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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 5-10065
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EARLE M. JORGENSEN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 95-0886610
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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3050 EAST BIRCH STREET, BREA, CALIFORNIA 92821
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (714) 579-8823
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. None
Number of shares outstanding of the registrant's common stock, par value
$.01 per share at April 30, 1998--128 shares
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PART I
SAFE HARBOR ACT STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 CONCERNING
CERTAIN ASPECTS OF THE BUSINESS OF THE COMPANY. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT INCLUDING, WITHOUT
LIMITATION, STATEMENTS REGARDING THE ISSUER'S FUTURE FINANCIAL POSITION,
BUSINESS STRATEGY, BUDGETS, PROJECTED COSTS AND PLANS AND OBJECTIVES OF
MANAGEMENT FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS,
INCLUDING, WITHOUT LIMITATION, CHANGES IN THE PRICE AND SUPPLY OF METAL
PRODUCTS, CHANGES IN THE DEMAND FOR METAL PRODUCTS IN THE INDUSTRIES SUPPLIED
BY THE COMPANY, RELATIONSHIPS WITH SIGNIFICANT CUSTOMERS, INTEREST RATE
FLUCTUATIONS, THE IMPACT OF ENVIRONMENTAL REGULATIONS, AND GENERAL ECONOMIC
AND BUSINESS CONDITIONS. SEE "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." ALTHOUGH THE COMPANY BELIEVES
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE
CORRECT. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
ITEM 1. BUSINESS
Earle M. Jorgensen Company (the "Company" or "EMJ") is one of the largest
independent distributors of metal products in the United States. The Company
was formed on May 3, 1990, when Kelso & Companies Inc. ("Kelso") and its
affiliates acquired control of and combined two leading metals distributors,
EMJ (founded in 1921) and Kilsby-Roberts Holding Co. ("Kilsby") (successor to
C.A. Roberts Company, founded in 1915). In connection with the combination of
EMJ and Kilsby, the Company became a wholly owned subsidiary of Earle M.
Jorgensen Holding Company, Inc. ("Holding"). The events, activities and
transactions associated with the Company becoming a wholly owned subsidiary of
Holding is together sometimes hereinafter referred to as the "Acquisition."
The Company is one of the largest independent distributors of metal products
in the U.S., providing value-added metals processing services and distributing
a broad line of carbon, alloy, stainless and aluminum bar, tubing and pipe,
and plate and sheet metal products. The Company sells these products to over
40,000 customers engaged in a wide variety of industries including machinery
manufacturing, transportation, fabricated metal products, aerospace, oil
tools, construction, shipbuilding, plastics, chemicals, petrochemicals, farm
equipment, food processing, energy and environmental control. These customers
are serviced through the Company's network of 25 service centers, four plate
processing centers, one cutting center, one tube honing facility, three sales
offices and a national merchandising office.
The Company serves its customers by providing quick product delivery, metals
processing expertise and inventory management services. The Company purchases
metals from primary producers and sells these metals in smaller quantities to
a wide variety of end users, generally within 24 hours from receipt of an
order. During fiscal 1998, the Company handled approximately 8,100 sales
transactions per business day, an average of $510 per transaction. EMJ
processes most of the metals it sells, by cutting to length, burning, sawing,
honing, shearing, grinding, polishing, and performing other similar services,
all to customer specifications.
In late fiscal 1997, the Company appointed a new Chief Executive Officer and
developed and began to implement a plan to restructure and realign its
operations and reduce its workforce. Since March 1997, the Company has closed
four domestic service centers (Birmingham, Alabama; Hartford, Connecticut;
Detroit, Michigan and Buffalo, New York) while continuing to service the
markets of those facilities from service centers in adjoining territories. The
Company also discontinued its flat-rolled processing center and consolidated
two honing operations and sold two of its foreign subsidiaries that generated
net operating losses of $2.9 million during the three years ended March 31,
1998. Since December 31, 1996, the Company's workforce has decreased
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15%, from approximately 2,600 on December 31, 1996 to approximately 2,200 on
March 31, 1998. In the aggregate, the Company believes that it has reduced its
cost structure by approximately $17 million since commencement of its 1997
restructuring plan. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--General".
The Company is currently engaged in a reengineering program emphasizing
process improvements including: (i) pursuing sales to new and existing
customers utilizing management information systems that provide improved
customer and market data and (ii) further implementing cost savings through
reductions in delivery and inventory handling expenses and through other
efficiency realizations. Effective fiscal 1998, the Company also instituted a
new management incentive compensation plan to provide bonuses to branch and
corporate managers based on the achievement of certain branch operating and
corporate financial objectives. See "Item 11. Executive Compensation--
Management Incentive Compensation Plan".
The Company's restructuring plan has resulted in, and the reengineering
program is expected to continue, a downward trend in operating expense ratios.
INDUSTRY OVERVIEW
The Company believes that metals service centers provide valuable services
that are needed by end users. Primary metals producers, which manufacture and
sell large volumes of steel, aluminum and specialty metals in standard sizes
and configurations, generally sell only to those large end-users and metals
service centers who do not require processing of the products and who can
order in large quantities and tolerate relatively long lead times. Metals
service centers, which offer services ranging from pre-production processing
in accordance with specific customer requirements to storage and distribution
of unprocessed metal products, function as intermediaries between primary
metals producers and end-users.
The current trend among primary metals producers is to focus on their core
competency of high-volume production of a limited number of standardized metal
products. This change in focus has been driven by their need to develop and
improve efficient, volume-driven production techniques in order to remain
competitive.
At the same time, most end-users have recognized the economic advantages
associated with outsourcing their metal processing and inventory management
requirements. Outsourcing permits end-users to reduce total production cost by
shifting the responsibility for pre-production processing to metals service
centers, whose higher efficiencies in performing these processing services
make the ownership and operation of the necessary equipment a better
investment. Inventory management and just-in-time delivery services provided
by metals service centers also enable end-users to reduce material costs,
decrease capital required for inventory and equipment and save time, labor and
other expenses.
As a result of these trends, metals service centers play an increasingly
important role in all segments of the metals industry. Metals service centers
purchase and distribute about 30% of all carbon industrial products and nearly
45% of all stainless steel products produced in the U.S. Metals service
centers are the single largest customer group of the U.S. domestic steel
industry and serve the metal supply needs of more than 300,000 manufacturers
and fabricators through service center locations nationwide. The metals
distribution and processing industry generated an estimated $40 billion in
revenues in the U.S. in 1996. The Company believes that the metals service
center industry will continue to increase its role as a valuable intermediary
between primary metal producers and end users, primarily as a result of (i)
the refocus by metal producers towards sales efforts to larger volume
purchasers to increase production efficiency and (ii) increased demand by end
users for outsourced metals processing, just-in-time inventory management and
the other value-added materials management services.
The metals service center industry is highly fragmented, consisting of a
large number of small companies, which are limited as to product line, size of
inventory and customers located within a specific geographic area, and a few
relatively large companies. The larger and more sophisticated companies, such
as EMJ, have certain
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advantages over smaller companies, such as higher discounts for volume
purchases, the ability to service customers with operations in multiple
locations and the use of more sophisticated information systems. There has
been a trend toward consolidation in the industry in recognition of the
advantages of larger companies. According to industry sources, the number of
steel processors and metals service center companies in the U.S. has been
reduced from approximately 7,000 in 1980 to approximately 3,400 in 1997.
COMPETITIVE STRENGTHS
The Company believes that the following factors contribute to its success in
the metals distribution industry:
Market Position. The Company is among the largest independent distributors
of metal products in the U.S. The Company believes that its broad product
offerings, with a specialization in higher margin bar and tubing (as compared
to flat-rolled products), have enabled it to maintain its position among the
market leaders and achieve gross margins that are among the highest for
comparable publicly-traded metals distribution companies. The Company is among
the largest purchasers of steel in the U.S. and has developed long-term
relationships with numerous metals producers, resulting in access to a wide
variety of metals and new product and service ideas. Because the Company
purchases large volumes of metals, it is able to achieve economies of scale in
purchasing. Furthermore, the Company believes that its salesforce is among the
most experienced in the industry.
Network of Strategically Located Facilities. The Company's service centers
are strategically located throughout North America, generally within one day's
delivery time to almost all U.S. manufacturing centers. The Company believes
that its network of strategically located facilities positions it to increase
sales to national customers that currently buy metals from various suppliers
in different locations. The Company's facilities serve more than 40,000
customers, with no single customer accounting for more than three percent of
the Company's gross revenues. Such diversification reduces the Company's
vulnerability to the financial or economic weakness of particular customers,
industries or regions.
Service and Product Selection. The Company specializes in higher gross
margin bar and tubing products that are not commonly sold directly by steel
and aluminum producers in small quantities. The Company serves the needs of
its customers by carrying a broad range of shapes and sizes in its core
product areas in large quantities, which allows the Company to deliver orders
to customers typically within 24 hours from receipt of an order. Each of the
Company's service centers strives to be a market leader in the Company's core
product lines in its geographic area. The Company benefits from an excellent
reputation for quality and service built over its 75 years in operation and
has received numerous quality and service awards from its customers. The
Company was among the first in the metals distribution industry to receive
multi-site ISO 9002 certification and had the first metals service center to
receive QS 9000 certification established by the automobile industry.
Management Information Systems and Inventory Practices. The Company has
invested significant resources to upgrade its management information and
financial reporting system. The Company's current system, which was brought on
line in February 1995, provides an internal benchmarking system to track
profitability by customer and product type. The Company believes that this
information will assist management in its efforts to purchase more
effectively, reallocate inventory among different locations and improve
customer service through better order reference data. The Company tailors its
inventory at each service center to the specific customer requirements of the
particular market served.
Reduced Cost Structure and Economies of Scale. The Company believes that the
closure or sale of underperforming assets, the reduction in its workforce and
other restructuring initiatives has improved the Company's cost structure by
approximately $17 million. The Company believes that it will be better able to
withstand an economic downturn as a result of its cost reduction initiatives.
In addition, because of the Company's large size and scope of operations, its
fixed costs are spread across a large base of sales.
Experienced Management with Equity Ownership. The Company's executives and
other members of its management have substantial experience in the metals
industry. In addition, the Company's employees directly,
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and indirectly through the Jorgensen Employee Stock Ownership Plan (the
"ESOP"), own in the aggregate approximately 35.3% (28.8% on a diluted basis)
of the outstanding Holding Common Stock as of March 31, 1998.
OPERATING AND GROWTH STRATEGY
The Company's primary business goal is to improve its operating profits
while expanding its market share. Its operating and growth strategy consists
of the following elements:
Continue Cost Reductions and Productivity Improvements. The Company is
currently implementing a reengineering program to improve profitability and
realize cost savings through continued reductions in delivery and inventory
handling expenses and through other efficiency realizations. The Company seeks
to increase asset and employee productivity and to further decrease unit costs
through initiatives intended to increase volume, thereby taking advantage of
economies of scale. The Company has made and will continue to make investments
in its management information system to increase the efficiency of the Company
and assist it in identifying additional areas for operational improvement. In
addition, the Company has instituted a new management incentive plan to
provide incentives to branch management that are based on branches operating
achievements and corporate financial objectives.
Focus on Higher Gross Margin Value-Added Products and Services. The Company
seeks to maintain its gross margins and to expand its market share by (i)
making sales from inventory with value-added services as often as possible,
since such sales generally generate higher gross margins and (ii) providing
inventory management and timely delivery services. Since the mid-1980's, the
Company has shifted its product mix away from commodity-like products such as
flat-rolled steel and has increased its sales of specialty products such as
carbon, alloy, stainless and aluminum bar and tubing that generally afford
higher gross margins. Although the Company continues to sell steel and
aluminum sheet products, it does so primarily in niche markets or as a service
to important customers that are significant purchasers of other higher gross
margin products.
Realize Efficiencies from Management Information System Investments. The
Company believes that continuing enhancements to the Company's management
information system will assist the Company in its initiatives to achieve
further cost savings and enable it to handle a larger number of orders.
Planned improvements in the Company's management information system include:
(i) an improved order processing system which will allow its salespersons to
access customer history and to improve order throughput, (ii) a warehouse
automation system to better control inventory and shipment logistics, (iii)
upgraded financial reporting, planning and sales and gross profit analysis
systems and (iv) document imaging technology to facilitate processing, storage
and retrieval of transactional data. These and other enhancements should
assist the Company's efforts to improve the information available to
management in its initiatives to improve customer service, optimize inventory
levels and achieve greater operational efficiencies.
CUSTOMERS AND MARKETS
The Company services the steel or aluminum requirements of over 40,000
active customers throughout the U.S. in a wide variety of industries,
including machinery manufacturing, transportation, fabricated metal products,
aerospace, oil tools, construction, shipbuilding, plastics, chemicals,
petrochemicals, farm equipment, food processing, energy and environmental
control. The Company is not dependent on any single customer or industry, and
during fiscal 1998 no single customer accounted for more than three percent of
revenues.
During fiscal 1998, the Company handled approximately 8,100 sales
transactions per business day generating an average revenue of approximately
$510 per transaction. Sales of stock inventory maintained by the Company
(referred to as "stock sales") represented approximately 87% of the Company's
domestic revenues in fiscal 1998. Special requirements of the customer are met
by arranging mill-direct sales and by making buy-outs from other distributors
of items the Company does not maintain as stock inventory. Such sales
generally have lower gross margins than stock sales, but provide a valuable
customer service.
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The vast majority of sales are from individual purchase orders and are not
subject to ongoing supply contracts; however, the Company sometimes enters
into contracts to purchase and supply specific products over a period of a
year or longer. Such contracts provide the customer with greater certainty as
to timely delivery, price stability and continuity of supply, and sometimes
satisfy particular processing or inventory management requirements. Such
contracts have resulted in new customer relationships and increased sales
volumes for the Company, but can have a slightly lower gross margin than
ordinary sales. Such contracts, in the aggregate, represented less than 10% of
Company revenues in fiscal 1998.
Seasonal fluctuations in the Company's business generally occur in the
summer months and in November and December, when many customers' plants are
closed for vacations. Order backlog is not a significant factor in the
business of the Company, as orders are generally filled within 24 hours.
PRODUCTS
The Company has designated certain carbon and alloy, aluminum, and stainless
products as core product offerings under its bar, tubing and pipe, plate, and
sheet product lines. The Company stocks a broad range of shapes and sizes of
each of these products in each service center (unless there is no market for
the product line at a particular location), and each service center strives to
be a market leader in the Company's core product lines in its geographic area.
Each service center also tailors its inventory to the customer and market
requirements of its geographic area.
Machinery manufacturing, transportation, fabricated metal products,
aerospace, oil tools, construction, shipbuilding, plastics, chemicals,
petrochemicals, farm equipment, food processing, energy and environmental
control, among others, are major markets for the Company. Carbon steel
products (hot-rolled and cold-finished) are used in construction equipment,
farm equipment, automotive and truck manufacturing, shipbuilding and oil
exploration as well as a wide range of other products. Stainless steel is used
widely in the chemical, petrochemical, and oil refining and biomedical
industries where resistance to corrosion is important. Aluminum is frequently
used in aircraft and aerospace applications where weight is a factor.
Different tubing products are appropriate for particular uses based on
different characteristics of the tubing materials, including strength, weight,
resistance to corrosion and cost. Carbon tubing and pipe are used in general
manufacturing. Alloy tubing is used primarily in the manufacturing of oil
field equipment and farm equipment. Stainless steel tubing and pipe are used
in applications requiring a high resistance to corrosion, such as food
processing. Aluminum tubing and pipe are used in applications that put a
premium on light weight (such as aerospace manufacturing).
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The following table sets forth a percentage breakdown of revenue from stock
sales (excludes mill-direct revenue and buy-outs) by product group for U.S.
operations for the fiscal years ended March 31, 1998, 1997 and 1996.
PERCENTAGE BREAKDOWN OF REVENUES FROM STOCK SALES BY PRODUCT GROUP
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YEAR ENDED MARCH
31,
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1998 1997 1996
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BARS:
Carbon and Alloy................................... 37.0% 33.9% 32.6%
Stainless.......................................... 12.2 13.6 14.2
Aluminum........................................... 6.2 5.5 5.7
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Total............................................ 55.4 53.0 52.5
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TUBING AND PIPE:
Carbon and Alloy................................... 27.0 26.8 26.4
Stainless.......................................... 3.6 3.7 3.8
Aluminum........................................... 3.3 3.6 3.7
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Total............................................ 33.9 34.1 33.9
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PLATE:
Carbon and Alloy................................... 5.5 5.6 5.4
Stainless.......................................... 1.5 1.8 2.2
Aluminum........................................... 2.4 2.5 2.8
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Total............................................ 9.4 9.9 10.4
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SHEET:
Carbon and Alloy................................... 0.4 0.5 0.6
Stainless.......................................... 0.3 0.6 0.9
Aluminum........................................... 0.5 1.8 1.5
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Total............................................ 1.2 2.9 3.0
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Other................................................ 0.1 0.1 0.2
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100.0% 100.0% 100.0%
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Revenues from stock sales as a percentage of total
revenues............................................ 87.2% 85.7% 83.4%
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INTELLECTUAL PROPERTY AND LICENSES
EMJ(R) is a registered trademark and service mark in the U.S. and in other
countries where the Company does or expects to do business. The Company
considers certain information owned by it to be trade secrets and the Company
takes measures to protect the confidentiality and control the disclosure of
such information. The Company believes that these safeguards adequately
protect its proprietary rights. While the Company considers all of its
intellectual property rights as a whole to be important, the Company does not
consider any single right to be essential to its operations.
MANAGEMENT INFORMATION SYSTEMS
In February 1995, the Company implemented a new management information
system that integrated three different systems the Company had operated in
prior years into one system for most Company operations. The transition to the
new system required a Company-wide training effort and changes in operational
processes. The Company experienced start-up operational difficulties in 1995
in connection with the implementation of its new management information system
that adversely affected its customer service, results of operations and
working capital. The Company believes such problems have been resolved.
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The system is designed to increase the Company's ability to analyze and
manage its operations and improve the productivity of the Company and its
customers and suppliers. The system enhances the Company's ability to utilize
electronic commerce in dealing with its customers and suppliers, including
EDI, remote inquiry and ordering ("RIO"), bar coding, document imaging and
other functions that can result in more efficiency and greater productivity
for all users. Planned improvements in the Company's management information
system include: (i) an advanced order processing system which will allow its
salespersons to access customer history and improve order throughput, (ii) a
warehouse automation system to better control inventory and shipment
logistics, (iii) an upgraded financial reporting, planning and sales and gross
profit analyses system and (iv) document imaging technology to facilitate
processing, storage and retrieval of transactional data.
SUPPLIERS
The majority of the Company's procurement activities are from a centralized
merchandising office in Chicago where specialists in each of the Company's
major product lines make inventory purchases. The Company concentrates on
developing close working relationships with high-quality suppliers to ensure
quality and timely delivery to the Company's customers.
The vast majority of the Company's purchases are made by purchase order and
the Company has no significant supply contracts with periods in excess of one
year. The Company is not dependent on any single supplier for a material
portion of its purchases, and in fiscal year 1998 no single supplier
represented more than 10% of its total purchases. The Company purchased less
than three percent of its inventory requirements from foreign-based suppliers
in fiscal 1998.
EMPLOYEES
As of March 31, 1998, the Company employed approximately 2,200 persons, of
whom approximately 1,285 were employed in production or shipping, 455 were
employed in sales and 460 served in executive, administrative or district
office capacities. Three different unions represented approximately 750 of the
Company's employees from 16 locations. The related collective bargaining
agreements expire on staggered dates between October 31, 1998 and May 31,
2001. The Company is negotiating a collective bargaining agreement with 18
newly organized employees of the Toronto facility, which is expected to be in
place by the end of June 1998. The Company is currently negotiating a renewal
of its collective bargaining agreement covering 83 employees at its facilities
in Los Angeles, California, which is expected to be in place by the end of
June 1998. The Company believes that it has a good overall relationship with
its employees.
FOREIGN OPERATIONS
The Company maintains two metal service centers in Canada operating through
a wholly owned subsidiary, Earle M. Jorgensen (Canada) Inc., a Canadian
limited liability company. On September 8, 1997, the Company sold its
operations in Mexico, and on January 29, 1998, the Company sold its operations
in the United Kingdom. For the fiscal years ended March 31, 1998, 1997 and
1996, revenues from foreign operations totaled $53.6 million, $63.8 million
and $66.7 million, respectively. See Note 4 to Consolidated Financial
Statements.
COMPETITION
The metals service center industry is highly fragmented and generally
competes on price, product availability, timely delivery, reliability, quality
and processing capability. Apart from price, these services are all "value-
added" services provided by metals service centers to lower customers' overall
costs. The industry includes both general-line distributors, which handle a
wide range of metal products, and specialty distributors, which specialize in
particular categories of metal products. Metals service centers range from
nationwide to regional and local in geographic coverage. Although the Company
is one of the largest distributors of metals in the U.S., some of its
competitors have greater financial resources and most of its competitors are
less leveraged than the Company.
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ENVIRONMENTAL MATTERS
The Company is subject to extensive and changing federal, state, local and
foreign laws and regulations designed to protect the environment and human
health and safety, including those relating to the use, handling, storage,
discharge and disposal of hazardous substances and the remediation of
environmental contamination. As a result, the Company is from time to time
involved in administrative and judicial proceedings and inquiries relating to
environmental matters.
During fiscal years 1998, 1997 and 1996, expenditures made in connection
with environmental matters totaled approximately $0.4 million, $1.1 million
and $0.8 million, respectively, principally for remediation and investigation
activities at sites where contamination of soil and/or groundwater is present,
including the sites discussed below. As of March 31, 1998, the Company had
accrued approximately $2.3 million for future investigation and remediation
expenditures that could be reasonably estimated related to the following
environmental matters.
Alameda Street (Los Angeles). Remediation was completed in fiscal 1996 and
the Company has received final approval from the County of Los Angeles
authorities. Total costs incurred by the Company in connection with this
project were $3.4 million, of which $1.7 million has been capitalized to the
property. The Company was reimbursed $1.5 million of such costs by the lessee
in accordance with a cost sharing agreement.
In February 1998 the Company was notified that it had potential
responsibility for lead and copper soil contamination of an undeveloped parcel
that is part of the Alameda Street property. A remediation plan has been
approved by local government agencies. As of March 31, 1998, the Company's
accrual for future investigation and remediation expenditures includes the
estimated costs under the remediation plan.
Bristol (Pennsylvania). A remedial action plan submitted and approved by the
Pennsylvania regulatory agency was completed in fiscal 1998. As of March 31,
1998, the project's cost has totaled $4.3 million, of which $3.2 million has
been paid by the Company and $1.1 million was paid by the former owner of the
property pursuant to a cost sharing agreement. No additional costs are
expected to be incurred. The Company sold the facility in July 1996.
Forge (Seattle/Kent, WA). The Company has indemnified the purchasers of its
former Forge facility for remediation of certain conditions at the facility
and at an off-site disposal site existing at the date of sale. In addition,
the Company indemnified such purchasers for up to $2.5 million of remediation
and investigation costs associated with or related to the environmental
conditions existing at the time of sale and discovered after the closing and
for which claims were made prior to July 2, 1995. No such claims were made. As
of March 31, 1997 and 1998, the remediation and investigation costs of the
Forge facility totaled $2.3 million and $2.6 million, respectively. The
Company's accrual for future investigation and remediation expenditures
includes the estimated remaining costs of remediation. The Company and the
current owner of the property are disputing responsibility for the remaining
costs of remediation. As of March 31, 1998, remediation and investigation
costs at the disposal site totaled $0.5 million and the Company has reserved
for future monitoring costs.
Union (New Jersey). During fiscal 1994, the Company was notified by the
current owner that it has potential responsibility for the environmental
contamination of a property formerly owned by a subsidiary and disposed of by
such subsidiary prior to its acquisition by the Company. The prior owner of
such subsidiary has also been notified of its potential responsibility. On
March 27, 1997, the current owner of the property informed the Company that it
estimated the cost of investigation and cleanup of the property at $875,000
and requested contribution to such costs from the Company and the prior owner.
The Company has contested responsibility and commented on the cleanup plan.
The Company does not have sufficient information to determine what potential
liability it has, if any. Accordingly, no reserves have been specifically
established for this matter as of March 31, 1998.
Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse
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effect on the Company's financial condition, results of operations or
liquidity. The possibility exists, however, that new environmental legislation
and/or environmental regulations may be adopted, or other environmental
conditions may be found to exist, that many require expenditures not currently
anticipated and that may be material.
ITEM 2. PROPERTIES
The Company currently maintains 25 service centers, four plate processing
centers, one cutting center, one tube honing facility, three sales offices and
one merchandising office at various locations throughout the U.S. and is
headquartered in Brea, California. Service centers in Birmingham, Alabama;
Hartford, Connecticut; Detroit, Michigan and Buffalo, New York were closed
and, except for Buffalo, sold in connection with the 1997 restructuring plan.
In addition, the Company sold facilities in Kansas City and Dallas in
connection with a consolidation of its operations in each of those cities,
discontinued its flat-rolled processing operations and sold its operations in
the United Kingdom and Mexico. The Company's facilities are in good condition
and are equipped to provide efficient processing of customer orders. The
Company's facilities generally are capable of being utilized at higher
capacities, if necessary. Most leased facilities have initial terms of more
than one year and include renewal options. While some of the leases expire in
the near term, the Company does not believe that it will have difficulty
renewing such leases or finding alternative sites.
Set forth below is a table summarizing certain information with respect to
the Company's facilities.
<TABLE>
<CAPTION>
OWNED/ FACILITY
COUNTRY/CITY/STATE LEASED (SQ. FT.)
------------------ ------ ---------
<S> <C> <C>
UNITED STATES:
Phoenix, Arizona.................................... Owned 72,200
Little Rock, Arkansas............................... Leased 28,800
Hayward, California................................. Leased 86,000
Los Angeles, California............................. Owned 632,700
Los Angeles, California............................. Leased 83,600
Denver, Colorado.................................... Leased 78,800
Honolulu, Hawaii.................................... Owned 109,200
Chicago, Illinois................................... Owned 554,000
Roselle, Illinois................................... Leased 4,900
Plainfield, Indiana................................. Owned 142,700
Davenport, Iowa..................................... Leased 59,200
Boston, Massachusetts............................... Owned 64,200
Minneapolis, Minnesota.............................. Owned 160,000
Kansas City, Missouri............................... Leased (a) 126,500
Kansas City, Missouri............................... Leased 103,500
St. Louis, Missouri................................. Leased 106,700
Charlotte, North Carolina........................... Owned 178,200
Cincinnati, Ohio.................................... Leased (b) 137,000
Cleveland, Ohio..................................... Owned 199,600
Cleveland, Ohio..................................... Owned 134,500
Tulsa, Oklahoma..................................... Owned 106,500
Tulsa, Oklahoma..................................... Owned 137,900
Portland, Oregon.................................... Leased 31,300
Philadelphia, Pennsylvania.......................... Leased 234,800
Memphis, Tennessee.................................. Leased 56,500
Dallas, Texas....................................... Owned 132,200
Houston, Texas...................................... Owned 276,000
Kent, Washington.................................... Leased 83,700
CANADA:
Toronto, Ontario.................................... Leased 38,600
Montreal, Quebec.................................... Leased 57,000
OTHER PROPERTIES:
Brea, California (headquarters)..................... Leased 38,300
</TABLE>
9
<PAGE>
- --------
(a) This previously owned facility was sold in March 1998 and is temporarily
being leased backed until completion of a move and consolidation to the
other Kansas City location. The move and consolidation is being
accommodated by an expansion, which is expected to be completed by
November 1998.
(b) The Company has exercised its option to purchase the facility.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries and branches are occasionally involved in
ordinary, routine litigation incidental to their normal course of business,
none of which they believe to be material to their financial condition or
results of operations. The Company and its subsidiaries and branches maintain
various liability insurance coverages to protect their assets from losses
arising out of or involving activities associated with ongoing and normal
business operations. See also "Item 1. Business--Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY
The Company has 128 shares of common stock par value $.01 per share, all of
which is owned by Holding. For each of the fiscal years ended March 31, 1998,
1997 and 1996, the Company paid dividends totaling $11,469,000, $5,552,000,
and $22,289,000, respectively, to Holding in connection with Holding's
repurchasing of its capital stock from employees of the Company whose
employment had terminated, as required by the terms of Holding's Stockholders
Agreement and the ESOP. In addition, in fiscal 1998, the Company paid
dividends of $45,419,000 to Holding in connection with the Refinancing
Transactions (as defined below). See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Refinancing
Transactions." The Company has not declared or paid any other dividends on its
capital stock in the three years ended March 31, 1998.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data are derived from the
audited consolidated financial statements of the Company. The consolidated
financial statements of the Company have been audited by Ernst & Young LLP,
independent auditors. All information contained in the following table should
be read in conjunction with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the consolidated
financial statements of the Company and the related notes thereto included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $1,050,005 $1,023,565 $1,025,659 $1,022,884 $843,380
Gross profit(1)......... 294,624 280,739 261,021 305,909 249,758
Operating expenses
exclusive of
restructuring and other
non-recurring charges.. 225,019 245,826 245,619 247,184 222,750
Restructuring and other
non-recurring charges.. 2,838 20,088 12,776 715 1,282
Income from operations.. 66,767 14,825 2,626 58,010 25,726
Net interest expense.... 41,059 40,880 40,874 34,604 30,032
Extraordinary loss(2)... 9,075 -- -- -- --
Net income (loss)....... 15,760 (26,556) (29,311) 19,919 (4,306)
BALANCE SHEET DATA:
Working capital......... $ 156,500 $ 170,988 $ 166,587 $ 243,738 $176,280
Net property, plant &
equipment.............. 106,643 120,050 134,259 139,705 143,099
Total assets............ 443,821 454,882 484,911 543,548 505,928
Long-term debt
(including current
portion)............... 312,234 291,286 279,952 296,274 294,136
Stockholder's equity.... (36,919) 1,927 25,141 76,400 54,708
OTHER SUPPLEMENTAL DATA:
Depreciation and
amortization(3)........ $ 9,475 $ 10,620 $ 12,022 $ 14,135 $ 14,680
Non-cash ESOP
expense(4)............. 2,788 3,102 3,401 7,694 6,005
Net cash interest
expense(5)............. 39,993 37,747 37,310 31,592 26,457
Capital expenditures.... 7,264 4,449 16,658 16,177 12,371
Ratio of earnings to
fixed charges(6)....... 1.54 -- -- 1.58 --
Dividends paid(7)....... 56,888 5,552 22,289 3,654 5,898
</TABLE>
- --------
(1) In February 1995, the Company began the implementation of a new enhanced
inventory and management information system. To ensure the accuracy of the
conversion of the perpetual inventory records, the
11
<PAGE>
Company performed physical inventory counts and other procedures at all of
its locations during the second, third and fourth quarters of fiscal 1996.
The Company identified a difference between the perpetual inventory records
and the general ledger amounting to $26,882 and, accordingly, recorded a
special charge to cost of sales for this difference in the fourth quarter
of fiscal 1996.
(2) The extraordinary loss of $9,075 includes the write-off of deferred
financing costs and payments of call premiums and other expenses in
connection with early retirement of debt. See Note 6 to Consolidated
Financial Statements.
(3) Depreciation and amortization excludes amortization of debt issue costs
aggregating $1,757, $2,144, $2,114, $2,117 and $2,040 for the years ended
March 31, 1998, 1997, 1996, 1995 and 1994, respectively, and debt issue
costs of $550 written off in connection with an amendment to the Company's
revolving loan agreement in fiscal 1996, reflected in the Company's
consolidated statements of operations as interest expense.
(4) Non-cash ESOP expense represents the amount of ESOP expense charged to
operations that were or will be funded in the form of Holding's equity
securities.
(5) Net cash interest expense represents net interest expense, including
interest expense associated with borrowings against cash surrender value
of life insurance policies maintained by the Company, adjusted to exclude
(i) the amortization and write-off of debt issue costs (see note (3)
above) and bond discount, and (ii) accrued interest.
(6) In computing the ratio of earnings to fixed charges, "earnings" represents
pre-tax income (loss) plus fixed charges except capitalized interest, if
any. "Fixed charges" represents interest whether expended or capitalized,
debt cost amortization, and 33% of rent expense, which is representative
of the interest factor. Earnings were sufficient to cover fixed charges
for the fiscal years ended March 31, 1998 and 1995. Earnings were
insufficient to cover fixed charges for the fiscal years ended March 31,
1997, 1996 and 1994 by $26,055, $38,248 and $4,306, respectively.
(7) Dividends paid to Holding in connection with Holding's repurchasing of its
capital stock from terminated employees. In fiscal 1998, the Company also
paid a dividend to Holding of $45,419 that was used by Holding to repay a
portion of Holding Notes (as defined below) and accrued interest. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Refinancing Transactions".
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Item 6.
Selected Financial Data" and the consolidated financial statements of the
Company, and the notes related thereto appearing elsewhere in this Form 10-K.
GENERAL
The Company was formed in May 1990 when Kelso and its affiliates acquired
control of and combined two leading metals distributors, EMJ (founded in 1921)
and Kilsby-Roberts Holding Co. (founded in 1915). Through its network of 25
service centers strategically located throughout North America, the Company
distributes a broad line of bar, tubing and pipe, and plate and sheet metal
products to over 40,000 customers.
During the past several years, the Company has undergone substantial
changes. In March 1997, the Company announced a $15.6 million restructuring
plan that included selling certain foreign operations, closing four domestic
distribution centers, and reducing the Company's workforce in order to improve
operating efficiencies and margins. In addition, fiscal 1997 included a $4.5
million write-off of certain costs related to its management information and
reporting system. In fiscal 1996, the Company recorded a $3.6 million
restructuring charge for workforce reductions and a non-recurring charge of
$9.2 million for asset write-downs and write-offs. In addition, fiscal 1996
included an inventory adjustment of $26.9 million representing the difference
between the Company's physical inventory balances and its perpetual inventory
records after the implementation and conversion to a new management
information system in February 1995. The implementation of the new computer
system adversely affected the Company's results of operations in fiscal 1996.
Start-up difficulties impacted sales, purchasing, receivables and inventory
management causing the Company to incur additional expense in correcting
errors arising in the transition process.
In late fiscal 1997, the Company appointed a new Chief Executive Officer and
developed and began to implement a plan to restructure and realign its
operations and reduce its workforce. In addition, the Company shifted its
strategic focus to emphasize maximizing operating income and cash flow. The
Company increased its operating earnings before restructuring and other non-
recurring charges to $69.6 million in fiscal 1998 from $34.9 million in fiscal
1997. This improved operating performance resulted primarily from the
successful implementation of the Company's 1997 restructuring plan. Cost
savings measures implemented under such plan included: (i) the closure of four
under-performing domestic service centers and the sale of unprofitable foreign
subsidiaries in Mexico and the United Kingdom (net operating losses totaled
$2.9 million during the three years ended March 31, 1998), and (ii) a
reduction in the number of employees from approximately 2,600 on December 31,
1996 to approximately 2,200 on March 31, 1998, including the elimination of a
number of corporate managerial positions. In the aggregate, the Company
believes that it has reduced its cost structure by approximately $17 million
since commencement of its restructuring plan.
The Company is currently engaged in a reengineering program emphasizing
process improvements including: (i) pursuing sales to new and existing
customers, utilizing enhanced information systems to provide improved customer
and market data and (ii) further implementing cost savings through reductions
in delivery and inventory handling expenses and through other efficiency
realizations. The Company is also pursuing further operational efficiencies
by: (i) providing incentives for service center managers and salespersons
based on branch operating achievements and corporate financial objectives; and
(ii) repositioning faster moving inventory from the facilities which the
Company had designated as depots to the service centers, which is designed to
increase sales and operating income. The Company is continually enhancing its
management information systems with the objective of improving operating
performance through better and more efficient service at reduced costs.
The Company's restructuring plan has resulted in, and the reengineering
program is expected to continue, a downward trend in operating expense ratios.
13
<PAGE>
The metals service center industry has been historically cyclical (with
periods of strong demand and higher prices followed by periods of weaker
demand and lower prices), principally due to the nature of the industries in
which the largest consumers of metals operate. The Company believes its
results have been less sensitive to economic trends than some of its
competitors due to its customer base, product mix and the variety of
industries served.
REFINANCING TRANSACTIONS
On March 24, 1998, the Company refinanced its indebtedness by (i)
consummating the issuance and sale (the "Offering") of $105.0 million in
aggregate principal amount of its 9 1/2% Senior Notes due 2005 (the "9 1/2%
Senior Notes"), (ii) replacing its existing revolving credit facility with an
amended and restated revolving credit facility (prior to and after such
amendment and restatement, the "Revolving Credit Facility"), and
(iii) borrowing $100.0 million in aggregate principal amount under a variable
rate term loan (the "Term Loan"). The net proceeds of the Offering, the Term
Loan and the Revolving Credit Facility were used to (i) redeem $155.0 million
in aggregate principal amount of the Company's outstanding 10 3/4% Senior
Notes (the "10 3/4% Notes" and together with the 9 1/2% Senior Notes, the
"Senior Notes") together with premium and accrued interest thereon to the date
of redemption, (ii) prepay approximately $5.1 million in aggregate principal
amount of purchase money indebtedness, including premium and accrued interest
thereon, and (iii) pay a dividend to Holding in the amount of approximately
$45.4 million used by Holding to (x) redeem $40.0 million in principal amount
of its senior indebtedness (the "Holding Notes"), and (y) pay approximately
$5.4 million of interest accrued as of March 24, 1998 on the Holding Notes
(collectively, the "Holding Prepayment"). The Holding Notes are owned by an
affiliate of Kelso.
The Offering, borrowings under the Term Loan, the refinancing of the
Revolving Credit Facility, and the Holding Prepayment are referred to
collectively as the "Refinancing Transactions." See Note 6 to Consolidated
Financial Statements.
STATEMENT OF OPERATIONS INFORMATION
The following table sets forth certain consolidated statement of operations
data for the Company. The historical consolidated financial data for the
fiscal years ended March 31, 1998, 1997 and 1996 are derived from the
historical consolidated financial statements included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------
1998 % 1997 % 1996 %
---------- ----- ---------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $1,050,005 100.0% $1,023,565 100.0% $1,025,659 100.0%
Gross profit............ 294,624 28.1 280,739 27.4 261,021 25.4
Operating expenses
exclusive of
restructuring and other
non-recurring expenses. 225,019 21.4 245,826 24.0 245,619 23.9
Warehouse and delivery
expenses............... 128,495 12.2 135,287 13.2 129,966 12.7
Selling expenses........ 37,147 3.5 40,791 4.0 41,794 4.1
General and
administrative
expenses............... 59,377 5.7 69,748 6.8 73,859 7.2
Income from operations.. 66,767 6.4 14,825 1.4 2,626 0.3
Net interest expense.... 41,059 3.9 40,880 4.0 40,874 4.0
Extraordinary loss...... 9,075 0.9 -- --
Net income (loss)....... 15,760 1.5 (26,556) (2.6) (29,311) (2.9)
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS--YEAR ENDED MARCH 31, 1998 COMPARED TO YEAR ENDED MARCH
31, 1997
Revenues. Revenues for fiscal 1998 increased 2.6% to $1,050.0 million,
compared to $1,023.6 million in fiscal 1997. Revenues from domestic operations
for fiscal 1998 increased $36.6 million (3.8%) to $996.4 million compared to
$959.8 million in fiscal 1997. Domestic revenues in fiscal 1998 reflect a 9%
increase in tonnage volume offset by a 3% reduction in average selling price
(material costs declined 4%) compared to fiscal 1997. Revenues from
international operations decreased $10.2 million to $53.6 million in fiscal
1998 due to the sale of the U.K. and Mexican subsidiaries (see Note 4 to
Consolidated Financial Statements).
Gross Profit. Gross profit increased $13.9 million to $294.6 million in
fiscal 1998 compared to $280.7 million in fiscal 1997 and gross margin
increased to 28.1% compared to 27.4%. Fiscal 1998 included a LIFO charge of
$0.3 million compared to a corresponding LIFO credit of $3.5 million in fiscal
1997. Gross profit and gross margin from foreign operations was $11.4 million
and 21.3% in fiscal 1998, compared to $13.4 million and 21.0% in fiscal 1997.
Exclusive of foreign operations and LIFO, gross margin was 28.5% for fiscal
1998 compared to 27.5% in fiscal 1997. The increase of 1.0% is due to changes
in product mix, primarily higher bar tonnage shipped (18%) and higher average
prices on tubular products (3%) in fiscal 1998 compared to fiscal 1997.
Expenses. Total operating expenses in fiscal 1998 were $227.8 million
compared to $265.9 million in fiscal 1997. Fiscal 1998 included a
restructuring charge of $2.8 million representing the loss on sale of the
Company's U.K. and Mexican operations (see Note 4 to Consolidated Financial
Statements). Fiscal 1997 included a restructuring charge of $15.6 million and
a non-recurring charge for asset write-offs of $4.5 million (see Note 1 to
Consolidated Financial Statements). Excluding such charges, operating expenses
in fiscal 1998 would have been $225.0 million, or 21.4% of revenues, compared
to $245.8 million, or 24.0% of revenues, in fiscal 1997.
Warehouse and delivery expenses decreased $6.8 million (5.0%) to $128.5
million in fiscal 1998 compared to $135.3 million in fiscal 1997. As a percent
of revenues, warehouse and delivery expenses were 12.2% in 1998 and 13.2% in
fiscal 1997. The decrease resulted from a 7% reduction in compensation and
related expenses resulting from a reduction in the number of employees,
including reductions from the closure of four domestic service centers and
from the sale of the Mexican and U.K. subsidiaries in August 1997 and January
1998, respectively, partially offset by higher freight and shipping expenses
attributable to the 9% increase in tonnage volume shipped and repositioning
depot inventories.
Selling, general and administrative expenses decreased $14.0 million (12.7%)
to $96.5 million in fiscal 1998 compared to $110.5 million in fiscal 1997. In
fiscal 1998 selling expenses decreased $3.7 million (9.1%) to $37.1 million,
compared to $40.8 million in fiscal 1997, and decreased as a percent of
revenues to 3.5% from 4.0% in fiscal 1997 due to a 5% reduction in
compensation and related expenses resulting from the closure of four domestic
service centers and the sale of the Mexican and U.K. subsidiaries. General and
administrative expenses decreased by $10.4 million (14.9%) to $59.4 million in
fiscal 1998, and to 5.7% of revenues in fiscal 1998 from 6.8% in fiscal 1997.
The decrease in general and administrative expenses was attributable to an 8%
decrease in compensation and related expenses resulting from the March 1997
restructuring, which included an administrative workforce reduction, higher
income from cash discounts taken on vendor payments and gains from sales of
surplus facilities.
Net Interest Expense. Net interest expense was $41.1 million in fiscal 1998
and $40.9 million in fiscal 1997. Such amounts include interest on the
Revolving Credit Facility, Senior Notes, Term Loan (in fiscal 1998 only), and
borrowings against the cash surrender value of certain life insurance policies
and the amortization of debt issue costs ($1.8 million in fiscal 1998 and $2.1
million in fiscal 1997).
During fiscal 1998 the average outstanding indebtedness (excluding
borrowings against the cash surrender value of certain life insurance
policies) was $303.9 million versus $304.5 million in fiscal 1997. The
weighted average interest rate on such indebtedness during fiscal 1998 was
9.68% versus 9.62% in fiscal 1997. The changes in the average outstanding
indebtedness and the average interest rate were attributable to the Company's
15
<PAGE>
Revolving Credit Facility borrowings and the impact of the Refinancing
Transactions consummated in March 1998 (see also "--Liquidity and Capital
Resources"). The average borrowings under the Revolving Credit Facility
decreased to $127.3 million from $130.4 million in fiscal 1997, and the
average interest rate increased to 8.65% in fiscal 1998 from 8.54% in fiscal
1997.
The outstanding borrowings against the cash surrender value of life
insurance policies was $88.9 million at March 31, 1998 and $76.5 million at
March 31, 1997, and the total interest expense on such borrowings increased to
$9.4 million in fiscal 1998 compared to $8.6 million in fiscal 1997. Such
increases resulted from a borrowing of $12.4 million against the increased
cash surrender value of life insurance policies in November 1997 to pay annual
premiums on such policies and to pay interest on previous borrowings (see "--
Liquidity and Capital Resources"). As specified in the terms of the insurance
policies, the rates for dividends payable on the policies correspondingly
increase when borrowings are outstanding under the policies. This increase in
dividends is greater than the increase in the incremental borrowing rate.
Dividend income earned under the policies was $10.3 million in fiscal 1998,
$7.8 million in fiscal 1997 and $7.6 million in fiscal 1996 and is reported as
an offset to general and administrative expenses in the Company's statements
of operations.
The interest rates on the 9 1/2% Senior Notes and on the life insurance
policy borrowings are fixed at 9.50% and 11.76%, respectively. The interest
rates on the Revolving Credit Facility and the Term Loan are floating rates
(9.0% and 8.94%, respectively, as of March 31, 1998).
Extraordinary Loss. The extraordinary loss of $9.1 million includes the
write-off of deferred financing costs and the payment of call premiums and
other expenses related to the early retirement of the Company's 10 3/4% Notes
and purchase money indebtedness as part of the Refinancing Transactions.
RESULTS OF OPERATIONS--YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH
31, 1996
Revenues. Revenues for fiscal 1997 decreased 0.2% to $1,023.6 million,
compared to $1,025.7 million in fiscal 1996. Revenues from domestic operations
for fiscal 1997 increased $0.8 million to $959.8 million compared to $959.0
million in fiscal 1996. Foreign revenues decreased $2.9 million to $63.8
million. While domestic revenues were relatively flat, foreign revenues were
adversely impacted by general weaknesses in the local economies.
Gross Profit. Gross profit increased $19.7 million to $280.7 million in
fiscal 1997 compared to $261.0 million in fiscal 1996 and gross margin
increased to 27.4% compared to 25.4%. The increases were primarily
attributable to an inventory adjustment of $26.9 million recorded in fiscal
1996 (see Note 2 to Consolidated Financial Statements). Fiscal 1997 also
included a LIFO credit of $3.5 million compared to a corresponding LIFO charge
of $9.7 million in fiscal 1996. Gross profit and gross margin from foreign
operations was $13.4 million and 21.0% in fiscal 1997, compared to $15.6
million and 23.4% in fiscal 1996. Exclusive of foreign operations, LIFO, and
the 1996 inventory adjustment, gross margin was 27.5% for fiscal 1997,
compared to 29.4% in fiscal 1996. The decrease of 1.9% reflects changes in
product and customer mix resulting from cyclical changes in industrial
production, competitive pricing pressures, disposition of slow moving and
discontinued inventory, and a sudden decline in stainless and aluminum sheet
commodity prices.
Expenses. Total operating expenses of $265.9 million in fiscal 1997 included
a restructuring charge of $15.6 million and a non-recurring charge for asset
write-offs of $4.5 million (see Note 1 to Consolidated Financial Statements).
Total operating expenses of $258.4 million in fiscal 1996 included a
restructuring charge of $3.6 million for workforce realignment, and a non-
recurring charge of $9.2 million for asset write-downs and write-offs (see
Note 1 to Consolidated Financial Statements). Excluding such charges,
operating expenses in fiscal 1997 would have been $245.8 million, or 24.0% of
revenues, compared to $245.6 million, or 23.9% of revenues, in fiscal 1996.
Warehouse and delivery expenses increased $5.3 million (4.1%) to $135.3
million in fiscal 1997 compared to $130.0 million in fiscal 1996. As a percent
of revenues, warehouse and delivery expenses were 13.2% in 1997
16
<PAGE>
and 12.7% in fiscal 1996. The increases are primarily attributable to higher
freight costs and related handling expenses resulting from the expansion of
services from existing inventory depots and from additional depots established
in fiscal 1996.
Selling, general and administrative expenses decreased $5.2 million (4.4%)
to $110.5 million in fiscal 1997 compared to $115.7 million in fiscal 1996. In
fiscal 1997 selling expenses decreased $1.0 million (2.4%) to $40.8 million,
and decreased as a percent of revenues to 4.0% from 4.1% in fiscal 1996 due to
lower compensation costs. General and administrative expenses decreased by
$4.1 million (5.5%) to $69.7 million in fiscal 1997, and to 6.8% of revenues
from 7.2% in fiscal 1996. The decrease in general and administrative expenses
was primarily due to lower compensation expense, lower depreciation and
amortization of property, plant and equipment resulting from a change in
accounting estimate in fiscal 1996, higher income from cash discounts taken on
vendor payments and gains from sales of surplus facilities.
NET INTEREST EXPENSE. Net interest expense was $40.9 million in both fiscal
1997 and 1996. Such amounts include interest on the Revolving Credit Facility,
Senior Notes, interest on borrowings against the cash surrender value of
certain life insurance policies and the amortization or write-off of debt
issue costs ($2.1 million in fiscal 1997 and $2.7 million in fiscal 1996).
During fiscal 1997 the average outstanding indebtedness (excluding
borrowings against the cash surrender value of certain life insurance
policies) was $304.5 million versus $305.4 million in fiscal 1996. The
weighted average interest rate on such indebtedness during fiscal 1997 was
9.62% versus 9.83% in fiscal 1996. The decrease in the average outstanding
indebtedness and the weighted average interest rate was attributable to the
Company's Revolving Credit Facility borrowings. The average borrowings under
the Revolving Credit Facility decreased to $130.4 million from $131.6 million
in fiscal 1996, and the average interest rate decreased to 8.54% in fiscal
1997 from 9.09% in fiscal 1996.
The outstanding borrowings against the cash surrender value of life
insurance policies was $76.5 million at March 31, 1997 and $65.9 million at
March 31, 1996, and the total interest expense on such borrowings increased to
$8.6 million in fiscal 1997 compared to $7.2 million in fiscal 1996. Such
increases resulted from a borrowing of $11.4 million against the increased
cash surrender value of life insurance policies in November 1996 to pay annual
premiums on such policies and to pay interest on previous borrowings (see "--
Liquidity and Capital Resources"). As specified in the terms of the insurance
policies, the rates for dividends earned under the policies correspondingly
increase when borrowings are outstanding under the policies. This increase in
dividends is greater than the increase in the incremental borrowing rate.
Dividend income earned under the policies was $7.8 million in fiscal 1997 and
$7.6 million in fiscal 1996 and is reported as an offset to general and
administrative expenses in the Company's statements of operations.
During fiscal 1997, the interest rates on the 10 3/4% Notes and on the life
insurance policy borrowings were fixed at 10.75% and 11.76%, respectively. The
interest rate on the Revolving Credit Facility was a floating rate (10.0% as
of March 31, 1997).
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing cash requirements for debt service and capital
expenditures are expected to consist primarily of interest payments under its
Revolving Credit Facility, interest and principal payments on the Term Loan,
interest payments on the 9 1/2% Senior Notes, dividend payments to Holding in
connection with the required repurchase of its capital stock from departing
stockholders pursuant to Holding's Stockholders Agreement and the ESOP,
capital expenditures and principal and interest payments on the Company's
industrial revenue bonds. As of March 31, 1998, annual principal payments
required by the Company's outstanding industrial revenue bonds indebtedness
amount to $0.5 million in fiscal 1999 and 2000, $1.4 million in fiscal years
2001 through 2004 and $6.2 million in the aggregate thereafter through 2010.
The Company will not be required to make any principal payments in respect of
the 9 1/2% Senior Notes until 2005. The Revolving Credit Facility will mature
in 2003 and the Term Loan will mature in 2004. The Term Loan requires
principal payments to be
17
<PAGE>
made in equal quarterly installments of $250,000. The final installment due at
maturity will repay in full all outstanding principal. The Revolving Credit
Facility, the Term Loan and 9 1/2% Senior Notes have covenants which are
comparable to those complied with previously, and although compliance with
such covenants in the future is largely dependent on the future performance of
the Company and general economic conditions, for which there can be no
assurance, the Company expects that it will continue to be in compliance with
all of its debt covenants for the foreseeable future.
As of March 31, 1998, the Company's primary sources of liquidity were
available borrowings of approximately $90.6 million under the Revolving Credit
Facility, available borrowings of approximately $5.5 million against certain
life insurance policies and internally generated funds. Borrowings under the
Revolving Credit Facility are secured by the Company's domestic inventory and
accounts receivable, and future availability under the facility is determined
by prevailing levels of the Company's accounts receivable and inventory. The
Term Loan is secured by a first priority lien on a substantial portion of the
Company's current and future acquired unencumbered property, plant and
equipment. The life insurance policy loans are secured by the cash surrender
value of the policies and are non-recourse to the Company. The interest rate
on the life insurance policy loans is 0.5% greater than the dividend income
rate on the policies. As of March 31, 1998, there was approximately
$16.5 million of cash surrender value in all life insurance policies
maintained by the Company, net of borrowings.
The Company's capital expenditures were $7.3 million in fiscal 1998, $4.4
million in fiscal 1997 and $16.7 million in fiscal 1996. Capital expenditures
in fiscal 1996 and 1995 included $6.3 million and $5.7 million, respectively,
of expenditures financed through purchase money and industrial revenue bond
indebtedness. During fiscal 1998, capital expenditures were primarily for
routine replacement of machinery and equipment and for computer hardware and
software. For fiscal 1999, the Company has planned approximately $15.3 million
of capital expenditures (including $4.3 million deemed carryover from the
fiscal 1998 budget) to be financed from internally generated funds.
Approximately $8.1 million is for routine replacement of machinery and
equipment and facility improvements and expansions, $5.3 million is for the
purchase of a leased facility, and $1.9 million is for further additions to
the Company's management information systems.
During fiscal 1998, the Company redeemed $11.5 million of its capital stock
from retiring and terminated employees, as required by the terms of the
Company's ESOP and Holding's Stockholders Agreement. The Company expects that
such redemptions for fiscal 1999 will be comparable, although the timing of
such expenditures is not within the control of the Company and there can be no
assurance in this regard.
The cash required to complete the 1997 restructuring, including the
redemption of stock from terminated employees was financed from proceeds from
the sale of domestic facilities and foreign operations, as discussed above,
and from internal cash flows.
The dividend payment to Holding of $45.4 million to effect the Holding
Prepayment (see "--Refinancing Transactions"), resulted in tax losses reported
by Holding in the amount of approximately $27.2 million. Such tax losses are
available to offset consolidated federal taxable income of Holding and the
Company and will reduce cash taxes payable by the Company under the Tax
Allocation Agreement between Holding and the Company (see Note 7 to
Consolidated Financial Statements).
18
<PAGE>
Working capital and cash flows of the Company over the past three fiscal
years are summarized below:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SELECTED DATA:
Working capital............................... $156,500 $170,988 $166,587
Net cash provided by (used in) operating
activities................................... 34,507 (5,504) 67,058
Net cash provided by (used in) investing
activities................................... 9,294 (680) (16,105)
Net cash provided by (used in) financing
activities................................... (44,515) 4,838 (38,745)
</TABLE>
The Company's working capital decreased $14.5 million to $156.5 million at
March 31, 1998 versus $171.0 million at March 31, 1997, primarily as the
result of the sale of foreign operations in the U.K. and Mexico and higher
accounts payable and accrued liabilities, including deferred taxes.
Inventories increased $6.4 million and accounts receivable decreased $8.2
million when compared to fiscal 1997 amounts. The Company's average accounts
receivable days outstanding were 36.1 days in fiscal 1998, 39.1 days in fiscal
1997 and 40.8 days in fiscal 1996.
Net cash provided by operations increased $40.0 million in fiscal 1998
compared to fiscal 1997 primarily due to the significant improvement in
earnings and lower accounts receivable. The impact of higher inventories on
operating cash flow in fiscal 1998 was offset by higher accounts payable and
accrued liabilities.
Net cash provided by investing activities increased $10.0 million in 1998
compared to 1997 primarily as a result of higher proceeds from fixed asset
dispositions, including excess facilities in Hartford, Connecticut;
Birmingham, Alabama; Grand Prairie, Texas; Detroit, Michigan and Kansas City,
Missouri, and proceeds received from the sale of foreign subsidiaries in the
U.K. and Mexico (see Note 4 to Consolidated Financial Statements), offset by
higher capital expenditures.
Net cash used in financing activities increased $49.4 million in 1998
compared to 1997 primarily as a result of reducing the outstanding balance
under the Revolving Credit Facility and payment of debt issue costs in
connection with the issuance of the 9 1/2% Senior Notes, the Term Loan, and
the replacement of the Revolving Credit Facility (see Note 6 to Consolidated
Financial Statements). Dividends paid to Holding for the repurchase of
Holding's capital stock from departing stockholders was $11.5 million in
fiscal 1998 compared to $5.6 million in fiscal 1997. In addition, proceeds
from the Refinancing Transactions were used to redeem the 10 3/4% Notes,
prepay purchase money indebtedness and pay a dividend to Holding to effect the
Holding Prepayment. See "--Refinancing Transactions."
The Company believes its sources of liquidity and capital resources are
sufficient to meet all currently anticipated operating cash requirements,
including debt service payments on the Revolving Credit Facility, the Term
Loan and the 9 1/2% Senior Notes prior to their respective maturities.
However, the Company anticipates that it will be necessary to replace the
Revolving Credit Facility on or prior to its maturity in 2003 and to refinance
all or a portion of the Term Loan on or prior to its maturity in 2004 and the
9 1/2% Senior Notes on or prior to their maturity in March 2005, although
there can be no assurance on what terms, if any, the Company would be able to
obtain such refinancing or additional financing. The Company's ability to make
interest payments on the Revolving Credit Facility and the 9 1/2% Senior Notes
and principal and interest payments on the Term Loan will be dependent on
maintaining the level of performance reflected in the fiscal 1998 results,
which will be dependent on a number of factors, many of which are beyond its
control, and the continued availability of revolving credit borrowings.
ENVIRONMENTAL CONTINGENCIES
The Company is currently involved with remediation and/or investigation
activities at several former facilities where soil and/or groundwater
contamination is present. As of March 31, 1998, reserves totaling
19
<PAGE>
$2.3 million have been established to cover those future environmental costs
that are known or can be reasonably estimated. See Note 9 to the Company's
Consolidated Financial Statements included elsewhere herein for a more
detailed discussion of specific environmental contingencies.
Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on the Company's financial condition, results
of operations or liquidity. The possibility exists, however, that new
environmental legislation and/or environmental regulations may be adopted, or
other environmental conditions may be found to exist, that may require
expenditures not currently anticipated and that may be material. See "Item 1.
Business--Environmental Matters."
FOREIGN EXCHANGE EXPOSURE
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Exchange adjustments resulting from foreign
currency transactions are recognized in net earnings, whereas adjustments
resulting from the translation of financial statements are reflected as a
separate component of stockholder's equity. The Company does not hedge its
exposure to foreign currency fluctuations. Net foreign currency transaction
gains or losses have not been material in any of the years presented. See
"Item 1. Business--Foreign Operations." However, the 1995 devaluation of the
Mexican peso and ongoing instability of the peso and the Mexican economy had a
negative impact on the Company's operations.
In March 1997, the Company approved a restructuring plan that included
selling its foreign operations in the United Kingdom and Mexico. As a result
of this decision, the cumulative foreign currency translation losses for these
operations were recognized as part of the estimated loss on sale of these
operations. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
YEAR 2000 COMPLIANCE
The Company believes that its management information systems are
substantially in compliance with Year 2000 standards and such standards are
not expected to materially impact the Company's internal operations. However,
Year 2000 considerations may have an effect on some of the Company's customers
and suppliers, and thus indirectly affect the Company. The Company is
assessing the effect, if any, on certain of its customers and suppliers by
conducting Year 2000 compliance surveys. It is not possible to quantify the
effect that customer, supplier or governmental authorities' problems with Year
2000 might have on the Company, but the Company has not been advised of any
problems of its customers, suppliers or governmental authorities that it
believes will have a material adverse effect on the Company's business.
INFLATION
The Company's operations have not been, nor are they expected to be,
materially affected by inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data required by this Item 8 are set
forth as indicated in Item 14(a)(1) and (2) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age (at March 31, 1997), principal
occupation and business experience during the last five years of each of the
directors and executive officers of the Company and Holding. The directors and
executive officers of the Company and Holding are identical. The executive
officers serve at the pleasure of the Board of Directors of the Company and
Holding, respectively.
Each member of the Board of Directors of the Company and of Holding holds
office until the next annual meeting of the stockholders thereof or until his
successor is elected and qualified. The election of directors of Holding is
subject to the provisions of a Stockholders' Agreement described below.
Prior to January 1, 1998, non-officer directors of the Company, other than
Messrs. Schuchert and Nickell, were paid an annual retainer of $25,000 plus
$1,000 for each board meeting attended. Effective January 1, 1998, each of
such non-officer directors (Messrs. Marquard, Rutledge and Ligon) was granted
options to purchase 10,000 shares of Holding Common Stock at their fair market
value as established by the most recent appraisal available at the date of
grant. Such options will vest in four equal increments at the end of each
calendar quarter of 1998. Effective April 1, 1997 and April 1, 1998, in
consideration for his service as a director, Chairman of the Executive
Committee and Chairman of the Board, Mr. Roderick was granted options to
purchase 20,000 shares of Holding Common Stock, in each case at their fair
market value as established by the most recent appraisal available at the date
of the grant. Such options are fully vested. The Company expects to continue
the practice of paying director's fees with grants of stock options.
In addition, all non-officer directors are reimbursed for all approved out-
of-pocket expenses related to meetings attended. The Company's directors
receive no additional compensation for their services as directors of Holding.
Officers of the Company and Holding who serve as directors do not receive
compensation for their services as directors other than the compensation they
receive as officers of the Company and Holding.
There are no family relationships among directors and executive officers of
the Company and Holding. For information regarding the stock ownership of
Holding by the Company's and Holding's directors and executive officers, see
"Item 12. Security Ownership of Certain Beneficial Owners and Management."
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Earle M. Jorgensen...... 99 Chairman Emeritus and Director
David M. Roderick....... 74 Chairman of the Board and Chairman of the
Executive Committee and Director
Maurice S. Nelson, Jr. . 60 President, Chief Executive Officer and Chief
Operating Officer and Director
Charles P. Gallopo...... 56 Vice President, Chief Financial Officer and
Secretary
Frank D. Travetto....... 45 Vice President Merchandising
Kenneth L. Henry........ 51 Vice President Central Region
James D. Hoffman........ 39 Vice President Eastern Region
R. Neil McCaffery....... 48 Vice President Western Region
Mark R. McWhirter....... 38 Vice President and Chief Information Officer
Joseph S. Schuchert..... 69 Director
Neven C. Hulsey......... 63 Director
Charles K. Ligon........ 60 Director
William A. Marquard..... 78 Director
Frank T. Nickell........ 50 Director
John Rutledge........... 49 Director
</TABLE>
21
<PAGE>
Earle M. Jorgensen. Mr. Jorgensen founded EMJ and was Chairman of the Board
of EMJ and its successor, the Company, from 1924 until April 1994. He was also
Chairman of the Board of Holding from May 1990 until April 1994. Mr. Jorgensen
was Chief Executive Officer of EMJ from 1924 to June 1986. Until February
1990, Mr. Jorgensen was a director of Northrop Corporation. Mr. Jorgensen has
been a director of Holding since May 1990. In April 1994, Mr. Jorgensen became
Chairman Emeritus of the Board of the Company and Holding.
David M. Roderick. Mr. Roderick became Chairman of the Board of the Company
and Holding on January 21, 1998. Mr. Roderick has also served as Chairman of
the Executive Committee of the Company and Holding since February 1, 1997.
Before that, Mr. Roderick was Chairman of the Board of the Company and Holding
from April 1994. Mr. Roderick has been a director of the Company and Holding
since January 1994. Mr. Roderick also serves as director of American Standard
Companies Inc., Baron Enterprises and Kelso & Companies, Inc. Previously, Mr.
Roderick served as Director, Chairman, and Chief Executive Officer of the USX
Corporation. Mr. Roderick joined USX in 1959, was Chairman of USX Finance
Committee and a Director from 1973 to 1975, was President and Director from
1975 until 1979 and was Chief Executive Officer and Chairman from 1979 to
1989.
Maurice S. Nelson, Jr. Mr. Nelson was elected President, Chief Executive
Officer and Chief Operating Officer and a director of the Company and Holding
effective February 1, 1997. Before that, Mr. Nelson served as President, Chief
Executive Officer and Chief Operating Officer of Inland Steel Company from
1992 until April 1996. Before that, Mr. Nelson was the President of the
Aerospace and Commercial division of the Aluminum Company of America (Alcoa)
from 1987 to 1992.
Charles P. Gallopo. Mr. Gallopo has been Secretary of the Company and
Holding since July 1997 and Vice President and Chief Financial Officer of the
Company and Holding since December 1993. Before that, Mr. Gallopo was Chief
Financial Officer of Severin Montres, Ltd. since July 1989. Severin Montres,
Ltd., owned by Gucci Group N.V., is a manufacturer and distributor of Gucci
watches.
Frank D. Travetto. Mr. Travetto has been the Company's Vice President
Merchandising since March 1997. Before that, Mr. Travetto was the Company's
Vice President Western Region since 1996, the Company's Vice President Eastern
Region from 1992 to 1996, and the Company's Division President, Canadian
Operations from 1990 to 1992.
Kenneth L. Henry. Mr. Henry has been the Company's Vice President Central
Region since October 1995. Since January 1998, Mr. Henry has also been
responsible for operations of the Company's Chicago facility. Before that, Mr.
Henry was the Company's Vice President Southern Region since 1994, and Vice
President of the Kilsby-Roberts Division of EMJ from April 1992 to 1994.
James D. Hoffman. Mr. Hoffman has been the Company's Vice President Eastern
Region since July 1996. Before that, Mr. Hoffman was District Manager for the
Company's Cleveland and Buffalo operations since June 1992.
R. Neil McCaffery. Mr. McCaffery has been the Company's Vice President
Western Region since March 1997. Before that, Mr. McCaffery was the Company's
Vice President Southern Region since April 1996, and was District Manager for
the Company's Los Angeles operations from 1991 to 1996.
Mark R. McWhirter. Mr. McWhirter has been Vice President and Chief
Information Officer of the Company since February 1995. Before that, Mr.
McWhirter was an Account Manager at Electronic Data Systems since March 1988.
Joseph S. Schuchert. Mr. Schuchert has been Chairman and a director of Kelso
& Companies, Inc. since March 1989 and was Chief Executive Officer from March
1989 to August 1997. Kelso & Companies, Inc. is the general partner of Kelso,
a Delaware limited partnership. Before the formation of Kelso & Companies,
Inc. in 1989, Mr. Schuchert was Managing General Partner of Kelso. Mr.
Schuchert is a director of American Standard
22
<PAGE>
Companies Inc. and Kelso Insurance Services, Inc. Mr. Schuchert has been a
director of the Company since March 1990, and a director of Holding since May
1990.
Neven C. Hulsey. Mr. Hulsey has been a director of the Company since March
1990 and Holding since May 1990. He served as Chairman of the Board of the
Company and Holding from February 1, 1997 until January 21, 1998. Before that,
Mr. Hulsey was President and Chief Executive Officer of the Company from April
1990, and of Holding from May 1990. Mr. Hulsey was Chairman of the Board,
Director, President and Chief Executive Officer of Kilsby from 1984 until May
1990. Mr. Hulsey has been a director of the Company from March 1990, and a
director of Holding from May 1990. Mr. Hulsey also serves as a director of
International House of Pancakes, Inc. and Webco Industries Inc.
Charles K. Ligon. Mr. Ligon has been a director of the Company since
November 1997. From 1992 through 1996, Mr. Ligon was a partner of Lundquist
Advisory, an investment advisory firm. Mr. Ligon has worked for Aluminum
Company of America (Alcoa) from 1959 to 1991 in many capacities, including LBO
Manager and Vice President of Alcoa Separations Technology, Group Vice
President of the Materials Science Group, and Vice President of Corporate
Planning and Development. Mr. Ligon also served as a director of FX Energy
from 1992 through 1994 and KMS Industries from 1987 through 1992.
William A. Marquard. Mr. Marquard has been a director of the Company since
March 1990, and a director of Holding since May 1990. Mr. Marquard also serves
as a director and Chairman of the Board of Arkansas Best Corporation and
Mosler, Inc., and as a director of Kelso & Companies, Inc., Treadco, Inc. and
EarthShell Container Corporation.
Frank T. Nickell. Mr. Nickell has served as director of the Company and
Holding since August 1993. He has been President and a director of Kelso &
Companies, Inc. since March 1989 and Chief Executive Officer of Kelso &
Companies, Inc. since September 1997. Kelso & Companies, Inc. is the general
partner of Kelso, a Delaware limited partnership. Before the formation of
Kelso & Companies, Inc., from 1984 to 1989, Mr. Nickell was a general partner
of Kelso. He is also a director of Charter Communications Long Beach, Inc.,
CCA Holdings Corp., CCT Holdings Corporation, Peebles Inc., Kelso Insurance
Services, Inc., and The Bear Stearns Companies.
John Rutledge. Dr. Rutledge has been a director of the Company and Holding
since June 1992. Dr. Rutledge is the founder of Rutledge & Company, Inc., a
merchant banking firm, and has been Chairman since January 1991. He is the
founder of Claremont Economics Institute, and has been Chairman since January
1979. Dr. Rutledge is also a director of Amerindo Investment Advisers, Inc.,
Lazard Freres Funds, Fluidrive Inc., United Refrigerated Services, Inc., Adobe
Air Inc. and CST Office Products, and is a consultant to Kelso and StairMaster
Sports/Medical Products, Inc.
STOCKHOLDERS' AGREEMENT
The Company's By-laws provide for one to ten directors. The Board of
Directors of the Company currently consists of nine directors. Certain of
Holding's shareholders have agreed, pursuant to the Stockholders' Agreement,
dated as of September 14, 1990, as amended (the "Stockholders' Agreement"),
that two directors shall be designated by the Management Stockholders (as
defined in the Stockholders' Agreement), so long as they are reasonably
acceptable to Kelso, and that at least five directors shall be designated by
Kelso. Messrs. Nelson and Hulsey are the directors designated by the
Management Stockholders and the remaining directors were designated by Kelso.
Mr. Ligon was elected as a director by the holders of Series A Preferred Stock
of Holding pursuant to the terms of the Series A Preferred Stock. The
Stockholders' Agreement also provides that in the event of termination of
employment, under certain circumstances, each Management Stockholder is
entitled to sell, and Holding can require such a Management Stockholder to
sell, their shares of Holding Common Stock to Holding at their appraised Fair
Market Value (as defined therein). The Board of Directors of the Company has
approved an extension of the term of the Stockholders' Agreement to March 24,
2008.
23
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Set forth below is information concerning the compensation levels for the
executive officers of Holding and the Company serving as of March 31, 1998.
Officers of the Company receive no additional compensation for their services
as officers of Holding.
Cash Compensation. The following table sets forth compensation for the three
fiscal years ended March 31, 1998 for the Chief Executive Officer and the four
most highly compensated executive officers of the Company as of March 31,
1998.
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- ----------------
SECURITIES
UNDERLYING STOCK
NAME AND PRINCIPAL OPTIONS/SAR ALL OTHER
POSITION YEAR SALARY BONUS(1) (#)(2) COMPENSATION(3)
------------------ ---- -------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Maurice S. Nelson, Jr. . 1998 $550,020 $591,111 $ 64,924
President, Chief
Executive Officer and 1997 91,670 -- 1,320,000 150,000
Chief Operating
Officer(4)
Charles P. Gallopo...... 1998 209,701 276,663 37,136
Vice President, Chief
Financial Officer 1997 196,470 84,714 23,928
and Secretary 1996 195,023 12,102 32,397
Frank D. Travetto....... 1998 193,480 183,997 25,000 23,856
Vice President,
Merchandising 1997 162,008 -- 12,488
1996 156,945 63,965 41,947
Kenneth L. Henry........ 1998 161,561 150,050 25,000 60,973
Vice President, Central
Region 1997 135,627 -- 13,359
1996 135,448 66,010 16,177
R. Neil McCaffery....... 1998 154,447 146,859 25,000 14,989
Vice President, Western
Region 1997 131,336 17,009 7,580
1996 95,152 122,674 7,720
</TABLE>
- --------
(1) Amounts reflect cash compensation earned by executive officers in each of
the fiscal years presented, including amounts received after fiscal year
end, or deferred at the election of those officers. Bonus amounts include
(i) a cash bonus payable pursuant to the Company's Management Incentive
Compensation Plan, which became effective April 1, 1997, and (ii) a cash
bonus payable each year to all management investors pursuant to the
Company's Management Stock Bonus Plan (or, in the case of Mr. Gallopo, an
equivalent policy) in proportion to their ownership of Holding Common
Stock. The following bonuses were paid to Messrs. Nelson, Gallopo,
Travetto, Henry and McCaffery under the Company's Management Incentive
Compensation Plan (a) in fiscal 1998: $591,111, $228,255, $183,997,
$150,050 and $146,859, respectively, (b) in fiscal 1997: none, and (c) in
fiscal 1996: none. The following bonuses were paid to Messrs. Gallopo,
Travetto, Henry and McCaffery under the Company's Management Stock Bonus
Plan (a) in fiscal 1998: none, except Mr. Gallopo ($48,408), (b) in fiscal
1997: none, except Mr. Gallopo ($84,714), and (c) in fiscal 1996: $12,102,
$3,000, $4,750 and $1,250, respectively. Prior to fiscal 1998, Messrs.
Travetto, Henry and McCaffery were participating under a predecessor
incentive plan based on the operating performance of their respective
regions. The following amounts were paid under this plan to Messrs.
Travetto, Henry and McCaffery, respectively (a) in fiscal 1997: none,
except for Mr. McCaffery ($17,009), and (b) in fiscal 1996: $60,965,
$61,260 and $121,424.
(2) Holding has granted Mr. Nelson and certain other executive officers
options to purchase shares of Holding Common Stock at their fair market
value on the date of grant. Mr. Nelson's options have an exercise price of
$5.41 per share; options granted to Messrs. Henry, Travetto and McCaffery
have an exercise price of $3.34 per share. See "Holding Stock Option Plan"
and "Stock Option Grants Table" below for further information.
24
<PAGE>
(3) Amounts shown include allocations to the accounts of each of the named
officers of contributions made by the Company to the ESOP and to the
Company's 401(a)(17) Supplemental Contribution Plan ("401(a)(17) Plan")
and of premiums paid by the Company for long-term disability and life
insurance policies. The following allocations were made in fiscal 1998 to
Messrs. Nelson, Gallopo, Travetto, Henry and McCaffery, respectively: (i)
ESOP--$8,000, $8,000, $8,000, $7,875 and $7,575; (ii) 401(a)(17) Plan--
49,057, $13,806, $10,710, $7,376 and $6,918; (iii) long term disability--
$7,285, $6,133, $3,745, $5,908 and none; and (iv) life insurance--$582,
$9,197, $1,401, $1,362 and $496. In fiscal 1997, the following allocations
were made to Messrs. Nelson, Gallopo, Travetto, Henry and McCaffery,
respectively: (i) ESOP--none, $7,500, $7,500, $6,600 and $7,270; (ii)
401(a)(17) Plan--none, $2,214, $540, none and none; (iii) long term
disability--none, $6,207, $3,573, $5,908 and none; and (iv) life
insurance--none, $8,007, $875, $851 and $310. In fiscal 1996, the
following allocations were made to Messrs. Gallopo, Travetto, Henry and
McCaffery, respectively: (i) ESOP--$7,500 each; (ii) 401(a)(17) Plan--
$9,996, $3,238, $2,163 and none; (iii) long term disability--$6,351,
$3,410, $5,908 and none; and (iv) life insurance--$8,550, $623, $606 and
$220. The amounts in respect of life insurance represent the estimated
value of the premiums paid by the Company on certain disability and life
insurance policies in respect of each executive. Some of the policies are
managed on a split-dollar basis and the Company will receive the premiums
it has paid from the proceeds of such insurance. In such cases the amount
of the other compensation attributed to the executive was calculated by
treating the premiums paid by the Company as a demand loan, and the amount
of compensation is equal to the imputed interest expense on the cumulative
outstanding premiums paid by the Company, assuming an interest rate equal
to the short-term federal funds rate, from time to time. Amounts shown
also include relocation payments of $38,452 to Mr. Henry in fiscal 1998
and $27,176 to Mr. Travetto in fiscal 1996 and a discretionary payment to
Mr. Nelson of $150,000 in fiscal 1997.
(4) Mr. Nelson joined the Company on February 1, 1997 and his compensation in
fiscal 1997 represents actual compensation for a period of two months.
HOLDING STOCK OPTION PLAN
Holding has adopted the Earle M. Jorgensen Holding Company, Inc. Stock
Option Plan (the "Stock Option Plan"). The Executive Committee of the Board of
Directors is authorized to grant options under the Stock Option Plan. Stock
options may be granted at not less than 100% of the fair market value of
Holding Common Stock on the date of grant and are generally exercisable for a
period not exceeding ten years. Option grants or the vesting of options may be
contingent upon such terms and conditions, such as the achievement of
performance measures or upon the passage of time, as the Executive Committee
determines. The Executive Committee will make grants under the Stock Option
Plan to provide executive officers with additional incentives for outstanding
individual performance and the opportunity to acquire an ownership stake in
the Company, thereby more closely aligning their interests with those of the
stockholders.
The Executive Committee has the right, if the holders of options agree, to
grant replacement options which may contain terms more favorable than the
options they replace, such as a lower exercise price, and cancel the replaced
options.
The aggregate number of shares of Holding Common Stock available for grants
or subject to outstanding options, and the respective prices and/or vesting
criteria applicable to outstanding options will be proportionately adjusted to
reflect any stock dividend on the Holding Common Stock, or any
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase the
Holding Common Stock at a price substantially below its fair market value. To
the extent deemed appropriate by the Executive Committee, subject to any
required action by the stockholders, in any merger, consolidation,
reorganization, liquidation, dissolution, or other similar transaction, any
option granted under the Stock Option Plan shall pertain to the securities and
any other property to which a holder of the number of shares of Common Stock
covered by the option would have been entitled to receive in connection with
such event.
Upon a Change of Control of Holding, with certain exceptions, all
outstanding stock options (whether or not then fully exercisable or vested)
will be cashed out at specified prices as of the date of the Change of
Control,
25
<PAGE>
except that any stock options outstanding for less than six months will not be
cashed out until six months after the applicable date of grant.
Generally, a participant who is granted a stock option will not be subject
to federal income tax at the time of grant and the Company will not be
entitled to a tax deduction by reason of such grant. Upon exercise of a
nonqualified option, generally the difference between the option price and the
fair market value of the Holding Common Stock on the date of exercise will be
considered ordinary income to the participant and generally the Company will
be entitled to a corresponding tax deduction.
Upon exercise of an incentive stock option, no taxable income will be
recognized by the participant and the Company is not entitled to a tax
deduction by reason of such exercise. However, if Holding Common Stock
purchased pursuant to the exercise of an incentive stock is sold within two
years from the date of grant or within one year after the transfer of such
Holding Common Stock to the participant, then the difference, with certain
adjustments, between the fair market value of the Holding Common Stock at the
date of exercise and the option price will be considered ordinary income to
the participant and generally the Company will be entitled to a corresponding
tax deduction. If the participant disposes of the Holding Common Stock after
such holding periods, any gain or loss upon such disposition will be treated
as a capital gain or loss and the Company will not be entitled to a deduction.
The maximum number of shares of Holding Common Stock reserved for issuance
under the Stock Option Plan is 1,700,000, subject to adjustment as provided in
the Stock Option Plan to reflect certain corporate transactions affecting the
number or type of outstanding shares.
STOCK OPTION GRANTS TABLE
The following table sets forth certain information concerning stock options
granted during fiscal 1998 by Holding to the Chief Executive Officer and the
next four most highly compensated executive officers of the Company. In
addition, there are shown hypothetical gains that could be realized for the
respective options, based on assumed rates of annual compound price
appreciation of 5% and 10% from the date the options are granted over the ten-
year term of the options. The actual gain, if any, realized upon exercise of
the options will depend upon the market price of Holding's Common Stock
relative to the exercise price of the option at the time the option is
exercised. There is no assurance that the amounts reflected in this table will
be realized.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
---------------------------------------------------------- STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS GRANTED EXERCISE OPTION TERM
SECURITIES UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION ----------------
NAME OPTIONS GRANTED (#)(1) FISCAL YEAR ($/SH.) DATE 5% ($) 10% ($)
- ---- ---------------------- --------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Maurice S. Nelson, Jr. . -- 0% N/A N/A N/A N/A
Charles P. Gallopo...... -- 0% N/A N/A N/A N/A
Kenneth L. Henry........ 25,000 20% $3.34 7/31/2007 $52,513 $133,077
Frank D. Travetto....... 25,000 20% 3.34 7/31/2007 52,513 133,077
R. Neil McCaffery....... 25,000 20% 3.34 7/31/2007 52,513 133,077
</TABLE>
- --------
(1) Holding has not granted any stock appreciation rights. All the options
shown above become exercisable on August 1, 1999. All outstanding stock
options shall become fully exercisable and shall be cancelled and
exchanged for cash in an amount equal to the excess of the Change in
Control Price (as defined in the Stock Option Plan as defined below) over
the exercise price, in the event of any transaction or series of
transactions, other than a public offering, where a person or a group,
excluding Holding, any of its subsidiaries and Kelso and its affiliates,
is or becomes the beneficial owner, directly or indirectly, of securities
representing 35% or more of the voting power of Holding's then outstanding
securities (an "SOP Change of Control"), unless the Executive Committee
determines prior to the occurrence of such SOP
26
<PAGE>
Change of Control that such options shall be honored, or assumed or new
rights (having substantially equivalent or better rights, terms and
conditions and economic value) substituted therefor.
THE ESOP
The Company maintains an employee stock ownership plan (the "ESOP") in
respect of the Company's nonunion employees who meet certain service
requirements. The Company's annual contributions to the ESOP are a percentage
(5% plus additional amounts up to an aggregate maximum contribution of 10%
pursuant to a program established by the Board of Directors for fiscal 1999
and 2000 rewarding the achievement of Company performance objectives) of total
cash compensation (as defined in the ESOP) and may be made by the Company in
cash or by Holding in shares of Holding capital stock. Participants become 20%
vested in their account balances after one year of continuous service.
