) there have been no strikes or work stoppages of
Seller involving or affecting the Pueblo operations in the past
ten years (H) Seller has no affirmative action plans; and (I)
Seller has never had a "mass layoff" or "plant closing" as
defined by the Worker Adjustment and Retraining Notification
Act.
(n) Taxes.
(i) Seller has paid all Taxes owed by it when due,
except for circumstances in which Seller is contesting the
payment of a Tax in good faith under circumstances in which
title to or use of the Total Assets by Purchaser will not be
adversely affected (such as by the posting of a bond by
Seller), and except for Taxes as to which Seller's failure to
pay will not result in the imposition of a lien or encumbrance
on any of the Total Assets or in any obligation of Purchaser to
pay such Taxes, any such exceptions being described on Exhibit
4.1(n). Seller has timely filed all Tax returns and reports.
(ii) Seller is a United States person within the
meaning of Section 7701(a)(9) and (a)(1) of the Code. Seller
has not entered into any agreement, whether or not written, for
the payment of Tax liabilities or entitlement to refunds and
related matters with any other party.
(iii) For purposes of this Agreement, the term
"Taxes" means all federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, customs, duties, real
estate or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes.
(o) Environmental Matters.
(i) Except to the extent specified on Exhibit
4.1(o), (A) neither the Seller nor, to the best of Seller's
knowledge, any other person or entity has engaged in or
permitted any operations or activities upon, or any use or
occupancy of, all or any portion of the Real Property,
resulting in the emission, release, discharge, dumping or
disposal of any Hazardous Materials (as defined below) on or
under the Real Property, (B) to the best of Seller's knowledge,
no Hazardous Materials have migrated from the Real Property
onto or beneath other properties, and (C) to the best of
Seller's knowledge, no Hazardous Materials have migrated from
other properties onto or beneath the Real Property.
(ii) Except to the extent specified on Exhibit
4.1(o), (A) there is not, nor has there ever been, constructed,
placed, deposited, stored, disposed of or located on the Real
Property any asbestos in any form by or on behalf of Seller,
or, to the best of Seller's knowledge, any other person or
entity, (B) no underground treatment or storage tanks or gas or
oil wells, are or have been located on the Real Property, (C)
there are no polychlorinated biphenyls (PCBs) or transformers,
capacitors or other equipment which contain dielectric fluid
containing PCBs at levels in excess of fifty parts per million
(50 ppm) constructed, placed, deposited, disposed of or located
on the Real Property, (D) the uses of and activities of Seller
on the Real Property have at all times complied in all material
respects with all Environmental Requirements (as defined
below), (E) Seller has obtained all permits necessary under
applicable Environmental Requirements to conduct the Business
at the Real Property, (F) neither the Seller nor, to the best
of Seller's knowledge, any other person or entity has received
any notice or other communication from a Governmental Entity
concerning any alleged violation of Environmental Requirements,
whether or not corrected to the satisfaction of the appropriate
authority, or any notice or other communication concerning
alleged liability for Environmental Damages (as defined below)
in connection with the Real Property, and (G) there exits no
judgment, decree, order, writ or injunction outstanding, or
litigation, action, suit, claim (including citation or
directive) or proceeding pending or, to the best of Seller's
knowledge, threatened, relating to the alleged violation of
Environmental Requirements, or from the suspected presence of
Hazardous Materials thereon or potential migration thereto.
(iii) For purposes of this Agreement, the term
"Hazardous Materials" means any substance (A) the presence of
which requires remediation under any Environmental
Requirements, and (B) which is identified as a hazardous waste
or hazardous substance under any applicable Law. "Hazardous
Materials" do not include household or ordinary commercial
products purchased by Seller ancillary to its business and
utilized for their intended use in ordinary quantities,
including without limitation janitorial and cleaning supplies,
paints, insecticides, and pesticides.
(iv) For purposes of this Agreement, the term
"Environmental Requirements" means all applicable Laws and
permits of any federal, Colorado or local Governmental Entity
in effect on or during any period prior to the Closing Date
relating to the protection of human health or the environment,
including: (A) all requirements pertaining to reporting,
licensing, permitting, investigation, and remediation of
emissions, discharges or releases of Hazardous Materials; and
(B) all requirements pertaining to the protection of the health
of employees or the public.
(v) For purposes of this Agreement, the term
"Environmental Damages" means any and all losses which are
incurred at any time as a result of (A) the existence of
Hazardous Materials, during the ownership of the Real Property
by Seller, upon or beneath the Real Property or migrating or
threatening to migrate from the Real Property, or (B) the
existence on or prior to Closing of a violation of
Environmental Requirements pertaining to the Real Property.
(p) Customers and Suppliers. Except as set forth on
Exhibit 4.1(p), Seller is not involved in any material claim or
controversy with any customer or supplier.
(q) Sufficiency of the Total Assets. The Total Assets
constitute all of the properties, assets and rights required for
the continued conduct of the Business as presently conducted,
except for the owned vehicles listed on Exhibit 4.1(q), software,
the computer system in the Rocky Ford, Colorado office, and any
other assets used in the Rocky Ford office for general, sales,
and administrative purposes in connection with the operation of
the Business and any other Excluded Assets. The Hankla, Rancho
Colorado and Nepesta properties referred to in Exhibit 1.3(c)
have not been used in Valco's Pueblo operations and are not
included in the mineral reserve calculation performed by Ted
Eyde.
(r) Political Contributions and Other Payments.
Neither Seller nor any other person or entity acting on behalf of
Seller has, during the past five years, (i) made any payment to
any governmental official or other governmental employee or agent
(domestic or foreign) to induce the recipient or the recipient's
employer to do business with, grant favorable treatment to or
compromise or forego any claim against Seller, or (ii) made any
significant payment or conferred any benefit which, under
prevailing business practices, Seller considers or reasonably
should consider to be improper to promote or retain sales or to
help, procure or maintain good relations with suppliers.
(s) Brokers, Finders and Agents. Seller has not taken
any action that would directly or indirectly obligate Seller,
Purchaser or anyone else to anyone acting as a broker, finder,
financial advisor or in any other similar capacity in connection
with this Agreement or the transactions contemplated by this
Agreement.
(t) Certain Transfers. Except as set forth on Exhibit
4.1(t), since May 22, 1996 Seller has not transferred any of the
Total Assets (to another operation of Seller, a third party or
otherwise) except for sales of inventory in the ordinary course
of business consistent with past practice and the transfer of the
Owned Tangible Property to Subsidiary, and has conducted the
Pueblo operations in the ordinary course of business consistent
with past practice.
(u) Insurance. Up until the effective time of the
Closing hereunder, Seller has maintained insurance of the types
and amounts and on terms which are customary covering liabilities
and losses relating to the Business and the Total Assets.
(v) Effect of Disclosures. Any matter expressly set
forth in any Exhibit in this Agreement will be deemed to apply to
any relevant Exhibit attached pursuant to this Article IV, as
long as the relevance of such information to such other Exhibit
would be reasonably and clearly apparent to a person not
intimately familiar with the business, assets and operations of
the Seller. The absence of a breach of a representation or
warranty (or the expiration of the period for claims under such
representation or warranty under Section 7.1) shall not affect a
claim for a breach of another representation or warranty or any
covenant hereunder.
4.2 Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as of the date hereof as
follows:
(a) Corporate Matters. Purchaser is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Purchaser is duly qualified to
conduct business as a foreign corporation in each jurisdiction in
which its ownership or lease of property or conduct of its
business requires such qualification under applicable law.
(b) Authorization and Effect of Agreement. Purchaser
has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated by this
Agreement to be performed by Purchaser. The execution and
delivery by Purchaser of this Agreement and the performance by
Purchaser of the transactions contemplated by this Agreement to
be performed by Purchaser have been duly authorized by all
necessary action on the part of Purchaser, Purchaser's board of
directors and, if applicable, Purchaser's stockholders and
holders of Purchaser's indebtedness. This Agreement has been
duly executed and delivered by Purchaser and, assuming the due
execution and delivery of this Agreement by Seller, constitutes a
valid and binding obligation of Purchaser enforceable in
accordance with its terms.
(c) No Conflicts. The execution and delivery of this
Agreement by Purchaser does not, and the performance by Purchaser
of the transactions contemplated by this Agreement to be
performed by it will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligations or
to loss of a material benefit under, (i) the articles of
incorporation or bylaws of Purchaser, (ii) any Law or judgment,
order or award existing or entered into as of the date of this
Agreement to which Purchaser is subject, (iii) any contract to
which Purchaser is a party, or (iv) any license or permit of
Purchaser. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to
Purchaser under any applicable Law in connection with the
execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of the transactions contemplated by this
Agreement to be performed by it.
(d) Brokers, Finders and Agents. Purchaser has not
taken any action that would directly or indirectly obligate
Seller, Purchaser or anyone else to anyone acting as a broker,
finder, financial advisor or in any other similar capacity in
connection with this Agreement or the transactions contemplated
by this Agreement.
V. Covenants
5.1 Further Employee Matters.
(a) Employee Benefits. Except as set forth below,
Seller will retain all liabilities and obligations in respect of
all Employees and any future employees of Seller, including
liabilities and obligations under any Employee Plan and
applicable Laws. Seller shall be responsible for satisfying the
requirements of the Consolidated Budget Reconciliation Act of
1985 with respect to Seller's employees terminated in connection
with this Agreement and not rehired by Purchaser, if any.
Purchaser will cause each Employee and Former Employee whom it
employs at or after the Closing to be covered under Purchaser's
existing health care plan that is available for Purchaser's
employees generally, such coverage to be effective immediately
upon the employment of any such person, subject to the provisions
of the plan. Purchaser will have no liability or obligation
whatsoever under any Employee Plan, nor will Purchaser have any
obligation to provide any employee benefits to any Employees or
Former Employees, other than as set forth above.
(b) Future Employment. Purchaser acknowledges that
Seller has disclosed to Purchaser the obligation set forth in
Article II, Section 4 of the Agreement with Teamsters
Construction Workers Local Union No. 13 and in Article I, Section
D of the Agreement with Operating Engineers Local No. 9. Seller
shall terminate the employment of all Employees employed in
connection with the Business, effective the Closing Date.
Purchaser intends to offer employment from and after the Closing
to all Employees employed by Seller in connection with the
Business, on such terms and conditions as Purchaser may, in its
sole discretion, determine.
(c) Non-Solicitation By Purchaser. Purchaser agrees
not to solicit any employees of Seller not listed on Exhibit
5.1(c) or encourage any such employees to leave the employ of
Seller for a period of two (2) years from the date of this
Agreement without prior written consent of Seller.
(d) Non-Solicitation By Seller. Seller agrees not to
solicit any Employees or Former Employees hired by Purchaser in
connection with the Business, or encourage any such employees to
leave the employ of Purchaser, for a period of two (2) years from
the date of this Agreement without prior written consent of
Purchaser.
(e) Employee Information. Upon written authorization
from any Employee employed primarily in connection with the
Business, Seller will provide to Purchaser, in a timely manner,
any information or documents that Purchaser may reasonably
request with respect to any such Employee employed primarily in
connection with the Business, which relates directly to such
Employee's performance, job duties, compensation and benefits
while employed by Seller, including, but not limited to, copies
of all personnel files relating to such Employee.
5.2 Certain Real Estate Matters.
(a) Title Commitments. At least five (5) days prior
to the Closing Date, Seller will deliver to Purchaser title
insurance commitments (the "Title Commitments") on each parcel of
Real Property issued by the Title Company (as defined in Section
6.1(ii)). Each of the Title Commitments shall contain the Title
Company's commitment to provide extended coverage over the
standard printed exceptions upon satisfaction by Seller of the
Title Company's requirements with respect to providing extended
coverage.
(b) Surveys. Prior to the Closing Date, the Purchaser
and the Title Company shall have received such surveys of the
Real Property, except for the east parcel of the Mining
Properties, as are reasonably required by Purchaser (the
"Surveys"). Each of the Surveys shall be prepared by a surveyor,
engineer or surveying or engineering firm licensed in the State
of Colorado.
(c) Certain Leases. Seller will continue as Lessor
with respect to the leases set forth in Exhibit 4.1(h)(iii);
provided, however, that Seller shall terminate any of such leases
(other than the lease with the Division of Wildlife-West Lake) as
to any portion of the Property covered by such leases within
forty-five (45) days after receipt of notice from Purchaser that
Purchaser intends to mine on such property (or portion of such
property) and that the continued use of the surface of such
property (or portion of such property) is not compatible with
such mining. Seller shall insure that said leases do not
materially interfere with the Business. Upon any transfer of the
Property to Purchaser, Seller shall transfer the Property free
and clear of such leases.
(d) Subdivision. The parties acknowledge that the
Plants To Be Sold and the Plant Sites are the Concrete Batch
Plant located at 201 Lane 26, Pueblo, Colorado (the "Batch
Plant") and the Aggregate Crushing and Screening Plant and Batch
Plant located at 5475 Hiway 96 West, Pueblo, Colorado (the
"Crushing Plant"). Because of the subdivision laws and
regulation of Colorado and Pueblo County, neither the property on
which the Batch Plant is located (the "Batch Plant Property") nor
the property on which the Crushing Plant is located (the
"Crushing Plant Property") can be conveyed to Purchaser unless
certain additional property located adjacent to the Batch Plant
(the "Excess Batch Plant Property") and certain additional
property located adjacent to the Crushing Plant (the "Excess
Crushing Plant Property") also is conveyed to Purchaser.
Accordingly, Seller will convey to Purchaser all of the Batch
Plant Property and the Excess Batch Plant Property by a special
warranty deed and all of the Crushing Plant Property and the
Excess Crushing Plant Property by a second special warranty deed.
Promptly after the Closing, Purchaser shall take such actions as
are reasonably necessary to subdivide the Batch Plant Property
and the Excess Batch Plant Property into a two lot subdivision
(the "Batch Plant Subdivision") and the Crushing Plant Property
and the Excess Crushing Plant Property into a second two lot
subdivision (the "Crushing Plant Subdivision. Upon completion of
the Batch Plant Subdivision and the Crushing Plant Subdivision,
which Purchaser shall use all reasonable efforts to complete
within two (2) years after the Closing Date, Purchaser shall
convey the Excess Batch Plant Property and the Excess Crushing
Plant Property to Seller by special Warranty Deed and, upon such
conveyance, the Excess Batch Plant Property and the Excess
Crushing Plant Property shall be added to the property leased to
Purchaser under the Lease. The parties acknowledge that the
Batch Plant Property is comprised of approximately acres,
the Excess Batch Plant Property is comprised of approximately
acres, the Crushing Plant Property is comprised of approximately
13 acres, and the Excess Crushing Plan Property is comprised of
approximately acres.
(e) Deed of Trust. In order to secure Purchaser's
obligation to reconvey the Excess Batch Plant Property and the
Excess Crushing Plant Property to Seller, Purchaser shall execute
and deliver to Seller at closing a deed of trust, in form and
substance acceptable to Purchaser and Seller encumbering the
Excess Batch Plant Property and the Excess Crushing Plant
Property (the "Deed of Trust"). The Deed of Trust shall provide,
among other things, that Seller may exercise its rights under the
Deed of Trust only after the Batch Plant Subdivision and the
Crushing Plant Subdivision have been completed and Purchaser has
refused, after receiving a written request from Seller, to convey
the Excess Batch Plant Property and/or the Excess Crushing Plant
Property to Seller. Except for the Deed of Trust, Purchaser will
not, without Seller's prior written consent, grant, permit or
suffer to exist any mortgage lien or similar encumbrance upon the
Excess Batch Plant Property or the Excess Crushing Plant
Property, except for liens and encumbrances caused by Seller's
actions.
(f) Option to Purchase. Contemporaneously with the
execution of this Agreement, Valco Inc. and Purchaser have
executed and delivered that certain Option to Purchase Agreement
(the "Option Agreement"), a copy of which is attached hereto as
Exhibit 5.2(f). The Option Agreement grants to Valco Inc. the
right to purchase the Batch Plant Property and the Crushing Plant
Property and the improvements then existing on the Batch Plant
Property and the Crushing Plant Property on the terms and subject
to the conditions contained in the Option Agreement in the event
the Lease is terminated by Seller as a result of a default by
Purchaser.
(g) Water Rights. The bargain and sale deed for
Seller's water rights also shall contain a possibility of
reverter which will provide that the water rights shall revert to
Seller upon the termination of the Lease, except for those water
rights attributable to or associated with the Batch Plant
Property and/or the Crushing Plant Property; provided, however,
that if the Batch Plant Property and the Crushing Plant Property
are purchased by Seller pursuant to the Option Agreement, such
water rights shall revert to or be conveyed to Seller, but the
value of such water rights shall be included in the determination
of the fair market value of the Batch Plant Property and the
Crushing Plant Property for purposes of the Option Agreement.
5.3 Certain Tax Matters.
(a) Any sales, use, transfer, vehicle transfer, stamp,
conveyance, value added or other similar Taxes that may be
imposed by any Governmental Entity, and all recording or filing
fees and notarial fees with respect to the purchase and sale of
the Assets, the lease of the Mining Properties or otherwise on
account of this Agreement or the transactions contemplated by
this Agreement, will be borne by Purchaser (and Purchaser shall
indemnify Seller therefrom); provided, however, that Seller shall
pay all Taxes that are imposed on the income or gain that Seller
realizes as a result of the transactions contemplated by this
Agreement. Seller will indemnify Purchaser against any
Liability, direct or indirect, for any Taxes (other than Taxes
prorated between Seller and Purchaser pursuant to Section 2.2)
imposed on Purchaser or on or with respect to any of the Total
Assets or the Business that are attributable to any taxable
period which ends on or prior to the Closing Date or with respect
to the allocable portion of any taxable period that includes but
does not end on the Closing Date.
(b) Seller will cause to be included in its income Tax
returns for all periods or portions thereof ending on or before
the Closing Date, all revenue and expense relating to the
operations of the Business during such periods or portions
thereof. Seller will prepare and timely file or cause to be
prepared and timely filed all such Tax returns with the
appropriate Governmental Entities. Seller will make all payments
of Tax shown to be due and owing in such Tax returns.
(c) Seller and Purchaser will (i) each provide the
other with such assistance as may reasonably be requested by any
of them in connection with the preparation of any tax return to
the extent such tax return relates to the allocation of the
Purchase Price to the Assets (including related depreciation and
amortization), audit or other examination by any taxing authority
or judicial or administrative proceedings relating to liability
for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such tax
return, audit or examination, proceeding or determination, and
(iii) each provide the other with any final determination of any
such audit or examination, proceeding or determination that
affects any amount required to be shown on any such tax return of
the other for any period. In addition, Seller will retain until
the applicable statutes of limitations (including any extensions)
have expired copies of all such tax returns, supporting work
schedules, and other records or information that may be relevant
to such tax returns for all tax periods or portions thereof
ending on or before or which include the Closing Date and will
not destroy or otherwise dispose of any such records (to the
extent they relate to such matters) without first providing
Purchaser with notice and a reasonable opportunity to review and
copy the same.
5.4 Transition Assistance. Seller shall provide Purchaser
with such assistance as may reasonably be requested by Purchaser
to implement and effectuate the terms hereof and the transfer of
the Business contemplated hereby including assistance to
accomplish the transfer of the Licenses to Purchaser on the same
terms and conditions currently in effect. Purchaser will
reimburse Seller for any reasonable out-of-pocket costs incurred
by Seller in connection with the foregoing.
5.5 MLRD Bond. Promptly after the Closing, Purchaser will
take all necessary steps to replace each of the bonds described
in Exhibit 5.5 (the "Bonds"), to cause Seller to be released from
all liability on the Bonds, and in any event to cause such
replacement and release to occur not later than September 19,
1997. Until the Bonds are so replaced and Seller is so released,
Purchaser will pay Seller, in advance on the first day of each
month, the sum of $225 and will indemnify Seller from any
liability arising under the Bonds after the Closing Date as a
result of the actions of Purchaser.
VI. The Closing
6.1 The Closing.
(a) The parties shall consummate the transactions
contemplated hereby ("Closing") on October 21, 1996 ("Closing
Date") as follows: The parties will execute and deliver this
Agreement, the Lease and the closing documents contemplated
hereby on October 21, 1996; provided, however, that the purchase
price adjustments for Accounts Receivable and Inventory as
provided in Section 2.1 shall be made as of the close of business
on October 20, 1996 and the delivery of the balance of the
Purchase Price shall occur on October __, 1996 as provided in
subsection (c) below (so that the parties may determine and
effectuate the adjusted Purchase Price on October __ and __, 1996
as contemplated by Article II above).
(b) Seller will deliver to Purchaser, at the expense
of Seller, the following (collectively, "Seller's Closing
Documents"):
(i) Opinion of Counsel. The opinion of Seller's
counsel, dated as of the Closing Date and addressed to
Purchaser, in substantially the form of Exhibit 6.1(b)(i).
(ii) Title Insurance. Owner's and Lessee's Policies
of Title Insurance for each item of the Plants To Be Sold, the
Plant Sites and the Mining Properties, respectively, each of
which policies (the "Title Policies") will (A) be issued by
Transnation Title Insurance Company (the "Title Company")
without any exceptions, other than the Permitted Liens and such
exceptions as are acceptable to Purchaser (the "Permitted
Exceptions"), (B) be in the amount of the market value for that
property as reasonably determined by Purchaser, (C) name
Purchaser as the insured owner or lessee of such property or
interest, and (D) insure that, as of the Closing Date, (1) in
the case of each of the Plants To Be Sold and the Plant Sites,
Purchaser is the owner of good and marketable title in fee
simple to such property or interest subject only to the
Permitted Exceptions that affect such Plants To Be Sold and the
Plant Sites, and (2) in the case of each item of the Mining
Properties, Purchaser is the owner of a good and indefeasible
leasehold estate (with reasonable specificity as to the lease
or other agreement creating such leasehold estate) in and to
such property or interest, subject only to the Permitted
Exceptions that affect such Mining Properties. Each of the
Title Policies shall contain such endorsements as Purchaser
shall reasonably request.
(iii) Lease. With respect to the Mining Properties,
a Lease, in the form of Exhibit 1.2B, duly executed by Seller
as lessor.
(iv) Transfer Documents. A special warranty deed to
the Batch Plant Property, the Excess Batch Plant Property, the
Crushing Plant Property and the Excess Crushing Plant Property,
a Bill of Sale and Assignment for the Inventory, Contracts,
Licenses, Accounts Receivable, a bargain and sale deed for the
water rights as described in Section 1.1(g), an assignment of
the water rights lease with the municipality of Pueblo,
Colorado and a copy of the assignment or bill of sale from
Seller to Subsidiary of the Owned Tangible Property.
(v) FIRPTA Affidavits. Affidavits pursuant to
Section 1445(b)(2) of the Code in substantially the form of
Exhibit 6.1(b)(vi), duly executed by Seller.
(vi) Receipts. Such receipts, duly executed by
Seller, as Purchaser may reasonably request.
(vii) Noncompetition Agreement. Seller and Thomas
E. Brubaker shall each have entered a Noncompetition and
Non-Disclosure Agreement, in substantially the form of Exhibit
6.1(b)(viii), with Purchaser.
(viii) Tax Release. Such consents, releases and
approvals from the Colorado Department of Revenue or other
taxing authority sufficient to release Purchaser from any
Colorado, state or local, Tax obligation of Seller that arose
prior to the Closing.
(ix) Subsidiary Assignments. Assignments (executed
by Seller and Thomas E. Brubaker) of the entire interest in
Subsidiary.