Participants vest an additional 20% for each year of service thereafter and
become fully vested upon completion of five years of service, retirement,
disability or death. Following the occurrence of a participant's termination
of service (as defined in the ESOP), retirement, disability, or death, the
ESOP is required to either distribute the vested balance in stock or cash. If
stock is distributed, it is accompanied by a put option to Holding under terms
defined in the ESOP. At March 31, 1998, shares of Holding's Series A and
Series B Preferred Stock and Holding Common Stock owned by the ESOP totaled
83,903, 24,946, 3,833,577 shares, respectively. Contributions payable to the
ESOP totaled $2,788,000, $3,102,000 and $3,401,000 as of March 31, 1998, 1997
and 1996, respectively. Contributions for fiscal years 1994 through 1997 were
made by Holding in the form of Holding Common Stock. The contribution for
fiscal 1998 will also be in the form of Holding Common Stock.
Although Holding has not expressed any intent to terminate the ESOP, it has
the right to terminate or amend the provisions of the ESOP at any time. In the
event of any termination, participants become fully vested to the extent of
the balances in their separate accounts and receive put options with respect
to Holding stock allocated to their accounts.
In 1984, 1985 and 1986, K-R purchased life insurance policies to provide,
among other things, a separate source for funds to repurchase capital stock,
including capital stock distributed by the ESOP, from departing employees.
Certain of these policies allow the Company to borrow against the cash
surrender value of such policies. As of March 31, 1998, the Company has
borrowed $88.9 million against the cash surrender value of such policies to
fund renewal premiums, accrued interest on previous borrowings and working
capital needs. The net cash surrender value available for future borrowings
was approximately $5.5 million as of March 31, 1998. Other resources of the
Company, such as the Revolving Credit Facility, are available, subject to
certain limitations, to satisfy stock repurchase obligations as they arise.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources".
The Internal Revenue Service (the "IRS") is currently conducting an audit of
the ESOP for the fiscal years ended March 31, 1992 through March 31, 1996. A
preliminary report was issued to the Company in which the IRS asserted that
certain contributions of stock by Holding to the ESOP violated provisions of
the Internal Revenue Code. The Company believes that this assertion is
incorrect and has responded to the IRS that it disagrees with the conclusions
of this preliminary report. The U.S. Department of Labor (the "DOL") is
currently conducting an investigation of the same transactions involving the
ESOP and has come to conclusions similar to those reached by the IRS. The
Company believes that the DOL's assertions are also incorrect and has
responded accordingly to the DOL. The DOL investigation is continuing, but the
Company does not have sufficient information to evaluate the effect of the
audit or investigation on the Company.
SUPPLEMENTAL ESOP
In fiscal 1996, the Company adopted a supplemental ESOP contribution plan
("Supplemental ESOP") for contributions not allowed under the ESOP pursuant to
limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code of
1986, as amended. Participants in the Supplemental Plan include certain highly
compensated employees and other employees who are not eligible to participate
in the ESOP. Contributions payable, vesting and distributions under the
Supplemental Plan are comparable with those under the ESOP. Contributions
under
27
<PAGE>
the Supplemental Plan are made in cash and are held in an irrevocable trust.
Contributions payable totaled $119,000, $30,000 and $93,000 as of March 31,
1998, 1997 and 1996, respectively.
MANAGEMENT INCENTIVE COMPENSATION PLAN
Effective April 1, 1997, the Company adopted a new Management Incentive
Compensation Plan (the "Incentive Plan"). The Incentive Plan provides for
payment of cash bonuses to senior executives and other key management
employees based on the achievement of certain operating profit and cash flow
objectives determined by the Board of Directors or the Executive Committee.
Bonuses awarded are determined on a sliding scale based on the percentage of
the objectives achieved. No bonus is payable unless at least 80% of the
objectives are achieved, and the maximum bonus payable is 150% of base
compensation. In addition, the Company's Chief Executive Officer may award
bonuses from a discretionary pool for exemplary service. The Board of
Directors ratified bonuses pursuant to the Incentive Plan aggregating
$6.9 million in fiscal 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
David M. Roderick, Frank T. Nickell and Maurice S. Nelson, Jr. are members
of the Executive Committee, which succeeded the functions of the Management
and Compensation Committee of Holding and the Company on January 30, 1997.
Kelso affiliates beneficially own shares of the capital stock of Holding as
described under "Item 12. Security Ownership of Certain Beneficial Owners and
Management." Mr. Nickell and Mr. Schuchert are stockholders of Kelso and
general partners of Kelso Partners I, L.P. ("KP I"), Kelso Partners III, L.P.
("KP III"), and Kelso Partners IV, L.P. ("KP IV"). KP I, KP III and KP IV are
the general partners of Kelso Investment Associates, Limited Partnership ("KIA
I"), KIA III-Earle M. Jorgensen, L.P. ("KIA III-EMJ") and Kelso Investment
Associates IV, L.P. ("KIA IV"), respectively. Mr. Nickell and Mr. Schuchert
are directors of Holding and the Company and share investment and voting power
with respect to shares of the capital stock of Holding held by KIA I, KIA III-
EMJ and KIA IV as described under "Item 12. Security Ownership of Certain
Beneficial Owners and Management."
In connection with the Acquisition, the Company agreed to pay Kelso an
annual fee of $1,250,000 each year for financial advisory services and to
reimburse it for out-of-pocket expenses incurred in connection with rendering
such services. Two general partners of Kelso affiliates serve on the Boards of
Directors of the Company and Holding. The agreement for advisory services was
amended in September 1997 to provide such services at an annual fee of
$625,000 for each of the fiscal years ending March 31, 1998 and 1999. For each
of the fiscal years 1998, 1997 and 1996, the Company paid Kelso the annual fee
and reimbursed Kelso $62,000, $393,000 and $154,000, respectively, for out-of-
pocket expenses.
Holding has issued to KIA IV two warrants, entitling KIA IV to purchase
2,937,915 shares of Holding Common Stock in the aggregate at a purchase price
of $.01 per share.
In January 1996, the Company amended its agreement with Kelso Insurance
Services, Inc. (an affiliate of Kelso) ("Kelso Insurance"), and American
Telephone and Telegraph Company ("AT&T") pursuant to which the Company as well
as certain other Kelso affiliated companies participates in a
telecommunications network under which AT&T provides communications services
to the group at a special tariff rate. Pursuant to such agreement, as amended,
the Company has guaranteed a minimum annual usage for communication services,
and Kelso Insurance has guaranteed the Company's minimum usage to AT&T. No fee
was paid by the Company to Kelso Insurance in connection with this
transaction.
Effective April 1, 1997 and April 1, 1998, in consideration for his service
as a director, Chairman of the Company's Executive Committee and Chairman of
the Board, the Company granted Mr. Roderick options to purchase 20,000 shares
of Holding Common Stock at a purchase price of $5.41 per share and $3.34 per
share, respectively, in each case, the fair market value as established by the
most recent appraisal available at the date
28
<PAGE>
of grant. Prior to this grant, Mr. Roderick had a three-year incentive
compensation agreement with Holding which expired on March 31, 1997. Pursuant
to such agreement, Mr. Roderick was granted 50,000 shares of Holding Common
Stock, 20,000 of which were vested upon issuance and all or a portion of the
remainder were to be vested through fiscal 1997, if Holding achieved certain
financial targets. A total of 34,000 shares were vested under the agreement
when it expired on March 31, 1997. Pursuant to the agreement, Mr. Roderick
received a cash payment in fiscal 1996 totaling $145,309, equal to the
federal, state and local income tax liability payable by him by reason of the
value of the initial payment of 20,000 unrestricted shares of Holding Common
Stock and such cash payment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK OF THE COMPANY
All of the issued and outstanding voting stock of the Company, consisting of
128 shares of common stock, is owned by Holding.
CAPITAL STOCK OF HOLDING
The following table sets forth information with respect to the beneficial
ownership of shares of Holding Common Stock and Series A Preferred Stock as of
March 31, 1998, by all stockholders of Holding known to be beneficial owners
of more than 5% of any such class, by each director, by each executive officer
of the Company named in the Summary Compensation Table and by all directors
and executive officers as a group as determined in accordance with Rule 13d-
3(i) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). As of March 31, 1998, 26,213 shares of Series B Preferred Stock of
Holding have been issued (and 1,163 shares have been accrued but not
declared), of which 24,946 were owned by the ESOP and 1,204 were owned by
Holding.
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF NUMBER OF SHARES OF
NUMBER OF SHARES OF SHARES SERIES A
NAME AND ADDRESS OF SHARES OF COMMON STOCK OF SERIES A PREFERRED STOCK
BENEFICIAL OWNER COMMON STOCK OUTSTANDING(a) PREFERRED STOCK OUTSTANDING(b)
------------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Kelso Investment
Associates, IV,
L.P.(c)................ 9,462,475(d) 59.3%(d) 0 0.0%
KIA III--Earle M.
Jorgensen, L.P.(c)..... 1,704,740 13.1% 0 0.0%
Joseph S. Schuchert(c).. 11,167,215(d)(e) 70.0%(d)(e) 24,519(f) 17.7%(f)
Frank T. Nickell(c)..... 11,187,714(d)(e) 70.1%(d)(e) 24,519(f) 17.7%(f)
Michael B. Goldberg(c).. 9,462,475(d)(e) 59.3%(d)(e) 0 0.0%
George E. Matelich(c)... 11,172,215(d)(e) 70.0%(d)(e) 24,519(f) 17.7%(f)
Thomas R. Wall, IV(c)... 11,172,215(d)(e) 70.0%(d)(e) 24,519(f) 17.7%(f)
Frank K. Bynum(c)....... 11,167,215(d)(e) 70.0%(d)(e) 0 0.0%
David I. Wahrhaftig(c).. 11,167,215(d)(e) 70.0%(d)(e) 0 0.0%
Earle M. Jorgensen(g)... 200,000 1.5% 0 0.0%
Neven C. Hulsey(g)...... 250,000 1.9% 24,519 17.7%
Maurice S. Nelson(g).... 0 0.0% 0 0.0%
Charles P. Gallopo(g)... 50,000 0.4% 0 0.0%
Frank D. Travetto(g).... 12,000 0.1% 0 0.0%
Kenneth L. Henry(g)..... 19,000 0.1% 704 0.5%
R. Neil McCaffery(g).... 5,000 0.0% 0 0.0%
David M. Roderick(g)(l). 74,000 0.6% 0 0.0%
John Rutledge(h)(l)..... 7,500 0.1% 0 0.0%
William A.
Marquard(c)(l)......... 12,500 0.1% 0 0.0%
Charles K. Ligon(l)..... 2,500 0.0% 0 0.0%
Earle M. Jorgensen
Company Employee Stock
Ownership Plan(g)...... 3,764,056(i) 28.9%(i) 80,338(i) 58.1%(i)
All directors and
executive officers of
the Company as a
group(l)............... 712,999(j) 5.5%(j) 25,223(k) 18.2%(k)
</TABLE>
29
<PAGE>
- --------
(a) The percentage of shares of Holding Common Stock outstanding for KIA IV,
and Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig and
Bynum was calculated assuming the total outstanding shares of Holding
Common Stock was 15,955,227, (i) including shares of Holding Common Stock
which would be outstanding assuming KIA IV exercised the two Warrants
referred to in note (d) below in succession and there had been no other
dilution events prior to such exercise, (ii) excluding 47,500 shares
subject to stock options referred to in note (l) below, and (iii)
excluding the 176,182 shares of Holding Common Stock currently held in the
Holding treasury. The percentage of shares of Holding Common Stock
outstanding for all other holders was calculated assuming the total
outstanding shares of Holding Common Stock was 13,017,312, excluding
shares subject to stock options, shares issuable upon the exercise of the
Warrants held by KIA IV and the 176,182 shares of Holding Common Stock
held in the Holding treasury as of March 31, 1998.
(b) The percentage of shares of Series A Preferred Stock outstanding was
calculated assuming the total outstanding shares of Series A Preferred
Stock was 138,417, excluding 109,129 shares of Series A Preferred Stock
held in the Holding treasury as of March 31, 1998.
(c) The business address for such person(s) is c/o Kelso & Company, 320 Park
Avenue, 24th Floor, New York, New York, 10022. Kelso & Company is a
private investment firm.
(d) Includes 2,937,915 shares of the Holding Common Stock that KIA IV is
entitled to purchase pursuant to two Warrants issued to KIA IV. Each
Warrant entitles the holder to purchase up to 10% of the Holding Common
Stock on a fully-diluted basis at an exercise price of $.01 per share.
(e) Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig and Bynum
may be deemed to share beneficial ownership of shares of Holding Common
Stock owned of record by (i) KIA IV and an affiliated entity by virtue of
their status as general partners of KP IV, the general partner of KIA IV,
and such affiliate, and (ii) except Mr. Goldberg, KIA III-EMJ by virtue of
their status as general partners of KP III, the general partner of KIA
III-EMJ. Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig
and Bynum share investment and voting power with respect to securities
owned by the Kelso affiliates of which they are general partners. Messrs.
Nickell, Wall, Matelich, Goldberg, Wahrhaftig and Bynum disclaim
beneficial ownership of the shares of Holding Common Stock owned by the
Kelso affiliates.
(f) Messrs. Schuchert, Nickell, Wall and Matelich may be deemed to share
beneficial ownership of shares of Series A Preferred Stock owned of record
by KIA I by virtue of their status as general partners of KP I, the
general partner of KIA I. Messrs. Schuchert, Nickell, Wall and Matelich
disclaim beneficial ownership of the shares of Series A Preferred Stock
owned by KIA I.
(g) The business address of such person(s) or entity is 3050 East Birch
Street, Brea, California, 92821.
(h) The business address for Dr. Rutledge is One Greenwich Office Park,
Greenwich, Connecticut, 06831.
(i) Excludes 69,521 shares of Holding Common Stock and 3,565 shares of Series
A Preferred Stock held by the ESOP in directed accounts that may be deemed
to be beneficially owned by any of the directors or executive officers or
other employees of the Company.
(j) Excludes (i) 11,167,215 shares of Holding Common Stock held by Kelso
affiliates that may be deemed to be beneficially owned by Mr. Schuchert
and Mr. Nickell, and (ii) shares held by the ESOP, except for shares held
in directed accounts that may be deemed to be beneficially owned by any of
the directors and executive officers of the Company.
(k) Excludes (i) 24,519 shares of Series A Preferred Stock held by KIA I that
may be deemed to be beneficially owned by Mr. Schuchert and Mr. Nickell,
and (ii) shares held by the ESOP, except for shares held in directed
accounts that may be deemed to be beneficially owned by any of the
directors or executive officers of the Company.
(l) Includes shares subject to stock options vested and exercisable as of
April 1, 1998.
30
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kelso affiliates beneficially own shares of the capital stock of Holding as
described under "Item 12. Security Ownership of Certain Beneficial Owners and
Management." Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig
and Bynum are indirect stockholders of Kelso and general partners of KP I
(other than Messrs. Goldberg, Bynum and Wahrhaftig), KP III (other than Mr.
Goldberg) and KP IV. KP I, KP III and KP IV are the general partners of KIA I,
KIA III-EMJ and KIA IV, respectively. Messrs. Schuchert and Nickell are
directors of Holding and the Company. See "Item 12. Security Ownership of
Certain Beneficial Owners and Management."
The Company, Holding and Kelso and its affiliates entered into certain
agreements in connection with the Acquisition. Such agreements and
transactions are described under "Item 11. Executive Compensation--
Compensation Committee Interlocks and Insider Participation."
KIA IV is the holder of two Holding warrants, which are described under
"Item 11. Executive Compensation--Compensation Committee Interlocks and
Insider Participation."
Mr. Gallopo has borrowed $403,000 from Holding by issuing two separate
notes, one of which is non-recourse, each in the principal amount of $201,500,
to Holding in payment for 50,000 shares of Holding Common Stock. The notes
mature on March 31, 2001, bear interest at the rate of 6% per annum, and are
secured by a pledge of Mr. Gallopo's Holding Common Stock. Mr. Gallopo has
also received 16,000 phantom stock units, which vested on November 29, 1997.
Each phantom stock unit entitles Mr. Gallopo to receive an amount equal to the
difference between the fair market value of a share of Holding Common Stock on
the date of redemption and a base price, subject to adjustment, of $9.23.
Mr. McWhirter has borrowed $92,300 from Holding by issuing two notes, one of
which is non-recourse, each in the principal amount of $46,150, to Holding in
payment for 10,000 shares of Holding Common Stock. The notes mature on March
31, 2002, bear interest at the rate of 6% per annum and are secured by a
pledge of Mr. McWhirter's Holding Common Stock.
Mr. Hulsey is a general partner of a California partnership, Kilsby-Roberts
Group ("KRG"), and has an interest in such partnership of 3.704%. Through
December 1996, KRG owned a facility leased to the Company and received
approximately $41,000 of rent monthly from the Company during fiscal 1997. The
Company believes such rent was a market rent and is not higher than would
otherwise be paid if such premises were leased from an independent third
party. In January 1997, KRG sold the facility to an independent third party.
Effective April 1, 1997 and April 1, 1998, in consideration for his service
as a director, Chairman of the Company's Executive Committee and Chairman of
the Board, the Company granted Mr. Roderick options to purchase 20,000 shares
of Holding Common Stock at their fair market value as established by the most
recent appraisal available at the date of grant. Mr. Roderick also had an
incentive compensation agreement with Holding which expired on March 31, 1997.
These transactions are described under "Item 11. Executive Compensation--
Compensation Committee Interlocks and Insider Participation."
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
See "Index to Financial Statements" (page F-1).
(a)(2) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because the information is not
applicable or is not material or because the information required is set forth
in the financial statements or the notes thereto.
31
<PAGE>
(a)(3) Exhibits.
See "Index to Exhibits" for listing of those exhibits included in this
filing.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1* Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1 as filed on January 15, 1993 (Registration No. 33-57134)
(the "Company's 1993 Registration Statement").
3.2* By-laws of the Company. Incorporated by reference to Exhibit 3.2 of
the Company's 1993 Registration Statement.
4.1** Form of Indenture with respect to the Company's 9 1/2% Senior Notes.
4.2(a)** Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$100,000,000.
4.2(b)** Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$4,350,000.
4.2(c)** Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$650,000.
4.3** Purchase Agreement, dated as of March 19, 1998, among the Company,
Donaldson, Lufkin & Jenrette Securities Corporation and BT Alex.
Brown Incorporated, for an aggregate of $105,000,000 in principal
amount of the Company's 9 1/2% Senior Notes due 2005.
4.4** Registration Rights Agreement, dated as of March 24, 1998, among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation and BT
Alex. Brown Incorporated.
4.5** Amended and Restated Credit Agreement dated as of March 3, 1993,
amended and restated as of March 24, 1998, among the Company,
Holding, Various Financial Institutions, and BT Commercial
Corporation, as Agent (the "Agent").
4.6** Term Loan Agreement ("Term Loan Agreement"), dated as of March 24,
1998 among the Company, Various Financial Institutions, as the
Lenders, DLJ Capital Funding, Inc., as the Syndication Agent for
the Lenders, Bankers Trust Company, as the Documentation Agent for
the Lenders and Fleet National Bank, as the Administrative Agent
("Administrative Agent") for the Lenders.
4.7* Form of Restructuring Agreement among Holding, the Company and KIA
IV. Incorporated by reference to Exhibit 4.25 of Amendment No. 3 to
the Company's 1993 Registration Statement ("Amendment No. 3").
4.8** Amendment to Restructuring Agreement, dated as of March 3, 1993, by
and between Holding and KIA IV, amended as of March 24, 1998.
4.9* Form of Security Agreement between the Company and BT Commercial
Corporation, as Collateral Agent, Incorporated by Reference to
Exhibit 4.27 of Amendment No. 3.
4.10** Form of Acknowledgement, Consent and Amendment, dated as of March
24, 1998, between the Company and the Agent.
4.11** Form of Security Agreement, dated as of March 24, 1998 by the
Company, in favor of the Administrative Agent.
4.12** Form of Mortgage, dated as of March 24, 1998, made by the Company in
favor of the Administrative Agent.
4.13** Intercreditor Agreement, dated as of March 24, 1998, by and among
Fleet National Bank, as the Administrative Agent, and BT Commercial
Corporation, as Agent.
10.1* Stockholders Agreement, amended and restated as of September 14,
1990, among Holding, KIA III-EMJ, KIA IV, Kelso Equity Partners II,
L.P. and the Management Stockholders and Other Investors named
therein. Incorporated by reference to Exhibit 4.1 of Holding's
Post-Effective Amendment No. 1 to the Form S-1 Registration
Statement as filed with the Commission on October 12, 1990
(Registration No. 33-35022) ("Holding's Post-Effective Amendment
No. 1 to the 1990 Form S-1").
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.2* Amendment to the Stockholders Agreement, dated as of January 20, 1992.
Incorporated by reference to Exhibit 10.2 of the Company's 1993
Registration Statement.
10.3* Management Stockholders Bonus Plan. Incorporated by reference to
Exhibit 4.7 of Holding's Post-Effective Amendment No. 1 to the 1990
Form S-1.
10.4* Services Agreement, between Acquisition and Kelso, dated March 19,
1990. Incorporated by reference to Exhibit 10.2 of Holding's
Registration Statement on Form S-1 as filed May 30, 1990 with the
Commission (Registration No. 33-35022) ("Holding's 1990 Registration
Statement").
10.5* Trust Agreement applicable to the EMJ Employee Stock Ownership and
Capital Accumulation Plan, dated as of May 25, 1984, by and between
Crocker National Bank ("Crocker"), as Trustee, and EMJ. Incorporated
by referenced to Exhibit 4.1 to Form 8 (Amendment No. 1 to EMJ's
Annual Report on Form 10-K, Registration No. L-7537, for the fiscal
year ended December 31, 1984)
(the "Form 8").
10.6* Amendment 1985-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan effective as of January 1985. Incorporated by
reference to Exhibit 4.1 to Post-Effective Amendment No. 1 to EMJ's
Registration Statement on Form S-8, Registration No. 2-87991, filed
August 21, 1985.
10.7* Amendment 1986-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan and Plan Trust Agreement executed December 1986
between EMJ and Wells Fargo Bank, N.A., as Trustee (formerly
Crocker). Incorporated by reference to Exhibit 4.2 to the Form 8.
10.8* Amendment 1988-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed February 29, 1988. Incorporated by
reference to Exhibit (10)d to EMJ's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.
10.9* Amendment 1988-II to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed June 22, 1988. Incorporated by reference
to Exhibit 8 to EMJ's Schedule 14D-9 filed on February 5, 1990
("EMJ's 1990 Schedule 14D-9").
10.10* Amendment 1989-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed March 20, 1989. Incorporated by reference
to Exhibit 8 to EMJ's 1990 Schedule 14D-9.
10.11* EMJ Supplemental Benefit Plan 1989 Amendment in Toto. Incorporated by
reference to Exhibit (10)p to EMJ's 1989 Form 10-K.
10.12* Amendment 1989-II to the EMJ Employee Stock Ownership and Capital
Accumulation Plan executed December 29, 1989. Incorporated by
reference to Exhibit (10)q to EMJ's 1989 Form 10-K.
10.13* Amendment 1990-I to the EMJ Employee Stock Ownership and Capital
Accumulation Plan Trust Agreement executed March 19, 1990.
Incorporated by reference to Exhibit (10)r to EMJ's Annual Report on
Form 10-K for fiscal year ended December 31, 1989.
10.14* C. A. Roberts Pension Plan, amended and restated as of January 1,
1986, with amendments thereto. Incorporated by reference to Exhibit
10.22 of Holding's 1990 Registration Statement.
10.15* Kilsby Executive Life Insurance Plan. Incorporated by reference to
Exhibit 10.25 of Holding's 1990 Registration Statement.
10.16* Kilsby Executive Long-Term Disability Plan. Incorporated by reference
to Exhibit 10.26 of Holding's 1990 Registration Statement.
10.17* Holding's ESOP. Incorporated by reference to Exhibit 10.31 of
Holding's Annual Report on Form 10-K for the year ended March 31,
1991 (Registration No. 33-35022) ("Holding's Form 10-K").
10.18* Amendment No. 1 to Holding's ESOP, dated October 21, 1991.
Incorporated by reference to Exhibit 10.24 of the Company's 1993
Registration Statement.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.19* Amendment No. 2 to Holding's ESOP, dated October 21, 1991.
Incorporated by reference to Exhibit 10.25 of the Company's 1993
Registration Statement.
10.20* Amendment No. 3 to Holding's ESOP, dated February 18, 1992.
Incorporated by reference to Exhibit 10.26 of the Company's 1993
Registration Statement.
10.21* Amendment No. 4 to Holding's ESOP, dated January 25, 1993.
Incorporated by reference to Exhibit No. 10.21 to Holding's
Registration Statement on Form S-1 as filed October 19, 1994 with the
Commission (Registration No. 33-85364) ("Holding's 1994 Registration
Statement").
10.22* Amendment No. 5 to Holding's ESOP, dated January 25, 1993.
Incorporated by reference to Exhibit No. 10.22 to Holding's 1994
Registration Statement.
10.23* Amendment No. 6 to Holding's ESOP, dated January 25, 1993.
Incorporated by reference to Exhibit No. 10.23 to Holding's 1994
Registration Statement.
10.24* Amendment No. 7 to Holding's ESOP, dated January 25, 1993.
Incorporated by reference to Exhibit No. 10.24 to Holding's 1994
Registration Statement.
10.25* Amendment No. 8 to Holding's ESOP, dated July 27, 1993. Incorporated
by reference to Exhibit No. 10.25 to Holding's 1994 Registration
Statement.
10.26* Amendment No. 9 to Holding's ESOP, dated October 7, 1994. Incorporated
by reference to Exhibit No. 10.26 to Holding's 1994 Registration
Statement.
10.27* Holding's ESOP Trust Agreement. Incorporated by reference to Exhibit
10.32 of Holding's Form 10-K.
10.28* Jorgensen Compensation Policy, dated as of April 1, 1991, including
description of Return on Net Operating Assets Incentive Plan.
Incorporated by reference to Exhibit 10.34 of Holding's 1991 Form 10-
K.
10.29* Lease and Agreement, dated as of August 1, 1991, between Advantage
Corporate Income Fund L.P. and the Company, relating to the sale and
lease-back of K-R's Kansas City, Missouri property. Incorporated by
reference to Exhibit 10.30 of the Company's 1993 Registration
Statement.
10.30* Lease and Agreement, dated as of September 1, 1991, between Advantage
Corporate Income Fund L.P. and the Company, relating to the sale and
lease-back of the Cincinnati, Ohio property. Incorporated by
reference to Exhibit 10.31 of the Company's 1993 Registration
Statement.
10.31* Industrial Building Lease, dated as of October 16, 1991, between Ira
Houston Jones and Helen Mansfield Jones, Roderick M. Jones and
Cherilyn Jones, Roger G. Jones and Norma Jean Jones, Robert M. Jones
and Olga F. Jones and the Company, relating to the sale and lease-
back of the Alameda Street property in Lynwood, California.
Incorporated by reference to Exhibit 10.32 of the Company's 1993
Registration Statement.
10.32* Stock Purchase Agreement, dated as of January 21, 1992, between
McJunkin Corporation and the Company, relating to the sale of the
Company's Republic Supply division. Incorporated by reference to
Exhibit 10.33 of the Company's 1993 Registration Statement.
10.33* Contract of Sale, dated as of January 21, 1992, between the Company
and Hansford Associates Limited Partnership, relating to the sale of
the warehouse properties and the sale of the Company's Republic
Supply division. Incorporated by reference to Exhibit 10.34 of the
Company's 1993 Registration Statement.
10.34* Stock Purchase Agreement, dated as of June 30, 1992, among Forge
Acquisition Corporation, The Jorgensen Forge Corporation and the
Company, relating to the sale of the Company's Forge division.
Incorporated by reference to Exhibit 10.35 of the Company's 1993
Registration Statement.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.35* Industrial Real Estate Lease, dated June 25, 1992, between Paul
Nadzikewycz and the Company, relating to the sale and lease-back of
JSA's Denver, Colorado property. Incorporated by reference to Exhibit
10.36 of the Company's 1993 Registration Statement.
10.36* Industrial Real Estate Lease, dated October 19, 1992, between Fiorito
Enterprises, Inc. and the Company, relating to the sale and lease-
back of the Portland, Oregon facility. Incorporated by reference to
Exhibit 10.27 of the Company's 1993 Registration Statement.
10.37* Truck Lease and Service Agreement, dated as of November 1, 1984,
between Ryder Truck Rental, Inc. ("Ryder") and EMJ and all amendments
thereto, between Ryder and the Company (amendments dated January 1,
1992, January 30, 1992 and undated (executed by the Company)).
Incorporated by reference to Exhibit 10.38 of the Company's 1993
Registration Statement.
10.38* Lease, dated July 30, 1982, between Republic Bank, Dallas N.A., as
Ancillary Trustee of the Fluor Employees' Trust Fund and Kilsby-
Roberts Co., relating to K-R's Houston, Texas property (the "Houston
Lease"). Incorporated by reference to Exhibit 10.42 of the Company's
1993 Registration Statement.
10.39* Amendment No. 1 to the Houston Lease, dated as of December 31, 1986,
among Barclays Bank of California, as Trustee for Republic Bank,
Dallas, N.A., as Ancillary Trustee of the Fluor Employees' Trust
Fund, KRG and Kilsby-Roberts Co. Incorporated by reference to Exhibit
10.43 of the Company's 1993 Registration Statement.
10.40* Form of Management Agreement between the Company and Holding.
Incorporated by reference to Exhibit 10.46 of Amendment No. 2 to the
Company's 1993 Registration Statement.
10.41* Form of Tax Allocation Agreement between the Company and Holding.
Incorporated by reference to Exhibit 10.47 of Amendment No. 3.
10.42* Earle M. Jorgensen Holding Company, Inc. Phantom Stock Plan adopted
January 11, 1995. Incorporated by reference to Exhibit 10.39 to
Amendment No.1 to Holding's 1994 Registration Statement as filed with
the commission on January 19, 1995 (Registration No. 33-85364)
("Amendment No. 1 to Holding's 1994 Registration Statement").
10.43* Industrial Real Estate Lease, dated July 15, 1993, between Jorgensen
and 58 Cabot L.P., relating to the Langhorne, Pennsylvania facility.
Incorporated by reference to Exhibit 10.27 to Holding's 1994
Registration Statement.
10.44* Amendment to the Stockholders Agreement, dated as of September 30,
1994. Incorporated by reference to Exhibit 10.41 to Amendment No. 1
to Holding's 1994 Registration Statement.
10.45* Stock Compensation Agreement, dated as of December 13, 1994, between
Holding and David M. Roderick. Incorporated by reference to Exhibit
10.42 to Amendment No. 1 to Holding's 1994 Registration Statement.
10.46* Holding's 401(a)(17) Supplemental Contribution Plan, effective April
1, 1994. Incorporated by reference to Exhibit 10.54 to the Company's
Annual Report on Form 10-K, Commission File No. 5-10065 for the
fiscal year ended March 31, 1995 (the "Company's 1995 Form 10-K").
10.47* Holding's Deferred Compensation Plan, effective April 1, 1994.
Incorporated by reference to Exhibit 10.55 to the Company's 1995 Form
10-K.
10.48* Amendment No. 2 to the Earle M. Jorgensen Company Capital Accumulation
Plan and Trust dated as of May 3, 1996. Incorporated by reference to
Exhibit 10.55 to the Company's Annual Report on Form 10-K, Commission
File No. 5-10065 for the fiscal year ended March 31, 1996 (the
"Company's 1996 Form 10-K").
10.49* Earle M. Jorgensen Holding Company, Inc. Stock Option Plan effective
January 30, 1997. Incorporated by reference to Exhibit 10.57 to the
Company's Annual Report on Form 10-K, Commission File No. 5-10065 for
the fiscal year ended March 31, 1997 (the "Company's 1997 Form 10-
K").
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.50* Form of Holding Incentive and Non-Qualified Stock Option Agreement.
Incorporated by reference to Exhibit 10.58 to the Company's 1997 Form
10-K.
10.51* Earle M. Jorgensen Holding Company, Inc. Stock Option Plan, as amended
July 21, 1997. Incorporated by reference to Exhibit 10.61 to the
Company's Quarterly Report on Form 10-Q, Commission File No. 5-10065
for the fiscal quarter ended September 29, 1997.
10.52* Earle M. Jorgensen Company Management Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.62 to the Company's Quarterly
Report on Form 10-Q, Commission File No. 5-10065 for the fiscal
quarter ended December 31, 1997.
12.1** Statement of Computation of Number of Times Fixed Charges Earned.
21** Listing of the Company's subsidiaries.
27** Financial Data Schedule
</TABLE>
- --------
* Previously filed.
** Included in this filing.
(b) Reports on Form 8-K.
None
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brea, State of
California, on the 27th day of May, 1998.
EARLE M. JORGENSEN COMPANY
/s/ Charles P. Gallopo
By __________________________________
Charles P. Gallopo
Vice President, Chief Financial
Officer and Secretary
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Earle M. Jorgensen Director and Chairman May 27, 1998
____________________________________ Emeritus
Earle M. Jorgensen
/s/ David M. Roderick Chairman of the Board and May 27, 1998
____________________________________ Chairman of The Executive
David M. Roderick Committee and Director
/s/ Maurice S. Nelson, Jr. President, Chief Executive May 27, 1998
____________________________________ Officer and Chief Operating
Maurice S. Nelson, Jr. Officer and Director
/s/ Charles P. Gallopo Vice President, Chief May 27, 1998
____________________________________ Financial Officer
Charles P. Gallopo (Principal Financial and
Accounting Officer) and
Secretary
/s/ Joseph S. Schuchert Director May 27, 1998
____________________________________
Joseph S. Schuchert
/s/ Neven C. Hulsey Director May 27, 1998
____________________________________
Neven C. Hulsey
/s/ Charles K. Ligon Director May 27, 1998
____________________________________
Charles K. Ligon
/s/ William A. Marquard Director May 27, 1998
____________________________________
William A. Marquard
/s/ Frank T. Nickell Director May 27, 1998
____________________________________
Frank T. Nickell
/s/ John Rutledge Director May 27, 1998
____________________________________
Dr. John Rutledge
</TABLE>
37
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EARLE M. JORGENSEN COMPANY:
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at March 31, 1998 and 1997.................... F-3
Consolidated Statements of Operations for the years ended March 31, 1998,
1997 and 1996............................................................ F-4
Consolidated Statements of Stockholder's Equity for the years ended March
31, 1998, 1997 and 1996.................................................. F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1998,
1997, 1996............................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Earle M. Jorgensen Company
We have audited the accompanying consolidated balance sheets of Earle M.
Jorgensen Company as of March 31, 1998 and 1997, and the related consolidated
statements of operations, stockholder's equity, and cash flows for each of the
three years in the period ended March 31, 1998. Our audits also included the
financial statement schedule listed in the index at item 14(a)(2). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Earle M.
Jorgensen Company at March 31, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Orange County, California
April 24, 1998
F-2
<PAGE>
EARLE M. JORGENSEN COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................... $ 20,763 $ 21,477
Accounts receivable, less allowance for doubtful
accounts.............................................. 105,303 113,544
Inventories............................................ 180,403 174,045
Other current assets................................... 3,679 3,915
--------- ---------
Total current assets................................. 310,148 312,981
--------- ---------
Net property, plant and equipment, at cost............... 106,643 120,050
Cash surrender value of life insurance policies.......... 16,470 14,258
Debt issue costs, net of accumulated amortization........ 8,600 4,806
Other assets............................................. 1,960 2,787
--------- ---------
Total assets......................................... $ 443,821 $ 454,882
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable....................................... $ 92,061 $ 87,519
Accrued employee compensation and benefits............. 21,883 15,066
Accrued restructuring expenses......................... 894 10,632
Other accrued liabilities.............................. 15,347 10,907
Deferred income taxes.................................. 21,963 16,919
Current portion of long-term debt...................... 1,500 950
--------- ---------
Total current liabilities............................ 153,648 141,993
--------- ---------
Long-term debt........................................... 310,734 290,336
Deferred income taxes.................................... 12,709 17,093
Other long-term liabilities.............................. 3,649 3,533
Commitments and contingencies............................ -- --
Stockholder's equity:
Preferred stock, $.01 par value; 200 shares authorized
and unissued.......................................... -- --
Common stock, $.01 par value; 2,800 share authorized;
128 shares issued and outstanding..................... -- --
Capital in excess of par value......................... 116,789 171,073
Foreign currency translation adjustment................ (278) 44
Accumulated deficit.................................... (153,430) (169,190)
--------- ---------
Total stockholder's equity........................... (36,919) 1,927
--------- ---------
Total liabilities and stockholder's equity........... $ 443,821 $ 454,882
========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $1,050,005 $1,023,565 $1,025,659
Cost of sales, before inventory adjustment.. 755,381 742,826 737,756
---------- ---------- ----------
294,624 280,739 287,903
Inventory adjustment........................ -- -- (26,882)
---------- ---------- ----------
Gross profit................................ 294,624 280,739 261,021
Expenses:
Warehouse and delivery.................... 128,495 135,287 129,966
Selling................................... 37,147 40,791 41,794
General and administrative................ 59,377 69,748 73,859
Restructuring............................. 2,838 15,638 3,571
Other non-recurring charges............... -- 4,450 9,205
---------- ---------- ----------
Total expenses.......................... 227,857 265,914 258,395
---------- ---------- ----------
Income from operations...................... 66,767 14,825 2,626
Interest expense, net....................... 41,059 40,880 40,874
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item......................... 25,708 (26,055) (38,248)
Income tax provision (benefit).............. 873 501 (8,937)
---------- ---------- ----------
Net income (loss) before extraordinary item. 24,835 (26,556) (29,311)
Extraordinary loss, early retirement of
debt....................................... 9,075 -- --
---------- ---------- ----------
Net income (loss)........................... $ 15,760 $ (26,556) $ (29,311)
========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL
IN FOREIGN
COMMON STOCK EXCESS CURRENCY
------------- OF PAR TRANSLATION ACCUMULATED
SHARES AMOUNT VALUE ADJUSTMENT DEFICIT TOTAL
------ ------ -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1995................... 128 $ -- $192,411 $(2,688) $(113,323) $ 76,400
Dividend to Parent...... -- -- (22,289) -- -- (22,289)
Capitalization of ESOP
contribution, net...... -- -- 3,401 -- -- 3,401
Foreign currency
translation adjustment. -- -- -- (3,060) -- (3,060)
Net loss................ -- -- -- -- (29,311) (29,311)
--- ----- -------- ------- --------- --------
Balance at March 31,
1996................... 128 -- 173,523 (5,748) (142,634) 25,141
Dividend to Parent...... -- -- (5,552) -- -- (5,552)
Capitalization of ESOP
contribution, net...... -- -- 3,102 -- -- 3,102
Foreign currency
translation adjustment
and writeoff........... -- -- -- 5,792 -- 5,792
Net loss................ -- -- -- -- (26,556) (26,556)
--- ----- -------- ------- --------- --------
Balance at March 31,
1997................... 128 -- 171,073 44 (169,190) 1,927
Dividend to Parent...... -- -- (56,888) -- -- (56,888)
Non-cash dividend to
Parent................. -- -- (184) -- -- (184)
Capitalization of ESOP
contribution, net...... -- -- 2,788 -- -- 2,788
Foreign currency
translation adjustment. -- -- -- (322) -- (322)
Net income.............. -- -- -- -- 15,760 15,760
--- ----- -------- ------- --------- --------
Balance at March 31,
1998................... 128 $ -- $116,789 $ (278) $(153,430) $(36,919)
=== ===== ======== ======= ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $ 15,760 $(26,556) $(29,311)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Inventory adjustment........................... -- -- 26,882
Write-off of foreign currency translation
losses........................................ -- 5,345 --
Asset write-downs.............................. -- 4,450 9,205
Depreciation and amortization.................. 9,475 10,620 12,022
Amortization of debt issue costs and discount
on senior notes included in interest expense.. 1,892 2,279 2,279
Write-off of debt issue costs and discount..... 3,225 -- --
Accrued postretirement benefits................ 280 280 (256)
ESOP expense contributed to capital............ 2,788 3,102 3,401
Deferred income taxes.......................... 660 1,202 (9,650)
Gain on sale of property, plant and equipment.. (2,480) (1,079) (559)
Loss on sale of subsidiaries................... 2,838 -- --
Provision for bad debts........................ 414 1,817 1,362
Decrease (increase) in cash surrender value of
life insurance over premiums paid............. 679 (1,798) (1,894)
Changes in operating assets and liabilities
(excluding subsidiaries sold):
Decrease (increase) in accounts receivable... 2,994 (1,697) 40,065
Decrease (increase) in inventories, excluding
the inventory adjustment above.............. (18,111) 14,407 (5,245)
Decrease (increase) in other current assets.. (341) 635 2,921
Increase (decrease) in accounts payable and
accrued liabilities and expenses ........... 15,069 (19,428) 19,241
Other.......................................... (635) 917 (3,405)
--------- -------- --------
Net cash provided by (used in) operating
activities................................ 34,507 (5,504) 67,058
--------- -------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment....... (7,264) (4,449) (16,658)
Proceeds from the sale of property, plant and
equipment....................................... 12,534 4,630 1,158
Proceeds from sale of subsidiaries............... 6,918 -- --
Premiums paid on life insurance policies......... (3,373) (2,345) (1,530)
Proceeds from redemption of life insurance poli-
cies............................................ 479 1,484 925
--------- -------- --------
Net cash provided by (used in) investing
activities................................ 9,294 (680) (16,105)
--------- -------- --------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving loan
agreements...................................... (23,576) 12,149 (19,747)
Proceeds from issuance of senior notes and term
loans........................................... 205,000 -- --
Repayment of senior notes........................ (155,000) -- --
Costs associated with early retirement of debt... (906) -- --
Other borrowings (payments), net................. (5,868) (949) 3,291
Increase in debt issue costs..................... (7,277) (810) --
Cash dividend to Parent.......................... (56,888) (5,552) (22,289)
--------- -------- --------
Net cash provided by (used in) financing
activities................................ (44,515) 4,838 (38,745)
--------- -------- --------
Net increase (decrease) in cash.................. (714) (1,346) 12,208
Cash at beginning of year........................ 21,477 22,823 10,615
--------- -------- --------
Cash at end of year.............................. $ 20,763 $ 21,477 $ 22,823
========= ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION--The Company became a wholly-owned
subsidiary of Earle M. Jorgensen Holding Company, Inc. (the Parent) as the
result of a series of business combinations and mergers effective April 1,
1990.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries including Earle M. Jorgensen
(U.K.) Ltd (EMJ (UK)) (formerly Kilsby Jorgensen Steel and Aluminium Ltd.),
Kilsby Jorgensen Steel & Aluminum S.A. de C.V. (EMJ (Mexico)), and Earle M.
Jorgensen (Canada) Inc. (EMJ (Canada)) (formerly Kilsby Jorgensen Steel and
Aluminum Inc.) and Stainless Insurance Ltd., a captive insurance subsidiary
(EMJ (Bermuda)) operating in the United Kingdom, Mexico, Canada and Bermuda,
respectively. Excluding EMJ (Bermuda), net losses from foreign operations
totaled $95,000 and $3,516,000 in 1998 and 1997, respectively. In fiscal 1996,
such foreign operations generated $357,000 of net income. In fiscal 1998 and
1997, EMJ (Bermuda) generated $155,000 and $436,000 of net income,
respectively, from investment income and intercompany fees. In fiscal 1998,
the Company sold its operations in the United Kingdom and Mexico (see Note 4).
All significant intercompany accounts and transactions have been eliminated.
Certain amounts reported in prior years have been reclassified to conform to
the 1998 presentation.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION--The Company recognizes revenue when products are
shipped.
CONCENTRATION OF CREDIT RISK--The Company sells the majority of its products
throughout the United States and Canada. Sales to the Company's recurring
customers are generally made on open account terms while sales to occasional
customers are made on a C.O.D. basis. The Company performs periodic credit
evaluations of its ongoing customers and generally does not require
collateral. The Company establishes an allowance for potential credit losses
based upon factors surrounding the credit risk for specific customers,
historical trends and other information; such losses have been within
management's expectations. The Company's allowance for doubtful accounts at
March 31, 1998 and 1997 was $406,000 and $963,000, respectively. Management
believes there are no significant concentrations of credit risk as of March
31, 1998.
RESTRUCTURING--In March 1997, the Company approved a plan to restructure its
operations. The plan's major actions included selling the Company's foreign
operations in the United Kingdom and Mexico, closing four domestic
distribution centers whose sales territories are now serviced from other
nearby facilities, and reducing the Company's workforce by approximately 10%.
As a result, a restructuring charge of $15,638,000 was recorded to cover
provisions for loss on sale of foreign operations ($7,027,000, including the
write-off of cumulative translation adjustments of $5,345,000); costs of
severance and other termination benefits and related expenses associated with
the reduction in workforce ($6,537,000); and costs directly related to the
closure of facilities for which there is no future economic value
($2,074,000).
During fiscal 1998, the restructuring plan was substantially completed,
including the sale of foreign operations in the United Kingdom and Mexico (see
Note 4) and the closure of three domestic facilities. As of March 31, 1998,
accrued restructuring expenses totaled $0.9 million and are considered
adequate to cover remaining foreseeable costs.
F-7
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In September 1995, the Company implemented a plan designed to enhance
operating productivity and efficiencies. As a result, a restructuring charge
of $3,571,000 was recorded to cover the costs associated with a 7% reduction
in the Company's workforce. In addition, the Company recorded a non-recurring
charge of $9,205,000 for write-downs and write-offs of certain property, plant
and equipment, a portion of which ($3,330,000) was the excess purchase price
or "step-up" allocated to the net book values of such assets at the time of
the Company's merger in 1990.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is recorded at
cost. Additions, renewals and betterments are capitalized; maintenance and
repairs which do not extend useful lives are expensed as incurred. Gains or
losses from disposals are reflected in income and the related costs and
accumulated depreciation are removed from the accounts. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of 10 to 40 years for buildings and improvements and three to 20
years for machinery and equipment. Leasehold improvements are amortized over
the terms of the respective leases.
IMPAIRMENT OF LONG-LIVED ASSETS--In fiscal 1996, the Company adopted SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", which requires impairment losses to be
recorded on long-lived assets used in operations or are expected to be
disposed of, when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets.
There were no impairment losses recorded in fiscal 1996 as the result of
adopting SFAS No. 121. In fiscal 1997, the Company evaluated certain
applications of its management information and financial reporting system and
determined that such applications would not be used in the future.
Accordingly, the Company recorded a non-recurring charge of $4,450,000 for the
write-off of costs related to these applications.
DEBT ISSUE COSTS--Debt issue costs are deferred and amortized to interest
expense over the life of the underlying indebtedness. The amortization of debt
issue costs aggregated $1,757,000, $2,144,000 and $2,144,000 for the years
ended March 31, 1998, 1997 and 1996, respectively. Accumulated amortization of
debt issue costs was $55,000 and $8,612,000 at March 31, 1998 and 1997,
respectively. In March 1998, the Company incurred $8,517,000 of costs related
to the issuance of indebtedness and wrote-off $2,966,000 of unamortized debt
issue costs related to retired debt in connection with a series of refinancing
transactions (see Note 6).
FOREIGN CURRENCY TRANSLATION--The assets and liabilities of the foreign
subsidiaries have been translated into U.S. dollars using the year-end
exchange rates. Revenues, costs and expenses have been translated at average
exchange rates for each year. Adjustments resulting from translation of
foreign currency financial statements are reflected as a separate component of
stockholder's equity. Exchange gains and losses from foreign currency
transactions are included in operations in the period in which they occur.
CASH AND STATEMENTS OF CASH FLOWS--Cash includes disbursements and deposits
not yet funded by or applied to the Company's Revolving Credit Facility as of
a balance sheet date. The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
For the years ended March 31, 1998, 1997 and 1996 cash paid for interest on
borrowings was $39,993,000, $37,747,000 and $37,310,000, and cash paid for
income taxes was $360,000, $403,000 and $677,000, respectively.
2. INVENTORIES
Substantially all inventories are held for sale at the Company's service
center locations and are valued at the lower of cost (using the last-in,
first-out (LIFO) method) or market. If the Company had used the first-in,
first-out (FIFO) method of inventory valuation, inventories would have been
higher by $2,046,000 at March 31, 1998 and $1,697,000 at March 31, 1997.
F-8
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In fiscal 1997, a reduction of LIFO inventory quantities carried at costs
lower or higher than costs prevailing in prior years occurred but did not have
a significant impact on the Company's gross profit. There were no such
reductions in fiscal years 1998 and 1996.
In February 1995, the Company began the implementation of a new enhanced
inventory and management information system. To ensure the accuracy of the
conversion of the perpetual inventory records, the Company performed physical
inventory counts and other procedures at all of its locations during the
second, third and fourth quarters of fiscal 1996. The Company identified a
difference between the perpetual inventory records and the general ledger
amounting to $26.9 million and, accordingly, recorded a charge to cost of
sales for this difference in the fourth quarter of fiscal 1996.
3. NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation at March 31, 1998
and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Land............................................ $ 27,732,000 $ 32,583,000
Buildings and improvements...................... 34,376,000 43,943,000
Machinery and equipment......................... 97,920,000 97,940,000
------------ ------------
160,028,000 174,466,000
Less accumulated depreciation................... 53,385,000 54,416,000
------------ ------------
Net property, plant and equipment............. $106,643,000 $120,050,000
============ ============
</TABLE>
4. SALE OF FOREIGN OPERATIONS
In March 1997, the Company approved a plan to sell its foreign operations in
the United Kingdom and Mexico and accordingly recorded a charge of $7,027,000
for the estimated loss on the sales, including the recognition of deferred
foreign currency translation losses. The Company sold its Mexican operations
in August 1997 and sold its United Kingdom operations in January 1998. As a
result of such sales, the Company recognized a loss of $2,838,000 in fiscal
1998 that is reflected as a restructuring charge in the accompanying
statements of operations.
For the fiscal years ended March 31, 1998, 1997 and 1996, combined revenues
from these foreign operations were $23,417,000, $35,193,000 and $36,629,000;
and income (loss) from operations was ($233,000), ($2,935,000) and $80,000,
respectively.
5. CASH SURRENDER VALUE OF LIFE INSURANCE
The Company is the owner and beneficiary of life insurance policies on all
former nonunion employees of a predecessor company including certain current
employees of the Company and its Parent. The Company is also the owner and
beneficiary of key man life insurance policies on certain current and former
executives of the Company and predecessor companies. These policies are
designed to provide cash to the Company to repurchase shares held by employees
in the ESOP and shares held individually by employees upon the termination of
their employment. Cash surrender value of the life insurance policies increase
by a portion of the amount of premiums paid and by dividend income earned
under the policies. Dividend income earned under the policies totaled
$10.3 million in fiscal 1998, $7.8 million in fiscal 1997 and $7.6 million in
fiscal 1996 and is recorded as an offset to general and administrative expense
in the accompanying statements of operations.
F-9
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has borrowed against the cash surrender value of certain
policies to pay a portion of the premiums and accrued interest on those
policies and to fund working capital needs. Interest rates on borrowings under
the life insurance policies are fixed at 11.76%. As of March 31, 1998,
approximately $5,500,000 was available for future borrowings.
<TABLE>
<CAPTION>
SURRENDER NET CASH
VALUE BEFORE LOANS SURRENDER
LOANS OUTSTANDING VALUE
------------ ----------- -----------
<S> <C> <C> <C>
Balance at March 31, 1998............ $105,350,000 $88,880,000 $16,470,000
Balance at March 31, 1997............ 90,805,000 76,547,000 14,258,000
</TABLE>
Interest on cash surrender value borrowings totaled $9,354,000, $8,621,000
and $7,173,000 in fiscal 1998, 1997 and 1996, respectively, and is included in
net interest expense in the accompanying statements of operations.
6. LONG-TERM DEBT
On March 24, 1998, the Company consummated a series of refinancing
transactions, including the issuance of 9 1/2% Senior Notes totaling
$105,000,000, borrowing of $100,000,000 under a variable rate Term Loan, and
the replacement of its revolving credit facility. The proceeds from such
transactions were used to redeem $155,000,000 of the 10 3/4% Senior Notes,
plus call premium and accrued interest, and to prepay $5,084,000 of purchase
money indebtedness, including call premium and accrued interest. Accordingly,
the Company recorded an extraordinary loss of $9,075,000 consisting of call
premiums paid and other expenses incurred, and the write-off of deferred
financing costs, related to the early retirement of debt.
Long-term debt at March 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revolving Loans due March 24, 2003............... $ 94,434,000 $118,011,000
Variable Rate Term Loan due March 24, 2004....... 100,000,000 --
9 1/2% Senior Notes due April 1, 2005............ 105,000,000 --
10 3/4% Senior Notes............................. -- 154,607,000
Industrial Development Revenue Bonds:
Payable in annual installments of $500,000
commencing June 1, 1998, interest at 9%....... 4,000,000 4,000,000
Payable in annual installments of $715,000
commencing December 1, 2004, interest at
5.25%......................................... 4,300,000 4,300,000
Payable in annual installments of $900,000
commencing September 1, 2000, interest at
8.5%.......................................... 4,500,000 4,500,000
Purchase money financing......................... -- 5,868,000
------------ ------------
312,234,000 291,286,000
Less current portion............................. 1,500,000 950,000
------------ ------------
$310,734,000 $290,336,000
============ ============
</TABLE>
Aggregate maturities of long-term debt are as follows: $1,500,000 in 1999;
$1,500,000 in 2000; $2,400,000 in 2001; $2,400,000 in 2002; $96,834,000 in
2003; and $207,600,000 thereafter.
F-10
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of the Company's Senior Notes and Term Loans at March 31,
1998 was $106,050,000 and $100,125,000, respectively, based on the quoted
market price as of that date. The carrying values of all other long-term debt
and other financial instruments at March 31, 1998 approximate fair value.
CREDIT AGREEMENT
Effective March 24, 1998, the Company entered into an amended and restated
revolving credit facility ("Credit Agreement"), which allows maximum
borrowings of $220 million, including letters of credit ($0.7 million
outstanding at March 31, 1998). Borrowings under the Credit Agreement bear
interest at a base rate (generally defined as the bank's prime lending rate
plus 1/2% or LIBOR plus 1.75%). At March 31, 1998, the bank's prime lending
rate was 8.50% and LIBOR was 5.69%. In addition, borrowings under the
revolving loans are limited to an amount equal to 85% of eligible trade
receivables plus 55% of eligible inventories (as defined). Unused available
borrowings under the revolving loans totaled $90.6 million at March 31, 1998.
The revolving loans mature on March 24, 2003 and are secured by a lien on all
domestic inventory and accounts receivable of the Company.
Under the Credit Agreement the Company is obligated to pay certain fees
including an unused commitment fee of 3/8%, payable quarterly in arrears, and
letter of credit fees of 1 3/4% per annum of the maximum amount available to
be drawn under each letter of credit, payable quarterly in arrears, plus
issuance, fronting, amendment and other standard fees. The Company paid loan
commitment fees totaling $257,000 in 1998, $305,000 in 1997 and $218,000 in
1996.
The Credit Agreement contains financial covenants in respect of maintenance
of minimum working capital and a fixed charge coverage ratio (as defined). The
Credit Agreement also limits, among other things, the incurrence of liens and
other indebtedness, mergers, consolidations, the sale of assets, annual
capital expenditures, advances, investments and loans by the Company and its
subsidiaries, dividends and other restricted payments by the Company and its
subsidiaries in respect to their capital stock, and certain transactions with
affiliates. On June 4, 1997, the Company received a waiver to fiscal 1997
financial covenants relating to consolidated net worth and fixed charge ratio
and received amendments to other financial covenants for future periods.
9 1/2% SENIOR NOTES AND VARIABLE RATE TERM LOAN
On March 24, 1998, the Company refinanced $155 million of 10 3/4% Senior
Notes by issuing $105 million of 9 1/2% Senior Notes and borrowing $100
million under a variable rate Term Loan. The 9 1/2% Senior Notes were issued
at par and interest is payable each April 1 and October 1, commencing October
1, 1998. The 9 1/2% Senior Notes are unsecured obligations of the Company and
may be redeemed by the Company under certain conditions and with certain
restrictions at varying redemption prices. The Indenture to the 9 1/2% Senior
Notes contains certain covenants which limits, among other things, the
incurrence of liens and other indebtedness, mergers, consolidations, the sale
of assets, investments and loans, dividends and other distributions, and
certain transactions with affiliates. The Term Loan bears interest at either
an Alternate Base Rate (as defined) plus 2.0% or at LIBOR plus 3.25%. At March
31, 1998, the effective interest rate under the Term Loan was 8.94%. Amounts
outstanding under the Term Loan are secured by a first priority lien on
substantially all the existing and future acquired unencumbered property,
plant and equipment of the Company. Principal payments are required to be paid
quarterly in amounts equal to $250,000, commencing on June 30, 1998. The Term
Loan may be prepaid, subject to declining call premiums through fiscal 2001
and is subject to prepayments at the option of the holder upon a Change in
Control (as defined) and with 100% of net proceeds from asset sales, as
permitted. Covenants under the Term Loan are similar to those under the 9 1/2%
Senior Notes.
F-11
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER
The Company issues industrial revenue bonds in connection with significant
facility improvements or construction projects. The purchase money financing
included borrowings under a loan agreement entered into on March 27, 1995
which provided up to $7,500,000 for the expansion or acquisition of facilities
and purchase of equipment. The outstanding borrowings required monthly
payments of principal of $79,112 plus interest (at one month LIBOR plus 3.25%)
through July 2003 and were repaid on March 24, 1998.
7. INCOME TAXES
The Company is included in the consolidated tax returns of Holding and
calculates its tax provision as though it files on a separate basis. The
consolidated tax liability of the Company and Parent is allocated to each of
these entities pursuant to a Tax Allocation Agreement between the Company and
Parent ("Tax Allocation Agreement"). Under the Tax Allocation Agreement,
Parent pays all taxes and is reimbursed by the Company for the lesser of (i)
the Company's allocated portion of the taxes due, or (ii) the tax that would
be payable if the Company filed its own returns.
The Company records deferred taxes based upon differences between the
financial statement and tax basis of assets and liabilities pursuant to SFAS
No. 109, "Accounting for Income Taxes", as though it files on a separate
basis. Any differences in deferred taxes determined on a separate basis and
the actual payments made or received under the Tax Allocation Agreement are
accounted for as an equity adjustment between the Company and Parent. There
were no such differences in fiscal 1998. Deferred taxes are also recorded for
the future benefit of Federal and state tax losses and tax credit
carryforwards. Deferred tax assets have not been recognized for the loss
carryforwards of the Company's foreign subsidiaries. Consistent with SFAS No.
109, a valuation allowance has been recognized for certain deferred tax
assets, which management believes are not likely to be realized.
At March 31, 1998, the Company had net operating loss carryforwards of
$70,000,000 for Federal income tax purposes. These carryforwards resulted from
the Company's losses during 1993 and 1996, and expire in years 2008 and 2011,
respectively. The ultimate realization of the benefits of these loss
carryforwards is dependent on future profitable operations. In addition, use
of the Company's net operating loss carryforwards and other tax attributes may
be substantially limited if a cumulative change in ownership of more than 50%
occurs within any three year period subsequent to a loss year.
Significant components of the Company's deferred income tax assets and
liabilities at March 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation..................... $ 8,497,000 $ 10,267,000
Purchase price adjustments..................... 40,903,000 43,324,000
------------ ------------
Total deferred tax liabilities................... 49,400,000 53,591,000
------------ ------------
Deferred tax assets:
Net operating loss carryforwards............... 26,524,000 27,352,000
Capital loss carryforward...................... 6,728,000 --
Other.......................................... 11,546,000 16,538,000
Valuation allowance for deferred tax assets.... (30,070,000) (24,311,000)
------------ ------------
Net deferred tax assets.......................... 14,728,000 19,579,000
------------ ------------
Net deferred tax liabilities..................... $ 34,672,000 $ 34,012,000
============ ============
</TABLE>
F-12
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income before taxes consists primarily of income (loss) from the Company's
domestic operations and also includes pre-tax income (loss) of $60,000,
$(3,080,000) and $359,000 from the Company's foreign operations for fiscal
1998, 1997 and 1996, respectively.
Significant components of the provision for income taxes attributable to
continuing operations for the years ended March 31, 1998, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Current:
Federal........................... $ 88,000 $ -- $ --
State............................. 125,000 403,000 676,000
----------- ------------ ------------
Total current..................... 213,000 403,000 676,000
----------- ------------ ------------
Deferred:
Federal........................... (6,109,000) (11,716,000) (12,240,000)
State............................. 1,010,000 (2,497,000) (3,235,000)
Valuation allowances.............. 5,759,000 14,311,000 5,862,000
----------- ------------ ------------
Total deferred.................... 660,000 98,000 (9,613,000)
----------- ------------ ------------
$ 873,000 $ 501,000 $ (8,937,000)
=========== ============ ============
</TABLE>
The reconciliation of the income tax provision (benefit) differs from that
which would result from applying the U.S. statutory rate as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Expected tax (benefit) at Federal
statutory rate..................... $ 5,412,000 $(9,119,000) $(13,387,000)
State tax expense (benefit), net of
Federal taxes...................... 657,000 (1,207,000) (1,876,000)
Net increase in cash surrender
values of life insurance........... (2,851,000) (2,797,000) (1,607,000)
State franchise and capital taxes... 448,000 403,000 423,000
Effect of Internal Revenue Service
examination........................ -- -- 792,000
Foreign loss carryforward (with)
without tax benefit................ -- 1,078,000 (126,000)
Tax benefit of credit carryovers and
carrybacks......................... (5,796,000) (800,000) --
Change in valuation allowance....... 5,759,000 12,706,000 5,862,000
Capital loss on sale of
subsidiaries....................... (4,125,000) -- --
Other............................... 1,369,000 237,000 982,000
----------- ----------- ------------
Income tax (benefit) expense...... $ 873,000 $ 501,000 $ (8,937,000)
=========== =========== ============
</TABLE>
The change of $5,759,000 in the valuation allowance for deferred tax assets
as of March 31, 1998 was due to the uncertainty of realizing the benefit
during the tax loss carryforward period.
F-13
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
The Company and its Parent have an Employee Stock Ownership Plan (ESOP)
which covers nonunion employees of the Company who meet certain service
requirements. The cost of the ESOP is borne by the Company through annual
contributions to an Employee Stock Ownership Trust (ESOT) in amounts
determined by the Board of Directors. Contributions may be made in cash or
shares of the Parent's stock as the Parent's Board of Directors may from time
to time determine. Participants vest at a rate of 20% per year of service and
become fully vested upon retirement, disability or death. Upon the occurrence
of a participant's termination (as defined), retirement, disability, or death,
the ESOP is required, by the terms of the ESOP, to either distribute the
vested balance in stock or to repurchase the vested balance for cash (as
determined by the Benefits Committee). If stock is distributed, it is
accompanied by a put option to the Parent under terms defined in the ESOP.
Shares of the Parent's Series A and B preferred and common stock owned by the
ESOP totaled 83,903, 24,946 and 3,833,577 at March 31, 1998, respectively.
Contributions payable to the ESOT totaled $2,788,000, $3,102,000 and
$3,401,000 in 1998, 1997 and 1996, which represented 5% of eligible
compensation for each of the respective years. The contribution for fiscal
years 1996 and 1997 was made in the form of Holding's common stock. The
contribution for fiscal 1998 will also be in the form of Holding's common
stock.
Although the Parent has not expressed any intent to terminate or amend the
plan, it has the right to do so at any time. In the event of any termination,
participants become fully vested to the extent of the balances in their
separate accounts and come under the put options as previously discussed.
PENSION AND POSTRETIREMENT BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan
covering substantially all hourly union employees (the "Hourly Plan").
Benefits under the Hourly Plan are vested over 5 years and are determined
based on years of service and the employee's compensation during the last ten
years of employment. The assets of the Hourly Plan for participants are held
in trust and consist of bonds, equity securities and insurance contracts and
the Company contributes at least the minimum required annually under ERISA.
Net pension expense for the Hourly Plan for the years ended March 31, 1998,
1997 and 1996 was $641,000, $420,000 and $500,000, respectively.
The Company maintains an unfunded supplemental plan which provides benefits
to highly compensated employees whose basic pension plan benefit is limited by
the Internal Revenue Code (the "Supplemental Plan"). Net pension expense for
the Supplemental Plan for the years ended March 31, 1998, 1997 and 1996 was
$70,000, $67,000 and $67,000, respectively.
In addition to the Company's defined benefit pension plans, the Company
sponsors a defined benefit health care plan that provides postretirement
medical and dental benefits to eligible full time employees (the
"Postretirement Plan"). The Postretirement Plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features such
as deductibles and coinsurance. The accounting for the Postretirement Plan
anticipates future cost-sharing changes to the written plan that are
consistent with the Company's expressed intent to increase the retiree
contribution rate annually to compensate for the expected health care trend
rate. The Company's policy is to fund the cost of medical benefits under this
plan as they are submitted for reimbursement. Gains and losses realized from
the remeasurement of the plan's liability are amortized to income over three
years.
F-14
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Information as of March 31, 1998, regarding the Hourly Plan, Supplemental
Plan, and Postretirement Plan follows:
<TABLE>
<CAPTION>
SUPPLEMENTAL POSTRETIREMENT
HOURLY PLAN PLAN PLAN
----------- ------------ --------------
<S> <C> <C> <C>
Projected benefit obligation....... $(9,675,000) $(793,000) $(3,371,000)
Fair value of plan assets.......... 10,333,000 -- --
Prepaid (accrued) pension costs.... (607,000) (480,000) (3,600,000)
Discount rate...................... 7.00% 7.00% 7.00%
Expected long-term rate of return
on assets......................... 8.00% -- --
Rate of increase in compensation
levels............................ 5.00% 5.00% --
</TABLE>
The discount rate, expected long-term rate of return on assets, and rate of
increase in compensation levels used to calculate the expense under these
plans for fiscal 1998, 1997 and 1996 were 7.00%, 8.00% and 5.00%; 7.25%, 8.00%
and 5.00% and 8.25%, 8.00% and 5.00%, respectively.
The health care cost trend rate used in the calculation of cost (income)
related to the postretirement health care plans was 8.5% grading down ratably
to 5.5% by March 2004. A 1% increase in the assumed health care cost trend
rate would have increased postretirement costs in fiscal 1998 by $191,000.
The health care cost trend rate used to calculate the accumulated
postretirement benefit obligation was 8.5% for 1998, grading down ratably to
5.5% by March 2004. The health care cost trend rate assumption can have a
significant effect on the amounts reported. A 1% increase in the assumed
health care cost trend rate in each year would increase the projected benefit
obligation as of March 31, 1998 by $463,000.
In accordance with union agreements, the Company also contributes to
multiemployer defined benefit retirement plans covering substantially all
union employees of the Company. Expenses incurred in connection with these
plans totaled $1,615,000, $1,753,000 and $1,771,000 in 1998, 1997 and 1996,
respectively.
9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases, under several agreements with varying terms, certain
office and warehouse facilities, equipment and vehicles. Rent expense totaled
$17,412,000, $18,859,000 and $17,844,000 for the years ended March 31, 1998,
1997 and 1996, respectively. The portion of rent expense paid to related
parties totaled none, $367,000 and $443,000 for the years ended March 31,
1998, 1997 and 1996, respectively. As of March 31, 1998, there were no future
lease obligations with related parties. Minimum rentals of certain leases
escalate from time to time based on certain indices. At March 31, 1998 the
Company was obligated under noncancellable operating leases for future minimum
rentals as follows:
<TABLE>
<S> <C>
Fiscal year:
1999....................................................... $13,073,000
2000....................................................... 11,058,000
2001....................................................... 8,667,000
2002....................................................... 6,060,000
2003....................................................... 4,457,000
Thereafter................................................. 14,257,000
-----------
Total.................................................... $57,572,000
===========
</TABLE>
F-15
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER COMMITMENTS
In connection with the 1990 merger, the Company agreed to pay Kelso &
Companies, Inc. (Kelso), affiliates of which own the majority of Parent's
common stock, an annual fee of $1.25 million each year for financial advisory
services and to reimburse it for out-of-pocket expenses incurred in connection
with rendering such services. The Company also agreed to indemnify Kelso and
its affiliates against certain claims, losses, damages and liabilities and
expenses that may arise in connection with the merger. The agreement for
advisory services was amended in September 1997 to provide such services at an
annual fee of $625,000 for each of the fiscal years ending March 31, 1998 and
1999. Fees and expenses paid to Kelso in connection with these agreements
totaled $687,000, $1,643,000 and $1,404,000 during the years ended March 31,
1998, 1997 and 1996, respectively.
ENVIRONMENTAL CONTINGENCIES
The Company is currently involved with investigation and/or remediation
activities at several current and formerly-owned facilities where soil and/or
groundwater contamination is present or alleged. As of March 31, 1998,
reserves totaling $2.3 million have been established to cover those future
environmental costs associated with the matters specified below, which are
known or can be reasonably estimated based on findings and recommendations
from independent environmental consultants.
Alameda Street (Los Angeles). Remediation was completed in fiscal 1996 and
the Company has received final approval from the County of Los Angeles
authorities. Total costs incurred by the Company in connection with this
project were $3.4 million, of which $1.7 million has been capitalized to the
property. The Company was reimbursed $1.5 million of such costs by the lessee
in accordance with a cost sharing agreement.
In February 1998 the Company was notified that it had potential
responsibility for lead and copper soil contamination of another undeveloped
parcel that is part of the Alameda Street property. A remediation plan has
been approved by local government agencies. As of March 31, 1998, the
Company's accrual for future investigation and remediation expenditures
includes the estimated costs under the remediation plan.
Bristol (Pennsylvania). A remedial action plan submitted and approved by the
Pennsylvania regulatory agency was completed in fiscal 1998. As of March 31,
1998, the project's cost has totaled $4.3 million, of which $3.2 million has
been paid by the Company and $1.1 million was paid by the former owner of the
property pursuant to a cost sharing agreement. No additional costs are
expected to be incurred. The Company sold the facility in July 1996.
Forge (Seattle/Kent, WA). The Company has indemnified the purchasers of its
former Forge facility for remediation of certain conditions at the facility
and at an off-site disposal site existing at the date of purchase. In
addition, the Company indemnified such purchasers for up to $2.5 million of
remediation and investigation costs associated with or related to the
environmental conditions existing at the time of sale and discovered after the
closing and for which claims were made prior to July 2, 1995. No such claims
were made. As of March 31, 1998, the remediation and investigation costs of
the Forge facility have totaled $2.6 million. The Company's accrual for future
investigation and remediation expenditures includes the estimated remaining
costs of remediation. As of March 31, 1998, remediation and investigation
costs at the disposal site have totaled $0.5 million and the Company has
reserved for future monitoring costs.
F-16
<PAGE>
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Union (New Jersey). During fiscal 1994, the Company was notified by the
current owner that it has potential responsibility for the environmental
contamination of a property formerly owned by a subsidiary and disposed of by
such subsidiary prior to its acquisition by the Company. The prior owner of
such subsidiary has also been notified of its potential responsibility. On
March 27, 1997, the current owner of the property informed the Company that it
estimated the cost of investigation and cleanup of the property at $875,000
and requested contribution to such costs from the Company and the prior owner.
The Company has contested responsibility and commented on the cleanup plan.
The Company does not have sufficient information to determine what potential
liability it has, if any. Accordingly, no reserves have been specifically
established for this matter as of March 31, 1998.
Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on the Company's financial condition, results
of operations or liquidity. The possibility exists, however, that new
environmental legislation and/or environmental regulations may be adopted, or
other environmental conditions may be found to exist, that many require
expenditures not currently anticipated and that may be material.
Other
The Company is involved in litigation in the normal course of business. In
the opinion of management, these matters will be resolved without a material
impact on the Company's financial position or results of operations.
F-17
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
SEQUENTIALLY
DESCRIPTION OF NUMBERED
SCHEDULE NUMBER SCHEDULES* PAGE
--------------- -------------- ------------
EARLE M. JORGENSEN COMPANY:
<C> <S> <C>
Valuation and Qualifying
Schedule II......................... Accounts and Reserves S-2
</TABLE>
- --------
* All other schedules are omitted as the required information is inapplicable
or the information is presented in the financial statements or related
notes.
S-1
<PAGE>
EARLE M. JORGENSEN COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ------------------- ------------------ ----------------------- -------------
BALANCE AT CHARGES TO BAD DEBTS CHARGED BALANCE AT
DESCRIPTION BEGINNING OF PERIOD COSTS AND EXPENSES OFF (NET OF RECOVERIES) END OF PERIOD
----------- ------------------- ------------------ ----------------------- -------------
<S> <C> <C> <C> <C>
Year ended March 31,
1998
Allowance for doubtful
accounts............. $ 963,000 $ 414,000 $ (971,000) $ 406,000
Year ended March 31,
1997
Allowance for doubtful
accounts............. 1,017,000 1,817,000 (1,871,000) 963,000
Year ended March 31,
1996
Allowance for doubtful
accounts............. 1,146,000 1,362,000 (1,491,000) 1,017,000
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
EARLE M. JORGENSEN COMPANY:
4.1 Form of Indenture with respect to the Company's 9 1/2% Senior Notes.
4.2(a) Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$100,000,000.
4.2(b) Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$4,350,000.
4.2(c) Form of Certificate for the Company's 9 1/2% Senior Notes, Series A,
$650,000.
4.3 Purchase Agreement, dated as of March 19, 1998, among the Company,
Donaldson, Lufkin & Jenrette Securities Corporation and BT Alex.
Brown Incorporated, for an aggregate of $105,000,000 in principal
amount of the Company's 9 1/2% Senior Notes due 2005.
4.4 Registration Rights Agreement, dated as of March 24, 1998, among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation and BT
Alex. Brown Incorporated.
4.5 Amended and Restated Credit Agreement ("Revolving Credit Facility"),
dated as of March 3, 1993 among the Company, Holding, Various
Financial Institutions, and BT Commercial Corporation, as agent (the
"Agent").
4.6 Term Loan Agreement ("Term Loan Agreement"), dated as of March 24,
1998 among the Company, Various Financial Institutions, as the
Lenders, DLJ Capital Funding, Inc., as the Syndication Agent for the
Lenders, Bankers Trust Company, as the Documentation Agent for the
Lenders and Fleet National Bank, as the Administrative Agent
("Administrative Agent") for the Lenders.
4.8 Amendment to Restructuring Agreement, between Holding and KIA IV.
4.10 Form of Acknowledgement, Consent and Amendment, dated as of March 24,
1998, between the Company and the Agent.
4.11 Form of Security Agreement, dated as of March 24, 1998 by the
Company, in favor of the Administrative Agent.
4.12 Form of Mortgage, dated as of March 24, 1998, made by the Company in
favor of the Administrative Agent.
4.13 Intercreditor Agreement, dated as of March 24, 1998, by and among
Fleet National Bank, as the Administrative Agent, and BT Commercial
Corporation, as Agent.
12.1 Statement of Computation of Number of Times Fixed Charges Earned.
21 Listing of the Company's Subsidiaries.
27 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 4.1
================================================================================
EARLE M. JORGENSEN COMPANY
TO
UNITED STATES TRUST COMPANY OF NEW YORK
____________________
INDENTURE
Dated as of March 24, 1998
_____________________
$105,000,000
9 1/2% Senior Notes
due 2005
================================================================================
<PAGE>
EARLE M. JORGENSEN COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939, AS AMENDED AND INDENTURE, DATED AS OF MARCH 24, 1998
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
(S) 310(a)(1) .......................................... 608
(a)(2) .......................................... 608
(a)(4) .......................................... 608
(a)(5) .......................................... 608
(b) .......................................... 609
(S) 311(a) .......................................... 613
(b) .......................................... 613
(b)(2) .......................................... 613
(S) 312(c) .......................................... 701
(S) 313(a) .......................................... 702
(b) .......................................... 702
(c) .......................................... 702
(d) .......................................... 702
(S) 314(a) .......................................... 703
(a)(4) .......................................... 1008(a)
(c)(1) .......................................... 102
(c)(2) .......................................... 102
(c)(3) .......................................... 102
(e) .......................................... 102
(S) 315(b) .......................................... 602
(e) ......................................... 515
(S) 316(a)(last
sentence) .......................................... 101
(a)(1)(A) .......................................... 502, 512
(a)(1)(B) .......................................... 513
(b) .......................................... 508
(c) .......................................... 104(d)
(S) 317(a)(1) .......................................... 503
(a)(2) .......................................... 504
(b) .......................................... 1003
(S) 318(a) .......................................... 111
</TABLE>
* This Reconciliation and tie sheet shall not, for any purpose, be decreed to
be a part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PARTIES.................................................................... 1
RECITALS OF THE COMPANY.................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Definitions............................................................... 2
Affiliate............................................................. 2
Agent................................................................. 3
APB 16................................................................ 3
Asset Disposition..................................................... 3
Attributable Debt..................................................... 3
Bankruptcy Law........................................................ 3
Board of Directors.................................................... 3
Board Resolution...................................................... 3
Business Day.......................................................... 3
Capital Stock......................................................... 3
Capitalized Lease Obligation.......................................... 3
Cash Equivalents...................................................... 4
Change of Control..................................................... 4
Common Stock.......................................................... 6
Company............................................................... 6
Company Order or Company Request...................................... 6
Consolidated Cash Flow................................................ 6
Consolidated Net Income............................................... 6
Consolidated Net Worth................................................ 7
Corporate Trust Office................................................ 7
Credit Facility....................................................... 7
Default............................................................... 7
Depositary 7
Designated Facilities................................................. 7
Eligible Accounts Receivable.......................................... 8
ERISA................................................................. 8
ESOP.................................................................. 8
</TABLE>
______________________
Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Event of Default...................................................... 8
Exchange Act.......................................................... 8
Exchange Offer........................................................ 8
Exchange Offer Registration Statement................................. 8
Excluded Facility..................................................... 8
Financing Disposition................................................. 8
Fixed Charges......................................................... 8
Fixed Charge Coverage Ratio........................................... 9
Foreign Subsidiary.................................................... 9
GAAP.................................................................. 9
Global Notes.......................................................... 9
Heller Documents...................................................... 9
Holder................................................................ 10
Holding............................................................... 10
Indebtedness.......................................................... 10
Indenture............................................................. 10
Interest Rate Contracts............................................... 11
Interest Payment Date................................................. 11
Issue Date............................................................ 11
Inventory............................................................. 11
Investments........................................................... 11
Kelso................................................................. 11
Legal Holiday......................................................... 11
Lien.................................................................. 11
Life Insurance Policies............................................... 12
Life Insurance Policy Loan............................................ 12
Management Agreement.................................................. 12
Material Subsidiary................................................... 12
Maturity Date......................................................... 12
Net Proceeds.......................................................... 12
New Credit Facility................................................... 13
Non-U.S. Person....................................................... 13
Note Register" and "Note Registrar.................................... 13
Notes................................................................. 13
Offer to Purchase..................................................... 13
Officer............................................................... 13
Officers' Certificate................................................. 13
Offshore Global Note.................................................. 13
Offshore Physical Note................................................ 13
Opinion of Counsel.................................................... 14
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Outstanding........................................................... 14
Paying Agent.......................................................... 15
Permitted Holders..................................................... 15
Permitted Indebtedness................................................ 15
Permitted Investment Amount........................................... 17
Permitted Liens....................................................... 17
Permitted Transactions................................................ 18
Person" or "person.................................................... 19
Physical Notes........................................................ 19
Predecessor Note...................................................... 19
principal............................................................. 19
Proceeds Offer........................................................ 19
Property.............................................................. 19
Purchase Date......................................................... 19
QIB................................................................... 20
Receivable............................................................ 20
Receivables Entity.................................................... 20
Receivables Financing................................................. 20
Receivables Subsidiary................................................ 20
Record Date........................................................... 20
Redeemable Stock...................................................... 20
Redemption Date....................................................... 20
Redemption Price...................................................... 21
Refinancing Transactions.............................................. 21
Regulation S.......................................................... 21
Repurchase Date....................................................... 21
Restricted Payments................................................... 21
Restricted Subsidiary................................................. 21
Rule 144A............................................................. 22
Sale and Leaseback Transaction........................................ 22
SEC................................................................... 22
Securities Act........................................................ 22
Senior Indebtedness................................................... 22
Series A Notes........................................................ 22
Series B Notes........................................................ 22
Shelf Registration Statement.......................................... 22
Special Record Date................................................... 22
Special Term Loan Agreement........................................... 23
Stockholders' Agreement............................................... 23
Subordinated Indebtedness............................................. 23
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Subsidiary............................................................ 23
Surviving Entity...................................................... 23
Tax Allocation Agreement.............................................. 23
Trust Indenture Act" or "TIA......................................... 23
Trustee............................................................... 23
Trust Officer......................................................... 24
U.S. Global Note...................................................... 24
U.S. Government Obligations........................................... 24
U.S. Legal Tender..................................................... 24
U.S. Physical Note.................................................... 24
Unrestricted Subsidiary............................................... 24
Wholly Owned Restricted Subsidiary.................................... 24
SECTION 102. Compliance Certificates and Opinions......................... 25
SECTION 103. Form of Documents Delivered to Trustee....................... 25
SECTION 104. Acts of Holders.............................................. 26
SECTION 105. Notices, Etc., to Trustee and Company........................ 28
SECTION 106. Notice to Holders; Waiver.................................... 28
SECTION 107. Effect of Headings, Table of Contents and Recitals........... 29
SECTION 108. Successors and Assigns....................................... 29
SECTION 109. Separability Clause.......................................... 29
SECTION 110. Benefits of Indenture........................................ 29
SECTION 111. Governing Law................................................ 29
SECTION 112. Legal Holidays............................................... 30
SECTION 113. No Recourse Against Others................................... 30
SECTION 114. Exhibits and Schedules....................................... 30
SECTION 115. Counterparts................................................. 31
SECTION 116. Duplicate Originals.......................................... 31
SECTION 117. Incorporation by Reference of TIA............................ 31
ARTICLE TWO
NOTES FORMS
SECTION 201. Forms Generally.............................................. 31
SECTION 202. Restrictive Legends.......................................... 33
SECTION 203. Form of Face of Note and Series B Note....................... 35
SECTION 204. Form of Reverse of Note...................................... 38
SECTION 205. Form of Trustee's Certificate of Authentication.............. 43
SECTION 206. Form of Transfer Notice for the Notes........................ 44
</TABLE>
iv
<PAGE>
ARTICLE THREE
THE NOTES
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
SECTION 301. Title and Terms.............................................. 47
SECTION 302. Denominations................................................ 47
SECTION 303. Execution, Authentication, Delivery and Dating............... 48
SECTION 304. Temporary Notes.............................................. 49
SECTION 305. Registration, Registration of Transfer and Exchange.......... 50
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.................. 51
SECTION 307. Payment of Interest; Interest Rights Preserved............... 52
SECTION 308. Persons Deemed Owners........................................ 54
SECTION 309. Cancellation................................................. 54
SECTION 310. Computation of Interest...................................... 54
SECTION 311. Book-Entry Provisions for Global Notes....................... 55
SECTION 312. Transfer Provisions.......................................... 56
SECTION 313. Form of Regulation S Certificate............................. 64
SECTION 314. Form of Rule 144A Certificate................................ 66
SECTION 315. CUSIP Numbers................................................ 67
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture...................... 68
SECTION 402. Application of Trust Money................................... 69
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default............................................ 69
SECTION 502. Acceleration of Maturity Date; Rescission
and Annulment................................................ 72
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee................................... 73
SECTION 504. Trustee May File Proofs of Claim............................. 74
SECTION 505. Trustee May Enforce Claims Without Possession of Notes....... 75
SECTION 506. Priorities................................................... 76
SECTION 507. Limitation on Suits.......................................... 76
SECTION 508 Unconditional Right of Holders to Receive Principal,
Premium and Interest......................................... 77
SECTION 509. Restoration of Rights and Remedies........................... 77
SECTION 510. Rights and Remedies Cumulative............................... 78
SECTION 511. Delay or Omission Not Waiver................................. 78
SECTION 512. Control by Holders........................................... 78
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
SECTION 513. Waiver of Past Default....................................... 79
SECTION 514. Undertaking for Costs........................................ 79
ARTICLE SIX
TRUSTEE
SECTION 601. Duties of Trustee............................................ 80
SECTION 602. Rights of Trustee............................................ 81
SECTION 603. Individual Rights of Trustee................................. 82
SECTION 604. Trustee's Disclaimer......................................... 83
SECTION 605. Notice of Default............................................ 83
SECTION 606. Reports by Trustee to Holders................................ 83
SECTION 607. Compensation and Indemnity................................... 84
SECTION 608. Replacement of Trustee....................................... 85
SECTION 609. Successor Trustee by Merger, Etc............................. 86
SECTION 610. Eligibility; Disqualification................................ 86
SECTION 611. Preferential Collection of Claims against Company............ 87
SECTION 612. Acceptance of Appointment by Successor....................... 87
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders................. 87
SECTION 702. Reports by Trustee........................................... 88
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms......... 88
SECTION 802. Opinion of Counsel to Trustee; Officers' Certificate......... 89
SECTION 803. Successor Corporation Substituted............................ 89
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders........... 89
SECTION 902. Supplemental Indentures with Consent of Holders.............. 91
SECTION 903. Execution of Supplemental Indentures......................... 92
SECTION 904. Effect of Supplemental Indentures............................ 93
SECTION 905. Conformity with Trust Indenture Act.......................... 93
SECTION 906. Reference in Notes to Supplemental Indentures................ 93
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
SECTION 907. Notice of Supplemental Indentures........................... 93
SECTION 908. Effect of Consents.......................................... 93
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Notes............................................ 94
SECTION 1002. Maintenance of Office or Agency............................. 94
SECTION 1003. Corporate Existence......................................... 95
SECTION 1004. Payment of Taxes and Other Claims........................... 95
SECTION 1005. Maintenance of Properties and Insurance..................... 96
SECTION 1006. Compliance Certificate; Notice of Default................... 96
SECTION 1007. SEC Reports................................................. 97
SECTION 1008. Waiver of Stay, Extension or Usury Laws..................... 98
SECTION 1009. Limitation on Restricted Payments........................... 98
SECTION 1010. Limitation on Indebtedness.................................. 100
SECTION 1011. Limitation on Liens......................................... 101
SECTION 1012. Limitation on Sale and Leaseback Transactions............... 101
SECTION 1013. Limitations on Dispositions of Assets....................... 101
SECTION 1014. Limitation on Restricted Subsidiary Dividends............... 105
SECTION 1015. Limitation on Transactions with Affiliates.................. 106
SECTION 1016. Limitation on Investments................................... 107
SECTION 1017. Money for Note Payments to Be Held in Trust................. 107
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption......................................... 109
SECTION 1102. Applicability of Article.................................... 109
SECTION 1103. Election to Redeem; Notice to Trustee....................... 109
SECTION 1104. Selection by Trustee of Notes to Be Redeemed................ 110
SECTION 1105. Notice of Redemption........................................ 110
SECTION 1106. Deposit of Redemption Price................................. 111
SECTION 1107. Notes Payable on Redemption Date............................ 111
SECTION 1108. Notes Redeemed in Part...................................... 112
ARTICLE TWELVE
RIGHT TO REQUIRE REPURCHASE
SECTION 1201. Repurchase of Notes at Option of the Holder
Upon Change of Control...................................... 112
</TABLE>
vii
<PAGE>
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
SECTION 1301. Company's Option to Effect Defeasance
or Covenant Defeasance...................................... 115
SECTION 1302. Defeasance and Discharge.................................... 115
SECTION 1303. Covenant Defeasance......................................... 116
SECTION 1304. Conditions to Defeasance or Covenant Defeasance............. 116
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.................... 118
SECTION 1306. Reinstatement............................................... 119
TESTIMONIUM................................................................ 100
SIGNATURES AND SEALS....................................................... 100
</TABLE>
viii
<PAGE>
INDENTURE, dated as of March 24, 1998 by and between EARLE M.
JORGENSEN COMPANY, a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal office
at 3050 East Birch Street, Brea, CA 92621, and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York banking corporation (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 9 1/2%
Senior Notes due 2005 (herein called the "Series A Notes"), and its 9 1/2%
Series B Senior Notes due 2005 (the "Series B Notes" and, together with the
Series A Notes, the "Notes") of substantially the tenor and amount hereinafter
set forth, and to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture.
Upon the issuance of the Series B Notes, if any, or the effectiveness
of the Shelf Registration Statement (as defined herein), this Indenture will be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
All things necessary have been done to make the Notes, when executed
by the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the Trust Inden
ture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-
liquidating paper", as used in TIA Section 311, shall have the meanings
assigned to them in the rules of the Commission adopted under the Trust
Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Ten, are defined in that
Article.
"Affiliate" of any Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, di rectly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
2
<PAGE>
"Agent" means any Registrar, Paying Agent or co-Registrar or agent,
-----
if any, for service of notices and demands.
"APB 16" means Accounting Principles Board Opinion No. 16 (Business
------
Combinations) as in effect on the date of this Indenture.
"Asset Disposition" shall have the meaning specified in Section 1013.
-----------------
"Attributable Debt" in respect of a Sale and Leaseback Transaction
-----------------
means, at the time of determination, the present value (discounted at the
interest rate implicit in the lease, compounded semiannually) of the obligation
of the lessee of the property subject to such Sale and Leaseback Transaction for
rental payments during the remaining term of the lease included in such
transaction including any period for which such lease has been extended or may,
at the option of the lessor, be extended or until the earliest date on which the
lessee may terminate such lease without penalty or upon payment of penalty (in
which case the rental payments shall include such penalty), after excluding all
amounts required to be paid on account of mainte nance and repairs, insurance,
taxes, assessments, water, utilities and similar charges.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any person, the Board of
------------------
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a duly adopted
----------------
resolution of the Board of Directors of such person.
"Business Day" means a day that is not a Legal Holiday.
------------
"Capital Stock" of any Person means any and all shares, interests,
-------------
participations, or other equivalents (however designated) of capital stock of
such Person and any rights (other than debt securities convertible into capital
stock), warrants or options to acquire such capital stock.
"Capitalized Lease Obligation" means, as to any Person, Indebtedness
----------------------------
represented by obligations under a lease that is required to be capitalized on
the
3
<PAGE>
balance sheet of such Person for financial reporting purposes in accordance with
GAAP and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with GAAP and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease.
"Cash Equivalents" means (i) obligations issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) and maturing within one year
from the date of acquisition, (ii) dollar and eurodollar time deposits and
certificates of deposit or bankers' acceptances of any domestic commercial bank
or domestic branch office or agency of a foreign commercial bank of recognized
standing having capital and surplus in excess of $100,000,000 (a "Qualified
Bank"), (iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any Qualified Bank, (iv) commercial paper issued by any Qualified Bank and
commercial paper of any other issuer rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing within one
year from the date of acquisition, (v) securities, bonds, notes, debentures or
investments or other forms of Indebtedness of any person rated at least A or the
equivalent thereof by Standard & Poor's Corporation and at least A or the
equivalent thereof by Moody's Investors Service, Inc., (vi) investments in money
market or mutual funds registered under the Investment Company Act of 1940, as
amended, whose sole investments are comprised of securities and other
instruments or obligations described in clauses (i) through (v) above and (vii)
with respect to only foreign operations of the Company and its Subsidiaries,
overnight deposits in the ordinary course of business with foreign commercial
banks and certificates of deposit or bankers' acceptances of foreign commercial
banks of recognized standing having capital and surplus in excess of
$100,000,000.
"Change of Control" means (i) directly or indirectly a sale, transfer
-----------------
or other conveyance of all or substantially all of the assets of the Company or
Holding, on a consolidated basis, to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), excluding transfers or conveyances to or among the Company's
Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an
entirety in one transaction or series of related transactions, (ii) prior to
the earlier to occur of (A) the first public offering of common stock of Holding
or (B) the first public offering of
4
<PAGE>
Common Stock, Permitted Holders cease to beneficially own, directly or
indirectly, in the aggregate a majority of the total voting power of all classes
of Capital Stock then outstanding and normally entitled to vote in elections of
directors ("Voting Stock") of the Company, whether as a result of issuance of
securities of the Company, any merger, consolidation, liquidation or
dissolution of the Company, any direct or indirect transfer of securities by
Holding or otherwise (the Permitted Holders will be deemed to beneficially own
any Voting Stock of the Company held by Holding so long as Permitted Holders
beneficially own, directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of Holding); (iii) any "person" or "group" (as
such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 30% of the total
voting power of all Voting Stock then outstanding of the Company and the
Permitted Holders "beneficially own" (as so defined), directly or indirectly, in
the aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company (for the purposes of this
clause (iii), such other person will be deemed to beneficially own any Voting
Stock of the Company held by Holding, if such other person "beneficially owns"
(as so defined), directly or indirectly, more than 30% of the voting power of
the Voting Stock of Holding and the Permitted Holders "beneficially own" (as so
defined), directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of Holding and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of Holding) or (iv) during any period of 24
consecutive months, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the shareholders of
the Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or who were
nominated and elected by the Permitted Holders pursuant to the Stockholder
Agreement) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
5
<PAGE>
"Common Stock" shall mean the common stock, par value $.01 per share,
------------
of the Company, now or hereafter issued.
"Company" means Earle M. Jorgensen Company until a successor replaces
-------
it pursuant to this Indenture and thereafter means such successor.
"Company Order or Company Request" means a written request or order
--------------------------------
signed by an Officer of the Company and delivered to the Trustee.
"Consolidated Cash Flow", of any Person, for any period, means the
----------------------
Consolidated Net Income of such Person plus the sum of (a) income taxes,
----
determined on a consolidated basis for such Person and its Restricted
Subsidiaries, (b) Fixed Charges of such Person and its Restricted Subsidiaries,
(c) depreciation expense, (d) amortization expense and (e) all other non-cash
items deducted from net revenues in determining Consolidated Net Income for such
period, all determined in accordance with GAAP.
"Consolidated Net Income", of any Person, for any period, means the
-----------------------
net income (loss) of such Person and its Restricted Subsidiaries for such
period, determined in accordance with GAAP, provided that (i) the net income
--------
(determined as set forth above) of any Unrestricted Subsidiary or any other
Person, other than a Restricted Subsidiary, in which such Person or any of its
Restricted Subsidiaries has a joint interest with a third party shall be
included only to the extent of the amount of dividends or distributions actually
paid to such Person or Restricted Subsidiary during such period, (ii) the net
income (loss) of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iii) the
net income of any Restricted Subsidiary shall be excluded to the extent such
Restricted Subsidiary is prohibited, directly or indirectly, from distributing
such net income or any portion thereof to such Person, (iv) the net income
(loss) of such Person shall be adjusted by excluding (to the extent otherwise
included) any extraordinary gains and extraordinary losses together with any
related provisions for taxes on any such gain or loss during any such period,
(v) the net income (loss) of such Person shall be adjusted by excluding any
adjustments relating to the LIFO method of accounting for inventory during such
period, (vi) the net income (loss) of the Company shall be adjusted to exclude
(to the extent otherwise included) the one-time non-cash charges associated with
the write-off of deferred debt issuance costs associated with the Refinancing
Transactions and to exclude any redemption
6
<PAGE>
premiums paid on the 10 3/4% Notes or the purchase money indebtedness redeemed
in connection with the Refinancing Transactions.
"Consolidated Net Worth" of any person, at any date, means the
----------------------
aggregate of capital, surplus and retained earnings less (a) any accumulated
deficit and (b) any amounts attributable to Redeemable Stock, of such Person and
its Restricted Subsidiaries as would be shown on a consolidated balance sheet of
such Person and its Restricted Subsidiaries prepared in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee currently
----------------------
located at 114 West 47th Street, New York, New York, 10036, Attn: Corporate
Trust and Agency Division, Tel. (212) 852-1000; Fax. (212) 852-1626.
"Credit Facility" means the credit facility dated as of March 3, 1993
---------------
among the Company, Holding, and BT Commercial Corporation and Chemical Bank, as
Agents and the other banks named therein and all other agreements, documents and
instruments from time to time delivered in connection with any thereof, in each
case as such agreements, documents and instruments may be amended, amended and
restated, supplemented or otherwise modified from time to time and includes any
agreement, document or instrument extending, refinancing, refunding, or
otherwise restructuring, substituting or replacing (whether or not with the same
agent and lenders and whether or not the interest rate payable in respect
thereof shall thereby be increased) all or any portion of the Indebtedness then
outstanding or permitted to be outstanding pursuant to such agreements,
documents or instruments, or any successor agreements and documents or
otherwise.
"Default" means any event or condition which is, or after notice or
-------
passage of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
----------
their respective successors.
"Designated Facilities" means the facilities of the Company located
---------------------
in Detroit, Michigan, Lynwood, California (the Alameda Sheet and Strip
building), Kansas City, Missouri (the JSA Facility), and Buffalo, New York and
any property, plant or equipment located at such facility.
7
<PAGE>
"Eligible Accounts Receivable" means all accounts receivable which
----------------------------
are not more than 180 days past due under their normal payment terms.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute.
"ESOP" means Earle M. Jorgensen Employee Stock Ownership Plan, as in
----
effect on the date of this Indenture.
"Event of Default" shall have the meaning specified in Section 501.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the offer by the Company to the Holders of the
--------------
Series A Notes to exchange all of the Series A Notes for Series B Notes, as
provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
-------------------------------------
Registration Statement as defined in the Registration Rights Agreement.
"Excluded Facility" means the real property and plant located at 601
-----------------
Redna Terrace, Cincinnati, Ohio, to the extent that such real property and plant
is purchased by the Company for an amount not exceeding $6,000,000 and subse
quently sold by the Company on or prior to March 31, 1999 pursuant to a
transaction in which the Company enters into a lease agreement with the
purchaser of such real property and plant on terms no less favorable in any
material respect than the terms of the existing lease agreement for such real
property and plant.
"Financing Disposition" means any sale, transfer, conveyance or other
---------------------
disposition of property or assets by the Company or any Subsidiary thereof to
any Receivables Entity, or by any Receivables Subsidiary, in each case in
connection with the incurrence by a Receivables Entity of Indebtedness, or
obligations to make payments to the obligor on Indebtedness, which may be
secured by a Lien in respect of such property or assets.
"Fixed Charges" means with respect to any Person for any period, such
-------------
Person's consolidated interest expense determined in accordance with GAAP, (a)
including amortization of original issue discount and non-cash expenses
attribut-
8
<PAGE>
able to accruals, the interest component of capital leases, (b) excluding the
amortization of debt issuance costs, (c) excluding an amount of interest expense
in respect of Life Insurance Policy Loans that is equal to any dividends
received in respect of the Life Insurance Policy Loans (not to exceed the amount
of such interest expense on the Life Insurance Policy Loans) and (d) plus the
product of (x) the sum of (i) cash dividends paid on any preferred stock of such
Person plus (ii) cash and the fair market value (as determined by the Company's
Board of Directors in good faith) of any non-cash dividends paid on any
preferred stock of any Restricted Subsidiary (other than a Wholly Owned
Restricted Subsidiary), times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective aggregate
Federal, state and local tax rate of such Person, expressed as a decimal. For
purposes of this definition, interest on a capital lease shall be deemed to
accrue at the rate of interest implicit in such capital lease in accordance with
GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board ("FASB")).
"Fixed Charge Coverage Ratio" means for any Person, for any period,
---------------------------
such Person's ratio of Consolidated Cash Flow to Fixed Charges for such period.
"Foreign Subsidiary" means either Earle M. Jorgensen (Canada) Inc.
------------------
(Ontario, Canada) or Stainless Insurance Ltd. (Bermuda).
"GAAP" means generally accepted accounting principles in effect in
----
the United States as of the time, when and for the period as to which such
accounting principles are to be applied; provided, however, that for purposes of
-------- -------
computing Consolidated Net Worth, the Fixed Charge Coverage Ratio and compliance
with Section 1009 hereof, "GAAP" means such generally accepted accounting
principles as adopted by the Company on the date hereof.
"Global Notes" has the meaning set forth in Section 201.
------------
"Heller Documents" means (a) the Loan and Security Agreement dated as
----------------
of March 27, 1995, by and between the Company and Heller Financial, Inc.; (b)
the Promissory Note dated March 30, 1995, made by the Company and payable to the
order of Heller Financial, Inc.; (c) the Deed of Trust and Security Agreement
dated as of March 28, 1995, by and between the Company as grantor, Scott A.
Stein, as trustee, and Heller Financial, Inc., as the lender, and (d) the
Guaranty dated March 28, 1995, made by Holding.
9
<PAGE>
"Holder" means the Person in whose name a Note is registered on the
------
Registrar's books.
"Holding" means Earle M. Jorgensen Holding Company, a Delaware
-------
corporation.
"Indebtedness" means, as to any Person, without duplication, (a) all
------------
obligations of such Person, including accrued and unpaid interest, for borrowed
money (including any net overdraft in any bank which overdraft is not satisfied
within three consecutive Business Days from its occurrence), (b) all obligations
of such Person evidenced by bonds (other than performance bonds issued in the
ordinary course of business), debentures, notes, letters of credit or
reimbursement agreements (other than letters of credit or reimbursement
agreements in respect of accounts payable to trade creditors incurred in the
ordinary course of business in connection with the obtaining of materials or
services) or similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable to
trade creditors arising in the ordinary course of business), (d) all Capitalized
Lease Obligations of such Person, (e) all indebtedness of others secured by a
Lien on any asset of such Person, whether or not such indebtedness is assumed
by such Person or guaranteed by such Person, (f) all indebtedness of others
guaranteed by such Person to the extent of such guarantee, (g) Attributable Debt
of such Person, (h) preferred stock issued by a Subsidiary of such Person, (i)
Redeemable Stock issued by such Person, and (j) obligations under interest rate
swaps and caps and currency swaps or options and other similar hedging
agreements (other than such arrangements entered into in the ordinary course of
business); and the amount of any such Indebtedness on the date of determination
thereof shall be the outstanding balance of any such unconditional obligations
as described above and the maximum liability of any such contingent obligation
at such date and, with respect to clauses (h) and (i), the amount of
Indebtedness shall equal the liquidation preference. The principal amount
outstanding of any Indebtedness issued with original issue discount is the
accreted value of such Indebtedness and Indebtedness shall not include any
liability for federal, state, local or other taxes.
"Indenture" means this Indenture, as amended or supplemented from
---------
time to time in accordance with the terms hereof, including, without limitation,
the provisions of the TIA. that are deemed to be a part of and govern this
instrument and any supplemental indenture, respectively.
10
<PAGE>
"Interest Rate Contracts" means interest rate swap agreements,
-----------------------
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Interest Payment Date" means the stated due date of an installment
---------------------
of interest on the Notes.
"Issue Date" means the date of first issuance of the Notes under this
----------
Indenture.
"Inventory" of any Person means any and all inventory, including raw
---------
materials, work-in-process and finished goods of such Person, intended for sale
in the ordinary course of business of such person, of every kind and
description, in the custody or possession, actual or constructive, of such
Person.
"Investments" of any Person means, collectively, any direct or
-----------
indirect loan, advance or other extension of credit, capital contribution, or
transfer of cash, property or other assets to, or any acquisition of Capital
Stock, securities or other evidences of Indebtedness including by way of
guarantee or similar arrangement, of, any other person. For the purposes of
Sections 1009 and 1016 hereof, (i) "Investment" shall include the fair market
value of the net assets of any Subsidiary at the time that such Subsidiary is
designated an Unrestricted Subsidiary, (ii) the fair market value of the net
assets of any Unrestricted Subsidiary that is designated a Restricted Subsidiary
shall be deducted from the aggregate amount of Investments in computing the net
amount of Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors of
the Company, and evidenced by a Board Resolution.
"Kelso" means Kelso & Company, Inc., a private merchant banking firm.
-----
"Legal Holiday" shall have the meaning provided in Section 112.
-------------
"Lien" means, with respect to any property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
property. The Company shall be deemed to own subject to a Lien any property
which it has acquired or holds subject to the interest of a vendor or lessor
under any
11
<PAGE>
conditional sale agreement, capital lease or other title retention agreement
relating to such property.
"Life Insurance Policies" means those certain life insurance policies
-----------------------
obtained in 1984, 1985 and 1986 by Kilsby-Roberts Holding Co. ("KR") from
Phoenix Mutual Life Insurance Company covering participants in the KR employee
stock ownership plan and certain other KR executives, as in effect on the date
of this Indenture.
"Life Insurance Policy Loan" means Indebtedness in respect of money
--------------------------
borrowed by the Company against the available loan value of any Life Insurance
Policy in accordance with the terms of such Life Insurance Policy on the date of
this Indenture, which Indebtedness shall be nonrecourse to the Company or any
Restricted Subsidiary.
"Management Agreement" means the management agreement, dated as of
--------------------
March 8, 1993, between the Company and Holding.
"Material Subsidiary" means a Subsidiary of the Company which is a
-------------------
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X
promulgated under the Securities Act.
"Maturity Date", when used with respect to any Note, means the date
-------------
on which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity, Repurchase Date, Purchase Date or by
declaration of acceleration, call for redemption or otherwise.
"Net Proceeds" means, from any Asset Disposition by any Person, cash
------------
received therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes actually paid or provided for as a
liability as a consequence of such Asset Disposition, (ii) appropriate amounts
to be provided by such Person as a reserve, in accordance with GAAP, against any
liabilities associated with the asset sold or disposed of in such Asset
Disposition and retained by such Person after such Asset Disposition, and (iii)
all payments made by such Person on any Indebtedness which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such asset sale or by applicable law, be repaid out of the
proceeds from such asset sale.
12
<PAGE>
"New Credit Facility" means the credit facility dated March 3, 1993,
-------------------
amended and restated as of March 24, 1998, among the Company, Holding, and BT
Commercial Corporation and BT Commercial Corporation, as Agent and the other
banks named therein and all other agreements, documents and instruments from
time to time delivered in connection with any thereof, in each case as such
agreements, documents and instruments may be amended, amended and restated,
supplemented or otherwise modified from time to time and includes any agreement,
document or instrument extending, refinancing, refunding, or otherwise
restructuring, substituting or replacing (whether or not with the same agent and
lenders and whether or not the interest rate payable in respect thereof shall
thereby be increased) all or any portion of the Indebtedness then outstanding or
permitted to be outstanding pursuant to such agreements, documents or
instruments, or any successor agreements and documents or otherwise.
"Non-U.S. Person" means a person who is not a U.S. person as defined
---------------
in Regulation S.
"Note Register" and "Note Registrar" have the respective meanings
------------- --------------
specified in Section 305.
"Notes" shall have the meaning specified in the first recital to this
-----
Indenture.
"Offer to Purchase" means any offer made by the Company to Holders of
-----------------
the Notes required by the provisions of Section 1013(a) and made pursuant to the
provisions of Section 1013(b), otherwise, also referred to as a "Section 1013
Offer" or a "Proceeds Offer."
"Officer" means, with respect to the Company, the President, any Vice
-------
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of the Company.
"Officers' Certificate" means, with respect to the Company, a
---------------------
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 102.
"Offshore Global Note" has the meaning set forth in Section 201.
--------------------
"Offshore Physical Note" has the meaning set forth in Section 201.
----------------------
13
<PAGE>
"Opinion of Counsel" means a written opinion from legal counsel who
------------------
is acceptable to the Trustee (but who may be regular outside counsel to the
Company) complying with the requirements of Section 102.
"Outstanding", when used with respect to Notes, means, as of the date
-----------
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Notes; provided that, if such Notes
--------
are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor reasonably satisfactory to the
Trustee has been made;
(iii) Notes, except to the extent expressly provided in Sections 1302
and 1303, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Thirteen; and
(iv) Notes that have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands the
Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making
such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only
14
<PAGE>
Notes that the Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Notes and that the pledgee is not the Company or any
other obligor upon the Notes or any Affiliate of the Company or such other
obligor.
"Paying Agent" means any Person (including the Company acting as
------------
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Notes on behalf of the Company.
"Permitted Holders" means collectively, Kelso and its Affiliates, the
-----------------
officers, directors and employees of the Company and its Subsidiaries, and the
ESOP.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
----------------------
of the Company and its Restricted Subsidiaries incurred under or in respect of
the New Credit Facility (or any substitute or replacement facility) provided
that the New Credit Facility shall be permanently reduced by the amount of any
prepayment from the proceeds of an Asset Disposition pursuant to Section 1013
and provided that the aggregate principal amount of such Indebtedness
outstanding at any time pursuant to this clause (i) may not exceed (x) the
greater of (a) $220,000,000 or (b) the sum of 85% of Eligible Accounts
Receivable and 60% of the book value of the Inventory (determined on a first-in
first-out basis) of the Company and its Restricted Subsidiaries, plus (y) any
additional amounts (without duplication) permitted to be incurred by the Company
and its Restricted Subsidiaries pursuant to clause (xvi) below (clause (i)(x)
and, collectively with clause (i)(y), the "Total Amount"), minus, (z) the
amount then outstanding under any Receivables Financing (as set forth in the
books and records of the Company and confirmed by the agent, trustee or other
representative of the institution or group providing such Receivables
Financing); (ii) Indebtedness evidenced by the Notes; (iii) indebtedness
evidenced by the Special Term Loan Agreement; (iv) Indebtedness of the Company
to any Wholly Owned Restricted Subsidiary or of any Wholly Owned Restricted
Subsidiary to the Company or to any other Wholly Owned Restricted Subsidiary;
(v) Indebtedness of the Company and its Restricted Subsidiaries outstanding on
the date of issuance of the Notes; (vi) Indebtedness of the Company in
connection with Life Insurance Policy Loans; (vii) Indebtedness of the Company
or any Restricted Subsidiary evidenced by standby letters of credit, performance
bonds, surety bonds, guarantees and similar obligations incurred in the ordinary
course of business for purposes of insuring the performance of obligations of
the Company or such Restricted Subsidiary and in an aggregate
15
<PAGE>
principal amount not to exceed $7,500,000 at any time; (viii) Indebtedness of
the Company or a Restricted Subsidiary in respect of Capitalized Lease
Obligations; provided, however, that the aggregate Indebtedness incurred under
-------- -------
this clause (viii) will not at any time exceed $12,500,000; (ix) Indebtedness of
the Company or a Restricted Subsidiary (including industrial revenue bond
Indebtedness) that is secured by a Lien on property, which Indebtedness
constitutes all or part of the purchase price of the property subject thereto or
is incurred prior to, at the time of or within 180 days after the acquisition of
such property for the purpose of financing all or any part of the purchase price
thereof, provided that such secured Indebtedness does not exceed the purchase
price of such property; (x) Indebtedness of the Company issued in exchange for,
or the net proceeds of which will be used to exchange, refinance or refund
outstanding Indebtedness incurred pursuant to the second paragraph of Section
1010 or pursuant to clauses (ii), (iii), (v), (xv) and (xvi) so long as (x) the
principal amount of the Indebtedness issued does not exceed the principal amount
(plus any premium and consent payments required) of the Indebtedness so
exchanged, refinanced or refunded, (y) where the Indebtedness to be exchanged,
refinanced or refunded is not Senior Indebtedness, the Indebtedness issued does
not have a final maturity or mandatory redemption payments prior to the earlier
of the final maturity of the Indebtedness being so exchanged, refinanced or
refunded or the stated maturity of the Notes, and (z) where the Indebtedness
being so exchanged, refinanced or refunded is subordinated to the Notes, the
Indebtedness is subordinated to the Notes in right of payment to the same extent
as the indebtedness so exchanged, refinanced or refunded; (xi) Attributable Debt
in respect of Sale and Leaseback Transactions engaged in pursuant to and in
accordance with clause (ii) under Section 1012; (xii) Indebtedness incurred in
connection with Investments in Unrestricted Subsidiaries; provided that such
Investments are permitted by Section 1016; (xiii) Indebtedness of the Company
incurred pursuant to Interest Rate Contracts related to the New Credit Facility
and the obligations under the Special Term Loan Agreement to the extent the
notional principal amount of any such Interest Rate Contract does not exceed the
amount of Indebtedness permitted pursuant to clause (i) above; (xiv)
Indebtedness of a Receivables Subsidiary secured by a Lien on all or part of the
assets disposed of in, or otherwise incurred in connection with, a Financing
Disposition; provided, that the aggregate principal amount of indebtedness
outstanding under this clause (xiv) may not exceed the Total Amount; (xv)
Indebtedness incurred by the Company's Canadian subsidiary under or in respect
of a secured bank credit facility, provided that the aggregate principal amount
of such Indebtedness outstanding pursuant to this clause (xv) shall not exceed
$10.0 million and (xvi) Indebtedness of the Company other than Indebtedness
permitted under clauses (i) through (xv), but without duplication as to
additional amounts permitted to be outstanding under
16
<PAGE>
clause (i)(y) above, provided that the aggregate amount of such Indebtedness
may not exceed $25,000,000 at any time outstanding. To the extent that Net
Proceeds from an Asset Disposition are used to repay, repurchase or redeem
Indebtedness incurred under or in respect of the New Credit Facility pursuant to
Section 1013, the amount of Indebtedness permitted by clauses (i) and (xiv) of
this definition shall be permanently reduced by the amount of such repayment,
repurchase or redemption provided, however, no such permanent reduction in
borrowing capacity shall be required if such repayment, repurchase or redemption
is made with the Net Proceeds remaining after consummation of a Proceeds Offer.
"Permitted Investment Amount" shall have the meaning specified in
---------------------------
Section 1016.
"Permitted Liens" means (i) Liens for taxes not yet due or which are
---------------
being contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Company or its
Restricted Subsidiaries, as the case may be, in conformity with GAAP; (ii)
statutory Liens or landlords' and carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business and not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings; (iii) pledges or deposits in
connection with workers' compensation, unemployment insurance and other types of
social security benefits; (iv) any attachment or judgment Lien not giving rise
to a Default or an Event of Default; (v) the Lien on the funds or securities
deposited with the trustee under the indenture relating to the 10 3/4% Notes
(such funds or securities not to exceed $162,500,000 plus earnings thereon) for
the purpose of defeasing or redeeming the 10 3/4% Notes on or prior to April 23,
1998; (vi) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of like
nature incurred in the ordinary course of business (exclusive of obligations for
the payment of borrowed money); (vii) easements, rights-of-way, restrictions and
other similar charges or encumbrances not interfering in any material respect
with the business of the Company; (viii) leases or subleases granted to others
not interfering with the ordinary conduct of the business of the Company; (ix)
title defects or irregularities which do not in the aggregate materially impair
the use of such properties by the Company, (x) Liens in respect of the Life
Insurance Policies incurred in connection with the Life Insurance Policy Loans
permitted under clause (vi) of the definition of "Permitted Indebtedness";
(xi) Capitalized Lease Obligations permitted under Section 1010, (xii) any other
Liens imposed by operation of law
17
<PAGE>
which do not materially affect the Company's ability to perform its obligations
under the Notes and this Indenture; (xiii) Liens existing on the date of this
Indenture and renewals and extensions thereof; (xiv) Liens securing obligations
under the New Credit Facility encumbering inventory (including raw materials,
work-in-process, supplies and finished goods), accounts receivable (including
sellers' rights relating thereto, all contracts and contract rights relating
thereto and all books and records relating thereto), all collection accounts,
deposit accounts and other bank accounts relating to collection of the
foregoing, together with the proceeds and products of all of the foregoing; (xv)
Liens granted to secure obligations under or in respect of the Special Term Loan
Agreement; (xvi) purchase money mortgages and purchase money security interests
incurred in the normal and ordinary course of the Company's and its Restricted
Subsidiaries' business to the extent related to Indebtedness incurred pursuant
to clause (ix) of the definition of "Permitted Indebtedness";(xvii) until April
1, 1998, Liens granted to secure Indebtedness under the Heller Documents;
(xviii) Liens securing Indebtedness of any entity existing at the time such
assets are acquired by the Company or a Restricted Subsidiary, whether by
merger, consolidation, purchase of assets or otherwise (whether or not such
Liens are created, incurred or assumed in contemplation of the acquisition
thereof by the Company or a Restricted Subsidiary), provided such Liens do not
extend to any other assets of the Company or any other Restricted Subsidiaries,
and Liens securing refinancings of such Indebtedness provided that such Liens do
not extend to any assets other than assets securing such Indebtedness to be
refinanced; (xix) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xx) Liens arising
pursuant to Sale and Leaseback Transactions engaged in pursuant to and in
accordance with Section 1012; (xxi) Liens securing Indebtedness or other
obligations of any Receivables Entity; (xxii) Liens securing Indebtedness
incurred pursuant to clause (xv) of the definition of "Permitted Indebtedness";
and (xxiii) Liens other than those described above with respect to obligations
not in excess of $5,000,000 in the aggregate at any time.
"Permitted Transactions" means (i) reasonable and customary fees,
----------------------
compensation and benefits paid to officers, directors, employees or consultants
of the Company or any Restricted Subsidiary or their respective Affiliates for
services rendered to the Company or any Restricted Subsidiary in the ordinary
course of business consistent with past practice, (ii) transfers of goods and
services by or among the Company and its Restricted Subsidiaries and their
respective Affiliates in the ordinary course of business consistent with past
practice, provided that if any such transaction or series of related
transactions involves in excess of $3,000,000, the
18
<PAGE>
Board of Directors of the Company shall determine in good faith by resolution
that such transaction is on terms fair and reasonable to the Company, (iii)
transactions pursuant to agreements with Affiliates which are currently in
effect in accordance with their terms, (iv) dividends and distributions to
Holding permitted under Section 1009, (v) any transactions between the Company
or any Restricted Subsidiary and the ESOP (or any successor thereto), (vi)
advances to employees, officers, directors, agents and representatives of the
Company for travel and other reasonable and ordinary business expenses, (vii)
advances and loans to employees and officers of the Company in connection with
their relocation, (viii) payments to Stainless Insurance Ltd. in respect of
insurance services provided to the Company or any Restricted Subsidiary, and
(ix) payments to any Receivables Subsidiary for services performed or
reimbursement of expenses in connection with the financing or refinancing of
Receivables.
"Person" or "person" means an individual, a corporation, a
------ ------
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning set forth in Section 201.
--------------
"Predecessor Note" of any particular Note means every previous Note
----------------
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"principal" of any Indebtedness (including the Notes) means the
---------
principal of such Indebtedness plus any applicable premium, if any, on such
Indebtedness.
"Proceeds Offer" shall have the meaning specified in Section 1013.
--------------
"Property" means any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchase Date" shall have the meaning specified in Section 1013.
-------------
19
<PAGE>
"QIB" means a Qualified Institution Buyer within the meaning of Rule
---
144A under the Securities Act.
"Receivable" means a right to receive payment arising from a sale or
----------
lease of goods or services by a Person pursuant to an arrangement with another
Person pursuant to which such other Person is obligated to pay for goods or
services under terms that permit the purchase of such goods and services on
credit, as determined in accordance with GAAP.
"Receivables Entity" means (x) any Receivables Subsidiary or (y) any
------------------
other Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts and/or other receivables, and/or related assets.
"Receivables Financing" means any financing of Receivables of the
---------------------
Company or any Restricted Subsidiary that have been transferred to a Receivables
Entity in a Financing Disposition.
"Receivables Subsidiary" means a Subsidiary of the Company that (a)
----------------------
is engaged solely in the business of acquiring, selling, collecting, financing
or refinancing Receivables, accounts (as defined in the Uniform Commercial Code
as in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all proceeds thereof and all rights
(contractual and other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and (b) is
designated as a "Receivables Subsidiary" by the Board of Directors of the
Company.
"Record Date" means each Record Date specified in the Notes whether
-----------
or not any such Record Date is a Business Day.
"Redeemable Stock" means any series or class of Capital Stock of any
----------------
Person which by its terms is redeemable at the option of the holder or is
subject to mandatory redemption prior to the maturity of the Notes.
"Redemption Date", when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Indenture and
Paragraph 5 in the form of Note.
20
<PAGE>
"Redemption Price", when used with respect to any Note to be
----------------
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Note.
"Refinancing Transactions" means the offering of the Notes, the
------------------------
Special Term Loan Agreement, the refinancing of the Credit Facility with the New
Credit Facility and the payment of a dividend of approximately $45.9 million to
Holdings.
"Regulation S" means Regulation S under the General Regulations of
------------
the Securities Act.
"Repurchase Date" shall have the meaning specified in Section 1201.
---------------
"Restricted Payments" means, collectively, with respect to any person
-------------------
(i) the declaration or payment of any dividend or other distribution on shares
of such person's or a Restricted Subsidiary's Capital Stock (except dividends or
distributions in additional shares of Capital Stock, other than Redeemable
Stock, or any dividend or distribution by a Restricted Subsidiary to the Company
or one of its Wholly Owned Restricted Subsidiaries), (ii) any payment on account
of the purchase, redemption, retirement or other acquisition of any shares of
the Company or a Restricted Subsidiary's Capital Stock or any option, warrant or
other right to acquire such shares, or (iii) any defeasance, redemption,
repurchase or other acquisition or retirement for value prior to scheduled
maturity, scheduled repayment, or scheduled sinking fund payment of any
Indebtedness subordinate in right of payment to the Notes; provided, however,
-------- -------
that the following items shall not be deemed to be Restricted Payments: (i)
payments by the Company pursuant to the Tax Allocation Agreement and (ii)
payments by the Company to Holding pursuant to the terms of the Management
Agreement provided that the 5% service fee referred to in Section 5(b) of the
Management Agreement shall not exceed $200,000 per annum.
"Restricted Subsidiary" means (i) any Subsidiary of the Company which
---------------------
exists on the date of this Indenture and (ii) any other such Subsidiary which
the Company has not classified as an Unrestricted Subsidiary. The Company by
resolution of its Board of Directors may classify a Subsidiary as an
Unrestricted Subsidiary until such time as the Company may, by further
resolution of its Board of Directors, classify such Subsidiary as a Restricted
Subsidiary.
21
<PAGE>
"Rule 144A" means Rule 144A under the General Regulations of the
---------
Securities Act.
"Sale and Leaseback Transaction" of any person means an arrangement
------------------------------
with any other Person or to which such other Person is a party providing for the
leasing by such person of any property or asset of such person which has been or
is being sold or transferred by such person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such other Person or to any Person to whom funds have been
or are to be advanced by such other Person on the security of such property or
asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and
--------------
the rules and regulations of the SEC promulgated thereunder.
"Senior Indebtedness" is defined as Indebtedness of the Company which
-------------------
is not by its terms subordinated to the Notes.
"Series A Notes" has the meaning specified in the recitals to this
--------------
Indenture.
"Series B Notes" has the meaning stated in the first recital of this
--------------
Indenture and refers to any Series B Notes containing terms substantially
identical to the Series A Notes (except that (i) such Series B Notes shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act, and (ii) certain provisions relating to Liquidated
Damages (as defined in the Note) shall be eliminated) that are issued and
exchanged for the Series A Notes in accordance with the Exchange Offer, as
provided for in the Registration Rights Agreement and this Indenture.
"Shelf Registration Statement" means the Shelf Registration
----------------------------
Statement, as defined in the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means
-------------------
a date fixed by the Trustee pursuant to Section 307.
22
<PAGE>
"Special Term Loan Agreement" means the loan agreement dated March
---------------------------
24, 1998 with DLJ Capital Funding Inc., as syndication agent, Donaldson, Lufkin
& Jenrette Securities Corporation and BT Alex. Brown Incorporated, as arrangers
and Fleet National Bank, as administrative agent and the lenders party thereto.
"Stockholders' Agreement" means the stockholders' agreement, dated as
-----------------------
of September 14, 1990, as amended as of January 20, 1992, as further amended
September 30, 1994, and any extension on substantially the same terms and
conditions among Holding, various Kelso Affiliates, management stockholders and
other investors named therein.
"Subordinated Indebtedness" means Indebtedness of the Company that is
-------------------------
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any person, (i) any corporation
----------
or other entity of which a majority of the total voting power of the shares of
capital stock or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions is at the time owned directly or indirectly by such person or (ii) any
partnership or joint venture at least a majority of the voting power of which is
directly or indirectly owned by such person, whether in the form of membership,
general, special or limited partnership interests or otherwise.
"Surviving Entity" shall have the meaning specified in Section
----------------
5.01(a).
"Tax Allocation Agreement" means the Tax Allocation Agreement dated
------------------------
as of March 8, 1993 between the Company and Holding.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
-------------------- ---
(15 U.S. Code (S)(S) 77aaa-77bbbb) as amended and in effect on the date of the
execution of this Indenture, except as otherwise provided in Section 905.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
23
<PAGE>
"Trust Officer" means any officer or assistant officer of the Trustee
-------------
assigned and duly authorized by the Trustee to administer its corporate trust
matters.
"U.S. Global Note" has the meaning set forth in Section 201.
----------------
"U.S. Government Obligations" means direct non-callable obligations
---------------------------
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
-----------------
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Note" has the meaning set forth in Section 201.
------------------
"Unrestricted Subsidiary" means any Subsidiary of the Company which
-----------------------
the Company by resolution of its Board of Directors shall classify as an
Unrestricted Subsidiary and any such Subsidiary of an Unrestricted Subsidiary
until such time as (i) the Company may, by further resolution of its Board of
Directors classify such Subsidiary as a Restricted Subsidiary or (ii) the
Company or any of its Restricted Subsidiaries becomes directly or indirectly
liable in respect of any contractual obligation or Indebtedness of such
Unrestricted Subsidiary. A Subsidiary of the Company may only be classified as
an Unrestricted Subsidiary if immediately after such classification, there would
not be a Default or Event of Default under this Indenture and the Company and
its Restricted Subsidiaries would have only Investments in such Subsidiary
which would be permitted by Section 1016. An Unrestricted Subsidiary of the
Company may only be reclassified as a Restricted Subsidiary if immediately after
giving effect to such reclassification, there would be no default or Event of
Default under this Indenture and the Company and Restricted Subsidiaries could
create, assume, guarantee or suffer to exist $1.00 of additional Indebtedness
(other than Permitted Indebtedness). Any valid classification shall be
effective as of the date specified in the applicable resolution of the Company's
Board of Directors, which shall not be prior to the date such resolution is
made.
"Wholly Owned Restricted Subsidiary" means, with respect to any
----------------------------------
person, a Restricted Subsidiary all of whose capital stock (other than
directors' qualifying shares) or other ownership interests having ordinary
voting power to elect
24
<PAGE>
a majority of the board of directors or other persons performing similar
functions and other equity interests are at the time owned directly or
indirectly by such person.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such
25
<PAGE>
matters be certified by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon (x) a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous or (y) one
or more certificates of public officials.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
26
<PAGE>
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Note Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
--------
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted
27
<PAGE>
or suffered to be done by the Trustee, any Paying Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
28
<PAGE>
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Effect of Headings, Table of Contents and Recitals.
--------------------------------------------------
The Article and Section headings herein, the Table of Contents and the
Recitals are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and the
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
SECTION 109. Separability Clause.
-------------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any Notes
Registrar and their successors hereunder, and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
-------------
This Indenture and the Notes shall be governed by and construed in
accordance with the law of the State of New York (without giving effect to the
conflict of laws principles thereof). The Trustee, the Company, and (by their
acceptance of the Notes) the Holders, agree to submit to the non-exclusive
jurisdiction of any United States federal or state court located in the Borough
of Manhattan, in the City of New York in any action or proceeding arising out of
or relating to this
29
<PAGE>
Indenture or the Notes. Upon the effectiveness of the Shelf Registration
Statement or the consummation of the Exchange Offer, this Indenture will be
subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions.
SECTION 112. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York City
are not required to be open. In any case where any Interest Payment Date,
Special Record Date, Redemption Date, Repurchase Date, Purchase Date or Stated
Maturity of any Note shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Notes) payment of principal (or
premium, if any) or interest need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, Special Record Date, Redemption Date, Repurchase
Date, Purchase Date or Stated Maturity provided that no interest shall accrue
--------
for the period from and after such Interest Payment Date, Special Record Date,
Redemption Date, Repurchase Date, Purchase Date or Stated Maturity, as the case
may be.
SECTION 113. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of, or premium, if any,
or interest on, any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any of the Notes, or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee, controlling person of
the Company or of a Subsidiary of the Company or of any successor Person of the
Company or of a Subsidiary of the Company. Each Holder by accepting a Note
waives and releases all such liability, and such waiver and release is part of
the consideration for the issuance of the Notes.
SECTION 114. Exhibits and Schedules.
----------------------
All exhibits and schedules attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
30
<PAGE>
SECTION 115. Counterparts.
------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
SECTION 116. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 117. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
under the TIA, have the meanings so assigned to them therein.
ARTICLE TWO
NOTES FORMS
SECTION 201. Forms Generally.
---------------
The Series A Notes shall be known as the "9 1/2% Senior Notes due
2005" and the Series B Notes shall be known as the "9 1/2% Series B Senior Notes
due 2005", in each case, of the Company. The Notes and the Trustee's
certificate of authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, law, governmental rule or regulation, depository rule or
usage, or other customary usage or as may, consistently herewith, be determined
by the officers executing such Notes, as evidenced by their execution of the
Notes. Any portion of the text of any Note may be set forth on the
31
<PAGE>
reverse thereof, with an appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Notes, as evidenced by their
execution of such Notes.
Series A Notes offered and sold in reliance on Rule 144A under the
Securities Act shall be issued initially in the form of one or more permanent
global Notes in substantially the form set forth herein and contain each of the
legends set forth in Section 203 (collectively the "U.S. Global Notes"),
registered in the name of the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary or its nominee, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Series A Notes offered and sold in offshore transactions in reliance
on Regulation S under the Securities Act shall be issued initially in the form
of a single global Note in substantially the form in Section 203 (the "Offshore
Global Note"), registered in the name of the nominee of the Depositary,
deposited with the Trustee, as custodian for the Depositary or its nominee, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Offshore Global Note may from
time to time be increased or decreased by adjustments made in the records of the
Trustee, as custodian for the Depositary or its nominee, as herein provided.
Series A Notes issued pursuant to Section 305 in exchange for or upon transfer
of beneficial interests in the U.S. Global Note or the Offshore Global Note
shall be in the form of permanent certificated Notes substantially in the form
set forth herein (the "U.S. Physical Notes" and the "Offshore Physical Notes"
respectively), as hereinafter provided.
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes." The U.S. Global Note
and the Offshore Global Note are sometimes collectively referred to as the
"Global Notes."
32
<PAGE>
SECTION 202. Restrictive Legends.
-------------------
Unless and until the earlier of (A) the date which is two years (or
such shorter period of time as permitted by rule 144 under the Securities Act
and any successor provision thereunder) after the later of the original issue
date of the Series A Notes or the last day on which the Company or any affiliate
of the Company was the owner of a Series A Note or (B) the date that (i) a
Series A Note is sold pursuant to an effective Shelf Registration Statement or
(ii) a Series A Note is exchanged for an Series B Note in an Exchange Offer
pursuant to an effective Exchange Offer Registration Statement, in each case
pursuant to the Registration Rights Agreement, (x) each U.S. Global Note and
U.S. Physical Note shall bear the following legend set forth below (the "Private
Placement Legend") on the face thereof and (y) the Offshore Physical Notes and
the Offshore Global Note shall bear the Private Placement Legend:
"THIS NOTE (OR ITS PREDESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"), OR (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURI-
33
<PAGE>
TIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
Each Global Note, whether or not a Series A Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONG-
34
<PAGE>
FUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE DATED AS OF MARCH 24, 1998
BETWEEN THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK AS TRUSTEE.
SECTION 203. Form of Face of Note and Series B Note.
--------------------------------------
EARLE M. JORGENSEN COMPANY
[Series B]/1/ 9 1/2% Senior Notes due 2005
No._____ $__________
CUSIP No.____
Earle M. Jorgensen Company, a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or its registered assigns, the principal sum of __________ Dollars on April
1, 2005 at the office or agency of the Company referred to below, and to pay
interest thereon on October 1, 1998 and semi-annually thereafter, on April 1 and
October 1 in each year, from October 1, 1998, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 9 1/2% per annum, until the principal hereof is paid or duly provided for,
and (to the extent lawful) to pay on demand interest on any overdue interest at
the rate borne by the Notes from the date on which such overdue interest becomes
payable to the date on which payment of such interest has been made or duly
provided for. The interest so payable, and
- ------------------------
/1/ Include only for Series B Notes
35
<PAGE>
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on the
Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Record Date, and
such defaulted interest, and (to the extent lawful) interest on such defaulted
interest at the rate borne by the Notes, may be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and interest on this Note
will be made at the office or agency of the Company maintained for that purpose
in The City of New York, or at such other office or agency of the Company as may
be maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
-------- -------
option of the Company (i) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Note Register or (ii) by transfer to
an account maintained by the payee located in the United States.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
36
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: _______ __, 1998 EARLE M. JORGENSEN COMPANY
By________________________
Attest: Title:
- --------------------------
Authorized Signature
37
<PAGE>
SECTION 204. Form of Reverse of Note.
-----------------------
This Note is one of a duly authorized issue of securities of the
Company designated as its 9 1/2% [Series B]/2/ Senior Notes due 2005 (herein
called the "Notes"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal of $105,000,000, that may be issued
under a Senior Notes Indenture (herein called the "Indenture") dated as of March
24, 1998 between the Company and United States Trust Company of New York (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the Trustee and
the Holders of the Notes, and of the terms upon which the Notes are, and are to
be, authenticated and delivered.
The Company, at its option, may redeem the Notes as a whole, or from
time to time in part, on or after April 1, 2002, at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest, if any, to the Redemption
Date):
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH
PERIOD BEGINNING APRIL 1, REDEMPTION PRICE
<S> <C>
2002........................ 104.750%
2003........................ 102.375%
2004 and thereafter......... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Notes originally outstanding at a redemption price equal to 109.5% of the
principal amount thereof, plus accrued and unpaid interest, if any to the
redemption date, with the net proceeds of a public offering of common stock by
the Company (or of Holding to the extent such net proceeds are contributed as a
capital contribution in exchange for common stock of the Company); provided that
at least 65% of the aggregate principal amount of the Notes originally
outstanding remain outstanding immediately after such redemption.
- -----------------------
/2/ Include only for Series B Notes
38
<PAGE>
Upon the occurrence of a Change of Control (the "Change of Control
Date"), each Holder shall have the right, at such Holder's option, to require
the Company to repurchase all or any part of such Holder's Notes pursuant to the
offer (the "Change of Control Offer") at a purchase price equal to 101% of the
principal amount thereof (the "Change of Control Purchase Price"), plus accrued
and unpaid interest, if any, to the date of repurchase.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated March 24, 1998, among the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). The
Registration Rights Agreement will provide that (i) if the Company fails to file
an Exchange Offer Registration Statement with the Commission on or prior to the
90th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 150th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th calendar day after the Exchange Offer Registration Statement is
declared effective, (iv) if obligated to file the Shelf Registration Statement
and the Company fails to file the Shelf Registration Statement with the
Commission on or prior to the 90th day after such filing obligation arises, (v)
if obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 150th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Transfer Restricted Securities,
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each, a "Registration Default"), the Company agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages ("Liquidated Damages") in an amount equal to $0.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90 day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week
$1,000 principal amount of Transfer Restricted Securities. The Company shall not
be required to pay Liquidated Damages for more than one Registration Default at
any given time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
39
<PAGE>
In the case of any redemption of Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Notes, or one or more Predecessor Notes, of record at the close
of business on the relevant Regular Record Date referred to on the face hereof.
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
All accrued Liquidated Damages shall be paid by the Company to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
The Indenture defines an Event of Default as being: (a) any failure to
pay an installment of interest on the Notes as and when the same becomes due and
payable and such failure continues for 30 days; (b) failure to pay all or any
part of the principal of (or premium, if any, on) the Notes when and as the same
shall become due and payable at maturity, redemption, by declaration or
otherwise, including payment of the Change of Control Purchase Price; (c)
failure by the Company duly to observe, perform or comply with any covenant or
agreement contained in the Notes or the Indenture which failure continues for a
period of 60 days after written notice specifying such failure and demanding
that the Company remedy the same has been given to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in aggregate principal
amount of Notes then outstanding; (d) certain events of bankruptcy, insolvency
or reorganization in respect of the Company or any Material Subsidiary; (e) (i)
a default which extends beyond any stated period of grace applicable thereto,
excluding any extension thereof, under any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any of its Restricted
Subsidiaries, whether now existing or hereafter created, aggregating in excess
of $10,000,000 at any one time, if as a result of such event of default the
maturity of such Indebtedness has been accelerated prior to its final stated
maturity, or (ii) failure to pay such Indebtedness, aggregating in principal
amount in excess of $10,000,000 at any one time, at its final stated maturity;
or (f) the rendering of final judgments not covered by insurance (which coverage
shall be in full force and effect) for the payment of money in an amount equal
to or greater than, in the
40
<PAGE>
case of any one such judgment $2,500,000, and, in the case of all such judgments
$5,000,000, against the Company or any of its Restricted Subsidiaries by a court
of competent jurisdiction which are not stayed, satisfied or discharged within
60 days after such judgments become final and nonappealable.
If an Event of Default (other than an Event of Default with respect to
the Company described in clause (d) of the preceding paragraph), shall occur and
be continuing then, and in every such case, unless the principal of all the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Notes, by notice in writing to the Company (and to the Trustee if given by
Holders), may declare all of the principal of the Notes (or the Change of
Control Purchase Price if the Event of Default includes failure to pay the
Change of Control Purchase Price), together with accrued interest thereon to be
due and payable immediately. If an Event of Default with respect to the Company
specified in clause (d) above occurs, all principal of, premium applicable to,
and accrued interest on, all then outstanding Notes shall become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
41
<PAGE>
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
No recourse for the payment of the principal of, or premium, if any,
or interest on, any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any of the Notes, or because of
the creation of any
42
<PAGE>
Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, employee, controlling person of the Company or
of a Subsidiary of the Company or of any successor Person of the Company or of a
Subsidiary of the Company. Each Holder by accepting a Note waives and releases
all such liability, and such waiver and release is part of the consideration for
the issuance of the Notes.
The Indenture and this Note shall be governed by, and construed in
accordance with, the internal laws of the State of New York (without giving
effect to the conflict of laws principles thereof). The Trustee, the Company,
and (by their acceptance of the Notes) the Holders agree to submit to the non-
exclusive jurisdiction of any United States federal or state court located in
the Borough of Manhattan, in the City of New York, in any action or proceeding
arising out of or relating to the Indenture of this Note.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Earle M.
Jorgensen Company, 3050 East Birch Street, Brea, CA 92621, Attention: Chief
Financial Officer.
SECTION 205. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: ____________________
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST
COMPANY
OF NEW YORK
43
<PAGE>
_______________________, as Trustee
By:
Authorized Officer
SECTION 206. Form of Transfer Notice for the Notes.
-------------------------------------
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON
ALL CERTIFICATES REPRESENTING INITIAL NOTES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
March 24, 2000; i.e., the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
Check One
---------
[_] this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
44
<PAGE>
or
--
[_] this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date:
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the
45
<PAGE>
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive officer
[THE FOLLOWING PROVISIONS SHALL APPLY TO ALL OF THE NOTES]
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1201 or Section 1013 of the Indenture, check the Box: [_]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1201 or Section 1013 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
46
<PAGE>
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Notes that may be authenticated and
delivered under this Indenture is limited to $105,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 906,
1009 or 1014.
The Series A Notes shall be known and designated as the "9 1/2% Senior
Notes due 2005" and the Series B Notes shall be known and designated as the
"9 1/2% Series B Senior Notes due 2005," in each case, of the Company. Their
maturity shall be April 1, 2005. Interest on any overdue principal amount shall
be payable on demand.
The principal of (and premium, if any) and interest on the Notes shall
be payable at the office or agency of the Company maintained for such purpose in
The City of New York, or at such other office or agency of the Company as may be
maintained for such purpose; provided, however, that, at the option of the
-------- -------
Company, interest may be paid (i) by check mailed to addresses of the Persons
entitled thereto as such addresses shall appear on the Note Register or (ii) by
transfer to an account maintained by the payee located in the United States.
Holders shall have the right to require the Company to purchase their
Notes, in whole or in part, in the event of a Change in Control pursuant to
Section 1009. The Notes shall be subject to repurchase pursuant to an Asset
Sale Offer as provided in Section 1016.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
-------------
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
47
<PAGE>
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Notes shall be executed on behalf of the Company by its Chairman,
its President or a Vice President and attested by its Secretary or an Assistant
Secretary. The signature of any of these officers on the Notes may be manual or
facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
On Company Order, the Trustee shall authenticate for original issue
Series A Notes in an aggregate principal amount not to exceed $105,000,000. On
Company Order, the Trustee shall authenticate for original issue Series B Notes
in an aggregate principal amount not to exceed $105,000,000; provided that such
--------
Series B Notes shall be issuable only upon the valid surrender for cancellation
of Series A Notes of a like aggregate principal amount in accordance with an
Exchange Offer pursuant to the Registration Rights Agreement. In each case, the
Trustee shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel of the Company that it may reasonably request in connection with such
authentication of Notes. Such Company Order shall specify the amount of Notes
to be authenticated and the date on which the original issue of Notes is to be
authenticated.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Notes, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Notes.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been
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duly authenticated and delivered hereunder and is entitled to the benefits of
this Indenture.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person that shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Notes authenticated or
delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Notes executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Notes surrendered for such exchange
and of like principal amount; and the Trustee, upon Company Request of the
successor Person, shall authenticate and deliver Notes as specified in such
request for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Notes, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Outstanding Notes for
Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
---------------
Pending the preparation of definitive Notes, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Notes that are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute
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and the Trustee, upon receipt of a Company Order, shall authenticate and deliver
in exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same rights, privileges and benefits under this Indenture as
definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Note Register shall be in written form
or any other form capable of being converted into written form within a
reasonable time. The Trustee is hereby initially appointed as security
registrar (the "Note Registrar") for the purpose of registering Notes and
transfers of Notes as herein provided. If the Trustee is not the Note
Registrar, the Company shall cause the Note Registrar to furnish to the Trustee
on or before the seventh Business Day preceding each Interest Payment Date and
at such other times as the Trustee or any Paying Agent may request in writing a
list in such form and as of such date as the Trustee reasonably may require of
the names and addresses of Holders and the Company shall otherwise comply with
TIA(S) 312(a).
Upon surrender for registration of transfer of any Note at the office
or agency of the Company designated pursuant to Section 1002, the Company shall
execute, and the Trustee, upon receipt of a Company Order, shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Notes of any authorized denomination or denominations of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged (including an exchange of Series A Notes
for Series B Notes), at such office or agency. Whenever any Notes are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes that the Holder making the exchange is
entitled to receive; provided that no exchange of Series A Notes for Series B
--------
Notes shall occur until an Exchange Offer Registration Statement shall have been
declared effective by the Commission, the Trustee shall have received an
Officers' Certificate confirming that the Exchange Offer Registration Statement
has been declared effective by the
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Commission and the Series A Notes to be exchanged for the Series B Notes
have been cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in the form
attached to the Note or otherwise satisfactory to the Company, the Note
Registrar and the Trustee, duly executed by the Holder thereof or his attorney
duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Sections 304, 906, 1012, 1013 or 1108 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the selection of Notes to be redeemed under Section 1104 and ending
at the close of business on the day of such mailing of the relevant notice of
redemption, (ii) to register the transfer of or exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (iii) to issue, register, transfer or exchange any
Note during a Change of Control Offer or an Asset Sale Offer, if such Note is
tendered pursuant to such Change of Control Offer or Asset Sale Offer and not
withdrawn.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
-------------------------------------------
If (i) any mutilated Note is surrendered to the Trustee, or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon Company
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Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Note or in lieu of any such destroyed, lost or stolen Note, a
replacement Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a replacement Note, pay such Note.
Upon the issuance of any replacement Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered at the close of
business on the Record Date for such interest at the office or agency of the
Company maintained for such purpose pursuant to Section 1002; provided, however,
-------- -------
that each installment of interest may at the Company's option be paid by (i)
mailing a check for such interest, payable to or upon the written order of the
Person entitled thereto pursuant to Section 308, to the address of such Person
as it appears in the Note Register or (ii) transfer to an account located in the
United States maintained by the payee.
Any interest on any Note that is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Record Date by virtue of having been such Holder,
and such
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defaulted interest and (to the extent lawful) interest on such defaulted
interest at the rate borne by the Notes (such defaulted interest and interest
thereon herein collectively called "Defaulted Interest") may be paid by the
Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements reasonably satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause (1) provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 106, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
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Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, that were carried by such other Note.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to and at the time of the due presentment of a Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Note is registered as the
owner of such Note for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Sections 305 and 307) interest on such Note and
for all other purposes whatsoever, whether or not such Note be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder that the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Notes previously authenticated
hereunder that the Company has not issued and sold, and all Notes so delivered
shall be promptly cancelled by the Trustee. No Notes shall be authenticated in
lieu of or in exchange for any Notes cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Notes held by
the Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Notes be returned to
it. The Trustee shall provide the Company with a list of all Notes that have
been cancelled from time to time as requested by the Company.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
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SECTION 311. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) Each Global Note initially shall (i) be registered in the name
of the Depositary for such Global Notes or the nominee of such Depositary, (ii)
be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a beneficial owner of any Note. The registered holder of a Global
Note may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take any
action which a Holder is entitled to take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note shall
be limited to transfers of such Global Note in whole, but not in part, to the
Depositary, its successors or their respective nominees, except (i) as otherwise
set forth in Section 312 and (ii) U.S. Physical Notes or Offshore Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the U.S. Global Note or the Offshore Global Note, respectively, in
the event that the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the applicable Global Note or the
Depositary ceases to be a "Clearing Agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days or an
Event of Default has occurred and is continuing and the Note Registrar has
received a request from the Depositary. In connection with a transfer of an
entire Global Note to beneficial owners pursuant to clause (ii) of this
paragraph (b), the applicable Global Note shall be deemed to be surrendered to
the Trustee for cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the applicable Global
Note, an equal aggregate principal amount of U.S. Physical Notes (in
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<PAGE>
the case of the U.S. Global Note) or Offshore Physical Notes (in the case of the
Offshore Global Note), as the case may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) Any U.S. Physical Note delivered in exchange for an interest
in the U.S. Global Note pursuant to paragraph (b) of this Section shall, unless
such exchange is made on or after the Resale Restriction Termination Date and
except as otherwise provided in Section 312, bear the Private Placement Legend.
SECTION 312. Transfer Provisions.
-------------------
Unless and until the earlier of (A) the date which is two years (or
such shorter period of time as permitted by rule 144 under the Securities Act
and any successor provision thereunder) after the later of the original issue
date of the Series A Notes or the last day on which the Company or any affiliate
of the Company was the owner of the Series A Note or (B) the date on which (i) a
Series A Note is sold pursuant to an effective Registration Statement, or (ii) a
Series A Note is exchanged for the Series B Note in the Exchange Offer pursuant
to an effective Registration Statement, in each case, pursuant to the
Registration Rights Agreement, the following provisions shall apply:
(a) General. The provisions of this Section 312 shall apply to all
-------
transfers involving any Physical Note and any beneficial interest in any
Global Note.
(b) Certain Definitions. As used in this Section 312 only, "delivery"
-------------------
of a certificate by a transferee or transferor means the delivery to the
Note Registrar by such transferee or transferor of the applicable
certificate duly completed; "holding" includes both possession of a
Physical Note and ownership of a beneficial interest in a Global Note, as
the context requires; "transferring" a Global Note means transferring that
portion of the principal amount of the transferor's beneficial interest
therein that the transferor has notified the Note Registrar that it has
agreed to transfer; and "transferring" a Physical Note means transferring
that portion of the principal amount thereof
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<PAGE>
that the transferor has notified the Note Registrar that it has agreed to
transfer.
As used in this Indenture, "Regulation S Certificate" means a
certificate substantially in the form set forth in Section 313; "Rule 144A
Certificate" means a certificate substantially in the form set forth in
Section 314; and "Non-Registration Opinion and Supporting Evidence" means a
written opinion of counsel reasonably acceptable to the Company to the
effect that, and such other certification or information as the Company may
reasonably require to confirm that, the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) Deemed Delivery of a Rule 144A Certificate in Certain
-----------------------------------------------------
Circumstances. A Rule 144A Certificate, if not actually delivered, will be
-------------
deemed delivered if (A) (i) the transferor advises the Company and the
Trustee in writing that the relevant offer and sale were made in accordance
with the provisions of Rule 144A (or, in the case of a transfer of a
Physical Note, the transferor checks the box provided on the Physical Note
to that effect) and (ii) the transferee advises the Company and the Trustee
in writing that (x) it and, if applicable, each account for which it is
acting in connection with the relevant transfer, is a qualified
institutional buyer within the meaning of Rule 144A, (y) it is aware that
the transfer of Notes to it is being made in reliance on the exemption from
the provisions of Section 5 of the Securities Act provided by Rule 144A,
and (z) prior to the proposed date of transfer it has been given the
opportunity to obtain from the Company the information referred to in Rule
144A(d)(4), and has either declined such opportunity or has received such
information (or, in the case of a transfer of a Physical Note, the
transferee signs the certification provided on the Physical Note to that
effect); or (B) the transferor holds the Global Note and is transferring to
a transferee that will take delivery in the form of the Global Note.
(d) Procedures and Requirements. If the proposed transferor holds:
---------------------------
(1) a U.S. Physical Note which is surrendered to the Note
Registrar, and the proposed transferee or transferor, as
applicable:
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<PAGE>
(A) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed transferee
requests delivery in the form of a U.S. Physical Note, then the Note
Registrar shall (x) register such transfer in the name of such transferee
and record the date thereof in its books and records, (y) cancel such
surrendered U.S. Physical Note and (z) deliver a new U.S. Physical Note to
such transferee duly registered in the name of such transferee in principal
amount equal to the principal amount being transferred of such surrendered
U.S. Physical Note;
(B) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed transferee is or
is acting through an Agent Member and requests that the proposed transferee
receive a beneficial interest in the U.S. Global Note, then the Note
Registrar shall (x) cancel such surrendered U.S. Physical Note, (y) record
an increase in the aggregate principal amount of the U.S. Global Note equal
to the principal amount being transferred of such surrendered U.S. Physical
Note and (z) notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer; or
(C) delivers a Regulation S Certificate, then the Note
Registrar shall cancel such surrendered U.S. Physical Note and at the
direction of the transferee, either:
(i) register such transfer in the name of such
transferee, record the date thereof in its books and records and
deliver a new Offshore Physical Note to such transferee duly
registered in the name of such transferee in principal amount equal to
the principal amount being transferred of such surrendered U.S.
Physical Note, or
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(ii) if the proposed transferee is or is acting
through an Agent Member, record an increase in the aggregate principal
amount of the Offshore Global Note equal to the principal amount being
transferred of such surrendered U.S. Physical Note and notify the
Depositary in accordance with the procedures of the Depositary that it
approves of such transfer.
In any of the cases described in this Section 312(d)(1)(A), (B) or (C)(i),
the Note Registrar shall deliver to the transferor a new U.S. Physical Note
duly registered in the name of such transferor in principal amount equal to
the principal amount not being transferred, if any, of such surrendered
U.S. Physical Note, as applicable.
(2) a beneficial interest in the U.S. Global Note, and the
proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed transferee
requests delivery in the form of a U.S. Physical Note, then the Note
Registrar shall (w) register such transfer in the name of such transferee
and record the date thereof in its books and records, (x) record a decrease
in the aggregate principal amount of the U.S. Global Note in an amount
equal to the beneficial interest therein being transferred, (y) deliver a
new U.S. Physical Note to such transferee duly registered in the name of
such transferee in principal amount equal to the amount of such decrease
and (z) notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(B) delivers (or is deemed to have delivered pursuant to clause (c)
above) a Rule 144A Certificate and the proposed transferee is or is acting
through an Agent Member and requests that the proposed trans-
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<PAGE>
feree receive a beneficial interest in the U.S. Global Note, then
the transfer shall be effected in accordance with the procedures of the
Depositary therefor; or
(C) delivers a Regulation S Certificate, then the Note
Registrar shall (x) record a decrease in the aggregate principal amount
of the U.S. Global Note in an amount equal to the beneficial interest
therein being transferred, (y) notify the Depositary in accordance with
the procedures of the Depositary that it approves of such transfer and
(z) at the direction of the transferee, either:
(i) register such transfer in the name of such
transferee, record the date thereof in its books and records and
deliver a new Offshore Physical Note to such transferee duly
registered in the name of such transferee in principal amount
equal to the amount of such decrease, or
(ii) if the proposed transferee is or is acting through
an Agent Member, record an increase in the aggregate principal
amount of the Offshore Global Note equal to the amount of such
decrease.
(3) an Offshore Physical Note which is surrendered to the Note
Registrar, and the proposed transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered pursuant to clause
(c) above) a Rule 144A Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the proposed
transferee receive a beneficial interest in the U.S. Global Note, then
the Note Registrar shall (x) cancel such surrendered Offshore Physical
Note, (y) record an increase in the aggregate principal amount of the
U.S. Global Note equal to the principal amount being trans-
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ferred of such surrendered Offshore Physical Note and (z) notify the
Depositary in accordance with the procedures of the Depositary that it
approves of such transfer;
(B) where the proposed transferee is or is acting through
an Agent Member, requests that the proposed transferee receive a beneficial
interest in the Offshore Global Note, then the Note Registrar shall (x)
cancel such surrendered Offshore Physical Note, (y) record an increase in
the aggregate principal amount of the Offshore Global Note equal to the
principal amount being transferred of such surrendered Offshore Physical
Note and (z) notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(C) delivers (or is deemed to have delivered pursuant to
clause (c) above) a Rule 144A Certificate and the proposed transferee
requests delivery in the form of a U.S. Physical Note, then the Note
Registrar shall (x) register such transfer in the name of such transferee
and record the date thereof in its books and records, (y) cancel such
surrendered Offshore Physical Note and (z) deliver a new U.S. Physical Note
to such transferee duly registered in the name of such transferee in
principal amount equal to the principal amount being transferred of such
surrendered U.S. Physical Note; or
(D) does not make a request covered by Section
312(d)(3)(A), (B) or(C), then the Note Registrar shall (x) register such
transfer in the name of such transferee and record the date thereof in its
books and records, (y) cancel such surrendered Offshore Physical Note and
(z) deliver a new Offshore Physical Note to such transferee duly registered
in the name of such transferee in principal amount equal to the principal
amount being transferred of such surrendered Offshore Physical Note.
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In any of the cases described in this Section 312(d)(3), the Note
Registrar shall deliver to the transferor a new Offshore Physical Note
duly registered in the name of such transferor in principal amount
equal to the principal amount not being transferred of such surrendered
Offshore Physical Note, as applicable.
(4) a beneficial interest in the Offshore Global Note, and the proposed
transferee or transferor, as applicable:
(A) delivers (or is deemed to have delivered pursuant to clause
(c) above) a Rule 144A Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the proposed
transferee receive a beneficial interest in the U.S. Global Note, then
the Note Registrar shall (x) record a decrease in the aggregate
principal amount of the Offshore Global Note in an amount equal to the
beneficial interest therein being transferred, (y) record an increase
in the aggregate principal amount of the U.S. Global Note equal to the
amount of such decrease and (z) notify the Depositary in accordance
with the procedures of the Depositary that it approves of such
transfer;
(B) where the proposed transferee is or is acting through an
Agent Member, requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the transfer
shall be effected in accordance with the procedures of the Depositary
therefor; or
(C) delivers (or is deemed to have delivered pursuant to clause
(c) above) a Rule 144A Certificate and the proposed transferee requests
delivery in the form of a U.S. Physical Note, then the Note Registrar
shall (w) register such transfer in the name of such transferee and
record the date thereof in its books and records, (x) record a decrease
in the aggregate principal amount of the Offshore Global Note in an
amount
62
<PAGE>
equal to the beneficial interest therein being transferred,
(y) deliver a new U.S. Physical Note to such transferee duly
registered in the name of such transferee in principal
amount equal to the amount of such decrease and (z) notify
the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(D) does not make a request covered by Section
312(d)(4)(A), (B) or (C), then the Note Registrar shall (w)
register such transfer in the name of such transferee and
record the date thereof in its books and records, (x) record
a decrease in the aggregate principal amount of the Offshore
Global Note in an amount equal to the beneficial interest
therein being transferred, (y) deliver a new Offshore
Physical Note to such transferee duly registered in the name
of such transferee in principal amount equal to the amount
of such decrease and (z) notify the Depositary in accordance
with the procedures of the Depositary that it approves of
such transfer.
(e) Execution, Authentication and Delivery of Physical Notes. In any
--------------------------------------------------------
case in which the Note Registrar is required to deliver a Physical Note to
a transferee or transferor, the Company shall execute, and the Trustee,
upon Company Order, shall authenticate and make available for delivery,
such Physical Note.
(f) Certain Additional Terms Applicable to Physical Notes. Any
-----------------------------------------------------
transferee entitled to receive a Physical Note may request that the
principal amount thereof be evidenced by one or more Physical Notes in any
authorized denomination or denominations and the Note Registrar shall
comply with such request if all other transfer restrictions are satisfied.
(g) Transfers Not Covered by Section 312(d). The Note Registrar shall
---------------------------------------
effect and record, upon receipt of a written request from the Company so to
do, a transfer not otherwise permitted by Section 312(d), such recording to
be done in accordance with the otherwise applicable provisions of Section
312(d), upon the furnishing by the proposed transferor or transferee of a
Non-Registration Opinion and Supporting Evidence.
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(h) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Note only as
provided in the Indenture. The Note Registrar shall not register a
transfer of any Note unless such transfer complies with the restrictions
with respect thereto set forth in this Indenture. The Note Registrar shall
not be required to determine (but may rely upon a determination made by the
Company) the sufficiency or accuracy of any such certifications, legal
opinions, other information or document.
(i) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Note Registrar shall deliver only Notes that
bear the Private Placement Legend unless (i) the requested transfer is at
least two years after the original issue date of the Series A Note (ii)
there is delivered to the Note Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Notes are exchanged for Series B Notes pursuant to an Exchange Offer.
SECTION 313. Form of Regulation S Certificate.
--------------------------------
Regulation S Certificate
------------------------
To: United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: Earle M. Jorgensen Company (the "Company")
9 1/2% Senior Notes due 2005 (the "Notes")
------------------------------------------
Ladies and Gentlemen:
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In connection with our proposed sale of $____ aggregate principal
amount of Notes, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S ("Regulation S") under the Securities Act of 1933,
as amended (the "Securities Act"), and accordingly, we hereby certify as
follows:
1. The offer of the Notes was not made to a person in the United
States (unless such person or the account held by it for which it is acting
is excluded from the definition of "U.S. person" pursuant to Rule 902(o) of
Regulation S under the circumstances described in Rule 902(i)(3) of
Regulation S) or specifically targeted at an identifiable group of U.S.
citizens abroad.
2. Either (a) at the time the buy order was originated, the buyer was
outside the United States or we and any person acting on our behalf
reasonably believed that the buyer was outside the United States or (b) the
transaction was executed in, on or through the facilities of a designated
offshore securities market, and neither we nor any person acting on our
behalf knows that the transaction was pre-arranged with a buyer in the
United States.
3. Neither we, any of our affiliates, nor any person acting on our or
their behalf has made any directed selling efforts in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable.
4. The proposed transfer of Notes is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
5. If we are an officer or director of the Company or a distributor,
we certify that the proposed transfer is being made in accordance with the
provisions of Rules 903 and 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the
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matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:________________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 314. Form of Rule 144A Certificate.
-----------------------------
Rule 144A Certificate
---------------------
To: United States Trust Company of New York
114 West 47/th/ Street
New York, New York 10036
Attention: Corporate Trust Department
Re: Earle M. Jorgensen Company (the "Company")
9 1/2% Senior Notes due 2005 (the "Notes")
------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $____ aggregate principal
amount of Notes, we confirm that such purchase has been effected pursuant to and
in accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933, as
amended (the "Securities Act"). We are aware that the transfer of Notes to us
is being made in reliance on the exemption from the provisions of Section 5 of
the Securities Act provided by Rule 144A. Prior to the date of this Certificate
we have been given the opportunity to obtain from the Company the information
referred to
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in Rule 144A(d)(4), and have either declined such opportunity or have received
such information.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 315. CUSIP Numbers.
-------------
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers and, if so, the Trustee shall
use such "CUSIP" numbers in addition to serial numbers in notices of redemption,
repurchase or other notices to Holders as a convenience to Holders; provided
--------
that any such notice may state that no representation is made as to the
correctness of such CUSIP numbers either as printed on the Notes or as contained
in any notice of a redemption or repurchase and that reliance may be placed only
on the serial or other identification numbers printed on the Notes, and any such
redemption or repurchase shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any change in the
CUSIP numbers.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Notes expressly provided for herein or pursuant hereto) and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(1) either
(a) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 306 and (ii) Notes for
whose payment money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1017) have been delivered to the Trustee
for cancellation; or
(b) all such Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for such purpose United States dollars in an
amount sufficient to pay and discharge the entire indebtedness on such
Notes not thereto-
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fore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case
of Notes that have become due and payable) or to the Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with. (Such Opinion of Counsel may, as to all
matters of fact, rely on, among other things, such Officers' Certificate).
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1017, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall
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be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any installment of interest upon any of
the Notes as and when the same becomes due and payable, and continuance of
such default for a period of 30 days;
(b) default in the payment of all or any part of the principal of (or
premium, if any, on), the Notes when and as the same become due and payable
at maturity, redemption, by declaration or otherwise, including payment of
the Change of Control Purchase Price (as defined in Section 1201(a)) in
accordance with this Indenture;
(c) failure by the Company to duly observe, perform or comply with
any covenant or agreement contained in the Notes or in this Indenture which
failure continues for a period of 60 days after written notice specifying
such failure stating that such notice is a "Notice of Default" hereunder
and demanding that the Company remedy the same has been given to the
Company by the Trustee or to the Company and the Trustee by Holders of at
least 25% in aggregate principal amount of the Notes at the time
outstanding;
(d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company or any Material Subsidiary in
an involuntary case under any applicable bankruptcy, insolvency or other
similar law affecting creditors' rights now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or any Material
Subsidiary or for any substantial part of the property of the Company or
any Material Subsidiary or ordering the winding up or liquidation of the
affairs of the Company or any Material Subsidiary, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days;
(e) the Company or any Material Subsidiary shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law
affecting creditors' rights now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such law, or
consent to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Company or any Material Subsidiary or for any substantial part of the
property of the
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Company or any Material Subsidiary, or the Company or any Material
Subsidiary shall make any general assignment for the benefit of creditors;
(f) (i) a default which extends beyond any stated period of grace
applicable thereto, excluding any extension thereof, under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness of
the Company or any of its Restricted Subsidiaries, whether now existing or
hereafter created, aggregating in principal amount in excess of $10,000,000
at any one time, if as a result of such event of default the maturity of
such Indebtedness has been accelerated prior to its final stated maturity,
or (ii) failure to pay such Indebtedness, aggregating in principal amount
in excess of $10,000,000 at any one time, at its final stated maturity; or
(g) the rendering of final judgments not covered by insurance (which
coverage shall be in full force and effect) for the payment of money in an
amount equal to or greater than, in the case of any one such judgment
$2,500,000, and, in the case of all such judgments $5,000,000, against the
Company or any of its Restricted Subsidiaries by a court of competent
jurisdiction which are not stayed, satisfied, vacated or discharged within
60 days after such judgments become final and nonappealable.
Notwithstanding the 60 day period and notice requirement contained in
Section 501(c) above, with respect to a default under Article Twelve, the 60 day
period referred to in Section 501(c) shall be deemed to have begun as of the
date the notice relating to a Change of Control Offer (as defined in Section
1201(a)) is required to be sent in the event such notice indicates (or would, if
sent, properly indicate) that the Company has not complied with the provisions
of Section 1201, and the Trustee or Holders of at least 25% in principal amount
of the then outstanding Notes thereafter give the Notice of Default referred to
in Section 501(c) to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Change of Control Purchase Price (as defined in Section 1201(a))
on the Repurchase Date (as defined in Section 1201(a)), such default shall be
deemed, for purposes of this Section 501, to arise no later than on such date.
Notwithstanding the 60-day period and notice requirement contained in
Section 501(c) above, with respect to a default under Section 1013 (a) the 60-
day period referred to in Section 501(c) shall be deemed to have begun as of the
date the Notice of a Section 1013 Offer is required to be sent in the event the
Section 1013
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Notice indicates (or would, if sent, properly indicate) that the Company has not
complied with the provisions of Section 1013, and the Trustee or Holders of at
least 25% in principal amount of the then outstanding Notes thereafter give the
Notice of Default referred to in Section 501(c) to the Company and, if
applicable, the Trustee; provided, however, that if the breach or default is a
-------- -------
result of a default in the payment when due of the Section 1013 Offer Price on
the Purchase Date, such default shall be deemed, for purposes of this Section
501, to arise no later than on the Purchase Date.