(c) Purchaser will deliver to Seller, at the expense
of Purchaser, the following (collectively, "Purchaser's Closing
Documents"):
(i) Payment of Purchase Price. An amount equal to
the Purchase Price by wire transfer as follows: (i) for the
transfer of funds on October 21, 1996 in the amount $5,000,000,
subject to the adjustments provided in Article II and on
Exhibit 2.1, and (ii) the balance of the Purchase Price by wire
transfer on October __, 1996 (reflecting the adjusted Purchase
Price, i.e., the Inventory and Accounts Receivable
adjustments).
(ii) Lease. With respect to the Mining Properties,
a Lease, in the form of Exhibit 1.2B, duly executed by
Purchaser, as lessee.
("Purchaser's Closing Documents" and "Seller's Closing Documents"
individually referred to as "Closing Document", collectively,
"Closing Documents").
VII. Survival and Indemnification
7.1 Survival of Representations, Warranties and Covenants.
The representations and warranties contained in Sections 4.1(n),
"Taxes" and 4.1(o), "Environmental Matters" will survive the
Closing Date and will remain operative and in full force and
effect until the expiration of the applicable statute of
limitations (giving effect to any tolling, waiver or extension
thereof). The representations and warranties contained in
Section 4.1(a), "Corporate Matters," Section 4.1(b)
"Authorization and Effect of Agreement," Section 4.1(c), "No
Restrictions Against Sale of the Assets," Section 4.1(e),
"Compliance with Laws," Sections 4.1(g)(i) and (iii), "Tangible
Personal Property; Assets," Sections 4.1(h)(ii)-(v), (vii),
(viii), (ix) and (xii) "Real Property," and the several covenants
of the parties contained in this Agreement (or in any document
delivered in connection with it) will remain operative and in
full force and effect without any time limitation, except as any
such covenant will be limited in duration by the express terms of
this Agreement. All other representations and warranties in this
Agreement will remain operative and in full force and effect for
a period of one year after the Closing Date. The representations
and warranties will not be affected or reduced as a result of any
investigation or knowledge of Purchaser; provided, however, that
prior to the Closing Purchaser shall notify Seller in writing to
the extent James Gidwitz, Joseph J. Sum, Mark S. Nichter, Nancy
O'Connell, Bud Herskind or Bill Lehmpuhl has actual knowledge
that Seller is in breach of any representation or warranty of
Seller contained in this Agreement; and the failure of Purchaser
to give Seller such notice shall constitute a waiver by Purchaser
of any such breach by Seller.
7.2 Indemnification by Purchaser. From and after the
Closing, Purchaser will indemnify, defend and hold Seller, its
Affiliates, and their respective directors, officers,
representatives, employees and agents harmless from and against,
and compensate and pay Seller for, any and all claims, actions,
suits, demands, assessments, judgments, losses, liabilities,
damages, costs and expenses (including interest, penalties,
attorneys' fees, accounting fees and investigation costs)
(collectively, "Liabilities") whether direct or indirect and
whether or not involving a Third Party Claim (as defined below)
resulting or arising from, relating to or incurred in connection
with: (a) any failure of Purchaser to pay, perform and discharge
any of the Assumed Liabilities, (b) any breach of any
representation or warranty of Purchaser contained in this
Agreement or in any other document delivered by Purchaser in
connection with it, or (c) any breach of any covenant of
Purchaser contained in this Agreement or in any other document
delivered by Purchaser in connection with it.
7.3 Indemnification by Seller. From and after the Closing,
Seller will indemnify, defend and hold Purchaser, its Affiliates,
and their respective directors, officers, representatives,
employees and agents harmless from and against, and compensate
and pay Purchaser for, any and all Liabilities whether direct or
indirect and whether or not involving a Third Party Claim
resulting or arising from, relating to or incurred in connection
with: (a) any failure of Seller to pay, perform and discharge any
of the Retained Liabilities, (b) any breach of any representation
or warranty of Seller contained in this Agreement or in any other
document delivered by Seller in connection with it, (c) any
breach of any covenant of Seller contained in this Agreement or
in any other document delivered by Seller in connection with it,
(d) any failure to comply with the laws of any jurisdiction
relating to bulk transfers which may be applicable in connection
with the transactions contemplated by this Agreement, (e) the
business of Seller (including the Business) transacted prior to
the Closing Date, (f) any pre-closing use of any Total Asset, (g)
liabilities relating to environmental matters arising from the
activities of Seller or as to which Seller had knowledge at or
before the Closing, or (h) products manufactured or sold or work
performed by Seller prior to the Closing Date.
7.4 Notice of Claim; Right to Participate in and Defend
Third Party Claim.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action or
proceeding, or the imposition of any penalty or assessment by a
third party in respect of which indemnity may be sought under
this Agreement (a "Third Party Claim"), and the indemnified party
intends to seek indemnity under this Agreement, then the
indemnified party will promptly provide the indemnifying party
with prompt written notice of such Third Party Claim, but in any
event not later than 30 calendar days after receipt of such
notice of Third Party Claim. The failure by an indemnified party
to notify an indemnifying party of a Third Party Claim will not
relieve the indemnifying party of any indemnification
responsibility under this Article VII, except to the extent, if
any, that such failure prejudices the ability of the indemnifying
party to defend such Third Party Claim.
(b) The indemnifying party will have the right to
control the defense, compromise or settlement of a Third Party
Claim with its own counsel (reasonably satisfactory to the
indemnified party) if the indemnifying party delivers written
notice to the indemnified party within seven days following the
indemnifying party's receipt of notice of a Third Party Claim
from the indemnified party which either acknowledges its
obligations to indemnify the indemnified party with respect to
such Third Party Claim in accordance with this Article VII or
unqualifiedly assumes the obligation to defend any Third Party
Claim, provided, however, that the indemnifying party will not
enter into any settlement of any Third Party Claim which would
impose or create any obligation or any financial or other
liability on the part of the indemnified party if such liability
or obligation (i) requires more than the payment of a liquidated
sum or (ii) is not covered by the indemnification provided to the
indemnified party under this Agreement. In its defense,
compromise or settlement of any Third Party Claim, the
indemnifying party will timely provide the indemnified party with
such information with respect to such defense, compromise or
settlement as the indemnified party may request, and will not
assume any position or take any action that would impose an
obligation of any kind on, or restrict the actions of, the
indemnified party. The indemnified party will be entitled (at
the indemnified party's expense) to participate in, but not
control, the defense by the indemnifying party of any Third Party
Claim with its own counsel.
(c) In the event that the indemnifying party does not
undertake the defense, compromise or settlement of a Third Party
Claim in accordance with subsection (b) of this Section 7.4, the
indemnified party will have the right to control the defense or
settlement of such Third Party Claim with counsel of its
choosing; provided, however, that the indemnified party will not
settle or compromise any Third Party Claim without the
indemnifying party's prior written consent (which consent shall
not be unreasonably withheld), unless the terms of such
settlement or compromise release the indemnified party or the
indemnifying party from any and all liability with respect to the
Third Party Claim. The indemnifying party will be entitled (at
the indemnifying party's expense) to participate in the defense
of any Third Party Claim with its own counsel.
(d) The indemnified party will assert any
indemnifiable claim under this Agreement that is not a Third
Party Claim by promptly delivering notice of such claim to the
indemnifying party. If the indemnifying party does not respond
to such notice within 60 days after its receipt, it will have no
further right to contest the validity of such claim.
7.5 Basket and Deductible. No indemnified party will be
entitled to indemnification from an indemnifying party under
Sections 7.2(b) or 7.3(b) for a breach of a representation or
warranty unless and until the aggregate amount of Liabilities
with respect to which such indemnified party and its Affiliates,
and their respective directors, officers, representatives,
employees and agents, would otherwise be entitled to assert under
Section 7.2(b) or 7.3(b), whichever is applicable, exceeds
$100,000 (the "Basket Amount"). When the aggregate amount of
Liabilities exceed the Basket Amount, the indemnified party will
be entitled to indemnification for all Liabilities, including
those within the Basket Amount.
7.6 Intentionally Omitted.
7.7 Limitations. In no event shall any indemnifying party
be liable under this Agreement for breaches of representations or
warranties which, individually or in the aggregate, exceed the
Purchase Price; the remedies set forth in this Article VII
constitute the exclusive remedy by either party for breach of
contract with respect to this Agreement by the other party,
absent fraud; provided, however, that nothing in this Agreement
shall exculpate the Seller or Purchaser from any liability either
of them may have to the other or to any other person or entity
under the Lease, any other agreement or any state or federal law
arising independently from this Agreement (e.g., a statutory
right to seek contribution under an environmental law).
VIII. Miscellaneous Provisions
8.1 Notices. All notices and other communications required
or permitted under this Agreement will be in writing and, unless
otherwise provided in this Agreement, will be deemed to have been
duly given when delivered in person or when dispatched by
telegram or electronic facsimile transfer (confirmed in writing
by mail simultaneously dispatched) or one business day after
having been dispatched by a nationally recognized overnight
courier service to the appropriate party at the address specified
below.
(a) If to Purchaser or the lessee under the Lease to:
Continental Materials Corporation
225 West Wacker Drive
Chicago, IL 60606-1229
Facsimile No.: 312/541-8089
Telephone No.: 312/541-7222
Attention: Chief Financial Officer
with a copy to:
Jerry J. Burgdoerfer, Esq.
Donald S. Horvath, Esq.
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Facsimile No.: (312) 527-0484
Telephone No.: (312) 222-9350
(b) If to Seller, to:
Valco Inc.
P.O. Box 550
200 South 17th Street
Rocky Ford, Colorado 81087
Facsimile No.: (719) 254-7468
Telephone No.: (719) 254-7464
Attention: Thomas E. Brubaker
with a copy to:
James F. Wood, Esq.
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, Colorado 80202
Facsimile No.: (303) 298-0940
Telephone No.: (303) 297-2900
or to such other address or addresses as any such party may from
time to time designate as to itself by like notice.
8.2 Expenses. Except as otherwise expressly provided in
this Agreement, Seller and Purchaser each will pay any expenses
incurred by it incident to this Agreement and in preparing to
consummate and consummating the transactions provided for in it.
8.3 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the parties to this Agreement
and their respective successors and assigns, but will not be
assignable or delegatable by any party without the prior written
consent of the other party; provided, however, that nothing in
this Agreement is intended to limit Purchaser's ability to (a)
assign the Lease as provided therein, or (b) transfer any of the
Total Assets following the Closing Date.
8.4 Waiver. Either Purchaser or Seller by written notice
to the other may (a) extend the time for performance of any of
the obligations or other actions of the other under this
Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any
Closing Document, (c) waive compliance with any of the conditions
or covenants of the other contained in this Agreement, or (d)
waive performance of any of the obligations of the other under
this Agreement. Except as provided in the immediately preceding
sentence, no action taken pursuant to this Agreement will be
deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this
Agreement and will not operate or be construed as a waiver of any
subsequent breach, whether of a similar or dissimilar nature.
8.5 Entire Agreement. This Agreement (including the
Exhibits) supersedes any other agreement, whether written or
oral, that may have been made or entered into by any party to
this Agreement or any of their respective Affiliates (or by any
director, officer or representative thereof) relating to the
matters contemplated by this Agreement. This Agreement
(including the Exhibits and documents contemplated hereby)
constitutes the entire agreement by and among the parties to this
Agreement and there are no agreements or commitments by or among
such parties or their Affiliates except as expressly set forth in
this Agreement.
8.6 Amendments, Supplements, Etc.. This Agreement may be
amended or supplemented at any time by additional written
agreements as may mutually be determined by Purchaser and Seller
to be necessary, desirable or expedient to further the purposes
of this Agreement, or to clarify the intention of the parties to
this Agreement.
8.7 Rights of the Parties. Except as provided in Article
VII or in Section 8.3, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give
any person or entity other than the parties to this Agreement any
rights or remedies under or by reason of this Agreement or any
transaction contemplated by this Agreement.
8.8 Further Assurances. From time to time, as and when
requested by any party to this Agreement, the other party will
execute and deliver, or cause to be executed or delivered, all
such documents and instruments as may be reasonably necessary to
consummate and fully effectuate the transactions contemplated by
this Agreement.
8.9 Bulk Sales. In consideration of the indemnity provided
by Seller under Section 7.3(d) of this Agreement, Purchaser
waives compliance by Seller with the provisions of the so-called
bulk sales law of any jurisdiction.
8.10 Transfers. Purchaser and Seller will cooperate and
take such action as may be reasonably requested by the other in
order to effect an orderly Transfer and lease of the Total Assets
and the Business with a minimum of disruption to the operations
of the Business.
8.11 Applicable Law; Jurisdiction. This Agreement and the
legal relations among the parties to this Agreement will be
governed by and construed in accordance with the substantive laws
of the State of Colorado, without giving effect to the principles
of conflict of laws thereof.
8.12 Titles and Headings. Titles and headings to Sections
in this Agreement are inserted for convenience of reference only,
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
8.13 Passage of Title and Risk of Loss. Legal title,
equitable title and risk of loss with respect to the Assets will
not pass to Purchaser until such Assets are Transferred or leased
at the Closing, which transfer, once it has occurred, will be
deemed effective for tax, accounting and other computational
purposes as of the close of business (Mountain Time) on the
Closing Date.
8.14 Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all
references to Sections, Articles and Exhibits are to Section,
Articles or Exhibits of or to this Agreement, (ii) each term
defined in this Agreement has the meaning assigned to it, (iii)
each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iv) "or" is
disjunctive but not necessarily exclusive, (v) words in the
singular include the plural and vice versa, (vi) the terms
"Subsidiary" and "Affiliate" have the meanings given to those
terms in Rule 12b-2 of Regulation 12B under the Securities
Exchange Act of 1934, as amended, (vii) the phrase "liabilities
and obligations" means all such matters of any nature, whether
fixed or contingent, known or unknown, or arising under Contract,
law, equity, or otherwise, (viii) the word "including" and
similar terms following any statement will not be construed to
limit the statement to the matters listed after such word or
term, whether or not a phrase of nonlimitation such as "without
limitation" is used; and (ix) any matter disclosed in any Exhibit
of or to this Agreement by Seller will be deemed also to have
been included in any other Exhibit of or to this Agreement to the
extent such information or matter is pertinent to such other
Exhibit. All references to "$" or dollar amounts will be to
lawful currency of the United States of America.
(b) No provision of this Agreement will be interpreted
in favor of, or against, any of the parties to this Agreement by
reason of the extent to which any such party or its counsel
participated in the drafting or by reason of the extent to which
any such provision is inconsistent with any prior draft.
(c) As to any matter represented in this Agreement as
being within Seller's knowledge, to the best of Seller's
knowledge, to the knowledge or best knowledge of Seller or any
equivalent limitation, such knowledge shall be deemed to exist
only if the matter is within the actual knowledge of any officer,
director or shareholder of Seller or Tom Brubaker, Reid Jones,
Mark Klune, Bill Pope or Richard Hervatin, after reasonable
inquiry of the employees of Seller who have within their job
responsibilities the duty to monitor such matter.
8.15 Execution in Counterparts. This Agreement may be
executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one
and the same agreement.
8.16 Remedies Not Exclusive. Subject to Section 7.7, no
remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy and
each remedy will be cumulative and will be in addition to every
other remedy given under this Agreement or hereafter existing at
law or in equity or by statute or otherwise. The election of any
one or more remedies will not constitute a waiver of the right to
pursue other available remedies.
The parties to this Agreement have executed this agreement
the day and year first above written.
VALCO PROPERTIES, LTD. VALCO INC.
By:_____________________ By:_________________________
Name: Name:
Title: Title:
CONTINENTAL MATERIALS CORPORATION
By:_________________________
Name:
Title:
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
("Agreement") is made this 21st day of October, 1996, by Valco
Inc., a Colorado corporation ("Valco") and Thomas E. Brubaker
("Brubaker"), in favor of Continental Materials Corporation, a
Delaware corporation ("CMC").
Preliminary Recitals:
WHEREAS, that certain Acquisition Agreement dated the date
hereof (the "Acquisition Agreement") by Valco and CMC, provides
for the acquisition by CMC of certain rights, properties, assets
(including a partnership interest) owned or held by Valco;
WHEREAS, that certain Fee Sand And Gravel Lease dated the
date hereof (the "Lease") between Valco and CMC provides for the
lease by Valco to CMC of certain property containing sand and
gravel deposits in Pueblo County, Colorado;
WHEREAS, Brubaker is presently President and a stockholder
of Valco;
NOW, THEREFORE, in consideration of CMC's agreements and
covenants contained in the Acquisition Agreement and the Lease
and to induce CMC to consummate the purchase and lease provided
for in the Acquisition Agreement and the Lease, Valco and
Brubaker hereby covenant and agree with CMC as follows:
1. Preamble; Preliminary Recitals
The preamble and preliminary recitals set forth above are by
this reference incorporated in and made a part of this Agreement.
2. Non-competition
(a) Without the prior written consent of CMC (which may be
withheld in CMC's sole discretion), for a period of ten (10)
years from and after the date hereof, neither Valco nor Brubaker
shall, directly or indirectly, whether as a stockholder,
individual, partner, agent, representative, employee, employer,
director, officer, principal, consultant, advisor, or independent
contractor, or through any of the foregoing, or in any other
relation or capacity whatsoever: (I) engage in the business
relating to sand and gravel mining or sales of ready mix
concrete, asphalt and construction aggregates, in Pueblo and/or
El Paso Counties, Colorado; (ii) operate or own a concrete batch
plant, aggregates operation or asphalt plant in Teller County,
Colorado; or (iii) except to Valco's present customers and
prospective customers in similar businesses, make any sales to
any customers in Teller County, Colorado.
(b) Without the prior written consent of CMC (which may be
withheld in CMC's sole discretion), for a period of two (2) years
from and after the date hereof, neither Valco nor Brubaker shall,
directly or indirectly, whether as a stockholder, individual,
partner, agent, representative, employee, employer, director,
officer, principal, consultant, advisor, or independent
contractor, or through any of the foregoing, or in any other
relation or capacity whatsoever, solicit employment of any of
Valco's current or former Pueblo area employees who are retained
by CMC or any of its subsidiaries in connection with the Pueblo
operations, or encourage any such employees to leave the employ
of CMC or any of its subsidiaries.
3. Non-disclosure
(a) Except as provided in Subsection (b) below, each of
Valco and Brubaker agrees that, for a period of ten (10) years
from and after the date hereof, all information previously or
hereafter disclosed to any of them by CMC in connection with the
transactions contemplated by the Acquisition Agreement and Lease
and information relating to Valco's (after the date hereof CMC's)
Pueblo operations is confidential (collectively, "Confidential
Information") and shall be held in strict confidence and not
disclosed to any person or entity.
(b) Valco and Brubaker shall have no requirement to keep
information confidential, and no such information shall be
considered Confidential Information, to the extent any of the
following applies: (I) the information was within the public
domain at the time it was first known or provided to Valco and
Brubaker; (ii) the information was published or otherwise became
part of the public domain after it was first known or provided to
Valco and Brubaker through no fault of either of them or their
respective directors, officers, agents employees or affiliates;
or (iii) the information is required to be disclosed (x) by any
federal or state law, rule or regulation, (y) by any applicable
judgment, order or decree of any court, governmental agency or
arbitrator having or purporting to have jurisdiction in the
matter, or (z) pursuant to any subpoena or other discovery
request in any litigation, arbitration or other proceeding;
provided, however, that if any of Valco and Brubaker proposes to
disclose the information in accordance with (x), (y) or (z), such
party shall, to the extent feasible, first give CMC reasonable
prior notice of the proposed disclosure of any such information
to the application of such law, rule or regulation, or to appear
before any court, governmental agency or arbitration order to
contest the disclosure, as the case may be.
(c) Valco may disclose, on a need to know basis,
Confidential Information to directors, officers, employees,
attorneys and accountants, subject to the last sentence of this
paragraph (c). With CMC's prior written consent (which will not
be unreasonably withheld), Valco and Brubaker may disclose, on a
need to know basis, Confidential Information to consultants,
advisors and institutional lenders, subject to the last sentence
of this paragraph (c). Valco also may disclose, on a need to
know basis, and subject to the last sentence of this paragraph
(c), to any bona fide acquirer (whether by purchase, exchange,
merger or otherwise) of the stock, of substantially all of the
assets of Valco, or of the interest of Valco under the Lease, the
formula under the Lease for determining the Production Royalty
Rate, the historical revenues received under the Lease, the total
tonnage mined (on an aggregate and not product type basis) under
the Lease and total remaining tons to be mined under the Lease,
and with CMC's prior written consent (not
2
to be unreasonably withheld), any other information concerning
the Lease, but CMC may withhold such consent in its sole
discretion as to such other information if in CMC's sole judgment
a recipient of such other information is or could be expected
to become a competitor of CMC in the Pueblo area. In the case of
any permitted disclosure of Confidential Information under this
paragraph (c), Valco and Brubaker shall inform such persons of
the existence of this Agreement and take all reasonable steps to
ensure that such persons comply with the provisions of this
Agreement applicable to Valco and Brubaker.
4. Enforcement; Damages; Construction
(a) Valco's and Brubaker's obligations hereunder shall be
joint and several as long as Brubaker controls Valco. If
Brubaker no longer controls Valco, Valco's and Brubaker's
obligation herein shall be several. Each of Valco and Brubaker
recognizes that it would be impossible to measure in money all
the damages which will accrue to CMC by reason of a failure to
comply with the restrictions and perform the obligations under
this Agreement. Each of Valco and Brubaker hereby acknowledges
that CMC would lack an adequate remedy at law and CMC shall, in
addition to and not in lieu of money damages, be entitled to
specific performance and injunctive relief against Valco and
Brubaker in an action or procedure to enforce the provisions
hereof. Valco and Brubaker shall reimburse CMC for its expenses,
including reasonable attorney's fees, incurred in connection with
the enforcement of the provisions hereof relating to a breach of
this Agreement by Valco or Brubaker.
(b) No waiver or amendment to this Agreement shall be valid
unless signed in writing by each of Valco, Brubaker and CMC. If
any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, or as applied to any
circumstance, under the laws of any jurisdiction which may govern
for such purpose, then such provision shall be deemed to be
modified or restricted to the extent and in a manner necessary to
render the same valid and enforceable, either generally or as
applied to such circumstance, or shall be deemed excised from
this Agreement, as the case may require, and this Agreement shall
be construed and enforced to the maximum extent permitted by law,
as if such provision had been originally incorporated herein as
so modified or restricted, or as if such provision had not been
originally incorporated herein, as the case may be.
(c) This Agreement shall be binding upon, and inure to the
benefit of, the successors and assigns of each of Valco, Brubaker
and CMC.
(d) The captions used in this Agreement are for convenience
only and shall not be construed to limit or define the scope or
intent of any paragraph.
(e) This Agreement has been executed and delivered in
Colorado Springs, Colorado and the validity and interpretation
hereof shall be governed in all respects by the laws of the State
of Colorado.
3
IN WITNESS WHEREOF, each of Valco and Brubaker has executed
this Agreement on the day and year first above written.
VALCO INC.
By: ___________________________
Name: Thomas E. Brubaker
Title: President
THOMAS E. BRUBAKER
By: ___________________________
Thomas E. Brubaker
FEE SAND AND GRAVEL LEASE
THIS FEE SAND AND GRAVEL LEASE (this "Lease") is made
and is effective as of October 21, 1996 by and between the
parties hereinafter named, for the term and upon and under the
terms and conditions hereinafter set forth.
. Parties. The parties to this Lease, and their
addresses for all purposes hereof, are: (a) LESSOR: Valco Inc.,
whose address is 200 South 17th Street, Rocky Ford, Colorado
81067; and (b) LESSEE: Continental Materials Corporation, whose
address is 225 West Wacker Drive, Suite 1800, Chicago, Illinois
60606.
. Grant of Lease.
() Lessor represents and warrants that it is the
owner in fee of certain lands situated in Pueblo County,
Colorado, more particularly described on Exhibit A attached
hereto (the "Lands"). Within the Lands are located certain plant
site improvements. The plant site improvements, together with
the parcel of land on which they are located, are referred to
herein as the "Improved Real Property." The Improved Real
Property is more fully described in the Acquisition Agreement (as
defined below) between the parties executed concurrently with
this Lease. In addition, there are water rights appurtenant to
the Lands. Pursuant to the terms of that certain Acquisition
Agreement of even date herewith between Lessor and Lessee (the
"Acquisition Agreement"), the Improved Real Property and the
water rights that are appurtenant to the Lands and to the
Improved Real Property, respectively, are being sold by Lessor to
Lessee. The Lands, excluding the Improved Real Property and the
appurtenant water rights, but together with the sand and gravel
reserves, other minerals, overburden, topsoil, loose rock or any
combination thereof on or contained within the Lands or formed in
association therewith and any portion or part of any earth, rock,
or other material that may be attached, combined with, or
constitute a part thereof ("Leased Sand and Gravel"), to the
extent that any of the foregoing occur and are found between the
surface and top of the uppermost underlying shale formation (the
"Leased Strata"), are the subject of this Lease and are
hereinafter referred to together as the "Property." The Property
also shall include all sand and gravel reserves, other minerals,
overburden, top soil, loose rock or any combination thereof in,
on and under all land or interests owned or claimed by Lessor
contiguous or appurtenant to the Property and located within the
same strata as the Leased Strata.
() For and in consideration of the payment of the
Minimum Royalty (as defined in Paragraph 6), the Production
Royalty (as defined in Paragraph 5) and the covenants herein
agreed to be paid and performed by Lessee, and subject to the
terms and conditions hereof, Lessor hereby grants, leases and
lets the Property exclusively unto Lessee, its successors and
permitted assigns, to have and to hold the same for the term
hereof, and warrants the title to the same, subject to the
Permitted Exceptions which are contained in Exhibit 2(b), unto
Lessee, its successors, and permitted assigns against all those
who may claim the same by and through the Lessor, its successors
and assigns, and further warrants that except as stated
hereinafter in Paragraph 7, there are no, and during the term of
this Lease Lessor will not create any outstanding non-operating
interests in the Property (such as overriding royalty interests)
or liens on the Property securing obligations of Lessor or its
affiliates that are not subordinated to this Lease. Lessee will
not during the term of this Lease create any non-operating
interests in the Property (such as overriding royalty interests).
() Lessor reserves unto itself, its successors and
assigns, Lessor's reversionary interest in the Property, together
with the royalties reserved herein, the estates in all minerals
and all deposits other than the Leased Sand and Gravel, and all
other estates and interests in the Property that are not the
subject of this Lease or the subject of the concurrent sale of
the Improved Real Property and the appurtenant water rights.
() In connection with and as a part of the leasehold
interests hereby granted, Lessee shall have and may exercise, the
following rights with respect to the Property: (i) the right to
conduct operations for exploring, developing and mining the
Leased Sand and Gravel, performing such exploration, development
and mining in any manner deemed necessary or convenient by
Lessee, whether by surface or other mining methods; (ii) the
right to stockpile and store on or within the Lands or
permanently to remove from the Lands, sell, use and dispose of
the Leased Sand and Gravel, including sand and gravel contained
in existing dumps or piles on the Lands, (iii) the right to
construct and operate on the Lands, if and solely to the extent
that the same are permitted uses, asphalt plants and concrete
plants, (iv) the right, subject to any provisions herein on
commingling, to stockpile sand and gravel on the Lands from other
sites without incurring royalties on subsequent removal or use of
same from the Lands; (v) the right to use the Lands for
processing plants, scale houses, sales offices, crushing and
screening plants, washing and settling facilities, and storage of
related equipment, to the extent permitted by applicable
government regulations; (vi) such rights of access for personnel,
equipment, supplies, utilities and water as may be necessary or
convenient for the conduct of Lessee's operations on the Lands,
including access upon and across any other intervening or
contiguous land owned or controlled by Lessor or over which
Lessor may have dominion or control; and (vii) the right to mine,
extract, sort, process, mix, convert to marketable concrete or
other products ("Aggregate Products"), or otherwise prepare for
market and to market and sell the Leased Sand and Gravel,
together with such other rights as are related to or incidental
to the exercise of the foregoing rights. As used herein, the
term Leased Sand and Gravel includes Aggregate Products and the
term Aggregate Products includes Leased Sand and Gravel and all
other commercial products containing Leased Sand and Gravel
located in the Leased Strata or produced from the Leased Sand and
Gravel. Notwithstanding the foregoing, provided that Lessee pays
the Minimum Royalty during each Lease Year (as defined in
Paragraph 3) or period, Lessee shall not be obligated in any
Lease Year or period to conduct operations for exploring,
developing or mining the Leased Sand and Gravel or to produce or
remove any Aggregate Product on or from the Property, but if
Lessee does not conduct sand and gravel mining operations for a
period of at least six months in any Lease Year (beginning with
the first Lease Year), then the Production Royalty Rate (as
defined in Paragraph 5) for the next Lease Year in which Lessee
conducts operations and the Minimum Royalty for the next Lease
Year shall be adjusted by the Pueblo Inflation Factor (as defined
in Paragraph 5) or by the PPI Factor (as defined below),
whichever would result in the higher Production Royalty Rate or
Minimum Royalty, as applicable. The "PPI Factor" will be the
percentage increase or decrease in the Producer Price Index
#1442-58 [Construction gravel-Western Region-Mountain sub-region]
(indexed at June 1982 = 100) for the Lease Year during which no
such substantial Sand and Gravel mining operations were
conducted.
. Term. The Term of this Lease shall commence on
the date first written above and, unless sooner terminated either
by Lessor or by Lessee in accordance with Paragraph 12, shall be
perpetual; provided, however, that if the foregoing grant
(including any options contained in this Lease) shall violate any
so-called rule against perpetuities now or at any time
hereinafter in effect, then the term of this Lease shall be for
one hundred (100) years or such shorter term as to make this
Lease non-violative of the rule against perpetuities, subject to
Lessee's right to renew and extend the term for such additional
periods on the same terms and conditions set forth herein as
Lessee may elect. Except with respect to Production Royalty and
Minimum Royalty calculations, in which calendar years are used,
references hereinafter to a "year" of the Lease shall be deemed
to be references to a "Lease Year," which is hereby defined to be
a calendar year of 365 days (366 days in leap years). The first
Lease period shall commence on the date first written above and
shall end on December 31, 1996. The first Lease Year shall begin
on January 1, 1997 and shall end on December 31, 1997. The dates
of beginning and ending of each subsequent Lease Year shall be
reckoned in the same manner.
. Representations.
Lessee makes the following representations to
Lessor.
() Lessee is a corporation duly formed, validly
existing and in good standing under the laws of the State of
Delaware and is authorized to conduct business in the State of
Colorado.
() Lessee has the requisite power and authority
to enter into and perform its obligations under this Lease.
() The person or persons executing this Lease on
behalf of Lessee are duly authorized by Lessee to do so.
() Lessee is not in violation of any law,
regulation, license, permit, or order, which violation would
prevent, hinder or delay the transfer to Lessee of any licenses
or permits necessary to the performance of Lessee's obligations
under the Lease.
. Production Royalty.
() Lessee shall pay to Lessor a quarterly
production royalty (the "Production Royalty") at the initial rate
of $0.37 per ton (the "Production Royalty Rate") of Leased Sand
and Gravel produced and removed from the Property or contained in
Aggregate Products produced and removed from the Property (herein
sometimes referred to as "Production"). Prior to the beginning
of the Lease term, Lessor was producing a total of fourteen
Aggregate Products, which are listed in Exhibit 5(a), attached
hereto and made a part hereof. Lessee may, subject to the
provisions hereof, cease producing one or more Aggregate Products
or add Aggregate Products to the list of Aggregate Products on
Exhibit 5(a).
() The amount of Leased Sand and Gravel produced
and removed from the Property shall be determined on the basis of
certifiable scale tickets. The amounts of Leased Sand and Gravel
contained in Aggregate Products produced and removed from the
Property, whether commercially measured by weight or volume,
shall be determined by Lessee by calculation of the weight of
Leased Sand and Gravel in representative samples.
() The initial Production Royalty Rate of $0.37
per ton shall apply during calendar year 1996, which shall be the
initial base year, and during calendar year 1997. The first
adjustment of the Production Royalty Rate will be made at the end
of calendar year 1997 to determine the Production Royalty Rate
for calendar year 1998. Beginning with calendar year 1998, and
each calendar year thereafter, at the beginning of the calendar
year, the Production Royalty Rate shall be adjusted upward or
downward for a "Pueblo Inflation Factor," as hereinafter
provided, but shall never be less than $0.37 per ton.
() As indicated above, but subject to the last
sentence of Paragraph 2(d), the Production Royalty Rate shall be
adjusted for calendar year 1998 and each calendar year thereafter
for the "Pueblo Inflation Factor" which shall be determined in
the following manner:
() The total tonnage of Production, the
total net sales price and the average net sales price per ton,
F.O.B. Lessor's Pueblo, Colorado plants, received with respect to
each of Lessor's thirteen existing Aggregate Products sold to
third parties during the period from January 1, 1996 to the date
of this Lease are set forth on Exhibit 5(d)(i) attached hereto.
Lessee shall have the right to audit such data. The average net
sales price per ton for calendar 1996 (weighted by actual sales,
determined on a product-by-product basis, by Lessor and Lessee in
1996) shall be deemed to be the 1996 initial base year average
net sales price per ton for each of the Aggregate Products.
() At the end of calendar year 1997, Lessee
shall calculate and furnish to Lessor the total tonnage of
Production, the total net sales price and the average net sales
price per ton, F.O.B. the Pueblo, Colorado plants, received with
respect to each of the same fourteen existing Aggregate Products
during calendar year 1997. The average net sales price per ton
thus determined (weighted by actual sales, determined on a
product-by-product basis, by Lessee during such year) shall be
deemed to be the 1997 average net sales price per ton for each of
the Aggregate Products.
() The calendar year 1998 Production Royalty
Rate shall be increased or decreased by the percentage increase
or decrease in the average net sales price for the preceding
calendar year (calendar year 1997) as compared with the previous
preceding calendar year (the 1996 base year) and shall be
determined by calculating an escalation factor (the "Pueblo
Inflation Factor") as follows: The total net sales revenue
received for all Aggregate Products during the preceding calendar
year (1997) shall be divided by the total net sales revenue that
would have been received for all Aggregate Products in the
preceding calendar year (1997) at the 1996 base year average net
sales prices per ton. The Pueblo Inflation Factor thus
determined shall then be multiplied by the Production Royalty
Rate in effect in the preceding year (calendar year 1997) to
determine the new Production Royalty Rate for the next year
(calendar year 1998).
() At the end of each subsequent calendar
year the Production Royalty Rate for the next calendar year shall
be determined in like manner, using actual production tonnages
and average net sales prices per ton for the calendar year just
ended for comparison with actual production tonnages for the year
just ended, as if they had been sold at the average net sales
prices for the preceding calendar year. The manner and method of
calculation is set forth in an illustration using hypothetical
figures for calendar years 1996, 1997, 1998 and 1999, which is
attached hereto as Exhibit 5(d)(iv).
() In the calculation of average net sales
prices no amounts of any Production sold to or used by Lessee or
any affiliate of Lessee shall be included.
() Neither the cessation of production and
removal of any Aggregate Product listed on Exhibit 5(a) nor the
production and removal of any new Aggregate Product not listed on
Exhibit 5(a), nor the resumption of production, sale and removal
of any Aggregate Product that Lessee has ceased to produce, sell,
and remove from the Property shall affect the Production Royalty
Rate retroactively, but any such cessation, addition or
resumption shall result in a recalculation of the tonnages and
average net sales prices for the years that would otherwise be
affected thereby in such a manner as to eliminate the effect of
such cessation on the calculation of the Production Royalty Rate
for future years and/or to bring the addition or resumption into
the Production Royalty Rate calculation for future years.
() In no event shall the adjustment of the
Production Royalty Rate result in a Production Royalty Rate less
than $0.37 per ton.
() Production Royalty shall continue to be
payable until either the Agreed Sand and Gravel Reserves within
the Property stated in Paragraph 6 below, have been produced and
removed from the Property and Production Royalty thereon paid, or
the sum of the amount of Leased Sand and Gravel produced and
removed from the Property and the remaining number of tons of
Leased Sand and Gravel on which Lessee has paid Minimum Royalty
equals the Agreed Sand and Gravel Reserves within the Property,
after which time Lessee shall have the right of election to
continue mining operations on the Property hereunder free of
either Minimum Royalty or Production Royalty or to terminate the
Lease as provided in Paragraph 12(b)(2).
() Payment of the Production Royalty shall be
made quarterly within thirty days after the end of each calendar
quarter for Production occurring during such calendar quarter.
Lessee shall be entitled to a credit against Production Royalty
due for such quarter in the amount of the Minimum Royalty paid as
provided in Paragraph 6, below. Each Production Royalty payment
shall be accompanied by a statement showing weights of the Leased
Sand and Gravel produced and removed from the Property or
contained in Aggregate Products produced and removed from the
Property during the calendar quarter, together with a calculation
of the amount of Production Royalty for the calendar quarter and
the amount of deduction therefrom for Minimum Royalty previously
paid. On the thirtieth day following the end of each calendar
year Lessee shall provide Lessor with a statement showing
calculations of the amounts of Production during the calendar
year and Production Royalty paid on such Production, together
with a statement showing amounts of Minimum Royalty paid and
credited against Production Royalty for the calendar year. If no
written objection is made by Lessor to the correctness of the
calendar year statement within one hundred twenty (120) days from
the date thereof, such statement, absent fraud, shall be
conclusively deemed to be correct and such Production Royalty
payment deemed sufficient and complete.
() In case of any dispute or question as to the
ownership of any royalty interest payment or any part thereof, to
be made by Lessee under this Lease, Lessee may deposit the
disputed amounts in escrow until the dispute is finally resolved.
() All payments due hereunder shall be payable
to Lessor and may be made by check, draft, wire or electronic
funds transfer sent or delivered to Lessor on or before the date
the same is due.
() Use of Scale. Quantities of the Leased Sand
and Gravel that are removed from the Property will be measured as
follows. Lessee shall maintain a scale or scales which are
certified by the State of Colorado, over which all Leased Sand
and Gravel removed from the Property shall be weighed, and shall
keep accurate records of all weights of such Leased Sand and
Gravel, including date and time when weighed, and including empty
weights of the trucks or other vehicles transporting such Leased
Sand and Gravel, and a reasonable identification of such
vehicles, which records shall be available for inspection by
Lessor at all reasonable times during business hours upon
twenty-four hours advance notice. If the Leased Sand and Gravel
on which royalties are due are mixed with other materials prior
to weighing (for example, in case of mixing gravel with asphalt
or water and Portland cement prior to removal) then an
appropriate deduction from the weight of the mixed materials
shall be made for the weight of the materials added; provided,
however, no deduction shall be made for the normal amount of
water contained in the Leased Sand and Gravel. Similarly, the
weight of materials brought onto the property by Lessee and mixed
with the Leased Sand and Gravel, such as asphalt, sand, gravel or
sand and gravel from other sites, may be deducted from the
weights of the Leased Sand and Gravel, provided that Lessee
establishes procedures, including methods of identification and
segregation of such materials and the maintenance of separate
stockpiles of such materials, and keeps records to substantiate
the same to enable accurate deductions of weight therefor. There
shall be no requirement to weigh mixed concrete exiting the
Property in trucks and sold by volume, but Lessee shall calculate
the weight of materials in such mixed concrete on which royalties
are due based on the weight of such materials in representative
samples of mixed concrete.
() Records to be Kept. In addition to records
ordinarily maintained by commercial sand and gravel operators
Lessee shall keep accurate records of quantities, nature and
weights of the Leased Sand and Gravel removed from the Property
and materials added to the Leased Sand and Gravel removed from
the Property, which records shall be available for inspection by
Lessor at all reasonable times during business hours upon
twenty-four hours advance notice. Lessee shall be permitted to
make the adjustments for materials added based upon total
materials added to those on which royalties are due over the
course of a quarter, rather than making an individual record and
calculation on each vehicle load.
() Retention of Records. Records for each Lease
Year shall be kept for ten years and may be destroyed after the
end of each such ten-year period.
() Audit; Cost. Lessor may cause an annual
audit of Lessee's books and records to be made by an independent
auditor selected by Lessor for purposes of verifying the amount
of royalties due to Lessor. All reasonably necessary records
shall be made available to Lessor or its agents for such
purposes. The fees of the auditor shall be paid by Lessor,
unless an understatement of the royalties properly due to Lessor
in excess of five percent (5%) of the amount of the royalties
reported occurs (giving effect to any agreement or determination
pursuant to paragraphs (m) or (n) below, as applicable), in which
event Lessee shall pay the fees of the auditor.
() Within ten (10) days after Lessor's audit is
completed, Lessor shall deliver a copy of Lessor's audit to
Lessee, together with a statement demanding payment of the amount
of royalties that Lessor's audit indicates were properly due and
payable for the calendar year in question ("Lessor's Statement").
If Lessee agrees with the amount of royalties demanded by Lessor
in Lessor's Statement, then Lessee shall promptly pay Lessor the
difference between the amount of royalties demanded by Lessor for
such calendar year and the amount of royalties previously paid by
Lessee for such calendar year pursuant to this Paragraph 5 (or if
Lessor's audit indicates an overpayment, Lessor shall promptly
refund the excess to Lessee). If Lessee does not agree with the
amount of royalties demanded by Lessor in Lessor's Statement,
then Lessor and Lessee shall attempt to resolve such dispute
within ten (10) days after Lessee receives Lessor's Statement.
If Lessor and Lessee cannot reach agreement within such ten (10)
day period, then either Lessor or Lessee may demand that the
matter be resolved by arbitration. Within fourteen (14) days
after any such demand, the parties shall select a mutually
acceptable arbitrator to resolve the dispute. If the parties
cannot agree upon a mutually acceptable arbitrator within such
fourteen (14) day period, then Lessor's independent auditor and
Lessee's independent auditor shall select the arbitrator within
ten (10) days thereafter, and the arbitrator selected by the
independent auditors shall determine the amount of royalties
payable by Lessee to Lessor in the manner set forth below. If
Lessor's and Lessee's independent auditors cannot agree upon an
arbitrator, then the parties shall apply to the American
Arbitration Association for the appointment of an arbitrator
within five (5) days after the expiration of the foregoing ten
(10) day period.
() Once the arbitrator is selected or appointed,
then as soon thereafter as practicable but in any case within
fourteen (14) days, the arbitrator shall select either Lessor's
determination of the amount of royalties payable for such
calendar year as contained in Lessor's Statement or Lessee's
calculation of the royalties payable for such calendar year as
determined under this Paragraph 5. The arbitrator's selection
shall be rendered in writing to both Lessor and Lessee and shall
be final and binding upon them. The party whose determination of
the amount of royalties payable is not chosen shall pay the costs
of the arbitrator.
() Promptly after receipt of the arbitrator's
decision, Lessee shall pay the additional amount of royalties, if
any, due to Lessor.
. Minimum Royalty.
() Lessee agrees to pay Lessor as minimum
royalty (the "Minimum Royalty") each calendar year the sum of
$300,000. The Minimum Royalty for a calendar year shall be
payable in that calendar year in four equal installments on
January 1, April 1, July 1, and October 1 or the first business
day immediately succeeding such dates. Minimum Royalty paid at
the beginning of a calendar quarter shall be deemed an advance
upon, and credited against the Production Royalty that would be
payable at the end of that calendar quarter. Lessee shall be
entitled to recoup such Minimum Royalty paid by direct deduction
of the amount paid for the calendar quarter from Production
Royalty that would otherwise be payable for the same calendar
quarter. The amount by which Minimum Royalty paid at the
beginning of any calendar quarter exceeds the amount of
Production Royalty that would otherwise have been payable on
Production in that calendar quarter, (the "Excess Minimum
Royalty") shall be carried forward and shall offset Production
Royalty otherwise payable on Production in the next and
subsequent calendar quarters; provided, however, that no Excess
Minimum Royalty paid during any calendar year shall be carried
forward beyond the end of such calendar year. The Minimum
Royalty for 1996 shall be prorated for the portion of the
calendar year covered by this Lease. The Minimum Royalty for
calendar year 1997 shall be $300,000. For calendar year 1998 and
each succeeding year the Minimum Royalty shall, subject to
Paragraph 2(d), be adjusted by the Pueblo Inflation Factor, as
determined pursuant to Paragraph 5, but in no calendar year shall
the Minimum Royalty be less than $300,000. The Minimum Royalty
shall continue to be payable until Lessee has paid royalties
(Minimum Royalty and/or Production Royalty) on the total agreed
sand and gravel reserves on the Property (the "Agreed Sand and
Gravel Reserves") of fifty (50) million tons of 2,000 pounds,
each; provided, however, that if Lessor does not acquire from the
State of Colorado the property legally described on Exhibit
6(a)(1) (the "State Property") in exchange for the property owned
by Lessor (and leased hereunder) and legally described on Exhibit
6(a)(2) (the "Valco Exchange Property") on or before the second
anniversary of the date hereof pursuant to that certain exchange
transaction presently being negotiated with the State of Colorado
(the "Exchange Transaction"), the "Agreed Sand and Gravel
Reserves" shall be reduced by 700,000 tons to a total of 49.3
million tons. For this purpose the Minimum Royalty amount for
each calendar year shall be deemed to be the equivalent of
810,811 tons of Leased Sand and Gravel (202,703 tons of Leased
Sand and Gravel per calendar quarter). The number of tons
adopted herein as the amount of the Agreed Sand and Gravel
Reserves will apply notwithstanding any event, occurrence or
condition, including but not limited to, any event of force
majeure, except as provided in Paragraphs 12(b)(3) and 12(b)(4)
below.
() Lessor agrees to use all reasonable efforts
to complete the Exchange Transaction prior to the second
anniversary of the date hereof. Upon completion of the Exchange
Transaction, the parties shall execute an amendment to this Lease
which will add the State Property to the Property and delete the
Valco Exchange Property from the Property. Lessor agrees that,
at the time the State Property is added to the Property, the
State Property shall not be subject to any lien, encumbrance,
covenant, condition, restriction, right-of-way, easement or other
matter affecting title other than the Permitted Exceptions.
() The parties acknowledge that the Property
does not presently include the property described on Exhibit
6(b)(1) attached hereto (the "Quiet Title Property"). Lessor
agrees to commence a quiet title action with respect to the Quiet
Title Property (the "Quiet Title Action"), promptly after the
execution of this Lease and to complete the Quiet Title Action
prior to the third anniversary of the date hereof. Upon
completion of the Quiet Title Action, the parties shall execute
an amendment to this Lease which will add the Quiet Title
Property to the Property. Lessor agrees that, at the time the
Quiet Title Property is added to the Property, the Quiet Title
Property shall not be subject to any lien, encumbrance, covenant,
condition, restriction, right-of-way, easement or other matter
affecting title other than the Permitted Exceptions.