SECTION 502. Acceleration of Maturity Date; Rescission and
---------------------------------------------
Annulment.
- ---------
If an Event of Default (other than an Event of Default with respect to
the Company specified in Section 501(d) or (e)) occurs and is continuing, then,
and in every such case, unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount of the then outstanding Notes, by a
notice in writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all of the principal of the Notes (or the
Change of Control Purchase Price if the Event of Default includes failure to pay
the Change of Control Purchase Price), determined as set forth below, together
with accrued interest thereon, to be due and payable immediately. If an Event
of Default with respect to the Company specified in Section 501(d) or (e)
occurs, all principal of, premium applicable to, and accrued interest on, the
Notes shall be immediately due and payable on all then outstanding Notes without
any declaration or other act on the part of the Trustee or the Holders.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article Five, the Holders of a
majority in aggregate principal amount of the then outstanding Notes, by written
notice to the Company and the Trustee, may waive, on behalf of all Holders, a
Default or an Event of Default if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest on all then outstanding Notes,
(ii) the principal of (and premium, if any, applicable to) any
Notes which would become due otherwise than by
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such declaration of acceleration, and interest thereon at
the rate borne by the Notes,
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the
Notes, and
(iv) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and
(b) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513,
including, if applicable, any Event of Default relating to the covenants
contained in Section 1201.
Notwithstanding the previous sentence of this Section 502, no waiver
shall be effective for any Default or Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each then outstanding Note, unless all such affected Holders
agree, in writing, to waive such Default or Event of Default. No such waiver
shall cure or waive any subsequent default or impair any right consequent
thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
Company covenants that if
(a) a default is made in the payment of any interest on any
Note when such interest becomes due and payable and such default continues
for a period of 30 days, or
(b) a default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity Date thereof, including the
payment of the Offer Price on the Purchase Date, and the payment of the
Change of Control Purchase Price on the Repurchase Date,
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(c) the Company shall, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Notes, the whole amount then due and
payable on such Notes for principal, premium (if any) and interest, and, to
the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Notes, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the compensation to, and expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, and such further amounts as shall be sufficient to cover the
costs and expenses of collection, including the compensation, expenses,
disbursements of the Trustee, its agents and counsel, may prosecute such
proceeding to judgment or final decree and may enforce the same against the
Company or any other obligor upon the Notes and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the property of the
Company or any other obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise to take any and all actions under
the TIA, including
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(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
(c) and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Notes or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust in favor of the Holders, and any recovery of judgment shall,
after provision for the payment of the compensation to, and expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
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SECTION 506. Priorities.
----------
Any money collected by the Trustee pursuant to this Article Six shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium
(if any) or interest, upon presentation of the Notes and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 607;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Notes for principal, premium (if any) and interest,
respectively; and
THIRD: To the Company or to such party as a court of competent
jurisdiction shall allow, the remainder, if any.
The Trustee may fix a record date and a payment date for any payment
to Holders pursuant to this Section 506.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Note shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the then
outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered and, if requested, provided to
the Trustee reasonable security or indemnity against the costs,
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expenses and liabilities to be incurred or reasonably probable to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the then outstanding Notes;
(f) it being understood and intended that no one or more Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except
in the manner herein provided and for the equal and ratable benefit of all
the Holders.
SECTION 508 Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision of this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and premium (if any) and interest on, such Note on
the Maturity Dates of such payments as expressed in such Note (in the case of
redemption, the Redemption Price on the applicable Redemption Date, in the case
of the Change of Control Purchase Price, on the applicable Repurchase Date, and
in the case of a Proceeds Offer on the Proceeds Purchase Date) and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies
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of the Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in Section 306, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Note to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event of
Default. Every right and remedy given by this Article Six or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal amount of
the then outstanding Notes shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided, however,
-------- -------
that the Trustee may refuse to follow any directions that
(a) conflicts with any rule of law or with this Indenture,
(b) the Trustee determines may be unduly prejudicial to the Holders
not taking part in such direction, or
(c) may involve the Trustee in personal liability unless the Trustee
has indemnification satisfactory to it against any loss or expense caused
by its following such directions, and
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(d) provided, further, that the Trustee may take any other action
-------- -------
deemed proper by the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Default.
----------------------
Subject to Section 508, the Holder or Holders of not less than a
majority in aggregate principal amount of the then Outstanding Notes may, on
behalf of all Holders, prior to the declaration of acceleration of the maturity
of the Notes, waive any past or existing Default or Event of Default hereunder
and its consequences, except a continuing Default
(a) in the payment of the principal of, premium, if any, or interest
on, any Note as specified in clauses (a) and (b) of Section 501, or
(b) in respect of a covenant or provision hereof which, under Article
Nine, cannot be modified or amended without the consent of the Holder of
each then outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair the exercise of any right arising therefrom.
SECTION 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 25% in aggregate principal amount of the then
outstanding Notes, or to any suit instituted by any Holder for enforcement of
the payment of principal of, or premium (if any) or interest on, any Note on or
after the respective Stated Maturities expressed in such Note (or, in the case
of redemption, on or after the applicable Redemption Date).
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ARTICLE SIX
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 601. Duties of Trustee.
-----------------
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and
no covenants or obligations shall be implied in or read into
this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(i) This paragraph does not limit the effect of paragraph (b)
of this Section 601.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 612.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take
any action under this Indenture or at the request, order or direction of
the Holders or in the exercise of any of its rights or powers if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 601.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 602. Rights of Trustee.
-----------------
Subject to Section 601 and provisions of TIA Sections 315(a) through
315(d):
(a) The Trustee may conclusively rely, and shall be protected from
acting or refraining from acting, on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 102 and 103. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent (other than an
agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred therein or thereby.
SECTION 603. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates with the same rights it would have
if it were not Trustee. However, subject to and in accordance with Section
310(b) of the TIA, in the event that the Trustee acquires any conflicting
interest it must eliminate such
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conflict within 90 days and apply to the SEC for permission to continue as
Trustee or resign. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 610 and 611.
SECTION 604. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes; it shall not be
accountable for the Company's use of the proceeds from the Notes; it shall not
be responsible for any statement of the Company in this Indenture or in any
document executed in connection with the sale of the Notes or in the Notes other
than the Trustee's certificate of authentication; and it shall not be
responsible for the use or application of any funds received by a Paying Agent
other than the Trustee.
SECTION 605. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or Event of Default in
payment of principal of (or premium, if any) or interest on, any Note (including
the payment of the Change of Control Purchase Price on the Change of Control
Purchase Date, the payment of the Redemption Price on the Redemption Date and
the Section 1013 Offer Price on the Purchase Date), the Trustee may withhold
such notice if and so long as a committee of its Trust Officers in good faith
determines that withholding such notice is in the interests of the Holders.
SECTION 606. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall deliver by first class mail to
each Holder a brief report dated as of such date that complies with TIA (S)
313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange or automatic quotation system.
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SECTION 607. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation relating to the trustee of an express
trust. The Company shall reimburse the Trustee upon request and presentation by
the Trustee of evidence therefor reasonably acceptable to the Company for all
reasonable disbursements, expenses and advances incurred or made by it. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee
and, if applicable, in its capacity as Notes Registrar and Paying Agent) and its
officers, directors, employees and agents against any loss, liability or expense
incurred by it without negligence or bad faith on its part, arising out of or in
connection with the administration of this trust and its rights or duties
hereunder, including the reasonable costs (including reasonable counsel fees and
expenses) and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations under this Section 607. The Company shall defend the claim and the
Trustee shall reasonably cooperate at the Company's expense in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of one such counsel; provided that the Company will not be required
--------
to pay such fees and expenses if it assumes the Trustee's defense and there is
no conflict of interest between the Company and the Trustee in connection with
such defense. The Company need not pay for any settlement made without its
written consent. The Company need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 607, the
Trustee shall have a lien prior to the Notes on all assets held or collected by
the Trustee, in its capacity as Trustee, except assets held in trust to pay
principal of and premium, if any, or interest on particular Notes.
When the Trustee (in its capacity as Trustee and, if applicable, in
its capacity as Notes Register and Paying Agent) incurs expenses or renders
services after an Event of Default specified in Section 601(d) or (e) occurs,
the expenses and
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the compensation for the services are intended to constitute expenses of
administration under any applicable Bankruptcy Law.
The Company's obligations under this Section 607 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article Eight of this Indenture and any
rejection or termination of this Indenture under any applicable Bankruptcy Law.
SECTION 608. Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and the appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section. The Trustee may resign
by so notifying the Company in writing. The Holder or Holders of a majority in
principal amount of the Notes then outstanding may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent, which consent shall not be unreasonably
withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 610;
(b) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law and
such order shall remain unstayed and in effect for a period of 60
consecutive days;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Notes then outstanding may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee appointed as provided in this Section shall
deliver a written acceptance of its appointment to the retiring Trustee and to
the Company. Immediately thereafter, the retiring Trustee shall transfer all
property held
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by it as Trustee to the successor Trustee, subject to the lien provided in
Section 607, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 610, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
608, the Company's obligations under Section 607 shall continue for the benefit
of the retiring Trustee.
SECTION 609. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
SECTION 610. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA (S)
310(a)(1) and TIA (S) 310(a)(5). The Trustee shall have a combined capital and
surplus of at least $75,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA (S) 310(b); provided
--------
that there shall be excluded from the operation of TIA (S) 310(b)(1) any
indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding,
if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met.
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SECTION 611. Preferential Collection of Claims against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
SECTION 612. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon reasonable request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Notes, by receiving and holding the same, agrees with
the Company and the Trustee that none of the Company or the Trustee or any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in accordance with
TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
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SECTION 702. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Notes, the Trustee shall transmit to the Holders,
in the manner and to the extent provided in TIA Section 313(c), a brief report
dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not in a single transaction or through a series of
related transactions consolidate with or merge with or into another person or
directly or indirectly sell, transfer, lease or convey all or substantially all
of its properties and assets to another person unless:
(a) (i) the Company is the continuing corporation in the case of a
merger or (ii) the resulting, surviving or transferee entity (the "Surviving
Entity") is a corporation or partnership organized under the laws of the United
States, any state thereof or the District of Columbia and expressly assumes by
supplemental indenture in a form reasonably satisfactory to the Trustee all of
the obligations of the Company under this Indenture and the Securities;
(b) no Default or Event of Default shall have occurred and be
continuing immediately after giving effect to such transaction;
(c) the Consolidated Net Worth of the Company or the Surviving
Entity, as the case may be, on a pro forma basis after giving effect to such
consolidation, merger or sale, transfer, lease or conveyance of assets (but
prior to any purchase accounting adjustments resulting from the transaction) is
not less than the Consolidated Net Worth of the Company, immediately prior to
the date of the transaction; and
(d) immediately after giving effect to such transaction, the Company
or the Surviving Entity, as the case may be, on a pro forma basis would be able
to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under
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Section 1010 as if, in the case of the Surviving Entity, such Person were the
Company.
Notwithstanding the foregoing, clause (d) above shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Company and evidenced by a Board Resolution) to
change the state of incorporation of the Company, and such transaction does not
have as one of its purposes the evasion of the restrictions of this section.
SECTION 802. Opinion of Counsel to Trustee; Officers' Certificate.
----------------------------------------------------
The Trustee, subject to the provisions of Section 601 and 602, shall
receive and be entitled to rely upon an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger, sale, lease or conveyance,
and any such assumption, complies with the applicable provisions of this
Indenture and that all conditions precedent herein provided relating to such
transaction have been complied with.
SECTION 803. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any transfer of assets in
accordance with Section 801, the Surviving Entity formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such Surviving
Entity had been named as the Company herein, all without any further act or deed
on the part of such successor being required. When a Surviving Entity duly
assumes all of the obligations of the Company pursuant hereto and pursuant to
the Securities, the predecessor shall be released from such obligations.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without notice to or the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
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time, may amend, waive or supplement this Indenture and the Notes and (if
necessary) enter into one or more indentures supplemental hereto, in form
reasonably satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein or in the Notes, or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company, or
(3) to add any additional Events of Default, or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
612, or
(5) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or in the
Notes, or to add any other provisions with respect to matters or questions
arising under this Indenture or the Notes; provided that such action shall
--------
not adversely affect the interests of the Holders in any material respect,
or
(6) to provide for uncertificated Notes in addition to or in place of
certificated Notes, or
(7) to change or eliminate any of the provisions herein or in the
Notes; provided that any such change or elimination shall become effective
--------
only when there is not Outstanding any Note created prior to the execution
of such amendment, waiver or supplemental indenture that is entitled to the
benefit of such provision, or
(8) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
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SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
Subject to Section 508, with the consent of the Holders of a majority
in aggregate principal amount of the then outstanding Notes evidenced by written
act of said Holders delivered to the Company and the Trustee and without prior
notice to any other Holder, the Company, when authorized by Board Resolution,
and the Trustee may amend or supplement this Indenture or the Notes or enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or the Notes or of modifying in any manner the rights of the
Holders under this Indenture or the Notes. Subject to Section 508, the Holder
or Holders of a majority in principal amount of the then outstanding Notes may
waive compliance by the Company with any provision of this Indenture or the
Notes, evidenced by written act of said Holder or Holders delivered to the
Company and the Trustee and without prior notice to any other Holder.
Notwithstanding any of the above, however, no such amendment, supplemental
indenture or waiver shall, without the consent of the Holder of each outstanding
Note affected thereby:
(a) change the percentage of principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver of any provision of this
Indenture or the Notes;
(b) reduce the rate of or extend the time for payment of interest on
any Note;
(c) reduce the principal amount of any Note, or reduce the Change of
Control Purchase Price (as defined in Section 1201(a)) or the Section1013 Offer
Price or the Redemption Price;
(d) change the Stated Maturity or the Repurchase Date (as defined in
Section 1201(a)) or the Purchase Date of any Note;
(e) alter the redemption provisions of Article Eleven or the terms or
provisions of Section 1013 or the terms or provisions of Article Twelve, in any
case, in a manner adverse to any Holder;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Notes or the rights of Holders to recover
the principal or premium of, interest on, or redemption payment with respect to,
any Note;
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(g) make any changes in Section 504, 507 or this third sentence of
this Section 902; or
(h) make the principal of, or the interest on, any Note payable with
anything or in any manner other than as provided for in this Indenture and the
Securities as in effect on the date hereof.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, supplement or waiver.
After an amendment, supplement or waiver under this Section 902 or
9.04 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article Nine, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
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SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect if this
Indenture shall then be required to be qualified under the TIA.
SECTION 906. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
replacement Notes so modified as to conform, in the opinion of the Trustee and
the Company, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Reasonably promptly after the execution by the Company and the Trustee
of any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding Note
affected, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any supplemental indenture or effectiveness of
any such amendment, supplement or waiver.
SECTION 908. Effect of Consents.
------------------
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Note or portion of that Note that evidences the same debt as the
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consenting Holder's Note, even if notation of the consent is not made on any
Note. After an amendment, supplement or waiver becomes effective, it shall bind
every Holder of Notes.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Notes.
----------------
The Company shall pay or cause to be paid the principal of and
interest on the Notes on the dates and in the manner provided in the Notes. An
in stallment of principal of or interest on the Notes shall be considered paid
on the date it is due if the Trustee or Paying Agent holds for the benefit of
the Holders on or before 10:00 a.m. New York City time on that date, U.S. Legal
Tender designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Notes compounded semi-
annually, to the extent lawful.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be presented or surrendered for
payment or for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 105. The Company hereby initially designates the
Corporate Trust Office of the Trustee as such office of the Company.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
--------
however, that no such designation or rescission shall in any manner relieve the
- -------
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Company of its obligation to maintain an office or agency in the Borough of
Manhat tan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Corporate Existence.
-------------------
Subject to Article Five, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or other existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents of each
of them and the rights (charter and statutory) and corporate franchises of the
Company and each of its Restricted Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to preserve, with respect to itself, any right or
franchise, and with respect to any of its Restricted Subsidiaries, any such
existence, right or franchise, if the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be, shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company or
any such Restricted Subsidiary, as applicable, and that the loss thereof is not
disadvantageous in any material respect to the Holders; and provided further,
however, that the provisions of this Section 1003 shall not limit the ability of
the Company or any Restricted Subsidiary of the Company to engage in any
transaction permitted by Article Eight hereof.
SECTION 1004. Payment of Taxes and Other Claims.
---------------------------------
The Company shall, and shall cause each of its Restricted Subsidiaries
to, pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon the Company or any of its Restricted Subsidiaries or
properties or assets of the Company or any of its Restricted Subsidiaries and
(b) all material lawful claims, whether for labor, materials, supplies, services
or anything else, which have become due and payable and which by law have or may
become a Lien upon the property or assets of the Company or any of its
Restricted Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and, if required by GAAP, for
which disputed amounts adequate reserves have been established or where the
failure to effect such payment or discharge is not adverse in any material
respect to any Holder.
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SECTION 1005. Maintenance of Properties and Insurance.
---------------------------------------
The Company shall cause all material properties owned by or leased to
it or any of its Restricted Subsidiaries and used or useful in the conduct of
its respective business or the business of any of its Restricted Subsidiaries to
be maintained and kept in normal condition, repair and working order (reasonable
wear and tear excepted) and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in its judgment may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
-------- -------
prevent the Company from discontinuing the use, operation or maintenance of any
of such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Company or any of
its Restricted Subsidiaries concerned, or of an officer (or other agent employed
by the Company or such Restricted Subsidiary) of the Company or such Restricted
Subsidiary having managerial responsibilities for any such property, desirable
in the conduct of the business of the Company or such Restricted Subsidiary, as
the case may be; and provided further, however, that the provisions of this
Section 1005 shall not limit the ability of the Company or of any Restricted
Subsidiary of the Company to engage in any transaction permitted by Article
Eight hereof.
The Company shall provide, or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable, good faith opinion of the
Company and adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner for corporations similarly
situated in the industry.
SECTION 1006. Compliance Certificate; Notice of Default.
-----------------------------------------
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year an Officers' Certificate stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this
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Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
of the Company to comply with any conditions or covenants in this Indenture and,
if such signer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate shall also
notify the Trustee should the relevant fiscal year end on any date other than
the current fiscal year end date.
The Company shall deliver to the Trustee within 120 days after the end
of each of its fiscal years a written report of a firm of independent certified
public accountants with an established national reputation (who may be the
Company's regular independent accountants) stating that in conducting their
audit for such fiscal year, nothing has come to their attention that caused them
to believe that the Company or any Subsidiary of the Company was not in
compliance with the provisions set forth in Section 1009, 1010, 1013 or 1016 of
this Indenture, or, if such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default, Event of
Default or default in the performance of any covenant, agreement or condition
contained in this Indenture or the Notes, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to have
knowledge of a Default or an Event of Default unless one of its trust officers
receives notice of the Default giving rise thereto from the Company or any of
the Holders.
SECTION 1007. SEC Reports.
-----------
The Company shall deliver to the Trustee and mail to each Holder,
within 15 days after it files them with the SEC, copies of its annual report and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the SEC and provide the Trustee and
Holders with such annual reports and such information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe)
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which are specified in Section 13 and 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of TIA (S) 314(a).
SECTION 1008. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, wherever enacted, which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Notes as
contemplated herein, now or at any time hereafter in force, or which may affect
the covenants or the perfor mance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all benefit or advantage
of any such law insofar as such law applies to the Notes, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 1009. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if, after
giving effect thereto (i) a Default or an Event of Default, shall have occurred
and be continuing or (ii) the aggregate amount of all Restricted Payments made
and the amount of Investments then outstanding pursuant to clause (vii)(y) under
Section 1016 by the Company and its Restricted Subsidiaries (the amount
expended, distributed or invested for such purposes, if other than in cash, to
be determined in good faith by the Board of Directors of the Company and
evidenced by a Board Resolution) from and after the date of the Indenture shall
exceed the sum of (a) 50% of Consolidated Net Income of the Company accrued for
the period (taken as one accounting period) commencing with the date of the
Indenture to and including the date of such calculation (or, in the event
Consolidated Net Income for such period is a deficit, then minus 100% of such
deficit); (b) 50% of the (1) increase in depreciation expense resulting from the
application of APB 16 purchase accounting to the acquisition of the Company in
1990, and (2) amortization of goodwill and deferred financing costs existing as
of the date of the Indenture, in each case, for the period specified in clause
(a) above; (c) the aggregate net cash proceeds, including marketable securities,
received by the Company or Holding from the issuance or sale (other than to a
Subsidiary of the Company or Holding, as the case may be) of its Capital Stock
(other than Redeemable Stock) or any convertible debt securities that have been
converted into shares of Capital Stock (other than Redeemable Stock), from and
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after the date of this Indenture, provided that, in the case of any issuance or
sale by Holding such net cash proceeds are contributed as a capital contribution
in exchange for common stock of the Company; (d) the aggregate amount received
by the Company or its Restricted Subsidiaries from an Unrestricted Subsidiary
(excluding amounts received by the Company or any Restricted Subsidiary from an
Unrestricted Subsidiary which represents a repayment of the principal portion of
any loan or advance or any return of contributed capital); (e) if there is a
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the
Company, such aggregate amount of the net reduction in Investments in clause
(vii) of Section 1016 not to exceed in the case of any Unrestricted Subsidiaries
the amount of Restricted Investments previously made by the Company or any
Restricted Subsidiary of the Company in such Unrestricted Subsidiary which
amount was included in the calculation of the amount of Restricted Payments; and
(f) $10,000,000.
The foregoing clause (ii) will not prevent (a) the payment of any
dividend on Capital Stock within 60 days after the date of its declaration if
such dividend could have been made on the date of its declaration in compliance
with the foregoing provisions, (b) the purchase, redemption or retirement or
other acquisition of Capital Stock in exchange for or out of the proceeds of a
substantially concurrent issue and sale (other than to a Subsidiary) of other
shares of Capital Stock (other than Redeemable Stock) of the Company, (c) cash
dividends paid to Holding which dividends are used by Holding to repurchase
Capital Stock of Holding from officers and employees (or their estates) of
Holding, the Company or its Subsidiaries upon death, disability or termination
of employment of such officers and employees to the extent required by the terms
of the Stockholders' Agreement, including any extension of the Stockholders'
Agreement on substantially the same terms and conditions, as in effect on the
date of the Indenture; provided, however, that the aggregate amount of all such
repurchases in any fiscal year of the Company does not exceed $5,000,000; (d)
cash dividends paid to Holding which dividends are used by Holding to repurchase
shares of its Capital Stock from participants who are distributed such shares
from the ESOP to the extent required by the terms thereof as in effect on the
date of the Indenture; (e) cash dividends paid to Holding out of the net
proceeds to the Company of any benefits paid pursuant to the terms of the Life
Insurance Policies; provided, however, that such net proceeds shall be first
used to repurchase Capital Stock of Holding from the estate of such former
officer or employee if such repurchase is required by the ESOP, the
Stockholders' Agreement or any other agreement and provided, further, that the
amount of such dividend shall be excluded in the calculation of Restricted
Payments for purposes of clause (ii) of the immediately preceding paragraph; (f)
the purchase, redemption, retirement or other acquisition of any Indebtedness
with the Net Proceeds from Asset Dispositions as permitted under
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Section 1013; (g) the exchanging, refinancing or refunding of Subordinated
Indebtedness through the issuance of Subordinated Indebtedness so long as (1)
the principal amount of the new Subordinated Indebtedness to be issued does not
exceed the principal amount (plus any premium and consent payments required) of
the Subordinated Indebtedness so exchanged, refinanced or refunded and (2) the
Subordinated Indebtedness to be issued does not have a final maturity or
mandatory redemption payments prior to the earlier of the final maturity of the
Subordinated Indebtedness being so exchanged, refinanced or refunded or the
stated maturity of the Notes; (h) any securities or other Investments received
in connection with any sale or other disposition of property or assets,
including any Asset Disposition that complies with Section 1013; and (i)
Investments in connection with a Financing Disposition by or to any Receivables
Entity, including Investments of funds held in accounts permitted or required by
the arrangements governing such Financing Disposition or any related
Indebtedness.
SECTION 1010. Limitation on Indebtedness.
--------------------------
The Company shall not create, incur, assume, guarantee or otherwise
become liable for, and shall not permit any of its Restricted Subsidiaries to
create, incur, assume, guarantee or otherwise become liable for, any
Indebtedness, except for Permitted Indebtedness.
Notwithstanding the foregoing, the Company may create, incur, assume,
guarantee or otherwise become liable for Indebtedness (other than guarantees of
Indebtedness, the incurrence of which would not be permitted under the
Indenture) if, at the time such Indebtedness is so created, incurred or assumed
and after giving effect thereto and the application of the proceeds therefrom,
the Fixed Charge Coverage Ratio of the Company for the four most recent fiscal
quarters for which financial information is available shall not be less than 2.0
to 1.0.
For purposes of calculating the Fixed Charge Coverage Ratio referred
to above, if the Indebtedness to be created, incurred or assumed is Indebtedness
of an entity which is to be acquired by, and made a Restricted Subsidiary of,
the Company or of a Restricted Subsidiary (whether or not such Indebtedness was
incurred by such entity in connection with such acquisition), or is Indebtedness
incurred by the Company or any Restricted Subsidiary in connection with such
acquisition, then the Fixed Charge Coverage Ratio of the Company shall be
determined on a pro forma basis giving effect to both the Fixed Charges related
to such additional Indebtedness as well as the Consolidated Cash Flow of the
entity to be acquired.
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SECTION 1011. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to create, incur, assume or permit to
exist any Lien except for Permitted Liens upon or with respect to any of its
property, whether owned at the date of the Indenture or thereafter acquired, or
on any income or profits therefrom or assign or otherwise convey any right to
receive income, unless the Notes are secured equally and ratably simultaneously
with or prior to the creation, incurrence or assumption of such Lien.
If at any time the Company or any of its Restricted Subsidiaries shall
incur any Lien requiring that the Notes be equally and ratably secured pursuant
to the covenant in subsection (a) of this Section, the Company shall promptly
deliver to the Trustee an Officers' Certificate, stating that such covenant has
been complied with, and an Opinion of Counsel, stating that in such counsel's
opinion such covenant has been complied with and that any instruments executed
by the Company or any Restricted Subsidiary in their performance of such
covenant complied with the requirements thereof.
SECTION 1012. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale and Leaseback Transaction unless (i) the Company would
be able to incur Indebtedness (other than Permitted Indebtedness) in an amount
equal to the Attributable Debt with respect to such Sale and Leaseback
Transaction or (ii) where the Company or such Restricted Subsidiary receives
consideration from such Sale and Leaseback Transaction at least equal to the
fair market value of the property subject thereto (which shall be determined in
good faith by the Board of Directors and evidenced by a Board Resolution) and
applies the Net Proceeds of such Sale and Leaseback Transaction in accordance
with the provisions set forth in Section 1013.
SECTION 1013. Limitations on Dispositions of Assets.
-------------------------------------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, sell, transfer, lease, convey or otherwise dispose of any assets
(other than (i) an asset disposition or the sale of Inventory in the ordinary
course of business consistent with past practice, (ii) any Financing
Disposition, (iii) any disposition of the Designated Facilities, or (iv) as
permitted under Section 801 which constitutes a transfer, conveyance, sale,
lease or other disposition of all or substantially all of the Company's assets)
unless (a) the Company (or the Restricted Subsidiary, as the case
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may be) receives consideration at the time of such disposition (an ''Asset
Disposition'') at least equal to the fair market value of the assets disposed of
(which shall be determined in good faith by the Board of Directors and evidenced
by a Board Resolution), and (b) the Net Proceeds received by the Company for
such disposition consists of at least 75% cash, provided, however, that for the
-------- --------
purposes of this covenant, "cash" shall include (i) the amount of any
liabilities (other than liabilities that are by their terms subordinated to the
Notes) of the Company or such Restricted Subsidiary (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet or in the notes
thereto) that are assumed by the transferee of any such assets or other property
in such Asset Disposition or are no longer the liability of the Company or any
Restricted Subsidiary (and excluding any liabilities that are incurred in
connection with or in anticipation of such Asset Disposition), but only to the
extent that such assumption is effected on a basis under which there is no
further recourse to the Company or any of its Restricted Subsidiaries with
respect to such liabilities and (ii) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary in connection with
such Asset Disposition that are converted by the Company or such Restricted
Subsidiary into cash within 180 days of receipt. Within 18 months from the date
of such disposition, the Net Proceeds (other than Net Proceeds of any Asset
Disposition of the Excluded Facility) thereof shall be (x) applied to capital
expenditures of the Company or the Restricted Subsidiaries; (y) used by the
Company or a Restricted Subsidiary to acquire additional properties or assets
related to the Company's business or to make Investments in entities, which,
after giving effect to such Investment, will become Restricted Subsidiaries, or
(z) applied to repay, repurchase or redeem Indebtedness of a Restricted
Subsidiary or Indebtedness of the Company ranking on a parity with or senior to
the Notes; provided, however, that if such repaid, repurchased or redeemed
Indebtedness is Indebtedness incurred under or in respect of the New Credit
Facility (or any substitute or replacement facility), the amount of borrowing
capacity under such facility shall be permanently reduced by the amount of such
repayment, repurchase or redemption; provided, however, no such permanent
-------- -------
reduction in borrowing capacity shall be required if such repayment, repurchase
or redemption is made with the Net Proceeds remaining after consummation of a
Proceeds Offer (as defined below).
To the extent that Net Proceeds from such disposition are not so
applied, the Company (or the Restricted Subsidiary, as the case may be) shall
use the remaining Net Proceeds (less any amount of Net Proceeds used to pay
reasonable fees and expenses connected with an offer to purchase hereunder) (the
"Purchase Amount") to make an offer to purchase Notes in accordance with
Section 1013(b) ("Proceeds Offer") at a price equal to 100% of the principal
amount thereof. If at any
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time any non-cash consideration received by the Company or a Restricted
Subsidiary in respect of a disposition of assets is converted into or sold or
otherwise disposed of for cash, then such cash shall constitute Net Proceeds for
purposes of this provision and shall be applied in accordance with the preceding
two sentences within 30 days of the receipt of such cash. The receipt of all
proceeds of insurance paid on account of the loss of or damage to any assets and
awards of compensation for any such assets taken by condemnation or eminent
domain, net of expenses incurred in their collection, shall constitute Net
Proceeds.
Notwithstanding the foregoing, a Proceeds Offer may be deferred with
respect to an Asset Disposition or series of related Asset Dispositions if the
Net Proceeds, after giving effect to the application, if any, as set forth in
clauses (x), (y) or (z) above, is less than $5,000,000. Such Proceeds Offer may
be deferred until such time as such Net Proceeds, plus the aggregate amount of
Net Proceeds resulting from any prior or subsequent Asset Disposition(s) during
any 12 month period not otherwise applied as provided in clauses (x), (y) or (z)
above, is at least equal to $7,500,000, at which time the Company shall apply
all such Net Proceeds to a Proceeds Offer pursuant to Section 1013(b).
Notwithstanding the foregoing, to the extent that any or all of the
Net Proceeds of any disposition of assets is prohibited or delayed by applicable
local law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to this
provision but may be retained for so long, but only for so long, as the
applicable local law will not permit repatriation to the United States. The
Indenture provides that the Company will promptly take all reasonable actions
required by the applicable local law to permit such repatriation, and once such
repatriation of any affected Net Proceeds is permitted under applicable local
law, such repatriation will be immediately effected and such repatriated Net
Proceeds will be applied in the manner set forth above as if such disposition of
assets had occurred on the date of repatriation.
(b) No later than the expiration of the 18-month period referred to in
Section 1013(a) (the "Proceeds Offer Trigger Date") in respect of an Asset
Disposition, the Company shall provide the Trustee with (i) an Officer's
Certificate setting forth a statement to the effect that (A) the Company or one
of its Restricted Subsidiaries has had an Asset Disposition, (B) the aggregate
principal amount of Notes able to be purchased and the basis of calculation in
determining such aggregate principal amount and (C) detailing the terms of a
Proceeds Offer or (ii) a statement to the effect that a Proceeds Offer need not
be made and briefly stating the reason that a Proceeds Offer need not be made.
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Notice of a Proceeds Offer shall be mailed by the Company (or caused
to be mailed by the Company), not more than 30 days following the Proceeds Offer
Trigger Date, to the Holders of all Notes at their last address as it appears on
the registry books of the Registrar with a copy to the Trustee. The notice
shall de scribe the transaction or transactions resulting in the Proceeds Offer
and shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Proceeds Offer. The notice shall state:
(A) that a Proceeds Offer is being made pursuant to this Section for
Notes in an aggregate principal amount equal to the Purchase Amount at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the Proceeds Purchase Date (defined below),
and that if the Notes tendered in the Proceeds Offer exceed the Purchase
Amount, Notes will be accepted for payment on a pro rata basis (in integral
--------
multiples of $1,000);
(B) the purchase date, which shall be no earlier than 30 days nor
later than 60 days after the date such notice is mailed (the "Proceeds
Purchase Date");
(C) that any Note not tendered or accepted for purchase will continue
to accrue interest in accordance with the terms thereof;
(D) that any Note purchased pursuant to a Proceeds Offer shall cease
to accrue interest after the Proceeds Purchase Date:
(E) that Holders electing to have a Note purchased pursuant to a
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse side of the
Security completed, to the Paying Agent at the address specified in the
notice not later than the close of business on the tenth Business Day prior
to the Proceeds Purchase Date;
(F) that Holders will be entitled to withdraw their election, in
whole or in part, if the Trustee receives, not later than the close of
business on the fifth Business Day prior to the Proceeds Purchase Date, as
specified by the Company in such notice (or such shorter period as may be
required by applicable law), a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
the Holder previously
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delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased; and
(G) that Holders whose Notes are accepted for purchase in part only
will be issued new Notes equal in principal amount to the unpurchased
portion of such Notes surrendered.
On or before the Proceeds Purchase Date, the Company shall (A) accept
for payment the Notes or portions thereof properly tendered pursuant to the
Proceeds Offer up to the Purchase Amount (and if more than the Purchase Amount
has been tendered, shall select the Securities to be repurchased on a pro rata
--- ----
basis), (B) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price of all Notes or portions thereof to be purchased and (C)
deliver to the Trustee an Officer's Certificate listing the Notes or portions
thereof purchased by the Company. The Payment Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price of
such Notes, and the Trustee shall promptly authenticate and deliver by first
class mail to each such Holder a new Note equal in principal amount to the
principal amount of any unpurchased portion of the Notes surrendered. Any Notes
not so accepted shall be promptly mailed or delivered by the Paying Agent to the
Holder thereof. The Company will publicly announce the results of the Proceeds
Offer on or as soon as practicable after the Proceeds Purchase Date.
In making any Proceeds Offer, the Company shall comply with the
applicable rules and regulations of the SEC under the Exchange Act, including to
the extent then applicable Rule 14e-1. Such compliance to the extent
inconsistent with any provision of this Section 1013, shall be deemed full
compliance with this Section 1013.
SECTION 1014. Limitation on Restricted Subsidiary Dividends.
---------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, assume or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions in respect of
such Restricted Subsidiary's Capital Stock or otherwise transfer cash or assets
or make loans or advances to the Company or any other Restricted Subsidiary, or
pay Indebtedness owing to the Company or any other Restricted Subsidiary, (ii)
make any loans or advances to the Company or any Restricted Subsidiary, or (iii)
transfer any of its property or cash to the Company or any Restricted
Subsidiary, other than as permitted by the Indenture,
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except for such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) customary non-assignment provisions of any agreement or
obligation, including a lease governing a leasehold interest, of the Company or
a Subsidiary of the Company, (c) the Indenture, (d) the Special Term Loan
Agreement and any amendments, modifications or refinancing thereof, provided,
however, that any such amendments, modifications, or refinancings shall not
impose any greater encumbrance or restriction than those contemplated by the
Special Term Loan Agreement as in existence on the date of original issuance of
the Notes, (e) the New Credit Facility, provided, however, that any amendments
to the New Credit Facility shall not impose any greater encumbrance or
restriction than those contemplated by such New Credit Facility as in existence
on the date of original issuance of the Notes, (f) any Indebtedness incurred
pursuant to clause (xv) of the definition of Permitted Indebtedness and any
amendments, modifications or refinancings thereof, (g) any instrument governing
Indebtedness of a Person acquired by the Company or any Subsidiary of the
Company at the time of such acquisition, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (h) any
restriction on the sale or other disposition of assets or property securing
Indebtedness as a result of a Permitted Lien on such assets or property
(including without limitation, customary restrictions relating to assets
securing any indebtedness under the Special Term Loan Agreement, the New Credit
Facility or the Indebtedness incurred pursuant to clause (ix) or (xv) of the
definition of Permitted Indebtedness), (i) contracts for the sale of assets,
including customary restrictions with respect to agreements for sale of
substantially all of the Capital Stock or assets of such Subsidiary provided
that such restrictions apply only to the assets being sold and for only so long
as such contract remains in effect, or (j) an agreement relating to Indebtedness
of or a Financing Disposition to or by any Receivables Entity. Nothing contained
in this Section 1014 shall prevent the Company or any Restricted Subsidiary from
(1) creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in Section 1011 or (2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.
SECTION 1015. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into transactions with Affiliates of the Company or
Holding (other than the Company and its Wholly Owned Restricted Subsidiaries)
except for Permitted Transactions, transactions in respect of Restricted
Payments made in accordance with Section 1009 and transactions the terms of
which are no less
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favorable than the terms which could be obtained by the Company, or, if the
Company is not a party to such transaction, such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's length basis between
unaffiliated parties, and for transactions involving aggregate payments in
excess of $3,000,000, the Company delivers to the Trustee a resolution of the
Board of Directors of the Company (including all, if any, of the disinterested
directors) to the effect that the terms of such transactions are fair and
reasonable to the Company, or if the Company is not a party to such transaction,
such Restricted Subsidiary.
SECTION 1016. Limitation on Investments.
-------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, make any Investments in any other person, except (i) Investments in the
Company or in any other Restricted Subsidiary by any Restricted Subsidiary or by
the Company in a Wholly Owned Restricted Subsidiary of the Company; (ii)
receivables owing to the Company or its Restricted Subsidiaries created in the
ordinary course of business and payable or dischargeable substantially in
accordance with customary trade terms; (iii) Permitted Transactions; (iv)
Investments made in Cash Equivalents; (v) Investments permitted to be made
pursuant to Section 1013; (vi) Investments existing on the date of the
Indenture; and (vii) Investments in Unrestricted Subsidiaries (or an entity (or
entities) which, after giving effect to such Investment, becomes an Unrestricted
Subsidiary) not otherwise permitted by clauses (i) through (vi) above, in an
aggregate amount not exceeding at any time outstanding the sum of (x) $7,500,000
and (y) an amount which is equal to the amount of Restricted Payments permitted
at such time to be made pursuant to Section 1009 (the sum of (x) and (y) being
referred to as the "Permitted Investment Amount").
SECTION 1017. Money for Note Payments to Be Held in Trust.
-------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (or premium, if any) or interest
on any of the Notes, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal of (or premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal of (or premium, if
any) or interest on any Notes, deposit with a Paying Agent a sum sufficient to
pay the principal (and premium, if any) or interest so becoming due, such sum to
be held in
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trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (or premium, if
any) or interest on any Note and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease.
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ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
-------------------
The Notes may be redeemed at the option of the Company, in whole or
from time to time in part, at any time on or after April 1, 2002, at the
Redemption Prices specified below:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH
PERIOD BEGINNING APRIL 1, REDEMPTION PRICE
<S> <C>
2002.......................... 104.750%
2003.......................... 102.375%
2004 and thereafter........... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Notes originally outstanding at a redemption price equal to 109.5 % of the
principal amount thereof, plus accrued and unpaid interest, if any to the
redemption date, with the net proceeds of a public offering of common stock by
the Company (or of Holding to the extent such net proceeds are contributed as a
capital contribution in exchange for common stock of the Company); provided that
at least 65% of the aggregate principal amount of the Notes originally
outstanding remain outstanding immediately after such redemption.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 30 days and not more than
60 days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and
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of the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
If less than all the Notes are to be redeemed, the particular Notes to
be redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Trustee from the Notes not previously called for redemption in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not then listed on a national
securities exchange, on a pro rata basis or by lot or any other method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions of the principal of Notes; provided, however, that no
-------- -------
such partial redemption shall reduce the portion of the principal amount of a
Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note that has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for in
Section [106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
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(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the notice that
relates to such Note shall state that on and after the Redemption Date,
upon surrender of such Note, the holder will receive, without charge, a new
Note or Notes of authorized denominations for the principal amount thereof
remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Note, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue on
and after said date,
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any, and
(7) the CUSIP number.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to 10:00 a.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and accrued interest on, all the Notes that are to be redeemed on that
date.
SECTION 1107. Notes Payable on Redemption Date.
--------------------------------
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest.
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Upon surrender of any such Note for redemption in accordance with said notice,
such Note shall be paid by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of any accrued and unpaid interest on Notes called for
redemption shall have been made available in accordance with Section 1106, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price of
and, subject to the provision in the preceding paragraph, any accrued and unpaid
interest on such Notes to the Redemption Date.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Notes.
SECTION 1108. Notes Redeemed in Part.
----------------------
Any Note that is to be redeemed only in part shall be surrendered at
the office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holders attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Note so surrendered.
ARTICLE TWELVE
RIGHT TO REQUIRE REPURCHASE
SECTION 1201. Repurchase of Notes at Option of the Holder Upon
------------------------------------------------
Change of Control.
- -----------------
(a) Upon the occurrence of a Change of Control (the "Change of Control
Date"), each Holder shall have the right, at such Holder's option, to require
the Company to repurchase all or any part of such Holder's Notes (provided that
the
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principal amount of such Notes at maturity must be $1,000 or an integral
multiple thereof) pursuant to the offer described in Section 1201(b) (the
"Change of Control Offer") at a purchase price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase (the "Change of Control Purchase Price").
(b) Within 10 Business Days after the occurrence of a Change of
Control Date, the Company shall make an unconditional Change of Control Offer to
the Holders to purchase all of the Notes pursuant to the offer described in
clause (c) of this Section 1201 at the Change of Control Purchase Price.
(c) Within 10 Business Days following the Change of Control Date, the
Company will send by first class mail, a notice to each Holder, with a copy to
the Trustee, stating, among other things:
(i) that a Change of Control has occurred and that such Holder
has the right to require the Company to repurchase such
Holder's Notes, in whole or in part (in denominations of
$1,000 or an integral multiple thereof), at the Change of
Control Purchase Price;
(ii) the circumstances and relevant facts regarding such Change
of Control (including relevant information with respect to
the transaction giving rise to such Change of Control);
(iii) the repurchase date specified by the Company (which shall
be not earlier than 30 days nor later than 60 days after
the date such notice is mailed) (the "Repurchase Date");
(iv) that any Note not tendered will continue to accrue interest
in accordance with the terms hereof;
(v) that any Note repurchased pursuant to the Change of Control
Offer will cease to accrue interest after the Repurchase
Date;
(vi) that Holders electing to have a Note or portion thereof
repurchased pursuant to a Change of Control Offer will
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be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address
specified in the notice not later than the close of
business on the fifth Business Day prior to the Repurchase
Date;
(vii) that Holders will be entitled to withdraw their election,
in whole or in part, if the Paying Agent receives, not
later than the close of business on the third Business Day
prior to the Repurchase Date (or such shorter period as
may be required by applicable law), a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes the Holder
previously delivered for purchase and a statement that
such Holder is withdrawing his election to have such Notes
(or portions thereof) purchased;
(viii) that Holders whose Notes are purchased only in part will
be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; and
(ix) the instructions determined by the Company, consistent
with this Article Eleven, that Holders must follow in
order to have their Notes accepted for repurchase.
In the event a Change of Control occurs and any repurchase pursuant to
the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act, the Company will comply with the requirements of Rule 14e-1 as
then in effect, to the extent applicable, and any other applicable securities
laws or regulations with respect to such repurchase. Such compliance to the
extent inconsistent with any provision of this Article Eleven shall be deemed
full compliance with this Article Eleven.
On or before the Repurchase Date, the Company shall (a) accept for
payment the Notes or portions thereof properly tendered pursuant to the Change
of Control Offer prior to the close of business on the third Business Day prior
to the Repurchase Date, (b) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Change of Control Purchase Price of all Notes or portions
thereof so tendered
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and (c) deliver to the Trustee Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the Change of Control Purchase Price with
respect thereto, and the Trustee shall promptly authenticate and deliver by
first class mail to each such Holder a new Note equal in principal amount to the
principal amount of any unpurchased portion of the Note surrendered. The Company
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Repurchase Date.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
- ----------
The Company may, at its option by Board Resolution, at any time, with
respect to the Notes, elect to have either Section 1302 or Section 1303 be
applied to all Outstanding Notes upon compliance with the conditions set forth
below in this Article Thirteen. Either Section 1302 or Section 1303 may be
applied to the Notes to any Redemption Date or the Maturity of the Notes.
SECTION 1302. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes, on the
date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Notes, which thereafter shall be deemed to be "Outstanding" only for
the purposes of Section 1305 and the other Sections of this Indenture referred
to in (A) and (B) below, and the Company, if any, shall be deemed to have
satisfied all its obligations under such Notes and this Indenture insofar as
such Notes are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following,
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Notes to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and
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interest on such Notes when such payments are due, (B) the Company's obligations
with respect to such Notes under Sections 304, 305, 306, 1002 and 1017, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen; provided, however, that the Company's rights pursuant to
-------- -------
Section 1101 shall not be terminated or discharged hereunder. Subject to
compliance with this Article Thirteen, the Company may exercise its option under
this Section 1302 notwithstanding the prior exercise of its option under Section
1303 with respect to the Notes.
SECTION 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from their
respective obligations under any covenant contained in Section 801(d) and in
Sections 1004 through 1015 with respect to the Outstanding Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Notes shall thereafter be deemed not to be "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to the
Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 501,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
1302 or Section 1303 to the Outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 608 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (A) money in
an
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amount, or (B) U.S. Government Obligations that through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants or a nationally recognized investment banking firm expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, the principal amount of, premium, if any, on
and interest on the Outstanding Notes to the Maturity (or Redemption Date,
if applicable) of such principal (and premium, if any) or installment of
interest on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of such Notes; provided
--------
that the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to said payments with
respect to the Notes. Before such a deposit, the Company may give to the
Trustee, in accordance with Section 1103 hereof, a notice of its election
to redeem all of the Outstanding Notes at a future date in accordance with
Article Eleven hereof, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the
foregoing.
(2) No Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the incurrence of Debt, the
proceeds of which are applied to such deposit) or, insofar as paragraphs
(d) and (e) of Section 501 hereof are concerned, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
(other than a Default or Event of Default resulting from the incurrence of
Indebtedness, the proceeds of which are applied to such deposit) or any
other material agreement or instrument to which the Company is a party or
by which it is bound.
(4) In the case of an election under Section 1302 and in the event
that such election shall occur more than twelve months prior to the
Maturity of the Outstanding Notes, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (x) the Company has received
from, or there
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has been published by, the Internal Revenue Service a ruling, or (y) since
March 24, 1998, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion
shall state to the effect that, the Holders of the Outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred.
(5) In the case of an election under Section 1303 and in the event
that such election shall occur more than twelve months prior to the
Maturity of the Outstanding Notes, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of the
Outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred.
(6) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the Company's
deposit, the trust funds shall not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or similar laws
affecting creditors' rights generally.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1302
or the covenant defeasance under Section 1303 (as the case may be) have
been complied with. In rendering such Opinion of Counsel, counsel may rely
on such Officers' Certificate as to any matters of fact (including as to
compliance with the foregoing clauses (1), (2) and (3)).
SECTION 1305. Deposited Money and U.S. Government Obligations to Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the
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provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Holders of such Notes of all sums due and
to become due thereon in respect of the principal amount at (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify and hold harmless the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Governmental Obligations deposited pursuant to Section 1304 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge that by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1304 that, in the opinion of a nationally recognized firm of independent
public accountants or a nationally recognized investment banking firm expressed
in a written certification thereof delivered to the Trustee, are in excess of
the amount thereof that would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance, as applicable, in accordance with
this Article.
SECTION 1306. Reinstatement.
-------------
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1305 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1302 or 1303, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1305; provided, however, that if the Company makes any payment of the principal
-------- -------
amount (or premium, if any) or interest on any Note following the reinstatement
of its obligations, the Company shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the money held by the Trustee or
Paying Agent.
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[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, all as of the day and year first above written.
EARLE M. JORGENSEN COMPANY
By /s/ Maurice S. Nelson, Jr.
--------------------------
Title: President, Chief Executive
Officer and Chief Operating
Officer
Attest: /s/ Charles P. Gallopo
----------------------
Title: Vice President and
Chief Financial Officer
UNITED STATES TRUST COMPANY
OF NEW YORK
By /s/ Gerard F. Ganey
-------------------
Title: Senior Vice President
Attest: /s/ Christine C. Collins
--------------------------
Title: Assistant Vice President
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EXHIBIT 4.2(a)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"), OR (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
<PAGE>
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIR ING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE DATED AS OF MARCH 24, 1998
BETWEEN THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK AS TRUSTEE.
<PAGE>
EARLE M. JORGENSEN COMPANY
9 1/2% Senior Notes due 2005
No. N-001 $100,000,000
CUSIP No.480829AB6
Earle M. Jorgensen Company, a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or its registered assigns, the principal sum of One Hundred Million
($100,000,000) Dollars on April 1, 2005 at the office or agency of the Company
referred to below, and to pay interest thereon on October 1, 1998 and semi-
annually thereafter, on April 1 and October 1 in each year, from October 1,
1998, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 9 1/2% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the date on
which such overdue interest becomes payable to the date on which payment of such
interest has been made or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on the
Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Record
Date, and such defaulted interest, and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes, may be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any, on) and interest
on this Note will be made at the office or agency of the Company maintained for
that purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States
<PAGE>
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
-------- -------
option of the Company (i) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Note Register or (ii) by transfer to
an account maintained by the payee located in the United States.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: March 24, 1998 EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
--------------------------------
Title: Vice President and Chief
Financial Officer
Attest:
/s/ William S. Johnson
- ----------------------
Authorized Signature
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: March 24, 1998
--------------
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST
COMPANY
OF NEW YORK
/s/ Gerard F. Ganey, as Trustee
--------------------
By: Gerard F. Ganey
Authorized Officer
<PAGE>
[Reverse of Note]
This Note is one of a duly authorized issue of securities of the
Company designated as its 9 1/2% Senior Notes due 2005 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal of $105,000,000, that may be issued under a Senior
Notes Indenture (herein called the "Indenture") dated as of March 24, 1998
between the Company and United States Trust Company of New York (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Notes, and of the terms upon which the Notes are, and are to be,
authenticated and delivered.
The Company, at its option, may redeem the Notes as a whole, or from
time to time in part, on or after April 1, 2002, at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest, if any, to the Redemption
Date):
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH
PERIOD BEGINNING APRIL 1, REDEMPTION PRICE
<S> <C>
2002........................ 104.750%
2003........................ 102.375%
2004 and thereafter......... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Notes originally outstanding at a redemption price equal to 109.5% of the
principal amount thereof, plus accrued and unpaid interest, if any to the
redemption date, with the net proceeds of a public offering of common stock by
the Company (or of Holding to the extent such net proceeds are contributed as a
capital contribution in exchange for common stock of the Company); provided that
at least 65% of the aggregate principal amount of the Notes originally
outstanding remain outstanding immediately after such redemption.
Upon the occurrence of a Change of Control (the "Change of Control
Date"), each Holder shall have the right, at such Holder's option, to require
the Company to repurchase all or any part of such Holder's Notes pursuant to the
offer (the "Change of Control Offer") at a purchase price equal to 101% of the
principal
<PAGE>
amount thereof (the "Change of Control Purchase Price"), plus accrued and unpaid
interest, if any, to the date of repurchase.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated March 24, 1998, among the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). The
Registration Rights Agreement will provide that (i) if the Company fails to file
an Exchange Offer Registration Statement with the Commission on or prior to the
90th day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 150th
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30th calendar day after the Exchange Offer Registration Statement is
declared effective, (iv) if obligated to file the Shelf Registration Statement
and the Company fails to file the Shelf Registration Statement with the
Commission on or prior to the 90th day after such filing obligation arises, (v)
if obligated to file a Shelf Registration Statement and the Shelf Registration
Statement is not declared effective on or prior to the 150th day after the
obligation to file a Shelf Registration Statement arises, or (vi) if the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective but thereafter ceases to be effective or
useable in connection with resales of the Transfer Restricted Securities,
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each, a "Registration Default"), the Company agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages "(Liquidated Damages") in an amount equal to $0.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90 day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week
$1,000 principal amount of Transfer Restricted Securities. The Company shall not
be required to pay Liquidated Damages for more than one Registration Default at
any given time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
In the case of any redemption of Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders
<PAGE>
of such Notes, or one or more Predecessor Notes, of record at the close
of business on the relevant Regular Record Date referred to on the face hereof.
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
All accrued Liquidated Damages shall be paid by the Company to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
The Indenture defines an Event of Default as being: (a) any failure to
pay an installment of interest on the Notes as and when the same becomes due and
payable and such failure continues for 30 days; (b) failure to pay all or any
part of the principal of (or premium, if any, on) the Notes when and as the same
shall become due and payable at maturity, redemption, by declaration or
otherwise, including payment of the Change of Control Purchase Price; (c)
failure by the Company duly to observe, perform or comply with any covenant or
agreement contained in the Notes or the Indenture which failure continues for a
period of 60 days after written notice specifying such failure and demanding
that the Company remedy the same has been given to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in aggregate principal
amount of Notes then outstanding; (d) certain events of bankruptcy, insolvency
or reorganization in respect of the Company or any Material Subsidiary; (e) (i)
a default which extends beyond any stated period of grace applicable thereto,
excluding any extension thereof, under any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any of its Restricted
Subsidiaries, whether now existing or hereafter created, aggregating in excess
of $10,000,000 at any one time, if as a result of such event of default the
maturity of such Indebtedness has been accelerated prior to its final stated
maturity, or (ii) failure to pay such Indebtedness, aggregating in principal
amount in excess of $10,000,000 at any one time, at its final stated maturity;
or (f) the rendering of final judgments not covered by insurance (which coverage
shall be in full force and effect) for the payment of money in an amount equal
to or greater than, in the case of any one such judgment $2,500,000, and, in the
case of all such judgments $5,000,000, against the Company or any of its
Restricted Subsidiaries by a court of
<PAGE>
competent jurisdiction which are not stayed, satisfied or discharged within 60
days after such judgments become final and nonappealable.
If an Event of Default (other than an Event of Default with respect to
the Company described in clause (d) of the preceding paragraph), shall occur and
be continuing then, and in every such case, unless the principal of all the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Notes, by notice in writing to the Company (and to the Trustee if given by
Holders), may declare all of the principal of the Notes (or the Change of
Control Purchase Price if the Event of Default includes failure to pay the
Change of Control Purchase Price), together with accrued interest thereon to be
due and payable immediately. If an Event of Default with respect to the Company
specified in clause (d) above occurs, all principal of, premium applicable to,
and accrued interest on, all then outstanding Notes shall become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
<PAGE>
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
No recourse for the payment of the principal of, or premium, if any,
or interest on, any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any of the Notes, or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee, controlling person of
the Company or of a Subsidiary of the Company or of any successor Person of the
Company or of a Subsidiary of
<PAGE>
the Company. Each Holder by accepting a Note waives and releases all such
liability, and such waiver and release is part of the consideration for the
issuance of the Notes.
The Indenture and this Note shall be governed by, and construed in
accordance with, the internal laws of the State of New York (without giving
effect to the conflict of laws principles thereof). The Trustee, the Company,
and (by their acceptance of the Notes) the Holders agree to submit to the non-
exclusive jurisdiction of any United States federal or state court located in
the Borough of Manhattan, in the City of New York, in any action or proceeding
arising out of or relating to the Indenture of this Note.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Earle M.
Jorgensen Company, 3050 East Birch Street, Brea, CA 92621, Attention: Chief
Financial Officer.
<PAGE>
[Form of Transfer Notice for the Notes]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
March 24, 2000; i.e., the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
Check One
---------
[_] this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
--
[_] this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date: __________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:_______________________________________
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the under signed's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:_____________________ -----------------------------
NOTICE: To be executed by an
executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1201 or Section 1013 of the Indenture, check the Box: [_]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1201 or Section 1013 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date: ______________________
Your Signature: __________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include mem
bership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 4.2(b)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"), OR (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
<PAGE>
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE DATED AS OF MARCH 24, 1998
BETWEEN THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK AS TRUSTEE.
<PAGE>
EARLE M. JORGENSEN COMPANY
9 1/2% Senior Notes due 2005
No. N-002 $4,350,000
CUSIP No.480829AB6
Earle M. Jorgensen Company, a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or its registered assigns, the principal sum of Four Million Three Hundred
Fifty Thousand ($4,350,000) Dollars on April 1, 2005 at the office or agency of
the Company referred to below, and to pay interest thereon on October 1, 1998
and semi-annually thereafter, on April 1 and October 1 in each year, from
October 1, 1998, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, at the rate of 9 1/2% per annum, until the
principal hereof is paid or duly provided for, and (to the extent lawful) to pay
on demand interest on any overdue interest at the rate borne by the Notes from
the date on which such overdue interest becomes payable to the date on which
payment of such interest has been made or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of business
on the Record Date for such interest, which shall be the March 15 or September
15 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Record
Date, and such defaulted interest, and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes, may be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any, on) and interest
on this Note will be made at the office or agency of the Company maintained for
that purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose,
<PAGE>
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
--------
however, that payment of interest may be made at the option of the Company (i)
- -------
by check mailed to the address of the Person entitled thereto as such address
shall appear on the Note Register or (ii) by transfer to an account maintained
by the payee located in the United States.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: March 24, 1998 EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
-----------------------
Title: Vice President and Chief
Financial Officer
Attest:
/s/ William S. Johnson
- --------------------------
Authorized Signature
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: March 24, 1998
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerard F. Ganey, as Trustee
-------------------
By: Gerard F. Ganey
Authorized Officer
<PAGE>
[Reverse of Note]
This Note is one of a duly authorized issue of securities of the
Company designated as its 9 1/2% Senior Notes due 2005 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal of $105,000,000, that may be issued under a Senior
Notes Indenture (herein called the "Indenture") dated as of March 24, 1998
between the Company and United States Trust Company of New York (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Notes, and of the terms upon which the Notes are, and are to be,
authenticated and delivered.
The Company, at its option, may redeem the Notes as a whole, or from
time to time in part, on or after April 1, 2002, at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest, if any, to the Redemption
Date):
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH
PERIOD BEGINNING APRIL 1, REDEMPTION PRICE
<S> <C>
2002........................ 104.750%
2003........................ 102.375%
2004 and thereafter......... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Notes originally outstanding at a redemption price equal to 109.5% of the
principal amount thereof, plus accrued and unpaid interest, if any to the
redemption date, with the net proceeds of a public offering of common stock by
the Company (or of Holding to the extent such net proceeds are contributed as a
capital contribution in exchange for common stock of the Company); provided that
at least 65% of the aggregate principal amount of the Notes originally
outstanding remain outstanding immediately after such redemption.
Upon the occurrence of a Change of Control (the "Change of Control
Date"), each Holder shall have the right, at such Holder's option, to require
the Company to repurchase all or any part of such Holder's Notes pursuant to the
offer (the "Change of Control Offer") at a purchase price equal to 101% of the
principal
<PAGE>
amount thereof (the "Change of Control Purchase Price"), plus accrued and unpaid
interest, if any, to the date of repurchase.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated March 24, 1998, among the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). The
Registration Rights Agreement will provide that (i) if the Company fails to file
an Exchange Offer Registration Statement with the Commission on or prior to the
90/th/ day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 150/th/
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30/th/ calendar day after the Exchange Offer Registration Statement
is declared effective, (iv) if obligated to file the Shelf Registration
Statement and the Company fails to file the Shelf Registration Statement with
the Commission on or prior to the 90/th/ day after such filing obligation
arises, (v) if obligated to file a Shelf Registration Statement and the Shelf
Registration Statement is not declared effective on or prior to the 150/th/ day
after the obligation to file a Shelf Registration Statement arises, or (vi) if
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, is declared effective but thereafter ceases to be effective
or useable in connection with resales of the Transfer Restricted Securities,
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each, a "Registration Default"), the Company agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages "(Liquidated Damages") in an amount equal to $0.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90 day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week
$1,000 principal amount of Transfer Restricted Securities. The Company shall
not be required to pay Liquidated Damages for more than one Registration Default
at any given time. Following the cure of all Registration Defaults, the accrual
of Liquidated Damages will cease.
In the case of any redemption of Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders
<PAGE>
of such Notes, or one or more Predecessor Notes, of record at the close of
business on the relevant Regular Record Date referred to on the face hereof.
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
All accrued Liquidated Damages shall be paid by the Company to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
The Indenture defines an Event of Default as being: (a) any failure to
pay an installment of interest on the Notes as and when the same becomes due and
payable and such failure continues for 30 days; (b) failure to pay all or any
part of the principal of (or premium, if any, on) the Notes when and as the same
shall become due and payable at maturity, redemption, by declaration or
otherwise, including payment of the Change of Control Purchase Price; (c)
failure by the Company duly to observe, perform or comply with any covenant or
agreement contained in the Notes or the Indenture which failure continues for a
period of 60 days after written notice specifying such failure and demanding
that the Company remedy the same has been given to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in aggregate principal
amount of Notes then outstanding; (d) certain events of bankruptcy, insolvency
or reorganization in respect of the Company or any Material Subsidiary; (e) (i)
a default which extends beyond any stated period of grace applicable thereto,
excluding any extension thereof, under any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any of its Restricted
Subsidiaries, whether now existing or hereafter created, aggregating in excess
of $10,000,000 at any one time, if as a result of such event of default the
maturity of such Indebtedness has been accelerated prior to its final stated
maturity, or (ii) failure to pay such Indebtedness, aggregating in principal
amount in excess of $10,000,000 at any one time, at its final stated maturity;
or (f) the rendering of final judgments not covered by insurance (which coverage
shall be in full force and effect) for the payment of money in an amount equal
to or greater than, in the case of any one such judgment $2,500,000, and, in the
case of all such judgments $5,000,000, against the Company or any of its
Restricted Subsidiaries by a court of
<PAGE>
competent jurisdiction which are not stayed, satisfied or discharged within 60
days after such judgments become final and nonappealable.
If an Event of Default (other than an Event of Default with respect to
the Company described in clause (d) of the preceding paragraph), shall occur and
be continu ing then, and in every such case, unless the principal of all the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Notes, by notice in writing to the Company (and to the Trustee if given by
Holders), may declare all of the principal of the Notes (or the Change of
Control Purchase Price if the Event of Default includes failure to pay the
Change of Control Purchase Price), together with accrued interest thereon to be
due and payable immediately. If an Event of Default with respect to the Company
specified in clause (d) above occurs, all principal of, premium applicable to,
and accrued interest on, all then outstanding Notes shall become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
<PAGE>
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
No recourse for the payment of the principal of, or premium, if any,
or interest on, any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any of the Notes, or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee, controlling person of
the Company or of a Subsidiary of
<PAGE>
the Company or of any successor Person of the Company or of a Subsidiary of the
Company. Each Holder by accepting a Note waives and releases all such liability,
and such waiver and release is part of the consideration for the issuance of the
Notes.
The Indenture and this Note shall be governed by, and construed in
accordance with, the internal laws of the State of New York (without giving
effect to the conflict of laws principles thereof). The Trustee, the Company,
and (by their acceptance of the Notes) the Holders agree to submit to the non-
exclusive jurisdiction of any United States federal or state court located in
the Borough of Manhattan, in the City of New York, in any action or proceeding
arising out of or relating to the Indenture of this Note.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in com mon), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Earle M.
Jorgensen Company, 3050 East Birch Street, Brea, CA 92621, Attention: Chief
Financial Officer.
<PAGE>
[Form of Transfer Notice for the Notes]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
March 24, 2000; i.e., the end of the period referred to in Rule 144(k) under the
Securities Act, the under signed confirms that without utilizing any general
solicitation or general advertising that:
Check One
---------
[ ] this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
--
[ ] this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
trans fer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date: __________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned in strument in every
particular, without alter ation or any change
whatsoever.
Signature Guarantee:
-------------------------------------------
<PAGE>
TO BE COMPLETED BY PURCHASER IF (A) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such informa tion regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:_______________________ __________________________________
NOTICE: To be executed by an
executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1201 or Section 1013 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1201 or Section 1013 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date: ________________________________
Your Signature: _______________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _______________________________________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 4.2(c)
THIS NOTE (OR ITS PREDESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"), OR (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATIONS UNDER
THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
<PAGE>
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE DATED AS OF MARCH 24, 1998
BETWEEN THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK AS TRUSTEE.
<PAGE>
EARLE M. JORGENSEN COMPANY
9 1/2% Senior Notes due 2005
No. S-001 $650,000
CUSIP No.U2677PAA7
Earle M. Jorgensen Company, a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or its registered assigns, the principal sum of Six Hundred Fifty Thousand
($650,000) Dollars on April 1, 2005 at the office or agency of the Company
referred to below, and to pay interest thereon on October 1, 1998 and
semi-annually thereafter, on April 1 and October 1 in each year, from October 1,
1998, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 9 1/2% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the date on
which such overdue interest becomes payable to the date on which payment of such
interest has been made or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on the
Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Record
Date, and such defaulted interest, and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes, may be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any, on) and interest
on this Note will be made at the office or agency of the Company maintained for
that purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or
<PAGE>
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
-------- -------
of interest may be made at the option of the Company (i) by check mailed to the
address of the Person entitled thereto as such address shall appear on the Note
Register or (ii) by transfer to an account maintained by the payee located in
the United States.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: March 24, 1998 EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
-----------------------
Title: Vice President and
Chief Financial Officer
Attest:
/s/ William S. Johnson
- ------------------------------
Authorized Signature
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated: March 24, 1998
--------------
This is one of the Notes referred to in the within-mentioned
Indenture.
UNITED STATES TRUST
COMPANY
OF NEW YORK
/s/ Gerard F. Ganey , as Trustee
----------------------------------
By: Gerard F. Ganey
Authorized Officer
<PAGE>
[Reverse of Note]
This Note is one of a duly authorized issue of securities of the
Company designated as its 9 1/2% Senior Notes due 2005 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal of $105,000,000, that may be issued under a Senior
Notes Indenture (herein called the "Indenture") dated as of March 24, 1998
between the Company and United States Trust Company of New York (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Notes, and of the terms upon which the Notes are, and are to be,
authenticated and delivered.
The Company, at its option, may redeem the Notes as a whole, or from
time to time in part, on or after April 1, 2002, at the redemption prices
(expressed as a percentage of the principal amount thereof) set forth below (in
each case together with accrued and unpaid interest, if any, to the Redemption
Date):
<TABLE>
<CAPTION>
IF REDEEMED DURING THE 12-MONTH
PERIOD BEGINNING APRIL 1, REDEMPTION PRICE
<S> <C>
2002........................ 104.750%
2003........................ 102.375%
2004 and thereafter......... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Notes originally outstanding at a redemption price equal to 109.5% of the
principal amount thereof, plus accrued and unpaid interest, if any to the
redemption date, with the net proceeds of a public offering of common stock by
the Company (or of Holding to the extent such net proceeds are contributed as a
capital contribution in exchange for common stock of the Company); provided that
at least 65% of the aggregate principal amount of the Notes originally
outstanding remain outstanding immediately after such redemption.
Upon the occurrence of a Change of Control (the "Change of Control
Date"), each Holder shall have the right, at such Holder's option, to require
the Company to repurchase all or any part of such Holder's Notes pursuant to the
offer (the "Change of Control Offer") at a purchase price equal to 101% of the
principal
<PAGE>
amount thereof (the "Change of Control Purchase Price"), plus accrued and
unpaid interest, if any, to the date of repurchase.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated March 24, 1998, among the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). The
Registration Rights Agreement will provide that (i) if the Company fails to file
an Exchange Offer Registration Statement with the Commission on or prior to the
90/th/ day after the Closing Date, (ii) if the Exchange Offer Registration
Statement is not declared effective by the Commission on or prior to the 150/th/
day after the Closing Date, (iii) if the Exchange Offer is not consummated on or
before the 30/th/ calendar day after the Exchange Offer Registration Statement
is declared effective, (iv) if obligated to file the Shelf Registration
Statement and the Company fails to file the Shelf Registration Statement with
the Commission on or prior to the 90/th/ day after such filing obligation
arises, (v) if obligated to file a Shelf Registration Statement and the Shelf
Registration Statement is not declared effective on or prior to the 150/th/ day
after the obligation to file a Shelf Registration Statement arises, or (vi) if
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, is declared effective but thereafter ceases to be effective
or useable in connection with resales of the Transfer Restricted Securities,
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each, a "Registration Default"), the Company agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages "(Liquidated Damages") in an amount equal to $0.05 per week per $1,000
in principal amount of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$0.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90 day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $0.50 per week
$1,000 principal amount of Transfer Restricted Securities. The Company shall
not be required to pay Liquidated Damages for more than one Registration
Default at any given time. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
In the case of any redemption of Notes, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders
<PAGE>
of such Notes, or one or more Predecessor Notes, of record at the close
of business on the relevant Regular Record Date referred to on the face hereof.
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
All accrued Liquidated Damages shall be paid by the Company to Holders
entitled thereto by wire transfer to the accounts specified by them or by
mailing checks to their registered address if no such accounts have been
specified.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
The Indenture defines an Event of Default as being: (a) any failure to
pay an installment of interest on the Notes as and when the same becomes due and
payable and such failure continues for 30 days; (b) failure to pay all or any
part of the principal of (or premium, if any, on) the Notes when and as the same
shall become due and payable at maturity, redemption, by declaration or
otherwise, including payment of the Change of Control Purchase Price;
(c) failure by the Company duly to observe, perform or comply with any covenant
or agreement contained in the Notes or the Indenture which failure continues
for a period of 60 days after written notice specifying such failure and
demanding that the Company remedy the same has been given to the Company by the
Trustee or to the Company and the Trustee by Holders of at least 25% in
aggregate principal amount of Notes then outstanding; (d) certain events of
bankruptcy, insolvency or reorganization in respect of the Company or any
Material Subsidiary; (e)(i) a default which extends beyond any stated period of
grace applicable thereto, excluding any extension thereof, under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness of the
Company or any of its Restricted Subsidiaries, whether now existing or hereafter
created, aggregating in excess of $10,000,000 at any one time, if as a result
of such event of default the maturity of such Indebtedness has been accelerated
prior to its final stated maturity, or (ii) failure to pay such Indebtedness,
aggregating in principal amount in excess of $10,000,000 at any one time, at its
final stated maturity; or (f) the rendering of final judgments not covered by
insurance (which coverage shall be in full force and effect) for the payment of
money in an amount equal to or greater than, in the case of any one such
judgment $2,500,000, and, in the case of all such judgments $5,000,000, against
the Company or any of its Restricted Subsidiaries by a court of
<PAGE>
competent jurisdiction which are not stayed, satisfied or discharged within 60
days after such judgments become final and nonappealable.
If an Event of Default (other than an Event of Default with respect to
the Company described in clause (d) of the preceding paragraph), shall occur and
be continuing then, and in every such case, unless the principal of all the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Notes, by notice in writing to the Company (and to the Trustee if given by
Holders), may declare all of the principal of the Notes (or the Change of
Control Purchase Price if the Event of Default includes failure to pay the
Change of Control Purchase Price), together with accrued interest thereon to be
due and payable immediately. If an Event of Default with respect to the Company
specified in clause (d) above occurs, all principal of, premium applicable to,
and accrued interest on, all then outstanding Notes shall become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
The Indenture contains provisions for defeasance at any time of
(a) the entire indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Notes at the time Outstanding. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
<PAGE>
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Note Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
No recourse for the payment of the principal of, or premium, if any,
or interest on, any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or in any of the Notes, or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee, controlling person of
the Company or of a Subsidiary of
<PAGE>
the Company or of any successor Person of the Company or of a Subsidiary of the
Company. Each Holder by accepting a Note waives and releases all such liability,
and such waiver and release is part of the consideration for the issuance of the
Notes.
The Indenture and this Note shall be governed by, and construed in
accordance with, the internal laws of the State of New York (without giving
effect to the conflict of laws principles thereof). The Trustee, the Company,
and (by their acceptance of the Notes) the Holders agree to submit to the
non-exclusive jurisdiction of any United States federal or state court located
in the Borough of Manhattan, in the City of New York, in any action or
proceeding arising out of or relating to the Indenture of this Note.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Earle M.
Jorgensen Company, 3050 East Birch Street, Brea, CA 92621, Attention: Chief
Financial Officer.
<PAGE>
[Form of Transfer Notice for the Notes]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
March 24, 2000; i.e., the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
Check One
---------
[ ] this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
--
[ ] this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date:
-------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
---------------------------------------------------
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
----------------------------- ------------------------------
NOTICE: To be executed by an
executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1201 or Section 1013 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1201 or Section 1013 of the Indenture, state the amount (in
original principal amount) below:
$______________________.
Date: _____________________
Your Signature: ____________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 4.3
EARLE M. JORGENSEN COMPANY
$105,000,000
9 1/2% Senior Notes due 2005
PURCHASE AGREEMENT
March 19, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
<PAGE>
$105,000,000
9 1/2% Senior Notes due 2005
of EARLE M. JORGENSEN COMPANY
PURCHASE AGREEMENT
March 19, 1998
Donaldson, Lufkin & Jenrette Securities Corporation
BT Alex. Brown Incorporated
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10005
Ladies and Gentlemen:
Earle M. Jorgensen Company (the "Company"), a Delaware corporation,
-------
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and BT Alex. Brown Incorporated (each an "Initial Purchaser"
--- -----------------
and, collectively, the "Initial Purchasers") an aggregate of $105,000,000 in
------------------
principal amount of its 9 1/2% Senior Notes due 2005 (the "Series A Notes"),
--------------
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture"), to be
---------
dated as of the Closing Date (as defined below), between the Company and United
States Trust Company of New York, as trustee (the "Trustee"). The Series A
-------
Notes and the Series B Notes (as defined below) issuable in exchange therefor
are collectively referred to herein as the "Notes." The Company is a wholly
-----
owned subsidiary of Earle M. Jorgenson Holding Company, Inc. (the "Holding
Company"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
<PAGE>
1. Offering Memorandum. The Series A Notes will be offered and
-------------------
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company has prepared a preliminary offering memorandum, dated
---
March 3, 1998 (the "Preliminary Offering Memorandum") and a final offering
-------------------------------
memorandum, dated March 19, 1998 (the "Offering Memorandum"), relating to the
-------------------
Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities (other than the Series B Notes) issued in exchange therefor, in
substitution thereof or upon conversion thereof) shall bear the following
legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT HAS ACQUIRED THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, ACCEPTABLE TO THE
COMPANY), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS," AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2
<PAGE>
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amount of
Series A Notes set forth opposite the name of such Initial Purchaser on Schedule
A hereto at a purchase price equal to 97.125% of the principal amount thereof
(the "Purchase Price").
--------------
3. Terms of Offering. The Initial Purchasers have advised the
-----------------
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
--------------
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs"), and (ii) to persons permitted to purchase
----
the Series A Notes in offshore transactions in reliance upon Regulation S under
the Act (each, a "Regulation S Purchaser") (such persons specified in clauses
----------------------
(i) and (ii) being referred to herein as the "Eligible Purchasers"). The
-------------------
Initial Purchasers will offer the Series A Notes to Eligible Purchasers
initially at a price equal to 97.125% of the principal amount thereof. Such
price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
-----------------------------
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission"),
----------
under the circumstances set forth therein, (i) a registration statement under
the Act (the "Exchange Offer Registration Statement") relating to the Company's
-------------------------------------
9 1/2% Senior Notes due 2005 (the "Series B Notes"), to be offered in exchange
--------------
for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415
--------------
under the Act (the "Shelf Registration Statement" and, together with the
----------------------------
Exchange Offer Registration Statement, the "Registration Statements") relating
-----------------------
to the resale by certain holders of the Series A Notes and to use its best
efforts to cause such Registration State ments to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. On the Closing Date (as
hereinafter defined), the Company intends to (i) enter into a loan agreement
(the "Special Term Loan") with DLJ Capital Funding, Inc., as syndication agent,
-----------------
Donaldson Lufkin & Jenrette
3
<PAGE>
Securities Corporation and BT Alex. Brown Incorporated, as arrangers, and the
other lenders party thereto pursuant to which the Company will borrow $100
million and (ii) enter into a $220 million revolving credit facility pursuant to
a credit agreement with a group of banks (the "New Credit Facility"). The New
-------------------
Credit Facility and the agreements creating security interests in certain assets
of the Company for the benefit of the holders of indebtedness arising under the
New Credit Facility are sometimes herein referred to as the "Bank Agreements"
---------------
The Special Term Loan and the agreements creating security interests in certain
assets of the Company for the benefit of the holders of indebtedness arising
under the Special Term Loan are sometimes herein referred to as the "Special
-------
Term Loan Agreements." This Agreement, the Indenture, the Notes, the Special
- --------------------
Term Loan Agreements, the Bank Agreements and the Registration Rights Agreement
are hereinafter sometimes referred to collectively as the "Operative Documents."
-------------------
4. Delivery and Payment.
--------------------
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the office of Skadden, Arps, Slate, Meagher &
Flom LLP at 919 Third Avenue, New York, New York, 10022-3897, or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m., New York City time, on March 24, 1998, or at such other time on
the same date or such other time and date as shall be agreed upon by the Initial
Purchasers and the Company in writing. The time and date of such delivery and
the payment for the Series A Notes are herein called the "Closing Date."
------------
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
---
aggregate principal amount of the Series A Notes (collectively, the "Global
------
Notes") shall be delivered by the Company to the Initial Purchasers (or as the
- -----
Initial Purchasers direct) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchasers of the Purchase
Price thereof by wire transfer in same day funds to such accounts with such
financial institutions as the Company may direct in writing. The Global Notes
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. Agreements of the Company. The Company hereby agrees with each
-------------------------
Initial Purchaser as follows:
4
<PAGE>
(a) To advise the Initial Purchasers promptly and, if requested by an
Initial Purchaser, confirm such advice in writing, (i) of the issuance by any
state securities commission or other regulatory authority of any stop order
suspending the qualification or exemption from qualification of any Series A
Notes for offering or sale in any jurisdiction designated by the Initial
Purchasers pursuant to Section 5(e) hereof, or the initiation of any proceeding
by any state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during the
period referred to in Section 5(c) below that makes any statement of a material
fact made in the Preliminary Offering Memorandum or the Offering Memorandum
untrue or that requires any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements therein
not misleading. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws and, if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any Series A
Notes under any state securities or Blue Sky laws, the Company shall use
commercially reasonable efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified
by the Initial Purchasers to the Company as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to each of the Initial
Purchaser's compliance with its respective representations and warranties and
agreements set forth in Section 7 hereof, the Company consents to the use of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
and supplements thereto required pursuant hereto, by the Initial Purchasers in
connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchaser for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or
5
<PAGE>
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of the Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchasers
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholder's equity as of the end of and for such fiscal
6
<PAGE>
year, together with comparable information as of the end of and for the
preceding year, certified by the Company's independent certified public
accountant and (ii) to mail and make generally available as soon as practicable
after the end of each quarterly period (except for the last quarterly period of
each fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated subsidiaries, if any) as of the end of
and for such period, and for the period from the beginning of such year to the
close of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company to its security holders or furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of either the Company or the Holding Company is listed and such other
publicly available information concerning the Company, the Holding Company and
the Company's subsidiaries, if any, as the Initial Purchasers may reasonably
request.
(h) So long as any of the Series A Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
------------
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the Act.
---------------------
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company under
this Agreement including: (i) the fees, disbursements and expenses of counsel to
the Company and accountants of the Company in connection with the sale and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by them in the
quantities specified herein, (ii) all costs and expenses related to the transfer
and delivery of the Series A Notes to the Initial Purchasers and pursuant to
Exempt Resales, including any transfer or other taxes payable thereon, (iii) all
costs of printing or producing this Agreement, the other
7
<PAGE>
Operative Documents and any other agreements or documents in connection with the
offering, purchase, sale or delivery of the Series A Notes, (iv) all expenses in
connection with the registration or qualification of the Series A Notes for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Initial Purchasers in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing certificates representing the Series A Notes, (vi) all expenses and
listing fees in connection with the application for quotation of the Series A
Notes in the National Association of Securities Dealers, Inc. ("NASD") Automated
----
Quotation System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee
------
and Trustee's counsel in connection with the Indenture and the Notes, (viii) the
costs and charges of any transfer agent, registrar and/or depositary (including
DTC), (ix) any fees charged by rating agencies for the rating of the Notes,
(x) all costs and expenses of the Exchange Offer and any Registration
Statement, as set forth in the Registration Rights Agreement, and (xi) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the Series A
Notes in PORTAL and to maintain the listing of the Series A Notes on PORTAL for
so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(l) During the period beginning on the date hereof and continuing
to and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or the
Holding Company or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or the Holding Company substantially
similar to the Notes (other than (i) the Notes and (ii) commercial paper issued
in the ordinary course of business), without the prior written consent of the
Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to
8
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Exempt Resales in a manner that would require the registration of any such sale
of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes registered pursuant to the Act to be offered in exchange
for the Series A Notes and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes.
6. Representations, Warranties and Agreements of the Company. As of the
---------------------------------------------------------
date hereof, the Company represents and warrants to each Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
do not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. The Company
acknowledges for all purposes under this Agreement that the statements with
respect to price and discount and the last paragraph on the cover page of the
Offering Memorandum, the information contained in the first, third, fifth, ninth
and tenth paragraphs under the caption "Plan of Distribution" in the Preliminary
Offering Memorandum and the Offering Memorandum, and the information regarding
stabilization on the inside front cover of the Preliminary Offering Memorandum
and the Offering Memorandum (or
9
<PAGE>
any amendment or supplement thereto) constitute the only written information
furnished to the Company by or on behalf of any Initial Purchaser expressly for
use in the Preliminary Offering Memorandum or the Offering Memoran dum (or any
amendment or supplement thereto) and that the Initial Purchasers shall not be
deemed to have provided any other information (and therefore are not responsible
for any such statement or omission) pertaining to any arrangement or agreement
with respect to any party other than the Initial Purchasers. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) The Company and each of its subsidiaries (each, a "Subsidiary"
----------
and, collectively, the "Subsidiaries") has been duly organized, is validly
------------
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as it is currently being conducted, to own, lease and operate its
properties as described in the Preliminary Offering Memorandum and the Offering
Memorandum (and, with respect to the Company, to authorize the offering of the
Notes, to execute, deliver and perform this Agreement and to issue, sell and
deliver the Notes), and each is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction where the
operation, ownership or leasing of property or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, singly or in the aggregate, have a material adverse effect on the business,
results of operations, condition (financial or otherwise) or properties of the
Company and the Subsidiaries taken as a whole (a "Material Adverse Effect").