() If Lessor does not complete the Quiet Title
Action within such three year period, the Agreed Sand and Gravel
Reserves shall be reduced by the total number of tons of Agreed
Sand and Gravel Reserves reasonably estimated by Lessee to be
located on or under the Quiet Title Property.
. Helmsing, Nelson and Fountain Encumbrances.
Lessor represents and warrants that portions of
the Lands are encumbered by notes and deeds of trust with respect
to three parcels, denominated the Helmsing parcel, the Nelson
parcel, and the Fountain parcel. A legal description of each
parcel is attached hereto as Exhibits 7(1), 7(2), and 7(3). The
total amount of the encumbrances against the three parcels does
not, and during the term of this Lease will not, exceed $150,000.
Lessor agrees to indemnify, defend and hold Lessee harmless
against any claim or demand whatsoever that is or may be brought
against Lessee for or on account of the outstanding indebtedness,
the notes, or the deeds of trust. Any claim or demand by any or
all of the holders of the foregoing notes and deeds of trust
shall be treated as a Third Party Claim (as defined in Paragraph
10) and Lessor's indemnification and other obligations described
in Paragraph 10 shall extend to any such claim or demand.
. Operations.
() Lessor shall not take any action which
interferes in any material respect with Lessee's operations
pursuant to its interest in this Lease.
() By executing this Lease Lessee agrees to
conduct its operations hereunder in a good, safe and minerlike
manner and in compliance in all material respects with all
applicable laws, regulations, licenses, permits and orders of any
governmental entity relating to (1) operations on the Property,
(2) the marketing of any product thereof, or (3) labor relations
in connection with such operations or marketing, including, but
not limited to, all laws, regulations, permits, bonds, orders and
required governmental consents pertaining to mining operations,
mined land reclamation, local land use regulation, and
environmental regulation and control. Lessee shall be deemed to
be in compliance with governmental regulations and orders while
Lessee is contesting any alleged or cited noncompliance in good
faith in circumstances in which Lessor's interest is not
jeopardized. Lessee may bring asphalt onto the Property for
recycling, but no asphalt shall be buried or disposed of on the
Property.
() The Minimum Royalty and Production Royalty
set forth above shall be deemed full payment to Lessor for any
damages to the surface of the Property or the Leased Strata which
may be caused by Lessee's operations hereunder, if and so long as
Lessee conducts its operations in a reasonable and prudent manner
and reasonably maintains the plant site improvements on the
Property.
() Use of Water.
() Lessee shall have the right to initiate,
appropriate and devote to its own use such water rights as are
necessary for Lessee's operations; provided, however, that Lessee
shall at all times comply with the provisions of applicable state
law.
() In addition, Lessee shall be entitled to
utilize on the Property the appurtenant water rights acquired by
purchase from Lessor pursuant to the Acquisition Agreement
concurrently with this Lease for existing wells, gravel pit
wells, ditches, flumes, pipelines, ponds, reservoirs, water and
water rights. Lessee acknowledges and agrees that Lessee shall
be solely responsible for obtaining new substitute supply plans
or extending existing substitute supply plans or for obtaining
court decreed plans for augmentation of all groundwater wells and
sand and gravel pit wells and maintaining the well permits
therefor. Upon termination of this Lease, Lessee shall be in
compliance with all applicable laws, regulations, orders,
permits, substitute supply plans, plans for augmentation, and
court decrees affecting the use of water on the Property. Prior
to any termination of the Lease, Lessee shall have provided, to
the satisfaction of the Colorado State Engineer, the Division
Engineer for Water Division No. 2 and the water court for Water
Division No. 2, as evidenced by a decreed plan or plans for
augmentation, for the ongoing requirements, if any, for water for
augmentation, exchange, or other like purposes on the Property
after termination of the Lease.
() If this Lease is terminated for any reason,
subject to payment of royalties, Lessee may remove all stockpiled
Leased Sand and Gravel and Aggregate Products from the Property
within twelve months after such termination. All such items not
removed within twelve months shall, at Lessor's option, become
the property of Lessor.
() Lessor shall take no action, directly or
indirectly, which would cause or encourage the loss or
restriction of Lessee's right under applicable governmental
regulations to mine and remove Leased Sand and Gravel from the
Property in the maximum quantity available from the Property,
provided that this subparagraph shall not limit Lessor's right to
terminate this Lease for default.
. Taxes and Encumbrances.
() All property and other taxes assessed against
the Property shall be paid when due by Lessor except that Lessee
shall pay property taxes when due on the surface estate of the
Improved Real Property. Lessee shall be responsible for and pay
when due any mineral production tax and any tax assessed against
the personal property, improvements or fixtures hereafter placed
on the Property by Lessee. All taxes for 1996 and the final
Lease Year of the term shall be prorated, as applicable, based on
the actual number of days in each such Lease Year that Lessee is
in possession or control of the Property pursuant to the terms of
this Lease. Notwithstanding the foregoing, Lessee shall be
responsible for property and other taxes assessed against the
Property which accrue after the transfer of the Property to
Lessee pursuant to Sections 12(b)(5) or 13 below.
() Each party (the "Paying Party") shall have
the right, but not the obligation, at any time to pay on behalf
of the other party (the "Defaulting Party") any tax or to satisfy
and remove any lien on the Property in the event of default of
payment or other obligation by the Defaulting Party and the
Paying Party shall be entitled to reimbursement of amounts paid
together with an interest charge at the rate of 12% per annum or
the highest rate allowed by law, whichever is less, which
amounts, including amounts for interest shall be added to any
amounts of money payable to Paying Party or deducted from any
amounts of money payable to Defaulting Party under the terms
hereof.
. Indemnification.
() Indemnification by Lessee. Lessee will
indemnify, defend, and hold Lessor, its directors, officers,
representatives, employees, and agents harmless from and against
any and all claims, actions, suits, demands, assessments,
judgments, losses, liabilities, damages, costs and expenses
(including interest, penalties, attorneys' fees, accounting fees,
and investigation costs (collectively "liabilities") resulting or
arising from, relating to or incurred in connection with: (1) any
failure of Lessee to pay, perform, and discharge any obligation
of Lessee under this Lease, any environmental liabilities arising
from operations or activities (of Lessee or third parties) during
the term hereof, ongoing and final reclamation obligations, and
water augmentation requirements, (2) any breach of any
representation of warranty of Lessee contained herein or in any
other document delivered to Lessor in connection herewith, (3)
any breach of any covenant of Lessee contained herein or in any
other document delivered to Lessor in connection herewith, and
(4) injury to or death of persons or for damage to property
resulting from the Lessee's negligence. Nothing contained in
this Lease will exculpate Lessee from any liability to Lessor or
to any other person or entity that it has or may have under state
or federal law or under common law.
() Indemnification by Lessor. Lessor will
indemnify, defend, and hold Lessee, its affiliates, and their
respective directors, officers, representatives, employees, and
agents harmless from and against any and all liabilities
resulting or arising from, relating to, or incurred in connection
with: (1) any failure of Lessor to pay, perform or discharge any
of Lessor's obligations under the Lease, any environmental
liabilities arising from operations or activities (of Lessor and,
if Lessor had knowledge prior to the date hereof, of third
parties) prior to the date hereof, (2) any breach of any
representation or warranty of Lessor contained herein or in any
other document delivered by Lessor in connection herewith, (3)
any breach of any covenant of Lessor contained herein or in any
other document delivered by Lessor in connection herewith, and
(4) injury to or death of persons or for damage to property
resulting from Lessor's negligence. Nothing contained in this
Lease will exculpate Lessor from any liability to Lessee or to
any other person or entity that it has or may have under any
state or federal law or under common law.
() Promptly after any party receives notice of
any claim, the commencement of any suit, action or proceeding, or
the imposition of any penalty or assessment by a third party in
respect of which indemnity may be sought hereunder (a "Third
Party Claim") and such party intends to seek indemnity hereunder,
such party will give prompt written notice of such Third Party
Claim to the other party, but the failure of such party to give
such notice promptly shall not relieve the other party from its
obligations under this Paragraph except to the extent, if any,
that such failure materially prejudices the ability of the
indemnifying party to defend such Third Party Claim.
() The indemnifying party will have the right to
control the defense, compromise, or settlement of the Third Party
Claim with its own counsel (reasonably satisfactory to the
indemnified party) if the indemnifying party delivers written
notice to the indemnified party within seven days following the
indemnifying party's receipt of notice of the Third Party Claim
from the indemnified party acknowledging its obligation to
indemnify the indemnified party (which acknowledgment may include
a reservation by the indemnifying party concerning the obligation
of the indemnifying party to indemnify the indemnified party for
the Third Party Claim, other than costs of defense); provided,
however, that the indemnifying party will not enter into any
settlement of any Third Party Claim which would impose any
obligation or other liability on the part of the indemnified
party if such liability or obligation (1) requires more than the
payment of a liquidated sum or (2) is not covered by the
indemnification provided to the indemnified party hereunder. In
its defense, compromise, or settlement of any Third Party Claim,
the indemnifying party will timely provide the indemnified party
with such information with respect to such defense, compromise,
or settlement as the indemnified party may request, and will not
assume any position or take any action that would impose an
obligation of any kind on, or restrict the actions of, the
indemnified party. The indemnified party will be entitled (at
the indemnified party's expense) to participate in the defense by
the indemnifying party of any Third Party Claim with its own
counsel.
() In the event that the indemnifying party does
not undertake the defense, compromise, or settlement of a Third
Party Claim in accordance with subparagraph (d) the indemnified
party will have the right to control the defense or settlement of
such Third Party Claim with counsel of its choosing; provided,
however, that the indemnified party will not settle or compromise
any such Third Party Claim without the indemnifying party's prior
written consent, unless (1) the terms of such settlement or
compromise release the indemnified party or the indemnifying
party from any and all liability with respect to the Third Party
Claim or (2) the indemnifying party will not have acknowledged
its obligations to indemnify the indemnified party with respect
to such Third Party Claim in accordance with this Paragraph. The
indemnifying party will be entitled (at the indemnifying party's
expense) to participate in the defense of any Third Party Claim
with its own counsel.
() Any indemnifiable claim hereunder that is not
a Third Party Claim will be asserted by the indemnified party by
promptly delivering notice thereof to the indemnifying party. If
the indemnifying party does not respond to such notice within 60
days after its receipt, it will have no further right to contest
the validity of the claim.
. Assignment.
() Except for an assignment or sublease pursuant
to Paragraph 11(b), below, there shall be no assignment or
subleasing by Lessee except to a person or entity who has
demonstrated to Lessor's reasonable satisfaction such person or
entity's general business reputation and that such person or
entity possesses knowledge, experience and competence in the
business of sand and gravel mining. Any assignment or sublease
of this Lease to a non-affiliated third party must apply as to
the entire leasehold interest of Lessee. No partial mortgage,
assignment or sublease or mortgage, assignment or sublease of
undivided interests or retention or reservation of overriding
royalties will be recognized by Lessor; and the effect, if any,
of any such transactions will be strictly and only as between the
parties thereto, and outside the terms of this Lease, and no
dispute between parties to any such transactions shall operate to
relieve Lessee from performance of any terms or conditions hereof
or to postpone the time therefor. A partial mortgage, assignment
or sublease shall not deprive Lessor of any of its benefits under
this Lease. Furthermore, no mortgage, assignment, or sublease of
this Lease will be valid as against Lessor unless the mortgagee,
assignee, or sublessee has executed an agreement, reasonably
satisfactory to Lessor in form and substance, to the effect that
the mortgagee, assignee, or sublessee, as the case may be, agrees
that it is responsible for performance of Lessee's obligations
under this Lease (or, as to a mortgagee only, that the
mortgagee's interests in the Lease are fully subordinate to the
rights of Lessor). Furthermore, no mortgage, assignment or
sublease shall be effective upon the Lessor until the mortgaging,
assigning or subleasing party has given written notice and copies
of the mortgage, assignment or sublease documents to the Lessor.
Subject to Paragraph 11(d) below, Lessor may assign, convey,
sell, mortgage, pledge or otherwise dispose of Lessor's
reversionary interest and/or Lessor's reserved royalty and other
interests in the Property or any portion thereof with ninety (90)
days prior notice to Lessee.
() Lessee may assign this Lease to an assignee
or sublessee that is controlled by Lessee and who assumes all the
obligations of the Lease and any provisions of the Acquisition
Agreement adopted herein, and may sublease this Lease to any
wholly-owned subsidiary of Lessee, and such subsidiary may
further sublease the leasehold interest to any other subsidiary
of Lessee, provided that Lessor's approval shall not be required
and provided further that Lessee shall remain primarily liable
and responsible for the full performance of all provisions of the
Lease by such assignee or sublessee. If Lessee assigns this
Lease to any such assignee or sublessee that is controlled by
Lessee or to any wholly-owned subsidiary of Lessee, then any
transfer, other disposition, or change in any other fact or
circumstances such that Lessee ceases to control such assignee or
sublessee or wholly-owned subsidiary shall be treated as an
assignment of this Lease and shall therefore be subject to the
provisions of Paragraph 11(a).
() In addition to the applicable requirements of
subparagraph (a) above Lessee may assign this lease to an
assignee or sublessee who is an entity that is incorporated or
organized under the laws of one of the United States and whose
consolidated net worth is certified to Lessor by an independent
accounting firm to be at least $25 million, under general
accounting principles, in which case Lessee shall be released of
all of its obligations hereunder.
() Lessor will not sell its reversionary
interest or its reserved royalty or other interest in the
Property (an "Interest") without first complying with the
provisions set forth in this Paragraph 11(d). Lessor will give
Lessee thirty (30) days advance notice that it desires to sell an
Interest. The notice will state the nature of the Interest and
the minimum purchase price (the "Minimum Price") proposed by
Lessor. If Lessee makes an offer to purchase the Interest, then
Lessee will have sixty (60) days from the date of its offer to
pay for the Interest at the Minimum Price. In the event of any
breach by Lessee in the payment for the Interest, Lessor shall
have available to it the remedy of specific performance in
addition to any damages that it may incur, and Lessor shall have
no further obligations under this Paragraph 11(d) with respect to
any proposed sale of any Interest of Lessor in the Property. If
Lessee fails to give the notice within the 30-day period referred
to above, then Lessor shall be free to sell the Interest at no
less than the Minimum Price for a period of six months after the
expiration of the period within which Lessee could have made the
offer. The provisions of this Paragraph 11(d) do not apply to
(i) any bona fide pledge of Lessor's interest in this Lease and
any transfer arising in connection with such pledge; provided
that such pledgee and/or transferee shall take subject to the
provisions of this Lease, including the right of first refusal
under this Paragraph 11(d) as to reconveyances by the pledgee or
the pledgee's successors or assigns, or (ii) any sale or other
disposition of any of Lessor's Interest in the Property to Tom
Brubaker or Reid Jones, any sibling of Tom Brubaker, any
shareholder of Lessor holding not less than 5% of Lessor's shares
for a period of at least one year, or any spouse or descendant of
any of the foregoing, or to any trust or estate created for the
benefit of any of the foregoing, or to any entity controlled by
any of the foregoing. In any event, Lessor agrees that any sale
or other disposition of any of Lessor's Interest in the Property
shall not materially and adversely affect Lessee's interest in
this Lease.
() If Lessee mortgages its leasehold estate,
such mortgage shall be subordinate to the interest of Lessor in
the Property. Lessor agrees to enter into such agreements with
the mortgagee or holder of the deed of trust as shall be
reasonably acceptable to Lessor including, without limitation,
providing estoppel certificates to such mortgagee or holder of a
deed of trust and/or making such amendments or modifications to
this Lease as may be reasonably acceptable to Lessor, provided
that such amendments or modifications are reasonable and
customarily required in similar financings and do not affect the
financial or economic terms of this Lease or otherwise materially
and adversely affect Lessor's interest in the Property or this
Lease.
. Termination, Condemnation and Force Majeure.
() Termination by Lessor.
(1) Termination by Lessor for Lessee's
default. Failure by Lessee to perform or comply with any of the
terms or conditions of this Lease, including provisions
concerning timeliness of payments, shall not automatically
terminate this Lease nor render the Lease null and void; but in
case of such default, Lessor may notify Lessee in writing
specifying the nature and particulars of such default, and Lessee
shall have a period of 30 days after receipt of such notice in
which to cure such default and if such default shall not have
been cured within such time, Lessor may, but shall not be
required to elect to terminate this Lease by giving written
notice to Lessee, provided, however, that if the default is other
than a payment default and cannot practically be corrected within
said 30-day period and Lessee has commenced corrective action and
is making all practical prompt efforts to correct the same, the
30-day period shall be extended for so long as is reasonably
required to correct the default, but not longer than ninety (90)
days. Lessor shall have the right to elect to enforce the Lease
and seek money damages or any other remedy available at law or in
equity rather than to terminate the Lease for default.
(2) Contemporaneously with the execution and
delivery of this Lease, the parties have executed that certain
Option to Purchase Agreement (the "Option Agreement"), a copy of
which is attached hereto as Exhibit 12(a)(2). The Option
Agreement grants to Lessor the right to purchase the Improved
Real Property and the improvements then existing on the Improved
Real Property on the terms and subject to the conditions
contained in the Option Agreement in the event this Lease is
terminated by Lessor as a result of a default by Lessee.
() Termination by Lessee.
() Default by Lessor. If Lessor fails to
perform or comply with any of the terms or conditions of this
Lease, or breaches any representation or warranty made by Lessor
in Lessee shall have the right to give Lessor written notice to
correct any such default within 30 days of such written notice.
In the event such default is not corrected within such period,
the Lessee may cure the default at Lessor's expense or in the
event Lessor fails to reimburse Lessee within ten (10) days of
Lessor's receipt of invoices itemizing such expenses, by set-off
against any moneys owed by Lessee to Lessor herein. If Lessor's
breach or default is such as practically to prevent Lessee from
mining and removing Leased Sand and Gravel under this Lease,
Lessee shall have the right to terminate this Lease by written
notice upon termination of the 30-day period; provided, however,
that if the default cannot be practically corrected within the
30-day period and Lessor has commenced corrective action and is
making all practical and prompt efforts to correct same, the
30-day period shall be extended for so long as is reasonably
required to correct the default, but not longer than ninety (90)
days, and during and for such period the minimum royalty
obligation will be suspended. Lessee shall also have such other
rights and remedies available at law or in equity.
() Payment of Royalty. This Lease may be
terminated by Lessee pursuant to Paragraph 5(e) upon thirty (30)
days' written notice to Lessor.
() Total Condemnation. If during the Term
Lessee's right under this Lease to mine and remove Leased Sand
and Gravel or remove, mine or produce Aggregate Products is
completely denied as the result of a condemnation, Lessee may
elect to (i) terminate this Lease in which case Lessee shall be
released of all of its obligations hereunder and shall assign its
claims against the condemning authority arising from the
condemnation (other than claims for costs of removal of
equipment) to Lessor, or (ii) continue this Lease, in which case
Lessor shall assign all of its claims against the condemning
authority arising from the condemnation to Lessee. For purposes
of this subparagraph 12(b)(3) and subparagraph 12(b)(4), a
"condemnation" is intended to mean a judicial proceeding
initiated by a governmental authority, or a private right of
condemnation under the constitution of the State of Colorado, and
is not intended to include a change in governmental regulation or
a change in the manner in which such governmental regulation is
interpreted or enforced, even if any such change has the same
effect as a condemnation.
(4) Partial Condemnation. If during the
Term Lessee's right under the Lease to mine and remove Leased
Sand and Gravel or remove, mine or produce Aggregate Products is
partially denied as the result of a condemnation, an equitable
adjustment to the remaining Agreed Sand and Gravel Reserves shall
be made, which may have the effect of adjusting the remaining
aggregate Minimum Royalty and aggregate Production Royalty due
hereunder; provided, however, that in the event of a partial
condemnation the annual Minimum Royalty rate of payments (for as
long as they continue to be due in the context of the adjusted
Agreed Sand and Gravel Reserves) and the Production Royalty Rate
shall not be adjusted as a result thereof. Any condemnation
award received in connection with a partial condemnation of the
Property shall be divided as follows: (a) Lessor shall receive
the lesser of (i) the condemnation award or (ii) the net present
value (using a six percent (6%) discount rate) of the future
royalties that would have been paid under this Lease with respect
to the portion of the Property condemned, determined by
multiplying the Production Royalty Rate in effect at the time the
condemnation award is paid times the Agreed Sand and Gravel
Reserves reasonably attributable to the portion of the Property
so condemned (using for this purpose the Gravel Reserve Estimate
prepared by GSA Resources in August, 1996) that remain on the
portion of the Property condemned (the "Production Award"); and
(b) Lessee shall receive the remainder, if any, of the
condemnation award. In the event the total condemnation award is
less than the Production Award (the "Condemnation Deficit"), then
Lessee shall pay the difference to Lessor in one payment upon the
expiration of this Lease (the "Additional Compensation"). The
Additional Compensation due and payable upon the expiration of
this Lease shall be determined by multiplying (y) the Production
Royalty Rate in effect at the time of expiration of this Lease by
(z) the result obtained by dividing the Condemnation Deficit by
the Production Royalty Rate in effect at the time of the
condemnation. The calculation of the present value of the
Production Award shall be based upon the number of years
(beginning with the date on which the condemnation award is paid)
that it would have taken to deplete the Agreed Sand and Gravel
Reserves attributable to the condemned portion of the Property
(using the annual Minimum Royalty). An example of the
calculation of the Condemnation Deficit is attached hereto as
Exhibit 12(b)(4). In no event will the Lessor be compensated for
more than 50,000,000 tons or such lesser amount as adjusted in
accordance with Section 6(a), Section 6(d,) Section 18 and/or
this Section 12(b)(4) whether in the form of Minimum Royalty,
Production Royalty, Production Award or Additional Compensation
or any combination thereof.
Notwithstanding the foregoing, as to any
portion of the Property that is condemned and at the time of the
condemnation all of the Agreed Sand and Gravel Reserves on such
portion of the Property have been removed or extracted, then the
condemnation award with respect to such portion of the Property
shall be divided between the parties as follows: (a) Lessor
shall receive the portion of the award attributable to the fee
simple interest in such portion of the Property (as if such
property were not improved) and (b) Lessee shall receive the
portion of the award relating to any improvements then existing
on such portion of the Property.
(5) Force Majeure. If during the term
Lessee's right under the Lease to mine and remove Leased Sand and
Gravel or remove, mine or produce Aggregate Products is
materially diminished or reduced as a result of any Force Majeure
Event, and such diminishment or reduction is or is reasonably
expected to be permanent (as to which the burden of proof shall
be Lessee's), Lessee's obligations under this Lease shall
continue; provided, however, that Lessee shall have the option to
purchase the Property on the terms and determined as provided in
Paragraph 13 below (except that the purchase price shall be equal
to 100% of the net present value (determined using a six percent
(6%) discount rate) of the future royalties to be paid under the
Lease) such option to be exercised by Lessee's written notice to
Lessor. Upon Lessee's acquisition of the Property, this Lease
shall terminate.
For purposes of this Lease, the term "Force
Majeure Event" shall mean any of the following: any material
change in government regulations or the manner in which such
government regulations are interpreted or enforced; Lessee's
inability to obtain required permits or approvals after
commercially reasonable efforts; any other event beyond Lessee's
reasonable control including, without limitation, any order,
decree, or direction by any governmental law, executive order,
rule, regulation, or request enacted or promulgated under color
of authority; by scarcity or inability to obtain equipment,
material, power or fuel; by strike or lockout with respect to a
supplier or other third party upon which Lessee depends and can
not reasonably be substituted, or industrial disturbance; or by
any act of God (including, without limitation, lightning,
earthquake, fire, storm, flood, or washout).