(c) The Holding Company has been duly organized, is validly existing
as a corporation in good standing under the laws of the State of Delaware and
does not engage in any business or investment activities other than owning 100%
of the issued and outstanding capital stock of the Company and supplying
management services to the Company pursuant to the terms of the Management
Agreement (as such term is defined in the Indenture) as described in the
Preliminary Offering Memorandum and the Offering Memorandum.
(d) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Preliminary Offering Memorandum and the Offering
Memorandum under "Capitalization." All of the issued and outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary have been
10
<PAGE>
duly and validly authorized and issued, and all of the shares of capital stock
of, or other ownership interests in, each Subsidiary are owned, directly or
through Subsidiaries, by the Company. All such shares of capital stock are fully
paid and nonassessable, and, other than pursuant to the Holding Pledge Agreement
(as defined in the Preliminary Offering Memorandum and Offering Memorandum) and
all agreements and other documents related thereto, are owned free and clear of
any security interest, mortgage, pledge, claim, lien or encumbrance (each, a
"Lien"). There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or Liens related to or
entitling any person to purchase or otherwise to acquire any shares of the
capital stock of, or other ownership interest in, any Subsidiary. The entities
listed on Schedule B hereto are the only subsidiaries, direct or indirect, of
the Company.
(e) The Indenture has been duly authorized by the Company and, when
duly executed and delivered by the Company and the Trustee in accordance with
its terms, will be a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws now or hereafter in effect relating to
creditors' rights generally; (ii) that the remedies of specific performance and
injunctive and other forms of relief are subject to general equitable
principles, whether enforcement is sought at law or in equity and that such
enforcement is sought at law or in equity and that such enforcement may be
subject to the discretion of the court before which any proceedings therefor may
be brought; and (iii) that a waiver of rights under any usury laws may be
unenforceable. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended,
(the "TIA" or "Trust Indenture Act") and the rules and regulations of the
--- -------------------
Commission applicable to an indenture which is qualified thereunder.
(f) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Company or any of its
Subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, which would be required by the Act to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 filed with the Commission.
11
<PAGE>
(g) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When the
Series A Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except
(i) as such enforcement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws now or
hereafter in effect relating to creditors' rights generally; (ii) that the
remedies of specific performance and injunctive and other forms of relief are
subject to general equitable principles, whether enforcement is sought at law or
in equity and that such enforcement is sought at law or in equity and that such
enforcement may be subject to the discretion of the court before which any
proceedings therefor may be brought; and (iii) that a waiver of rights under any
usury laws may be unenforceable. On the Closing Date, the Series A Notes will
conform as to legal matters to the description thereof contained in the Offering
Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws now or hereafter in effect relating to
creditors' rights generally; (ii) that the remedies of specific performance and
injunctive and other forms of relief are subject to general equitable
principles, whether enforcement is sought at law or in equity and that such
enforcement is sought at law or in equity and that such enforcement may be
subject to the discretion of the court before which any proceedings therefor may
be brought; and (iii) that a waiver of rights under any usury laws may be
unenforceable.
(i) Neither the Holding Company, the Company nor any of the
Subsidiaries is in violation of its respective charter or bylaws or in default
in the performance of any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other contract, lease
or other instrument to which the Holding Company, the Company or any of the
Subsidiaries is a party or by which any of them is bound, or to which any of the
property or assets of the Holding
12
<PAGE>
Company, the Company or any of the Subsidiaries is subject, except such as have
been waived or which would not have, singly or in the aggregate, a Material
Adverse Effect.
(j) This Agreement has been duly authorized and validly executed and
delivered by the Company and (assuming the due execution and delivery hereof by
you) constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws now or hereafter in effect relating to
creditors' rights generally; (ii) that the remedies of specific performance and
injunctive and other forms of relief are subject to general equitable
principles, whether enforcement is sought at law or in equity and that such
enforcement may be subject to the discretion of the court before which any
proceedings therefor may be brought; and (iii) as rights to indemnity and
contribution may be limited by state or federal laws relating to securities or
by the policies underlying such laws.
(k) All indebtedness of the Company that will be repaid with the
proceeds of the issuance and sale of the Series A Notes was incurred, and the
indebtedness represented by the Series A Notes is being incurred, for proper
purposes and in good faith and the Company was, at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance and sale
of the Series A Notes, and will be on the Closing Date (after giving effect to
the application of the proceeds from the issuance of the Series A Notes)
solvent, and had at the time of the incurrence of such indebtedness that will be
repaid with the proceeds of the issuance and sale of the Series A Notes and will
have on the Closing Date (after giving effect to the application of the proceeds
from the issuance of the Series A Notes) sufficient capital for carrying on
their respective business and were, at the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and sale of
the Series A Notes, and will be on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Series A Notes) able to pay
their respective debts as they mature.
(l) Other than as described in the Preliminary Offering Memorandum and
the Offering Memorandum, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, pending against or
affecting the Holding Company, the Company or any of the Subsidiaries, or any of
their respective properties, which is required to be disclosed in the
Preliminary Offering Memorandum and the Offering Memorandum, or which would
13
<PAGE>
reasonably be expected to result, singly or in the aggregate, in a Material
Adverse Effect or which would reasonably be expected to materially and adversely
affect the consummation of this Agreement or the transactions contemplated
hereby, and to the best of the Company's knowledge, no such proceedings are
contemplated or threatened.
(m) The Registration Rights Agreement has been duly authorized by the
Company on the Closing Date, will have been duly executed and delivered by the
Company. When the Registration Rights Agreement has been duly executed and
delivered, the Registration Rights Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except (i) as such enforcement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws now or
hereafter in effect relating to creditors' rights generally; and (ii) that the
remedies of specific performance and injunctive and other forms of relief are
subject to general equitable principles, whether enforcement is sought at law or
in equity and that such enforcement is sought at law or in equity and that such
enforcement may be subject to the discretion of the court before which any
proceedings therefor may be brought. On the Closing Date, the Registration
Rights Agreement will conform as to legal matters to the description thereof in
the Offering Memorandum.
(n) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company and the Holding Company and compliance
by the Company and the Holding Company with all provi sions hereof and thereof
and the consummation of the transactions contemplated hereby and thereby will
not (i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as has
been obtained or as may be required (i) under the securities or Blue Sky laws of
the various states governing the purchase or distribution of the Notes or (ii)
to register the Series B Notes under the Securities Act of 1933 or to qualify
the Indenture under the TIA in connection with the performance by the Company of
its obligations under the Registration Rights Agreement), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or the Holding Company or any bond, note,
debenture or other evidence of indebtedness, indenture, loan agreement,
mortgage, deed of trust, lease or other agreement or instrument that is material
to the Company and the Holding Company, taken as a whole, to which the Company
or the Holding Company is a party or by which the Company or the Holding Company
or their respective property is bound, (iii) violate or conflict with any
material applicable law or any material rule,
14
<PAGE>
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company, the Holding Company or their
respective property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a material Lien under, any agreement or
instrument to which the Company or the Holding Company is a party or by which
the Company or the Holding Company or their respective property is bound, except
pursuant to the Special Term Loan Agreements, the Bank Agreements and the
Restructuring Agreement (as such term is defined in the Preliminary Offering
Memorandum and the Offering Memorandum) or (v) result in the termination,
suspension or revocation of any Authorization (as defined below) of the Company
or the Holding Company or result in any other impairment of the rights of the
holder of any such Authorization, other than, in the case of clauses (ii),
(iii), (iv) or (v) above, for such conflicts, breaches, defaults, acceleration
of an obligation or Lien (x) arising with respect to obligations and agreements
that will be discharged or terminated concurrently with the closing of the
transactions contemplated hereby or (y) which would not, singly or in the
aggregate, have a Material Adverse Effect.
(o) Except as disclosed in the Preliminary Offering Memorandum and the
Offering Memorandum and as would not, singly or in the aggregate, have a
Material Adverse Effect: (i) the Company in compliance with all laws and
regulations relating to protection of human health or environment or imposing
liability or standards of conduct concerning any Materials of Environmental
Concern (as defined below) ("Environmental Laws"), including, without
------------------
limitation, possession of required permits and compliance with the terms of
conditions thereof, and there are no circumstances known to the Company that
will prevent such compliance in the future; (ii) the Company has not received
any notice and there is no pending or threatened action, suit or proceeding
before or by any court of governmental agency or body ("Environmental Claim")
-------------------
alleging potential liability (including, but not limited to, investigatory,
cleanup or governmental response costs, natural resources or property
damages, personal injuries, or penalties) of the Company or any person or entity
for whom the Company has contractually retained or assumed responsibility,
arising out of, based on, or resulting from the presence, or release, discharge,
emission or disposal into the environment, of any Material of Environmental
Concern at or from any location, owned or operated by the Company or any
violation or alleged violation of any Environmental Law; and (iii) to the best
of the Company's knowledge, there are no past or present actions, activities,
conditions, events or incidents that could be reasonably expected to form the
basis of any such Environmental Claim; the term "Materials of Environmental
--------------------------
Concern" means (a) any "hazardous substance" as defined by the Comprehensive
- -------
Environmental
15
<PAGE>
Response, Compensation and Liability of 1980, as amended, (b) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as amended, (c)
any petroleum or petroleum product, (d) any polychlorinated biphenyl, and (e)
any pollutant or contaminant or hazardous, dangerous, or toxic chemical,
material, waste or substance regulated or defined under any other Environmental
Law;
(p) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "Authorization") of,
-------------
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. Each such Authorization is valid
and in full force and effect and the Company is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company or the Holding Company; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(q) Except as would not result, singly or in the aggregate, in a
Material Adverse effect, the Company and each of the Subsidiaries has title,
free and clear of all Liens (except Permitted Liens (as defined in the
Indenture, including Liens in connection with the Bank Agreements and the
Special Term Loan Agreements)), to all property and assets reflected in the
Company's consolidated financial statements for the nine months ended December
31, 1997.
(r) The accountants, Ernst & Young LLP, that has certified the
financial statements and supporting schedules included in the Preliminary
Offering Memorandum and the Offering Memorandum are independent public
accountants with respect to the Company, as required by the Act and the Exchange
Act. The historical financial statements, together with related notes, set forth
in the Preliminary Offering
16
<PAGE>
Memorandum and the Offering Memorandum comply as to form in all material
respects with the requirements applicable to registration statements on Form S-1
under the Act.
(s) The historical financial statements, together with related notes
forming part of the Offering Memorandum (and any amendment or supplement
thereto), present fairly the consolidated financial position, results of
operations and changes in financial position of the Company on the basis stated
in the Offering Memorandum at the respective dates or for the respective periods
to which they apply; such statements and related notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Offering
Memorandum relating specifically to the Company (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(t) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and give
effect to assumptions used in the preparation thereof on a reasonable basis and
in good faith and present fairly the historical and proposed transactions
contemplated by the Preliminary Offering Memorandum and the Offering Memorandum;
and such pro forma financial statements comply as to form in all material
respects with the requirements applicable to pro forma financial statements
included in registration statements on Form S-1 under the Act.
(u) Each of the Company and the Holding Company is not and, after
giving effect to the offering and sale of the Series A Notes and the application
of the net proceeds thereof as described in the Offering Memorandum, will not
be, an "investment company," as such term is defined in the Investment Company
Act of 1940, as amended.
(v) There are no contracts, agreements or understandings between the
Company or the Holding Company and any person granting such person the right to
require the Company or the Holding Company to file a registration statement
under the Act with respect to any securities of the Company or to require the
Company or the Holding Company to include such securities with the Notes
registered pursuant to any Registration Statement.
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(w) Neither the Company nor the Holding Company nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Series A Notes to
violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System.
(x) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company's retaining any rating assigned to the
Company or any securities of the Company or (ii) has indicated to the Company
that it is considering (a) the downgrading, suspension or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company or any securities of the Company.
(y) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum (ex
clusive of any amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and the Holding Company, taken as a whole, (ii) there has not been
any material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company and
(iii) the Company has not incurred any material liability or obligation, direct
or contingent.
(z) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(aa) When the Series A Notes are issued and delivered pursuant to this
Agreement, the Series A Notes will not be of the same class (within the meaning
of Rule 144A under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
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<PAGE>
(ab) No form of general solicitation or general advertising (as defined
in Regulation D under the Act) was used by the Company, the Holding Company or
any of their respective representatives (other than the Initial Purchasers and
their representatives, as to whom the Company and the Holding Company make no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(ac) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(ad) None of the Company, the Holding Company nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Company and the Holding Company make no
representa tion) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with respect
------------
to the Series A Notes.
(ae) The Series A Notes offered and sold in reliance on Regulation S
have been and will be offered and sold in "offshore transactions" within meaning
of Rule 902 of Regulation S.
(af) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(ag) No registration under the Act of the Series A Notes is required
for the sale of the Series A Notes to the Initial Purchasers as contemplated
hereby or for the Exempt Resales, assuming the accuracy of the Initial
Purchasers' representations and warranties and agreements set forth in Section 7
hereof.
(ah) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
pursuant to the terms of this Agreement shall be deemed to be a representation
and warranty of the Company, as applicable, to the Initial Purchasers as to the
matters covered thereby.
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<PAGE>
(ai) Except as disclosed in the Offering Memorandum, each of the
amendments to the Holding Company and the Company's respective certificate of
incorporation and bylaws, each of the agreements with their stockholders and
other parties, and each of the actions of the Holding Company and the Company's
board of directors and stockholders which are in each case necessary to effect
any of the transactions and events described in the Preliminary Offering
Memorandum and the Offering Memorandum are in full force and effect.
(aj) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, the Company and each Subsidiary maintains insurance
covering their properties, operations, personnel and businesses; such insurance
insures against such losses and risks as are adequate in accordance with
customary industry practice to protect the Company and its Subsidiaries and
their businesses; neither the Company nor any Subsidiary has received notice
from any insurer or agent of such insurer that substantial capital improvements
or other expenditures will have to be made in order to continue such insurance;
all such insurance is outstanding and duly in force on the date hereof and will
be outstanding and duly in force on the Closing Date.
(ak) The Company and each of the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(al) Except as described in the Preliminary Offering Memorandum and the
Offering Memorandum, neither the Holding Company, the Company nor any of the
Subsidiaries has violated any federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees nor any applicable
wage or hour laws, nor any provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA") or the rules and regulations promulgated thereunder, nor
has the Company or any of the Subsidiaries engaged in any unfair labor practice,
which in each case might result, singly or in the aggregate, in a Material
Adverse Effect. Except as described in the Preliminary Offering Memorandum and
the Offering Memorandum, there is (i) no significant unfair labor practice
complaint
20
<PAGE>
pending against the Company or any of the Subsidiaries or, to the best
knowledge of the Company, threatened against any of them, before the National
Labor Relations Board or any state or local labor relations board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Company or
any of the Subsidiaries or, to the best knowledge of the Company, threatened
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Company or any of its Subsidiaries or, to the best
knowledge of the Company, threatened against the Company or any of the
Subsidiaries and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the Company or
any of the Subsidiaries and, to the best knowledge of the Company, no union
organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, singly or in the aggregate) such
as could not have a Material Adverse Effect.
The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers, will rely
upon the accuracy and truth of the foregoing representations and hereby consent
to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the
--------------------------------------------------
Initial Purchasers, severally and not jointly, represents and warrants to the
Company, and agrees that:
(a) Such Initial Purchasers are QIBs with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchasers (A) are not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
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<PAGE>
(c) Such Initial Purchasers agree that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by such Initial Purchasers or any of their representatives
in connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchasers agree that, in connection with Exempt
Resales, such Initial Purchasers will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from (A) purchasers that the Initial Purchasers reasonably believe are QIBs, and
(B) Regulation S Purchasers, in each case, that agree that (x) Series A Notes
purchased by them may be resold, pledged or otherwise transferred within the
time period referred to under Rule 144(k) (taking into account the provisions of
Rule 144(d) under the Act, if applicable) under the Act, as in effect on the
date of the transfer of such Series A Notes, only (I) to the Company or any of
its Subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements of
Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144
under the Act, (V) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VI) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Notes or an interest therein is transferred a
notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
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<PAGE>
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
Such Initial Purchasers acknowledge that the Company and, for
purposes of the opinions to be delivered to each Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchasers hereby consent to such reliance.
8. Indemnification.
---------------
(a) The Company agrees, to indemnify and hold harmless the
Initial Purchasers, their directors, their officers and each person, if any, who
controls such Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company or the Holding Company to any
holder or prospective purchaser of Series A Notes pursuant to Section 5(h) or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to the Initial Purchasers
furnished in writing to the Company by such Initial Purchasers; provided,
however, that the foregoing indemnity agreement with respect to any Preliminary
Offering Memorandum shall not inure to the benefit of any Initial Purchasers who
failed to deliver a Final Offering Memorandum (as then amended or supplemented,
provided by the Company to the several Initial Purchasers in the requisite
quantity and on a timely basis to permit proper delivery on or prior to the
Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement
23
<PAGE>
or omission or alleged material misstatement or omission was cured in the Final
Offering Memorandum.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company, and its respective directors and officers and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchasers but only with reference to information
relating to the Initial Purchaser furnished in writing to the Company by the
Initial Purchasers expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
- ------------------
against whom such indemnity may be sought (the "indemnifying party") in writing
------------------
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of the counsel, except as provided below, shall be at the expense of
such Initial Purchasers). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party within a reasonable time after
notice of commencement of such action or proceeding or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemni fied party shall
have been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circum-
24
<PAGE>
stances, be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all indemnified parties and all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation,
in the case of the parties indemnified pursuant to Section 8(a) and by the
Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if (a) the fees and expenses of
counsel are at the expense of the indemnifying party and the indemnified party
shall have requested the indemnifying party for such fees and expenses of
counsel as incurred, (b) such indemnifying party shall have failed to reimburse
the indemnified party in accordance with such request for reimbursement prior to
the date of settlement, (c) the amount of such fees and expenses or the
reimbursement obligation is not being disputed in good faith by the indemnifying
party (the "Default"), (d) the indemnified party provides the indemnifying party
twenty days prior written notice to the indemnifying party of such Default and
the indemnified party's intention to settle the action without the indemnifying
party's written consent, including the details of the proposed settlement and
(e) the indemnifying party has failed to cure such Default. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the indemnified
party is a party or in respect of which indemnity or contribution may be sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand from the
offering of the Series A Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such
25
<PAGE>
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company, on the
one hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Initial Purchasers, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Series A Notes
(after underwriting discounts and commissions, but before deducting expenses)
received by the Company, and the total discounts and commissions received by the
Initial Purchasers bear to the total price to investors of the Series A Notes,
in each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company, on the one hand, and each Initial
Purchaser, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or an Initial Purchaser, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable consid erations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, each Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchaser exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omis sion. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in
26
<PAGE>
proportion to the respective principal amount of Series A Notes purchased by
each of the Initial Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The obligations of the
---------------------------------------------
Initial Purchasers to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) On or after the date hereof, (i) there shall not have occurred
any downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of, or
of any review (or of any potential or intended review) for a possible change
that does not indicate the direction of the possible change, in any rating of
the Company or any securities of the Company (including, without limitation, the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred
any change, nor shall any notice have been given of any potential or intended
change, in the outlook for any rating of the Company or the Holding Company or
any securities of the Company or the Holding Company by any such rating
organization and (iii) no such rating organization shall have given notice that
it has assigned (or is considering assigning) a lower rating to the Notes than
that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in
the Offering Memorandum, other than as set forth in the Offering Memorandum (ex
clusive of any amendments or supplements thereto subsequent to the date of this
Agreement) (i) there shall not have occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and any of its subsidiaries, taken as a whole, (ii) there shall not
have been any change or any development involving a prospective change in the
capital stock or
27
<PAGE>
in the long-term debt of the Company or any of its Subsidiaries and (iii) the
Company or any of its Subsidiar ies shall not have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by the President and the Chief Financial Officer of the
Company, confirming the matters set forth in Sections 9(a) and 9(b) and stating
that the Company has complied with all the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied on or
prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchasers), dated the Closing
Date, of Katten, Muchin and Zavis, counsel for the Company, to the effect that:
(i) Each of the Company and Holding is a corporation duly
organized, existing and in good standing under the laws of the State of
Delaware;
(ii) The Company is qualified to transact business as a foreign
corporation and in good standing in the jurisdictions listed on schedule to
the opinion;
(iii) The Company has the requisite corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum;
(iv) The Company's authorized and issued capital stock as of
March 19, 1998 was 128 shares of $.01 par value Common Stock;
(v) The Company has the requisite corporate power and
authority to enter into and perform its obligations under the Purchase
Agreement and the Registration Rights Agreement and to issue, sell and
deliver the Series A Notes to be sold by it to the Initial Purchasers as
provided in the Offering Memorandum and the Purchase Agreement, and the
Purchase Agreement and the Registration Rights Agreement have been duly
authorized
28
<PAGE>
by all requisite corporate action and have been duly executed and delivered
by the Company and are enforceable against the Company in accordance with
their respective terms;
(vi) The Company has the requisite corporate power and
authority to enter into the Indenture and the Indenture has been duly
authorized by all requisite corporate action and has been executed and
delivered by the Company and is enforceable in accordance with its terms;
the Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA"),
and the rules and regulations of the Securities and Exchange Commission
(the "Commission") applicable to an indenture which is qualified
thereunder; and no qualification of the Indenture under the TIA is required
in connection with the offer and sale of the Series A Notes contemplated by
the Purchase Agreement or in connection with the Exempt Resales;
(vii) The Series A Notes have been duly authorized by all
requisite corporate action of the Company, and, assuming they have been
executed by the Trustee, when issued and delivered by the Company to the
Initial Purchasers against payment therefor and in accordance with the
terms of the Purchase Agreement will be entitled to the benefits of the
Indenture and will be enforceable against the Company in accordance with
their terms;
(viii) Neither (i) the offer, sale or delivery of the Series A
Notes in the manner contemplated in the Offering Memorandum and the
Purchase Agreement nor (ii) the execution, delivery or performance by the
Company of the Purchase Agreement, the Registration Rights Agreement or the
Indenture, compliance by the Company with the provisions thereof nor
consummation by the Company of the transactions contemplated thereby, will
(a) violate the Certificate of Incorporation or By-Laws of the Company or
Holding, (b) result in a material breach of, or constitute a material
default under, any material contract, instrument, agreement, indenture,
lease or other instrument filed by the Company with the Commission pursuant
to its reporting under the Securities Exchange Act of 1934, as amended
(collectively "Material Contracts"), or (c) other than as described in the
Offering Memorandum with respect to the liens in connection with the Bank
Agreements, the Special Term Loan Agreements and the Holding Notes (as
defined in the Offering Memoran dum), will result in the creation or
imposition of any lien,
29
<PAGE>
charge or encumbrance upon any property or assets of the Company pursuant
to the terms of any Material Contract, nor will any such action result in
any violation in any material respect of any law, regulation, judgment,
injunction, order or decree known to us and applicable to the Company or
any of its properties;
(ix) The Series B Notes have been duly authorized by all
requisite corporate action of the Company;
(x) To the knowledge of such counsel, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental authority is required on the part of the Company (except as
has been obtained, or such as may be required (i) under state securities or
Blue Sky laws governing the purchase and distribution of the Series A
Notes, or (ii) to register the Series B Notes under the Securities Act of
1933, as amended (the "33 Act"), to qualify the Indenture under the TIA and
under state securities or Blue Sky laws in connection with the performance
by the Company of its obligations under the Registration Rights Agreement,
as to which we express no opinion) in connection with the authorization,
issuance and delivery of the Series A Notes to the Initial Purchasers as
contemplated by the Purchase Agreement and the Offering Memorandum or the
execution, delivery or performance by the Company of each of the Purchase
Agreement, the Registration Rights Agreement and the Indenture;
(xi) Those provisions of any contract or other legal documents
that are described in the Offering Memorandum conform in all material
respects to the descriptions thereof contained in the Offering Memoran dum;
(xii) The description of Series A Notes conforms in all material
respects to the descriptions thereof contained in the Offering Memorandum;
(xiii) The information contained in the Offering Memorandum under
the headings "Description of Other Indebtedness" and "U.S. Federal Income
Tax Consequences" to the extent it constitutes matters of law, summaries of
legal matters, documents or proceedings, or legal conclusions, has been
reviewed by such counsel and is correct in all material respects;
30
<PAGE>
(xiv) To the knowledge of such counsel, except as described in
the Offering Memorandum, no holder of any securities of the Company (except
for the holders of the Series A Notes) or any other person has the right to
have any securities of the Company included in any registration statement
contemplated by the Registration Rights Agreement;
(xv) Assuming (i) the accuracy of the representations of the
Company in Sections 6(ab), (ad), (ae) and (af) of the Purchase Agreement,
(ii) the accuracy of the representations and warranties of the Initial
Purchasers in Section 7 of the Purchase Agreement, (iii) the due
performance by the Initial Purchasers of the covenants and agreements set
forth in Section 7 of the Purchase Agreement, (iv) compliance by the
Initial Purchasers with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (vi) the accuracy of the
representations and warranties made in accordance with the Purchase
Agreement and the Offering Memorandum by purchasers to whom the Initial
Purchasers initially resell the Series A Notes and (vi) purchasers to whom
the Initial Purchasers initially resell the Series A Notes receive a copy
of the Offering Memorandum prior to such sale, it is not necessary to
register the Series A Notes under the 33 Act in connection with (A) the
offer and sale of the Series A Notes and the delivery of the certificate
for the Series A Notes on the Closing Date by the Company to the Initial
Purchasers pursuant to the Purchase Agreement and (B) the offer and resale
of the Series A Notes delivered on the Closing Date by the Initial
Purchasers as contemplated by the Purchase Agreement;
(xvi) Neither the consummation of the transactions contemplated
by the Purchase Agreement nor the sale, issuance, execution or delivery of
the Series A Notes, nor the application of the proceeds therefrom (as
described in the Offering Memorandum under the caption "Use of Proceeds"),
will violate regulation G (12 C.F.R. Part 207), T (12 C.F.R. Part 220), U
(12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of Governors of
the Federal reserve System;
(xvii) Neither the Company nor Holdings is or, after giving
effect to the offering and sale of the Series A Notes and the application
of the proceeds as described in the Offering Memorandum, will be an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended;
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<PAGE>
(xviii) The Company is not required to deliver the information
specified in Rule 144(d)(4) in connection with the offering and resale of
the Series A Notes by the Initial Purchasers.
Such counsel shall further state that it has participated in
conferences with officers and other representatives of the Company, the Initial
Purchasers and their counsel and representatives of the independent public
accountants for the Company, at which conferences the contents of the Offering
Memorandum, and related matters were discussed, and, although such counsel does
not pass upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements in the Offering Memorandum, any
amendment thereof or supplement thereto (except as expressly provided in such
opinion), on the basis of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other representatives of the Company),
no facts (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need not
express a belief) have come to the attention of such counsel in the course of
such participation or representation of the Company to lead such counsel to
believe that the Offering Memorandum or any amendment thereof, as of their dates
or as of the date hereof, contains any untrue statement of a material fact or
omits a state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Such counsel shall also confirm that, based solely on a review of our
search of the dockets of the (a) Los Angeles Superior Court, Central District,
(b) Delaware Supreme Courts, (c) United States District Courts of Delaware and
the Central District of California and (d) United States Courts of Appeals in
Delaware and California copies of which are attached hereto as Exhibit A and
inquiries of appropriate officers of the Company to such counsel's knowledge,
there are no actions or proceedings against the Company pending or overtly
threatened in writing, before any court, governmental agency or arbitrator,
which (i) seek to affect the enforceability of the Purchase Agreement, the
Registration Rights Agreement, the Series A Notes or the Indenture or (ii) are
required to be described in the Offering Memorandum which are not described as
required, as if the Offering Memorandum were a prospectus subject to the
requirements of the 33 Act.
The opinion of Katten, Muchin and Zavis described in Section 9(e)
above shall be rendered to you at the request of the Company and the Holding
Company and shall so state therein.
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<PAGE>
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP,
counsel for the Initial Purchasers in form and substance reasonably satisfactory
to the Initial Purchasers.
(g) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof and
of the Closing Date, as the case may be, in form and substance satisfactory to
the Initial Purchasers from Ernst & Young LLP, independent public accountant,
containing the information and statements of the type ordinarily included in
accountant's "comfort let ter" to the Initial Purchasers with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
(h) The Series A Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(i) The Initial Purchasers shall have received a counterpart, conformed
as executed of the Indenture which shall have been entered into by the Company
and the Trustee.
(j) The Company shall have executed the Registration Rights Agreement
and the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
(k) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company, as the case may be, at or prior to
the Closing Date.
(l) The Initial Purchasers shall have received a solvency opinion from
Murray, Devine & Co., Inc. in form and substance reasonably satisfactory to the
Initial Purchasers.
(m) On or prior to the Closing Date, (i) (A) the Refinancing
Transactions (as defined in the Offering Memorandum) shall have been consummated
and (B) the Company shall have entered into the Bank Agreements and the Special
Term Loan Agreements and all conditions to the effectiveness thereof shall have
been satisfied or waived, (ii) such transactions described in the foregoing
clause (i) shall continue to be in full force and effect in accordance with the
terms thereof, and (iii)
33
<PAGE>
the Company shall have provided to each of the Initial Purchasers and counsel to
the Initial Purchasers copies of the definitive Bank Agreements and the Special
Term Loan Agreements and copies of all material closing documents delivered in
connection therewith.
(n) The Initial Purchasers shall have been furnished with a copy
of the opinions delivered on behalf of the Company and the Holding Company, as
applicable, in connection with the Refinancing Transactions, the Bank Agreements
and the Special Term Loan Agreements, which opinions shall expressly state, or
be accompanied by letters expressly stating, that the Initial Purchasers are
entitled to rely on the opinions therein.
10. Effectiveness of Agreement and Termination. This Agreement shall
------------------------------------------
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing Date by
the Initial Purchasers by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, make it impracticable to market the Series A Notes on the terms and in
the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any other such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company, taken as
a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the financial markets in the
United States.
34
<PAGE>
If on the Closing Date any one or more of the Initial Purchasers shall fail
or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule B bears to the aggregate
principal amount of the Series A Notes which all the non-defaulting Initial
Purchasers, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
11. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (i) if to the Company or the Holding
Company, to Earle M. Jorgensen Company, 3050 East Birch Street, Brea, California
92822, Attention: President, with a copy to Katten, Muchin and Zavis at 1999
Avenue of the Stars, Suite 1400, Los Angeles, CA 90007-6042, Attention: Mark
Conley, Esq., (ii) if to either Initial Purchaser, c/o Donaldson, Lufkin &
Jenrette Securities Corpo ration, 277 Park Avenue, New York, New York 10172,
Attention: Patrick
35
<PAGE>
Fallon, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP at 919 Third
Avenue, New York, NY 10022, Attention: Mark C. Smith, Esq. or (iii) in any case
to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, and the Initial Purchasers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchasers, the officers or
directors of an Initial Purchaser, any person controlling an Initial Purchaser,
the Company, the Holding Company, the officers or directors of the Company or
the Holding Company, or any person controlling the Company, (ii) acceptance of
the Series A Notes and payment for them hereunder and (iii) termination of this
Agreement.
If for any reason the Series A Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agree ment pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
Initial Purchasers and their officers, directors and each person, if any, who
controls such Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation their rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Holding
Company, the Initial Purchasers, the Initial Purchasers' directors and officers,
any controlling persons referred to herein, the directors of the Company and the
Holding Company, and their respective successors and assigns, all as and to the
extent provided in this Agreement, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Series A Notes from the Initial
Purchasers merely because of such purchase.
36
<PAGE>
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
37
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Initial Purchasers.
Very truly yours,
Earle M. Jorgensen Company
By: /s/ Charles P. Gallopo
-------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief
Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Scott McLallen
---------------------
Name: Scott McLallen
Title: Vice President
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
----------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............ $ 63,000,000
BT Alex. Brown Incorporated.................. $ 42,000,000
------------
Total......................... $105,000,000
</TABLE>
<PAGE>
EXHIBIT 4.4
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of March 24, 1998
by and among
Earle M. Jorgensen Company
and
Donaldson, Lufkin & Jenrette Securities Corporation
BT Alex. Brown Incorporated
================================================================================
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
---------
into as of March 24, 1998, by and among Earle M. Jorgensen Company, a Delaware
corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities
-------
Corporation and BT Alex. Brown Incorporated (each an "INITIAL PURCHASER" and,
-----------------
collectively, the "INITIAL PURCHASERS"), each of whom has agreed to purchase the
------------------
Company's 9 1/2% Senior Notes due 2005 (the "SERIES A NOTES") pursuant to the
--------------
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March 19,
1998 (the "PURCHASE AGREEMENT"), by and among the Company and the Initial
------------------
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Section 9(j) of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated March 24, 1998,
between the Company and United States Trust Company of New York, as Trustee,
relating to the Series A Notes and the Series B Notes (the "INDENTURE").
---------
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended and the rules and regulations
---
promulgated by the Commissioner thereunder.
AFFILIATE: As defined in Rule 144 of the Act.
---------
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
-------------
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
-----------------------
CLOSING DATE: The date hereof.
------------
COMMISSION: The Securities and Exchange Commission.
----------
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
---------------------
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
----------------------
1
<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended and the
------------
rules and regulations promulgated by the Commissioner thereunder.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
--------------
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose
--------------
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and pursuant to Regulation S under
the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
---------------
HOLDERS: As defined in Section 2 hereof.
-------
PROSPECTUS: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
-------------------
REGISTRATION DEFAULT: As defined in Section 5 hereof.
--------------------
REGISTRATION STATEMENT: Any registration statement of the Company
----------------------
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including pre- and post-
effective amendments) and all exhibits and material incorporated by reference
therein.
REGULATION S: Regulation S promulgated under the Act.
------------
RULE 144: Rule 144 promulgated under the Act.
--------
SERIES B NOTES: The Company's 9 1/2% Series B Senior Notes due 2005 to
--------------
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
----------------------------
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
-----------------
2
<PAGE>
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Series A Note, until the earliest to
------------------------------
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note which is entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Series A Note has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Series B Notes), or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued Series B Notes) and each Series B Note until the date
on which such Series B Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date, but
in no event later than 90 days after the Closing Date (such 90/th/ day being the
"FILING DEADLINE"), (ii) use its reasonable best efforts to cause such Exchange
---------------
Offer Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the Closing Date (such 150/th/ day
being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A)
----------------------
file all pre-effective amendments to such Exchange Offer Registration Statement
as may be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting (i) registration of the Series B Notes to be offered in exchange
for the Series A Notes that are Transfer Restricted Securities and (ii) resales
of Series B Notes by Broker-Dealers that tendered into the Exchange Offer Series
A Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below. The Exchange Offer shall not be subject to any condition,
other than that the Exchange Offer does not violate any applicable law or
interpretation of the staff of the Commission.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days.
3
<PAGE>
The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Calendar Days thereafter (such 30/th/ day being the "CONSUMMATION DEADLINE").
---------------------
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the Shearman & Sterling no-action letter (available
July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in the Exchange
Offer Registration Statement is available for sales of Series B Notes by Broker-
Dealers, the Company agrees to use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and current
as required by and subject to the provisions of Section 6(a) and (c) hereof and
in conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been exchanged, disposed of or distributed pursuant thereto. The
Company shall provide sufficient copies of the latest version of such Prospectus
to such Broker-Dealers, promptly upon request, and in no event later than one
day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the Series
B Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Notes acquired directly from
the Company or any of its Affiliates, then the Company shall:
4
<PAGE>
(x) cause to be filed, on or prior to 90 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
---------------
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
----------------------------
all Transfer Restricted Securities the Holders of which have provided the
information, if any, specifically required pursuant to Section 3(d) hereof, and
(y) shall use its best efforts to cause such Shelf Registration Statement
to become effective on or prior to 150 days after the Filing Deadline for the
Shelf Registration Statement (such 150/th/ day being the "EFFECTIVENESS
-------------
DEADLINE").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the Closing Date, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration
5
<PAGE>
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "REGISTRATION DEFAULT"), then the Company agrees to pay to each Holder of
--------------------
Transfer Restricted Securities affected thereby liquidated damages in an amount
equal to $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange Offer,
that in the reasonable opinion of counsel to the Company raises a substantial
question as to whether the Exchange Offer is permitted by applicable federal
law, the Company hereby agrees to seek a no-action letter or other favorable
decision from the Commission allowing the Company to Consummate an Exchange
Offer for such Transfer Restricted Securities, unless in the written opinion
of outside securities counsel to the
6
<PAGE>
Company such a no-action letter or other favorable decision is unlikely to be
received. The Company hereby agrees to pursue the issuance of such a decision
to the Commission staff level. In connection with the foregoing, the Company
hereby agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange Offer should
be permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation, any
Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Series B Notes to be
issued in the Exchange Offer and (C) it is acquiring the Series B Notes in
its ordinary course of business. Each Holder using the Exchange Offer to
participate in a distribution of the Series B Notes hereby acknowledges and
agrees that, if the resales are of Series B Notes obtained by such Holder in
exchange for Series A Notes acquired directly from the Company or an
Affiliate thereof, it (1) could not under Commission policy as in effect on
the date of this Agreement, rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
---------------------------- -------------
Holdings Corporation (available May 13, 1988), as interpreted in the
--------------------
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
-------------------
no-action letters (including, if applicable, any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration Statement,
if required by the Commission, the Company shall provide a supplemental
letter to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley
---------------------------------- --------------
and Co., Inc. (available June 5, 1991) as interpreted in the Commission's
-------------
letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-
-------------------
action letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be received
in the Exchange Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
7
<PAGE>
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall:
(i) comply with all the provisions of Section 6(c) below;
(ii) use its best efforts to effect such registration to permit the sale
of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof; and
(iii) issue, upon the request of any Holder or purchaser of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company shall
register Series B Notes on the Shelf Registration Statement for this purpose
and issue the Series B Notes to the purchasers of securities subject to the
Shelf Registration Statement in the names as such purchasers shall designate.
(c) General Provisions. In connection with any Registration Statement and
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any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Section 3 or 4 of this Agreement, as applicable. Upon
the occurrence of any event that would cause any such Registration Statement
or the Prospectus contained therein (A) to contain an untrue statement of
material fact or omit to state any material fact necessary to make the
statements therein not misleading or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to comply
fully with Rules 424, 430A and 462, as applicable, under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(iii) advise each Holders promptly and, if requested by such Holders,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective
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amendment has been filed, and, with respect to any applicable Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the state ments therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or sale, if
any, before filing with the Commission, copies of any Registration Statement
or any Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration Statement
or Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which a majority of such Holders shall reasonably object within
five Business Days after the receipt thereof. The objection of such Holders
shall be deemed to be reasonable if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains an
untrue statement of a material fact or omits to state any material fact
necessary to make the statements therein not misleading or fails to comply
with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's representatives available for
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<PAGE>
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as such
Holders reasonably request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all financial
and other records, pertinent corporate documents of the Company and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, attorney or accountant in connection
with such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness; provided,
however, that such persons shall first agree in writing with the Company that
any information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless (i) disclosure
of such information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of the
Shelf Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a result
of a disclosure or failure to safeguard such information by such person, or
(iv) such information becomes available to such person from a source other
than the Company and its subsidiaries and such source is not bound by a
confidentiality agreement; and provided, further, that the foregoing
inspection and information gathering shall be coordinated by one counsel
designated by and on behalf of such other persons;
(viii) if requested by any Holders in connection with such exchange or
sale, promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such Holders may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or sale
without charge, at least one copy of the Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company hereby
consents to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each selling Holder in connection with the
offering and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement as may be
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<PAGE>
reasonably requested by any Holder in connection with any sale or resale
pursuant to any applicable Registration Statement. In such connection, the
Company shall:
(A) upon request of any Holder, furnish (or in the case of paragraphs
(2) and (3), use its best efforts to cause to be furnished) to each
Holder, upon Consummation of the Exchange Offer or upon the effectiveness
of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the Company
by (x) the President or any Vice President and (y) a principal
financial or accounting officer of the Company, confirming, as of the
date thereof, the matters set forth in Sections 6(ab), 9(a) and 9(b) of
the Purchase Agreement and such other similar matters as such Holders
may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for the Company covering matters similar
to those set forth in paragraph (e) of Section 9 of the Purchase
Agreement and such other matter as such Holder may reasonably request,
and in any event including a statement to the effect that such counsel
has participated in conferences with officers and other representatives
of the Company, representatives of the independent public accountants
for the Company and has considered the matters required to be stated
therein and the statements contained therein, although such counsel has
not independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis of
the foregoing (relying as to materiality to the extent such counsel
deems appropriate upon the statements of officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that caused
such counsel to believe that the applicable Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the Exchange
Offer, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue statement of
a material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and
schedules and other financial data included in any Registration
Statement contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 9(g) of the
Purchase Agreement; and
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<PAGE>
(B) deliver such other documents and certificates as may be
reasonably requested by a majority of the selling Holders to evidence
compliance with the matters covered in clause (A) above and with any
customary conditions contained in any agreement entered into by the
Company pursuant to this clause (xi) ;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling Holders
may request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that the Company shall not be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in connection with any exchange, disposal or distribution of
Transfer Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof to consum mate the
disposition of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders with regard to any applicable Registration Statement, as
soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-month
period beginning after the effective date of the Registration Statement (as
such term is defined in paragraph (c) of Rule 158 under the Act). If the
Company files annual reports on Form 10-K with the Commission, the Company
may discharge its obligation under this paragraph by mailing copies of such
reports to the Holders so long as such reports set forth the information
required by Rule 158.
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be
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<PAGE>
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder shall be deemed to agree by
-----------------------
acquisition of a Transfer Restricted Security that, upon receipt of the notice
referred to in Section 6(c)(iii)(C) or any notice from the Company of the
existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in
each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue
-----------------
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Holder has received copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension
-------------------
Notice hereby agrees that it will either (i) destroy any Prospectuses, other
than permanent file copies, then in such Holder's possession which have been
replaced by the Company with more recently dated Prospectuses or (ii) deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of the
Suspension Notice. The time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by a number of days equal to the number of days in the period from
and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
(e) Underwriting Registrations. If any of the Transfer Restricted
--------------------------
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company (which will not be
unreasonably withheld or delayed).
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance by the Company with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and the counsel for the Holders of
Transfer Restricted Securities pursuant to Section 7(b); (v) all application and
filing fees in connection with listing the Series B Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and
comfort letters required by or incident to such performance).
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<PAGE>
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes into in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Skadden, Arps, Slate, Meagher & Flom LLP, unless
another firm shall be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration Statement
is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any Holder
or any prospective purchaser of Series B Notes or registered Series A Notes, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and its respective
directors and officers, and each person. if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
to the same extent as the foregoing indemnity from the Company set forth in
section (a) above, but only with reference to information relating to such
Holder furnished in writing to the Company by such Holder expressly for use in
any Registration Statement. In no event shall any Holder, its directors,
officers or any Person who controls such Holder be liable or responsible for any
amount in excess of the amount by which the total amount received by such Holder
with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages that such
Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified
14
<PAGE>
party shall promptly notify the person against whom such indemnity may be sought
(the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume
-------------------
the defense of such action, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all fees and expenses
of such counsel, as incurred (except that in the case of any action in respect
of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a
Holder shall not be required to assume the defense of such action pursuant to
this Section 8(c), but may employ separate counsel and participate in the
defense thereof, but the fees and expenses of such counsel, except as provided
below, shall be at the expense of the Holder). Any indemnified party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party within a
reasonable time after notice of commencement of such action or proceeding or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by a majority of the Holders, in the case of
the parties indemnified pursuant to Section 8(a) and by the Company, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if (a) the fees and expenses of counsel are at the expense of
the indemnifying party and the indemnified party shall have requested the
indemnifying party for such fees and expenses of counsel as incurred, (b) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of settlement,
(c) the amount of such fees and expenses or the reimbursement obligation is not
being disputed in good faith by the indemnifying party (the "Default"), (d) the
indemnified party provides the indemnifying party twenty days prior written
notice to the indemnifying party of such Default and the indemnified party's
intention to settle the action without the indemnifying party's written consent,
including the details of the proposed settlement and (e) the indemnifying party
has failed to cure such Default. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is a party and
indemnity or contribution may be sought hereunder by the indemnified party,
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability on claims that are or could
have been the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
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<PAGE>
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limita tions set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the
Exchange
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Act, to make all filings required thereby in a timely manner in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144.
Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
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Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
--------------------------
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer and that does not affect directly or indirectly the rights of
other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities subject to such
Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
17
<PAGE>
(ii) if to the Company:
Earle M. Jorgensen Company
3050 East Birch Street
Brea, California 92822
Telecopier No.: 714-577-3765
Attention: Charles P. Gallopo
With a copy to:
Katten, Muchin & Zavis
1999 Avenue of Stars
Suite 1400
Los Angeles, California 90067
Telecopier No.: 310-788-4471
Attention: Mark Conley
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Donaldson, Lufkin &
Jenrette Securities Corporation, on behalf of the Initial Purchasers (in the
form attached hereto as Exhibit A) and shall be addressed to: Attention: Louise
Guarneri (Compliance Department), 277 Park Avenue, New York, New York 10172.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
18
<PAGE>
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
19
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Initial Purchasers.
Very truly yours,
Earle M. Jorgensen Company
By: /s/ Charles P. Gallopo
------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Scott McLallen
------------------------------
Name: Scott McLallen
Title: Vice President
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Earle M. Jorgensen
9 1/2% Senior Notes due 2005
Date: ___, 199__
For your information only (NO ACTION REQUIRED):
Today, __, 1998. we filed [an A/B Exchange Registration Statement/a Shelf
Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
business days of the date hereof.
<PAGE>
EXHIBIT 4.5
[CONFORMED AS EXECUTED]
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
in the amount of
$220,000,000
among
EARLE M. JORGENSEN HOLDING COMPANY, INC.,
EARLE M. JORGENSEN COMPANY,
VARIOUS FINANCIAL INSTITUTIONS
and
BT COMMERCIAL CORPORATION,
as Agent
_____________________________________
Dated as of March 3, 1993
Amended and Restated as of March 24, 1998
_____________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1.
<C> <S> <C>
Definitions....................................................................... 1
1.1 General Definitions..................................................... 1
1.2 Accounting Terms and Determinations..................................... 26
1.3 Other Defined Terms..................................................... 26
ARTICLE 2.
Revolving Loans................................................................... 27
2.1 Commitments............................................................. 27
2.2 Determination of Borrowing Base......................................... 27
2.3 Borrowing Mechanics..................................................... 28
2.4 Settlements Among the Payments Administrator and the Lenders............ 29
2.5 Mandatory Payment; Mandatory Reduction of Commitments................... 32
2.6 Payments and Computations............................................... 32
2.7 Maintenance of Account.................................................. 34
2.8 Statement of Account.................................................... 34
2.9 Taxes................................................................... 34
2.10 Sharing of Payments.................................................... 36
ARTICLE 3.
Letters of Credit................................................................. 36
3.1 Issuance of Letters of Credit........................................... 36
3.2 Terms of Letters of Credit.............................................. 37
3.3 Lenders' Participation.................................................. 37
3.4 Notice of Issuance...................................................... 38
3.5 Payment of Amount Drawn Under Letters of Credit......................... 38
3.6 Payment by Lenders...................................................... 38
3.7 Nature of Issuing Bank's Duties......................................... 39
3.8 Obligations Absolute.................................................... 39
ARTICLE 4.
Interest, Fees and Expenses....................................................... 40
4.1 Interest on Eurodollar Rate Loans....................................... 40
4.2 Interest on Prime Rate Loans............................................ 41
4.3 Notice of Continuation and Notice of Conversion......................... 41
4.4 Interest After Default.................................................. 42
4.5 Reimbursement of Expenses............................................... 43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.6 Unused Line Fee.......................................................................................... 43
4.7 Letter of Credit Fee; Facing Fee......................................................................... 43
4.8 Authorization to Charge Account.......................................................................... 44
4.9 Indemnification in Certain Events........................................................................ 44
4.10 Calculations............................................................................................. 45
4.11 Change of Applicable Lending Office...................................................................... 45
ARTICLE 5.
Conditions Precedent........................................................................................... 46
5.1 Conditions to Initial Loans and Letters of Credit on the Restatement Effective
Date............................................................................................... 46
(a) Execution of Agreement; Notes................................................................. 46
(b) Material Adverse Change....................................................................... 46
(c) Officer's Certificate......................................................................... 46
(d) Opinions of Counsel........................................................................... 46
(e) Corporate Proceedings......................................................................... 46
(f) Issuance of New Senior Notes.................................................................. 47
(g) Amendment to Holding Restructuring Agreement and Holding Notes................................ 47
(h) Special Term Loan Agreement................................................................... 48
(i) Use of Proceeds............................................................................... 48
(j) Existing Credit Agreement..................................................................... 48
(k) Approvals..................................................................................... 49
(l) Litigation.................................................................................... 49
(m) Acknowledgment, Consent and Amendment......................................................... 49
(n) Insurance Policies............................................................................ 49
(o) Existing Indebtedness Agreements; Shareholders' Agreements; Management Agreements; Employment
Agreements; Tax Sharing Agreements............................................................ 49
(p) Balance Sheet................................................................................. 50
(q) Solvency Opinion.............................................................................. 50
(r) Payment of Fees............................................................................... 51
(s) Borrowing Base Certificate.................................................................... 51
(t) Consent Letter................................................................................ 51
(u) Intercreditor Agreement....................................................................... 51
5.2 Conditions to Each Revolving Loan and Letter of Credit............................................... 51
ARTICLE 6.
Representations and Warranties................................................................................. 52
6.1 Corporate Status..................................................................................... 52
6.2 Corporate Power and Authority........................................................................ 53
6.3 No Violation......................................................................................... 53
6.4 Litigation........................................................................................... 53
6.5 Use of Proceeds...................................................................................... 53
6.6 Governmental Approvals............................................................................... 53
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
6.7 Investment Company Act.................................................... 54
6.8 Public Utility Holding Company Act........................................ 54
6.9 True and Complete Disclosure.............................................. 54
6.10 Financial Condition; Financial Statements................................. 55
6.11 Locations of Offices, Records and Inventory............................... 55
6.12 Fictitious Business Names................................................. 55
6.13 Security Interests........................................................ 56
6.14 Tax Returns and Payments.................................................. 56
6.15 Compliance with ERISA..................................................... 56
6.16 Subsidiaries.............................................................. 57
6.17 Patents, etc.............................................................. 57
6.18 Compliance with Statutes, etc............................................. 57
6.19 Properties................................................................ 58
6.20 Labor Relations; Collective Bargaining Agreements......................... 58
6.21 Restrictions on Subsidiaries.............................................. 59
6.22 Conduct of Business....................................................... 59
6.23 Status of Accounts........................................................ 59
6.24 Material Contracts........................................................ 59
ARTICLE 7.
Affirmative Covenants................................................................ 59
7.1 Financial Information..................................................... 60
7.2 Inventory................................................................. 63
7.3 Corporate Franchises...................................................... 63
7.4 Compliance with Statutes, etc............................................. 63
7.5 ERISA..................................................................... 64
7.6 Good Repair............................................................... 65
7.7 Books and Records......................................................... 65
7.8 Collateral Records........................................................ 65
7.9 Security Interests........................................................ 66
7.10 Insurance; Casualty Loss.................................................. 66
7.11 Taxes..................................................................... 67
7.12 End of Fiscal Years; Fiscal Quarters...................................... 67
7.13 Further Assurances........................................................ 67
7.14 Maintenance of Corporate Separateness..................................... 67
7.15 Post-Closing Obligations.................................................. 68
ARTICLE 8.
Negative Covenants................................................................... 68
8.1 Consolidation, Merger, Sale or Purchase of Assets, etc.................... 68
8.2 Liens..................................................................... 69
8.3 Indebtedness.............................................................. 71
8.4 Capital Expenditures...................................................... 73
8.5 Investments............................................................... 73
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
8.6 Dividends, etc................................................................................................... 75
8.7 Transactions with Affiliates..................................................................................... 75
8.8 Changes in Business.............................................................................................. 76
8.9 Working Capital.................................................................................................. 76
8.10 Fixed Charge Coverage Ratio...................................................................................... 76
8.11 Limitation on Voluntary Payments and Modifications of Indebtedness;
Modifications of Governing Documents and Preferred Stock; etc.................................................... 77
8.12 Issuance of Subsidiary Stock..................................................................................... 77
8.13 Limitation on Restrictions Affecting Subsidiaries............................................................... 77
8.14 No Additional Bank Accounts...................................................................................... 78
8.15 No Excess Cash................................................................................................... 78
8.16 Additional Negative Pledges...................................................................................... 78
ARTICLE 9.
Events of Default and Remedies............................................................................................... 79
9.1 Events of Default................................................................................................ 79
(a) Payments...................................................................................................... 79
(b) Representations, etc.......................................................................................... 79
(c) Covenants..................................................................................................... 79
(d) Default Under Other Agreements................................................................................ 79
(e) Bankruptcy, etc............................................................................................... 80
(f) ERISA......................................................................................................... 80
(g) Collateral Documents.......................................................................................... 80
(h) Guaranty...................................................................................................... 81
(i) Judgments..................................................................................................... 81
ARTICLE 10.
The Agent.................................................................................................................... 81
10.1 Appointment...................................................................................................... 81
10.2 Nature of Duties of the Agent.................................................................................... 82
10.3 Lack of Reliance on the Agent.................................................................................... 82
10.4 Certain Rights of the Agent...................................................................................... 83
10.5 Reliance by the Agent............................................................................................ 83
10.6 Indemnification of the Agent..................................................................................... 83
10.7 The Agent in its Individual Capacity............................................................................. 83
10.8 Holders of Notes................................................................................................. 84
10.9 Successor Agent.................................................................................................. 84
10.10 Collateral Matters............................................................................................... 84
10.11 Actions with Respect to Defaults................................................................................. 85
10.12 Delivery of Information.......................................................................................... 86
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 11.
<S> <C>
Miscellaneous................................................................................................................ 86
11.1 Submission to Jurisdiction; Waivers.............................................................................. 86
11.2 Jury Trial....................................................................................................... 87
11.3 Governing Law.................................................................................................... 87
11.4 Delays: Partial Exercise of Remedies............................................................................ 87
11.5 Notices.......................................................................................................... 87
11.6 Benefit of Agreement............................................................................................. 87
11.7 Confidentiality.................................................................................................. 90
11.8 Indemnification.................................................................................................. 91
11.9 Entire Agreement; Successors and Assigns......................................................................... 92
11.10 Amendment or Waiver.............................................................................................. 92
11.11 Nonliability of Agent and Lenders................................................................................ 92
11.12 Independent Nature of Lenders' Rights............................................................................ 92
11.13 Counterparts..................................................................................................... 92
11.14 Effectiveness.................................................................................................... 93
11.15 Severability..................................................................................................... 93
11.16 Headings Descriptive............................................................................................. 93
11.17 Maximum Rate..................................................................................................... 93
11.18 Right of Setoff.................................................................................................. 94
11.19 Amendment and Restatement; Termination of Existing Credit Agreement.............................................. 94
11.20 Additions of New Lenders; Conversion of Original Loans of Continuing Lenders; Termination of Commitments of
Non-Continuing Lenders........................................................................................... 94
ARTICLE 12.
Guaranty..................................................................................................................... 95
12.1 The Guaranty..................................................................................................... 95
12.2 Bankruptcy....................................................................................................... 96
12.3 Nature of Liability.............................................................................................. 96
12.4 Independent Obligation........................................................................................... 96
12.5 Authorization.................................................................................................... 96
12.6 Reliance......................................................................................................... 97
12.7 Subordination.................................................................................................... 97
12.8 Waiver........................................................................................................... 97
12.9 Limitation on Enforcement........................................................................................ 98
</TABLE>
(v)
<PAGE>
<TABLE>
<S> <C>
SCHEDULE I List of Lenders
SCHEDULE II Existing Indebtedness
SCHEDULE III Existing Letters of Credit
SCHEDULE IV Litigation
SCHEDULE V Governmental Approvals
SCHEDULE VI Chief Executive Offices, Records Locations and Inventory and
Equipment Locations
SCHEDULE VII Fictitious Business Names
SCHEDULE IX Subsidiaries
SCHEDULE X Real Properties
SCHEDULE XI Collective Bargaining Agreements
SCHEDULE XII Insurance
SCHEDULE XIII Permitted Property Sales
SCHEDULE XIV Permitted Liens
SCHEDULE XV Investments
SCHEDULE XVI Transactions with Affiliates
SCHEDULE XVII Bank Accounts
EXHIBIT A Form of Assignment and Assumption Agreement
EXHIBIT B Form of Collateral Access Agreement
EXHIBIT C Form of Revolving Note
EXHIBIT D Form of Notice of Borrowing
EXHIBIT E-1 Form of Collection Bank Agreement
EXHIBIT E-2 Form of Concentration Account Agreement
EXHIBIT F Form of Letter of Credit Request
EXHIBIT G-1 Form of Notice of Continuation
EXHIBIT G-2 Form of Notice of Conversion
EXHIBIT H-1 Form of Opinion of Katten, Muchin & Zavis
EXHIBIT H-2 Form of Opinion of White & Case
EXHIBIT I Form of Officer's Certificate
EXHIBIT J Form of Acknowledgment, Consent and Amendment
EXHIBIT K Form of Consent Letter
EXHIBIT L Form of Intercreditor Agreement
EXHIBIT M Form of Compliance Certificate
EXHIBIT N Form of Borrowing Base Certificate
EXHIBIT O Form of Notice of Assignment
EXHIBIT P Form of Confidentiality Agreement
</TABLE>
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 3, 1993,
and amended and restated as of March 24, 1998, among Earle M. Jorgensen Holding
Company, Inc., a Delaware corporation ("Holding"), Earle M. Jorgensen Company, a
Delaware corporation (the "Borrower"), each of those financial institutions
listed from time to time on Schedule I hereto (each a "Lender" and collectively,
the "Lenders"), and BT COMMERCIAL CORPORATION, acting as Agent in the manner and
to the extent described in Article 10 hereof. Capitalized terms used and not
otherwise defined herein have the respective meanings set forth in Section 1.1
hereof.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Holding, the Borrower, each of the Lenders, and BT Commercial
Corporation and Chemical Bank, as Agents, are party to a Credit Agreement, dated
as of March 3, 1993 (as the same has been amended, modified or supplemented
prior to, but not including, the Restatement Effective Date, the "Existing
Credit Agreement");
WHEREAS, the parties hereto wish to amend and restate the Existing
Credit Agreement as herein provided;
WHEREAS, the Borrower wishes to obtain a credit facility to (i)
refinance the Existing Credit Agreement, (ii) prepay certain purchase money
indebtedness, including premium and accrued interest thereon, as set forth in
the Heller Documents, (iii) pay certain fees and expenses incurred in connection
with the Transaction and (iv) provide for the Borrower's general corporate
purposes;
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Lenders are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1.
Definitions
-----------
1.1 General Definitions. As used herein, the following terms shall
-------------------
have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
Accounts shall mean, with respect to any Person, all present and
--------
future accounts, contract rights and other rights to payment for goods sold or
leased (whether or not delivered) or for services rendered which are not
evidenced by an instrument or chattel paper, whether or not they have been
earned by performance, and any letter of credit, guarantee, security interest or
other security issued or granted to secure payment by an account debtor.
<PAGE>
Acknowledgment, Consent and Amendment shall have the meaning given to
-------------------------------------
such term in Section 5.1(m) hereof.
Adjusted Certificate of Deposit Rate shall mean on any day, the sum
------------------------------------
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by Bankers Trust Company on the basis of quotations for
such certificates received by it from three certificate of deposit dealers in
New York of recognized standing, by (y) a percentage equal to 100% minus the
stated maximum rate of all reserve requirements as specified in Regulation D
applicable on such day to a three-month certificate of deposit in excess of
$100,000 issued by a member bank of the Federal Reserve System with deposits in
excess of five billion dollars (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus the then daily net
annual assessment rate as estimated by Bankers Trust Company for determining the
current annual assessment payable by Bankers Trust Company to the Federal
Deposit Insurance Corporation for insuring three month certificates of deposit.
Adjusted Eurodollar Rate shall mean, with respect to each Interest
------------------------
Period for any Eurodollar Rate Loan, the rate obtained by dividing (i) the
Eurodollar Rate for such Interest Period by (ii) a percentage equal to 100%
minus the stated maximum rate (stated as a decimal) of all reserves, if any,
required by the Board of Governors of the Federal Reserve System to be
maintained by a member bank of the Federal Reserve System in New York City with
deposits in excess of five billion dollars against "Eurocurrency liabilities" as
specified in Regulation D (or against any other category of liabilities which
includes deposits by reference to which the interest rate on Eurodollar Rate
Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any Lender to United
States residents).
Affiliate shall mean, with respect to any Person, any entity which
---------
directly or indirectly controls, is controlled by, or is under common control
with, such Person or any Subsidiary of such Person or any Person who is a
director or officer of such Person or any Subsidiary of such Person. For
purposes of this definition, "control" shall mean the possession, directly or
indirectly, of the power to (i) vote ten percent (10%) or more of the securities
having ordinary voting power for the election of directors of such Person or
(ii) direct or cause the direction of management and policies of a business,
whether through the ownership of voting securities, by contract or otherwise and
either alone or in conjunction with others or any group. Neither any Lender nor
any person controlling any Lender nor any of their respective Subsidiaries shall
be treated as an Affiliate of the Credit Parties or their respective
Subsidiaries.
Agent shall mean BTCC in its capacity as Agent for the Lenders
-----
hereunder, and shall include any successor thereto as Agent, appointed as such
pursuant to Section 10.9.
2
<PAGE>
Amendment to Holding Restructuring Agreement shall mean the Amendment
--------------------------------------------
to Holding Restructuring Agreement entered into by and between Holding and KIA
IV on the Restatement Effective Date.
Applicable Lending Office shall mean, with respect to each Lender,
-------------------------
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Loan,
and such Lender's Domestic Lending Office in the case of a Base Rate Loan.
Applicable Margin shall mean a percentage per annum equal to (i) in
-----------------
the case of Eurodollar Rate Loans, the Eurodollar Rate plus 1.75% and (ii) in
the case of Base Rate Loans, the Base Rate plus 0.50%
Assignment and Assumption Agreement shall mean an assignment and
-----------------------------------
assumption agreement entered into by an assigning Lender and an assignee Lender,
and accepted by the Syndication Agent, in accordance with Section 11.6,
substantially in the form of Exhibit A.
Auditors shall mean a nationally-recognized firm of independent public
--------
accountants selected by the Borrower and reasonably satisfactory to the Agent.
For purposes of this Credit Agreement, the Borrower's current firm of
independent public accountants, Ernst & Young LLP, shall be deemed to be
satisfactory to the Agent.
Available Amount shall mean, as of any date of calculation thereof, an
----------------
amount equal to zero, plus or minus the sum of all Excess Cash Flow Amounts for
-------------
all Excess Cash Flow Periods then ended, minus the amount of all Dividends
previously made pursuant to Sections 8.6(b)(iv) (A), (B) and (C).
Base Rate shall mean, at any time, the highest of (i) the Prime
---------
Lending Rate, (ii) 1/2 of 1% in excess of the overnight Federal Funds Rate then
in effect and (iii) 1/2 of 1% in excess of the Adjusted Certificate of Deposit
Rate then in effect. If for any reason Bankers Trust Company shall have
determined (which determination shall be final absent manifest error) that it is
unable to ascertain the Adjusted Certificate of Deposit Rate, the Base Rate
shall be determined without regard to clause (iii), until the circumstance
giving rise to such inability shall no longer exist.
Base Rate Loan shall mean each Revolving Loan bearing interest as
--------------
provided in Section 4.2.
Borrower shall have the meaning provided in the preamble to this
--------
Credit Agreement.
Borrowing shall mean an incurrence of Revolving Loans of the same Type
---------
from all the Lenders on the same day (or resulting from Conversion or
Continuance on the same date), having, in the case of Eurodollar Rate Loans, the
same Interest Period.
Borrowing Base shall have the meaning given to such term in Section
--------------
2.2.
3
<PAGE>
Borrowing Base Certificate shall have the meaning given to such term
--------------------------
in Section 7.1(e).
BT Account shall have the meaning given to such term in Section
----------
2.6(c).
BT Delaware shall have the meaning provided in Section 2.3(b).
-----------
BTCC shall mean BT Commercial Corporation, in its individual capacity.
----
Business Day shall mean any day other than a Saturday, Sunday or legal
------------
holiday on which commercial banks in New York, New York are authorized to close.
When used in connection with Eurodollar Rate Loans, this definition will also
exclude any day on which commercial banks are not open for dealing in U.S.
Dollar deposits in the New York interbank Eurodollar market.
Capital Expenditures shall mean, for any period, the aggregate of all
--------------------
expenditures (whether paid in cash or accrued as liabilities (including
Capitalized Lease Obligations)) by the Borrower and its Subsidiaries during that
period that, in conformity with GAAP, are, or are required to be, included in
the property, plant or equipment reflected in the balance sheet of Borrower and
its Subsidiaries; provided that Capital Expenditures shall in any event include
--------
the purchase price paid in connection with the acquisition of any Person
(including through the purchase of all of the capital stock or other ownership
interests of such Person or through merger or consolidation) to the extent
allocable to property, plant and equipment.
Capital Lease, as applied to any Person, shall mean any lease of any
-------------
property (whether real, personal or mixed) by that Person or any of its
Subsidiaries as lessee which, in conformity with GAAP, is accounted for as a
capital lease on the consolidated balance sheet of that Person.
Capitalized Lease Obligations shall mean the obligations under Capital
-----------------------------
Leases of Borrower and its Subsidiaries in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.
Cash Equivalents shall mean (i) securities issued or directly and
----------------
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
--------
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers acceptances of (x) any Lender that
is a domestic commercial bank of recognized standing having capital and surplus
in excess of $500,000,000 or (y) any bank whose short-term commercial paper
rating from Standard & Poor's Corporation ("S&P") is at least A-1 or the
equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at
least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each
case with maturities of not more than one year from the date of acquisition,
(iii) commercial paper issued by any Lender or Approved Bank or by the parent
company of any Lender or Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by
4
<PAGE>
S&P or at least P-1 or the equivalent thereof by Moody's (any such company, an
"Approved Company"), or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within one
year after the date of acquisition, (iv) any fund or funds investing solely in
investments of the type described in clauses (i) through (iii) above, and (v)
repurchase obligations with a term of not more than seven days for investments
of the type described in clause (i) above and entered into with any Lender or
Approved Bank.
Casualty Loss shall have the meaning given to such term in Section
-------------
7.10.
CERCLA shall mean the Comprehensive Environmental Response,
------
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et seq.
-- ----
Change of Control shall mean (x) a "Change of Control" (or any similar
-----------------
term) under and as defined in the New Senior Note Documents or Special Term Loan
Documents, (y) the direct or indirect acquisition by any Person, entity or
"group" (as such term is defined in Section 13(d)(3) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act")) of beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Exchange Act) of 30% or more
of the outstanding shares of Voting Stock of the Borrower or Holding, other than
any such Person, entity or group which is the direct transferee of any of the
voting stock of Holding from Kelso & Company and/or its Affiliates, officers and
employees and/or the ESOP so long as Kelso & Company and its Affiliates,
officers and employees and/or the ESOP which owned the voting stock of Holding
on the Restatement Effective Date continue to beneficially own a majority of the
voting stock of Holding or (z) Holding shall cease to own a majority of the
voting stock of the Borrower.
Code shall mean the Internal Revenue Code of 1986, as amended from
----
time to time, and the regulations promulgated and rulings issued thereunder.
Collateral shall mean all of the Collateral as defined in each of the
----------
Collateral Documents.
Collateral Access Agreements shall mean any landlord waivers,
----------------------------
mortgagee waivers, bailee letters or any similar acknowledgment agreements of
any warehouseman or processor in possession of Inventory, in each case as
executed in connection with the Existing Credit Agreement, or executed pursuant
to the requirements in clause (b) of the definition of Eligible Inventory and
Section 7.7, and otherwise substantially in the form of Exhibit B with such
changes thereto as are reasonably acceptable to the Agent.
Collateral Agent shall mean BTCC acting as collateral agent pursuant
----------------
to the Collateral Documents.
Collateral Documents shall mean all contracts, instruments and other
--------------------
documents now or hereafter executed and delivered in connection with the
Existing Credit Agreement or this Credit Agreement, pursuant to which liens and
security interests are granted to the Collateral
5
<PAGE>
Agent in the Collateral for the benefit of the Lenders, including, without
limitation, the Security Agreement.
Collection Account shall mean the account established at a Collection
------------------
Bank pursuant to the Collection Bank Agreement, into which funds on deposit in
the relevant Sub-Collection Account shall be transferred pursuant to Section
2.6.
Collection Agreements shall have the meaning given to such term in
---------------------
Section 2.6(b)(ii).
Collection Bank shall have the meaning given to such term in Section
---------------
2.6(b)(ii).
Collective Bargaining Agreements shall mean any collective bargaining
--------------------------------
agreements or any other similar agreement or arrangements covering the employees
of the Borrower.
Commitment of any Lender shall mean the amount set forth opposite such
----------
Lender's name on Schedule I, as such Schedule may be amended from time to time,
under the heading "Commitment," as such amount may be reduced from time to time
pursuant to the terms of this Credit Agreement.
Computation Date shall mean the last Business Day of each month and
----------------
any other date specified in writing by an Issuing Bank with respect to a Letter
of Credit, or any replacement or renewal thereof.
Concentration Account shall have the meaning given to such term in
---------------------
Section 2.6(c).
Concentration Account Agreement shall have the meaning given to such
-------------------------------
term in Section 2.6(c).
Consolidated Net Income shall mean for any period the consolidated net
-----------------------
income of the Borrower and its Subsidiaries for such period as determined in
accordance with GAAP applied on a basis consistent with prior practices.
Contingent Obligations shall mean as to any Person any obligation of
----------------------
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
-------- -------
the term Contingent Obligations shall not include (x) endorsements of
instruments for deposit or collection in the ordinary course of business or (y)
6
<PAGE>
guarantees made by a Person of the obligations of a Subsidiary or Affiliate of
such Person which do not constitute Indebtedness of such Subsidiary or Affiliate
and are incurred in the ordinary course of business of such Subsidiary or
Affiliate. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
Continuation and Continuance each shall refer to a continuation of
----------------------------
Revolving Loans pursuant to Section 4.3, provided that each such term shall not
--------
constitute the making of a Revolving Loan for purposes of this Credit Agreement.
Continuing Lender shall mean each Existing Lender with a Commitment
-----------------
under this Credit Agreement (immediately upon giving effect to this Credit
Agreement on the Restatement Effective Date).
Convert, Conversion and Converted each shall refer to a conversion of
---------------------------------
Revolving Loans of one Type into Revolving Loans of another Type pursuant to
Section 4.3, provided that each such term shall not constitute the making of a
--------
Revolving Loan for purposes of this Credit Agreement.
Credit Agreement shall mean this Amended and Restated Credit
----------------
Agreement, as the same may be amended, modified, restated, amended and restated,
supplemented, extended or renewed from time to time.
Credit Documents shall mean, collectively, this Credit Agreement and
----------------
once executed and delivered pursuant to the terms of this Credit Agreement (or
previously executed in connection with the Existing Credit Agreement), each
Revolving Note, each Letter of Credit, each Notice of Borrowing, each Notice of
Conversion, each of the Collateral Documents, the Intercreditor Agreement and
all other documents, agreements, instruments and certificates now or hereafter
executed and delivered in connection herewith or therewith, as the same may be
modified, amended, extended, restated or supplemented from time to time, except
as released prior to or in accordance with the execution of this Credit
Agreement.
Credit Event shall mean the making of a Revolving Loan or the issuance
------------
of a Letter of Credit.
Credit Parties shall mean, collectively, Holding and the Borrower.
--------------
Current Assets shall mean all assets (including cash and Cash
--------------
Equivalents) designated as "current" on a consolidated balance sheet of the
Borrower prepared in accordance with GAAP.
Current Liabilities shall (i) mean all liabilities designated as
-------------------
"current" on a consolidated balance sheet of the Borrower prepared in accordance
with GAAP and (ii) include, without limitation, and solely for the purpose of
calculating financial covenants contained in this Credit Agreement, the balance
of Revolving Loans outstanding.
7
<PAGE>
Default shall mean an event, condition or default which with the
-------
giving of notice, the passage of time or both would be an Event of Default.
Defaulting Lender shall have the meaning given to such term in Section
-----------------
2.4(c).
Disbursement Account shall have the meaning given to such term in
--------------------
Section 2.3(b).
Dividend shall have the meaning given to such term in Section 8.6.
--------
Dollars and the sign $ shall each mean freely transferable lawful
------- -
money of the United States.
Domestic Lending Office shall mean, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" opposite its
name on Schedule I, as such annex may be amended from time to time.
EBITDA shall mean, in any fiscal period, the Consolidated Net Income
------
(other than extraordinary items of the Borrower and its Subsidiaries for such
period but including any Inventory adjustments), (i) plus the amount of all
Interest Expense, income tax expense, depreciation and amortization, including
amortization of any goodwill or other intangibles for such period, (ii) less
gains and plus losses attributable to any fixed asset sales, (iii) plus or minus
(as the case may be) any other non-cash charges (other than any reserve
established by the Borrower against Accounts and/or Inventory) which have been
subtracted or added, as the case may be, in calculating Consolidated Net Income
for such period, all determined in accordance with GAAP, (iv) plus or minus (as
the case may be) any decrease or increase in the amount of deferred taxes (to
the extent the amount of such increase or decrease is not duplicative of any
other taxes already included in this calculation) as shown on the balance sheet
as of the end of such period since the first day of the same period, (v) plus
ESOP contributions during such period which are paid in cash and subsequently
invested in the capital stock of, or otherwise contributed to, the Borrower,
(vi) plus any LIFO expense and (vii) minus any LIFO income.
Eligible Accounts Receivable shall mean Accounts of the Borrower
----------------------------
payable in Dollars and deemed by the Agent in its Permitted Discretion to be
eligible for inclusion in the calculation of the Borrowing Base. In determining
the amount to be so included, the face amount of such Accounts shall be reduced
by the amount of all returns, discounts, claims, credits, charges, or other
allowances and by the aggregate amount of all reserves, limits and deductions
provided for in this definition and elsewhere in this Credit Agreement. Unless
otherwise approved in writing by the Agent, no Account shall be deemed to be an
Eligible Account Receivable if:
(a) it arises out of a sale made by the Borrower to an Affiliate; or
(b) the Account is unpaid more than 90 days after the original
payment invoice date, with respect to Accounts the invoice for which
provides that payment is due in 30 days and 120 days from invoice date with
respect to Accounts the invoice for which is due in 60 days after the
original payment invoice date or less from the date of such invoice; or
8
<PAGE>
(c) it is from the same account debtor (or any Subsidiary thereof)
and fifty percent (50%) or more, in face amount, of all Accounts from such
account debtor (or any Subsidiary thereof) are ineligible pursuant to (b)
above; or
(d) the Account, when aggregated with all other Accounts of such
account debtor, exceeds five percent (5%) in face value of all Accounts of
the Borrower then outstanding, to the extent of such excess; provided,
--------
however, that Accounts supported or secured by an irrevocable letter of
-------
credit in form and substance satisfactory to the Agent, issued by a
financial institution satisfactory to the Agent, and duly pledged to the
Collateral Agent (together with sufficient documentation to permit direct
draws by the Collateral Agent) shall be excluded for purposes of such
calculation; or
(e) (i) the account debtor is also a creditor of the Borrower, (ii)
the account debtor has disputed its liability on, or the account debtor has
made any claim with respect to, such Account or any other Account due from
such account debtor to the Borrower, which has not been resolved or (iii)
the Account otherwise is or may become subject to any right of setoff by
the account debtor; provided that any Account deemed ineligible pursuant to
--------
this clause (e) shall only be ineligible to the extent of the amount owed
by the Borrower to the account debtor, the amount of such dispute or claim,
or the amount of such setoff, as applicable; or
(f) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or if a decree or order for
relief has been entered by a court having jurisdiction over the account
debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or if any other petition or other
application for relief under the federal bankruptcy laws has been filed by
or against the account debtor, or if the account debtor has filed a
certificate of dissolution under applicable state law or shall be
liquidated, dissolved or wound up, or shall authorize or commence any
action or proceeding for dissolution, winding-up or liquidation, or if the
account debtor has failed, suspended business, declared itself to be
insolvent, is generally not paying its debts as they become due or has
consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or
affairs, unless the payment of Accounts from such account debtor is secured
in a manner satisfactory to the Agent or, if the Account from such account
debtor arises subsequent to a decree or order for relief with respect to
such account debtor under the federal bankruptcy laws, as now or hereafter
in effect, the Agent shall have determined that the timely payment and
collection of such Account will not be impaired; or
(g) the sale is to an account debtor outside of the United States,
unless the account debtor thereon has supplied the Borrower with an
irrevocable letter of credit in form and substance satisfactory to the
Agent, issued by a financial institution satisfactory to the Agent and
which has been duly pledged to the Collateral Agent (together with
sufficient documentation to permit direct draws by the Collateral Agent);
or
9
<PAGE>
(h) the sale to the account debtor is on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval or consignment basis or made
pursuant to any other written agreement providing for repurchase or return
(other than pursuant to ordinary course of business warranties); or
(i) the Agent determines in its Permitted Discretion that such
Account may not be paid by reason of the account debtor's financial
inability to pay; or
(j) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower duly
assigns its rights to payment of such Account to the Collateral Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. (S)
3727 et seq.); or
-- ----
(k) title to the goods giving rise to such Account has not been
transferred to the account debtor or the services giving rise to such
Account have not been performed by the Borrower and accepted by the account
debtor or the Account otherwise does not represent a final sale; or
(l) the Account does not comply with all applicable legal
requirements, including, where applicable, the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System, in each case as amended;
or
(m) the Collateral Agent does not have a valid and perfected first
priority security interest in or Lien (subject to Permitted Liens) on such
Account or the Account does not otherwise conform to the representations
and warranties contained in this Credit Agreement or the other Credit
Documents, except that the value of any Account shall be reduced by the
amount of any obligations secured by Permitted Liens which are prior to the
Lien in favor of the Collateral Agent.
Eligible Inventory shall mean Inventory of the Borrower deemed by the
------------------
Agent in its Permitted Discretion to be eligible for inclusion in the
calculation of the Borrowing Base. In determining the amount to be so included,
the amount of such Inventory shall be valued on a FIFO basis at the lower of
cost or market as adjusted from the Borrower's month end balance sheet, less any
----
goods returned or rejected by the Borrower's customers and goods in transit
(other than goods to which the Borrower has title), less any reserves otherwise
----
required by the Agent pursuant to Section 2.2(b), and less any Inventory that
----
the Agent determines to be ineligible pursuant to Section 2.2(b). Unless
otherwise approved in writing by the Agent, no Inventory shall be deemed
Eligible Inventory if:
(a) the Inventory is not owned solely by the Borrower and with
respect to which the Borrower does not have good, valid and marketable
title; or
(b) the Inventory is not stored on property that is either (i) owned
or leased by the Borrower or (ii) owned or leased by a warehouseman that
has contracted with the Borrower to store Inventory on such warehouseman's
property, provided that (x) with
--------
10
<PAGE>
respect to Inventory stored on property leased by the Borrower, such
Inventory shall be deemed Eligible Inventory so long as, by the date which
-- ---- --
is 60 days after the Restatement Effective Date, the Borrower shall have
delivered in favor of the Collateral Agent a Collateral Access Agreement
executed by the lessor of such property, and, with respect to Inventory
stored on property owned or leased by a warehouseman, the Borrower shall
have delivered to the Collateral Agent a Collateral Access Agreement
executed by such warehouseman and (y) with respect to Inventory of the
Borrower stored on property owned or leased by a customer of the Borrower,
such Inventory shall be deemed Eligible Inventory so long as (1) such
-- ---- --
Inventory is segregated and identifiable from such customer's other
inventory, (2) such Inventory and other Inventory stored on property owned
or leased by other customers of the Borrower do not exceed $5,000,000 in
the aggregate and (3) the Borrower shall have delivered in favor of the
Collateral Agent a collateral access agreement, in form and substance
satisfactory to the Agent, executed by such customer; or
(c) the Inventory is not subject to a perfected first priority Lien
(subject to Permitted Liens) in favor of the Collateral Agent except, (i)
with respect to Eligible Inventory stored at sites described in clause (b)
above, for Liens for normal and customary warehouseman charges and (ii) the
value of any Inventory shall be reduced by the amount of any obligations
secured by Permitted Liens which are prior to the Lien in favor of the
Collateral Agent; or
(d) the Inventory is not located in the United States; or
(e) the Inventory is obsolete or the Inventory does not otherwise
conform to the representations and warranties contained in this Credit
Agreement or the other Credit Documents; or
(f) the Inventory to the extent to which the FIFO value for each
Inventory product item is in excess of the previous rolling 12 month cost
of goods sold for such item (to the extent of such excess); or
(g) such Inventory is part of one product line as disclosed on the
schedules attached to the Borrowing Base Certificate and the amount of such
Inventory exceeds 20% of the FIFO stock Inventory at such time (in the
amount of such excess).
Eligible Transferee shall mean and include a commercial bank,
-------------------
financial institution or other "accredited investor" (as defined in SEC
Regulation D).
Employment Agreements shall have the meaning provided in Section
---------------------
5.1(o).
Environmental Claims shall mean any and all administrative, regulatory
--------------------
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any of its Subsidiaries solely in the ordinary course of such
Person's business or as required in connection with a financing transaction and
not in response to any third party action or request of any kind) or
11
<PAGE>
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials arising from alleged injury or threat of injury to health,
safety or the environment.