() Except in the case of a termination of this
Lease under Paragraph 12(b)(5), upon the termination of this
Lease, Lessee shall surrender possession of the Property to
Lessor, shall execute and deliver to Lessor a recordable written
release of all of Lessee's right, title and interest in this
Lease. Upon request by Lessor and at its expense, Lessee shall
also use its best efforts to obtain transfers of all existing
licenses and permits issued for the Property and held in Lessee's
name upon the same terms and conditions as set forth in the
existing documents. In the case of a termination pursuant to
Paragraph 12(b)(5), Lessor shall convey the Property to Lessee by
special warranty deed (subject to the title exceptions shown in
the title policy delivered to Lessee pursuant to the Acquisition
Agreement and other matters as may have arisen as a result of
Lessee's operations on the Property during the term hereof.
() Upon termination of this Lease for any
reason, in addition to any liability of one party to the other
arising from such termination, Lessee shall be responsible for
compliance with applicable laws and regulations relating to
Lessee's operations on the Property, including mining operations,
mined land reclamation, local land use regulation, water
augmentation and environmental regulation and control; subject,
however, to Lessor's obligations for periods prior to the
commencement of the term of this Lease for compliance with all
such laws and regulations, except laws and regulations (and
attendant obligations) relating to mined land reclamation and
water augmentation. Lessor shall grant Lessee reasonable access
to the Property to carry out post-termination reclamation or
other activities that may be required or permitted to be
performed by Lessee after termination.
. Net Worth Covenant. If, during the term of this
Lease, () the consolidated net worth of Lessee falls below $15
million, and () such net worth remains below $15 million for a
period of six months Lessor, provided that Lessor is not in
material default under the Lease or, being in default, has failed
to cure as provided in Paragraph 12(b)(1), shall have the right
(the "Put Right") to require Lessee to purchase the Property at a
price equal to 105% of the net present value (determined using a
six percent (6%) discount rate) of the future royalties to be
paid under this Lease determined by multiplying the Production
Royalty Rate that is in effect at the time the Put Right is
exercised times the Agreed Sand and Gravel Reserves less the
number of tons of Leased Sand and Gravel on which Minimum Royalty
and Production Royalty have been paid prior to the closing of the
Put Right (an example of the foregoing is attached as Exhibit
13). The term "net worth" as used herein means the consolidated
net worth under general accounting principles of Continental
Materials Corporation. Upon request (but not more often than
annually) of Lessor, Lessee will cause its outside accounting
firm (presently Coopers & Lybrand, L.L.P.) to certify to Lessor
that Lessee is in compliance with this net worth covenant.
Lessor, at its cost, shall have the right to have an independent
public accounting firm verify such certification; provided,
however, that such firm shall keep confidential all information
discovered in such verification process except the result of its
determination that there is or is not compliance with this net
worth covenant. Transfer of title under this Paragraph shall be
by special warranty deed (subject to the title exceptions shown
in the title policy delivered to Lessee pursuant to the
Acquisition Agreement and such other matters as may have arisen
as a result of Lessee's operations on the Property during the
term hereof) to be delivered at closing within thirty days (30)
after notice by Lessor of its election to exercise the Put Right.
. Notices. Any notice required or permitted to be
given hereunder shall be deemed properly given as provided in the
Acquisition Agreement.
. Reclamation. Rules and Regulations of the
Colorado Division of Minerals and Geology, the Mined Land
Reclamation Board and the Mined Land Reclamation Office, or their
successors, for reclamation of mined land will apply where
applicable to the Property. Variations or waivers may be
granted, accepted or agreed to only with Lessor's approval which
shall not be unreasonably withheld.
. Inspection. During business hours and upon three
(3) business days advance notice to Lessee, Lessor, or its duly
authorized agent shall be and hereby is authorized to go on the
Property and to examine, inspect and survey the same. All
conveniences necessary for said inspection or survey shall be
furnished to Lessor, or its agent, by Lessee, at Lessor's
expense; provided, however, that Lessor's exercise of the rights
reserved herein shall not unreasonably interrupt or interfere
with Lessee's operations on the Property.
. Maps. Lessor, at its own expense and with three
(3) business days advance notice to Lessee, may authorize an
engineer or surveyor duly licensed by the State of Colorado,
together with a mapping party of not more than three persons, to
come onto the Property once each year for the purpose of
preparing a map of the workings herein authorized to be made.
The mapping party shall enter and remain on the Property at its
own risk and Lessor shall indemnify and hold Lessee harmless
against any claim for personal injury or property damage to said
mapping party or otherwise arising as a result of said mapping
visits to the Property. Said map shall be of a scale of not less
than 100 feet to the inch, showing vertical and horizontal
dimensions of all excavations, fills, stockpiles, and other
disturbances of the surface, by means of accurate contour lines
(not more than five-foot interval) or cross-sections, all to be
correctly related to a base line which is properly located in
relation to known section lines; said map to show county,
section, township and range, the North point, the scale to which
the map is drawn with an explanatory legend, and the certificate
of the engineer or surveyor as to its accuracy. The engineer or
surveyor shall show clearly upon said map the cubic yards of
material displaced and removed by operations since the previous
survey, map and report. A copy of said map shall be delivered to
Lessee not later than thirty days after its preparation. If
Lessee causes such a map or similar map to be prepared
periodically or from time to time for Lessee's purposes, Lessee
shall provide a copy of such map to Lessor within thirty days
after its preparation, without charge therefor. Lessee shall
also provide Lessor a copy of Lessee's annual report to the
Colorado Division of Minerals and Geology or successor agency,
within 30 days after filing said report.
. East Mining Property Survey Adjustment. Lessee
may, at its expense, cause a survey to be conducted for the east
portion of the Property at any time during the one-year period
following the date hereof for the purpose of confirming its right
to mine the full amount of the Agreed Sand and Gravel Reserves.
If the survey indicates a decrease or an increase in the amount
of minable Agreed Sand and Gravel Reserves (based solely on a
change in the outside boundaries of the Property, determined on a
parcel by parcel basis) in excess of three percent (3%), then the
amount of the remaining Agreed Sand and Gravel Reserves shall be
adjusted to reflect such impairment or increase; provided,
however, that in the case of an increase, the Agreed Sand and
Gravel Reserves shall only be increased to the extent that the
additional reserves in tons exceeds the dollar cost of the survey
divided by .37.
. Other Minerals Not Covered by this Lease. In the
event other minerals are found on the Property below the Leased
Strata, Lessor reserves the right to lease the Property for the
removal of such minerals but Lessee shall not be required to
forego or delay Lessee's operations under this Lease for the
removal of Leased Sand and Gravel and any operations conducted by
or for Lessor for the removal of such minerals shall be
subordinated to Lessee's operations and shall not unreasonably
interrupt or interfere with the operations of Lessee on the
Property.
. Insurance. Lessee shall obtain and maintain
during the term hereof workers' compensation insurance;
employer's liability insurance with minimum limits of not less
than $1,000,000 each accident; automobile liability insurance
with minimum limits of not less than $1,000,000 combined single
limit per occurrence; and general liability insurance with
minimum limits of not less than $1,000,000 single limit per
occurrence. The general liability insurance shall cover Lessee,
Lessee's agents, employees, and contractors and, shall name
Lessor as an additional insured.
. Binding Effect. This Lease and all its terms,
conditions and stipulations shall extend to and be binding on all
successors and permitted assigns of the parties.
. Interest on Unpaid Amounts. Interest at the prime
rate plus three points shall be payable on all amounts payable
under this Lease from and after the date on which such amounts
are due until they are paid in full. The prime rate shall be the
prime rate quoted by the Wall Street Journal on the date the
amount is due and payable.
. Governing Law; Venue. This Lease and its
interpretation and all disputes pertaining thereto (other than
disputes to be settled by arbitration pursuant to subparagraphs
5(l) through (o), above) or to any issue in respect of the
performance or non-performance of this Lease shall be governed by
the laws and decisions of courts of the State of Colorado. Any
action or proceeding at law or in equity by a party against
another party to this Lease may be brought in any District Court
in which venue is proper under the Colorado Rules of Civil
Procedure, notwithstanding that venue may also be proper in the
District Court for another county.
. Attorneys' Fees. Except as otherwise provided
herein in connection with the provisions of this Lease regarding
indemnification of parties, in any action or proceeding at law or
in equity by a party against another party to this Lease, the
prevailing party shall be entitled to reasonable attorneys' fees
and expenses.
. Depletion Allowance. The parties acknowledge that
all payments made pursuant to Paragraphs 5 and 6 of this Lease
are in the form of royalties and not lease, rent or production
payments. Further, the parties acknowledge that the Leased Sand
and Gravel which are the subject of this Lease are natural
resources which are the subject of a tax deduction of a
reasonable allowance for depletion of such materials, which
presently requires an equitable apportionment between the Lessor
and Lessee.
. Memorandum for Recording. Simultaneous with the
execution of this Lease the parties have executed a memorandum
for recording ("Memorandum for Recording"). Either party may
record the Memorandum for Recording but neither party shall
record this Lease without the prior written consent of the other.
. Construction of Document. The parties do not
intend that this Lease be characterized as a sale of real
property. However, if any court of competent jurisdiction should
characterize this Lease as a sale of real property, then the
parties intend that, upon such event, this Lease should be
treated as a mortgage, pursuant to which Lessee has granted to
Lessor a lien on the Property. In such event, the parties agree
to record an additional Memorandum for Recording containing the
necessary information to cause such Memorandum for Recording to
be effective as a mortgage.
IN WITNESS WHEREOF, the undersigned have executed this
Lease on the day and year first above written.
LESSOR:
VALCO INC.
By:/s/Thomas E. Brubaker
Thomas E. Brubaker
President
ATTEST:
By:____________________________
Name:__________________________
Its:___________________________
LESSEE:
CONTINENTAL MATERIALS CORPORATION
By:/s/ Joseph J. Sum
Joseph J. Sum
Vice President and Chief Financial
Officer
ATTEST:
By:____________________________
Name:__________________________
Its:___________________________
STATE OF COLORADO )
) ss.
COUNTY OF _________ )
Acknowledged before me this 21st day of October, 1996,
by Thomas E. Brubaker and ______________, the President and
__________________, respectively, of Valco Inc.
WITNESS my hand and official seal.
My commission expires:__________________________.
[SEAL] ____________________________
Notary Public
____________________________
Address:
____________________________
____________________________
STATE OF COLORADO )
) ss.
COUNTY OF _________ )
Acknowledged before me this 21st day of October, 1996,
by Joseph J. Sum and ______________, the Vice President and Chief
Financial Officer and __________________ , respectively, of
Continental Materials Corporation.
WITNESS my hand and official seal.
My commission expires:__________________________.
[SEAL] ____________________________
Notary Public
____________________________
Address:
____________________________
____________________________
AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Dated as of October 21, 1996
CONTINENTAL MATERIALS CORPORATION, a corporation organized
under the laws of the state of Delaware (the "Borrower"), THE
NORTHERN TRUST COMPANY, an Illinois banking corporation, as
administrative agent and as a lender (Northern in its capacity as
administrative agent referred to in this Agreement as "Agent" and
in its capacity as a lender as "Northern") and LASALLE NATIONAL
BANK as a lender("LaSalle Bank)" (Northern and LaSalle Bank each
referred to individually in this Agreement as a "Lender" and
collectively as the "Lenders"), agree as follows:
RECITALS:
A.The parties hereto have previously entered into that certain
Revolving Credit and Term Loan Agreement dated as of February 28,
1996 (said Revolving Credit and Term Loan Agreement being the
"Original Agreement").
B.Pursuant to the Original Agreement, the Lenders have issued
the following described letters of credit (the "Existing Letters
of Credit") for the account of the Borrower:
Issuing Lender No. Beneficiaries
Northern S262251W St. Paul Fire & Marine Insurance
Northern S250188W CNA Insurance Company
Northern S250189W CNA Insurance Company
Northern S258180W The Home Insurance Co.
LaSalle 9200002188 St. Paul Fire & Marine Insurance
LaSalle 9260137087 CNA Insurance Company
LaSalle 9260237088 CNA Insurance Company
LaSalle 9200000426 The Home Insurance Co.
C.The Original Agreement, the promissory notes of the Borrower
issued and remaining unpaid thereunder (the "Existing Notes"),
the Existing Letters of Credit, and the documents related to or
referenced therein are referred to herein as the "Prior
Documents".
D.Pursuant to that certain Acquisition Agreement dated October
__, 1996, (the "Acquisition Agreement") the Borrower wishes to
acquire certain assets of Valco, Inc. on the terms and conditions
and for the consideration set forth therein (the acquisition by
Borrower being the "Acquisition," and the date of consummation of
the Acquisition being the "Acquisition Date."
E.The parties to and/or bound by the Prior Documents wish to
consolidate and amend and restate the Prior Documents in their
entirety in order to provide for the Acquisition and certain
other changes, and to restate their agreements with respect to
the subject matter hereof.
NOW, THEREFORE, the parties hereto amend and restate the
Original Agreement in its entirety to read as follows:
SECTION 1 DEFINITIONS
SECTION 1.1 GENERAL. As used herein:
The term "affiliate" means any corporation of which the
Borrower owns directly or indirectly 20% or more, but less than
50%, of the outstanding voting stock, or any partnership, joint
venture, trust or other legal entity of which the Borrower has
effective control, by contract or otherwise.
The term "Agent-Related Person" shall mean the Agent and any
successor thereto appointed pursuant to Section 9.8 or otherwise
succeeding the Agent, together with their respective affiliates,
and the officers, directors, employees, agents and attorneys-in
fact of such entities and affiliates.
The term "Applicable LIBOR Margin," for purposes of determining
the interest rate on:
(a) a Revolving LIBOR Loan, shall mean (1) prior to the first
semi-annual adjustment pursuant to clause (2) of this
subparagraph (a), 1.5% (the "Normal Revolving LIBOR Margin"); and
(2) the Normal Revolving LIBOR Margin as modified by semi-annual
adjustments (such adjusted Normal Revolving LIBOR Margin, the
"Applicable Revolving LIBOR Margin") determined as follows:
If EBITDA, as determined no later than March 31, 1997, for the
period of four fiscal quarters ended December 28, 1996 is:
Applicable Revolving
LIBOR Margin is:
greater than $7,000,000 1.25%
$6,000,000 to $7,000,000 1.50%
$5,000,000 to 5,999,999 1.75%
$3,750,000 to 4,999,999 2.00%
less than $3,750,000 2.50%
If EBITDA, as determined no later than September 30, 1997, for
the period of four fiscal quarters ended June 28, 1997 is:
Applicable Revolving
LIBOR Margin is:
greater than $7,500,000 1.25%
$6,500,000 to $7,500,000 1.50%
$5,500,000 to 6,499,999 1.75%
$4,250,000 to 5,499,999 2.00%
less than $4,250,000 2.50%
If EBITDA, (A) as determined no later than March 31, 1998, for
the period of four fiscal quarters ended January 3, 1998, and
(B) as determined no later than September 30, 1998 and no
later than March 31 and September 30 (March 31 and September
30 of any year are each referred to hereinafter as an
"Applicable LIBOR Margin Reset Date") of each year occurring
after September 30, 1998, for the period of four fiscal
quarters, which (i) in the case of an Applicable LIBOR Margin
Reset Date occurring on March 31, ends on the same date as the
end of the fourth fiscal quarter of the Borrower's immediately
preceding fiscal year, and (ii) in the case of an Applicable
LIBOR Margin Reset Date occurring on September 30, ends on the
same date as the end of the second fiscal quarter of the
Borrower's then current fiscal year, is:
Applicable Revolving
LIBOR Margin is:
greater than $8,000,000 1.25%
$7,000,000 to $8,000,000 1.50%
$6,000,000 to 6,999,999 1.75%
$4,750,000 to 5,999,999 2.00%
less than $4,750,000 2.50%;
(b) a Term LIBOR Loan, shall mean either (1) the Normal
Revolving LIBOR Margin plus .25%, or (2) the Applicable Revolving
LIBOR Margin, plus .25%, in each case as determined in accordance
with subparagraph (a) hereof.
Not later than twenty (20) days after the Agent's receipt of the
quarterly financial statements required by Section 6.2(a) hereof
for the Borrower's second and fourth fiscal quarters, accompanied
by a certificate of the chief accounting officer or Treasurer of
the Borrower computing EBITDA for the period of the four fiscal
quarters ending on the same date as the end of such second and
fourth fiscal quarters, Agent will determine whether such
financial information indicates such a change in EBITDA as would
justify a change in the Applicable LIBOR Margin and shall then
notify the Borrower and the Lenders of such determination and of
any change in the Applicable LIBOR Margin resulting therefrom.
Any change in the Applicable LIBOR Margin, and in the rate of
interest applicable to LIBOR loans resulting therefrom, shall be
effective prospectively as of the first day after the relevant
Applicable LIBOR Margin Reset Date, and with such new Applicable
LIBOR Margin to continue in effect until the effectiveness of the
next redetermination thereof. Any determination by Agent of
EBITDA shall be conclusive and binding upon the Borrower and the
Lenders provided that it has been made reasonably and in good
faith, absent manifest error. If the Borrower fails to timely
submit the quarterly financial statements and certificate
referred to above, the rate of interest applicable to LIBOR Loans
as of the next determination date of the Applicable LIBOR Margin
shall be determined and based upon the Default Rate.
The term "Borrowing" shall mean the total of Loans of a single
type (i.e. LIBOR Loan or Prime Rate Loan) made by the Lenders to
the Borrower on a single date and for a single Interest Period.
Borrowings of Loans are made ratably from each of the Lenders
according to their respective commitments.
The term "Business Day" shall mean any day other than a
Saturday, Sunday or other day on which banks in Chicago, Illinois
are authorized to close, and with respect to LIBOR Loans, a day
on which dealings in United States Dollars may be carried on by
the Reference Bank in the London interbank eurodollar market.
The term "Commitment - Revolving Credit" shall mean each such
amount set forth below across from the name of each Lender:
Lender Amount
Northern $6,750,000
LaSalle Bank $6,750,000
Provided that the Commitment-Revolving Credit of each Lender
shall permanently reduce to a maximum of $5,750,000 on June 30,
1997.
The term "Commitment - Term Loan" shall mean each such amount
set forth below across from the name of each Lender:
Lender Amount
Northern $4,250,000
LaSalle Bank $4,250,000
The term "EBITDA", with reference to any period, shall mean,
on a consolidated basis, the sum of the Borrower's:
(i) consolidated net income or loss after all
provisions or credits for any Federal, state or other
income taxes, plus
(ii) Federal, state and other income taxes deducted in
the determination of consolidated net income, plus
(iii) Interest Expense deducted in the determination of
consolidated net income, plus
(iv) depreciation and amortization expense deducted in
the determination of consolidated net income, and minus
(v) any items of gain which are
extraordinary items to
the extent reflected in the determination of
consolidated net income.
The term "Fixed Charges" for any Measurement Period shall
mean, on a consolidated basis, the Interest Expense and scheduled
principal payments (including capitalized lease obligations) of
the Borrower.
The term "Fixed Charge Coverage Ratio" shall mean, for any
period (a "Measurement Period") consisting of the four fiscal
quarters of the Borrower ending as of the end of each fiscal
quarter of the Borrower, the ratio of Income Available for Fixed
Charges to Fixed Charges.
The term "Funded Debt" shall mean Indebtedness which by its
terms or by the terms of any instrument or agreement relating
thereto matures more than one year from, or is directly renewable
or extendible at the option of the debtor to a date more than one
year (including an option of the debtor under a revolving credit
or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year) from the date of
creation thereof; provided, however, that in any event "Funded
Debt" includes all Revolving Credit Loans.
The term "Income Available for Fixed Charges" for any
Measurement Period shall mean on a consolidated basis, the sum of
the Borrower's:
(i) consolidated net income or loss before all
provisions or credits for any Federal, state or other
income taxes, plus
(ii) depreciation, depletion and amortization (other than
amortization of debt discount expense), plus
(iii) Interest Expense, minus
(iv) capital expenditures (but excluding therefrom
capital expenditures (a) financed with that portion of
Revolving Credit Loans converted, or intended or
anticipated to be converted, to the Term Loan pursuant to
Section 2.2(A) hereof, and (b) incurred by the Borrower
in order to fund all or any part of the Acquisition).
The term "Indebtedness" of any entity or consolidated group
means, without duplication:
(i) all obligations, contingent or otherwise, of such
entity for borrowed money and all obligations of such
entity evidenced by bonds, debentures, notes or other
similar instruments;
(ii) all obligations of such entity as lessee under
leases which have been or should be, in accordance with
generally accepted accounting principles, recorded as
capitalized lease liabilities;
(iii) all guaranties, whether direct or indirect,
secured or unsecured, of Indebtedness of another person
by such entity or any of its subsidiaries;
(iv) net liabilities of such entity under all interest
rate swap agreements, interest rate cap agreements,
interest rate collar agreements and all other agreements or
arrangements designed to protect such entity against
fluctuations in interest rates or currency exchange rates;
(v) whether or not so included as liabilities in
accordance with generally accepted accounting
principles, all obligations of such entity to pay the
deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon)
secured by a lien on property owned or being purchased
by such entity (including indebtedness arising under
conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed
by such entity or is limited in recourse; and
(vi) all contingent liabilities of such entity in
respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
entity shall include its pro rata share of Indebtedness of any
partnership or joint venture in which such entity is a general
partner or a joint venturer, except that any and all Indebtedness
of Oracle Ridge Mining Partners ("Oracle Ridge") shall be
excluded from the definition of Indebtedness for purposes of this
Agreement, if and so long as the Borrower is not the majority
owner of Oracle Ridge, Oracle Ridge is not consolidated with the
Borrower for financial reporting purposes, and the Borrower is
not legally responsible for said Indebtedness of Oracle Ridge.
The term "Interest Expense" shall mean, for any Measurement
Period of the Borrower, all interest accrued (whether or not
actually paid) during such period on Indebtedness of the Borrower
and its subsidiaries (determined on a consolidated basis),
provided that the term "Interest Expense" also shall include
(without limitation) (i) dividends paid on any preferred or
special stock issued by the Borrower, (ii) amortized discount in
respect to Indebtedness of the Borrower and its subsidiaries
issued at a discount and (iii) imputed interest on capitalized
lease obligations of the Borrower and its subsidiaries.
The term "Interest Period" shall mean the period commencing on
the date a Borrowing of LIBOR Loans is made and ending on the
date, as the Borrower may select, 30 days, 60 days, 90 days or
180 days thereafter; provided, however, that:
(a) the Borrower may not select an Interest Period that
extends beyond the Termination Date; and
(b) whenever the last day of any Interest Period would
otherwise be a day that is not a Business Day, the last day of
such Interest Period shall be extended to the next succeeding
Business Day.
The term "LIBOR Loan" shall mean either a Revolving LIBOR Loan
or a Term LIBOR Loan (each as hereinafter defined), as
applicable.
The term "Loan Document" shall mean any instrument, document,
note, agreement, or guaranty delivered to either Lender in
connection with the Loans.
The term "Prime Rate" shall mean the rate of interest per year
announced from time to time by Agent called its prime rate, which
may or may not at any time be the lowest rate of interest charged
by Agent. Changes in the rate of interest resulting from a
change in the Prime Rate shall take effect on the date set forth
in each announcement.
The term "Prime Rate Loan" shall mean either a Term Prime Rate
Loan or a Revolving Prime Rate Loan (each as hereinafter
defined), as applicable.
The term "Reference Bank" shall mean Agent.
The term "Revolving LIBOR Loan" shall mean a Revolving Credit
Loan bearing interest at a rate determined by reference to
Adjusted LIBOR.
The term "Revolving Prime Rate Loan"shall mean a Revolving Loan
bearing interest at a rate determined by reference to the Prime
Rate.
The term "subsidiary" means any corporation, partnership,
joint venture, trust, or other legal entity of which the Borrower
owns directly or indirectly 50% or more of the outstanding voting
stock or interest, or of which the Borrower has effective
control, by contract or otherwise.
The term "Tangible Net Worth" means, at any date, net
stockholders' equity, minus goodwill, patents, trademarks,
service marks, trade names, copyrights, and all other intangible
assets and all items that are treated as intangible assets under
generally accepted accounting principles.
The term "Termination Date" shall mean June 15, 1998, subject
to any extension thereof pursuant to Section 2.1(A) hereof.
The term "Term LIBOR" Loan" shall mean a Term Loan bearing
interest at a rate determined by reference to Adjusted LIBOR.
The term "Term Prime Rate Loan"shall mean a Term Loan bearing
interest at a rate determined by reference to the Prime Rate.
The term "Unmatured Event of Default" means an event or
condition which would become an Event of Default with notice or
the passage of time or both.
SECTION 1.2 APPLICABILITY OF SUBSIDIARY AND AFFILIATE
REFERENCES. Terms hereof pertaining to any subsidiary or
affiliate shall apply only during such times as the Borrower has
any subsidiary or affiliate.
SECTION 1.3 ACCOUNTING TERMS. Except as and unless otherwise
specifically provided herein, all accounting terms in this
Agreement shall have the meanings given to them by generally
accepted accounting principles and shall be applied and all
reports required by this Agreement shall be prepared, in a manner
consistent with generally accepted accounting principles
consistently applied.
SECTION 2 LOANS
SECTION 2.1 REVOLVING CREDIT LOANS. Subject to the terms and
conditions of this Agreement, each Lender, severally and not
jointly, agrees to make loans to the Borrower, from time to time
from the date of this Agreement through the Termination Date, at
such times and in such amounts, not to exceed the amount of each
such Lender's Commitment - Revolving Credit, at any one time
outstanding, as the Borrower may request (the "Revolving Credit
Loan(s)"). During such period, the Borrower may borrow, repay
and reborrow hereunder. Each borrowing shall be in the amount of
at least $25,000.00 or the remaining unused amount of the
Commitment - Revolving Credit. Notwithstanding the generality of
the foregoing, neither Lender shall make any Revolving Credit
Loans under this Agreement or the Revolving Credit Note (as
hereinafter defined) if at any time the sum of: (a) the aggregate
principal amount outstanding under the Revolving Credit Notes and
due such Lender plus (b) the aggregate face amount of all Letters
of Credit (as hereinafter defined) issued by such Lender for the
benefit of the Borrower and any drawn and unpaid amounts
thereunder equals or exceeds such Lender's Commitment - Revolving
Credit.
SECTION 2.1(A) EXTENSIONS OF THE TERMINATION DATE. The
Borrower may advise the Lenders in writing of its desire to
extend the Termination Date for an additional one year, provided
(i) such request is made no later than 90 days prior to such
Termination Date, (ii) not more than one such request for the
extension of the Termination Date may be made in any one calendar
year, and (iii) in no event shall the Termination Date be
extended beyond June 15, 1999. Each Lender shall notify the
Borrower, the other Lender and the Agent, in writing within 45
days after such Lender receives such request from the Borrower,
whether such Lender in its sole discretion agrees to such
extension. In the event that a Lender shall fail to so notify
the Borrower, the other Lender and the Agent within such 45 day
period, whether it agrees to such extension, such Lender shall be
deemed to have refused to grant the requested extension. Upon
receipt by the Borrower, the Agent and all Lenders of the consent
of all Lenders within such 45 day period, the Termination Date
shall be automatically extended for an additional one year, and
the Agent shall confirm such automatic extension in writing to
the Borrower and the Lenders. In the event the Borrower and all
Lenders do not consent to the requested extension of the
Termination Date, such Termination Date shall take place as
scheduled.
SECTION 2.2 REVOLVING CREDIT NOTE. The Revolving Credit Loans
shall be evidenced by a revolving credit note (the "Revolving
Credit Note"), substantially in the form of Exhibit A, with
appropriate insertions, dated the date hereof, payable to the
order of each Lender, in the principal amount of the Commitment -
Revolving Credit of each such Lender, and with the amounts
borrowed and repaid and the balance indorsed on the grid by such
Lender. As long as such Lender is the holder of such Revolving
Credit Note it may, at its option, in lieu of endorsing the grid,
record the amounts borrowed and repaid under and the balance due
on the Revolving Credit Note in each such Lender's respective
books and records, which books and records may treat
each borrowing as a separate Revolving Credit Loan; such
endorsement or recording by such Lender shall be rebuttably
presumptive evidence of the principal balance due on each
Revolving Credit Note. Subject to Section 2.2(A) hereof, the
principal of each Revolving Credit Note shall be payable in full
on the Termination Date.
SECTION 2.2(A) CONVERSION OF PORTIONS OF REVOLVING CREDIT
LOANS. At any time on or before June 30, 1997, the Borrower may
advise the Lenders in writing (the "Conversion Notice(s)") of its
election to convert up to $1,000,000 of each Lender's Revolving
Credit Loans to such Lender's Term Loan. Any Conversion Notice
must be delivered to the Lenders no later than June 15, 1997, and
not more than one such election may be made. The Conversion
Notice must specify: (i) the amount of each Lender's Revolving
Credit Loans to be converted to such Lender's Term Loan (the
"Converted Amount", which cannot exceed $1,000,000 and which must
be the same amount for each Lender); and (ii) the date on which
the Converted Amount is to be converted to the relevant Term
Loan, which date (the "Conversion Date") cannot be less than
seven nor more than thirty days after the date on which the
Conversion Notice(s) is received by the Lenders, but in any event
can be no later than June 30, 1997. Any Conversion Notice(s),
and the election set forth therein, is irrevocable, but is
ineffective if an Event of Default has occurred and is continuing
on either the date of the Conversion Notice(s) or the Conversion
Date. From and after the Conversion Date, the Converted Amount
payable to each Lender shall be and become part of the Term Loan
payable to such Lender, and is repayable and bears interest as
set forth herein and in the Term Note of such Lender. From and
after the Conversion Date, each Lender's Commitment - Revolving
Credit is permanently reduced by $1,000,000.
SECTION 2.3 LETTERS OF CREDIT. Subject to the terms of this
Agreement, each Lender shall issue stand-by and/or commercial
letters of credit for the account of the Borrower (collectively,
the "Letter(s) of Credit"), from time to time from the date of
this Agreement through the Termination Date or such later date as
may from time to time be agreed upon in writing by the Borrower
and the Lenders, with a maturity date on any Letter of Credit no
later than the Termination Date, at such times and in such
amounts, as the Borrower may request, up to a maximum amount not
in excess of: (a) $13,500,000 minus (b) the aggregate amount of
Revolving Credit Loans outstanding under the Revolving Credit
Notes minus (c) the unexpired portion of all outstanding Letters
of Credit and any amount drawn under any such Letters of Credit
(including without limitation, any draft drawn under a Letter of
Credit and accepted by such Lender for which the Lender has not
been reimbursed). At any time the Borrower determines that it
desires the issuance of a Letter of Credit, the Borrower may
request such Letter of Credit from the Agent, which request shall
be in writing and irrevocable as to the Borrower. At the time
the Agent receives a request by the Borrower for the issuance of
a Letter of Credit, the Agent will inform the Lenders in writing
of the request and, subject to the terms hereof and each Lender's
respective internal rules regarding the issuance of letters of
credit, each Lender will each issue a Letter of Credit for one
half the face amount requested by the Borrower. Notwithstanding
the generality of the foregoing, neither Lender will issue a
Letter of Credit unless the other Lender agrees in writing to
simultaneously issue an identical Letter of Credit. The Borrower
shall execute, and be subject to, such documentation in form and
substance as may be required by each Lender. The Borrower shall
pay each Lender its standard fees, charges, commissions, and
discounts in connection with any Letter of Credit or any draft
drawn under any Letter of Credit, which, subject to the terms and
provisions of the forementioned documents, is three-quarters of
one percent (3/4%) per annum for each Letter of Credit with a
$250.00 minimum, said fee(s) being payable quarterly in arrears.
Any draft drawn under a Letter of Credit not paid on or before
its maturity shall constitute a Revolving Credit Loan and shall
bear interest at the rate and be payable as provided for other
Revolving Credit Loans. The Borrower shall not request the
issuance of any Letter of Credit and the Lenders shall not issue
any Letters of Credit if: (a) the aggregate face amount of all
unexpired Letters of Credit issued by all Lenders (including
without limitation, any draft drawn under a Letter of Credit and
accepted by any Lender for which the Lender has not been
reimbursed), equals or exceeds $5,000,000, or (b) issuance of a
new Letter of Credit in the amount contemplated by the Borrower
would cause the aggregate face amount of all unexpired Letters of
Credit issued by all Lenders (including without limitation, any
draft drawn under a Letter of Credit and accepted by any Lender
for which the Lender has not been reimbursed) to exceed
$5,000,000. For all purposes hereof, each Existing Letter of
Credit shall be deemed to be a Letter of Credit issued hereunder.
SECTION 2.4 TERM LOAN. Subject to the terms and conditions
of this Agreement, each Lender, severally and not jointly, agrees
to lend to the Borrower, and the Borrower agrees to borrow from
each Lender, on the date hereof, the amount of each Lender's
Commitment - Term Loan (the "Term Loan"; the Revolving Credit
Loans and the Term Loan, collectively, the "Loans"). Any amount
of Term Loans repaid may not be reborrowed.
SECTION 2.5 TERM NOTE. The Term Loan shall be evidenced by a
term note (the "Term Note"; the Revolving Credit Notes and the
Term Notes, collectively, the "Notes"), substantially in the form
of Exhibit B, with appropriate insertions, dated the date hereof,
payable to the order of each Lender, in the principal amount of
the Commitment - Term Loan of each such Lender. The principal
balance of the Term Loan is payable in ten (10) principal
payments as follows: (a) one (1) payment in the amount of
$500,000, due on December 15, 1996; (b) four (4) payments, each
in the amount of $750,000, due on June 15, 1997, December 15,
1997, June 15, 1998 and December 15, 1998; (c) four (4) payments,
each in the amount of $1,000,000, due June 15, 1999, December 15,
1999, June 15, 2000 and December 15, 2000; with all then unpaid
principal, due in full on June 15, 2001. Provided, however, that
if and when any Converted Amount is added to the Term Loans of
each Lender pursuant to Section 2.2(A) hereof, that portion of
such Term Loans is payable as follows: commencing on the first
semi-annual principal payment date (June 15 and December 15)
after the Conversion Date, and continuing on each such principal
payment date thereafter, each principal payment of the Term Loan
and Term Note (as set forth in this Section 2.5) then due shall
be increased by an amount equal to ten percent (10.0%) of the
Converted Amount.
SECTION 2.6 GUARANTY. The Loans and all of the Borrower's
other liabilities, obligations and indebtedness to each of the
Lenders, direct or indirect, absolute or contingent, due or to
become due, now or hereafter existing with respect to principal,
and interest accrued thereon, whether under this Agreement or any
other agreement with either or both of the Lenders or note
payable to either or both of the Lenders, shall be guaranteed by:
(a) Transit Mix Concrete Co., a Colorado corporation ("Transit
Mix"), by execution and delivery of a Guaranty in the form of
Exhibit C hereto with appropriate insertions (the foregoing
Guaranty, and all amendments, restatements, and replacements,
if any, thereto or therefor, collectively, the "Transit Mix
Guaranty");
(b) Phoenix Manufacturing, Inc., an Arizona corporation
("Phoenix"), by execution and delivery of a Guaranty in the
form of Exhibit D hereto with appropriate insertions (the
foregoing Guaranty, and all amendments, restatements, and
replacements, if any, thereto or therefor, collectively, the
"Phoenix Guaranty");
(c) Williams Furnace Co., a Delaware corporation
("Williams"), by execution and delivery of a Guaranty in the
form of Exhibit E hereto with appropriate insertions (the
foregoing Guaranty, and all amendments, restatements, and
replacements, if any, thereto or therefor, collectively, the
"Williams Guaranty");
(d) Castle Concrete Company, a Colorado corporation
("Castle"), by execution and delivery of a Guaranty in the
form of Exhibit F hereto with appropriate insertions (the
foregoing Guaranty, and all amendments, restatements, and
replacements, if any, thereto or therefor, collectively, the
"Castle Guaranty"); and
(e) Transit Mix of Pueblo, Inc., a Colorado corporation
("Pueblo"), by execution and delivery of a Guaranty in the
form of Exhibit G hereto with appropriate insertions (the
foregoing Guaranty, and all amendments, restatements, and
replacements, if any, thereto or therefor, collectively, the
"Pueblo Guaranty").
SECTION 3 INTEREST AND FEES
SECTION 3.1 INTEREST. The Borrower may elect that each
Borrowing of Loans be made by means of a Prime Rate Loan or a
LIBOR Loan; provided, however, that there shall not be more than
six Borrowings of LIBOR Loans outstanding at any time.
(a) Prime Rate Loans. Each Prime Rate Loan made by the
Lenders shall bear interest on the unpaid principal amount
thereof from the date such Loan is made until maturity (whether
by acceleration or otherwise) at a rate per annum equal to the
Prime Rate from time to time in effect.
(b) LIBOR Loans. Each LIBOR Loan made by the Lenders shall
bear interest on the unpaid principal amount thereof from the
date such Loan is made until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable
LIBOR Margin from time to time in effect plus the Adjusted LIBOR.
"Adjusted LIBOR" means, for any Borrowing of LIBOR Loans, a
rate per annum determined in accordance with the following
formula:
LIBOR
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of LIBOR
Loans, the rate of interest per annum (rounded upwards, if
necessary, to nearest 1/100 of 1%) at which deposits in U.S.
dollars in immediately available funds are offered by the
Reference Bank at approximately 11:00 a.m. (London, England time)
two (2) Business Days before the beginning of such Interest
Period by prime banks in the interbank eurodollar market for a
period equal to such Interest Period and in an amount equal or
comparable to the principal amount of the LIBOR Loans scheduled
to be made by the Lenders as part of such Borrowing.
"Eurodollar Reserve Percentage" means, for any Borrowing of
LIBOR Loans, the daily average for the applicable Interest Period
of the maximum rate at which reserves (including, without
limitation, any supplemental, marginal and emergency reserves)
are imposed during such Interest Period by the Board of Governors
of the Federal Reserve System (or any successor) under Regulation
D on "eurocurrency liabilities," as defined in such Board's
Regulation D, (or in respect of any other category of liabilities
that includes deposits by reference to which the interest rate on
LIBOR Loans is determined or any category of extension of credit
or other assets that include loans by non-United States offices
of any Lender to United States residents) subject to any
amendments of such reserve requirement by such Board or its
successor, taking into account any transitional adjustments
thereto. For purposes of this definition, the LIBOR Loans shall
be deemed to be "eurocurrency liabilities" as defined in
Regulation D.
(c) Rate Determinations. The Agent shall determine each
interest rate applicable to the Loans hereunder, and its
determination thereof shall be conclusive and binding except in
the case of manifest error.
SECTION 3.2 MINIMUM AND MAXIMUM BORROWING AMOUNTS. Each
Borrowing of Prime Rate Loans (other than an L/C Refinancing
Borrowing) shall be in an amount not less than $25,000 or any
larger amount that is an integral multiple of $25,000. Each
Borrowing of LIBOR Loans shall be in an amount not less than
$500,000, or any larger amount that is an integral multiple of
$100,000.
SECTION 3.3 BASIS OF COMPUTATION. Interest on all Loans shall
be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days, including the date a Loan is made
and excluding the date a Loan or any portion thereof is paid or
prepaid.
SECTION 3.4 INTEREST PAYMENT DATES. Accrued interest on Prime
Rate Loans shall be paid on the fifteenth (15th) day of each
March, June, September and December of each year, at maturity and
upon payment in full, beginning with the first of such dates to
occur after the date of the first such Loan hereunder. Accrued
interest on LIBOR Loans shall be paid on the last day of the
applicable Interest Period and at maturity and, if the applicable
Interest Period is longer than ninety (90) days, on each day
occurring ninety (90) days after the date such LIBOR Loan is
made. After maturity, whether by acceleration or otherwise,
accrued interest on all Loans shall be paid upon demand.
SECTION 3.5 DEFAULT RATE. If the Borrower is in default under
any of the financial requirements set forth in Section 6.4
hereof, or if any payment of principal on any Loan or other
monetary obligation is not made when due (whether by acceleration
or otherwise), such Loan or other monetary obligation shall bear
interest, after as well as before judgment, from the date such
payment was due until paid in full, payable on demand, at a rate
per annum (the "Default Rate") equal to:
(a) with respect to any Prime Rate Loan, the sum of two
percent (2%) plus the interest rate from time to time in effect
with respect to such Prime Rate Loan pursuant to Section 3.1(a);
and
(b) with respect to any LIBOR Loan, the sum of two percent
(2%) plus the rate of interest in effect thereon at the time of
such default until the end of the Interest Period applicable
thereto and, thereafter, at a rate per annum equal to the sum of
two percent (2%) plus the Prime Rate from time to time in effect;
and
(c) with respect to other monetary obligations for which a
Default Rate is not otherwise specified, the sum of two percent
(2%) plus the Prime Rate from time to time in effect.
SECTION 3.6 CLOSING FEE. The Borrower agrees to pay each
Lender, on the date of execution hereof, a closing fee of $6,250.
SECTION 3.7 COMMITMENT FEE, REDUCTION OF COMMITMENT. The
Borrower agrees to pay each Lender a commitment fee (the
"Commitment Fee") of three-eighths of one percent (3/8%) per year
on the average daily unused amount of each Lender's Commitment
Revolving Credit. The Commitment Fee shall commence to accrue on
the date of this Agreement and shall be paid on the fifteenth
(15th) day of each March, June, September and December in each
year, beginning with the first of such dates to occur after the
date of this Agreement, at maturity and upon payment in full. At
any time or from time to time, upon at least ten days' prior
written notice, which shall be irrevocable, the Borrower may
reduce each Lender's Commitment - Revolving Credit in the amount
of at least $25,000.00 or in full, provided, however, that all
such reductions of Commitment - Revolving Credit shall reduce the
Commitment - Revolving Credit of each Lender on a pro rata basis
based on the Commitment - Revolving Credit of each Lender
immediately prior to such reduction. Upon any such reduction of
any part of the unused Commitment - Revolving Credit, the
Commitment Fee on the part reduced shall be paid in full as of
the date of such reduction.
SECTION 3.8 ADMINISTRATIVE AGENT FEE. The Borrower agrees to
pay the Agent an administrative agent fee of $2,500.00 per year.
Such administrative agent fee shall be paid in arrears in four
(4) equal payments of $625.00 due on March 15, June 15, September
15 and December 15 of each year. The first such payment shall be
due on December 15, 1996
SECTION 4 PAYMENTS AND PREPAYMENTS.
SECTION 4.1 PAYMENTS. All payments and prepayments of
principal, interest, closing fees and Commitment Fee shall be
made in immediately available funds to each respective Lender at
its main banking office in Chicago, Illinois.
SECTION 4.2 MANNER OF BORROWING. The Borrower shall give the
Agent written or telephonic prior irrevocable notice (a
"Borrowing Notice") by 11:00 a.m., Chicago, Illinois time, (i) on
the date at least three (3) Business Days prior to the date of
each requested Borrowing of LIBOR Loans and (ii) on the date of
any requested Borrowing of Prime Rate Loans. Each such notice
shall specify the date of Borrowing, which must be a Business
Day, the aggregate amount of the requested Borrowing, the type of
Loans to comprise such Borrowing and, if such Borrowing is to be
comprised of LIBOR Loans, the Interest Period applicable thereto.
The Agent will then notify the Lenders in writing or by telephone
by 12:00 noon on the date of receipt of the foregoing notice
(which such notice in the case of LaSalle Bank, if it relates to
Revolving Credit Loan Borrowings constituting Prime Rate Loans,
may be made before or after Northern has funded its 50% portion
of such requested Loans) and, if such notice requests the Lenders
to make LIBOR Loans, the Agent shall give notice to the Borrower
and to the Lenders of the interest rate applicable thereto
promptly after the Agent has made such determination. The
Lenders, on the date of Borrowing of any Revolving Credit Loan,
shall each remit 50% of any requested Revolving Credit Loan to
the Borrower's account, except to the extent such Borrowing is
either a reborrowing, in whole or in part, of the principal
amount of a maturing Borrowing of Loans (a "Refunding Borrowing")
or an L/C Refinancing Borrowing, in which case each Lender shall
record the Loan made by it as a part of such Refunding Borrowing
or L/C Refinancing Borrowing, as the case may be, on its books or
records or on a schedule to the appropriate Note, and shall
effect the repayment, in whole or in part, as appropriate, of its
maturing Loan or reimbursement obligation through the proceeds of
such new Loan. At the time Northern has made a Revolving Credit
Loan, LaSalle Bank shall be deemed to have funded its 50% share
of such Revolving Credit Loan and the obligation to remit to
Northern on such day its 50% of the Revolving Credit Loan shall
be absolute and irrevocable. Each borrowing from the Lenders
under this Agreement shall be made on a pro rata basis of their
respective Commitment - Revolving Credit and Commitment - Term
Loan. Each payment and prepayment made by the Borrower shall be
made to the Lenders pro rata on the basis of the respective
amounts of the Loans outstanding immediately prior to such
payment or prepayment. In the event the Borrower fails to give
notice pursuant to this Section 4.2 of the reborrowing of the
principal amount of any maturing Borrowing or of a Borrowing to
refinance a reimbursement obligation with respect to a Letter of
Credit (an "L/C Refinancing Borrowing") and has not notified the
Agent by 11:00 a.m. (Chicago time) on the day such Borrowing
matures or such reimbursement obligation becomes due that it
intends to repay such Borrowing or such reimbursement obligation
with funds not borrowed hereunder, the Borrower shall be deemed
to have requested a Borrowing of Prime Rate Loans on such day in
the amount of the maturing Borrowing or of the reimbursement
obligation then due, which new Borrowing shall be applied to pay,
as the case may be, the maturing Borrowing or reimbursement
obligation then due.
Each LIBOR Loan shall mature and become due and payable by the
Borrower on the last day of the Interest Period applicable
thereto.
SECTION 4.3 CHANGE IN CIRCUMSTANCES, ETC. (a) The Borrower
agrees to pay to each Lender such amounts as will compensate each
Lender for any increase in the cost to such Lender of making or
maintaining any Loans hereunder or of maintaining its Commitment
- - Revolving Credit to make Revolving Credit Loans hereunder,
caused by any change in any reserve, tax, capital guidelines,
special deposit, or similar requirement with respect to assets
of, deposits with or for the account of, or credit extended by,
or commitments extended by, such Lender which are imposed on such
Lender and which are caused by any change in law, treaty, rule,
regulation (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System), any
interpretation thereof by any governmental, fiscal, monetary or
other authority charged with the administration thereof or having
jurisdiction over such Loan or such Lender, or any requirement
imposed by any such authority, whether or not having the force of
law. Such additional amounts shall be payable on demand. Such
Lender's calculation of such additional amounts shall be final
and binding absent manifest error.