Environmental Law shall mean any applicable Federal, state, foreign or
-----------------
local statute, law, rule, regulation, ordinance, code, guide, policy and rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, CERCLA;
RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S) 1251 et
--
seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean
- ---- -- ----
Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)
-- ----
300f et seq.; the Emergency Planning and Community Right-to-Know Act, 49 U.S.C.
-- ----
(S) 1801 et seq.; the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et
-- ---- --
seq.; the Oil Pollution Act of 1990, 33 U.S.C (S) 2701 et seq. and any
- ---- -- ----
applicable state and local or foreign counterparts or equivalents.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Credit Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
ERISA Affiliate shall mean each person (as defined in Section 3(9) of
---------------
ERISA) which together with Holding, the Borrower or any Subsidiary of Holding or
the Borrower would be deemed to be a "single employer" within the meaning of
Section 414(b) or (c) of the Code, and for the purpose of any specific provision
of this Credit Agreement which expressly refers to Section 302 of ERISA or
Section 412 of the Code, within the meaning of Section 414(b), (c), (m) or (o)
of the Code.
ESOP shall mean the Earle M. Jorgensen Employee Stock Ownership Plan,
----
as in effect on the Restatement Effective Date.
Eurodollar Lending Office shall mean, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite its
name on Schedule I, as such annex may be amended from time to time (or, if no
such office is specified, its Domestic Lending Office), or such other office or
Affiliate of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
Eurodollar Rate shall mean, with respect to an Interest Period for
---------------
each Eurodollar Rate Loan comprising part of the same Borrowing, an interest
rate per annum equal to the average (rounded upward to the nearest whole
multiple of one-sixteenth (1/16) of one percent (1%) per annum, if such rate is
not such a multiple) of the offered quotation, if any, to first class
12
<PAGE>
banks in the New York interbank Eurodollar market by Bankers Trust Company for
U.S. dollar deposits of amounts in immediately available funds comparable to the
principal amount of the Eurodollar Rate Loan of BTCC for which the Eurodollar
Rate is being determined with maturities comparable to the Interest Period for
which such Eurodollar Rate will apply as of approximately 11:00 A.M. New York
City time two (2) Business Days prior to the commencement of such Interest
Period.
Eurodollar Rate Loan shall mean a Revolving Loan bearing interest as
--------------------
provided in Section 4.1.
Event of Default shall have the meaning provided for in Section 9.1 of
----------------
this Credit Agreement.
Excess Cash Flow shall mean, for any period (calculated based on
----------------
annual audited numbers for the first Excess Cash Flow Period), the remainder of
(i) the sum of (a) EBITDA for such period and (b) the decrease, if any, in
Working Capital from the first day to the last day of such period, minus (ii)
-----
the sum of (a) the amount of Capital Expenditures (to the extent not financed
with Indebtedness (other than the amount financed by Revolving Loans) or made
with the proceeds from asset sales, insurance proceeds or condemnation awards)
made by the Borrower during such period, (b) the aggregate principal amount of
permanent principal payments of Indebtedness for borrowed money of the Borrower
(provided that repayments of Revolving Loans shall be deducted in determining
--------
Excess Cash Flow only if such repayments were accompanied by a reduction in the
Total Commitments) during such period and (c) the increase, if any, in Working
Capital from the first day to the last day of such period.
Excess Cash Flow Amount shall mean, for any Excess Cash Flow Period,
-----------------------
the amount, which may be a positive or negative number, of Excess Cash Flow
calculated for such period.
Excess Cash Flow Period shall mean (i) the period commencing on April
-----------------------
1, 1998 and ending on March 31, 1999 and (ii) each subsequent fiscal year of the
Borrower.
Exchange Notes shall mean exchange notes of the Borrower issued,
--------------
pursuant to a registration statement to be filed by the Borrower with the
Securities and Exchange Commission, to the holders of the New Senior Notes (in
exchange for such New Senior Notes), which such exchange notes shall have terms
substantially identical in all material respects to the New Senior Notes.
Existing Credit Agreement shall have the meaning given to such term in
-------------------------
the first WHEREAS clause hereof.
Existing Indebtedness shall mean all Indebtedness of the Borrower and
---------------------
its Subsidiaries outstanding prior to, and to remain outstanding on and after,
the Restatement Effective Date, and set forth on Schedule II, without giving
effect to extensions or renewals thereto, except as expressly provided therein.
13
<PAGE>
Existing Indebtedness Agreements shall have the meaning given to such
--------------------------------
term in Section 5.1(o) hereof.
Existing Lender shall mean a Lender with a Commitment pursuant to the
---------------
Existing Credit Agreement.
Existing Letter of Credit shall have the meaning given to such term in
-------------------------
Section 3.1.
Existing Loans shall have the meaning given to such term in Section
--------------
5.1(j) hereof.
Expenses shall mean all present and future expenses incurred by or on
--------
behalf of the Agent in connection with this Credit Agreement, any other Credit
Document or otherwise in its capacity as the Agent under this Credit Agreement,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to, the cost of record searches, the reasonable fees and expenses
of attorneys and paralegals, all costs and expenses incurred by the Agent in
opening bank accounts, depositing checks, receiving and transferring funds, and
any charges imposed on the Agent due to insufficient funds of deposited checks
and the standard fee of the Agent relating thereto, collateral examination fees
and expenses, reasonable fees and expenses of accountants, appraisers or other
consultants, experts or advisors employed or retained by the Agent, out of
pocket syndication fees and expenses, fees and taxes relative to the filing of
financing statements, costs of preparing and recording any other Collateral
Documents, all expenses, costs and fees set forth in Article 4 of this Credit
Agreement, all other fees and expenses required to be paid pursuant to the Fee
Letter and all fees and expenses incurred in connection with releasing
Collateral and the amendment or termination of any of the Credit Documents.
Expiration Date shall mean March 24, 2003.
---------------
Facing Fee shall have the meaning given to such term in Section
----------
4.7(c).
Federal Funds Rate shall mean, for any period, a fluctuating interest
------------------
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Payments Administrator from three Federal Funds
brokers of recognized standing selected by it.
Fees shall mean, collectively, the Unused Line Fee, the Letter of
----
Credit Fees and the other fees provided for in Section 4.8 hereof.
Financial Statements shall mean the consolidated and consolidating
--------------------
balance sheets and statements of operations and consolidated statements of cash
flows and statements of changes in shareholder's equity of the Borrower for the
period specified prepared in accordance with GAAP and consistent with prior
practices.
14
<PAGE>
Fixed Charge Coverage Ratio for any period shall mean the ratio of (x)
---------------------------
EBITDA less the sum of (i) Capital Expenditures for such period and (ii) the
aggregate principal amount of all scheduled payments of Indebtedness subject to
a Lien permitted by Section 8.2(o) for such period to (y) Fixed Charges for such
period.
Fixed Charges for any period shall mean the sum of (i) Interest
-------------
Expense and (ii) for purposes of calculating the Fixed Charge Coverage Ratio as
used in Section 8.6(b)(iv)(C), Dividends paid from Available Amounts calculated
for such period (other than Dividends the proceeds of which are promptly
contributed to the Borrower) plus the amount of the Dividend proposed to be paid
pursuant to Section 8.6(b)(iv)(C) at such time of the calculation for such
purpose.
GAAP shall mean generally accepted accounting principles in the United
----
States as in effect from time to time subject to Section 1.2.
Governing Documents shall mean, as to any Person, the certificate or
-------------------
articles of incorporation and by-laws or other organizational or governing
documents of such Person.
Governmental Authority shall mean any nation or government, any state
----------------------
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Guarantor shall mean Holding in its capacity as the guarantor under
---------
Article 12.
Guaranty shall mean the guaranty provided by Holding pursuant to
--------
Article 12 of this Credit Agreement.
Hazardous Materials shall mean (a) any petroleum or petroleum
-------------------
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contained dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
Heller Documents means (a) the Loan and Security Agreement dated as of
----------------
March 27, 1995, by and between the Borrower and Heller Financial, Inc., (b) the
Promissory Note dated March 30, 1995, made by the Borrower and payable to the
order of Heller Financial, Inc., in the original principal amount of $2,875,974,
(c) the Deed of Trust and Security Agreement dated as of March 28, 1995, by and
between the Borrower as grantor, Scott A. Stein, as trustee, and Heller
Financial, Inc., as the lender and (d) the Guaranty dated March 28, 1995, made
by the Parent.
Highest Lawful Rate shall mean, at any given time during which any
-------------------
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate, if any, that at any time or
15
<PAGE>
from time to time may be contracted for, taken, reserved, charged or received on
the Obligations owing under this Credit Agreement, under the laws of the State
of New York (or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Credit Agreement and the
other Credit Documents), or under applicable federal laws which may presently or
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than under New York (or such other jurisdiction's) law, in any case after
taking into account, to the extent permitted by applicable law, any and all
relevant payments or charges under this Credit Agreement and any other Credit
Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
Holding shall have the meaning provided in the preamble to this Credit
-------
Agreement.
Holding Management Agreement shall mean the Management Agreement
----------------------------
between Holding and the Borrower as in effect on the Restatement Effective Date.
Holding Note Documents shall mean and include each of the documents
----------------------
and other agreements entered into by Holding (including, without limitation, the
Holding Restructuring Agreement and the Holding Note Pledge Agreement) relating
to the issuance by Holding of the Holding Notes, as in effect on the Restatement
Effective Date and as the same may be modified, supplemented or amended from
time to time to the extent permitted pursuant to the terms hereof and thereof.
Holding Note Pledge Agreement shall mean the Pledge Agreement entered
-----------------------------
into by Holding and KIA IV in the form attached as Exhibit D to the Holding
Restructuring Agreement, as in effect on the Original Effective Date and as same
may be modified, supplemented or amended from time to time to the extent
permitted pursuant to the terms hereof and thereof.
Holding Notes shall mean the Series A Variable Rate Senior Notes due
-------------
2006, including any Series A Variable Rate Senior Notes issued in lieu of
interest thereon, issued by Holding under the Holding Restructuring Agreement,
and amended by the Amendment to Holding Restructuring Agreement as in effect on
the Restatement Effective Date and as the same may be modified, supplemented or
amended from time to time to the extent permitted pursuant to the terms hereof
and thereof.
Holding PIK Notes shall mean senior notes of Holding, issued, pursuant
-----------------
to the Holding Restructuring Agreement, to the holders of Holding Notes in lieu
of payments of interest on such Holding Notes to the extent that Holding has
insufficient excess cash flow to pay such interest, which such senior notes
shall have terms substantially identical in all material respects to the Holding
Notes.
Holding Restructuring Agreement shall mean the Restructuring Agreement
-------------------------------
entered into by and between Holding and KIA IV, as in effect on the Restatement
Effective Date (after giving effect to the Amendment to Holding Restructuring
Agreement) and as the same may be modified, supplemented or amended from time to
time to the extent permitted pursuant to the terms hereof and thereof.
16
<PAGE>
Indebtedness of any Person shall mean without duplication (i) all
------------
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e., take-or-
----
pay and similar obligations, (vii) all obligations of such Person under Interest
Rate Agreements, (viii) all reimbursement or other monetary obligations with
respect to surety, performance and bid bonds, and (ix) all Contingent
Obligations of such Person; provided that (x) Indebtedness shall not include
--------
trade payables and accrued expenses, in each case arising in the ordinary course
of business and (y) Indebtedness for purposes of determining compliance with
Sections 8.9 and 8.10 shall not include Contingent Obligations and Interest Rate
Agreements to the extent not reflected on the Borrower's balance sheet in
accordance with GAAP.
Initial Credit Event shall mean the making of the initial Revolving
--------------------
Loans hereunder.
Insurance Sub shall mean a Wholly-Owned Subsidiary of the Borrower
-------------
organized under the laws of Bermuda.
Intercreditor Agreement shall have the meaning given to such term in
-----------------------
Section 5.1(u) hereof.
Interest Expense shall mean the aggregate consolidated interest
----------------
expense of the Borrower and its Subsidiaries in respect of Indebtedness
determined on a consolidated basis in accordance with GAAP, including, without
limitation, the interest portion of any deferred payment obligation and the
interest component of any Capital Lease Obligations, provided that for the
--------
purpose of the definition "Fixed Charges", amortization of original issue
discount and debt issuance costs on any Indebtedness and all fees payable in
connection with the incurrence of such Indebtedness (to the extent included in
interest expense) and debt issuance costs incurred by the Borrower in connection
with the Transaction shall each be excluded in calculating Interest Expense;
provided, further, that, interest expense in respect of Life Insurance Policy
- --------
Loans shall be included in the calculation of "Interest Expense" only to the
extent that such interest expense exceeds any dividends received by the Borrower
in respect of the Life Insurance Policies relating to such Life Insurance Policy
Loans.
Interest Period shall mean for any Eurodollar Rate Loan the period
---------------
commencing on the date of the Borrowing, Conversion or Continuance thereof and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be one, two,
three or six months, in each case as the Borrower may, in an appropriate Notice
of Borrowing, Notice of Continuation or Notice of Conversion, select; provided,
--------
however, that the Borrower may not select any Interest Period that ends after
- -------
the Expiration Date. Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the
17
<PAGE>
next succeeding Business Day; provided, however, that if such extension would
-------- -------
cause the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the next
preceding Business Day. Whenever any Interest Period begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period),
such Interest Period shall end on the last Business Day of the applicable
calendar month.
Interest Rate Agreement shall mean any interest rate protection
-----------------------
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which the
Borrower or any of its Subsidiaries is a party or beneficiary.
Interim Advance shall mean a Revolving Loan made by the Payments
---------------
Administrator to the Borrower pursuant to Section 2.3(c).
Interim Advance Period shall have the meaning given to such term in
----------------------
Section 2.3(c).
Inventory shall mean all of the inventory owned by the Borrower,
---------
including without limitation: (i) all raw materials, work in process, parts,
components, assemblies, supplies and materials used or consumed in the
Borrower's business; (ii) all goods, wares and merchandise, finished or
unfinished, held for sale or lease or leased or furnished or to be furnished
under contracts of service; and (iii) all goods returned or repossessed by the
Borrower.
Inventory Sublimit shall have the meaning given to such term in
------------------
Section 2.2(a).
Investment shall have the meaning given to such term in Section 8.5.
----------
Issuing Bank shall mean Bankers Trust Company or any Lender that is
------------
acceptable to the Agent which has agreed to issue a Letter of Credit for the
account of the Borrower under this Credit Agreement.
Issuing Bank Fees shall have the meaning given to such term in Section
-----------------
4.7.
KIA IV shall mean Kelso Investment Associates IV, L.P.
------
Lender shall have the meaning given to such term in the preamble to
------
this Credit Agreement.
Letter of Credit Fees shall have the meaning given to such term in
---------------------
Section 4.7.
Letter of Credit Obligations shall mean, at any time, the sum of (i)
----------------------------
the aggregate Stated Amount of all Letters of Credit outstanding at such time,
plus (ii) the aggregate amount of all drawings under Letters of Credit which
- ----
have not been reimbursed by the Borrower (including through the incurrence of
Revolving Loans).
Letter of Credit Request shall have the meaning given to such term in
------------------------
Section 3.4.
18
<PAGE>
Letters of Credit shall mean all letters of credit (whether
-----------------
documentary or stand-by and whether for the purchase of inventory, equipment or
otherwise) issued for the account of the Borrower pursuant to Article 3 of this
Credit Agreement and all amendments, renewals, extensions or replacements
thereof.
Lien(s) shall mean any lien, charge, pledge, security interest, deed
-------
of trust, mortgage, other encumbrance or other arrangement having the practical
effect of the foregoing or other preferential arrangement of any other kind and
shall include the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
Life Insurance Policies shall mean those certain life insurance
-----------------------
policies obtained in 1984, 1985 and 1986 by Kilsby-Roberts Holding Co. ("KR")
from Phoenix Mutual Life Insurance Company covering participants in the KR
employee stock ownership plan and certain other KR executives, as in effect on
the Restatement Effective Date.
Life Insurance Policy Loans shall mean the loans made to the Borrower
---------------------------
and secured by its interests in the Life Insurance Policies.
Management Agreements shall have the meaning given to such term in
---------------------
Section 5.1(o).
Margin Stock shall have the meaning provided in Regulation U.
------------
Material Adverse Effect shall mean a material adverse effect on (i)
-----------------------
the business, prospects, operations, results of operations, assets, liabilities
or financial condition of the Borrower or of Holding and its Subsidiaries taken
as a whole, (ii) the value of Collateral or the amount which the Agent and the
Lenders would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral, (iii)
any Credit Party's ability to perform its material obligations under the Credit
Documents to which it is a party, or (iv) the material rights and remedies of
the Agent, the Issuing Banks or the Lenders under any Credit Document.
Material Contract shall mean any contract or other arrangement (other
-----------------
than the Credit Documents), whether written or oral, to which the Borrower or
any of its Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto may be reasonably expected
to have a Material Adverse Effect.
Multiemployer Plan shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA.
Net Sale Proceeds shall mean for any sale of assets, the gross cash
-----------------
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith), (ii) payments of
unassumed liabilities relating to the assets sold at the time of, or within 90
days after, the date of such sale and (iii) the
19
<PAGE>
amount of such gross cash proceeds required to be used to repay any Indebtedness
(other than Indebtedness of the Lenders pursuant to this Credit Agreement) which
is secured by the respective assets which were sold.
New Lenders shall mean each of the Persons listed on Schedule I hereto
-----------
which is not a Continuing Lender.
New Senior Note Documents shall mean and include each of the documents
-------------------------
and other agreements entered into (including, without limitation, the New Senior
Note Indenture) relating to the issuance by the Borrower of the New Senior
Notes, as in effect on the Restatement Effective Date and as the same may be
entered into, modified, supplemented or amended from time to time to the extent
permitted pursuant to the terms hereof and thereof.
New Senior Note Indenture shall mean the Indenture, dated as of March
-------------------------
24, 1998, entered into by and between the Borrower and United States Trust
Company of New York, as trustee thereunder, as in effect on the Restatement
Effective Date and as the same may be modified, amended or supplemented from
time to time to the extent permitted in accordance with the terms hereof and
thereof.
New Senior Notes shall mean the Borrower's 9 1/2% Senior Notes due in
----------------
the year 2005, as in effect on the Restatement Effective Date and the Exchange
Notes issued in exchange therefor in accordance with the terms of the New Senior
Note Indenture as the same may be modified, supplemented or amended from time to
time to the extent permitted pursuant to the terms hereof and thereof.
Non-Continuing Lender shall mean each Existing Lender that is not a
---------------------
Continuing Lender.
Notice of Borrowing shall have the meaning given to such term in
-------------------
Section 2.3(a) and shall include any deemed Notice of Borrowing pursuant to
Section 3.5.
Notice of Continuation shall have the meaning given to such term in
----------------------
Section 4.3(a).
Notice of Conversion shall have the meaning given to such term in
--------------------
Section 4.3(b).
Obligations shall mean, without duplication, the unpaid principal of
-----------
and interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to Holding, the Borrower or any Subsidiary of the
Borrower, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) the Revolving Notes, any reimbursement obligation or
indemnity of Holding, the Borrower or any Subsidiary of the Borrower on account
of Letters of Credit or any accommodation extended with respect to applications
for Letters of Credit, the Fees, the Expenses and all other obligations and
liabilities of Holding, the Borrower or any Subsidiary of the Borrower to the
Agent, the Issuing Banks or to the Lenders, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, this Credit Agreement, the
Revolving Notes, any other
20
<PAGE>
Credit Document and any other document made, delivered or given in connection
herewith or therewith.
Offering Memorandum shall mean the final Offering Memorandum pursuant
-------------------
to which the New Senior Notes are issued and sold.
Original Effective Date shall mean March 3, 1993.
-----------------------
Outstandings shall mean, at any time, the sum of (i) the principal
------------
amount of Revolving Loans outstanding at such time plus (ii) the Letter of
----
Credit Obligations at such time.
Payment Office shall mean 14 Wall Street, New York, New York 10005 or
--------------
any other office within the continental United States designated by the Payments
Administrator to the Borrower from time to time as the office for payment of all
amounts required to be paid by the Borrower or Holding under this Credit
Agreement.
Payments Administrator shall mean BTCC; provided, however, that if
---------------------- -------- -------
BTCC shall cease to be the Agent hereunder, the Lenders shall have the option to
appoint one of the remaining Lenders as the Payments Administrator by written
notice to the Borrower.
PBGC shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA and any Person succeeding to the functions
thereof.
Permitted Discretion shall mean, with respect to the Agent, the
--------------------
Agent's judgment exercised in good faith based upon its consideration of any
factor which it believes in good faith: (i) will or could adversely affect the
value of any Collateral, the enforceability or priority of the Collateral
Agent's Liens thereon or the amount which the Agent and the Lenders would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral; (ii) suggests that any
collateral report or financial information delivered to the Agent by any Person
on behalf of Holding, the Borrower or any Subsidiary of the Borrower is
incomplete, inaccurate or misleading in any material respect; (iii) materially
increases the likelihood of a bankruptcy, reorganization or other insolvency
proceeding involving Holding, the Borrower or any of the Borrower's Subsidiaries
or any of the Collateral; or (iv) creates or reasonably could be expected to
create a Default or Event of Default. In exercising such judgment, the Agent
may consider such factors already included in or tested by the definition of
Eligible Accounts Receivable or Eligible Inventory, as well as any of the
following: (i) the financial and business climate of the Borrower's industry and
general macroeconomic conditions, (ii) changes in collection history and
dilution with respect to the Accounts, (iii) changes in demand for, and pricing
of, Inventory, (iv) changes in any concentration of risk with respect to
Accounts and Inventory, and (v) any other factors that change the credit risk of
lending to the Borrower on the security of the Accounts and Inventory. The
Agent shall disclose to the Borrower the basis on which its Permitted Discretion
is exercised, however, the burden of establishing lack of good faith hereunder
shall be on the Borrower.
21
<PAGE>
Permitted Liens shall mean any Liens permitted under Section 8.2(d)
---------------
and, to the extent such Liens may by operation of law take priority over a
previously perfected Lien, Sections 8.2(a) and (n).
Permitted Materials shall have the meaning given to such term in
-------------------
Section 6.18(c).
Permitted Transactions shall mean (i) reasonable and customary fees,
----------------------
compensation and benefits paid to officers, directors, employees or consultants
of the Borrower or any of its Subsidiaries or their respective Affiliates for
services rendered to the Borrower or any such Subsidiary in the ordinary course
of business consistent with past practices; (ii) transfers of goods and services
by or among the Borrower and its Subsidiaries and their respective Affiliates in
the ordinary course of business on fair and reasonable terms, provided that if
--------
any such transaction or series of related transactions involves in excess of
$3,000,000, the Board of Directors of the Borrower shall determine in good faith
by resolution that such transaction is on terms fair and reasonable to the
Borrower; (iii) Dividends permitted under Section 8.6; (iv) transactions
pursuant to the Holding Management Agreement (provided that the 5% service fee
--------
referred to in Section 5(b) of the Management Agreement shall not exceed
$200,000 per annum) and the Tax Sharing Agreement; (v) transactions between the
Borrower or any Subsidiary and the ESOP and permitted under Sections 8.3 and
8.5; and (vi) transactions between Holding, the Borrower or its Subsidiaries
(other than Insurance Sub) and Insurance Sub in connection with compliance by
the Borrower with Section 7.10.
Person shall mean any individual, sole proprietorship, partnership,
------
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each.
Plan shall mean any multiemployer or single-employer plan as defined
----
in Section 4001 of ERISA, which (i) is maintained or contributed to by (or to
which there is an obligation to contribute of), or (ii) at any time during the
five year period preceding (A) in the case of any Credit Event, the date of such
Credit Event or (B) in the case of any event or condition described in Section
7.5 or 9.1(f), the date thereof, was maintained or contributed to by (or to
which there is or was an obligation to contribute of), Holding, the Borrower, a
Subsidiary of Holding or the Borrower or an ERISA Affiliate.
Prime Lending Rate shall mean the rate which Bankers Trust Company
------------------
publicly announces in New York City from time to time as its prime lending rate,
as in effect from time to time. The Prime Lending Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to any
customer. Bankers Trust Company may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.
Proportionate Share shall mean, with respect to any Lender, a fraction
-------------------
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the Total Commitments
or, if the Commitments are terminated, a fraction the numerator of which shall
be the amount of such Lender's Revolving Loans and the
22
<PAGE>
denominator of which shall be the aggregate amount of then outstanding Revolving
Loans of all the Lenders.
RCRA shall mean the Resources Conservation and Recovery Act, as
----
amended, 42 U.S.C. (S) 6901 et seq.
-- ----
Real Property of any Person shall mean all of the right, title and
-------------
interest of such Person in and to land, improvements and fixtures, including
leaseholds.
Recovery Event shall mean the receipt by Holding or any of its
--------------
Subsidiaries of any (i) cash insurance proceeds payable (x) by reason of theft,
loss, physical destruction or damage or any other similar event with respect to
any property or assets of Holding or any of its Subsidiaries and (y) under any
policy of insurance required to be maintained under Section 7.10 or (ii)
condemnation award payable by reason of eminent domain or deed in lieu thereof.
Regulation D shall mean Regulation D of the Board of Governors of the
------------
Federal Reserve System as from time to time in effect and any successor thereto.
Regulation U shall mean Regulation U of the Board of Governors of the
------------
Federal Reserve System as from time to time in effect and any successor thereto.
Reportable Event shall mean any of the events described in Section
----------------
4043 of ERISA with respect to a Plan as to which the 30-day notice requirement
has not been waived by the PBGC.
Required Lenders shall mean, at any time, those Lenders then owed or
----------------
holding in the aggregate more than 50% of the sum of the then existing aggregate
unpaid principal amount of the Revolving Loans and the then existing aggregate
undrawn amount of the Total Commitments.
Requirement of Law shall mean, as to any Person, the Governing
------------------
Documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
Restatement Effective Date shall have the meaning set forth in Section
--------------------------
11.14.
Revolving Loan Conversion shall have the meaning set forth in Section
-------------------------
2.1.
Revolving Loans shall have the meaning given to such term in Section
---------------
2.1.
Revolving Note shall mean a promissory note of the Borrower payable to
--------------
the order of a Lender, substantially in the form of Exhibit C, evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from the
Revolving Loans made by such Lender or acquired by such Lender pursuant to
Section 11.6.
23
<PAGE>
Security Agreement shall mean the Security Agreement entered into
------------------
pursuant to the Existing Credit Agreement, as same may be amended, modified or
supplemented from time to time.
Senior Note Indenture shall mean the Indenture, dated as of March 11,
---------------------
1993, entered into by and between the Borrower and United States Trust Company
of New York, as trustee thereunder, as in effect on the Restatement Effective
Date and as the same may be modified, amended or supplemented from time to time
to the extent permitted in accordance with the terms hereof and thereof.
Senior Notes shall mean the Borrower's 10-3/4% Senior Notes due in the
------------
year 2000, issued pursuant to the Senior Note Indenture, as in effect prior to
the Restatement Effective Date and as the same may be modified, supplemented or
amended from time to time to the extent permitted pursuant to the terms hereof
and thereof.
Settlement Date shall have the meaning given to such term in Section
---------------
2.4(b)(i).
Shareholders' Agreement shall have the meaning given to such term in
-----------------------
Section 5.1(o).
Special Term Loan Agreement shall mean the Term Loan Agreement, dated
---------------------------
as of March 24, 1998, among the Borrower, DLJ Capital Funding, Inc., as
Syndication Agent, Donaldson, Lufkin & Jenrette Securities Corporation and BT
Alex. Brown Incorporated, as Arrangers, Bankers Trust Company, as Documentation
Agent, Fleet National Bank, as Administrative Agent, and various financial
institutions party thereto from time to time (as amended, modified or
supplemented from time to time to the extent permitted by the terms hereof and
thereof).
Special Term Loan Documents shall mean and include each of the
---------------------------
documents and other agreements entered into (including, without limitation, the
Special Term Loan Agreement) by the Borrower in connection with the Special Term
Loan Agreement, as in effect on the Restatement Effective Date and as the same
- ----
may be entered into, modified, supplemented or amended from time to time to the
extent permitted pursuant to the terms hereof and thereof.
Special Term Loan Security Agreement shall mean the Security
------------------------------------
Agreement, dated as of March 24, 1998, between the Borrower, Fleet National
Bank, as Administrative Agent, and certain Subsidiaries of the Borrower from
time to time party thereto.
Stated Amount of each Letter of Credit shall, at any time, mean the
-------------
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any conditions to drawing could then be met).
Sub-Collection Account shall have the meaning given to such term in
----------------------
Section 2.6(b)(i).
Subsidiary shall mean as to any Person, a corporation, partnership or
----------
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than
24
<PAGE>
stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Credit Agreement shall refer to a Subsidiary or Subsidiaries of the
Borrower.
Syndication Agent shall mean BTCC; provided that if BTCC shall cease
----------------- --------
to be the Agent hereunder, the Lenders shall have the option to appoint one of
the remaining Lenders as the Syndication Agent.
Syndication Date shall mean the earlier of (x) the date which is 60
----------------
days after the Restatement Effective Date and (y) the date upon which the Agent
determines in its sole discretion (and notifies the Borrower) that the primary
syndication (and the resulting addition of institutions as Lenders pursuant to
Section 11.6) has been completed, notice of which shall be promptly given to the
Borrower.
Tax Sharing Agreements shall have the meaning given to such term in
----------------------
Section 5.1(o).
Taxes shall have the meaning given to such term in Section 2.9.
-----
Total Availability shall mean the difference between (i) the lesser of
------------------
(x) the Total Commitments and (y) the Borrowing Base and (ii) the Outstandings.
Total Commitments shall mean the aggregate of the Commitments of all
-----------------
the Lenders.
Transaction shall mean, collectively, (i) the issuance by the Borrower
-----------
of the New Senior Notes, (ii) the entering into by the Borrower of the Special
Term Loan Agreement and the incurrence by the Borrower of loans thereunder and
(iii) the execution and effectiveness of this Credit Agreement and the
incurrence by the Borrower of the Revolving Loans hereunder.
Transaction Documents shall mean, collectively, (i) the New Senior
---------------------
Note Documents, (ii) the Special Term Loan Documents and all other documentation
executed in connection therewith and (iii) the Credit Documents.
Type shall mean, with respect to any Revolving Loan, whether such
----
Revolving Loan is a Eurodollar Rate Loan or a Base Rate Loan.
UCC shall mean the Uniform Commercial Code.
---
Unfunded Current Liability of any Plan shall mean the amount, if any,
--------------------------
by which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual
25
<PAGE>
valuation of the Plan, exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the Code.
Unused Line Fee shall have the meaning given to such term in Section
---------------
4.6.
Wholly-Owned Subsidiary of any Person shall mean any Subsidiary of
-----------------------
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' qualifying shares, is owned directly
or indirectly by such Person or a Wholly-Owned Subsidiary thereof.
Working Capital shall mean, at any time, the excess of Current Assets
---------------
over Current Liabilities.
1.2 Accounting Terms and Determinations. Unless otherwise defined or
-----------------------------------
specified herein, all accounting terms used herein shall have the meanings
customarily given in accordance with GAAP, and all financial computations to be
made under this Credit Agreement shall, unless otherwise specifically provided
herein, be made in accordance with GAAP applied on a basis consistent in all
material respects with the Financial Statements referred to in Section 6.10(b).
All accounting determinations for purposes of determining compliance with
Sections 8.6(b), 8.9 and 8.10 hereof shall be made in accordance with GAAP and
applied on a basis consistent in all material respects with the Financial
Statements referred to in Section 6.10(b) and shall exclude, in any event, any
(i) interest accrued on the Senior Notes after the Restatement Effective Date
and (ii) any interest income earned on the funds deposited by the Borrower with
the trustee under the Senior Note Indenture on March 24, 1998 for the purpose of
defeasing or redeeming all Senior Notes on or prior to April 23, 1998. The
Financial Statements required to be delivered hereunder from and after the
Restatement Effective Date and all financial records shall be maintained in
accordance with GAAP as in effect as of the date of the Financial Statements
referred to in Section 6.10(b) or, if GAAP shall change from the basis used in
preparing the Financial Statements referred to in Section 6.10(b), the
certificates required to be delivered pursuant to Section 7.1 demonstrating
compliance with the covenants contained herein shall include calculations
setting forth the adjustments necessary to demonstrate how the Borrower is in
compliance with the financial covenants based upon GAAP as utilized in the
Section 6.10(b) Financial Statements. If the Borrower shall change its method
of inventory accounting from the last-in-first-out method to the first-in-first-
out method, all calculations necessary to determine compliance with the
covenants contained herein shall be made as if such method of inventory
accounting had not been so changed. Any reference herein to a fiscal quarter
shall mean a fiscal quarter consisting of 63 Business Days, except in the case
of 366-day year, in which case one fiscal quarter may contain an additional
Business Day. Any reference herein to a fiscal month shall mean a fiscal month
consisting of 21 Business Days.
1.3 Other Defined Terms. Terms not otherwise defined herein which
-------------------
are defined in the UCC as in effect in the State of New York shall have the
meanings given them in such UCC. The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Credit Agreement shall refer to
this Credit Agreement as a whole and not to any particular provision of this
Credit Agreement, and references to Article, Section, Schedule, Exhibit and like
references are references to this Credit Agreement unless otherwise specified.
An Event of
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<PAGE>
Default shall "continue" or be "continuing" until such Event of Default has been
cured or waived in accordance with Section 11.10 hereof.
ARTICLE 2.
Revolving Loans
---------------
2.1 Commitments. Subject to and upon the terms and conditions set
-----------
forth herein, each Lender with a Commitment severally agrees, (A) in the case of
each Continuing Lender, to convert into Revolving Loans (each a "Revolving Loan
Conversion", and together, the "Revolving Loan Conversions"), on the Restatement
Effective Date, Existing Loans made by such Continuing Lender to the Borrower
pursuant to the Existing Credit Agreement and outstanding on the Restatement
Effective Date, and/or (B) at any time and from time to time on and after the
Restatement Effective Date and prior to the Expiration Date, to make a revolving
loan or revolving loans (together with each Revolving Loan Conversion, each a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, (ii)
shall not exceed for any Lender at any time outstanding such Lender's Commitment
and (iii) shall not exceed for all Lenders at anytime outstanding that aggregate
principal amount which, when added to the amount of all Letter of Credit
Obligations at such time, equals the Total Commitments at such time. The
Borrower hereby agrees to execute and deliver to each Lender a Revolving Note to
evidence the Revolving Loans made by such Lender.
2.2 Determination of Borrowing Base. (a) Subject to Section 2.2(b)
-------------------------------
and Section 2.3(c), Revolving Loans shall not in aggregate principal amount
exceed the lesser of:
(i) the Total Commitments then in effect minus the sum of (A) the
-----
Letter of Credit Obligations and (B) the Borrower's exposure (as determined
by the Agent) under any Interest Rate Agreements entered into in connection
with Section 8.3(m); and
(ii) the amount then equal to:
(A) Eighty-five percent (85%) of the Eligible Accounts
Receivable, plus
----
(B) Fifty-five percent (55%) of the Eligible Inventory, and
minus
-----
(C) the Borrower's exposure (as determined by the Agent) under
any Interest Rate Agreements entered into in connection
with Section 8.3(m), and minus
-----
(D) the Letter of Credit Obligations.
The sum of the amounts calculated in accordance with clauses (ii)(A), (B) and
(C) above is hereinafter referred to as the "Borrowing Base." In addition,
fifty-five percent (55%) of the Eligible Inventory shall not exceed sixty
percent (60%) of Outstandings (the "Inventory Sublimit").
27
<PAGE>
(b) The Agent at any time shall be entitled to (i) establish and
increase or decrease reserves against Eligible Accounts Receivable and Eligible
Inventory, (ii) reduce the advance rates under Section 2.2(a)(ii)(A) or (B) or
restore such advance rates to any level equal to or below the advance rates
stated in Section 2.2(a)(ii)(A) or (B), and (iii) impose additional restrictions
(or eliminate the same) to the standards of "Eligible Accounts Receivable" and
"Eligible Inventory," in the exercise of its Permitted Discretion. The Agent
may but shall not be required to rely on each Borrowing Base Certificate and any
other schedules or reports delivered to it in connection herewith in determining
the then eligibility of Accounts and Inventory. Reliance thereon by the Agent
from time to time shall not be deemed to limit the right of the Agent to revise
advance rates or standards of eligibility as provided in this Section 2.2(b).
2.3 Borrowing Mechanics. (a) Except as provided in Section 2.3(b),
-------------------
Borrowings shall be made on notice from the Borrower to the Payments
Administrator, given not later than 1:00 P.M. New York City time on the date on
which the proposed Borrowing consisting of Base Rate Loans is requested to be
made and on the third Business Day prior to the date on which any proposed
Borrowing consisting of Eurodollar Rate Loans is requested to be made.
(i) Each Notice of Borrowing shall be given by either telephone,
telecopy, telex, or cable, and, if by telephone, confirmed in writing,
substantially in the form of Exhibit D (the "Notice of Borrowing"). Each
Notice of Borrowing shall be irrevocable by and binding on the Borrower.
(ii) The Borrower shall notify the Payments Administrator in writing
of the names of the officers authorized to request Revolving Loans on
behalf of the Borrower, and shall provide the Payments Administrator with a
specimen signature of each such officer. The Payments Administrator shall
be entitled to rely conclusively on such officers' authority to request
Revolving Loans on behalf of the Borrower until the Payments Administrator
receives written notice to the contrary. The Payments Administrator shall
have no duty to verify the authenticity of the signature appearing on any
Notice of Borrowing or other writing delivered pursuant to this Section
2.3(a) and, with respect to an oral request for Revolving Loans, the
Payments Administrator shall have no duty to verify the identity of any
individual representing himself as one of the officers authorized to make
such request on behalf of the Borrower. Neither the Payments Administrator
nor any of the Lenders shall incur any liability to the Borrower as a
result of acting upon any telephonic notice referred to in this Section
2.3(a) which notice the Payments Administrator believes in good faith to
have been given by a duly authorized officer or other individual authorized
to request Revolving Loans on behalf of the Borrower or for otherwise
acting reasonably and in good faith under this Section 2.3(a) and, upon the
funding of Revolving Loans by the Lenders in accordance with this Credit
Agreement, pursuant to any such telephonic notice, the Borrower shall be
deemed to have made a Borrowing of Revolving Loans hereunder.
(iii) In a Notice of Borrowing, the Borrower may request one or more
Borrowings on a single day. Each such Borrowing shall, unless otherwise
specifically provided herein, consist entirely of Revolving Loans of the
same Type and shall be in an aggregate amount for all Lenders of not less
than $1,000,000 in the case of Eurodollar Rate Loans or $500,000 in the
case of Base Rate Loans. Unless otherwise requested in the applicable
Notice of Borrowing, all
28
<PAGE>
Revolving Loans shall be Base Rate Loans. The right of the Borrower to
choose Eurodollar Rate Loans is subject to the provisions of Section
4.3(c).
(iv) The Borrower may not incur Eurodollar Rate Loans prior to the
Syndication Date.
(b) The Borrower has informed the Agent that it has decided to open a
checking account (the "Disbursement Account") with Bankers Trust (Delaware) ("BT
Delaware") for general corporate purposes, including the purpose of paying trade
payables and other operating expenses. The Lenders hereby authorize the
Payments Administrator, and so long as the conditions for Borrowing in Article 5
remain satisfied, the Payments Administrator on behalf of the Lenders may but
shall not be obligated to make Revolving Loans to cover the amount of checks
presented for payment and other disbursements from the Disbursement Account.
Advice from BT Delaware of amounts required to cover such amounts will be deemed
a sufficient Notice of Borrowing. Such Borrowings shall be of Base Rate Loans
only and will not be subject to the minimum amount requirement of Section
2.3(a)(iii).
(c) In the event the Borrower is unable to comply with (i) the
Borrowing Base limitations set forth in Section 2.2(a) or (ii) the conditions
precedent to the making of a Revolving Loan or the issuance of a Letter of
Credit set forth in Section 5.2, the Lenders authorize the Payments
Administrator to make Interim Advances to the Borrower for a period commencing
on the date the Payments Administrator first receives a Notice of Borrowing
requesting an Interim Advance until the earlier of (i) the fifteenth Business
Day after such date (unless the Required Lenders authorize a later date), (ii)
the date the Borrower is again able to comply with the Borrowing Base
limitations and the conditions precedent to the making of Revolving Loans and
issuance of Letters of Credit, or obtains an amendment or waiver with respect
thereto, or (iii) the date the Required Lenders instruct the Payments
Administrator to cease making Interim Advances (in each case, the "Interim
Advance Period"). The Payments Administrator shall not make any Interim Advance
to the extent that at such time the amount of such Interim Advance when added to
the aggregate outstanding amount of other Interim Advances would exceed the
greater of (1) the lesser of (A) the difference between the Total Commitments
and the Outstandings and (B) the greater of (x) $10,000,000 or (y) 10% of the
Outstandings and (2) such amount as the Required Lenders shall authorize.
2.4 Settlements Among the Payments Administrator and the Lenders.
------------------------------------------------------------
(a) Except as provided in Section 2.4(b), the Payments Administrator shall give
to each Lender prompt notice of each Notice of Borrowing by telecopy, telex or
cable. No later than 12:00 Noon New York City time on the date of each Borrowing
representing the incurrence of Revolving Loans (unless the Restatement Effective
Date is the date of such incurrence, in which case no later than 11:00 A.M. New
York City time on the Restatement Effective Date), each Lender will make
available for the account of its Applicable Lending Office, to the Payments
Administrator at its Payment Office, in immediately available funds, its
Proportionate Share of such Borrowing. Unless the Payments Administrator shall
have been notified by any Lender on the Restatement Effective Date or, with
respect to each Borrowing after the Restatement Effective Date, prior to the
date of such Borrowing that such Lender does not intend to make available to the
Payments Administrator its portion of such Borrowing to be made on such date,
the Payments Administrator may assume that such Lender will make such amount
available to the Payments
29
<PAGE>
Administrator at its Payment Office on such date of Borrowing, or, if
applicable, the Settlement Date (as defined below) and the Payments
Administrator, in reliance upon such assumption, may but shall not be obligated
to make available the amount of the Borrowing to be provided by such Lender.
Except as provided in Section 2.4(b) and subject to Section 2.4(e), promptly
after its receipt of payments from or on behalf of the Borrower (other than
amounts payable to the Agent to reimburse the Agent and any Issuing Bank for
fees and expenses payable solely to them), the Payments Administrator will cause
such payments to be distributed ratably to the Lenders. The Lenders will apply
such payments in accordance with Section 2.6(d).
(b) Unless the Required Lenders have instructed the Payments
Administrator to the contrary, the Payments Administrator on behalf of the
Lenders may but shall not be obligated to make Base Rate Loans under Section 2.3
without prior notice of the proposed Borrowing to the Lenders, as follows:
(i) The amount of each Lender's Proportionate Share of Revolving
Loans shall be computed weekly (or more frequently in the Payment
Administrator's discretion) and shall be adjusted upward or downward on the
basis of the amount of outstanding Revolving Loans as of 5:00 P.M. New York
City time on the last Business Day of the period specified by the Payments
Administrator (such date, the "Settlement Date"). The Payments
Administrator shall deliver to each of the Lenders promptly after the
Settlement Date a summary statement of the amount of outstanding Revolving
Loans for such period. The Lenders shall transfer to the Payments
Administrator, or, subject to Section 2.4(e), the Payments Administrator
shall transfer to the Lenders, such amounts as are necessary so that (after
giving effect to all such transfers) the amount of Revolving Loans made by
each Lender shall be equal to such Lender's Proportionate Share of the
aggregate amount of Revolving Loans outstanding as of such Settlement Date.
If the summary statement is received by the Lenders prior to 12:00 Noon New
York City time on any Business Day, each Lender shall make the transfers
described above in immediately available funds no later than 3:00 P.M. New
York City time on the day such summary statement was received; and if such
summary statement is received by the Lenders after 12:00 Noon New York City
time on such day, each Lender shall make such transfers no later than 3:00
P.M. New York City time on the next succeeding Business Day. The
obligation of each of the Lenders to transfer such funds shall be
irrevocable and unconditional and without recourse to or warranty by the
Payments Administrator. Each of the Payments Administrator and the Lenders
agree to mark their respective books and records on the Settlement Date to
show at all times the dollar amount of their respective Proportionate
Shares of the outstanding Revolving Loans.
(ii) To the extent that the settlement described above shall not yet
have occurred, upon repayment of Revolving Loans by the Borrower, the
Payments Administrator may apply such amounts repaid directly to the
amounts made available by the Payments Administrator pursuant to this
Section 2.4(b).
(iii) Because the Payments Administrator on behalf of the Lenders
may be advancing and/or may be repaid Revolving Loans prior to the time
when the Lenders will actually advance and/or be repaid Revolving Loans,
interest with respect to Revolving Loans shall
30
<PAGE>
be allocated by the Payments Administrator to each Lender and the Payments
Administrator in accordance with the amount of Revolving Loans actually
advanced by and repaid to each Lender and the Payments Administrator and
shall accrue from and including the date such Loans are so advanced to but
excluding the date such Loans are either repaid by the Borrower in
accordance with Section 2.5 or actually settled by the applicable Lender as
described in this Section 2.4(b).
(c) If any amount described in this Section 2.4 is not made available
to the Payments Administrator by a Lender (such Lender being hereinafter
referred to as a "Defaulting Lender") and the Payments Administrator has made
such amount available to the Borrower, the Payments Administrator shall be
entitled to recover such amount on demand from such Defaulting Lender. If such
Defaulting Lender does not pay such amount forthwith upon the Payments
Administrator's demand therefor, the Payments Administrator shall promptly
notify the Borrower and the Borrower shall immediately (but in any event no
later than five Business Days after such demand) pay such amount to the Payments
Administrator. The Payments Administrator shall also be entitled to recover
from such Defaulting Lender and the Borrower, (x) interest on such amount in
respect of each day from the date such corresponding amount was made available
by the Payments Administrator to the Borrower to the date such amount is
recovered by the Payments Administrator, at a rate per annum equal to either (i)
--- -----
if paid by such Defaulting Lender, the overnight Federal Funds Rate or (ii) if
paid by the Borrower, the then applicable rate of interest, calculated in
accordance with Section 4.1 or Section 4.2 hereof, plus (y) in each case, an
----
amount equal to any costs (including legal expenses) and losses incurred as a
result of the failure of such Defaulting Lender to provide such amount as
provided in this Credit Agreement; provided, however, that the Payments
-------- -------
Administrator shall not be entitled to demand payment by the Borrower of any
amount under clause (y) above unless demand therefor has been made of the
Defaulting Lender and not paid within five Business Days of such demand.
Nothing herein shall be deemed to relieve any Lender from its duty to fulfill
its obligations hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any default by such Lender hereunder,
including, without limitation, the right of the Borrower to seek reimbursement
from any Defaulting Lender for any amounts paid by the Borrower under clause (y)
above on account of such Defaulting Lender's default.
(d) The failure of any Lender to make the Revolving Loan to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Loan on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Revolving Loan to be made by such other Lender on the date of
any Borrowing.
(e) Notwithstanding anything contained herein to the contrary, so
long as any Lender is a Defaulting Lender or has rejected its Commitment, the
Payments Administrator shall not be obligated to transfer to such Lender any
payments made by the Borrower to the Payments Administrator for the benefit of
such Lender; and such Lender shall not be entitled to the sharing of any
payments pursuant to Section 2.10. Amounts payable to such Lender under Section
2.10 shall instead be paid to the Payments Administrator. The Payments
Administrator may hold and, in its discretion, re-lend to the Borrower the
amount of all such payments received by it for such Lender. For purposes of
voting or consenting to matters with respect to the Credit Documents
31
<PAGE>
and determining Proportionate Share, such Defaulting Lender shall be deemed not
to be a "Lender" and such Lender's Commitment shall be deemed to be zero (0).
This Section 2.4(e) shall remain effective with respect to such Defaulting
Lender until (x) the Obligations under this Agreement shall have been paid in
full to the Payments Administrator and/or the Lenders other than the Defaulting
Lender or (y) the Required Lenders, the Payments Administrator and the Borrower
shall have waived such Defaulting Lender's default in writing. No Commitment of
any Lender shall be increased or otherwise affected, and performance by the
Borrower shall not be excused, by the operation of this Section 2.4(e).
2.5 Mandatory Payment; Mandatory Reduction of Commitments. (a)
-----------------------------------------------------
Revolving Loans shall be due and payable without any demand at any time (A) the
Outstandings at such time exceeds the Borrowing Base or the Total Commitments,
in the amount of such excess and (B) the Inventory Sublimit is exceeded, in the
amount of such excess, provided that (i) no such payment shall be required
--------
pursuant to the foregoing (A) as a result of a Borrowing Base deficiency during
an Interim Advance Period and (ii) if the then aggregate outstanding principal
amount of Revolving Loans is less than either such excess (after giving effect
to the foregoing clause (i)), Letters of Credit will be required to be cash
collateralized (to the satisfaction of the Collateral Agent) in the amount of
such difference.
(b) On the Expiration Date, the Total Commitments (and the Commitment
of each Lender) shall automatically reduce to zero and all outstanding Revolving
Loans shall be paid in full.
(c) The Borrower may reduce or terminate the unutilized Total
Commitments at any time and from time to time in whole or in part; provided,
--------
however, that each such reduction must be in an amount not less than $1,000,000
- -------
(and in increments of $100,000 thereafter); and provided further, that (i) if
-------- -------
the Borrower seeks to reduce the Total Commitments to an amount less than
$25,000,000, then the Total Commitments shall be reduced to zero and this Credit
Agreement shall be terminated and (ii) once reduced the amount of any such
reductions in the Total Commitments may not be reinstated.
(d) Upon the occurrence of a Change in Control, unless the Required
Lenders otherwise consent, the Total Commitments shall automatically be reduced
to zero.
(e) Any reduction to the Total Commitments pursuant to this Section
2.5 shall reduce the Commitment of each of the Lenders pro rata.
--- ----
2.6 Payments and Computations. (a) The Borrower shall make each
-------------------------
payment hereunder and under the Revolving Notes not later than 3:00 P.M. New
York City time on the day when due in Dollars to the Payments Administrator at
its Payment Office in immediately available funds. The Borrower's obligations
to the Lenders with respect to such payments shall be discharged by making such
payments to the Payments Administrator pursuant to this Section 2.6 or, if such
payments are not received prior to the foregoing deadline, by the Payments
Administrator's adding such payments to the principal amount of the Revolving
Loans outstanding by charging such payments to the Borrower's Revolving Loan
account (which charge shall consti-
32
<PAGE>
tute an incurrence of Revolving Loans (that are Base Rate Loans) in an aggregate
principal amount equal to the amount so charged).
(b) (i) The Borrower shall have established and shall maintain one
or more accounts for the collection of payments made in respect of Accounts
(each, a "Sub-Collection Account") and shall instruct all account debtors on the
Accounts of the Borrower to remit all payments to its Sub-Collection Account.
All amounts received by the Borrower from any account debtor, in addition to all
other cash received from any other source (other than proceeds kept in the
"Collateral Account" (as defined in and pursuant to the Special Term Loan
Agreement)), shall, subject to the requirements of Section 8.15, upon receipt be
deposited into a Sub-Collection Account.
(ii) The Borrower, the Collateral Agent and financial institutions
selected by the Borrower and acceptable to the Agent (the "Collection Banks")
shall enter into agreements substantially in the form of Exhibit E-1 (the
"Collection Agreements"), providing, among other things, for all receipts
received in respect of Accounts to be transferred at the end of each day from
each Sub-Collection Account to the appropriate Collection Account.
(iii) The Borrower may close Sub-Collection Accounts and/or open new
Sub-Collection Accounts with the prior written consent of the Collateral Agent
and subject to prior execution and delivery to the Collateral Agent of
Collection Agreements consistent with the provisions of this Section 2.6 and in
form and substance satisfactory to the Agent and its counsel.
(c) Upon the terms and subject to the conditions set forth in the
Collection Agreements, all available amounts held in the Collection Accounts
shall be wired each Business Day into an account (the "Concentration Account")
established pursuant to a concentration account agreement entered into among the
Borrower, the Collateral Agent and Bankers Trust Company substantially in the
form of Exhibit E-2 (the "Concentration Account Agreement"). Subject to the
terms and conditions of the Concentration Account Agreement, all available funds
in the Concentration Account shall be transferred on every Business Day to an
account (the "BT Account") maintained by the Collateral Agent at Bankers Trust
Company.
(d) All available amounts held in the BT Account shall be distributed
and applied on a daily basis in the following order: first, to the payment of
-----
any Fees, Expenses or other Obligations due and payable to the Agent under any
of the Credit Documents, including amounts advanced by the Payments
Administrator on behalf of the Lenders pursuant to Section 2.3(b), 2.3(c) or
2.4(b); second, to the payment of any Fees, Expenses or other Obligations due
------
and payable to any Issuing Bank under any of the Credit Documents; third, to the
-----
ratable payment of any Fees, Expenses or other Obligations due and payable to
the Lenders under any of the Credit Documents other than those Obligations
specifically referred to in this Section 2.6(d); fourth, to the ratable payment
------
of interest due on the Loans; and fifth, to the ratable payment of principal on
-----
the Loans. Any payment received hereunder as a distribution in any proceeding
referred to in Section 9.1(e) shall, unless paid with respect to amounts
specifically owing to the Agent or any Issuing Bank, be distributed and applied
by the Collateral Agent to the payment of the amounts due hereunder and under
the Revolving Notes ratably in accordance with such amounts (or, if a court of
competent jurisdiction shall otherwise specify, as specified by such court).
33
<PAGE>
2.7 Maintenance of Account. The Payments Administrator shall
----------------------
maintain an account on its books in the name of the Borrower in which the
Borrower will be charged with all loans and advances made by the Lenders to the
Borrower or for the Borrower's account, including the Revolving Loans, the
Letter of Credit Obligations, the Fees, the Expenses and any other Obligations.
The Borrower will be credited, in accordance with Section 2.6 above, with all
amounts received by the Lenders from the Borrower or from others for the
Borrower's account, including, as set forth above, all amounts received by the
Payments Administrator in payment of Accounts and applied to the Obligations.
In no event shall prior recourse to any Accounts or other Collateral be a
prerequisite to the Payments Administrator's right to demand payment of any
Obligation upon its maturity. Further, the Payments Administrator shall have no
obligation whatsoever to perform in any respect any of the Borrower's contracts
or obligations relating to the Accounts.
2.8 Statement of Account. After the end of each month the Payments
--------------------
Administrator shall send the Borrower a statement accounting for the charges,
loans, advances and other transactions occurring among and between the Agent,
the Lenders, the Issuing Banks and the Borrower during that month. The monthly
statements shall, absent manifest error, be an account stated, which is final,
conclusive and binding on the Borrower.
2.9 Taxes. (a) All payments made by the Borrower or Holding, as the
-----
case may be, hereunder, under any Revolving Note, under the Guaranty or under
any other Credit Document will be made without setoff, counterclaim or other
defense to the extent permitted by law. Except as provided for in Section
2.9(b), all such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
Governmental Authority or by any political subdivision or taxing authority
thereof or therein (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income of a Lender pursuant
to the laws of the Governmental Authority in which such Lender is organized or
incorporated or in which the principal office or Applicable Lending Office of
such Lender is located or under the laws of any political subdivision or taxing
authority thereof or therein) and all interest, penalties or similar liabilities
with respect thereto (collectively, "Taxes"). If any Taxes are so levied or
imposed, the Borrower or Holding, as the case may be, agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due hereunder, under any Revolving Note, under the
Guaranty or under any other Credit Document, after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for
herein, in such Revolving Note or in the Guaranty. The Borrower shall also
reimburse each Lender, upon the written request of such Lender, for taxes
imposed on or measured by the net income of such Lender pursuant to the laws of
the Governmental Authority in which such Lender is organized or incorporated or
in which the principal office or Applicable Lending Office of such Lender is
located or of any political subdivision or taxing authority thereof or therein
as such Lender shall determine are payable by such Lender in respect of Taxes
paid to or on behalf of such Lender pursuant to this or the preceding sentence.
The Borrower will furnish to the Payments Administrator within 45 days after the
date the payment of any Taxes, or any withholding or deduction on account
thereof, is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower or Holding, as the case may be. The
Borrower or Holding, as the case may be, will
34
<PAGE>
indemnify and hold harmless the Agent and each Lender, and reimburse the Agent
or such Lender upon its written request, for the amount of any Taxes so levied
or imposed and paid or withheld by such Lender.
(b) Each Lender which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees (i) to provide to each of the Borrower and the Agent on or prior to the
Restatement Effective Date two original signed copies of Internal Revenue
Service Form 4224 or Form 1001 certifying to such Lender's entitlement as of
such date to an exemption from United States withholding tax with respect to
payments to be made under this Credit Agreement, under any Revolving Note, under
the Guaranty or under any other Credit Document and (ii) that, to the extent
legally entitled to do so, (x) with respect to a Lender that is an assignee or
transferee of an interest under this Credit Agreement pursuant to Section 11.6
(unless the respective Lender was already a Lender hereunder immediately prior
to such assignment or transfer), upon the date of such assignment or transfer to
such Lender, and (y) with respect to any such Lender, from time to time upon the
reasonable written request of the Borrower or the Agent after the Restatement
Effective Date, such Lender will provide to each of the Borrower and the Agent
two original signed copies of Internal Revenue Service Form 4224 or Form 1001
(or any successor forms) certifying to such Lender's entitlement to an exemption
from, or reduction in, United States withholding tax with respect to payments to
be made under this Credit Agreement, under any Revolving Note, under the
Guaranty, or under any other Credit Document. Notwithstanding anything to the
contrary contained in Section 2.9(a), but subject to the immediately succeeding
sentence, the Borrower or Holding, as the case may be, shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder (without any obligation to pay the respective Lender additional
amounts with respect thereto) for the account of any Lender which is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes and which has not provided to the
Borrower or the Agent such forms required to be provided to the Borrower or the
Agent pursuant to the first sentence of this Section 2.9(b). Notwithstanding
anything to the contrary contained in the preceding sentence and except as set
forth in Section 2.9(b), the Borrower or Holding, as the case may be, agrees to
indemnify each Lender in the manner set forth in Section 2.9(a) in respect of
any amounts deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes that are effective after the Restatement
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
(c) If the Borrower pays any additional amount pursuant to this
Section 2.9 and any Lender actually receives a refund of tax or a credit against
its tax liabilities as a result of such payment by the Borrower, such Lender
shall pay to the Borrower an amount that such Lender determines, in its sole
judgment, is equal to the net tax benefit obtained by such Lender as a result of
such payment by the Borrower. Whether or not any Lender claims any credit or
refund shall be in the sole discretion of each Lender. Nothing in this Section
2.9(c) shall require any Lender to disclose or detail the basis of its
calculation of the amount of any tax benefit or any other information to the
Borrower or any other party.
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2.10 Sharing of Payments. If any Lender shall obtain any payment
-------------------
(whether voluntary, involuntary, through the exercise of any right of set-off or
otherwise) on account of the Revolving Loans made by it or its participation in
Letters of Credit in excess of its Proportionate Share of payments on account of
the Revolving Loans or Letters of Credit obtained by all the Lenders (other than
any Lender that has waived its Proportionate Share in writing), such Lender
shall forthwith purchase from the other Lenders such participation in the
Revolving Loans made by them or in their participation in Letters of Credit as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and each such Lender shall repay to
the purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect to the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.10 may, to the fullest extent permitted by
law, exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
ARTICLE 3.
Letters of Credit
-----------------
3.1 Issuance of Letters of Credit. Subject to the terms and
-----------------------------
conditions of this Credit Agreement and in reliance upon the representations and
warranties of the Borrower set forth herein, upon the request of the Borrower
pursuant to Section 3.4, one or more Issuing Banks selected by the Borrower
shall issue Letters of Credit hereunder and for the Borrower's account, as more
specifically described below. No Issuing Bank shall be obligated to issue any
Letter of Credit for the account of the Borrower if at the time of such
requested issuance:
(a) the face amount of such requested Letter of Credit when added to
the Letter of Credit Obligations then outstanding, would (i) cause the
Letter of Credit Obligations to exceed $15,000,000 or (ii) when added to
the aggregate amount of Revolving Loans then outstanding would exceed (x)
the lesser of (A) the Total Commitments and (B) the Borrowing Base then in
effect or (y) the Inventory Sublimit;
(b) any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit or any Requirement of Law
applicable to such Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction
over such Issuing Bank shall prohibit, or request such Issuing Bank to
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon such Issuing Bank with respect to
such Letter of Credit any restriction or reserve or capital requirement
(for which such Issuing Bank is not otherwise compensated) not in effect as
of the Restatement Effective Date, or any unreimbursed loss, cost or
expense which was not applicable, in effect or known to such Issuing Bank
as of the
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Restatement Effective Date and which such Issuing Bank deems in good faith
to be material to it; or
(c) a default of any Lender's obligations to fund under Section 3.6
exists, or such Lender is a Defaulting Lender under Section 2.4(c), unless
the Agent and the Issuing Banks have entered into satisfactory arrangements
with the Borrower to eliminate such Issuing Bank's risk with respect to
such Lender, including cash collateralization of such Lender's
Proportionate Share of the Letter of Credit Obligations.
Schedule III attached hereto contains a description of all letters of credit
issued by an Issuing Bank pursuant to the Existing Credit Agreement and which
are to remain outstanding on the Restatement Effective Date. Each such letter
of credit, including any extension thereof (each an "Existing Letter of Credit")
shall constitute a "Letter of Credit" for all purposes of this Agreement. Each
Existing Letter of Credit shall be deemed issued for purposes of Sections 3.3
and 4.7 on the Restatement Effective Date.
3.2 Terms of Letters of Credit. The Letters of Credit shall be in a
--------------------------
form customarily issued by the respective Issuing Bank or in such other form as
has been approved by such Issuing Bank. Each Letter of Credit shall be
denominated in Dollars. At the time of issuance, the amount and the terms and
conditions of each Letter of Credit, and the form of any drafts or acceptances
thereunder, shall be subject to approval by the Agent and the Borrower. In no
event may the term of any standby Letter of Credit issued hereunder exceed 12
months (except that such Letters of Credit may provide for annual renewal) nor
the term of any documentary Letter of Credit exceed 180 days, and all Letters of
Credit issued hereunder shall expire no later than the date that is five
Business Days prior to the Expiration Date. Any Letter of Credit containing an
automatic renewal provision shall also contain a provision pursuant to which,
notwithstanding any other provisions thereof, it shall expire no later than the
date that is five Business Days prior to the Expiration Date. Notwithstanding
the foregoing, to the extent that an Issuing Bank of a Letter of Credit
denominated in a currency other than Dollars has agreed in writing to such
arrangement at the time of the issuance of such Letter of Credit, the Borrower
shall reimburse any drawing thereunder in the currency in which such Letter of
Credit is denominated; provided that (x) if any such drawing is made at a time
--------
when there exists an Event of Default or (y) if such reimbursement is not made
by the close of business two Business Days after the Borrower has received
notice of such drawing, then, in either such case, such reimbursement shall
instead be made in Dollars and in immediately available funds.
3.3 Lenders' Participation. Immediately upon the issuance or
----------------------
amendment by any Issuing Bank of any Letter of Credit in accordance with the
procedures set forth in Section 3.1, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from such Issuing Bank,
without recourse or warranty, an undivided interest and participation to the
extent of such Lender's Proportionate Share (based upon its Commitment) of the
liability with respect to such Letter of Credit (including, without limitation,
all obligations of the Borrower with respect thereto, other than amounts owing
to such Issuing Bank consisting of Issuing Bank Fees and Facing Fees) and any
security therefor or guaranty pertaining thereto.
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3.4 Notice of Issuance. Whenever the Borrower desires the issuance
------------------
of a Letter of Credit, the Borrower shall deliver to the Payments Administrator
and the Issuing Bank a written notice no later than 1:00 P.M. New York City time
at least three Business Days (or such shorter period as may be agreed to by such
Issuing Bank) in advance of the proposed date of issuance of a letter of credit
request in substantially the form attached as Exhibit F (a "Letter of Credit
Request"). The Payments Administrator shall promptly transmit copies of each
Letter of Credit Request to each Lender. The transmittal by the Borrower of
each Letter of Credit Request shall be deemed to be a representation and
warranty by the Borrower that the Letter of Credit may be issued in accordance
with and will not violate any of the requirements of Section 3.1 or 5.2. A
Letter of Credit Request may be given in writing or electronically with prompt
confirmation in writing.
3.5 Payment of Amount Drawn Under Letters of Credit. In the event of
-----------------------------------------------
any request for drawing under any Letter of Credit by the beneficiary thereof,
the respective Issuing Bank shall notify the Payments Administrator, which shall
notify the Borrower of such request, not later than 11:00 A.M. on the Business
Day immediately prior to the date on which such Issuing Bank intends to honor
such drawing. The Borrower shall give notice to be received by the Payments
Administrator and the Issuing Bank not later than 1:00 P.M. on such Business Day
if it intends to reimburse such Issuing Bank for the amount of such drawing with
funds other than the proceeds of Revolving Loans. Such notice from the Borrower
shall be irrevocable and, if given, the Borrower shall reimburse such Issuing
Bank not later than the close of business New York City time on the day on which
such drawing is honored in an amount in same day funds equal to the amount of
such drawing. If the Payments Administrator shall not have timely received such
notice (i) the Borrower shall be deemed to have timely given a Notice of
Borrowing to the Payments Administrator to incur Revolving Loans on the date on
which such drawing is honored in an amount equal to the amount of such drawing
and (ii) subject to satisfaction or waiver of the conditions specified in
Section 5.2 hereof and the other terms and conditions of Borrowings contained
herein, the Lenders shall, on the date of such drawing, make Revolving Loans in
the amount of such drawing, the proceeds of which shall be applied directly by
the Payments Administrator to reimburse such Issuing Bank for the amount of such
drawing or payment. Borrowings pursuant to this Section 3.5 shall not be
subject to the minimum amount requirement of Section 2.3(a)(iii). If for any
reason, proceeds of Revolving Loans are not received by such Issuing Bank on
such date in an amount equal to the amount of such drawing, the Borrower shall
be obligated to and shall reimburse such Issuing Bank, on the Business Day
immediately following the date of such drawing, in an amount in same day funds
equal to the excess of the amount of such drawing over the amount of such
Revolving Loans, if any, which are so received, plus accrued interest on such
amount at the rate set forth in Section 4.2; provided, however, that any such
-------- -------
payments shall not prejudice any rights that the Borrower may have against any
Lender as a result of any default by such Lender in funding such Revolving
Loans, as provided in the final sentence of Section 2.4(c).
3.6 Payment by Lenders. (a) In the event that the Borrower does not
------------------
reimburse an Issuing Bank for the amount of any drawing pursuant to Section 3.5
and the proceeds of Revolving Loans incurred for such purpose are insufficient
for such purpose, the Payments Administrator shall promptly notify each Lender
of the unreimbursed amount and of such Lender's respective participation
therein. Each Lender shall make available to such Issuing Bank an
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amount equal to its respective participation in same day funds, at the office of
such Issuing Bank specified in such notice, not later than 1:00 P.M. New York
City time on the Business Day after the date notified by the Payments
Administrator. In the event that any Lender fails to make available to the
Issuing Bank the amount of such Lender's participation in such Letter of Credit
as provided in this Section 3.6, such Issuing Bank shall be entitled to recover
such amount on demand from such Lender, together with interest at the Federal
Funds Rate.
(b) The Payments Administrator or the Issuing Bank, as the case may
be, shall distribute to each Lender which has paid all amounts payable by it
under this Section 3.6 with respect to any Letter of Credit such Lender's
Proportionate Share of all payments subsequently received by the Payments
Administrator or the Issuing Bank, as the case may be, from the Borrower in
reimbursement of drawings honored under such Letter of Credit when such payments
are received.
3.7 Nature of Issuing Bank's Duties. In determining whether to pay
-------------------------------
under any Letter of Credit, each Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit. As between the Borrower, an
Issuing Bank and each other Lender, the Borrower assumes all risks of the acts
and omissions of, or misuse of the Letter of Credit issued by each Issuing Bank
by, the respective beneficiaries of such Letter of Credit. In furtherance and
not in limitation of the foregoing, no Issuing Bank nor any of the other Lenders
shall be responsible (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of or any drawing honored under
such Letter of Credit even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged, (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign such Letter of Credit, or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason, (iii) for failure of the beneficiary
of such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit, (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex, telecopy or otherwise, whether or not they be in cipher, (v) for errors
in interpretation of technical terms, (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit, or of the proceeds thereof, (vii) for the
misapplication by the beneficiary of such Letter of Credit of the proceeds of
any drawing honored under such Letter of Credit, and (viii) for any consequences
arising from actions or omissions taken or omitted in good faith or from causes
beyond the control of such Issuing Bank or the other Lenders; provided, however,
-------- -------
that nothing in this sentence shall relieve an Issuing Bank of liability for its
own gross negligence or willful misconduct.
3.8 Obligations Absolute. The obligations of the Borrower to
--------------------
reimburse an Issuing Bank for drawings honored under a Letter of Credit issued
by it and the obligations of the Lenders under Section 3.6 shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Credit Agreement under all circumstances including, without
limitation, the following circumstances:
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<PAGE>
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, set-off, defense or other right which
the Borrower or any Affiliate of the Borrower may have at any time against
a beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such beneficiary or transferee may be acting), such
Issuing Bank, any Lender or any other Person, whether in connection with
this Credit Agreement, the transactions contemplated herein or any
unrelated transaction, provided, however, that nothing contained herein
-------- -------
shall preclude the Borrower from asserting any such claim, defense or
counterclaim in a separate judicial proceeding or by compulsory
counterclaim;
(c) any draft, demand, certificate or any other documents presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents;
(e) payment by such Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
(f) failure of any drawing under a Letter of Credit or any non-
application or misapplication by the beneficiary of the proceeds of any
drawing; or
(g) the fact that a Default or Event of Default shall have occurred
and be continuing;
provided, however, that the Borrower shall have no obligation to reimburse an
- -------- -------
Issuing Bank and the Lenders shall have no obligation under Section 3.6 in the
event of such Issuing Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit comply with
the terms of such Letter of Credit or with respect to any other express
obligation an Issuing Bank may have under this Credit Agreement in making any
payment pursuant to any Letter of Credit.
ARTICLE 4.
Interest, Fees and Expenses
---------------------------
4.1 Interest on Eurodollar Rate Loans. Subject to the provisions of
---------------------------------
Section 4.4 hereof, interest on Eurodollar Rate Loans shall be payable on the
last day of each Interest Period with respect to such Eurodollar Rate Loans
(and, if earlier, the date three months after the date of the incurrence,
Conversion or Continuance thereof), at the date of any Conversion thereof (or
portion thereof) to a Base Rate Loan, upon any prepayment (on the amount
prepaid) and at maturity at an interest rate per annum equal during each
Interest Period for such Eurodollar Rate Loan to the Adjusted Eurodollar Rate in
effect for such Interest Period in effect for such Eurodollar Rate Loan plus the
Applicable Margin. The Payments Administrator upon
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<PAGE>
determining the Adjusted Eurodollar Rate for any Interest Period shall promptly
notify the Borrower and the Lenders thereof. Each determination by the Payments
Administrator of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.
4.2 Interest on Prime Rate Loans. Subject to the provisions of
----------------------------
Section 4.4 hereof, interest on Base Rate Loans shall be payable monthly as of
the end of each month, upon any Conversion thereof (or portion thereof) to a
Eurodollar Rate Loan, upon any prepayment (on the amount prepaid) and at
maturity at an interest rate per annum equal to the Base Rate plus the
Applicable Margin; provided that the payment of any interest that would
--------
otherwise be required to be paid on the Restatement Effective Date in respect of
any Existing Loan which is repaid on such date as described in Section 5.1(j)
shall be deferred until the date on which the Interest Period applicable to such
Existing Loan would have otherwise ended. Each determination by the Payments
Administrator of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.
4.3 Notice of Continuation and Notice of Conversion. (a) With
-----------------------------------------------
respect to any Borrowing consisting of Eurodollar Rate Loans, the Borrower may,
subject to the provisions of Section 4.3(c) and the condition that no Default or
Event of Default then exists, elect to maintain such Borrowing or any portion
thereof equal to at least $1,000,000 as Eurodollar Rate Loans by selecting a new
Interest Period for such Borrowing (or portion thereof), which new Interest
Period shall commence on the last day of the immediately preceding Interest
Period. Each selection of a new Interest Period (a "Continuation") shall be
made by notice given not later than 12:00 P.M. New York City time on the third
Business Day prior to the date of any such Continuation, by the Borrower to the
Payments Administrator. Such notice (a "Notice of Continuation") shall be by
telephone, telecopy, telex or cable, confirmed immediately in writing if by
telephone, substantially in the form of Exhibit G-1, which shall be completed in
such manner as is necessary to comply with all limitations on Revolving Loans
outstanding hereunder. If the Borrower shall fail to, or does not have the
right to, select a new Interest Period for any Borrowing consisting of
Eurodollar Rate Loans in accordance with this Section 4.3(a), such Loans will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Base Rate Loans.
(b) The Borrower may on any Business Day occurring on or after the
Syndication Date (provided that no Default or Event of Default has occurred and
--------
is continuing), upon notice (each such notice, a "Notice of Conversion") given
to the Payments Administrator, and subject to the provisions of Section 4.3(c),
Convert the entire amount of or a portion of Revolving Loans of one Type into a
Borrowing of Revolving Loans of the other Type; provided, however, that any
-------- -------
Conversion of any Eurodollar Rate Loans into Base Rate Loans shall be made on,
and only on, the last day of an Interest Period for such Eurodollar Rate Loans.
Each such Notice of Conversion shall be given not later than 12:00 P.M. New York
City time on the Business Day prior to the date of any proposed Conversion into
Base Rate Loans and on the third Business Day prior to the date of any proposed
Conversion into Eurodollar Rate Loans. Subject to the restrictions specified
above, each Notice of Conversion shall be by telephone, telecopy, telex or
cable, confirmed immediately in writing if by telephone, substantially in the
form of Exhibit G-2. Each Conversion shall be in an aggregate amount for the
Revolving Loans of all Lenders of not less than $1,000,000.
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(c) Notwithstanding anything contained in Section 2.3 or subsections
(a) and (b) above to the contrary,
(i) if the Payments Administrator is unable to determine the
Adjusted Eurodollar Rate for Eurodollar Rate Loans comprising any requested
Borrowing, Continuation or Conversion, the right of the Borrower to select
or maintain Eurodollar Rate Loans for such Borrowing or any subsequent
Borrowing shall be suspended until the Payments Administrator shall notify
the Borrower and the Lenders that the circumstances causing such suspension
no longer exist, and each Revolving Loan comprising such Borrowing shall be
made as, or Converted into, a Base Rate Loan,
(ii) if the Required Lenders shall, at least one Business Day before
the date of any requested Borrowing, Continuation or Conversion, notify the
Payments Administrator that the Adjusted Eurodollar Rate for Revolving
Loans comprising such Borrowing will not adequately reflect the cost to
such Lenders of making or funding their respective Revolving Loans for such
Borrowing, the right of the Borrower to select Eurodollar Rate Loans for
such Borrowing shall be suspended until the Payments Administrator shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Revolving Loan comprising such
Borrowing shall be made as, or Converted into, a Base Rate Loan, and
(iii) there shall not be at any one time more than five (5) Interest
Periods in effect with respect to Eurodollar Rate Loans.
(d) Each Notice of Continuation and Notice of Conversion shall be
irrevocable by and binding on the Borrower. In the case of any Borrowing,
Continuation or Conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be comprised of Eurodollar
Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill, on or
before the date for such Borrowing, Continuation or Conversion specified in such
Notice of Borrowing, Notice of Continuation or Notice of Conversion, the
applicable conditions set forth in Article 5, including, without limitation, any
loss (excluding loss of anticipated profits), cost or expense incurred by reason
of the liquidation or re-employment of deposits or other funds acquired by such
Lender to fund the Eurodollar Rate Loan to be made by such Lender as part of
such Borrowing, Continuation or Conversion.
4.4 Interest After Default. Interest on any amount of matured
----------------------
principal of the Revolving Loans, and interest on the amount of principal of the
Revolving Loans outstanding as of the date an Event of Default under Section
9.1(a) or (c) (to the extent arising from the failure to comply with Sections
8.3, 8.9, 8.10 or 8.15 and after the Agent has given notice of such failure to
the Borrower) occurs, and at all times thereafter until the earlier of the date
upon which (i) all Obligations have been paid and satisfied in full, (ii) such
Event of Default shall have been cured or waived, or (iii) with respect to such
Events of Default arising under Section 9.1(c) the date which is thirty days
after the first day the rate is increased pursuant to Section 4.4 with respect
to any individual occurrence of Event of Default shall be payable on demand at a
rate equal to the rate at which the Revolving Loans are bearing interest
pursuant to Sections 4.1 or 4.2 above plus 2%, or,
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if higher, the Base Rate in effect from time to time plus the sum of (x) the
Applicable Margin for Base Rate Loans and (y) 2%.
4.5 Reimbursement of Expenses. (a) From and after the Restatement
-------------------------
Effective Date, the Borrower shall promptly reimburse the Agent for all Expenses
of the Agent as the same are incurred by the Agent and upon receipt of invoices
therefor and, if requested by the Borrower, such reasonable backup materials and
information as the Borrower shall reasonably request.
(b) If any payment of principal of, or any Conversion of, any
Eurodollar Rate Loan is made other than on the last day of an Interest Period
applicable thereto for any reason, the Borrower shall, upon demand by any Lender
(with a copy of such demand to the Payments Administrator), pay to the Payments
Administrator for the account of such Lender any amounts required to compensate
such Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Eurodollar Rate Loan.
4.6 Unused Line Fee. The Borrower shall pay to the Payments
---------------
Administrator for the benefit of each of the Lenders (other than a Defaulting
Lender for so long as such Lender is a Defaulting Lender) a non-refundable fee
(the "Unused Line Fee") equal to 0.375% per annum on the unused portion of such
Lender's Commitment, which fee shall (i) accrue from the date this Credit
Agreement becomes effective pursuant to Section 11.14 until the Expiration Date
and (ii) be due and payable quarterly in arrears on the last Business Day of
March, June, September and December, and on the Expiration Date or such earlier
date upon which the Total Commitments are terminated.
4.7 Letter of Credit Fee; Facing Fee. (a) The Payments
--------------------------------
Administrator, for the ratable benefit of the Lenders, shall be entitled to
charge to the account of the Borrower (i) a fee (the "Letter of Credit Fee"), in
an amount equal to 1.75% per annum of the daily weighted average amount of
outstanding Letter of Credit Obligations during the immediately preceding
quarter, due and payable quarterly in arrears on the last Business Day of March,
June, September and December, and on the Expiration Date or such earlier date
upon which the Total Commitments are terminated, and (ii) as and when incurred
by the Payment Administrator or any Lender, any charges, fees, costs and
expenses charged to the Payment Administrator or any Lender for the Borrower's
account by any Issuing Bank (other than any fees charged to such Payment
Administrator or any Lender which would be duplicative of the Letter of Credit
Fee paid to such Payment Administrator for the benefit of the Lenders) (the
"Issuing Bank Fees") in connection with the issuance of any Letters of Credit by
any Issuing Bank. Each determination by the Payments Administrator of Letter of
Credit Fees hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(b) Letter of Credit Fees payable in respect of Letter of Credit
Obligations outstanding as of the date an Event of Default under Section 9.1(a)
or (c) (to the extent arising from the failure to comply with Sections 8.3, 8.9,
8.10 or 8.15 and after the Agent has given notice of such failure to the
Borrower) occurs, and at all times thereafter until the earlier of the date upon
which (i) all Obligations have been paid and satisfied in full, (ii) such Event
of Default
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shall have been cured or waived, or (iii) with respect to such Events of Default
arising under Section 9.1(c) the date which is thirty days after the first day
the rate is increased pursuant to this clause (b) with respect to any individual
occurrence of Event of Default shall be payable on demand at a rate equal to the
rate at which the Letter of Credit Fees are charged pursuant to Section 4.7(a)
above, plus 2%.
(c) The Borrower agrees to pay to the respective Issuing Bank, for
its own account, a facing fee in respect of each Letter of Credit issued for its
account hereunder (the "Facing Fee') for the period from and including the date
of issuance of such Letter of Credit to and including termination of such Letter
of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily Stated
Amount of such Letter of Credit; provided that in no event shall the annual
--------
Facing Fee with respect to each Letter of Credit be less than $500. Accrued
Facing Fees shall be due and payable quarterly in arrears on the last Business
Day of March, June, September and December, and on the Expiration Date or such
earlier date upon which the Total Commitments are terminated and no Letters of
Credit remain outstanding.
4.8 Authorization to Charge Account. The Borrower hereby authorizes
-------------------------------
the Payments Administrator, subject to prior notice to the Borrower, to charge
the Borrower's Revolving Loan account with the amount of all Fees, Expenses and
other payments to be paid hereunder and under the other Credit Documents as and
when such payments become due. The Borrower confirms that any charges which the
Payments Administrator may so make to the Borrower's Revolving Loan account as
herein provided will be made as an accommodation to the Borrower and solely at
the Payments Administrator's discretion.
4.9 Indemnification in Certain Events. (a) If after the Restatement
---------------------------------
Effective Date, either (i) any change in or in the interpretation of any law or
regulation is introduced, including, without limitation, with respect to reserve
requirements, applicable to the Agent, BT Delaware or any of the Lenders (or, in
the case of a Lender which is not a banking institution, any Affiliate of such
Lender funding such Lender ("Funding Affiliate")), or (ii) any of the Lenders
(or, in the case of a Lender which is not a banking institution, any Funding
Affiliate) complies with any future guideline or request from any central bank
or other Governmental Authority or (iii) any of the Lenders (or, in the case of
a Lender which is not a banking institution, any Funding Affiliate) reasonably
determines that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or any of the Lenders (or, in the case of a
Lender which is not a banking institution, any Funding Affiliate) complies with
any future request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, and in the case of any event set forth in this clause (iii), such
adoption, change or compliance has or would have the direct or indirect effect
of reducing the rate of return on any of the Lenders' (or, in the case of a
Lender which is not a banking institution, any Funding Affiliate) capital as a
consequence of its obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration the Lenders' (or, in the case of a Lender which is not a banking
institution, any Funding Affiliate) policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, and any of the foregoing
events described in
44
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clauses (i), (ii) or (iii) increases the cost to the Agent, any Issuing Bank or
any of the Lenders of (A) funding or maintaining its Commitment or (B) issuing,
making or maintaining any Letter of Credit or of purchasing or maintaining any
participation therein, or reduces the amount receivable in respect thereof by
the Agent or any Lender, then the Borrower shall within 10 days after demand by
the Agent, pay to the Payments Administrator, for the account of each applicable
Lender, additional amounts sufficient to indemnify the Lenders against such
increase in cost or reduction in amount receivable allocable to such Lenders'
funding or maintaining its Commitment or issuing, making or maintaining any
Letter of Credit or purchasing or maintaining any participation therein. A
certificate as to the amount of such increased cost and setting forth in
reasonable detail the calculation thereof shall be submitted to the Borrower by
the Payments Administrator, or the applicable Lender, and shall be conclusive
absent manifest error.
(b) Each Lender or Issuing Bank or the Agent will notify the
Borrower and the Payments Administrator of any event occurring after the
Restatement Effective Date which will entitle such Lender, Issuing Bank or the
Agent to payment pursuant to Section 4.9(a) as promptly as practicable after it
obtains knowledge thereof, specifying the event giving rise to such claim and
setting out in reasonable detail an estimate of the basis and computation of
such claim. Upon receipt of such notice, the Borrower shall compensate such
Lender or Issuing Bank or the Agent in accordance with Section 4.9(a) from the
date such costs are incurred (including, without limitation, where such costs
are retroactively applied); provided, however, that the Borrower shall not be
-------- -------
required to compensate a Lender or Issuing Bank or the Agent for cost incurred
earlier than 150 days prior to the date of the notice required to be delivered
to the Borrower pursuant to this Section 4.9(b).
4.10 Calculations. All calculations of (i) interest hereunder and
------------
(ii) fees, including, without limitation, Unused Line Fees and Letter of Credit
Fees, shall be made by the Payments Administrator, on the basis of a year of 360
days, or, if such computation would cause the interest and fees chargeable
hereunder to exceed the Highest Lawful Rate, 365/366 days, in each case for the
actual number of days elapsed (including the first day but excluding the last
day) occurring in the period for which such interest or fees are payable. Each
determination by the Payments Administrator of an interest rate or payment
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
4.11 Change of Applicable Lending Office. Each Lender agrees that on
-----------------------------------
the occurrence of any event giving rise to the operation of Sections 2.9 or 4.9
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Revolving Loans or Letters of Credit
affected by such event, provided that such designation is made on such terms
--------
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of such Sections. Nothing in this Section 4.11 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Sections 2.9 or 4.9.
45
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ARTICLE 5.
Conditions Precedent
--------------------
5.1 Conditions to Initial Loans and Letters of Credit on the
--------------------------------------------------------
Restatement Effective Date. The occurrence of the Restatement Effective Date
- --------------------------
and the obligation of each Lender to make the initial Revolving Loans hereunder
are subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such Revolving Loans on the Restatement
Effective Date, the following conditions precedent:
(a) Execution of Agreement; Notes. On or prior to the Restatement
-----------------------------
Effective Date, this Credit Agreement shall have become effective as
provided in Section 11.14 and there shall have been delivered to the
Payments Administrator for the account of each Lender the appropriate
Revolving Note in the amount, maturity and as otherwise provided herein.
(b) Material Adverse Change. (i) Since the Restatement Effective
-----------------------
Date, no Lender shall have become aware of any, or no change, occurrence,
event or development or event involving a prospective change shall have
occurred and be continuing, in either case, that is reasonably likely to
have a Material Adverse Effect or (ii) there shall not have occurred a
substantial impairment of the financial markets generally that is
reasonably likely to materially and adversely affect the transactions
contemplated hereby, in each case as determined by the Agent.
(c) Officer's Certificate. On the Restatement Effective Date, the
---------------------
Agent shall have received a certificate dated such date signed by an
appropriate officer of the Borrower stating that all of the applicable
conditions set forth in Sections 5.1(b), (f), (g), (h), (i), (j)(ii) and
(iv), (k) and (l) and 5.2(a), (b), (c) and (d) exist as of such date.
(d) Opinions of Counsel. On the Restatement Effective Date, the
-------------------
Agent shall have received opinions, addressed to each of the Lenders and
dated the Restatement Effective Date, (i) from Katten, Muchin & Zavis,
special counsel to Holding and the Borrower, which opinion shall be
substantially in the form of Exhibit H-1 and shall cover the matters
contained in Exhibit H-1 and such other matters incident to the
transactions contemplated herein as the Agent may reasonably request and
(ii) from White & Case, special counsel to the Lenders, which opinion shall
be substantially in the form of Exhibit H-2 and shall cover the matters
contained in Exhibit H-2.
(e) Corporate Proceedings. (i) On the Restatement Effective Date,
---------------------
the Agent shall have received from each Credit Party a certificate, dated
the Restatement Effective, signed by the president, chief executive
officer, vice president or chief financial officer, and attested by the
secretary or any assistant secretary of such Person, substantially in the
form of Exhibit I with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws, or other organizational documents
of such Credit Party and the resolutions of such Credit Party referred to
in such certificate and all of the foregoing
46
<PAGE>
(including each such Certificate of Incorporation and By-Laws) shall be
satisfactory to the Agent.
(ii) On the Restatement Effective Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Credit Agreement and the other
Transaction Documents shall be reasonably satisfactory in form and
substance to the Agent, and the Agent shall have received all information
and copies of all certificates, documents and papers, including good
standing certificates and any other records of corporate proceedings and
governmental approvals, if any, which the Agent reasonably may have
requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental
authorities.
(f) Issuance of New Senior Notes. (i) On or prior to the
----------------------------
Restatement Effective Date, the Borrower shall have received cash proceeds
(after the payment of discount and the payment of underwriting or placement
fees in respect thereof) of approximately $105,000,000 from the issuance by
the Borrower of its New Senior Notes, provided that such cash proceeds
--------
received and the proceeds received pursuant to the Special Term Loan
Agreement described in Section 5.1(h) shall not exceed $225,000,000 in the
aggregate.
(ii) On or prior to the Restatement Effective Date, the Borrower
shall have complied with all requirements of the Senior Note Indenture to
redeem or defease the outstanding Senior Notes and the Agent shall have
received evidence in form, scope and substance satisfactory to it that the
matters set forth in this Section 5.1(f)(ii) have been satisfied at such
time.
(iii) On or prior to the Restatement Effective Date, the Agent shall
have received copies of the New Senior Note Documents, which shall be in
full force and effect and certified as true and correct by an authorized
officer of the Borrower and all of the terms and conditions of the New
Senior Notes and the New Senior Note Documents shall be in form and
substance satisfactory to the Agent.
(g) Amendment to Holding Restructuring Agreement and Holding Notes.
--------------------------------------------------------------
(i) On or prior to the Restatement Effective Date, Holding and KIA IV shall
have entered into the Amendment to Holding Restructuring Agreement, and the
Holding Notes shall have been amended in accordance with the Holding
Restructuring Agreement.
(ii) On or prior to the Restatement Effective Date, the Agent shall
have received copies of the Holding Restructuring Agreement, the Amendment
to Holding Restructuring Agreement and documents evidencing the amendment
to the Holding Notes, which shall be in full force and effect and certified
as true and correct by an authorized officer of the Borrower and all of the
terms and conditions of the Amendment to Holding Restructuring Agreement
and the documents evidencing the amendment to the Holding Notes shall be in
form and substance satisfactory to the Agent.
47
<PAGE>
(h) Special Term Loan Agreement. (i) On or prior to the
--------------------------
Restatement Effective Date, the Borrower shall have entered into the
Special Term Loan Agreement, incurred loans thereunder and received
proceeds in the amount of approximately $100,000,000 as a result thereof,
provided that such proceeds received and the cash proceeds received
--------
pursuant to the issuance of New Senior Notes described in Section 5.1(f)
shall not exceed $225,000,000 in the aggregate.
(ii) On or prior to the Restatement Effective Date, the Agent shall
have received copies of the Special Term Loan Documents, which shall be in
full force and effect and certified as true and correct by an authorized
officer of the Borrower and all of the terms and conditions of the Special
Term Loan Agreement and the Special Term Loan Documents shall be in form
and substance satisfactory to the Agent.
(i) Use of Proceeds. On the Restatement Effective Date, the
---------------
Borrower shall have utilized proceeds received by it from the consummation
of the Transaction to (i) deposit funds not exceeding approximately
$162,500,000 with the trustee under the Senior Note Indenture for the
purpose of defeasing or redeeming all Senior Notes on or prior to April 23,
1998, pursuant to documents (including the documents described in Section
8.01 of the Senior Note Indenture) in form and substance satisfactory to
the Agent and repaying accrued and unpaid interest, in the amount of
approximately $7,200,000, on the Senior Notes, (ii) (x) deposit funds not
exceeding $5,100,000 with an escrow agent under an escrow agreement in form
and substance satisfactory to the Agent, and (y) Heller Financial, Inc.
shall have delivered to the escrow agent all mortgage releases, UCC
termination statements and other instruments as may be suitable or
appropriate to release all Liens securing payment of the obligations under
the Heller Documents (and the Borrower shall have delivered copies of such
documents described in this clause (y) to the Agent and such documents
shall be in form and substance satisfactory to the Agent), (iii) pay a
dividend in the amount of $45,400,000 (provided that if more than
--------
$205,000,000, in the aggregate, in proceeds are raised from the
transactions described in Sections 5.1(f) and (g), the net excess amount of
the proceeds raised may be used to increase the amount of the dividend
payment by such net excess amount) to Holding to enable Holding to prepay
approximately $40,000,000 of principal of, and approximately $5,400,000 of
interest accrued on, the Holding Notes as of March 31, 1998 and (iv) pay
related fees and expenses in the aggregate amount of approximately
$9,000,000.
(j) Existing Credit Agreement. On the Restatement Effective Date,
-------------------------
(i) each Continuing Lender shall have converted its Existing Loans as
contemplated by Section 1.1, (ii) the Borrower shall have paid all interest
and fees (including commitment fees) owing under the Existing Credit
Agreement through the Restatement Effective Date, (iii) the Agent shall
have received evidence in form, scope and substance satisfactory to it that
the matters set forth in this Section 5.1(j) have been satisfied on the
Restatement Effective Date and (iv) the Borrower shall have paid to any
Non-Continuing Lender the expenses, if any, set forth in Section 4.5(b).
48
<PAGE>
(k) Approvals. On or prior to the Restatement Effective Date, all
---------
necessary governmental and third party approvals in connection with the
Transaction shall have been obtained and remain in effect and evidence
thereof shall have been provided to the Agent, and all applicable waiting
periods shall have expired without any action being taken by any competent
authority which restrains, prevents or imposes, in the judgment of the
Required Lenders or the Agent, materially adverse conditions upon the
consummation of the Transaction.
(l) Litigation. On the Restatement Effective Date, there shall be
----------
no actions, suits or proceedings pending or threatened (i) with respect to
this Credit Agreement or any other Transaction Document or (ii) except as
set forth on Schedule IV, which the Agent or the Required Lenders shall
determine is reasonably likely to have a Material Adverse Effect.
(m) Acknowledgment, Consent and Amendment. (i) On the Restatement
-------------------------------------
Effective Date, the Borrower and the Agent shall have duly authorized,
executed and delivered an Acknowledgment, Consent and Amendment,
substantially in the form of Exhibit J hereto (as amended, modified,
extended, renewed, replaced, restated or supplemented from time to time,
the "Acknowledgment, Consent and Amendment").
(ii) On the Restatement Effective Date, (1) the Security Agreement
shall remain in full force and effect, (2) no filings, recordings,
registrations or other actions shall be necessary or desirable to maintain
the perfection and priority of the security interests granted pursuant to
the Security Agreement in the Security Agreement Collateral covered thereby
and (3) the Agent shall have received:
(x) executed copies of Form UCC-1 financing statements in
appropriate form for filing under the UCC of each jurisdiction as may
be necessary to perfect the security interests purported to be created
by the Security Agreement;
(y) evidence of the completion of all recordings and filings of,
or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created thereby; and
(z) evidence that all other actions necessary or, in the opinion
of the Collateral Agent, desirable to perfect the security interests
purported to be created by the Security Agreement have been taken.
(n) Insurance Policies. On the Restatement Effective Date, the
------------------
Agent shall have received evidence (including, without limitation,
certificates of insurance complying with the requirements of Section 7.10
for the business and properties of the Borrower, in form and substance
satisfactory to the Agent.
(o) Existing Indebtedness Agreements; Shareholders' Agreements;
-----------------------------------------------------------
Management Agreements; Employment Agreements; Tax Sharing Agreements. On
--------------------------------------------------------------------
or prior to the
49
<PAGE>
Restatement Effective Date, there shall have been delivered to the Agent
copies, certified as true and correct by an appropriate officer of Holding
and the Borrower, respectively, making such delivery, of:
(i) all agreements evidencing or relating to the Existing
Indebtedness (collectively, the "Existing Indebtedness Agreements"),
if any, of Holding and the Borrower, respectively;
(ii) all agreements entered into by Holding or any of its
Subsidiaries (x) governing the terms and relative rights of its
capital stock or (y) with any shareholders relating to such entity
with respect to their capital stock (collectively, the "Shareholders'
Agreements"), if any, of Holding and the Borrower, respectively;
(iii) any material agreements (or the forms thereof) with
members of, or with respect to the, management of Holding or any of
its Subsidiaries (collectively the "Management Agreements"), if any,
of Holding and the Borrower, respectively;
(iv) any employment agreements (or the forms thereof together
with a list of employees who are parties to such agreements) entered
into by Holding or any of its Subsidiaries (collectively, the
"Employment Agreements"), if any, of Holding and the Borrower,
respectively; and
(v) any tax sharing, tax allocation and other similar
agreement entered into by Holding, or any Subsidiary of Holding
(collectively, the "Tax Sharing Agreements"), if any, of Holding and
the Borrower, respectively;
all of which Existing Indebtedness Agreements, Shareholders' Agreements,
Management Agreements, Employment Agreements and Tax Sharing Agreements
shall be in the form delivered to counsel to the Agent on or prior to the
date hereof or otherwise in form and substance satisfactory to the Agent
and shall be in full force and effect on the Restatement Effective Date.
(p) Balance Sheet. On the Restatement Effective Date, Holding shall
-------------
have delivered, or shall have caused to be delivered, to the Agent, the
unaudited December 31, 1997 pro forma consolidated balance sheet of the
--- -----
Borrower and its Subsidiaries, after giving effect to the Transaction and
the related financing thereof, which pro forma balance sheet as well as the
--- -----
assumptions heretofore supplied to the Agent relating to taxes and
intangibles and the amortization of intangibles, shall be satisfactory in
form and substance to the Agent.
(q) Solvency Opinion. On the Restatement Effective Date, the
----------------
Lenders shall have received opinions of value and other appropriate factual
information and expert advice from Murray, Devine & Co., Inc. supporting
the conclusions that, after giving effect to the Transaction, the Borrower
and its Subsidiaries taken as a whole will not be
50
<PAGE>
insolvent and will not be rendered insolvent by the indebtedness incurred
or guaranteed in connection therewith, will not be left with unreasonably
small capital with which to engage in its or their businesses and will not
have incurred debts beyond its or their ability to pay such debts as they
mature.
(r) Payment of Fees. On the Restatement Effective Date, all costs,
---------------
fees and expenses, and all other compensation contemplated by this Credit
Agreement, due to the Agent or the Lenders (including, without limitation,
legal fees and expenses) shall have been paid to the extent due.
(s) Borrowing Base Certificate. On the Restatement Effective Date,
--------------------------
the Borrower shall have delivered to the Agent a Borrowing Base Certificate
meeting the requirements of Section 7.1(e) and which Borrowing Base shall
be deemed appropriate by the Agent in its Permitted Discretion with respect
to the Borrower's overall business and working capital requirements.
(t) Consent Letter. On the Restatement Effective Date, the Agent
--------------
shall have received a letter from CT Corporation System, indicating its
consent to its continued appointment by Holding and the Borrower as their
agent to receive service of process, pursuant to the consent letter
executed in connection with the Existing Credit Agreement and substantially
in the form of Exhibit K hereto, as specified in Section 11.1 of this
Credit Agreement.
(u) Intercreditor Agreement. On the Restatement Effective Date, (i)
-----------------------
the Agent on behalf the Lenders, and Fleet National Bank, as administrative
agent for the lenders under the Special Term Loan Agreement, shall have
entered into an Intercreditor Agreement substantially in the form of
Exhibit L (as modified, amended or supplemented from time to time in
accordance with the terms thereof and hereof, the "Intercreditor
Agreement"), which shall be in full force and effect and (ii) the Borrower
shall have delivered to such parties set forth in clause (i) an
acknowledgment of the Intercreditor Agreement.
5.2 Conditions to Each Revolving Loan and Letter of Credit. On the
------------------------------------------------------
date of the making of any Revolving Loan or the issuance of any Letter of
Credit, both immediately before and after giving effect thereto and to the
application of the proceeds therefrom, the following statements shall be true to
the satisfaction of the Agent (and each delivery or deemed delivery of each
Notice of Borrowing and a Letter of Credit Request, and the acceptance by the
Borrower of the proceeds of such Revolving Loans or issuance of such Letter of
Credit, shall constitute a representation and warranty by the Borrower that on
the date of such Revolving Loans or issuance of such Letter of Credit
immediately before and after giving effect thereto and to the application of the
proceeds therefrom, such statements are true):
(a) the representations and warranties contained in this Credit
Agreement and in each other Credit Document are true and correct in all
material respects on and as of the date of such Revolving Loans or issuance
of such Letter of Credit as though made on and as of such date, except to
the extent that such representations and warranties expressly
51
<PAGE>
relate solely to an earlier date (in which case such representations and
warranties shall have been true and accurate on and as of such earlier
date);
(b) no event has occurred and is continuing, or would result from
such Revolving Loans or the issuance of any Letter of Credit or the
application of the proceeds thereof, which would constitute a Default or an
Event of Default;
(c) no change or development which in any such case, has had or is
reasonably expected to have a Material Adverse Effect, shall have occurred
and be continuing; and
(d) with respect to the issuance of any Letter of Credit, none of the
events set forth in Section 3.1 hereof has occurred and is continuing or
would result from the issuance of such Letter of Credit.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Lenders that all
of the applicable conditions specified above exist as of the date of such Credit
Event. All of the certificates, legal opinions and other documents and papers
referred to in this Section 5, unless otherwise specified, shall be delivered to
the Payments Administrator at its address specified in Section 11.5 hereof for
the account of each of the Lenders and, except for the Notes, in sufficient
counterparts or copies for each of the Lenders and shall be in form and
substance as specified herein or otherwise satisfactory to the Agent.
ARTICLE 6.
Representations and Warranties
------------------------------
To induce the Lenders to enter into this Credit Agreement and to make
Revolving Loans and issue and/or participate in the Letters of Credit provided
for herein, each of Holding and the Borrower makes the following
representations, warranties and agreements, as to itself and as to each of its
Subsidiaries, with the Lenders, all of which shall survive the execution and
delivery of this Credit Agreement, the making of the Revolving Loans and the
issuance of the Letters of Credit (with the occurrence of each Credit Event
being deemed to constitute a representation and warranty that the matters
specified in this Article 6 are true and correct in all material respects on and
as of the date of each such Credit Event, unless stated to relate to a specific
earlier date):
6.1 Corporate Status. Holding, the Borrower and each of the
----------------
Borrower's Subsidiaries (i) is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction of its organization and has
the corporate power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage and (ii)
has duly qualified and is authorized to do business and is in good standing in
all jurisdictions where it is required to be so qualified and where the failure
to be so qualified would be reasonably likely to have a Material Adverse Effect.
52
<PAGE>
6.2 Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting the rights and remedies of creditors and (ii) federal securities or
other laws or regulations or public policy insofar as they may restrict the
enforceability of rights to indemnification.
6.3 No Violation. Neither the execution, delivery and performance by
------------
any Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Collateral
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of such Credit Party or
any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed
of trust, agreement or other instrument to which such Credit Party or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject or (iii) will violate any provision of the
charter or By-Laws of Holding, the Borrower or any of the Borrower's
Subsidiaries, except, in the case of clauses (i) and (ii) any immaterial
contravention, conflict, inconsistency, breach or default which are not
reasonably likely to adversely affect any Lender.
6.4 Litigation. Except as set forth on Schedule IV, there are no
----------
actions, suits or proceedings pending or threatened with respect to Holding, the
Borrower or any of the Borrower's Subsidiaries that, after giving effect to
expected insurance proceeds and indemnity payments, are reasonably likely to
have a Material Adverse Effect.
6.5 Use of Proceeds. (a) The proceeds of all Revolving Loans shall
---------------
be utilized (i) to refinance the Existing Loans, (ii) pay no more than
$20,000,000 (w) to repay the $155,000,000 of the Senior Notes, plus premium and
accrued and unpaid interest, in the amount of approximately $7,200,000, on the
Senior Notes, (x) repay the aggregate principal amount of purchase money
indebtedness, including premium and accrued interest thereon, as set forth in
the Heller Documents, (y) to pay in part a dividend to Holding and (z) to pay
related fees and expenses and (iii) for general corporate purposes of the
Borrower and/or its Subsidiaries.
(b) No part of the proceeds of any Revolving Loan will be used to
purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.6 Governmental Approvals. Except as set forth on Schedule V hereto
----------------------
and except for the filing of financing statements and continuation statements as
required under the
53
<PAGE>
Collateral Documents, no order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
foreign or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance by each Credit Party of any Credit Document
or (ii) the legality, validity, binding effect or enforceability of any Credit
Document as against each Credit Party thereto.
6.7 Investment Company Act. Neither Holding, the Borrower nor any of
----------------------
the Borrower's Subsidiaries is an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
6.8 Public Utility Holding Company Act. Neither Holding, the
----------------------------------
Borrower nor any of the Borrower's Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
6.9 True and Complete Disclosure. (a) All factual information
----------------------------
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
Holding or the Borrower in writing to the Agent or any Lender (including,
without limitation, such information contained in the Confidential Information
Memorandum delivered to the Agent for purposes of or in connection with this
Credit Agreement or the Transaction does not, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Holding or
the Borrower in writing to the Agent or any Lender will not, as of the date as
of which such information is dated or certified, contain any untrue statement of
a material fact or omit to state any material fact necessary to make such
information (taken as a whole) not misleading as of such time, in each case in
light of the circumstances under which such information was provided, it being
understood and agreed that for the purposes of this Section 6.9, such factual
information shall not include projections and pro forma financial information.
--- -----
(b) The projections and pro forma financial information contained in
--- -----
the factual information referred to in clause (a) above are based on good faith
estimates and assumptions believed by the Borrower to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and necessarily were based upon numerous
assumptions with respect to industry performance, general business and economic
and competitive conditions and uncertainties, taxes and other matters which are
beyond the control of Holding, the Borrower and the Borrower's Subsidiaries,
such that there can be no assurance that such projections will be realized and
actual results may differ from the projected results.
(c) As of the Restatement Effective Date, there is no fact known to
any Credit Party (other than matters of general economic, political or social
nature) which materially and adversely affects the business, property, assets,
liabilities, financial condition or prospects of the Borrower and its
Subsidiaries taken as a whole which has not been disclosed herein or in such
other documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated hereby.
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6.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Restatement Effective Date on a pro forma basis after giving effect to the
--- -----
Transaction and all Indebtedness incurred, and to be incurred, and Liens created
and to be created, by each Credit Party in connection with this Credit
Agreement, (x) the sum of the assets, at a fair valuation, of the Borrower and
its Subsidiaries taken as a whole will exceed their debts, (y) the Borrower and
its Subsidiaries taken as a whole will not have incurred nor intended to, or
believe that they will, incur debts beyond their ability to pay such debts as
such debts mature and (z) the Borrower and its Subsidiaries taken as a whole do
not have unreasonably small capital with which to conduct their respective
businesses. For purposes of this Section 6.10(a), "debt" means any reasonably
expected liability on a claim, and "claim" means (i) right to payment whether or
not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(b) Holding and/or the Borrower have furnished to the Lenders the
following financial statements, which have been prepared in accordance with GAAP
(except, in the case of the unaudited financial statements referred to below,
for the omission of footnotes and ordinary year end adjustments) consistently
applied throughout the periods involved: (i) the Borrower's consolidated
balance sheet as of, and statements of operations, shareholder's equity and cash
flows for the fiscal year ended March 31, 1997, audited by independent certified
public accountants, and accompanied by an unqualified opinion thereof and (ii)
an unaudited consolidated balance sheet of the Borrower as of, and unaudited
statements of operations, shareholder's equity and cash flows for the nine-month
period ending December 31, 1997. Since the date of the financial statements
referred to in clause (ii) above, nothing has occurred which would be reasonably
likely to result in a Material Adverse Effect.
6.11 Locations of Offices, Records and Inventory. The address of the
-------------------------------------------
principal place of business and chief executive office of Holding and the
Borrower as of the date hereof and as of the Restatement Effective Date is set
forth on Schedule VI. The books and records of Holding and the Borrower, and
all its chattel paper and records of Accounts, are maintained exclusively at the
locations listed on Schedule VI. As of the date hereof and as of the
Restatement Effective Date, there is no jurisdiction in which the Borrower has
any chattel paper, records of Account and Inventory (except for Inventory in
transit) other than those jurisdictions identified on Schedule VI. Schedule VI
also contains a complete list of the legal names and addresses of each facility
or warehouse at which Inventory is stored as of the date hereof and as of the
Restatement Effective Date. None of the receipts received by the Borrower from
any warehouseman states that the goods covered thereby are to be delivered to
bearer or to the order of a named person other than the Borrower or its
Subsidiaries or to a named person and such named person's assigns.
6.12 Fictitious Business Names. Except as set forth in Schedule VII,
-------------------------
the Borrower has not used any corporate or fictitious name since May 4, 1990,
other than the corporate name shown on its Governing Documents.
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6.13 Security Interests. On and after the Restatement Effective
------------------
Date, each of the Collateral Documents create, as security for the Obligations,
a valid and enforceable perfected security interest in and Lien on all of the
Collateral, superior to and prior to the rights of all third persons and subject
to no other Liens, other than (i) Permitted Liens to the extent permitted to
encumber the Collateral and (ii) as otherwise permitted under the Collateral
Documents. At all times on or after the Restatement Effective Date, the
respective grantor under each Collateral Document shall have good and marketable
title to all the Collateral subject thereto free and clear of all Liens other
than Liens permitted under Section 8.2. No filings or recordings are required in
order to perfect the security interests created under any Collateral Document
except for filings or recordings required in connection with any such Collateral
Document.
6.14 Tax Returns and Payments. Holding, the Borrower and each of the
------------------------
Borrower's Subsidiaries has timely filed or caused to be timely filed with the
appropriate taxing authority, all federal returns and all other material
returns, domestic and foreign statements, forms and reports for taxes required
to be filed by or with respect to the income, properties or operations of
Holding, the Borrower and/or any of the Borrower's Subsidiaries. Such returns
accurately reflect all liability for taxes of Holding, the Borrower and the
Borrower's Subsidiaries for the periods covered thereby. Holding, the Borrower
and each of the Borrower's Subsidiaries has paid all material taxes payable by
it other than taxes which are not established, and other than those contested in
good faith and for which adequate reserves have been established in accordance
with generally accepted accounting principles. Except as provided in Schedule
VIII, there is no material action, suit, proceeding, investigation, audit, or
claim now pending or, to the knowledge of Holding or the Borrower, threatened by
any authority regarding any taxes relating to Holding, the Borrower or any of
the Borrower's Subsidiaries. Except as provided in Schedule VIII, as of the
Restatement Effective Date, neither Holding, the Borrower nor any of the
Borrower's Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of Holding, the
Borrower or any of the Borrower's Subsidiaries, or is aware of any circumstances
that would cause the taxable years or other taxable periods of Holding, the
Borrower or any of the Borrower's Subsidiaries not to be subject to the normally
applicable statute of limitations. None of Holding, the Borrower or any of the
Borrower's Subsidiaries have provided, with respect to themselves or property
held by them, any consent under Section 341 of the Code. Neither Holding, the
Borrower nor any of the Borrower's Subsidiaries has incurred, or will incur, any
material tax liability with respect to the Transaction and the other
transactions contemplated hereby.
6.15 Compliance with ERISA. Except to the extent that all events and
---------------------
obligations described in the following clauses of this Section 6.15 and then in
existence would not, in the aggregate, be reasonably likely to have a Material
Adverse Effect; each Plan is in substantial compliance with ERISA and the Code;
no Reportable Event has occurred with respect to a Plan (other than a
Multiemployer Plan); no Multiemployer Plan is insolvent (as defined in Section
4245 of ERISA) or in reorganization (as defined in Section 4241 of ERISA); no
Plan (other than a Multiemployer Plan) has an Unfunded Current Liability; no
Plan (other than a Multiemployer Plan) has an accumulated or waived funding
deficiency or has applied for an extension of any amortization period within the
meaning of Section 412 of the Code or Section 302 of ERISA; neither Holding nor
any Subsidiary nor any ERISA Affiliate has incurred any liability which as of
56
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the date hereof has not been fully satisfied, to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or Section 4971 or 4975 of the Code or expects to incur any
liability under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate any Plan; no condition exists
which presents a material risk to Holding or any Subsidiary or any ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to the
foregoing provisions of ERISA and the Code; no lien imposed under the Code or
ERISA on the assets of Holding or any Subsidiary or any ERISA Affiliate exists
or, to the knowledge of Holding or any Subsidiary is likely to arise on account
of any Plan; and Holding and its Subsidiaries do not maintain or contribute to
any employee welfare benefit plan (as defined in Section 3(1) of ERISA) (other
than such an employee welfare benefit plan which is a "multiemployer plan"
within the meaning of Section 414(f) of the Code) which provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA) the obligations with respect to which could reasonably be expected to
have a Material Adverse Effect. With respect to Plans that are Multiemployer
Plans the representations and warranties in this Section 6.15, other than any
made with respect to liability under Section 4201 or 4204 of ERISA, are made to
the knowledge of the Borrower.
6.16 Subsidiaries. Schedule IX hereto lists each Subsidiary of the
------------
Borrower, and the direct and indirect ownership interest of the Borrower
therein, in each case existing on the Restatement Effective Date. All
Subsidiaries of the Borrower are Wholly-Owned Subsidiaries. Holding is the
record and beneficial owner of all of the capital stock of the Borrower.
6.17 Patents, etc. Holding and each of its Subsidiaries have
-------------
obtained all material patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as presently
conducted and as proposed to be conducted.
6.18 Compliance with Statutes, etc. (a) Holding, the Borrower and
------------------------------
each of the Borrower's Subsidiaries is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliances as are
not likely to, in the aggregate, have a Material Adverse Effect.
(b) Except as set forth in the Offering Memorandum or Schedule IV,
Holding, the Borrower and each of the Borrower's Subsidiaries is in compliance
with all applicable Environmental Laws governing its business for which failure
to comply is likely to have a Material Adverse Effect, and neither Holding, the
Borrower nor any of the Borrower's Subsidiaries is liable for any material
penalties, fines or forfeitures for failure to comply with any of the foregoing
in the manner set forth above. All licenses, permits, registrations or
approvals required for the business of Holding, the Borrower and each of the
Borrower's Subsidiaries, as conducted as of the Restatement Effective Date,
under any Environmental Law have been secured and Holding, the Borrower and each
of the Borrower's Subsidiaries is in material compliance therewith, except such
licenses, permits, registrations or approvals the failure to secure or to comply
therewith is not likely to have a Material Adverse Effect. Neither Holding, the
Borrower nor any of the Borrower's Subsidiaries is in any respect in
noncompliance with, breach of or default under any
57
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applicable writ, order, judgment, injunction, or decree to which Holding, the
Borrower or such Subsidiary is a party or which would affect the ability of
Holding, the Borrower or such Subsidiary to operate its business or other Real
Property and no event has occurred and is continuing which, with the passage of
time or the giving of notice or both, would constitute noncompliance, breach of
or default thereunder, except in each such case, such noncompliances, breaches
or defaults as are not likely to, in the aggregate, have a Material Adverse
Effect. Except as set forth in the Offering Memorandum delivered to the Agent,
there are as of the Restatement Effective Date no Environmental Claims pending
or, to the best knowledge of the Borrower, threatened, which (a) question the
validity, term or entitlement of Holding, the Borrower or any of the Borrower's
Subsidiaries for any permit, license, order or registration required for the
operation of any facility which Holding, the Borrower or any of the Borrower's
Subsidiaries currently operates and (b) wherein an unfavorable decision, ruling
or finding would be reasonably likely to have a Material Adverse Effect. There
are no facts, circumstances, conditions or occurrences on any Real Property of
Holding, the Borrower or any of the Borrower's Subsidiaries or on any property
adjoining or adjacent to any such Real Property, that are reasonably expected
(i) to form the basis of an Environmental Claim against Holding, the Borrower
any of the Borrower's Subsidiaries or any Real Property of Holding, the Borrower
or any of the Borrower's Subsidiaries, or (ii) to cause such Real Property to be
subject to any restrictions on the ownership, occupancy, use or transferability
of such Real Property under any Environmental Law, except in each such case,
such Environmental Claims or restrictions that individually or in the aggregate
are not likely to have a Material Adverse Effect.
(c) Except as set forth in the Offering Memorandum delivered to the
Agent prior to the date hereof, Hazardous Materials have not at any time been
(i) generated, used, treated or stored on, or transported to or from, by
Holding, the Borrower or any of the Borrower's Subsidiaries, any Real Property
of Holding, the Borrower or any of the Borrower's Subsidiaries, except Hazardous
Materials generated, used, treated or stored on, or transported to or from, any
Real Property of Holding, the Borrower or any of the Borrower's Subsidiaries in
the ordinary course of business and in compliance with Environmental Laws
("Permitted Materials") or (ii) released or disposed of (not including the sale
of inventory) on any such Real Property, in each case where such occurrence or
event is likely to have a Material Adverse Effect.
6.19 Properties. Holding and each of its Subsidiaries has good title
----------
to all material properties owned by it free and clear of all Liens, other than
as permitted by Section 8.2. Schedule X contains a true and complete list of
each Real Property owned, if any, and each Real Property leased by the Borrower
on the Restatement Effective Date and the type of interest therein held by the
Borrower.
6.20 Labor Relations; Collective Bargaining Agreements. (a) Set
-------------------------------------------------
forth on Schedule XI hereto is a list (including dates of termination) of all
collective bargaining or similar agreements between or applicable to the
Borrower or any of its Subsidiaries and any union, labor organization or other
bargaining agent in respect of the employees of the Borrower and/or any of its
Subsidiaries on the Restatement Effective Date.
(b) Neither the Borrower nor any of its Subsidiaries is engaged in
any unfair labor practice that is likely to have a Material Adverse Effect.
There is (i) no significant unfair labor
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practice complaint pending against Holding, the Borrower or any of the
Borrower's Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the Restatement
Effective Date against Holding, the Borrower or any of the Borrower's
Subsidiaries or, to the best knowledge of the Borrower, threatened against any
of them, (ii) no significant strike, labor dispute, slowdown or stoppage is
pending against Holding, the Borrower or any of the Borrower's Subsidiaries or,
to the best knowledge of the Borrower, threatened against Holding, the Borrower
or any of the Borrower's Subsidiaries, except (with respect to any matter
specified in clause (i) and (ii) above, either individually or in the aggregate)
such as is not reasonably likely to have a Material Adverse Effect.
6.21 Restrictions on Subsidiaries. Except for restrictions contained
----------------------------
in the Credit Documents, the New Senior Note Documents, the Special Term Loan
Agreement and in agreements with respect to the Existing Indebtedness, as of the
Restatement Effective Date there are no contractual or consensual restrictions
on the Borrower or any of its Subsidiaries which prohibit or otherwise restrict
(i) the transfer of cash or other assets (x) between the Borrower and any of its
Subsidiaries or (y) between any Subsidiaries of the Borrower or (ii) the ability
of the Borrower or any of its Subsidiaries to grant security interests to the
Lenders in the Collateral.
6.22 Conduct of Business. Prior to the Restatement Effective Date,
-------------------
Holding has not conducted any other business other than those associated with
its status as a holding company of all the outstanding capital stock of the
Borrower and its obligations under the Holding Management Agreement.
6.23 Status of Accounts. Each Account is based on an actual and bona
------------------
fide sale and delivery of goods or rendition of services to customers, made by
the Borrower in the ordinary course of its business; the goods and inventory
being sold and the Accounts created are its exclusive property and are not and
shall not be subject to any Lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever other than the Liens created pursuant
to the Collateral Documents and Permitted Liens, and, except as otherwise
reported or reserved against on the Borrower's or its Subsidiaries books and
records, the Borrower's customers have accepted the goods or services, owe and
are obligated to pay the full amounts stated in the invoices according to their
terms, without any dispute, offset, defense, or counterclaim.
6.24 Material Contracts. Neither the Borrower nor any of its
------------------
Subsidiaries is in breach of or in default under any Material Contract.
ARTICLE 7.
Affirmative Covenants
---------------------
Holding and the Borrower hereby covenant and agree that on the
Restatement Effective Date and thereafter, for so long as this Credit Agreement
is in effect and until the Total Commitments have terminated, no Letters of
Credit or Revolving Notes are outstanding and the
59
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Revolving Loans and Letter of Credit Obligations, together with interest, Fees,
Expenses and all other Obligations (other than any indemnities described in
Section 11.8 hereof which are not then due and payable) incurred hereunder, are
paid in full:
7.1 Financial Information. The Borrower shall (and Holding shall,
---------------------
with respect to the financial statements referred to in clause (a)(i) below)
furnish to the Lenders the following information within the following time
periods:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, (i) audited consolidated balance
sheets, statements of operations, statements of cash flows and statements
of changes in shareholder's equity of Holding as of the close of such
fiscal year, (ii) audited Financial Statements as of the close of the
fiscal year and for the fiscal year, together with a comparison to the
Financial Statements for the prior year, in each case accompanied by (A)
report thereon of the Auditors unqualified as to scope, which report shall
state that such consolidated financial statements fairly present the
consolidated financial position of the Borrower and its consolidated
Subsidiaries as at the date indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP (except as
otherwise stated therein) and that the examination by the Auditors has been
made in accordance with generally accepted auditing standards, (B) such
Auditors' "Management Letter" to Holding and/or the Borrower, (C) a written
statement signed by the Auditors stating that in the course of the regular
audit of the business of Holding and of the Borrower, which audit was
conducted by the Auditors in accordance with generally accepted auditing
standards, the Auditors have not obtained any knowledge of the existence of
any Default or Event of Default under any provision of Sections 8.4, 8.9
and 8.10 of this Credit Agreement, or, if such Auditors shall have obtained
from such examination any such knowledge, they shall disclose in such
written statement the existence of the Default or Event of Default and the
nature thereof, it being understood that such Auditors shall not be
required hereunder to perform any special audit procedures and shall have
no liability, directly or indirectly, to anyone for failure to obtain
knowledge of any such Default or Event of Default and (iii) a compliance
certificate substantially in the form of Exhibit M along with a schedule in
form satisfactory to the Agent of the calculations used in determining, as
of the end of such fiscal year, whether the Borrower was in compliance with
the covenants set forth in Articles 7 and 8 of this Credit Agreement for
such year. To the extent that the Borrower's annual report on Form 10-K
contains any of the foregoing items, the Lenders will accept the Borrower's
Form 10-K in lieu of such items;
(b) as soon as available and in any event within 45 days after the
end of each fiscal quarter of the Borrower (except the last fiscal quarter
of any fiscal year) (i) Financial Statements as at the end of such period
and for the fiscal year to date, together with a comparison to the
Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to the addition of footnotes
and audit and normal year-end adjustments) by the chief executive officer
or chief financial officer of the Borrower as having been prepared
substantially in accordance with GAAP and (ii) a compliance certificate
substantially in the form of Exhibit M along with a schedule in form
satisfactory to the Agent of the calculations used in determining, as of
the end of such
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fiscal quarter, whether the Borrower was in compliance with the covenants
set forth in Articles 7 and 8 of this Credit Agreement for such quarter. To
the extent that the Borrower's quarterly report on Form 10-Q contains any
of the foregoing items, the Lenders will accept the Borrower's Form 10-Q in
lieu of such items;
(c) as soon as available and in any event within 30 days after the
end of each month (except the last month of any fiscal quarter, with
respect to which such reports shall be delivered within 45 days after the
end of the month (other than the last quarter of the fiscal year with
respect to which such reports shall be delivered within 90 days after the
end of the month)), a consolidated and consolidating balance sheet for the
Borrower as at the end of such month and for the fiscal year to date and
consolidated statements of operations and cash flows for such month and for
the fiscal year to date, together with a comparison to the balance sheet,
statement of operations and statement of cash flows for the same periods in
the prior year, all in reasonable detail and duly certified (subject to the
addition of footnotes and audit and normal year-end adjustments) by the
chief executive officer or chief financial officer of the Borrower as
having been prepared substantially in accordance with GAAP;
(d) not later than 45 days after the end of each fiscal year
commencing with the fiscal year ending March 31, 1999, monthly projections
of the financial condition and results of operations of the Borrower and
its Subsidiaries for the following fiscal year and annual projections for
each subsequent fiscal year through and including the fiscal year in which
the Expiration Date occurs, including, but not limited to, a projected
consolidated balance sheet and statement of operations, for such fiscal
years;
(e) upon request by the Agent or at any time a Default or Event of
Default shall exist and in any event either (i) if the Total Availability
is equal to or less than $30,000,000, not later than 12:00 Noon Los Angeles
time on the third Business Day of each week, and within 12 Business Days
after the last Business Day of each month, a Borrowing Base certificate,
substantially in the form of Exhibit N (the "Borrowing Base Certificate"),
duly completed, as of the Friday of the immediately preceding week and as
of the last day of such month, as applicable (or such other date as the
Agent may specify in such request) or (ii) if the Total Availability is
more than $30,000,000, within five Business Days after the end of each
month, a draft of, and within 12 Business Days after the end of each month,
a final version of, the Borrowing Base Certificate, duly completed, as of
the last day of such immediately preceding month (or such other date as the
Agent may specify in such request). In any event, such Borrowing Base
Certificate shall be certified by the Borrower's chief executive officer,
chief financial officer, treasurer or controller and be subject only to
adjustment upon completion of the normal year-end audit and confirmation
based upon cycle counting verification. In addition, each Borrowing Base
Certificate shall have attached to it such additional schedules and/or
other information, including monthly aging reports, as the Agent may
reasonably request;
(f) promptly and in any event within five Business Days after
becoming aware of the occurrence of a Default or Event of Default, a
certificate of the chief executive officer
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or chief financial officer of the Borrower specifying the nature thereof
and the Borrower's proposed response thereto, each in reasonable detail;
(g) within 30 days after the end of each month (except the last month
of any fiscal quarter, with respect to which such reports shall be
delivered within 45 days after the end of the month (other than the last
quarter of the fiscal year with respect to which such reports shall be
delivered within 90 days after the end of the month)), a comparison of
actual results of operations, cash flow and capital expenditures for the
Borrower and the Borrower's Subsidiaries for such month and for the period
from the beginning of the current fiscal year through the end of such month
(i) with amounts projected for such month and for the period from the
beginning of the current fiscal year through the end of such month pursuant
to Section 7.1(d) above and (ii) with actual results of operations, cash
flow and capital expenditures for the Borrower and the Borrower's
Subsidiaries for the same periods of the prior fiscal year;
(h) promptly upon the earlier of the mailing or filing thereof,
copies of all 10-Ks, 10-Qs, 8-Ks, proxy statements, annual reports,
quarterly reports, registration statements and any other filings or other
communications made by the Borrower or Holding to holders of its publicly
traded securities or the Securities Exchange Commission from time to time
pursuant to the Securities Exchange Act of 1934, as amended, or the
Securities Act of 1933, as amended;
(i) promptly and in any event after becoming aware of the occurrence
of any of the following events:
(i) any Material Contract of the Borrower or any of its
Subsidiaries is terminated or amended or any new Material Contract is
entered into which is reasonably likely to have an adverse effect on
the Lenders (in which event the Borrower shall provide the Agent with
a copy of such Material Contract); or
(ii) any of the material terms (other than price) upon which
material suppliers of the Borrower or any of its Subsidiaries do
business with the Borrower or such Subsidiary are changed or amended
the results of which are reasonably likely to have an adverse effect
on the Lenders; or
(iii) any order, judgment or decree in excess of $2,000,000
(after reasonably expected insurance and indemnity recovery) shall
have been entered against Holding, the Borrower or any of its
Subsidiaries or any of their respective properties or assets; or
(iv) any notification of violation of any Requirement of Law
shall have been received by Holding, the Borrower or any of its
Subsidiaries from any Governmental Authority the results of which are
likely to have a Material Adverse Effect; and
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(j) from time to time, such further information, including customer
address list, regarding the Collateral, business affairs and financial
condition of Holding, the Borrower and/or each of the Borrower's
Subsidiaries as the Agent may reasonably request.
7.2 Inventory. Upon the request of the Agent from time to time, the
---------
Borrower shall provide to the Agent written statements listing items of
Inventory in reasonable detail as requested by the Agent. The Borrower shall
make available when complete the results of any physical inventory count or
reconciliation of perpetual inventory to the general ledger.
7.3 Corporate Franchises. The Borrower will, and will cause each of
--------------------
its Subsidiaries to, do or cause to be done, all things necessary to preserve
and keep in full force and effect its existence, material rights and authority
to do business, provided that any transaction permitted by Section 8.1 will not
constitute a breach of this Section 7.3, and provided further that the Borrower
shall not be required to preserve, with respect to itself, any material right or
authority to do business and with respect to any of its Subsidiaries, any such
existence, material right or authority to do business if the Borrower shall
reasonably determine that such preservation is no longer desirable in the
ordinary course of business, and the loss thereof shall not be reasonably likely
to have a Material Adverse Effect.
7.4 Compliance with Statutes, etc. (a) Holding and the Borrower
------------------------------
will, and will cause each of the Borrower's Subsidiaries to, comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including applicable
Environmental Laws) other than those the non-compliance with which (individually
or in the aggregate) would not have a Material Adverse Effect. Neither Holding
nor any of its Subsidiaries will generate, use, treat, store, release or dispose
of, or permit the generation, use, treatment, storage, release or disposal of
Hazardous Materials on any of its Real Property, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property, except
for quantities used or stored at such Real Properties in material compliance
with all applicable Environmental Laws and required in connection with the
normal operation, use and maintenance of such Real Property or the operation of
the business of the Borrower and its Subsidiaries. If required to do so under
any applicable Environmental Law, the Borrower agrees to undertake, and agrees
to cause each of its Subsidiaries to undertake, any cleanup, removal, remedial
or other action necessary to remove and clean up any Hazardous Materials from
any Real Property in accordance with the requirements of all such applicable
Environmental Laws and in accordance with orders and directives of all
governmental authorities; provided that neither Holding nor any of its
--------
Subsidiaries shall be required to take any such action where same is being
contested by appropriate legal proceedings in good faith by Holding or such
Subsidiary.
(b) At the request of the Agent or the Required Lenders at any time
and from time to time, but in any event no more frequently than once a year, the
Borrower will provide, at the Borrower's sole cost and expense, an environmental
site assessment report concerning any Real Property of the Borrower or any
Subsidiary, prepared by an environmental consulting firm reasonably acceptable
to the Agent, indicating the presence or release of Hazardous Materials and the
potential cost of any removal or remedial action in connection with any
Hazardous Materials on such Real Property; provided, however, no such request
-------- -------
may be made unless the Agent or the
63
<PAGE>
Required Lenders reasonably believe that (i) the Borrower or any of its
Subsidiaries is in material noncompliance with any Environmental Law with
respect to such Real Property and such noncompliance is reasonably likely to
result in a liability of the Borrower in excess of $5,000,000 (after expected
insurance and indemnity recovery) or (ii) an Event of Default is in existence.
If the Borrower fails to provide the same after sixty (60) days' written notice,
the Agent may order the same, and the Borrower shall grant and hereby grants to
the Agent and the Lenders and their agents access to such Real Property at all
reasonable times and without unreasonably interfering with the Borrower's
operations and specifically grants the Agent and the Lenders an irrevocable
nonexclusive license, subject to the rights of tenants, to undertake such an
assessment all at the Borrower's sole expense.
7.5 ERISA. As soon as possible and, in any event, within twenty (20)
-----
days after Holding, the Borrower or any of the Borrower's Subsidiaries or any
ERISA Affiliate knows or has reason to know of the occurrence of any of the
following events relating to a Plan, the Borrower will deliver to each of the
Lenders a certificate of the chief financial officer of the Borrower setting
forth details as to such occurrence and the action, if any, that Holding, the
Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices required to be given to or filed with or by
Holding, the Borrower, such Subsidiary, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred which could reasonably be expected to result in material
liability of Holding, the Borrower, any of the Borrower's Subsidiaries or any
ERISA Affiliate (except to the extent that Holding or the Borrower has
previously delivered to the Lenders a certificate and notices (if any)
concerning such event pursuant to the next clause hereof); that a contributing
sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title
IV of ERISA is subject to the advance reporting requirement of PBGC Regulation
Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event
described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation
Section 4043 is reasonably expected to occur with respect to such Plan within
the following 30 days; that, with respect to a Plan which is not a Multiemployer
Plan, an accumulated funding deficiency has been incurred or an application will
be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code or Section 302 of ERISA with respect to a Plan; that a Plan has been or may
be terminated (other than pursuant to Section 4041(b) of ERISA), reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability giving rise to a lien under ERISA or the Code; that
proceedings have been instituted to terminate a Plan (other than pursuant to
Section 4041(b) of ERISA); that a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Plan; or that
Holding, any Subsidiary or any ERISA Affiliate will or may incur any material
liability (including any contingent or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 4971
or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA. Upon the
request of the Agent, Holding will deliver to each of the Lenders a complete
copy of the annual report (Form 5500) of each Plan required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Lenders pursuant to the first sentence hereof, copies of any material
notices received by Holding, the Borrower, any Subsidiary of
64
<PAGE>
Holding or the Borrower or any ERISA Affiliate with respect to any Plan shall be
delivered to the Lenders no later than 10 Business Days after the date such
records, documents and/or information have been furnished to the PBGC or such
notice has been received by Holding, the Borrower or such Subsidiary or the
ERISA Affiliate, as applicable.
7.6 Good Repair. The Borrower will, and will cause each of its
-----------
Subsidiaries to, use its best efforts to provide that its material properties
and equipment used or useful in its business in whomsoever's possession they may
be, are kept in good repair, working order and condition, normal wear and tear
excepted and, subject to Section 8.4, that from time to time there are made in
such properties and equipment all needful and proper repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto, to
the extent and in the manner customary for companies in similar businesses.
7.7 Books and Records. The Borrower agrees to maintain, and to cause
-----------------
each of its Subsidiaries to maintain, books and records pertaining to the
Collateral in such detail, form and scope as is consistent with good business
practice, and agrees that such books and records will reflect the Lenders'
interest in its Accounts. The Borrower agrees that the Collateral Agent or its
agents may enter upon the premises of Holding or any of its Subsidiaries at any
time and from time to time, during normal business hours and upon reasonable
notice under the circumstances, and at any time at all during the continuance of
an Event of Default, for the purposes of (i) inspecting the Collateral, (ii)
inspecting and/or copying (at the Borrower's expense) any and all records
pertaining thereto, (iii) discussing the affairs, finances and business of the
Borrower with any officers, employees and directors of the Borrower or with the
Auditors (it being understood that the Borrower shall be entitled to have a
representative present at any such discussions) and (iv) verifying Eligible
Account Receivable and/or Eligible Inventory. The Borrower shall give the
Collateral Agent fifteen days prior written notice of any change in the location
of any facility owned or leased by the Borrower or any of its Subsidiaries where
Collateral is located or in the location of its chief executive office or place
of business from the locations specified in Schedule VI, and to execute in
advance of such change, cause to be filed and/or delivered to the Collateral
Agent any financing statements, Collateral Access Agreements or other documents
required by the Agent, all in form and substance satisfactory to the Agent. The
Borrower agrees to advise the Agent promptly, in sufficient detail, of any
substantial change relating to the type, quantity or quality of the Collateral,
or any event (other than a change in price) which could have an adverse effect
on the value of the Collateral or on the security interests granted to the
Lenders therein. The Borrower shall, and shall cause of each of its
Subsidiaries to, adopt internal procedures and systems measures in advance of
January 1, 2000 to address the "Year 2000 Problem" as it may apply to the
Borrower and its Subsidiaries.
7.8 Collateral Records. The Borrower agrees to execute and deliver,
------------------
and to cause each of its Subsidiaries to execute and deliver, to the Collateral
Agent, from time to time, solely for the Agent's convenience in maintaining a
record of the Collateral, such written statements and schedules as the
Collateral Agent may reasonably require, including, without limitation, those
described in Section 7.1 of this Credit Agreement, designating, identifying or
describing the Collateral pledged or granted to the Lenders under the Collateral
Documents. The failure by the Borrower or any of its Subsidiaries, however, to
promptly give the Agent such statements or
65
<PAGE>
schedules shall not affect, diminish, modify or otherwise limit the Lenders'
security interests in the Collateral.
7.9 Security Interests. The Borrower shall, and shall cause each of
------------------
its Subsidiaries to, defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. The Borrower
shall, comply with the requirements of all state and federal laws in order to
grant to the Lenders valid and perfected first priority security interests in
the Collateral, subject only to Permitted Liens. The Collateral Agent is hereby
authorized by the Borrower to file any UCC financing statements covering the
Collateral whether or not the signatures of the Borrower appear thereon. The
Borrower shall do whatever the Collateral Agent may reasonably request, from
time to time, to effect the purposes of this Credit Agreement and the other
Credit Documents, including without limitation, filing notices of liens, UCC
financing statements and amendments, renewals and continuations thereof;
cooperating with the Collateral Agent's representatives; keeping stock records;
obtaining waivers from landlords and mortgagees and from warehousemen and their
landlords and mortgagees; and, paying claims which might, if unpaid, become a
Lien on the Collateral other than a Permitted Lien.
7.10 Insurance; Casualty Loss. Schedule XII hereto sets forth a true
------------------------
and complete listing of all insurance maintained by the Borrower and each of its
Subsidiaries as of the Restatement Effective Date. The Borrower agrees to
maintain, and to cause each of its Subsidiaries to maintain, public liability
insurance, third party property damage insurance and replacement value (or such
higher coverage as the Borrower may obtain) insurance on the Collateral under
such policies of insurance, with such insurance companies and/or Insurance Sub,
in such amounts and covering such risks in at least such amounts and against at
least such risks as are described on Schedule XII, or as are at all times
satisfactory to the Agent in its commercially reasonable judgment. All policies
covering the Collateral are to name the Collateral Agent as an additional
insured and the Collateral Agent as loss payee in case of loss, as its interests
may appear, and are to contain such other provisions as the Agent may reasonably
require to fully protect the Lenders' interest in the Collateral and to any
payments to be made under such policies. The Borrower shall provide written
notice to the Agent of the occurrence of any of the following events within ten
Business Days after the occurrence of such event: any Collateral is (i) damaged
or destroyed, or suffers any other loss, or (ii) condemned, confiscated or
otherwise taken, in whole or in part, or the use thereof is otherwise diminished
so as to render impracticable or unreasonable the use of such Collateral or to
materially diminish its marketability, and in either case the amount of the
damage, destruction, loss or diminution in value is in excess of $5,000,000
(collectively, a "Casualty Loss"). The Borrower and/or the respective
Subsidiary shall diligently file and prosecute their claim or claims for any
award or payment in connection with a Casualty Loss. In the event of a Casualty
Loss, the Borrower shall pay to the Collateral Agent, promptly upon receipt
thereof, any and all net insurance proceeds and payments received by the
Borrower or any Subsidiary on account of damage, destruction, loss, condemnation
or eminent domain proceedings, whereupon the Collateral Agent shall, at the
election of the Agent, in its sole discretion, either (a) apply the proceeds
realized from Casualty Losses to payment of accrued and unpaid interest or
outstanding principal under the Revolving Loans or (b) pay such proceeds to the
Borrower to be used to repair or replace the Collateral that was the subject of
the Casualty Loss. After the occurrence and during the continuance of an Event
of Default, (i) no settlement on account of any such Casualty Loss shall be made
without the consent of the Collateral Agent and
66
<PAGE>
(ii) the Collateral Agent may participate in any such proceedings and the
Borrower shall deliver to the Collateral Agent such documents as may be
requested by the Collateral Agent to permit such participation and shall consult
with the Collateral Agent, its attorneys and agents in the making and
prosecution of such claim or claims. The Borrower hereby irrevocably authorizes
and appoints the Collateral Agent its attorney-in-fact, after the occurrence and
continuance of an Event of Default, to collect and receive for any such award or
payment and to file and prosecute such claim or claims, which power of attorney
shall be irrevocable and shall be deemed to be coupled with an interest, and the
Borrower shall, upon demand of the Collateral Agent, make, execute and deliver
any and all assignments and other instruments sufficient for the purpose of
assigning any such award or payment to the Collateral Agent for the benefit of
the Lenders, free and clear of any encumbrances of any kind or nature
whatsoever, other than the right of the Borrower to any insurance proceeds
remaining after application thereof by the Collateral Agent as provided in this
Section 7.10.
7.11 Taxes. Holding will, and will cause each of its Subsidiaries
-----
to, pay and discharge all federal income and other material taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, or payable by it pursuant to
the Tax Sharing Agreements, in each case on a timely basis, and all lawful
claims which, if unpaid, might become a Lien or charge upon any properties of
Holding or of any of its Subsidiaries; provided that neither Holding nor any of
--------
its Subsidiaries shall be required to pay any such tax, assessment, charge, levy
or claim which is being contested in good faith and by proper proceedings if it
has maintained adequate reserves (in the good faith judgment of the management
of such Person) with respect thereto in accordance with GAAP.
7.12 End of Fiscal Years; Fiscal Quarters. The Borrower will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on March 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to consist of 63 Business
Days each, except in the case of a 366 day year, in which case one fiscal
quarter may contain an additional Business Day.
7.13 Further Assurances. Holding and the Borrower shall take, and
------------------
shall cause each of the Borrower's Subsidiaries to take, all such further
actions and execute all such further documents and instruments as the Collateral
Agent may at any time reasonably determine to be necessary or desirable to
further carry out and consummate the transactions contemplated by the Credit
Documents, to cause the execution, delivery and performance of the Credit
Documents to be duly authorized and to perfect or protect the Liens (and the
priority status thereof) of the Collateral Agent on the Collateral.
Furthermore, the Borrower shall cause to be delivered to the Collateral Agent
such opinions of counsel, title insurance and other related documents as may be
reasonably requested by the Collateral Agent to assure itself that this Section
7.13 has been complied with.
7.14 Maintenance of Corporate Separateness. Holding and the Borrower
-------------------------------------
will, and will cause each of the Borrower's Subsidiaries to, satisfy customary
corporate formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate offices and records.
Neither the Borrower nor any of its Subsidiaries shall make any payment to a
creditor of Holding in respect of any liability of Holding, and no bank
67
<PAGE>
account of Holding shall be commingled with any bank account of the Borrower or
any of its Subsidiaries. Any financial statements distributed to any creditors
of Holding shall, to the extent permitted by GAAP, clearly state the corporate
separateness of Holding from the Borrower and its Subsidiaries. Finally, neither
Holding nor any of its Subsidiaries shall take any action, or conduct its
affairs in a manner, which is likely to result in the corporate existence of
Holding being ignored, or in the assets and liabilities of the Borrower or any
of its Subsidiaries being substantively consolidated with those of Holding in a
bankruptcy, reorganization or other insolvency proceeding.
7.15 Post-Closing Obligations. Notwithstanding anything to the
------------------------
contrary contained in this Agreement or the other Documents, the parties hereto
acknowledge and agree that no later than thirty (30) days after the Restatement
Effective Date, (i) the Agent shall have received full executed copies of the
Collection Agreements, (ii) the requirements set forth in Section 2.6(c) shall
have been satisfied as if the Agent had already received fully executed copies
of the Collection Agreements and (iii) the Agent shall have received an executed
copy of the payoff letter or equivalent termination document and all other
documents evidencing the termination and cancellation of the Heller Documents.
ARTICLE 8.
Negative Covenants
------------------
Holding and the Borrower hereby covenant and agree that as of the
Restatement Effective Date, and thereafter, for so long as this Credit Agreement
is in effect and until the Total Commitments have terminated, no Letter of
Credit or Revolving Notes are outstanding and the Revolving Loans and Letter of
Credit Obligations, together with interest, Fees, Expenses and all other
Obligations (other than any indemnities described in Section 11.8 hereof which
are not then due and payable) incurred hereunder, are paid in full:
8.1 Consolidation, Merger, Sale or Purchase of Assets, etc. Holding
-------------------------------------------------------
and the Borrower will not, and will not permit any of the Borrower's
Subsidiaries to, wind up, liquidate or dissolve its affairs, or enter into any
transaction of merger or consolidation, sell or otherwise dispose of all or any
part of its property or assets (other than (x) inventory, obsolete equipment,
excess equipment no longer needed in the conduct of business or equipment being
replaced with other equipment, in each case in the ordinary course of business
and (y) in the case of Holding, the disposition of the capital stock of the
Borrower in accordance with the Holding Note Pledge Agreement as in effect on
the Restatement Effective Date) or purchase, lease or otherwise acquire (in one
transaction or a series of related transactions) all or any part of the property
or assets of any Person (other than (i) to replace obsolete property or assets
disposed of in compliance with this Section and (ii) purchases, leases or other
acquisitions of goods, inventory and equipment, operating leases of property, in
each case, in the ordinary course of business) or agree to do any of the
foregoing at any future time, except that the following shall also be permitted:
(a) Capital Expenditures to the extent within the limitations set
forth in Section 8.4;
68
<PAGE>
(b) the investments, acquisitions and transfers or dispositions of
properties permitted pursuant to Section 8.5;
(c) any Subsidiary (other than Insurance Sub) of the Borrower may be
merged or consolidated with or into, or be liquidated into, the Borrower or
any other Subsidiary (other than Insurance Sub) of the Borrower (so long as
the Borrower or any other Subsidiary (other than Insurance Sub) of the
Borrower is the surviving corporation), or all or any part of the business,
properties and assets of any Subsidiary (other than Insurance Sub) may be
conveyed, leased, sold or transferred to the Borrower or any other
Subsidiary (other than Insurance Sub) of the Borrower;
(d) the Borrower and its Subsidiaries may sell or otherwise dispose
of (i) assets the net cash proceeds of which in the aggregate do not exceed
$10,000,000 (excluding the assets described in clause (ii) hereof) and (ii)
the properties listed on Schedule XIII; and
(e) the Borrower may (i) purchase the real property and plant located
at 601 Redna Terrace, Cincinnati, Ohio for no more than $6,000,000 and (ii)
enter into a sale leaseback agreement with a third party for such real
property and plant on terms no less favorable than the terms of the
existing lease agreement for such real property and plant.
To the extent the Required Lenders waive the provisions of this Section 8.1 with
respect to the sale of any Collateral, or any Collateral is sold as permitted by
this Section 8.1, such Collateral in each case shall be sold free and clear of
the Liens in favor of the Lenders created by the Collateral Documents and the
Collateral Agent shall take such actions as it deems appropriate in connection
therewith or may be reasonably requested by the Borrower to evidence such Lien
release, in each case at the Borrower's expense.
8.2 Liens. Holding will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to (i) the capital stock of the Borrower (other than pursuant to, and
only to the extent provided in, the Holding Note Pledge Agreement) or (ii) any
property or assets of any kind (real or personal, tangible or intangible) of the
Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable or notes with recourse to the Borrower or any of its
Subsidiaries) or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute, except:
(a) Liens for taxes not yet due and payable or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Borrower)
have been established;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law or which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, Liens in favor of customs and revenue
authorities to secure payment of customs duties in
69
<PAGE>
connection with the importation of goods, and other similar Liens arising
in the ordinary course of business and not overdue for a period of more
than 60 days, and (x) which, if any such property or asset is material, do
not in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the
business of the Borrower or such Subsidiary or (y) which are being
contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property or asset
subject to such Lien;
(c) Liens created by or pursuant to this Credit Agreement or the
other Credit Documents;
(d) Liens existing on the Restatement Effective Date and listed on
Schedule XIV hereto without giving effect to any subsequent extensions,
renewals or replacements thereof;
(e) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (x) in connection with liability
insurance, workers' compensation, unemployment insurance and other types of
social security, or (y) to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
incurred in the ordinary course of business, in an aggregate amount (in the
case of this clause (y) not to exceed $7,500,000) (exclusive of obligations
(i) in respect of borrowed money or (ii) in respect of which a Letter of
Credit has been issued);
(f) leases or subleases granted to third Persons not interfering with
the ordinary course of business of Borrower or any of its Subsidiaries;
(g) Capital Leases to the extent permitted under Section 8.3(b);
(h) Liens (x) arising pursuant to purchase money mortgages securing
Indebtedness representing the purchase price (or financing of the purchase
price within 180 days after the respective purchase) of property or other
assets acquired by the Borrower, provided that (i) any such Liens attach
--------
only to the assets so purchased, (ii) the Indebtedness secured by any such
Lien does not exceed 100% of the purchase price of the assets being
purchased and (iii) the Indebtedness secured thereby or any refinancing
thereof is permitted by Section 8.3(b); or (y) existing on specific
tangible assets at the time acquired by the Borrower or on assets of a
Person at the time such Person first becomes a Subsidiary; provided that
--------
(i) any such Liens were not created at the time of or in contemplation of
the acquisition of such assets or Person by the Borrower, (ii) in the case
of any such acquisition of a Person, any such Lien attaches only to
specific tangible assets of such Person and not assets of such Person
generally and (iii) the Indebtedness secured thereby or any refinancing
thereof is permitted by Section 8.3(b);
(i) any attachment or judgment Lien arising from a judgment not
giving rise to a Default or an Event of Default so long as such Lien, if
encumbering Collateral, has not attached to such Collateral for more than
45 days;
70
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(j) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the business
of the Borrower and its Subsidiaries;
(k) title defects or irregularities that do not in the aggregate
materially impair the use of such properties by the Borrower or its
Subsidiaries;
(l) Liens on Life Insurance Policies incurred in connection with the
Life Insurance Policy Loans permitted under Section 8.3(h);
(m) Liens on the property or assets of Subsidiaries of the Borrower
incorporated outside of the United States to secure Indebtedness of such
Subsidiaries permitted under Section 8.3(l);
(n) Liens created under ERISA and under Environmental Laws that are
being contested in good faith and as to which adequate reserves have been
established to the extent required by GAAP and secure obligations not in
excess of $5,000,000 in the aggregate;
(o) Liens created by or pursuant to the Special Term Loan Agreement
or other documents executed in connection therewith; and
(p) Liens on the funds deposited on the Restatement Effective Date
with the trustee under the Senior Note Indenture (such funds not to exceed
approximately $162,500,000 plus earnings thereon) for the purpose of
defeasing or redeeming all Senior Notes on or prior to April 23, 1998;
(q) until April 1, 1998, Liens granted to secure Indebtedness under
the Heller Documents;
(r) Liens not encumbering Collateral other than those described in
the preceding clauses (a) through (o) with respect to obligations not in
excess of $5,000,000 in the aggregate.
8.3 Indebtedness. Holding will not, and will not permit any of its
------------
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Credit Agreement and the
other Credit Documents;
(b) Capitalized Lease Obligations and Indebtedness of the Borrower
secured by Liens permitted by Section 8.2(h) in an aggregate amount not to
exceed $12,500,000 at any time outstanding;
(c) Existing Indebtedness;
71
<PAGE>
(d) Indebtedness of the Borrower evidenced by the New Senior Notes in
aggregate principal amount of approximately $105,000,000, provided that
--------
such amount of Indebtedness and the amount of Indebtedness incurred
pursuant to the Special Term Loan Agreement do not exceed $225,000,000 in
the aggregate;
(e) Indebtedness of Holding evidenced by the Holding Note (and any
Holding PIK Notes);
(f) Indebtedness of the Borrower incurred pursuant to the Special
Term Loan Agreement, provided that such amount of Indebtedness and the
--------
amount of Indebtedness incurred pursuant to the New Senior Notes do not
exceed $225,000,000 in the aggregate.
(g) Indebtedness of the Borrower or any of its Wholly-Owned
Subsidiaries owing to the Borrower or any of its Wholly-Owned Subsidiaries,
in each case to the extent making such loan was permitted in Section 8.5;
(h) Indebtedness of the Borrower in connection with any Life
Insurance Policy Loans so long as such Indebtedness is limited to the cash
-- ---- --
surrender value of such Life Insurance Policies and is without recourse to
Holding, the Borrower or any Subsidiary of the Borrower or any of their
assets other than such insurance policies;
(i) Indebtedness of the Borrower or any of its Subsidiaries evidenced
by guarantees, performance bonds and surety bonds incurred in the ordinary
course of business for purposes of insuring the performance of the Borrower
or such Subsidiary in an aggregate principal amount not to exceed
$7,500,000 at any time;
(j) Indebtedness of Subsidiaries of the Borrower arising out of loans
made by the Borrower to such Subsidiary and permitted by Section 8.5;
(k) drafts payable for payroll and ordinary expense items;
(l) Indebtedness of those of the Borrower's Subsidiaries organized
under the laws of a nation other than the United States, in an aggregate
principal amount not to exceed $8,500,000 at any time outstanding so long
as such Indebtedness is without recourse to the Borrower or any of its
assets
(m) Indebtedness under Interest Rate Agreements relating to the
Obligations and the "Obligations" defined in the Special Term Loan
Agreement, provided that (i) such Interest Rate Agreements entered into by
--------
the Borrower are on terms and conditions satisfactory to the Agent and (ii)
the outstanding exposure in connection therewith shall not exceed
$8,000,000.
(n) Indebtedness of the Borrower or any of its Subsidiaries, in
addition to other Indebtedness permitted under clauses (a) through (m)
above, in an aggregate principal amount not to exceed $10,000,000 at any
time outstanding.
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<PAGE>
8.4 Capital Expenditures. Holding will not, and will not permit any
--------------------
of its Subsidiaries to, incur Capital Expenditures except Capital Expenditures
made in compliance with this Section 8.4. Capital Expenditures shall be
permitted to be made by the Borrower (a) with the proceeds of insurance or any
condemnation award to restore or replace capital assets in accordance with
Section 7.10 plus (b) with respect to each period listed below, in an aggregate
amount not in excess of the corresponding amount set forth below opposite such
period (it being understood and agreed that the purchase price of the real
property and plant referred to in Section 8.1(e) will be excluded from the
calculation of Capital Expenditures to the extent that the sale leaseback
transaction with respect to such property and plant as described in Section
8.1(e) has been consummated prior to March 31, 1999):
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal year beginning April 1, 1997 and ending $12,000,000
March 31, 1998
Fiscal year beginning April 1, 1998 and ending $12,000,000
March 31, 1999
Fiscal year beginning April 1, 1999 and ending $12,000,000
March 31, 2000
Fiscal year beginning April 1, 2000 and ending $14,000,000
March 31, 2001
Fiscal year beginning April 1, 2001 and ending $14,000,000
March 31, 2002
Fiscal year beginning April 1, 2002 and ending $14,000,000
March 31, 2003
Fiscal year beginning April 1, 2003 and thereafter $14,000,000
</TABLE>
provided, however, that to the extent the maximum amount of Capital Expenditures
- -------- -------
permitted to be made in any period listed above pursuant to this clause (b),
without giving effect to this proviso, exceeds the aggregate amount actually
made during such period (the excess), Capital Expenditures may be made only in
the immediately subsequent period in an amount equal to such Capital
Expenditures plus such excess.
8.5 Investments. Holding will not, and will not permit any of its
-----------
Subsidiaries to, lend money or credit or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to (collectively, "Investments")
any other Person, except:
(a) the Borrower or any of its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or
73
<PAGE>
dischargeable in accordance with the customary trade terms of the Borrower
or its applicable Subsidiary, as the case may be;
(b) loans and advances to employees, officers and directors in the
ordinary course of business in an aggregate principal amount not to exceed
$3,000,000 at any time outstanding shall be permitted;
(c) Investments existing on the Restatement Effective Date and listed
on Schedule XV hereto, without giving effect to any additions thereto or
replacements thereof shall be permitted;
(d) the Borrower may make Investments in its Subsidiaries so long as
the aggregate amount of all Investments outstanding at any time permitted under
this clause (d) shall not exceed $4,000,000;
(e) any Investment by any Subsidiary (other than Insurance Sub) of
the Borrower in the Borrower (so long as any loan made by a Subsidiary of the
Borrower to the Borrower is subordinated to the Obligations on terms
satisfactory to the Agent) or in another Subsidiary of the Borrower in an
aggregate principal amount for all Investments permitted by this clause (e) not
to exceed $4,000,000 at any time outstanding shall be permitted;
(f) Subject to Section 8.15, Investments in Cash Equivalents shall be
permitted;
(g) Investments by the Borrower and/its Subsidiaries permitted under
Section 8.1 and Capital Expenditures permitted under Section 8.4 shall be
permitted;
(h) Investments received in connection with the bona fide settlement
of debts created in the ordinary course of business shall be permitted;
(i) Contributions by Holding to the ESOP;
(j) Contributions to the ESOP by the Borrower and/or its Subsidiaries
to the extent permitted by Section 8.7;
(k) the Borrower may make capital contributions to Insurance Sub in
an aggregate amount not to exceed $1,000,000;
(l) any Investments in accordance with any Rabbi Trust of the
Borrower in effect on January 1, 1997 that is for the benefit of the
Borrower's 401(a)(17) Supplemental Compensation Plan and deferred
compensation plans; and
(m) any Investments in addition to those contemplated by the
foregoing clauses (a) through (l), provided that all Investments made
--------
pursuant to this clause (m) shall be permitted by the New Senior Notes and
the Special Term Loan Agreement and shall not exceed $10,000,000 at any
time outstanding.
74
<PAGE>
8.6 Dividends, etc. The Borrower will not, and will not permit any
---------------
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in capital stock of the Borrower) or return any capital to,
its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for a
consideration (other than consideration in the form of capital stock of the
Borrower), any shares of any class of its capital stock now or hereafter
outstanding (or any warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for any of the
foregoing purposes and the Borrower will not permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class
of the capital stock of Holding or the Borrower now or hereafter
outstanding (or any warrants for or options or stock appreciation rights
issued by such Person in respect of any such shares) (all of the foregoing
"Dividends"), except that:
(a) any Subsidiary of the Borrower may pay dividends to the Borrower;
and
(b) the Borrower may pay cash Dividends to Holding in an amount
necessary and to the extent immediately used by Holding to (i) pay accrued
fees and expenses arising from the Transaction and/or ongoing reporting and
related requirements, (ii) pay taxes payable by Holding (whether for itself
alone or for itself and its Subsidiaries), in each case to the extent then
due and payable and to the extent not otherwise paid by the Borrower
pursuant to the Tax Sharing Agreement, (iii) repurchase shares of capital
stock of Holding as required pursuant to the ESOP or pursuant to the
Shareholders' Agreement, provided that the repurchase price therefor is
--------
available to the Borrower from the net proceeds of any benefits paid
pursuant to the terms of any life insurance policies covering certain
participants in the ESOP and certain other executives of Holding and the
Borrower, (iv) so long as no Default or Event of Default then exists, (A)
pay the repurchase price payable to any officer or employee (or their
estates) of Holding, the Borrower or any of its Subsidiaries upon death,
disability or termination of employment of such officers and employees to
the extent provided by the terms of any Shareholders' Agreement (including
any extension thereof) as in effect on the date of this Credit Agreement,
provided, however, that the aggregate amount of all such repurchases in any
-------- -------
fiscal year of the Borrower shall not exceed $5,000,000, (B) pay amounts to
repurchase shares of its capital stock from participants who were
distributed such shares from, and as required under, the ESOP and (C) make
current payments of interest on the Holding Notes or pay principal in
respect of Holding Notes issued in lieu of interest, so long as (x) the
----------
Fixed Charge Coverage Ratio calculated for any period of four consecutive
fiscal quarters (or, if shorter, the period beginning on April 1, 1998 and
ending on the last day of the last fiscal quarter then ended) in each case
taken as one accounting period shall exceed 2:1 and (y) the Borrower would
be permitted to make a Restricted Payment under, and as defined in, the New
Senior Note Indenture in the amount of such Dividend, provided that the
--------
amount of any Dividend paid pursuant to this clause (b)(iv)(C) shall not
exceed the Available Amount in effect immediately prior to the payment of
such Dividend.
8.7 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions involving payments or
75
<PAGE>
property with a value in excess of $100,000, whether or not in the ordinary
course of business, with any Affiliate other than (i) Permitted Transactions,
(ii) Investments permitted under Section 8.5, (iii) Dividends permitted under
Section 8.6, (iv) fees and expenses set forth in Schedule XVI, (v) amounts
payable under the contractual agreements listed in Schedule XVI, as in effect as
of the date of this Credit Agreement, copies of which have been delivered to the
Agent, (vi) cash contributions by the Borrower and its Subsidiaries to the ESOP
in an amount not to exceed 10% of their aggregate cash compensation to employees
during any fiscal year plus any amounts reinvested by the ESOP in capital stock
of Holding and contributed to the Borrower, and (vii) any other transaction or
series of transactions the terms and conditions of which are substantially as
favorable (or more favorable) to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-
length transaction with a Person other than an Affiliate, and for transactions
involving aggregate payments in excess of $3,000,000, the Borrower delivers to
the Agent a resolution of the Board of Directors of the Borrower (including all,
if any, of the disinterested directors) to the effect that the terms of such
transactions are fair and reasonable to the Borrower.
8.8 Changes in Business. (a) Except as otherwise permitted by
-------------------
Sections 7.3 and 8.1 and clause (c) of this Section 8.8, the Borrower will not
alter the character of the business of the Borrower and its Subsidiaries from
that conducted by the Borrower and its Subsidiaries on the Restatement Effective
Date.
(b) Holding shall not engage in any business other than its
ownership of the capital stock of the Borrower (and no other Person) and the
performance of certain management services for the Borrower and its Subsidiaries
pursuant to the Holding Management Agreement.
(c) Insurance Sub shall not engage in any business other than the
performance of insurance services for Holding, the Borrower and its Subsidiaries
and the investment of its assets in cash and/or Cash Equivalents.
8.9 Working Capital. The Borrower shall maintain as of the end of
---------------
each fiscal quarter, a level of Working Capital (without giving effect to any
balance sheet LIFO reserves) of not less than $30,000,000.
8.10 Fixed Charge Coverage Ratio. The Borrower will not permit the
---------------------------
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
(or, if shorter, the period beginning on April 1, 1998 and ending on the last
day of each fiscal quarter of the Borrower specified below), in each case taken
as one accounting period, ended on a date set forth below to be less than the
ratio set forth opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter
Ended Ratio
-------------- -----
<S> <C>
June 27, 1998 1.10 to 1
September 26, 1998 1.15 to 1
December 30, 1998 1.20 to 1
March 31, 1999 and each quarter thereafter 1.25 to 1
</TABLE>
76
<PAGE>
8.11 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness; Modifications of Governing Documents and Preferred Stock; etc.
- ----------------------------------------------------------------------------
(a) The Borrower will not, and will not permit any of its Subsidiaries to: (i)
make (or give any notice in respect of) any voluntary or optional payment or
prepayment of principal on or voluntary or optional redemption of or acquisition
for value of (including, without limitation, by way of depositing with the
trustee with respect thereto or any other Person money or securities before due
for the purpose of paying when due), exchange (except through the issuance of
Exchange Notes, as contemplated by the New Senior Note Indenture), purchase,
redeem or acquire for value (whether as a result of a Change of Control, the
consummation of asset sales or otherwise) any Existing Indebtedness (except as
otherwise provided in Section 8.11(b)) or the Indebtedness described in Section
8.3(c), (d) and (f) (provided that the proceeds from "Asset Dispositions" (as
--------
defined in the Special Term Loan Agreement) may be used to prepay the "Term
Loans" (as defined in the Special Term Loan Agreement) as required by the
Special Term Loan Documents), (ii) amend or modify, or permit the amendment or
modification of, any provision of (x) any such Indebtedness (other than
Indebtedness incurred pursuant to the Special Term Loan Agreement), (y) the
Special Term Loan Agreement, the effect of which would be to change any of the
covenants or defaults thereunder, shorten the weighted average life of the Term
Loans thereunder, or allow the lenders thereunder to create liens in collateral
of the Borrower other than real property, plant and equipment or (z) any
provision of its Certificate of Incorporation or By Laws relating to any
preferred or preference stock or the Shareholders' Agreement (without the
consent of the Agent) or (iii) issue any preferred or preference stock.
(b) Holding will not amend, modify or waive, or permit the
amendment, modification or waiver of, any provision of the Holding Note
Documents (including, without limitation, the Holding Note Pledge Agreement)
without the Agent's consent, or make (or give any notice in respect of) any
voluntary or optional redemption of or acquisition for value (including, without
limitation, by way of depositing with the trustee with respect thereto money or
securities for the purpose of paying when due) the Holding Notes (other than (i)
Holding PIK Notes issued in lieu of interest and repaid with Dividends as
permitted by Section 8.6 and (ii) any such redemption or repayment made with the
proceeds of the issuance of equity by Holding).
8.12 Issuance of Subsidiary Stock. The Borrower will not permit any
----------------------------
of its Subsidiaries directly or indirectly to issue, sell, assign, pledge or
otherwise encumber or dispose of any shares of its capital stock or other equity
securities (or warrants, rights or options to acquire shares or other equity
securities) of such Subsidiary to any Person other than the Borrower or another
wholly-owned Subsidiary, except (i) to the extent permitted by Sections 8.1(c)
and 8.5 and (ii) for the issuance of directors' qualifying shares to the extent
required by applicable law.
8.13 Limitation on Restrictions Affecting Subsidiaries. The Borrower
-------------------------------------------------
will not, and will not permit any Subsidiary of the Borrower to, directly, or
indirectly, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or limits the ability of any Subsidiary of the
Borrower to (a) pay dividends or make other distributions or pay any
Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make
loans or advances to the Borrower or any Subsidiary of the Borrower, (c)
transfer any of its properties or assets to the Borrower or any Subsidiary of
the Borrower or (d) create, incur, assume or suffer to exist any lien upon any
of its property, assets or revenues, whether now owned or hereafter
77
<PAGE>
acquired, other than encumbrances and restrictions arising under (i) applicable
law, (ii) this Credit Agreement and the other Transaction Documents, (iii)
Indebtedness permitted pursuant to Sections 8.3(c), (d), (f) and (l), (iv)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Borrower or any of its Subsidiaries, (v) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of the Borrower or any of its Subsidiaries, (vi) any
agreement relating to permitted Indebtedness incurred by a Subsidiary of the
Borrower prior to the date on which such Subsidiary was acquired by the Borrower
or any other Subsidiary of the Borrower and outstanding on such acquisition
date, (vii) the extension or continuation of contractual obligations in
existence on the date hereof, provided that any such encumbrances or
--------
restrictions contained in such continuation are no less favorable to the Lenders
than those encumbrances and restrictions under or pursuant to the contractual
obligations continued hereby, and (viii) restrictions imposed under the
agreements relating to Indebtedness permitted under Section 8.3(b), provided
--------
that such restrictions apply only to the property giving rise to such
Indebtedness.
8.14 No Additional Bank Accounts. The Borrower will not, and will
---------------------------
not permit any of its Subsidiaries (other than Insurance Sub) within the United
States to, directly or indirectly, open, maintain or otherwise have any
checking, savings or other deposit accounts at any bank or other financial
institution where money is or may be deposited or maintained with any Person,
other than (i) the Disbursement Account and the accounts set forth on Schedule
XVII, (ii) local accounts for petty cash deposit in the ordinary course of
business and (iii) the "Collateral Account" (as defined in the Special Term Loan
Agreement and as required under the Special Term Loan Documents).
8.15 No Excess Cash. The Borrower will not, and will not permit any
--------------
of its Subsidiaries (other than Insurance Sub) to, directly or indirectly,
maintain in the aggregate in all of the checking, savings or other accounts
(other than the Disbursement Accounts, the Sub-Collection Accounts, the
Collection Accounts, the Concentration Account and the payroll accounts) of the
Borrower and its Subsidiaries (other than Insurance Sub) total cash balances and
investments (other than Investments permitted under Section 8.5(l)) in excess of
$8,000,000 at any time during which any Revolving Loans are outstanding
hereunder.
8.16 Additional Negative Pledges. The Borrower will not, and will
---------------------------
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or permit any of its
Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, any prohibition or restriction (including any
agreement to provide equal and ratable security to any other Person in the event
a Lien is granted to or for the benefit of the Agent and the Lenders) on the
creation or existence of any Lien upon the assets of the Borrower or its
Subsidiaries, other than the restrictions contained in (i) the Transaction
Documents, (ii) any agreement relating to a Lien permitted pursuant to Section
8.2 as relating to the property encumbered thereby or (iii) restrictions
described in Section 8.13.
78
<PAGE>
ARTICLE 9.
Events of Default and Remedies
------------------------------
9.1 Events of Default. Upon the occurrence of any of the following
-----------------
specified events (each an "Event of Default"):
(a) Payments. The Borrower shall (i) default in the payment when due
--------
of any principal of the Revolving Loans or (ii) default, and such default
shall continue for five or more days, in the payment when due of, any
interest on the Revolving Loans or any drawings under Letters of Credit
which have not been reimbursed by the Borrower (including through the
incurrence of Revolving Loans), or (iii) default, and such default shall
continue for five or more days after written demand therefor by the Agent,
in the payment when due of any Fees, Expense or any other amounts owing
hereunder or under any other Credit Document; or
(b) Representations, etc. Any representation, warranty or statement
---------------------
made by any Credit Party herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the
date as of which made or deemed made; or
(c) Covenants. Holding or the Borrower shall (i) default in the due
---------
performance or observance by it of any term, covenant or agreement
contained in Article 8, or (ii) default in the due performance or
observance by it of any term, covenant or agreement (other than those
referred to in Section 9.1(a), 9.1(b) or clause (i) of this Section 9.1(c))
contained in this Credit Agreement and such default shall continue
unremedied for a period of at least 30 days after notice to the defaulting
party by the Agent or the Required Lenders; or
(d) Default Under Other Agreements. Holding, the Borrower or any of
------------------------------
its Subsidiaries shall (i) default in any payment in respect to any
Indebtedness (other than the Obligations) in excess of $2,500,000
individually or $5,000,000 in the aggregate of the Borrower and its
Subsidiaries beyond the period of grace, if any, provided in the agreement
or instrument under which such Indebtedness was issued, including, but not
limited to, the New Senior Note Documents and the Special Term Loan
Documents, or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or holders
of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is
required to so cause), any such Indebtedness to become due prior to its
stated maturity; or any such Indebtedness of Holding, the Borrower or any
such Subsidiary shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment, prior to the stated maturity thereof; or
79
<PAGE>
(e) Bankruptcy, etc. Holding, the Borrower or any of its
----------------
Subsidiaries shall commence a voluntary case concerning itself under Title
11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary
case is commenced against Holding, the Borrower or any of its Subsidiaries
and the petition is not controverted within 30 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holding, the Borrower or any of its
Subsidiaries; or Holding, the Borrower or any of its Subsidiaries commences
any other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to
Holding, the Borrower or such Subsidiary; or there is commenced against
Holding, the Borrower or any of its Subsidiaries any such proceeding which
remains undismissed for a period of 60 days; or Holding, the Borrower or
any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered;
or Holding, the Borrower or any of its Subsidiaries suffers any appointment
of any custodian or the like for it or any substantial part of its property
to continue undischarged or unstayed for a period of 60 days; or Holding,
the Borrower or any of its Subsidiaries makes a general assignment for the
benefit of creditors; or any corporate action is taken by Holding, the
Borrower or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
(f) ERISA. (i) Any Plan shall fail to satisfy the minimum funding
-----
standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code or Section 302 of ERISA, any Plan is, shall have
been, or is reasonably likely to be terminated or the subject of
termination proceedings under ERISA, an event shall have occurred or a
condition shall exist in either case entitling the PBGC to terminate a
Plan, any Plan shall have an Unfunded Current Liability, Holding, the
Borrower or any Subsidiary or any ERISA Affiliate has incurred or is
reasonably likely to incur a liability to or on account of a Plan under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 4971 or 4975 of the Code, or Holding, the Borrower
or any Subsidiary has incurred or is reasonably likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in
Section 3(1) of ERISA) that provide benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or
employee pension benefit plans (as defined in Section 3(2) of ERISA); (ii)
there shall result from any event or events set forth in clause (i) of this
Section 9.1(f) the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and
(iii) such lien, security interest or liability, will have a Material
Adverse Effect; or
(g) Collateral Documents. Any Collateral Document shall cease to be
--------------------
in full force and effect, or shall cease to give the Collateral Agent on
behalf of the Lenders the Liens, rights, powers and privileges purported to
be created thereby in favor of the Collateral Agent, or any Credit Party
shall default in any material respect in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
80
<PAGE>
pursuant to any such Collateral Document and such default shall continue
unremedied for a period of at least 15 days after notice to the Borrower by
the Agent or the Required Lenders; or
(h) Guaranty. The Guaranty or any provision thereof shall cease to
--------
be in full force and effect, or Holding or any Person acting by or on
behalf of Holding shall deny or disaffirm obligations under the Guaranty;
or
(i) Judgments. One or more judgments or decrees shall be entered
---------
against Holding, the Borrower or any of its Subsidiaries involving a
liability of $2,500,000 or more in the case of any one such judgment or
decree and $5,000,000 or more in the aggregate for all such judgments and
decrees for Holding and all its Subsidiaries (to the extent not paid or
covered by insurance provided by a carrier that has acknowledged coverage)
and all such judgments or decrees shall not have been vacated, discharged
or stayed pending appeal within 60 days from the entry thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Lenders, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Credit Agreement (provided that, if an Event of Default
--------
specified in Section 9.1(e) shall occur with respect to the Borrower, the result
which would occur upon the giving of written notice by the Agent as specified in
clauses (i) and (ii) below shall occur automatically without the giving of any
such notice): (i) declare the Total Commitments terminated, whereupon the
Commitment of each Lender shall forthwith terminate immediately and any Unused
Line Fee accrued and unpaid shall forthwith become due and payable without any
other notice of any kind; (ii) declare the principal of and any accrued interest
in respect of all Revolving Loans and all Obligations owing hereunder to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) direct the Collateral Agent to enforce any or all of the
Liens and security interests created pursuant to the Collateral Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; and/or (v) direct the Borrower to pay (and the Borrower hereby agrees
upon receipt of such notice, or upon the occurrence of any Event of Default
specified in Section 9.05 in respect of the Borrower, it will pay) to the
Payments Administrator at its Payment Office such additional amounts of cash, to
be held as security for the Borrower's reimbursement obligations in respect of
Letters of Credit then outstanding equal to the aggregate of all Letters of
Credit Obligations.
ARTICLE 10.
The Agent
---------
10.1 Appointment. (a) Each Lender hereby designates BTCC as Agent
-----------
(for purposes of this Section 10, the term "Agent" shall include BTCC as
Payments Administrator and as Collateral Agent under the Collateral Documents
and Syndication Agent) to act as herein specified. Each Lender hereby
irrevocably authorizes, and each holder of any Revolving Note or
81
<PAGE>
participation in any Letter of Credit by the acceptance of a Revolving Note or
participation shall be deemed irrevocably to authorize, the Agent to take such
action on its behalf under the provisions of this Credit Agreement and the
Revolving Notes and any other instruments and agreements referred to herein and
to exercise such powers and to perform such duties hereunder and thereunder as
are specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The
Collateral Agent shall hold all Collateral and the Payments Administrator shall
hold all payments of principal, interest, Fees, charges and Expenses received
pursuant to this Credit Agreement or any other Credit Document for the benefit
of the Lenders to be distributed as provided herein. The Agent may perform any
of its duties hereunder by or through its agents or employees.
(b) The provisions of this Article 10 are solely for the benefit of
the Agent and the Lenders, and neither Holding nor any of its Subsidiaries shall
have any rights as a third party beneficiary of any of the provisions hereof
(other than Sections 10.9 and 10.10(c)). In performing its functions and duties
under this Credit Agreement, the Agent shall act solely as agent of the Lenders
and does not assume and shall not be deemed to have assumed any obligation
toward or relationship of agency or trust with or for Holding or any of its
Subsidiaries.
10.2 Nature of Duties of the Agent. The Agent shall not have any
-----------------------------
duties or responsibilities except those expressly set forth in this Credit
Agreement and the other Credit Documents. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or in connection herewith, unless caused by its
or their gross negligence or willful misconduct. The duties of the Agent shall
be mechanical and administrative in nature; the Agent shall have by reason of
this Credit Agreement or the other Credit Documents a fiduciary relationship in
respect of any Lender; and nothing in this Credit Agreement or the other Credit
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Credit Agreement or the
other Credit Documents except as expressly set forth herein or therein.
10.3 Lack of Reliance on the Agent. (a) Independently and without
-----------------------------
reliance upon the Agent, each Lender, to the extent it deems appropriate, has
made and shall continue to make (i) its own independent investigation of the
financial or other condition and affairs of the Borrower and its Subsidiaries in
connection with the taking or not taking of any action in connection herewith
and (ii) its own appraisal of the creditworthiness of the Borrower and its
Subsidiaries, and, except as expressly provided in this Credit Agreement, the
Agent shall not have any duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the making of
the Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the
Revolving Notes or the financial or other condition of the Borrower or any of
its Subsidiaries. The Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Credit Agreement or the Revolving Notes, or the
82
<PAGE>
financial condition of the Borrower or any of its Subsidiaries, or the existence
or possible existence of any Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
10.4 Certain Rights of the Agent. The Agent shall have the right to
---------------------------
request instructions from the Required Lenders at any time. If the Agent shall
request instructions from the Required Lenders with respect to any act or action
(including the failure to act) in connection with this Credit Agreement, the
Agent shall be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the Required Lenders,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Lenders.
10.5 Reliance by the Agent. The Agent shall be entitled to rely, and
---------------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. The Agent may consult with legal counsel (including
counsel for the Borrower with respect to matters concerning the Borrower and its
Subsidiaries), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
10.6 Indemnification of the Agent. To the extent the Agent is not
----------------------------
reimbursed and indemnified by the Borrower, each Lender will reimburse and
indemnify the Agent, in proportion to its respective Commitment, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever (including all Expenses) which
may be imposed on, incurred by or asserted against the Agent in performing its
duties hereunder, in any way relating to or arising out of this Credit
Agreement; provided that no Lender shall be liable for any portion of such
--------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct.
10.7 The Agent in its Individual Capacity. With respect to its
------------------------------------
obligation to lend under this Credit Agreement, the Loans made by it and the
Revolving Notes issued to it, and its participation in Letters of Credit issued
hereunder, the Agent shall have the same rights and powers hereunder as any
other Lender or holder of a Revolving Note or participation interests and may
exercise the same as though it was not performing the duties specified herein;
and the terms "Lenders," "Required Lenders," "holders of Revolving Notes," or
any similar terms shall, unless the context clearly otherwise indicates, include
the Agent in its individual capacity. The Agent may accept deposits from, lend
money to, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory or other business with Holding or any
Affiliate of Holding as if it were not performing the duties specified herein,
and may accept fees and other consideration from Holding for services in
connection with this Credit Agreement and otherwise without having to account
for the same to the Lenders.
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10.8 Holders of Notes. The Agent may deem and treat the payee of
----------------
any Revolving Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any Person who, at the time
of making such request or giving such authority or consent, is the holder of any
Revolving Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Revolving Note or of any Revolving Note or
Revolving Notes issued in exchange therefor.
10.9 Successor Agent. (a) The Agent may, upon five (5) Business
---------------
Days' notice to the Lenders and the Borrower, resign at any time (effective upon
the appointment of a successor Agent pursuant to the provisions of this Section
10.9) by giving written notice thereof to the Lenders and the Borrower. Such
resignation of the Agent shall also operate as a resignation as an Issuing Bank,
as Payments Administrator and as Syndication Agent. Upon any such resignation,
the Required Lenders shall have the right, upon five (5) days' notice and
approval by the Borrower (which approval shall not be unreasonably withheld), to
appoint a successor Agent which shall also serve as a successor Issuing Bank.
If no successor Agent (i) shall have been so appointed by the Required Lenders,
and (ii) shall have accepted such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation, then, upon five (5) days'
notice, the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall also serve as a successor Issuing Bank.
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Credit Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this Credit
Agreement.
(c) In the event of a material breach by the Agent of its duties
hereunder, the Agent may be removed by the Required Lenders (other than the
Agent and without giving effect to any Revolving Loans or Commitments made by
the Agent) for cause and the provisions of this Section 10.9 shall apply to the
appointment of a successor Agent. Such removal of the Agent shall also operate
as a removal as an Issuing Bank, as Payments Administrator as Syndication Agent.
10.10 Collateral Matters. (a) Each Lender authorizes and directs
------------------
the Collateral Agent to enter into the Collateral Documents for the benefit of
the Lenders. Each Lender hereby agrees, and each holder of any Revolving Note by
the acceptance thereof will be deemed to agree, that, except as otherwise set
forth herein, any action taken by the Required Lenders in accordance with the
provisions of this Credit Agreement or the Collateral Documents, and the
exercise by the Required Lenders of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of the Lenders. The Collateral Agent is hereby
authorized on behalf of all of the Lenders, without the necessity of any notice
to or further consent from any Lender, from time to time prior to an Event of
Default, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and liens upon the Collateral granted pursuant to the Collateral
Documents.
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(b) The Lenders hereby authorize the Collateral Agent, at its
option and in its discretion, upon the direction of the Agent to release any
Lien granted to or held by the Collateral Agent upon any Collateral (i) upon
termination of the Commitments and payment and satisfaction of all of the
Obligations at any time arising under or in respect of this Credit Agreement or
the Credit Documents or the transactions contemplated hereby or thereby, (ii)
constituting property being sold or disposed of upon receipt of the proceeds of
such sale by the Collateral Agent if the Borrower certifies to the Collateral
Agent that the sale or disposition is made in compliance with Section 8.1 hereof
(and the Agent may rely conclusively on any such certificate, without further
inquiry) or (iii) if approved, authorized or ratified in writing by the Required
Lenders, unless such release is required to be approved by all of the Lenders
hereunder. Upon request by the Agent at any time, the Lenders will confirm in
writing the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this Section 10.10.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Credit Agreement, or consented to in
writing by the Required Lenders or all of the Lenders, as applicable, and upon
at least five (5) Business Days' prior written request by the Borrower, the
Collateral Agent shall (and is hereby irrevocably authorized by the Lenders to)
execute such documents as may be necessary to evidence the release of the Liens
granted to the Collateral Agent for the benefit of the Lenders herein or
pursuant hereto upon the Collateral that was sold or transferred; provided that
--------
(i) the Collateral Agent shall not be required to execute any such document on
terms which, in the Collateral Agent's opinion, would expose the Collateral
Agent to liability or create any obligation or entail any consequence other than
the release of such Liens without recourse, representation or warranty and (ii)
such release shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of the Borrower or any of its Subsidiaries in
respect of) all interests retained by the Borrower or any of its Subsidiaries,
including, without limitation, the proceeds of the sale, all of which shall
continue to constitute part of the Collateral. In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, the Collateral Agent shall be authorized to deduct all of the
Expenses reasonably incurred by the Collateral Agent from the proceeds of any
such sale, transfer or foreclosure.
(d) The Collateral Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or is owned
by the Borrower or any of its Subsidiaries or is cared for, protected or insured
or that the Liens granted to the Collateral Agent herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise or to
continue exercising at all or in any manner or under any duty of care,
disclosure or fidelity any of the rights, authorities and powers granted or
available to the Collateral Agent in this Section 10.10 or in any of the
Collateral Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Collateral Agent
may act in any manner it may deem appropriate, in its sole discretion, given the
Collateral Agent's own interest in the Collateral as one of the Lenders and that
the Collateral Agent shall have no duty or liability whatsoever to the Lenders,
except for its gross negligence or willful misconduct.
10.11 Actions with Respect to Defaults. In addition to the Agent's
--------------------------------
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such
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action with respect to an Event of Default as shall be directed by the Required
Lenders; provided that until the Agent shall have received such directions, 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 and in the best interests of the Lenders.
10.12 Delivery of Information. The Agent shall not be required to
-----------------------
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from Holding,
the Borrower, any Subsidiary, the Required Lenders, any Lender or any other
Person under or in connection with this Credit Agreement or any other Credit
Document except (i) as specifically provided in this Credit Agreement or any
other Credit Document and (ii) as specifically requested from time to time in
writing by any Lender with respect to a specific document, instrument, notice or
other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
ARTICLE 11.
Miscellaneous
-------------
11.1 Submission to Jurisdiction; Waivers. Each of Holding and the
-----------------------------------
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Credit Agreement and the other credit documents
to which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts
of the State of New York located in New York City, the Courts of the United
States of America for the Southern District of New York and appellate
courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) designates, appoints and empowers CT Corporation System with
offices on the date hereof at 1633 Broadway, New York, New York 10019 as
its designee, appointee and agent to receive, accept and acknowledge for
and on its behalf, and in respect of its property, service of any and all
legal process, summons, notices and documents which may be served in any
such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, each Credit Party agrees
to designate a new designee, appointee and agent in New York City on the
terms and for the purposes of this provision satisfactory to the Agent
under this Credit Agreement;
(d) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially
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similar form of mail), postage prepaid, to the Borrower at its address set
forth in Section 11.5 or at such other address of which the Agent shall
have been notified pursuant thereto;
(e) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction;
(f) to the extent permitted by law, waives the right to assert any
setoff, counterclaim or cross-claim in respect of, and all statutes of
limitations which may be relevant to, such action or proceeding (other than
compulsory counterclaims), provided that nothing in this clause (f) shall
--------
preclude a separate action asserting any such claims; and
(g) waives due diligence, demand, presentment and protest and any
notices thereof as well as notice of nonpayment.
11.2 Jury Trial. Holding, the Borrower, the Agent, the Issuing Banks
----------
and the Lenders each hereby waive any right to a trial by jury in any action or
proceeding arising out of this Credit Agreement, the Credit Documents or any
other agreements or transactions related hereto or thereto.
11.3 Governing Law. The validity, interpretation and enforcement of
-------------
this Credit Agreement shall be governed by the laws of the State of New York.
11.4 Delays: Partial Exercise of Remedies. No delay or omission of
-------------------------------------
the Agent, any Issuing Bank or the Lenders to exercise any right or remedy
hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any
such Event of Default. No single or partial exercise by the Agent, any Issuing
Bank or the Lenders of any right or remedy shall preclude any other or further
exercise thereof, or preclude any other right or remedy.
11.5 Notices. Except as otherwise provided herein, all notices and
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correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent, or any of the Lenders, then to BTCC,
14 Wall Street, New York, New York 10005, Attention: Basil Palmeri, and if to
the Borrower, 10th Floor then to the Borrower at 3050 East Birch Street, Brea,
California 92621, Attention: Charles P. Gallopo, or by facsimile transmission,
promptly confirmed in writing sent by first class mail, if to the Agent, or any
of the Lenders, in the case of BTCC at (212) 618-2628, and if to the Borrower at
(714) 577-3765. All such notices and correspondence shall be deemed given when
received by the party to whom sent.
11.6 Benefit of Agreement. (a) This Credit Agreement shall be
--------------------
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that no Credit Party may
--------
assign or transfer any of its interests hereunder, without the prior written
consent of the Lenders and provided further, that the rights of each Lender to
----------------
transfer, assign or grant participations in its rights and/or obligations
hereunder shall be limited as set forth below in this Section 11.6, provided
--------
that nothing in this Section 11.6 shall prevent or
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prohibit any Lender from pledging its rights under this Credit Agreement and/or
its Revolving Loans and/or Revolving Notes hereunder to a Federal Reserve Bank
in support of borrowings made by such Lender from such Federal Reserve Bank.
(b) Each Lender shall have the right to transfer, assign or grant
participations in all or any part of its remaining rights and obligations
hereunder on the basis set forth below in this clause (b).
(A) Assignments. Each Lender may assign pursuant to an Assignment
-----------
and Assumption Agreement all or a portion of its rights and obligations
hereunder pursuant to this clause (b)(A) to (x) one or more Lenders or (y) one
or more other Eligible Transferees, provided that (i) any such assignment
--------
pursuant to clause (y) above shall be in the aggregate amount of at least
$5,000,000, and (ii) any assignment pursuant to clause (y) shall require the
consent of the Agent which consent shall not be unreasonably withheld. Any
assignment to another Lender pursuant to this clause (b)(A) will become
effective upon the payment to the Payments Administrator by either the assigning
or the assignee Lender of a nonrefundable assignment fee of $3,500 and the
recording by the Payments Administrator of such assignment, and the resultant
effects thereof on the Revolving Loans and Commitments of the assigning Lender
and the assignee Lender, in a register maintained by the Payments Administrator
(the "Register"), the Payments Administrator hereby agreeing to effect such
recordation no later than five Business Days after its receipt of a written
notification by the assigning Lender and the assignee Lender of the proposed
assignment, provided that the Payments Administrator shall not be required to,
--------
and shall not, so record any assignment in the Register on or after the date on
which any proposed amendment, modification or supplement in respect of this
Credit Agreement has been circulated to the Lenders for approval until the
earlier of (x) the effectiveness of such amendment, modification or supplement
in accordance with Section 11.10 or (y) 30 days following the date on which such
proposed amendment, modification or supplement was circulated to the Lenders.
Assignments pursuant to clause (b)(A) (y) will only be effective if the Payments
Administrator shall have received a written notice, substantially in the form of
Exhibit O hereto, from the assigning Lender and the assignee and payment of a
nonrefundable assignment fee of $2,500 to the Payments Administrator by either
the assigning Lender or the assignee. No later than five Business Days after
its receipt of such written notice, the Payments Administrator will record such
assignment, and the resultant effects thereof on the Revolving Loans and
Commitment of the assigning Lender, in the Register, at which time such
assignment shall become effective, provided that the Payments Administrator
--------
shall not be required to, and shall not, so record any assignment in the
Register on or after the date on which any proposed amendment, modification or
supplement in respect of this Credit Agreement has been circulated to the
Lenders for approval until the earlier of (x) the effectiveness of such
amendment, modification or supplement in accordance with Section 11.10 or (y) 30
days following the date on which such proposed amendment, modification or
supplement was circulated to the Lenders. Upon the effectiveness of any
assignment pursuant to clause (b)(A)(y), (x) the assignee will become a "Lender"
for all purposes of this Credit Agreement and the other Credit Documents with
Revolving Loans and a Commitment as so recorded by the Payments Administrator in
the Register, and to the extent of such assignment, the assigning Lender shall
be relieved of its obligations hereunder with respect to the portion of its
Commitment being assigned and (y) if such assignment occurs after the
Restatement Effective Date, the Borrower shall issue new Revolving Notes (in
exchange for the Revolving Note or Revolving Notes of the assigning
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Lender) to the assigning Lender (to the extent such Lender's Commitment is not
reduced to zero as a result of such assignment) and to the assignee Lender, in
each case to the extent requested by the assigning Lender or assignee Lender, as
the case may be, to the extent needed to reflect the revised Commitments of such
Lenders. The Payments Administrator will (x) notify each Letter of Credit Issuer
with respect to outstanding Letters of Credit within 5 Business Days of the
effectiveness of any assignment hereunder and (y) prepare on the last Business
Day of each calendar quarter during which an assignment has become effective
pursuant to this clause (b)(A) a new Schedule I giving effect to all such
assignments effected during such quarter and will promptly provide same to the
Borrower and each of the Lenders. In addition, each agreement creating any
assignment must include an agreement by the assignee to be bound by the
provisions of Section 11.7 of this Credit Agreement and such assignee shall have
executed a confidentiality agreement substantially in the form of Exhibit P
hereto.
(B) Participations. Each Lender may transfer, grant or assign
--------------
participations in all or any part of such Lender's interests and obligations
hereunder pursuant to this clause (b)(B) to any Eligible Transferee, provided
--------
that (i) such Lender shall remain a "Lender" for all purposes of this Credit
Agreement and the transferee of such participation shall not constitute a Lender
hereunder and (ii) no participant under any such participation shall have rights
to approve any amendment to or waiver of this Credit Agreement or any other
Credit Document except to the extent such amendment or waiver would (x) extend
the final scheduled maturity of any of the Revolving Loans or the Commitment in
which such participant is participating (it being understood that a waiver of a
mandatory reduction in the Total Commitments or the waiver of the application of
any prepayment to the Revolving Loans shall not constitute the extension of the
final scheduled maturity of any Revolving Loan or Commitment), (y) reduce the
interest rate (other than as a result of waiving the applicability of any post-
default increases in interest rates) or Fees applicable to any of the Revolving
Loans, Commitments or Letters of Credit or postpone the payment or reduce the
amount thereof or (z) release all or substantially all of the Collateral or
guaranties (except as expressly provided in the Credit Documents). In the case
of any such participation, the participant shall not have any rights under this
Credit Agreement or any of the other Credit Documents (the participant's rights
against the granting Lender in respect of such participation to be those set
forth in the agreement with such Lender creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as if such Lender
had not sold such participation, provided that such participant shall be
--------
entitled to receive additional amounts under Sections 2.9, 2.10, 4.5 and 4.9 on
the same basis as if it were a Lender. In addition, each agreement creating any
participation must include an agreement by the participant to be bound by the
provisions of Section 11.7 of this Credit Agreement and such participant shall
have executed a confidentiality agreement substantially in the form of Exhibit P
hereto.
(c) Notwithstanding any other provisions of this Section 11.6, no
transfer or assignment of the interests or obligations of any Lender hereunder
or any grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.
(d) If any Lender becomes a Defaulting Lender, or upon the occurrence
of any event giving rise to the operation of Section 2.9, 4.3(c)(ii) or 4.9 with
respect to such Lender, the
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Borrower shall have the right, if no Default or Event of Default then exists, to
either replace such Lender (the "Replaced Lender") with one or more Eligible
Transferee (collectively, the "Replacement Lender"), provided that (i) at the
--------
time of any replacement pursuant to this Section 11.6(d), the Replacement Lender
shall enter into one or more Assignment and Assumption Agreements pursuant to
Section 11.6(b)(A) (and with all fees payable pursuant to said Section
11.6(b)(A) to be paid by the Replacement Lender) pursuant to which the
Replacement Lender shall acquire all of the Commitments and outstanding
Revolving Loans of, and participations in Letters of Credit by, the Replaced
Lender and, in connection therewith, shall pay to (x) the Replaced Lender in
respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Revolving Loans of
the Replaced Lender, (B) an amount equal to all drawings under Letters of Credit
that have been funded by (and not reimbursed to) such Replaced Lender, together
with all then unpaid interest with respect thereto at such time, (C) at the
option of the Borrower, an amount equal to the increased costs incurred by the
Borrower and owing to the Replaced Lender pursuant to Sections 2.9 and 4.9 and
(D) an amount equal to all accrued, but theretofore unpaid, Fees owing to the
Replaced Lender pursuant to Article 4 and (y) any Issuing Bank the amount of all
unreimbursed drawings under Letters of Credit attributable to such Replaced
Lender and (ii) all obligations of the Borrower owing to the Replaced Lender
(other than those specifically described in clause (i) above in respect of which
the assignment purchase price has been, or is concurrently being, paid) shall be
paid in full by the Borrower to such Replaced Lender concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreements the payment of amounts referred to in clauses (i) and (ii) above the
Replacement Lender shall become a Lender hereunder and the Replaced Lender shall
cease to constitute a Lender hereunder, except with respect to indemnification
provisions under this Credit Agreement, which shall survive as to such Replaced
Lender.
(e) Each Lender initially party to this Credit Agreement hereby
represents, and each Person that becomes a Lender pursuant to an assignment
permitted by the preceding clause (b)(A) will upon its becoming party to this
Credit Agreement represent, that it is an Eligible Transferee which makes loans
in the ordinary course of its business and that it will make or acquire
Revolving Loans for its own account in the ordinary course of such business,
provided that subject to the preceding clauses (a) through (d), the disposition
- --------
of any promissory notes or other evidences of or interests in Indebtedness held
by such Lender shall at all times be within its exclusive control.
11.7 Confidentiality. Each Lender agrees that it will use its
---------------
reasonable best efforts not to disclose without the prior consent of the
Borrower (other than to its employees, auditors, or counsel, or to another
Lender if the disclosing Lender or such disclosing Lender's holding or parent
company in its sole discretion determines that any such party should have access
to such information) any information with respect to the Borrower or any of the
Borrower's Subsidiaries, which is furnished pursuant to the Credit Documents and
which is designated by the Borrower to the Lenders in writing as confidential;
provided that any Lender may disclose any such information (a) as has become
- --------
generally available to the public, (b) as may be required or appropriate in any
report, statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (c) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any Requirement of Law, and (e) to any
prospective or actual transferee or participant in connection
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with any contemplated transfer or participation of any of the Revolving Notes or
Commitments or any interest therein by such Lender which prospective transferee
or participant shall have agreed in writing to be subject to the confidentiality
provisions of this Section 11.7; provided, however, that in the case of any
-------- -------
disclosure pursuant to the foregoing clauses (c) or (d), such Lender will use
its reasonable efforts to notify the Borrower, to the extent permitted as
advised by counsel, in advance (or, in the case of clause (d), promptly
thereafter) of such disclosure so as to afford the Borrower the opportunity to
protect the confidentiality of the information proposed to be so disclosed.
11.8 Indemnification. (a) Each of Holding and the Borrower shall
---------------
and hereby agrees to jointly and severally indemnify, defend and hold harmless
the Agent, each Issuing Bank and each of the Lenders and their respective
directors, officers, agents and employees (the "Indemnitee") from and against
(x) any and all losses, claims, damages, liabilities, deficiencies, judgments or
expenses incurred by any of them (except to the extent that it is finally
judicially determined to have resulted from their own gross negligence or
willful misconduct) arising out of or by reason of any litigations,
investigations, claims or proceedings which arise out of or are in any way
related to (i) this Credit Agreement or the transactions contemplated thereby,
(ii) the issuance of the Letters of Credit, (iii) the failure of an Issuing Bank
to honor a drawing under any Letter of Credit, as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, (iv) any actual or proposed use by
the Borrower of the proceeds of the Revolving Loans or (v) the Agent's or the
Lenders' entering into this Credit Agreement, the other Credit Documents or any
other agreements and documents relating hereto, including, without limitation,
amounts paid in any settlement agreed to by the Borrower, court costs and the
reasonable fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding or any advice rendered in
connection with any of the foregoing and (y) any such losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred in connection with any
remedial or other action taken by Holdings or any of the Lenders in connection
with compliance by Holdings or any of its Subsidiaries, or any of their
respective properties, with any federal, state or local environmental laws,
acts, rules, regulations, orders, directions, ordinances, criteria or
guidelines.
(b) If and to the extent that the Obligations of either of Holding
or the Borrower hereunder are unenforceable for any reason, each of Holding and
the Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of such Obligations which is permissible under applicable law.
Each of Holding's and the Borrower's Obligations hereunder shall survive any
termination of this Credit Agreement and the other Credit Documents and the
payment in full of the Obligations, and are in addition to, and not in
substitution of, any other of their Obligations set forth in this Credit
Agreement.
(c) In addition, each of Holding and the Borrower shall, upon
demand, pay to the Agent and any Lender all costs and expenses (including the
reasonable fees and disbursements of counsel and other professionals) paid or
incurred by the Agent or such Lender in (i) enforcing or defending its rights
under or in respect of this Credit Agreement, the other Credit Documents or any
other document or instrument now or hereafter executed and delivered in
connection herewith, (ii) in collecting the Revolving Loans, (iii) in
foreclosing or otherwise collecting upon the
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Collateral or any part thereof and (iv) obtaining any legal, accounting or other
advice in connection with any of the foregoing.
11.9 Entire Agreement; Successors and Assigns. This Credit
----------------------------------------
Agreement and the other Credit Documents constitute the entire agreement among
Holding, the Borrower, the Agent and the Lenders, supersedes any prior
agreements among them, and shall bind and benefit Holding, the Borrower, the
Agent and the Lenders and their respective successors and permitted assigns.
11.10 Amendment or Waiver. Neither this Credit Agreement nor any
-------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Lenders, provided that no
--------
such change, waiver, discharge or termination shall, without the consent of each
Lender affected thereby, (i) extend the final scheduled maturity of any
Revolving Loan or Revolving Note (it being understood that any waiver of the
application of any prepayment or the method of application of any prepayment to
the Revolving Loans or any mandatory reduction to the Total Commitments shall
not constitute an extension of the final maturity date of such Revolving Loans),
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the amount thereof, or increase the Commitment of any Lender over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Commitments, or
mandatory prepayment, shall not constitute a change in the terms of any
Commitment of any Lender), (ii) release all or substantially all of the
Collateral or guaranties (except as expressly provided in the Credit Documents),
(iii) amend, modify or waive any provision of this Section, (iv) reduce the
percentage specified in the definition of Required Lenders or (v) consent to the
assignment or transfer by any Credit Party of any of its rights and obligations
under any Credit Document. No provision of Article 3, 10 or 11 may be amended
without the consent of each Issuing Bank or the Agent, respectively.
11.11 Nonliability of Agent and Lenders. The relationship between
---------------------------------
Holding, the Borrower and the Borrower's Subsidiaries, and the Lenders and the
Agent shall be solely that of borrower and lender. Neither the Agent nor any
Lender shall have any fiduciary responsibilities to Holding, the Borrower, or
any of the Borrower's Subsidiaries. Neither the Agent nor any Lender undertakes
any responsibility to Holding, the Borrower, or any of the Borrower's
Subsidiaries to review or inform Holding, the Borrower, or any of the Borrower's
Subsidiaries of any matter in connection with any phase of the business or
operations of Holding, the Borrower, or any of the Borrower's Subsidiaries.
11.12 Independent Nature of Lenders' Rights. The amounts payable at
-------------------------------------
any time hereunder to each Lender under such Lender's Revolving Note or Notes
shall be a separate and independent debt.
11.13 Counterparts. This Credit Agreement may be executed in any
------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
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11.14 Effectiveness. (a) This Credit Agreement shall become
-------------
effective on the date (the "Restatement Effective Date") on which (i) all of the
parties hereto shall have signed a copy hereof (whether the same or different
copies) and shall have delivered (including by way of facsimile device) the same
to the Agent pursuant to Section 11.5 or, in the case of the Lenders, shall have
given to the Agent written, telecopied or telex notice (actually received) at
such office that the same has been signed and mailed to it and (ii) the
conditions precedent set forth in Section 5.1 have been met to the satisfaction
of the Agent or have been waived by the Agent.
(b) On the Restatement Effective Date, each New Lender and each
Continuing Lender shall have delivered to the Agent for the account of the
Borrower an amount equal to (i) in the case of each New Lender, the Revolving
Loans to be made by such New Lender on the Restatement Effective Date and (ii)
in the case of each Continuing Lender, the amount by which the principal amount
of Loans to be made and/or converted by such Continuing Lender on the
Restatement Effective Date exceeds the amount of the Existing Loans of such
Continuing Lender outstanding on the Restatement Effective Date. Notwithstanding
anything to the contrary contained in this Section 11.14(b), in satisfying the
foregoing condition, unless the Agent shall have been notified by any Lender
prior to the occurrence of the Restatement Effective Date that such Lender does
not intend to make available to the Agent such Lender's Revolving Loans required
to be made by it on such date, then the Agent may, in reliance on such
assumption, make available to the Borrower the corresponding amounts in
accordance with the provisions of Section 2.4 of this Credit Agreement, and the
making available by the Agent of such amounts shall satisfy the condition
contained in this Section 11.14(b).
11.15 Severability. In case any provision in or obligation under
------------
this Credit Agreement or the Revolving Notes or the other Credit Documents shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
11.16 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Credit Agreement, and the Table of Contents, are inserted
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Credit Agreement.
11.17 Maximum Rate. Notwithstanding anything to the contrary
------------
contained elsewhere in this Credit Agreement or in any other Credit Document,
the Borrower, the Agent and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to the Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance and
Lender should ever receive anything of value deemed interest by applicable
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law which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrower. All sums paid or agreed to be paid to
the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other Indebtedness of the Borrower to the Agent or any Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness until payment
in full so that the actual rate of interest on account of all such Indebtedness
does not exceed the Highest Lawful Rate throughout the entire term of such
Indebtedness. The terms and provisions of this Section shall control every
other provision of this Credit Agreement and all agreements among the Borrower,
the Agent and the Lenders.
11.18 Right of Setoff. In addition to and not in limitation of all
---------------
rights of offset that any Lender or any Issuing Bank may have under applicable
law, each Lender and each Issuing Bank shall, upon the occurrence of any Event
of Default and whether or not such Lender or such Issuing Bank has made any
demand or the Obligations of any Credit Party are matured, have the right, upon
prior notice to the Borrower, to appropriate and apply to the payment of the
Obligations of Holding or any of its Subsidiaries all deposits (general or
special, time or demand, provisional or final) then or thereafter held by and
other Indebtedness or property then or thereafter owing by such Lender or such
Issuing Bank, including, without limitation, any and all amounts in any
Depositary Account, the Concentration Account or the Disbursement Account. Each
Lender or each Issuing Bank exercising such rights shall notify the Agent
thereof and any amount received as a result of the exercise of such rights shall
be reallocated among the Lenders and the Issuing Bank as set forth in Section
2.11 provided, however, that failure of the Borrower to receive such notice
shall not impair any Lender's or Issuing Bank's rights hereunder.
11.19 Amendment and Restatement; Termination of Existing Credit
---------------------------------------------------------
Agreement. On the Restatement Effective Date, without further action by any
- ---------
party, the Existing Credit Agreement shall be amended and restated to read in
full as set forth herein. The Borrower and each of the Lenders agrees that the
"Commitments" as defined in the Existing Credit Agreement shall be terminated in
their entirety on and as of the Restatement Effective Date.
11.20 Additions of New Lenders; Conversion of Original Loans of
---------------------------------------------------------
Continuing Lenders; Termination of Commitments of Non-Continuing Lenders. (a)
- ------------------------------------------------------------------------
On and as of the occurrence of the Restatement Effective Date in accordance with
Section 11.14, each New Lender shall become a "Lender" under, and for all
purposes of, this Agreement and the other Credit Documents.
(b) The parties hereto acknowledge that each Existing Lender has
been offered the opportunity to participate in this Credit Agreement, after the
occurrence of the Restatement Effective Date, as a Continuing Lender hereunder,
but that no Existing Lender is obligated to be a Continuing Lender.
(c) Notwithstanding anything to the contrary contained in the
Existing Credit Agreement, this Credit Agreement or any other Credit Document,
the Borrower and each of the
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Lenders hereby agree that on the Restatement Effective Date, (i) each Lender
with a Commitment as set forth on Schedule I (after giving effect to the
Restatement Effective Date) shall make or maintain (including by way of
conversion) that principal amount of Revolving Loans to the Borrower as is
required by Section 2.1, provided that if the Existing Loans of any Continuing
--------
Lender outstanding on the Restatement Effective Date (immediately before giving
effect thereto) exceed the aggregate principal amount of Loans required to be
made available by such Lender on such date (after giving effect to the
Restatement Effective Date), then Existing Loans of such Continuing Lender in an
amount equal to such excess shall be repaid on the Restatement Effective Date to
such Lender and (ii) in the case of each Non-Continuing Lender, all of such Non-
Continuing Lender's Existing Loans outstanding on the Restatement Effective Date
shall be repaid in full on such date, together with interest thereon and all
accrued Fees (and any other amounts) owing to such Non-Continuing Lender, and
the Commitment (under, and as defined in, the Original Credit Agreement) of such
Non-Continuing Lender, if any, shall be terminated, effective upon the
occurrence of the Restatement Effective Date. Notwithstanding anything to the
contrary contained in the Existing Credit Agreement, this Credit Agreement or
any other Credit Document, the parties hereto hereby consent to the repayments
and reductions required above, and agree that in the event that any Existing
Lender shall fail to execute a counterpart of this Credit Agreement prior to the
occurrence of the Restatement Effective Date, such Existing Lender shall be
deemed to be a Non-Continuing Lender and, concurrently with the occurrence of
the Restatement Effective Date, the Commitment (under, and as defined, in the
Existing Credit Agreement) of such Existing Lender, if any, shall be terminated,
all Existing Loans of such Existing Lender outstanding on the Restatement
Effective Date shall be repaid in full, together with interest thereon and all
accrued Fees (and any other amounts) owing to such Existing Lender, and
concurrently with the occurrence of the Restatement Effective Date, such
Existing Lender shall no longer constitute a "Lender" under this Credit
Agreement and the other Credit Documents, provided that all indemnities of the
--------
Credit Parties under the Existing Credit Agreement and the other Credit
Documents (as in effect prior to the Restatement Effective Date) for the benefit
of such Existing Lender shall survive in accordance with the terms thereof.
ARTICLE 12.
Guaranty
--------
12.1 The Guaranty. In order to induce the Lenders to enter into this
------------
Credit Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by the Guarantor from the proceeds of the Revolving
Loans and the issuance of the Letters of Credit, the Guarantor hereby agrees
with the Lenders as follows: the Guarantor hereby unconditionally and
irrevocably guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all indebtedness of the Borrower to the Lenders hereunder. If any or
all of the indebtedness of the Borrower to the Lenders becomes due and payable
hereunder, the Guarantor unconditionally promises to pay such indebtedness to
the Lenders, or order, on demand, together with any and all reasonable expenses
which may be incurred by the Agent or the Lenders in collecting any of the
indebtedness. The word "indebtedness" is used in this Section 12 in its most
comprehensive sense and means any and all advances, debts, obligations and
liabilities of the Borrower arising in connection with this Credit Agreement, in
each case, heretofore, now, or hereafter made, incurred or
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created, whether voluntarily or involuntarily, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether or not such
indebtedness is from time to time reduced, or extinguished and thereafter
increased or incurred, whether the Borrower may be liable individually or
jointly with others, whether or not recovery upon such indebtedness may be or
hereafter become barred by any statute of limitations, and whether or not such
indebtedness may be or hereafter become otherwise unenforceable.
12.2 Bankruptcy. Additionally, the Guarantor unconditionally and
----------
irrevocably guarantees the payment of any and all indebtedness of the Borrower
to the Lenders whether or not due or payable by the Borrower upon the occurrence
in respect of the Borrower of any of the events specified in Section 9.1(e), and
unconditionally and irrevocably promises to pay such indebtedness to the
Lenders, or order, on demand, in lawful money of the United States.
12.3 Nature of Liability. The liability of the Guarantor hereunder
-------------------
is exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by the Guarantor, any other
guarantor or by any other party, and the liability of the Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, or (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the indebtedness of the Borrower, or (c) any payment on or in
reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e)
any payment made to the Agent or the Lenders on the indebtedness which the Agent
or such Lender repay the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
the Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
12.4 Independent Obligation. The obligations of the Guarantor
----------------------
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted against
the Guarantor whether or not action is brought against any other guarantor or
the Borrower and whether or not any other guarantor or the Borrower be joined in
any such action or actions. The Guarantor waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the
Borrower shall, to the fullest extent permitted by law, operate to toll the
statute of limitations as to the Guarantor.
12.5 Authorization. The Guarantor authorizes the Agent and the
-------------
Lenders without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) subject to the agreement of the Borrower, change the manner,
place or terms of payment of, and/or change or extend the time of payment
of, renew, increase, accelerate or alter, any of the indebtedness
(including any increase or decrease in the rate of interest thereon), any
security therefor, or any liability incurred directly or indirectly in
respect thereof, and the Guaranty herein made shall apply to the
indebtedness as so changed, extended, renewed or altered;
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(b) take and hold security for the payment of the indebtedness and
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any property by whomsoever at any time pledged
or mortgaged to secure, or howsoever securing, the indebtedness or any
liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset there against;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment of all or any part thereof to the payment of any liability
(whether due or not) of the Borrower to its creditors other than the
Lenders;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Lenders regardless of what
liability or liabilities of the Guarantor or the Borrower remain unpaid;
and/or
(g) consent to or waive any breach of, or any act, omission or
default under, this Credit Agreement or any of the instruments or
agreements referred to herein, or otherwise, with the agreement of the
Borrower, amend, modify or supplement this Credit Agreement or any of such
other instruments or agreements
12.6 Reliance. It is not necessary for the Agent or the Lenders to
--------
inquire into the capacity or powers of the Borrower or its Subsidiaries or the
officers, directors, partners or agents acting or purporting to act on its
behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
12.7 Subordination. Any indebtedness of the Borrower now or
-------------
hereafter owing to the Guarantor is hereby subordinated to the indebtedness of
the Borrower owing to the Agent and the Lenders; provided that payment may be
--------
made by the Borrower on any such indebtedness owing to the Guarantor so long as
the same is not prohibited by this Credit Agreement; and provided further, that
----------------
if the Agent so requests at a time when an Event of Default exists, all such
indebtedness of the Borrower to the Guarantor shall be collected, enforced and
received by the Guarantor as trustee for the Lenders and be paid over to the
Lenders on account of the indebtedness of the Borrower to the Lenders, but
without affecting or impairing in any manner the liability of the Guarantor
under the other provisions of this Guaranty. Prior to the transfer by the
Guarantor of any note or negotiable instrument evidencing any indebtedness of
the Borrower to the Guarantor, the Guarantor shall mark such note or negotiable
instrument with a legend that the same is subject to this subordination.
12.8 Waiver. (a) The Guarantor waives any right (except as shall be
------
required by applicable statute and cannot be waived) to require the Agent or the
Lenders to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any
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security held from the Borrower, any other guarantor or any other party or (iii)
pursue any other remedy in the Agent's or the Lenders' power whatsoever. The
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full of
the indebtedness, including, without limitation, any defense based on or arising
out of the disability of the Borrower, any other guarantor or any other party,
or the unenforceability of the indebtedness or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower other than
payment in full of the indebtedness. The Agent and the Lenders may, at their
election, foreclose on any security held by the Agent, the Collateral Agent or
the Lenders by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the Agent
and the Lenders may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the indebtedness has been paid. The
Guarantor waives, to the fullest extent permitted by law, any defense arising
out of any such election by the Agent and the Lenders, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of the Guarantor against any Borrower or any other party
or any security.
(b) The Guarantor waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. The Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the indebtedness and
the nature, scope and extent of the risks which the Guarantor assumes and incurs
hereunder, and agrees that the Agent and the Lenders shall have no duty to
advise the Guarantor of information known to them regarding such circumstances
or risks.
(c) The Guarantor, until the Obligations have been indefeasibly paid
in full, hereby waives all rights of subrogation which it may at any time
otherwise have as a result of this Guaranty (whether contractual, under Section
509 of the Bankruptcy Code, or otherwise) to the claims of the Lenders against
the Borrower or any other guarantor of the indebtedness of the Borrower to the
Lenders (collectively, the "Other Parties") and all contractual, statutory or
common law rights of reimbursement, contribution or indemnity from any Other
Party which it may at any time otherwise have as a result of this Guaranty. The
Guarantor hereby further waives any right to enforce any other remedy which the
Lenders now have or may hereafter have against any Other Party, any endorser or
any other guarantor of all or any part of such indebtedness of the Borrower to
the Lenders and any benefit of, and any right to participate in, any security or
collateral given to or for the benefit of the Lenders to secure payment of such
indebtedness of the Borrower to the Lenders.
12.9 Limitation on Enforcement. The Lenders agree that this Guaranty
-------------------------
may be enforced only by the action of the Agent, in each case acting upon the
instructions of the Required Lenders and that no Lender shall have any right
individually to seek to enforce or to enforce this Guaranty it being understood
and agreed that such rights and remedies may be exercised by the Agent for the
benefit of the Lenders upon the terms of this Credit Agreement. The Lenders
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further agree that this Guaranty may not be enforced against any Affiliate,
director, officer, employee or stockholder of the Guarantor.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
EARLE M. JORGENSEN HOLDING
COMPANY, INC.
By /s/ Charles P. Gallopo
-----------------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial
Officer
EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
-----------------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial
Officer
AGENT:
-----
BT COMMERCIAL CORPORATION,
as Agent
By /s/ Basil Palmeri
-----------------------------------------
Name: Basil Palmeri
Title: Vice President
ISSUING BANK:
------------
BANKERS TRUST COMPANY,
as Issuing Bank
By /s/ Basil Palmeri
-----------------------------------------
Name: Basil Palmeri
Title: Vice President
<PAGE>
LENDER:
------
BT COMMERCIAL CORPORATION,
as Lender
By /s/ Basil Palmeri
-----------------------------------------
Name: Basil Palmeri
Title: Vice President
<PAGE>
EXHIBIT 4.6
[EXECUTION COPY]
================================================================================
U.S. $100,000,000
TERM LOAN AGREEMENT,
dated as of March 24, 1998,
among
EARLE M. JORGENSEN COMPANY,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
BANKERS TRUST COMPANY,
as the Documentation Agent for the Lenders,
and
FLEET NATIONAL BANK,
as the Administrative Agent for the Lenders.
================================================================================
DONALDSON, LUFKIN & JENRETTE BT ALEX. BROWN INCORPORATED,
SECURITIES CORPORATION, as Co-Arranger
as Arranger
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<C> <S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms..................................................... 2
1.2. Use of Defined Terms.............................................. 23
1.3. Cross-References.................................................. 23
1.4. Accounting and Financial Determinations........................... 23
1.5. Use of UCC Terms.................................................. 23
1.6. Officers' Certificates and Opinions............................... 23
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
2.1. Commitments....................................................... 24
2.1.1. Term Loan Commitments............................................. 24
2.1.2. Lenders Not Permitted or Required to Make the Term Loans.......... 24
2.2. Borrowing Procedures and Funding Maintenance...................... 24
2.3. Continuation and Conversion Elections............................. 24
2.4. Funding........................................................... 25
2.5. Loan Accounts..................................................... 25
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application........................... 26
3.1.1. Repayments and Prepayments........................................ 26
3.1.2. Application....................................................... 27
3.2. Interest Provisions............................................... 28
3.2.1. Rates............................................................. 28
3.2.2. Default Rates..................................................... 28
3.2.3. Payment Dates..................................................... 28
3.3. Fees.............................................................. 29
3.3.1. Arrangement, Structuring and Commitment Fees...................... 29
3.3.2. Administrative Agent Fee.......................................... 29
</TABLE>
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<TABLE>
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<C> <S> <C>
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful........................................ 29
4.2. Deposits Unavailable.............................................. 29
4.3. Increased LIBO Rate Loan Costs, etc............................... 30
4.4. Funding Losses.................................................... 30
4.5. Increased Capital Costs........................................... 30
4.6. Taxes............................................................. 31
4.7. Payments, Computations, etc....................................... 32
4.8. Sharing of Payments............................................... 32
4.9. Setoff............................................................ 33
4.10. Replacement of Lender............................................. 33
ARTICLE V
CONDITIONS TO TERM LOAN EXTENSION
5.1. Resolutions, etc................................................... 34
5.2. Borrowing Request.................................................. 34
5.3. Issuance of the Senior Notes....................................... 34
5.4. Revolving Credit Agreement......................................... 34
5.5. Payment of Outstanding Indebtedness, etc........................... 34
5.6. Amendment of Notes................................................. 35
5.7. Transaction Documents.............................................. 35
5.8. Additional Security Documents...................................... 35
5.9. Mortgages.......................................................... 36
5.10. Lien Waivers....................................................... 37
5.11. Solvency Opinion................................................... 37
5.12. Closing Date Certificates.......................................... 37
5.13. Financial Information, etc......................................... 37
5.14. Litigation......................................................... 38
5.15. Material Adverse Change............................................ 38
5.16. Consents and Approvals, etc........................................ 38
5.17. Insurance.......................................................... 38
5.18. Opinions of Counsel................................................ 38
5.19. Closing Fees, Expenses, etc........................................ 39
5.20. Satisfactory Legal Form............................................ 39
5.21. No Default......................................................... 39
5.22. Compliance with Warranties......................................... 39
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<C> <S> <C>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc................................................. 39
6.2. Due Authorization, Non-Contravention, etc......................... 39
6.3. No Conflicts...................................................... 40
6.4. Validity and Binding Effect....................................... 40
6.5. No Default........................................................ 40
6.6. Financial Statements.............................................. 40
6.7. Insurance......................................................... 40
6.8. Litigation; Contingent Liabilities................................ 40
6.9. Liens............................................................. 41
6.10. Subsidiaries...................................................... 41
6.11. Partnerships; Joint Ventures...................................... 41
6.12. Senior Notes...................................................... 41
6.13. Intellectual Property............................................. 41
6.14. Solvency.......................................................... 41
6.15. Contracts; Labor Matters.......................................... 42
6.16. Pension and Welfare Plans......................................... 42
6.17. Regulations G, U and X............................................ 43
6.18. Compliance........................................................ 43
6.19. Taxes............................................................. 43
6.20. Investment Company Act Representation............................. 43
6.21. Public Utility Holding Company Act Representation................. 43
6.22. Environmental and Safety and Health Matters....................... 43
6.23. Related Agreements and Transaction Documents...................... 44
6.24. Ownership of Properties........................................... 45
6.25. Accuracy of Information........................................... 45
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants............................................. 45
7.1.1. Financial Information, Reports, Notices, etc...................... 45
7.1.2. Corporate Existence............................................... 48
7.1.3. Maintenance of Properties......................................... 48
7.1.4. Insurance......................................................... 48
7.1.5. Taxes............................................................. 48
7.1.6. Books and Records................................................. 48
7.1.7. Use of Proceeds, etc.............................................. 49
7.1.8. Concerning the Collateral and the Loan Documents.................. 49
7.1.9. Maintenance of Corporate Separateness............................. 49
7.1.10. Working Capital Line.............................................. 50
7.1.11. Additional Mortgages.............................................. 50
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<C> <S> <C>
7.1.12. Future Subsidiaries............................................... 51
7.1.13. Compliance with Statutes, etc..................................... 52
7.1.14. Lien Waivers...................................................... 52
7.2. Negative Covenants................................................ 53
7.2.1. Indebtedness...................................................... 53
7.2.2. Liens............................................................. 55
7.2.3. Restricted Payments, etc.......................................... 55
7.2.4. Payment Restrictions Affecting Restricted Subsidiaries............ 57
7.2.5. Consolidation, Merger, etc........................................ 57
7.2.6. Asset Dispositions, etc........................................... 58
7.2.7. Modification of Certain Agreements................................ 60
7.2.8. Transactions with Affiliates...................................... 61
7.2.9. Limitation on Investments......................................... 61
7.2.10. Impairment of Security Interest................................... 61
7.2.11. Sale and Leaseback................................................ 62
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default...................................... 62
8.1.1. Non-Payment of Obligations........................................ 62
8.1.2. Breach of Warranty................................................ 62
8.1.3. Non-Performance of Certain Covenants and Obligations.............. 62
8.1.4. Non-Performance of Other Covenants and Obligations................ 63
8.1.5. Disaffirmation of Obligations..................................... 63
8.1.6. Default Under Revolving Credit Agreement.......................... 63
8.1.7. Default on Other Indebtedness..................................... 63
8.1.8. Judgments......................................................... 63
8.1.9. Bankruptcy, Insolvency, etc....................................... 63
8.1.10. Impairment of Security, etc....................................... 64
8.2. Action if Bankruptcy, etc......................................... 64
8.3. Action if Other Event of Default.................................. 64
ARTICLE IX
THE AGENTS
9.1. Appointment of Agents............................................. 65
9.2. Nature of Duties of the Agents.................................... 65
9.3. General Immunity.................................................. 65
9.4. Successor......................................................... 66
9.5. Agents in Their Capacity as Lenders............................... 67
9.6. Actions by Each Agent............................................. 67
9.7. Right to Indemnity................................................ 67
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<C> <S> <C>
9.8. Administrative Agent.............................................. 68
9.9. Suits to Protect Collateral....................................... 68
9.10. Determinations Relating to Collateral............................. 68
9.11. Trust Moneys...................................................... 69
9.12. Release of Collateral............................................. 69
9.13. Application of Proceeds of Collateral............................. 69
9.14. Rights and Remedies to be Exercised by Administrative Agent Only.. 70
9.15. Credit Decisions.................................................. 70
9.16. Copies, etc....................................................... 70
9.17. The Syndication Agent and the Administrative Agent................ 70
9.18. Agreement to Cooperate............................................ 71
9.19. Lenders to Act as Agents.......................................... 71
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc.......................................... 71
10.2. Notices........................................................... 72
10.3. Payment of Costs and Expenses..................................... 72
10.4. Indemnification................................................... 73
10.5. Survival.......................................................... 74
10.6. Severability...................................................... 74
10.7. Headings.......................................................... 74
10.8. Execution in Counterparts, Effectiveness, etc..................... 74
10.9. Governing Law; Entire Agreement................................... 74
10.10. Successors and Assigns............................................ 75
10.11. Sale and Transfer of Term Loans and Term Notes; Participations in
Term Loans and Term Notes....................................... 75
10.11.1. Assignments....................................................... 75
10.11.2. Participations.................................................... 77
10.12. Other Transactions................................................ 78
10.13. Confidentiality................................................... 78
10.14. Forum Selection and Consent to Jurisdiction....................... 79
10.15. Waiver of Jury Trial.............................................. 79
</TABLE>
-v-
<PAGE>
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages and Administrative Information
SCHEDULE III - Owned Property
SCHEDULE IV - Leased Property
EXHIBIT A - Form of Term Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Mortgage
EXHIBIT E - Form of Security Agreement
EXHIBIT F - Form of Borrower Closing Date Certificate
EXHIBIT G - Form of Parent Closing Date Certificate
EXHIBIT H - Form of Lender Assignment Agreement
-vi-
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT, dated as of March 24, 1998, among EARLE M.
JORGENSEN COMPANY, a Delaware corporation (the "Borrower"), the various
--------
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent (the
- -------- ---
"Syndication Agent") for the Lenders, BANKERS TRUST COMPANY, as documentation
- ------------------
agent (the "Documentation Agent") for the Lenders, and FLEET NATIONAL BANK
-------------------
("Fleet"), as administrative agent (the "Administrative Agent") for the Lenders.
- ------- --------------------
W I T N E S S E T H:
WHEREAS, the Borrower is the wholly owned and sole subsidiary of Earle M.
Jorgensen Holding Company, Inc., a Delaware corporation (the "Parent");
------
WHEREAS, the Borrower, desires (i) to issue its senior unsecured notes due
2005 for gross cash proceeds of $105,000,000 pursuant to a private offering
thereof (the "Senior Note Offering"), (ii) to obtain from the Lenders a
--------------------
commitment to provide Term Loans (as defined below) in an aggregate principal
amount of $100,000,000 and (iii) to enter into an amended and restated revolving
credit agreement which would provide for a five-year revolving credit facility
in an amount for up to $220,000,000;
WHEREAS, the Borrower intends to use the proceeds of the Senior Notes and
the Term Loans (i) to prepay $155,000,000 in aggregate principal amount of its
outstanding 10 3/4% Senior Notes (the "Outstanding Notes") due in the year 2000,
issued pursuant to the Indenture dated as of March 11, 1993, entered into by and
between the Borrower and United States Trust Company of New York (the
"Outstanding Note Indenture"), together with premium and accrued interest
- ---------------------------
thereon to the date of redemption not exceeding $6,200,000, (ii) to prepay
approximately $5,100,000 in aggregate principal amount of purchase money
indebtedness, including premium and accrued interest thereon, as set forth in
the Heller Documents (as defined herein), (iii) to pay a dividend to the Parent
in the amount of approximately $45,400,000 to enable the Parent (A) to prepay
$40,000,000 in principal amount of the Series A Variable Rate Senior Notes (the
"Parent Notes") due in the year 2006, issued pursuant to the Restructuring
------------
Agreement dated as of March 3, 1993, entered into by and between the Parent and
KIA IV, as amended by the Amendment to Holding Restructuring Agreement dated as
of March 24, 1998, and (B) to pay approximately $5,400,000 of interest accrued
as of March 31, 1998 on the Parent Notes and (iv) to pay related transaction
fees and expenses of approximately $9,000,000; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend the
---------
commitments and make the loans described herein to the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
-------------
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agent" is defined in the preamble and includes (a) each
-------------------- --------
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4 and (b) where the context relates
-----------
to the perfection, possession or foreclosure of any of the Collateral, each
other Person appointed by the Administrative Agent to carry out such action.
"Affiliate" means, with respect to any Person, any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agents" means, collectively, the Administrative Agent, the Syndication
------
Agent and the Documentation Agent.
"Agreement" means, on any date, this Term Loan Agreement as originally in
---------
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, for any day and with respect to all Base Rate
-------------------
Loans, a fluctuating rate of interest per annum equal to the higher of: (a)
0.50% per annum above the Federal Funds Rate most recently determined by the
Administrative Agent and (b) the rate of interest in effect for such day as most
recently publicly announced or established by the Administrative Agent at its
Domestic Office as its "prime rate." (The "prime rate" is a rate set by the
Administrative Agent based upon various factors including the Administrative
Agent's costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be priced at,
above or below such announced rate.) Any change in the reference rate announced
by the Administrative Agent shall take effect at the opening of business on the
day of such establishment or announcement.
"APB 16" means Accounting Principles Board Opinion No. 16 (Business
------
Combinations) as in effect on the date of this Agreement.
"Applicable Margin" means (i) with respect to the unpaid principal amount
-----------------
of each Term Loan maintained as a Base Rate Loan, 2.00% and (ii) with respect to
the unpaid principal amount of each Term Loan maintained as a LIBO Rate Loan,
3.25%.
-2-
<PAGE>
"Approved Fund" means, with respect to any Lender that is a fund or trust
-------------
that makes, purchases or invests in commercial loans, any other fund or trust
that makes, purchases or invests in commercial loans and is managed by the same
investment advisor as such Lender.
"Arranger" means Donaldson, Lufkin & Jenrette Securities Corporation, a
--------
Delaware corporation.
"Asset Disposition" is defined in Section 7.2.6.
----------------- -------------
"Assignee Lender" is defined in Section 10.11.1.
--------------- ---------------
"Assignor Lender" is defined in Section 10.11.1.
--------------- ---------------
"Attributable Debt" means, with respect to any Sale and Leaseback
-----------------
Transaction, as at the time of determination, the present value (discounted at
the interest rate implicit in the lease, compounded semiannually) of the
obligation of the lessee of the property subject to such Sale and Leaseback
Transaction for rental payments during the remaining term of the lease included
in such transaction including any period for which such lease has been extended
or may, at the option of the lessor, be extended or until the earliest date on
which the lessee may terminate such lease without penalty or upon payment of
penalty (in which case the rental payments shall include such penalty), after
excluding all amounts required to be paid on account of maintenance and repairs,
insurance, taxes, assessments, water, utilities and similar charges.
"Authorized Officer" means, relative to any Obligor, those of its officers
------------------
whose signatures and incumbency shall have been certified to the Administrative
Agent and the Lenders pursuant to Section 5.1.
-----------
"Bankruptcy Law" means chapter 11 of Title 11 of the United States Code, as
--------------
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Base Rate Loan" means a Term Loan bearing interest at a fluctuating rate
--------------
determined by reference to the Alternate Base Rate.
"Board of Directors" means the Board of Directors of the Borrower or any
------------------
committee thereof duly authorized to act on behalf of such Board of Directors.
"Board Resolution" of any corporation means a copy of a resolution
----------------
certified by the Secretary or an Assistant Secretary of such corporation to have
been duly adopted by the board of directors of such entity and to be in full
force and effect on the date of such certification and delivered to the
Administrative Agent.
"Borrower" is defined in the preamble.
-------- --------
"Borrower Closing Date Certificate" means a certificate of an Authorized
---------------------------------
Officer of the Borrower substantially in the form of Exhibit F hereto, delivered
---------
pursuant to Section 5.12.
------------
-3-
<PAGE>
"Borrowing" means Term Loans of the same type and, in the case of LIBO Rate
---------
Loans, having the same Interest Period made by all Lenders on the same Business
Day.
"Borrowing Request" means a loan request and certificate duly executed by
-----------------
an Authorized Officer of the Borrower, substantially in the form of Exhibit B
---------
hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor a
------------
legal holiday on which banks are authorized or required to be closed in New York
City or Boston, Massachusetts and, with respect to Borrowings of, Interest
Periods with respect to, payments of principal and interest in respect of,
continuations or conversions of Base Rate Loans into, LIBO Rate Loans, on which
dealings in Dollars are carried on in the London interbank market.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations, or other equivalents (however designated) of capital
stock or beneficial ownership interests of such Person (including general and
limited partnership interests and limited liability company interests) and any
rights (other than debt securities convertible into capital stock), warrants or
options to acquire such capital stock or beneficial ownership interests.
"Capitalized Lease Obligation" means, as to any Person, Indebtedness
----------------------------
represented by obligations under a lease that is required to be capitalized on
the balance sheet of such Person for financial reporting purposes in accordance
with GAAP and the amount of such Indebtedness shall be the capitalized amount of
such obligations and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease.
"Cash Equivalents" means (i) obligations issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) and maturing within one year
from the date of acquisition, (ii) dollar and eurodollar time deposits and
certificates of deposit or bankers' acceptances of any domestic commercial bank
or domestic branch office or agency of a foreign commercial bank of recognized
standing having capital and surplus in excess of $100,000,000 (a "Qualified
---------
Bank"), (iii) repurchase obligations with a term of not more than seven days for
- ----
underlying securities of the types described in clause (i) above entered into
----------
with any Qualified Bank, (iv) commercial paper issued by any Qualified Bank and
commercial paper of any other issuer rated at least A-2 or the equivalent
thereof by S&P or at least P-2 or the equivalent thereof by Moody's and in each
case maturing within one year from the date of acquisition, (v) securities,
bonds, notes, debentures or investments or other forms of Indebtedness of any
person rated at least A or the equivalent thereof by S&P and at least A or the
equivalent thereof by Moody's, (vi) investments in money market or mutual funds
registered under the Investment Company Act of 1940, as amended, whose sole
investments are comprised of securities and other instruments or obligations
described in clauses (i) through (v) above; and (vii) with respect to only
----------- ---
foreign operations of the Borrower and its Subsidiaries, overnight deposits in
the ordinary course of business with foreign commercial banks and certificates
of deposit or bankers' acceptances of foreign commercial banks of recognized
standing having capital and surplus in excess of $100,000,000.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, 42 U.S.C. 9601, et seq., as amended.
-4-
<PAGE>
"CERCLIS" means the Comprehensive Environmental Response Compensation
-------
Liability Information System List.
"Change of Control" means (i) directly or indirectly a sale, transfer or
-----------------
other conveyance of all or substantially all of the assets of the Borrower or
Parent, on a consolidated basis, to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), excluding transfers or conveyances to or among the Borrower's
Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an
entirety in one transaction or series of related transactions, (ii) prior to the
earlier to occur of (A) the first public offering of Common Stock of the Parent
and (B) the first public offering of Common Stock of the Borrower, Kelso &
Company and its Affiliates, the officers, directors and employees of the
Borrower and its Subsidiaries and the ESOP (collectively, the "Permitted
---------
Holders") cease to beneficially own, directly or indirectly, in the aggregate a
- -------
majority of the total voting power of all classes of Capital Stock then
outstanding and normally entitled to vote in elections of directors ("Voting
------
Stock") of the Borrower, whether as a result of issuance of securities of the
- -----
Borrower, any merger, consolidation, liquidation or dissolution of the Borrower,
any direct or indirect transfer of securities by Parent or otherwise (the
Permitted Holders will be deemed to beneficially own any Voting Stock of the
Borrower held by Parent so long as Permitted Holders beneficially own, directly
or indirectly, in the aggregate a majority of the voting power of the Voting
Stock of Parent); (iii) any "person" or "group" (as such terms are used for
purposes of Section 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a person shall be deemed to
have "beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 30% of the total voting power of
all Voting Stock then outstanding of the Borrower and the Permitted Holders
"beneficially own" (as so defined), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the Borrower
than such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors of the Borrower (for the purposes of this clause (iii), such other
------------
person will be deemed to beneficially own any Voting Stock of the Borrower held
by Parent, if such other person "beneficially owns" (as so defined), directly or
indirectly, more than 30% of the voting power of the Voting Stock of Parent and
the Permitted Holders "beneficially own" (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of Parent, and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors of Parent), or (iv) during any period of 24-consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors of the Borrower (together with any new directors whose election by
such Board or whose nomination for election by the shareholders of the Borrower
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or who were nominated and
elected by the Permitted Holders pursuant to the Stockholder Agreement) cease
for any reason to constitute a majority of the Board of Directors of the
Borrower then in office.
"Closing Date" means the date of the initial Borrowing, not to be later
------------
than March 31, 1998.
-5-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
----
otherwise modified.
"Collateral" means the property and assets of the Borrower and its
----------
Restricted Subsidiaries which may from time to time be subject to one or more of
the Liens evidenced or created by any Loan Document.
"Collateral Account" means the Collateral Account as defined in the
------------------
Security Agreement.
"Collateral Proceeds" is defined in Section 7.2.6.
------------------- -------------
"Commitment Termination Event" means (i) the occurrence of any Event of
----------------------------
Default described in Section 8.1.9 or (ii) the occurrence and continuance of any
-------------
other Event of Default and the giving of notice to the Borrower by the
Administrative Agent, acting at the direction of the Required Lenders, that the
Term Loan Commitments have been terminated.
"Consolidated Cash Flow" means, with respect to any Person, for any period,
----------------------
the Consolidated Net Income of such Person plus, to the extent deducted in
determining Consolidated Net Income, the sum of (a) income taxes, determined on
a consolidated basis for such Person and its Restricted Subsidiaries, (b) Fixed
Charges of such Person and its Restricted Subsidiaries, (c) depreciation
expense, (d) amortization expense and (e) all other non-cash items deducted from
net revenues in determining Consolidated Net Income for such period, all
determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, and as to any Person, the
-----------------------
net income (loss) of such Person and its Restricted Subsidiaries for such
period, determined in accordance with GAAP, provided that (i) the net income
--------
(determined as set forth above) of any Unrestricted Subsidiary or any other
Person, other than a Restricted Subsidiary, in which such person or any of its
Restricted Subsidiaries has a joint interest with a third party shall be
included only to the extent of the amount of dividends or distributions actually
paid to such person or Restricted Subsidiary during such period, (ii) the net
income (loss) of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iii) the
net income of any Restricted Subsidiary shall be excluded to the extent such
Restricted Subsidiary is prohibited, directly or indirectly, from distributing
such net income or any portion thereof to such Person, (iv) the net income
(loss) of such Person shall be adjusted by excluding (to the extent otherwise
included) any extraordinary gains and extraordinary losses together with any
related provisions for taxes on any such gain or loss during any such period,
(v) the net income (loss) of such person shall be adjusted by excluding any
adjustments relating to the LIFO method of accounting for inventory during such
period, (vi) the net income (loss) of the Borrower shall be adjusted to exclude
(to the extent otherwise included) the one-time non-cash charges associated with
the write-off of deferred debt issuance costs associated with the Refinancing
Transactions and to exclude any redemption premiums paid on the Outstanding
Notes or the purchase money indebtedness redeemed in connection with the
Refinancing Transactions.
"Consolidated Net Worth" of any Person, at any date, means the aggregate of
----------------------
capital, surplus and retained earnings less (a) any accumulated deficit and (b)
any amounts attributable to Redeemable Stock, of such Person and its Restricted
Subsidiaries as would be shown on a
-6-
<PAGE>
consolidated balance sheet of such Person and its Restricted Subsidiaries
prepared in accordance with GAAP.
"Continuation/Conversion Notice" means a notice of continuation or
------------------------------
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
---------
"Custodian" means any receiver, trustee, assignee, liquidator or similar
---------
official under any Bankruptcy Law.
"Default" means any Event of Default or any condition, occurrence or event
-------
which, after notice or lapse of time or both, would, unless cured or waived,
constitute an Event of Default.
"Designated Facilities" means the facilities of the Borrower located in
---------------------
Detroit, Michigan, Lynwood, California (the Alameda Sheet and Strip building),
Kansas City, Missouri (the JSA Facility), and Buffalo, New York and any
property, plant or equipment located at such facility and used at such facility
consistent with past practice.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
-------------------
Schedule I, as it may be amended, supplemented or otherwise modified from time
- ----------
to time by the Borrower with the written consent of the Administrative Agent and
the Required Lenders.
"DLJ" is defined in the preamble.
--- --------
"Documentation Agent" is defined in the preamble.
------------------- --------
"Dollar" and the sign "$" mean lawful money of the United States.
------ -
"Domestic Office" means, relative to any Lender, the office of such Lender
---------------
designated as such in Schedule II hereto or designated in the Lender Assignment
-----------
Agreement or such other office of a Lender (or any successor or assign of such
Lender) within the United States as may be designated from time to time by
notice from such Lender, as the case may be, to each other Person party hereto.
A Lender may have separate Domestic Offices for purposes of making, maintaining
or continuing, as the case may be, Base Rate Loans.
"Effective Date" means the date this Agreement becomes effective pursuant
--------------
to Section 10.8.
------------
"Eligible Accounts Receivable" means all accounts receivable which are not
----------------------------
more than 180 days past due under their normal payment terms.
"Environmental Laws" means all applicable foreign, federal, state or local
------------------
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to protection and
conservation of the environment concerning any hazardous, toxic or dangerous
waste, substance or constituent, or any pollutant or contaminant.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case
-7-
<PAGE>
as in effect from time to time. References to sections of ERISA also refer to
any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other trade or
---------------
business (whether or not incorporated) that is, along with the Borrower, a
member of a controlled group of corporations or a controlled group of trades or
businesses, as described in Section 414(b) and 414(c), respectively, of the Code
or Section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of Section 414(m) of the Code.
"Escrow Agent" is defined in Section 5.5(b).
------------ --------------
"ESOP" means the Earle M. Jorgensen Employee Stock Ownership Plan.
----
"Event of Default" is defined in Section 8.1.
---------------- -----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Excluded Facility" means the real property and plant located at 601 Redna
-----------------
Terrace, Cincinnati, Ohio, to the extent that such real property and plant is
purchased by the Borrower for an amount not exceeding $6,000,000 and
subsequently sold by the Borrower on or prior to March 31, 1999, pursuant to a
transaction in which the Borrower enters into a lease agreement with the
purchaser of such real property and plant (such lease agreement to contain the
lien waivers referred to in Section 7.1.14) on terms no less favorable in any
--------------
material respect than the terms of the existing lease agreement for such real
property and plant.
"Existing Indebtedness" means all Indebtedness (other than the Senior Notes
---------------------
outstanding) of the Borrower or any Restricted Subsidiary existing on the date
hereof and listed on Item 7.2.1(e) ("Existing Indebtedness") of the Disclosure
------------- ---------------------
Schedule.
"FASB" is defined in the definition of "Fixed Charges".
----
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
------------------
annum equal for each day during such period to (i) the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or (ii) if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated as of March 24, 1998,
----------
between the Borrower and the Administrative Agent.
"Financial Statements" means the consolidated and consolidating balance
--------------------
sheets and statements of operations and the consolidated statements of cash
flows and statements of changes in shareholder's equity of the Borrower and its
Subsidiaries for the period specified, in each case prepared in accordance with
GAAP consistent with prior practice.
-8-
<PAGE>
"Financing Disposition" means any sale, transfer, conveyance or other
---------------------
disposition of property or assets by the Borrower or any Subsidiary thereof to
any Receivables Entity, or by any Receivables Subsidiary, in each case in
connection with the incurrence by a Receivables Entity of Indebtedness, or
obligations to make payments to the obligor on indebtedness, which may be
secured by a Lien in respect of such property or assets.
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means any period of twelve consecutive months ending on March
-----------
31; references to a Fiscal Year with a numbering corresponding to any calendar
year refer to the fiscal year ending on the 31st of March during such calendar
year.
"Fixed Charges" means, with respect to any Person for any period, such
-------------
Person's consolidated interest expense determined in accordance with GAAP, (i)
including amortization of original issue discount and non-cash expenses
attributable to accruals and the interest component of capital leases, (ii) and
excluding the amortization of debt issuance costs, (iii) excluding an amount of
interest expense in respect of Life Insurance Policy loans that is equal to any
dividends received in respect of the Life Insurance Policies, and (iv) plus the
----
product of (x) the sum of (1) cash dividends paid on any preferred stock of such
person plus (2) cash and the fair market value (as determined by the Borrower's
----
Board of Directors in good faith) of any non cash dividends paid on any
preferred stock of any Restricted Subsidiary (other than a Wholly Owned
Restricted Subsidiary), times (y) a fraction, the numerator of which is one and
-----
the denominator of which is one minus the then current effective aggregate
Federal, state and local tax rate of such person, expressed as a decimal. For
purposes of this definition, interest on a capital lease shall be deemed to
accrue at the rate of interest implicit in such capital lease in accordance with
GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board ("FASB")).
----
"Fixed Charge Coverage Ratio" means for any Person, for any period, such
---------------------------
Person's ratio of Consolidated Cash Flow to Fixed Charges for such period.
"Fleet" is defined in the preamble.
----- --------
"Foreign Subsidiary" means any Subsidiary of the Borrower (a) which is
------------------
organized under the laws of any jurisdiction outside of the United States of
America, (b) which conducts the major portion of its business outside of the
United States of America or (c) all or substantially all of the property and
assets of which are located outside of the United States of America.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
------------
or any successor thereto.
"GAAP" means generally accepted accounting principles in effect in the
----
United States as of the time when (and for the period as to which) such
accounting principles are to be applied; provided, however, that for purposes of
-------- -------
computing Consolidated Net Worth and the Fixed Charge Coverage Ratio and with
respect to compliance with Section 7.2.3, "GAAP" means such generally accepted
-------------
accounting principles as adopted by the Borrower on the date of this Agreement.
-9-
<PAGE>
"Hazardous Materials" means any toxic substance, hazardous substance,
-------------------
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any other
pollutant or contaminant subject to an Environmental Law, and shall include, but
not be limited to, petroleum, including crude oil, any radioactive material,
including but not limited to any source, special nuclear or by-product material
as defined at 42 U.S.C. Section 2011 et seq., as amended or hereafter amended,
-- ---
polychlorinated biphenyls and asbestos in any form or condition.
"Heller Documents" means (a) the Loan and Security Agreement dated as of
----------------
March 27, 1995, by and between the Borrower and Heller Financial, Inc.; (b) the
Promissory Note dated March 30, 1995, made by the Borrower and payable to the
order of Heller Financial, Inc., in the original principal amount of $2,875,974;
(c) the Deed of Trust and Security Agreement dated as of March 28, 1995, by and
between the Borrower as grantor, Scott A. Stein, as trustee, and Heller
Financial, Inc., as the lender; and (d) the Guaranty dated March 28, 1995, made
by the Parent.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
------ ------ ------ ---------
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"including" means including without limiting the generality of any
---------
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
------- -------
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"incur" has the meaning ascribed in Section 7.2.1; provided that (a) with
----- ------------- --------
respect to any Indebtedness of any Restricted Subsidiary of the Borrower that is
owing to the Borrower or another Restricted Subsidiary of the Borrower, any
disposition, pledge or transfer of such Indebtedness to any Person (other than
the Borrower or a Wholly-Owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness and (b) with respect to any Indebtedness of the
Borrower or a Restricted Subsidiary that is owing to another Restricted
Subsidiary, any transaction pursuant to which a Wholly-Owned Restricted
Subsidiary to which such Indebtedness is owing ceases to be a Wholly-Owned
Restricted Subsidiary shall be deemed to be an incurrence of such Indebtedness;
and provided, further, that any Indebtedness of a Person existing at the time
-------- -------
such Person becomes a Restricted Subsidiary shall be deemed to be incurred by
such Restricted Subsidiary at the time it becomes a Restricted Subsidiary. The
term "incurrence" has a corresponding meaning.
"Indebtedness" means, as to any Person, without duplication, (a) all
------------
obligations of such Person, including accrued and unpaid interest, for borrowed
money (including any net overdraft in any bank which overdraft is not satisfied
within three consecutive Business Days from its occurrence), (b) all obligations
of such person evidenced by bonds (other than performance bonds issued in the
ordinary course of business), debentures, notes, letters of credit or
reimbursement agreements (other than letters of credit or reimbursement
agreements in respect of accounts payable to trade creditors incurred in the
ordinary course of business in connection with the obtaining of materials or
services