(b) Notwithstanding any other provisions of this Agreement or
any Note, if at any time after the date hereof any change in
applicable law or in the interpretation thereof makes it unlawful
for any Lender to make or continue to maintain LIBOR Loans or to
give effect to its obligations as contemplated hereby, such
Lender shall promptly give notice thereof to the Borrower, with a
copy to the Agent and the other Lender, and such Lender's
obligations to make or maintain LIBOR Loans under this Agreement
shall terminate until it is no longer unlawful for such Lender to
make or maintain LIBOR Loans. The Borrower shall prepay on
demand the outstanding principal amount of any such affected
LIBOR Loans, together with all interest accrued thereon and all
other amounts then due and payable to such Lender under this
Agreement; provided, however, subject to all of the terms and
conditions of this Agreement, the Borrower may then elect to
borrow the principal amount of the affected LIBOR Loan from such
Lender by means of a Prime Rate Loan from such Lender that shall
not be made ratably by the Lenders but only from such affected
Lender.
(c) If on or prior to the first day of any Interest Period
for any Borrowing of LIBOR Loans:
(i) The Agent advises the Borrower that deposits in United
States Dollars (in the applicable amounts) are not being offered
to it in the interbank eurodollar market, for such Interest
Period, or
(ii) either Lender advises the Borrower that LIBOR as
determined by the Agent will not adequately and fairly reflect
the cost to such Lender of funding its LIBOR Loans for such
Interest Period, then, until the Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist,
the obligation of the Lenders to make LIBOR Loans shall be
suspended.
SECTION 4.4 FUNDING INDEMNITY. In the event any Lender shall
incur any loss, cost or expense (including, without limitation,
any loss of profit, and any loss, cost or expense incurred by
reason of the liquidation or re-employment of deposits or other
funds acquired by such Lender to fund or maintain any LIBOR Loan
or the relending or reinvesting of such deposits or amounts paid
or prepaid to such Lender) as a result of:
(a) any payment (including prepayment) of a LIBOR Loan on a
date other than the last day of its Interest Period for any
reason, whether before or after default, and whether or not such
payment is required by any provisions of this Agreement, or
(b) any failure (because of a failure to meet the conditions
of borrowing or otherwise) by the Borrower to borrow a LIBOR Loan
on the date specified in a Borrowing Notice,
then, upon the demand of such Lender, the Borrower shall pay to
such Lender such amount as will reimburse such Lender for such
loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrower, with a copy to
the Agent and the other Lender, a certificate executed by an
officer of such Lender setting forth the amount of such loss,
cost or expense in reasonable detail (including an explanation of
the basis for and the computation of such loss, cost or expense)
and the amounts shown on such certificate shall be deemed
rebuttably presumptive evidence of the correctness thereof.
SECTION 4.5 DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any other provision of this Agreement, each
Lender shall be entitled to fund and maintain its funding of all
or any part of its Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Lender had
actually funded and maintained each LIBOR Loan through the
purchase of deposits in the relevant market having a maturity
corresponding to such Loan's Interest Period and bearing an
interest rate equal to LIBOR, for such Interest Period.
SECTION 4.6 PREPAYMENTS. The Borrower shall have the
privilege of prepaying without premium or penalty and in whole or
in part (but, if in part, then: (i) in an amount not less than
$250,000 and in integral multiples of $25,000 in the case of
Prime Rate Loans, and in an amount not less than $500,000 and in
integral multiples of $100,000 in the case of LIBOR Loans and
(ii) in an amount such that the minimum amount required for a
Borrowing pursuant to Section 3.2 hereof remains outstanding) on
any Business Day upon prior notice to the Lenders which must be
received by the Lenders by no later than 11:00 a.m. (Chicago
time) on the date of such prepayment in the case of Prime Rate
Loans and by no later than 11:00 a.m. (Chicago time) on the date
three Business Days in advance of the date of such prepayment in
the case of LIBOR Loans, such prepayment to be made by the
payment of the principal amount to be prepaid and, in the case of
LIBOR Loans, any compensation required by Section 4.4 hereof.
Partial prepayments of any outstanding type of Loan shall be
applied to the various Borrowings thereof in the inverse order of
their maturity. Partial prepayments of the Term Loans shall be
applied to installments thereof in the inverse order of their
maturity. Unless otherwise designated by the Borrower,
prepayments of any outstanding type of Loan shall be deemed paid
with respect to such Loans which are Prime Rate Loans.
SECTION 4.7 MANDATORY REPAYMENT. If at any given time from
and after the date of this Agreement, the amount of Revolving
Credit Loans plus all outstanding and unpaid Letters of Credit
issued by all Lenders exceeds the then aggregate amount of the
Commitments-Revolving Credit of all Lenders, THEN the Borrower
shall immediately repay to the Lenders that amount necessary to
reduce the unpaid and outstanding principal amount of the
Revolving Credit Loans such that the amount of Revolving Credit
Loans plus all outstanding and unpaid Letters of Credit issued by
all Lenders is equal to or less than the then aggregate amount of
the Commitments-Revolving Credit of all Lenders. All repayments
of principal under this Section 4.7 shall include interest
accrued to the date of repayment on the principal amount repaid.
SECTION 5 REPRESENTATIONS AND WARRANTIES
To induce each Lender to make each of the Loans, the
Borrower represents and warrants, and at the time the Borrower
requests or accepts any Loan, the Borrower shall be deemed to
represent and warrant, to each Lender that:
SECTION 5.1 ORGANIZATION. The Borrower is a corporation
existing and in good standing under the laws of the state of
Delaware; any subsidiary is a corporation duly existing and in
good standing under the laws of the state of its formation as
indicated on Exhibit H; the Borrower and any subsidiary are duly
qualified, in good standing and authorized to do business in each
jurisdiction where, because of the nature of their activities or
properties, such qualification is required and failure to qualify
could have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole; and the Borrower and any
subsidiary have the power and authority to own their properties
and to carry on their businesses as now being conducted.
SECTION 5.2 AUTHORIZATION; NO CONFLICT. The borrowings
hereunder, the execution and delivery of the Notes and the
performance by the Borrower of its obligations under this
Agreement and the Notes are within the Borrower's corporate
powers, have been authorized by all necessary corporate action,
have received all necessary governmental approval (if any shall
be required) and do not and will not contravene or conflict with
any provision of law or of the charter or by-laws of the Borrower
or any subsidiary or of any agreement binding upon the Borrower
or any subsidiary.
SECTION 5.3 FINANCIAL STATEMENTS. The Borrower's audited
consolidated financial statement as at December 30, 1995 and its
unaudited consolidated financial statement as at June 29, 1996,
copies of which have been furnished to the Agent, have been
prepared in conformity with generally accepted accounting
principles applied on a basis consistent with that of the
preceding fiscal year, and accurately present the financial
condition of the Borrower and any subsidiary as at such dates and
the results of their operations for the respective periods then
ended. Since the date of those financial statements, no
material, adverse change in the business, properties, assets,
operations, conditions or prospects of the Borrower or any
subsidiary has occurred of which the Agent has not been advised
in writing before this Agreement was signed. There is no known
contingent liability of the Borrower or any subsidiary which is
known to be in an amount in excess of $100,000.00 which is not
reflected in such financial statements or in Exhibit J hereto or
of which the Agent has not been advised in writing before this
Agreement was signed.
SECTION 5.4 TAXES. The Borrower and any subsidiary have filed
or caused to be filed all federal, state and local tax returns
which, to the knowledge of the Borrower or any subsidiary, are
required to be filed, and have paid or have caused to be paid all
taxes as shown on such returns or on any assessment received by
them, to the extent that such taxes have become due (except for
current taxes not delinquent and taxes being contested in good
faith and by appropriate proceedings for which adequate reserves
have been provided on the books of the Borrower or the
appropriate subsidiary, and as to which no foreclosure,
distraint, sale or similar proceedings have been commenced). The
Borrower and any subsidiary have set up reserves which are
adequate for the payment of additional taxes for years which have
not been audited by the respective tax authorities.
SECTION 5.5 LIENS. None of the assets of the Borrower or any
subsidiary are subject to any mortgage, pledge, title retention
lien, or other lien, encumbrance or security interest, except
for: (a) current taxes not delinquent or taxes being contested in
good faith and by appropriate proceedings; (b) liens arising in
the ordinary course of business for sums not due or sums being
contested in good faith and by appropriate proceedings, but not
involving any deposits or advances or borrowed money or the
deferred purchase price of property or services; (c) to the
extent specifically shown in the financial statements referred to
above; and (d) liens existing on the date hereof as listed in
Exhibit I hereto.
SECTION 5.6 ADVERSE CONTRACTS. Neither the Borrower nor any
subsidiary is a party to any agreement or instrument or subject
to any charter or other corporate restriction, nor is it subject
to any judgment, decree or order of any court or governmental
body, which may have a material and adverse effect on the
business, assets, liabilities, financial condition, operations or
business prospects of the Borrower and its subsidiaries taken as
a whole or on the ability of the Borrower to perform its
obligations under this Agreement or the Notes. Neither the
Borrower nor any subsidiary has, nor with reasonable diligence
should have had, knowledge of or notice that it is in default in
the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any such
agreement, instrument, restriction, judgment, decree or order.
SECTION 5.7 REGULATION U. The Borrower is not engaged
principally in, nor is one of the Borrower's important
activities, the business of extending credit for the purpose of
purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereinafter in effect.
SECTION 5.8 LITIGATION AND CONTINGENT LIABILITIES, No
litigation (including derivative actions), arbitration
proceedings or governmental proceedings are pending or threatened
against the Borrower which would (singly or in the aggregate), if
adversely determined, have a material and adverse effect on the
financial condition, continued operations or prospects of the
Borrower or any subsidiary, except as set forth (including
estimates of the dollar amounts involved) in Exhibit J hereto.
SECTION 5.9 SUBSIDIARIES. Attached hereto as Exhibit H is a
correct and complete list of all subsidiaries and affiliates of
the Borrower.
SECTION 5.10 PURPOSE. The Borrower shall use the proceeds of
the Loans to refinance the amounts owing under the Prior
Documents, to finance the Acquisition, for working capital
purposes, and for general corporate purposes, including capital
expenditures.
SECTION 6 COVENANTS
Until all obligations of the Borrower hereunder and under the
Notes are paid and fulfilled in full, and as a condition
precedent to the Borrower requesting the Term Loans and any
Revolving Credit Loan, the Borrower agrees that it shall, and
shall cause any subsidiary to, comply with the following
covenants, unless the Lenders consent otherwise in writing:
SECTION 6.1 CORPORATE EXISTENCE, MERGERS, ETC. The Borrower
and any subsidiary shall preserve and maintain its corporate
existence, rights, franchises, licenses and privileges, and will
not liquidate, dissolve, or merge, or consolidate with or into
any other corporation, or sell, lease, transfer or otherwise
dispose of all or a substantial part of its assets, except that:
(a) Any subsidiary may merge or consolidate with or into any
one or more wholly-owned subsidiaries;
(b) Any subsidiary may sell, lease, transfer or otherwise
dispose of any of its assets to the Borrower or one or more
wholly-owned subsidiaries; and
(c) The Borrower may liquidate, dissolve, sell, lease,
transfer, or otherwise dispose of the net assets of any
subsidiary whose net assets constitute ten percent (10%) or
less of the Borrower's consolidated net assets. For purposes
of this Section 6.1(c), the Borrower's consolidated net assets
shall be determined immediately prior to any such liquidation,
dissolution, sale, lease, transfer, or other disposition, and
the ten percent limitation applies on a cumulative basis to all
such dispositions during the period beginning on the date
hereof and ending on the Termination Date.
SECTION 6.2 REPORTS, CERTIFICATES AND
OTHER INFORMATION. The Borrower shall furnish to Agent, with
sufficient copies for each Lender:
(a) Interim Reports. Within 45 days after the end of each
quarter of each fiscal year of the Borrower, a copy of an
unaudited financial statement of the Borrower and any
subsidiary prepared on a consolidated basis consistent with
the audited consolidated financial statements of the Borrower
and any subsidiary referred to above, signed by an authorized
officer of the Borrower and consisting of at least (i) a
balance sheet as at the close of such quarter and (ii) a
statements of earnings and cash flows for such quarter and for
the period from the beginning of such fiscal year to the close
of such quarter.
(b) Audit Report. Within 100 days after the end of each
fiscal year of the Borrower, a copy of an annual audit report
of the Borrower and any subsidiary prepared on a consolidated
basis and in conformity with generally accepted accounting
principles applied on a basis consistent with the audited
consolidated financial statements of the Borrower and any
subsidiary referred to above, duly certified by independent
certified public accountants of recognized standing
satisfactory to the Lender, accompanied by an opinion without
significant qualification.
(c) Certificates. Contemporaneously with the furnishing of a
copy of each quarterly report provided for in this Section, a
certificate dated the date of such quarterly report and signed
by either the President, the Chief Accounting officer or the
Treasurer of the Borrower, to the effect that no Event of
Default or Unmatured Event of Default has occurred and is
continuing, or, if there is any such event, describing it and
the steps, if any, being taken to cure it, and containing
(except in the case of the certificate dated the date of the
annual report) a computation of, and showing compliance with,
any financial ratio or restriction contained in this
Agreement, and also containing a description of the amount and
type of capital expenditures which are excluded from capital
expenditures pursuant to the parenthetical in clause (iv) of
the definition of Income Available for Fixed Charges.
(d) Reports to SEC and to Shareholders. Copies of each
filing and report made by the Borrower or any subsidiary with
or to any securities exchange or the Securities and Exchange
Commission, except in respect of any single shareholder, and
of each communication from the Borrower or any subsidiary to
Borrower's shareholders generally, promptly upon the filing or
making thereof.
(e) Notice of Default, Litigation and ERISA Matters.
Immediately upon learning of the occurrence of any of the
following, written notice describing the same and the steps
being taken by the Borrower or any subsidiary affected in
respect thereof: (i) the occurrence of an Event of Default or
an Unmatured Event of Default; or (ii) the institution of, or
any adverse determination in, any litigation, arbitration or
governmental proceeding which is material to the Borrower or
any subsidiary on a consolidated basis; or (iii) the
occurrence of a reportable event under, or the institution of
steps by the Borrower or any subsidiary to withdraw from, or
the institution of any steps to terminate, any employee
benefit plans as to which the Borrower or any of its
subsidiaries may have any liability.
(f) Subsidiaries. Promptly from time to time a written
report of any changes in the list of its subsidiaries.
(g) Other Information. From time to time such other
information, financial or otherwise, concerning the Borrower
or any subsidiary as the Agent or either Lender may reasonably
request.
SECTION 6.3 INSPECTION. The Borrower and any subsidiary
shall permit the Agent or any Lender and their agents at any time
during normal business hours to inspect their properties and to
inspect and make copies of their books and records.
SECTION 6.4 FINANCIAL REQUIREMENTS. Until all of the
obligations of the Borrower under this Agreement and the Notes
are fully paid and performed, neither the Borrower nor any
subsidiary will, unless at any time both Lenders shall otherwise
expressly consent in writing:
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio, as determined as of December 28, 1996 and as of
the end of each fiscal quarter thereafter of the Borrower's
fiscal year, in all instances for the period of the four fiscal
quarters then ending, to be less than 1.25:1.0;
(b) Current Ratio. Permit the ratio of consolidated current
assets to current liabilities (with current liabilities not
including the final installment on the Term Loans due on June
15, 2001) as determined as of the end of each fiscal quarter of
the Borrower's fiscal year, to be less than 1.75:1.0;
(c) Tangible Net Worth. Permit the Borrower's consolidated
Tangible Net Worth, determined as of the end of each fiscal
quarter of the Borrower's fiscal year, to be less than
$25,000,000, plus fifty percent (50%) of the Borrower's
cumulative consolidated net income (disregarding losses) for
all periods subsequent to December 28, 1996.
(d) Leverage Ratio. Permit the Borrower's ratio of (i)
consolidated Funded Debt as at the end of each fiscal quarter
of the Borrower's fiscal year, to (ii) EBITDA for the
Measurement Period ending at the last day of such quarter, to
exceed 2.5:1.0 as at the end of each fiscal quarter ending
after September 28, 1996.
SECTION 6.5 INDEBTEDNESS, LIENS AND TAXES. The Borrower and
any subsidiary shall:
(a) Indebtedness. Not incur, permit to remain outstanding,
assume or in any way become committed for Indebtedness in
respect of borrowed money, except (i) Indebtedness incurred
hereunder or to either Lender; (ii) Indebtedness existing on
the date of this Agreement shown on the financial statements
furnished to both Lenders before this Agreement was signed;
(iii) other Indebtedness existing on the date hereof as listed
in Exhibit K hereto; (iv) other Indebtedness to which the
Lenders give the Borrower prior written consent; and (v)
Indebtedness in the aggregate amount not greater than five
percent (5%) of the Tangible Net Worth of the Borrower at any
time or from time to time.
(b) Liens. Not create, suffer or permit to exist any lien or
encumbrance of any kind or nature upon any of their assets now
or hereafter owned or acquired, or acquire or agree to acquire
any property or assets of any character under any conditional
sale agreement or other title retention agreement, but this
Section shall not be deemed to apply to: (i) liens existing on
the date of this Agreement which are listed on Exhibit I hereto
or of which the Lenders have been advised in writing before
this Agreement was signed; (ii) liens of landlords,
contractors, laborers or supplement, tax liens, or liens
securing performance or appeal bonds or other similar liens or
charges arising out of the Borrower's business, provided that
tax liens are removed before related taxes become delinquent
and other liens are promptly removed, in either case unless
contested in good faith and by appropriate proceedings, and as
to which adequate reserves shall have been established; and
(iii) liens securing borrowings or advances from the Borrower
to wholly-owned subsidiaries.
(c) Taxes. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon them, upon their
income or profits or upon any properties belonging to them,
prior to the date on which penalties attach thereto, and all
lawful claims for labor, materials and supplies when due,
except that no such tax, assessment, charge, levy or claim
need be paid which is being contested in good faith by
appropriate proceedings and as to which adequate reserves
shall have been established, and as to which no foreclosure,
distraint, sale or similar proceedings have commenced.
(d) Keep Well Agreements. Except as set forth in Exhibit J
hereto, not assume, guarantee, indorse or otherwise become or
be responsible in any manner (whether by agreement to purchase
any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or
otherwise) with respect to the obligation of any other person
or entity, except by the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business
and except as permitted by this Agreement.
SECTION 6.6 INVESTMENTS AND LOANS. Neither the Borrower
nor any subsidiary shall make any loan, advance, extension of
credit or capital contribution to, or purchase or otherwise
acquire for a consideration, evidences of indebtedness,
capital stock or
other securities of, or all or substantially all of the assets
of, any person in an aggregate amount greater than $1,500,000 (as
determined for the period beginning on the date hereof and ending
on the Termination Date), except that the Borrower and any
subsidiary may:
(a) purchase or otherwise acquire and own short-term money
market items;
(b) extend credit upon customary terms to their customers in
the ordinary course of their business; and
(c) extend credit to officers and employees in accordance with
policies in effect on the date of this Agreement of which the
Lenders have been advised in writing.
SECTION 6.7 CAPITAL STRUCTURE AND DIVIDENDS. Neither the
Borrower nor any subsidiary shall purchase or redeem, or
obligate itself to purchase or redeem, any shares of the
Borrower's capital stock, of any class, issued and outstanding
from time to time, provided, however, that the Borrower may
purchase an amount of shares of the Borrower's capital stock in
a total amount not to exceed $1,000,000 in the aggregate (as
determined for the period beginning on the date hereof and
ending on the Termination Date); or declare or pay any dividend
(other than dividends payable in its own common stock or to the
Borrower) or make any other distribution in respect of such
shares other than to the Borrower. The Borrower shall continue
to own, directly or indirectly, the same (or greater)
percentage of the stock of each subsidiary that it held on the
date of this Agreement, and no subsidiary shall issue any
additional securities other than to
the Borrower.
SECTION 6.8 MAINTENANCE OF PROPERTIES. The Borrower and any
subsidiary shall maintain, or cause to be maintained, in good
repair, working order and condition, all their properties
(whether owned or held under lease), and from time to time make
or cause to be made all needed and appropriate repairs, renewals,
replacements, additions, betterments and improvements thereto, so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 6.9 INSURANCE. The Borrower and any subsidiary shall
maintain insurance in responsible companies in such amounts and
against such risks as is usually carried by owners of similar
businesses and properties in the same general area in which the
Borrower or its subsidiaries operate. The Lenders agree that the
Borrower may self-insure certain risks and that the levels of
such self-insurance shall be reasonably and prudently determined
solely by the Borrower.
SECTION 6.10 USE OF PROCEEDS.
(a) General. The Borrower and any subsidiary shall not use
or permit any proceeds of the Loans to be used, either directly
or indirectly, for the purpose, whether immediate, incidental
or ultimate, of "purchasing or carrying any margin stock'
within the meaning of Regulations U or X of the Board of
Governors of the Federal Reserve System, as amended from time
to time. If requested by either Lender, the Borrower and any
subsidiary will furnish to such Lender a statement in
conformity with the requirements of Federal Reserve Form U-1 to
the foregoing effect. No part of the proceeds of the Loans
will be used for any purpose which violates or is inconsistent
with the provisions of Regulation U or X of the Board of
Governors.
(b) Tender Offers and Going Private. Neither the Borrower
nor any subsidiary shall use (or permit to be used) any
proceeds of the Loans to acquire any security in any
transaction which is subject to Section 13 or 14 of the
Securities Exchange Act of 1934, as amended, or any regulations
or rulings thereunder.
SECTION 6.11 PURPOSE. The Borrower shall use the proceeds of
the Loans as set forth in Section 5.10 above.
SECTION 6.12 ACCOUNTING PERIODS. The Borrower shall not
alter the method by which it establishes the dates on which its
fiscal year and fiscal quarters end without prior written
notice to the Agent.
SECTION 7 CONDITIONS OF LENDING
The obligation of each Lender to make the Term Loan and each
of the Revolving Credit Loans is subject to the following
conditions precedent:
SECTION 7.1 DOCUMENTATION; FIRST LOAN. In addition to the
conditions precedent set forth in Section 7.2 hereinbelow, the
obligation of both Lenders to make the Term Loan and the first
Revolving Credit Loan is subject to the conditions precedent that
both Lenders shall have received all of the following, each duly
executed and dated the date of this Agreement, in form and
substance satisfactory to the Lenders and their counsel, at the
expense of the Borrower, and in such number of signed
counterparts as each Lender may request (except for the Notes, of
which only the original of each shall be signed):
(a) Revolving Credit Note. Revolving Credit Notes in the
form of Exhibit A, with appropriate insertions, each payable
to each Lender for the face amount of such Lender's Commitment
- Revolving Credit;
(b) Term Note. Term Notes in the form of Exhibit B, with
appropriate insertions, each payable to each Lender for the
face amount of such Lender's Commitment - Term Loan;
(c) Resolutions. A copy of a resolution of the Board of
Directors of the Borrower authorizing or ratifying the
execution, delivery and performance, respectively, of this
Agreement, the Notes and the other documents provided for in
this Agreement, certified by the Secretary of the Borrower;
copies of the resolutions of the Board of Directors of each
subsidiary authorizing or ratifying the execution, delivery
and performance of its guaranty, certified by its Secretary;
(d) Articles of Incorporation and By-laws; Good Standing
Certificates. A copy of the articles of incorporation and by
laws of the Borrower and each subsidiary, certified by the
Secretary of the Borrower and each subsidiary, respectively,
or, in lieu thereof, certification by the Secretary of the
Borrower and each subsidiary that there have been no changes
to said articles of incorporation and by-laws since the
date(s) when certified copies thereof were last furnished to
the Lenders; good standing certificates issued by the
Secretary of State of each state in which the Borrower or such
subsidiary is incorporated and qualified to do business;
(e) Certificates of Incumbency. A certificate of the
Secretary of the Borrower and each subsidiary certifying the
names of the officer or officers of the Borrower or such
subsidiary authorized to sign this Agreement, the Notes, its
guaranty and the other documents provided for in this
Agreement to be signed by the Borrower and such subsidiary,
together with a sample of the true signature of each such
officer (the Lender may conclusively rely on such certificate
until formally advised by a like certificate of any changes
therein);
(f) Guaranties. The Transit Mix Guaranty in the form of
Exhibit C, with appropriate insertions; the Phoenix Guaranty
in the form of Exhibit D, with appropriate insertions; the
Williams Guaranty in the form of Exhibit E, with appropriate
insertions; and the Castle Guaranty in the form of Exhibit F,
and the Pueblo Guaranty in the form of Exhibit G with
appropriate insertions;
(g) Certificate of No Default. A certificate signed by the
Chairman of the Board of Directors, the Chief Financial
Officer, the Treasurer or the Secretary of the Borrower to the
effect that: (i) no Event of Default or Unmatured Event of
Default has occurred and is continuing or will result from the
making of the Term Loan and the first Revolving Credit Loan;
and (ii) the representations and warranties of the Borrower
contained herein are true and correct as at the date of the
Term Loan and the first Revolving Credit Loan as though made
on that date;
(h) Opinion of Counsel to the Borrower and Subsidiaries. An
opinion of counsel to the Borrower and its subsidiaries to
such effect as the Lenders may require;
(i) Acquisition Agreement. A certified copy of the
Acquisition Agreement;
(j) Acquisition. The Agent shall have received evidence,
reasonably satisfactory to the Agent, that the Acquisition has
been completed on terms and conditions satisfactory to the
Lenders;
(k) Certificate of Financial Compliance. A certificate
signed by the Chairman of the Board of Directors, the Chief
Financial Officer, the Treasurer or the Secretary of the
Borrower, showing that as of September 28, 1996, the Borrower
was in full compliance with any financial ratio or restriction
contained in the Original Agreement and also containing a
description of the amount and type of capital expenditures
which are excluded from capital expenditures pursuant to the
parenthetical in clause (iv) of the definition of Income
Available for Fixed Charges as set forth in the Original
Agreement; and
(l) Miscellaneous. Such other documents and certificates as
the Agent or the Lenders may request.
SECTION 7.2 REPRESENTATIONS AND WARRANTIES: NO DEFAULT.
(a) Representations and Warranties. At the date of the Term
Loan and each Revolving Credit Loan, the Borrower's
representations and warranties set forth herein shall be true
and correct as at such date with the same effect as though
those representations and warranties had been made on and as
at such date.
(b) No Default. At the time of the Term Loan and each
Revolving Credit Loan, and immediately after giving effect to
the Term Loan and each Revolving Credit Loan, the Borrower
shall be in compliance with all the terms and provisions set
forth herein on its part to be observed or performed, and no
Event of Default or Unmatured Event of Default shall have
occurred and be continuing at the time of any Loan, or would
result from the making of any Loan.
SECTION 7.3 SUCCEEDING LOANS. The application by the
Borrower for any Revolving Credit Loan other than the first shall
be deemed a representation and warranty by the Borrower that the
statements in Section 7.2 are true and correct on and as of the
date of each such Loan.
SECTION 8 DEFAULT
SECTION 8.1 EVENTS OF DEFAULT. Each of the following
occurrences is hereby defined as an "Event of Default":
(a) Nonpayment or Non-Compliance with Financial Requirements.
The Borrower shall fail to make any payment of principal,
interest, or other amounts payable hereunder when and as due,
or shall fail to be in compliance with any of the Financial
requirements set forth at Section 6.4 hereof; or
(b) Default under Related Documents. Any default, event of
default, or similar event shall occur or continue beyond any
applicable grace or notice period under any Loan Document, or
any Loan Document shall not be, or shall cease to be,
enforceable in accordance with its terms; or
(c) Cross-Default. There shall occur any default or event of
default, or any event which might become such with notice or
the passage of time or both, or any similar event, or any
event which requires the prepayment of borrowed money or the
acceleration of the maturity thereof, under the terms of any
evidence of indebtedness or other agreement issued or assumed
or entered into by the Borrower or any subsidiary or under the
terms of any indenture, agreement or instrument under which
any such evidence of indebtedness or other agreement is
issued, assumed, secured or guaranteed, and such event shall
continue beyond any applicable period of grace; or
(d) Dissolutions, etc, The Borrower shall fail to comply with
any provision concerning its existence or that of any
subsidiary or any prohibition against dissolution,
liquidation, merger, consolidation or sale of assets; or
(e) Warranties. Any representation, warranty, schedule,
certificate, financial statement, report, notice or other
writing furnished by or on behalf of the Borrower or to the
Agent or to either Lender is false or misleading in any
material respect on the date as of which the facts therein set
forth are stated or certified; or
(f) Change in Control. A transfer of or an accumulation of
a majority of the outstanding capital stock of the Borrower
shall be acquired, directly or indirectly, by a person or
entity, or group of persons or entities acting in concert, who
own on the date hereof less than 5% of such voting stock; or
(g) ERISA. Any reportable event shall occur under the
Employee Retirement Income Security Act of 1974, as amended,
in respect of any employee benefit plan maintained for
employees of the Borrower or any subsidiary; or
(h) Litigation. Any suit, action or other proceeding
(judicial or administrative) commenced against the Borrower or
any subsidiary, or with respect to any assets of the Borrower
or any subsidiary, shall threaten to have a material and
adverse effect on the future operations of the Borrower or any
subsidiary; or a final judgment or settlement shall be entered
in, or agreed to in respect of, any such suit, action or
proceeding and said final judgment or settlement is for or in
an amount which would have a material adverse effect on the
Borrower and its subsidiaries taken as a whole; or
(i) Noncompliance with this Agreement. The Borrower shall
fail to comply with any material provision hereof, which
failure does not otherwise constitute an Event of Default, and
such failure shall continue for thirty days after notice
thereof to the Borrower by the Agent or either Lender or any
other holder of a Note; or
(j) Guaranty. Any guaranty of the Loans (specifically
including but not limited to the Transit Mix Guaranty, the
Phoenix Guaranty, the Williams Guaranty, the Castle Guaranty
or the Pueblo Guaranty) shall be repudiated or become
unenforceable or incapable of performance; or
(k) Voluntary Bankruptcy. The Borrower or any subsidiary
shall file a petition or answer or consent seeking relief
under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other applicable federal, state
or foreign bankruptcy law or other similar law, or the
Borrower or any subsidiary shall consent to the institution of
proceedings thereunder or the filing of any such petition or
to the appointment or taking possession of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or
similar official of the Borrower or any subsidiary; or
(l) Involuntary Bankruptcy. There shall be entered a decree
or order by a court constituting an order for relief in
respect of the Borrower or any subsidiary under Title 11 of
the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign
bankruptcy law or other similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or
similar official of the Borrower or any subsidiary or of any
substantial part of their respective properties, or ordering
the winding-up of or liquidation of the affairs of the
Borrower or any subsidiary and any such decree or order shall
continue unstayed and in effect for a period of forty-five
(45) consecutive calendar days; or
(m) Insolvency. The Borrower or any subsidiary shall become
insolvent or shall fail or be unable to pay its debts as they
mature, shall admit in writing its inability to pay its debts
as they mature, shall make a general assignment for the
benefit of its creditors, shall enter into any composition or
similar agreement, or shall suspend the transaction of all or
a substantial portion of its usual business.
SECTION 8.2 REMEDIES. Upon the
occurrence of any Event of Default set forth in subsections
(a)-(j) of Section 8.1 and during the continuance thereof,
Agent shall, at the request of,
or may, with the consent of the Lenders declare the Notes and any
other amounts owed to the Lenders, including without limitation
any accrued but unpaid Commitment Fee, to be immediately due and
payable, whereupon the Notes and any other amounts owed to the
Lenders shall forthwith become due and payable. Upon the
occurrence of any Event of Default set forth in subsections (k)
(m) of Section 8.1, all of the Notes and any other amounts owed
to both Lenders, including without limitation any accrued but
unpaid Commitment Fee, shall be immediately and automatically due
and payable without action of any kind on the part of either
Lender or any other holder of a Note. Upon the occurrence of any
Event of Default, any obligation of either Lender to make Loans
shall immediately and automatically terminate without action of
any kind on the part of the Agent or either Lender until such
Event of Default is waived by the Lenders, if ever. The Borrower
expressly waives presentment, demand, notice or protest of any
kind in connection herewith. The Agent shall promptly give the
Borrower written notice of any such declaration, but failure to
do so shall not impair the effect of such declaration. No delay
or omission on the part of the Agent, the Lenders or any holder
of a Note in exercising any power or right hereunder or under
such Note shall impair such right or power or be construed to be
a waiver of any Event of Default or any acquiescence therein, nor
shall any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof, or the
exercise of any other power or right.
SECTION 9 THE AGENT
SECTION 9.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby
irrevocably appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms
of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly
set forth herein, nor shall the Agent be deemed to have any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Documents or
otherwise exist against the Agent.
SECTION 9.2 DELEGATION OF DUTIES. The Agent may execute any
of its duties under this Agreement or any other Loan Document by
or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
SECTION 9.3 LIABILITY OF AGENT. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful
misconduct) or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty
made by the Borrower, or any subsidiary or affiliate of the
Borrower, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement
or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Borrower or
any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or
to inspect the properties, books or records of the Borrower or
any of the Borrower's subsidiaries or affiliates.
SECTION 9.4 RELIANCE BY AGENT. (a) the Agent shall be
entitled to rely, and shall be fully protected in relying upon
any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or
made by the proper person or persons, and upon advice and
statements of legal counsel (including counsel to the Borrower),
independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document until
it shall have first received such advice or concurrence of the
Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in
refraining from acting under this Agreement or any other Loan
Document in accordance with a request or consent of the Lenders
and such request and any action taken or failure to act pursuant
thereto shall be binding upon the Lenders.
(b) for purposes of determining compliance with the
conditions specified in Section 7.1 hereof, each Lender shall be
deemed to have consented to, approved or accepted, or to be
satisfied with, each document or other matter sent by the Agent
to such Lender for consent, approval, acceptance or satisfaction,
or required thereunder to be consented to or approved by or
acceptable or satisfactory to the Lender.
SECTION 9.5 NOTICE OF DEFAULT. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Event of
Default, except with regard to defaults in the payment of
principal, interest and fees required to be paid to the Agent for
the account of the Lenders, unless the Agent shall have received
written notice from a Lender or the Borrower referring to this
Agreement, describing such Event of Default and stating that such
notice is a "notice of default." The Agent shall promptly notify
the Lenders of its receipt of any such notice. The Agent shall
take such action with respect to such Event of Default as may be
requested by the Lenders in accordance with Section 8 hereof;
provided, however, that unless and until the Agent has received
any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with
respect to such Event of Default as it shall deem advisable or in
the best interest of the Lenders.
SECTION 9.6 CREDIT DECISION. Each Lender acknowledges that
none of the Agent-Related Persons has made any representation or
warranty to it, and that no act by the Agent hereinafter taken,
including any review of the affairs of the Borrower and its
subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender
represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such
documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and
creditworthiness of the Borrower and its subsidiaries, and all
applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder. Each
Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports
and other documents expressly herein required to be furnished to
the Lenders by the Agent, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations,
property, financial or other condition or creditworthiness of the
Borrower which may come into the possession of any of the Agent
Related Persons.
SECTION 9.7 INDEMNIFICATION OF AGENT. Whether or not the
transactions contemplated hereby are consummated, the Lenders
shall indemnify upon demand the Agent-Related Persons (to the
extent not reimbursed by or on behalf of the Borrower and without
limiting the obligation of the Borrower to do so), pro rata, from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including legal fees) of any kind or
nature whatsoever which may at any time (including at any time
following the repayment of the Loans, the termination of the
Letters of Credit or the resignation or replacement of the Agent)
be imposed on, incurred by or asserted against such Agent-Related
Persons in any way relating to or arising out of this Agreement,
or any Loan document, or any of the transactions contemplated
hereby, or any action taken or omitted by such Agent-Related
Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or
proceeding relating to or arising out of this Agreement or the
Loans or the Letters of Credit or the use of the proceeds
thereof, whether or not the Agent-Related Person so indemnified
is a party thereto; provided, however, that the Lenders shall
have no obligation hereunder to indemnify any Agent-Related
Person under this Section 9.7 with respect to obligations
resulting solely from the gross negligence or willful misconduct
of such Agent-Related Person. Without limitation of the
foregoing, each Lender shall reimburse the Agent upon demand for
its ratable share of any costs or out-of-pocket expenses
(including legal fees) incurred by the Agent in connection with
the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower. The
undertaking in this Section shall survive the payment of all
obligations hereunder and the resignation or replacement of the
Agent.
SECTION 9.8 AGENT IN INDIVIDUAL CAPACITY. Northern and its
affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Borrower and
its subsidiaries and affiliates as though Northern were not the
Agent hereunder and without notice to or consent of the Lenders.
The Lenders acknowledge that, pursuant to such activities,
Northern or its affiliates may receive information regarding the
Borrower or its subsidiaries (including information that may be
subject to confidentiality obligations in favor of the Borrower
or such subsidiary) and acknowledge that the Agent shall be under
no obligation to provide such information to them. With respect
to its Loans, Northern shall have the same rights and powers
under this Agreement as any other Lender and may exercise the
same as though it were not the Agent.
SECTION 9.9 SUCCESSOR AGENT. The Agent may, and at the
request of the Lenders shall, resign as Agent upon 30 days'
notice to the Lenders. If the Agent resigns under this
Agreement, the Lenders shall appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is
appointed prior to the effective date of the resignation of the
Agent, the Agent may appoint, after consulting with the Lenders
and the Borrower, a successor agent from among the Lenders. Upon
the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such
successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the applicable provisions of this
Section 9 shall inure to its benefit as to any actions taken or
omitted to be taken by its while it was Agent under this
Agreement. If no successor agent has accepted appointment as
Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent hereunder until such time,
if any, as the Lenders appoint a successor agent as provided for
above.
SECTION 10 MISCELLANEOUS
SECTION 10.1 WAIVER OF DEFAULT. The Lenders may, by written
notice to the Borrower, at any time and from time to time, waive
any default in the performance or observance of any condition,
covenant or other term hereof, or any Event of Default, which
shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver,
the Lenders and the Borrower shall be restored to their former
position and rights hereunder and under the Notes, respectively,
and any default or Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to
or impair any right consequent thereon or to any subsequent or
other default or Event of Default.
SECTION 10.2 NOTICES. All notices, requests and demands to or
upon the respective parties hereto shall be deemed to have been
given or made when deposited in the mail, postage prepaid, or
when sent if sent by facsimile, addressed:
(a) if to the Borrower to 225 West Wacker Drive, Chicago,
Illinois 60606 (Attention: Treasurer)
(b) if to Northern, in its capacity as Agent, or in its
capacity as a Lender, to 50 South LaSalle Street, Chicago,
Illinois 60675, (Attention: Joseph M. Kunze, Vice President)
(c) if to LaSalle Bank to 120 South LaSalle Street, Chicago,
Illinois 60603, (Attention: Michael Foster, Senior Vice
President)
or to such other address as may be hereafter designated in
writing by the respective parties hereto.
SECTION 10.3 NONWAIVER: CUMULATIVE REMEDIES.
No failure to exercise, and no delay in exercising, on the part
of the Agent or either or all of the Lenders of any right,
power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies of the Lenders herein
provided are cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.4 SURVIVAL OF AGREEMENTS. All
agreements, representations and warranties made herein shall
survive the delivery of the Notes and the making of any Loan
hereunder.
SECTION 10.5 SUCCESSORS; PARTICIPATIONS.
This Agreement shall, upon execution and delivery by the
Borrower, and acceptance by the Lenders in Chicago, Illinois,
become effective and shall be binding upon and inure to the
benefit of the Borrower, the Agent, the Lenders and their
respective successors and assigns, except that the Borrower may
not transfer or assign any of its rights or interest hereunder
without the prior written consent of all Lenders. The Lenders
may, without notice or consent of any kind, sell, assign,
transfer or grant participations in all or any of the Loans.
In such event each and every immediate and successive assignee,
transferee or holder of or participant in all or any of the
Loans shall have the right to enforce this Agreement, the
Notes, and all of the other document or instrument executed in
connection herewith, by suit or otherwise, for the benefit of
such assignee, transferee, holder or participant as fully as if
such assignee, transferee, holder or participant were herein by
name specifically given such rights, powers and benefits, but
the Lenders shall have an unimpaired right, prior and superior
to that of any assignee, transferee or holder to enforce this
Agreement, the Notes, and all of the other documents or
instrument executed in connection herewith for the benefit of
the Lenders or any such participant,
as to so much of the Loans as it has not sold, assigned or
transferred.
SECTION 10.6 CAPTIONS. Captions in this
Agreement are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
References herein to Sections or provisions without reference
to the document in which they are contained are references to
this Agreement.
SECTION 10.7 SINGULAR AND PLURAL. Unless the
context requires otherwise, wherever used herein the singular
shall include the plural and vice versa, and the use of one
gender shall also denote the others where appropriate.
SECTION 10.8 COUNTERPARTS. This Agreement
may be executed by the parties on any number of separate
counterparts, and by each party on separate counterparts; each
counterpart shall be deemed an original instrument; and all of
the counterparts taken together shall be deemed to constitute
one and the same instrument.
SECTION 10.9 FEES. The Borrower agrees, upon
demand of the Lenders, to pay or reimburse the Lenders for all
reasonable costs, expenses (including attorneys' fees and legal
costs and expenses, and time charges of attorneys who may be
employees of either of the Lenders, in each case both in and
out of court and in original, appellate and bankruptcy
proceedings), and disbursements incurred or paid by the Lenders
in connection with the preparation, negotiation, documentation,
administration, amendment, modification, waiver or
interpretation of this Agreement, and/or in enforcing or
preserving its rights hereunder or under the Notes or any
document or instrument executed in connection herewith.
Notwithstanding the foregoing, the Borrower shall not be
obligated to pay expenses of the Lenders pertaining to any
lawsuit initiated by the Lenders if the Lender's complaint
shall be dismissed with prejudice or if judgment shall be
rendered, in whole, against the Lenders (and shall not be
reversed on appeal).
SECTION 10.10 CONSTRUCTION; PROVISIONS
SEVERABLE, This Agreement, the Notes and any document or
instrument executed in connection herewith shall be governed
by, and construed and interpreted in accordance with, the
internal laws of the State of Illinois, and shall be deemed to
have been executed in the State of Illinois. If any term or
provision of this Agreement, the Notes, or any other documents
or instrument executed in connection herewith shall be
unenforceable or invalid, such unenforceability or invalidity
shall not render any other term or provision hereof
unenforceable or invalid, and all other terms and provisions of
this Agreement, the Notes, and any other documents or
instrument executed in connection herewith shall be enforceable
and valid.
SECTION 10.11 SUBMISSION TO JURISDICTION;
VENUE. To induce the Lenders to make the Loans, as evidenced
by the Notes and this Agreement, the Borrower irrevocably
agrees that, subject to the Lender's sole and absolute
election, all suits, actions or other proceedings in any way,
manner or respect, arising out of or from or related to this
Agreement, the Notes or any document or instrument executed in
connection herewith, shall be subject to litigation in courts
having situs within Chicago, Illinois. The Borrower hereby
consents and submits to the jurisdiction of any local, state or
federal court located within Chicago, Illinois. The Borrower
hereby waives any right it may have to transfer or change the
venue of any suit, action or other proceeding brought against
the Borrower by the Lenders in accordance with this
Section.
SECTION 10.12 SET-OFF. At any time and without notice of any
kind, any account, deposit or other indebtedness owing by either
Lender to Borrower, and any securities or other property of
Borrower delivered to or left in the possession of either Lender
or its nominee or bailee, may be set off against and applied in
payment of any obligation hereunder (whether as Loans or Letters
of Credit), whether due or not. The Lenders hereby agree that if
either shall, through the exercise of any right of counterclaim,
set-off, banker's lien, or otherwise, receive payment of a
proportion of the aggregate amount of principal and interest due
with respect to its participation in the Loans that is greater
than the proportion received by the Lenders in respect of the
aggregate amount of principal and interest due with respect to
its pro rata share in the Loans, the party receiving such
proportionately greater payment shall increase (the "Set-Off
Increase") its Commitment - Revolving Credit or Commitment - Term
Loan (which it shall be deemed to have done simultaneously upon
receipt of such payment) in the Revolving Credit Loans or Term
Loan, respectively, so that all such recoveries of principal and
interest with respect to all Loans and Letters of Credit shall be
on a pro rata basis. If at any time either Lender is required to
return or refund all or any part of a payment, then after its
refund or repayment, its increased Commitment - Revolving Credit
or Commitment Term Loan shall be computed as if it had never
received such payment.
SECTION 10.13 DOCUMENTATION. Both Lenders represent,
warrant, and covenant to the other Lender that:
(a) In making its decision to enter into this Agreement
and the Notes:
(i) it independently has taken whatever steps it considers
necessary to evaluate the financial condition and affairs of
the Borrower;
(ii) it has made an independent credit judgment;
(iii) it has not relied upon any representation by the
other Lender; and
(iv) neither Lender shall be responsible or liable to the
other Lender for any statements in or omissions from this
Agreement, the Notes, or any other document or instrument
executed by the Borrower or by and among the Borrower and the
Lenders and document or instrument received by either Lender
from the Borrower or concerning the Borrower, and
(b) With respect to the Loans and Letters of Credit and so
long as any portion of the Loans and Letters of Credit,
respectively, remains outstanding, each Lender will continue to
make its own independent evaluation of the financial conditions
and affairs of the Borrower.
SECTION 10.14 LENDERS. The Lenders agree that neither Lender
may amend, waive, alter or agree to any other modification of
this Agreement, the Notes and all other documents or instruments
executed in connection herewith without the prior written consent
and agreement of the other Lender.
SECTION 10.15 MERGER AND INTEGRATION. Commencing as of the
date of this Agreement, this Agreement, the Notes, the Letters of
Credit, the Guaranties referred to herein, and the other
documents and instruments referred to herein contain the entire
agreement among the parties hereto and thereto with respect to
the subject matter hereof and thereof, and specifically
supersede, amend and restate in their entirety the Prior
Documents and the commitments thereunder shall be deemed
terminated. Notwithstanding the foregoing and without limiting
any other rights that may have accrued under the Prior Documents
prior to the date hereof, all rights of the Lenders under the
Prior Documents to payment under the Prior Documents that have
accrued or arose on or prior to the date hereof, shall survive
the termination of commitments under the Prior Documents, and the
principal amount of all advances made under the Prior Documents
shall not, however, be deemed paid in full but rather transferred
as provided herein. All Notes issued hereunder are, to the
extent of such outstanding indebtedness, in substitution for, and
not in repayment of, the principal indebtedness evidenced by the
Original Agreement.
CONTINENTAL MATERIALS CORPORATION
By:
Its:
THE NORTHERN TRUST COMPANY
By:
Its:
LASALLE NATIONAL BANK
By:
Its:
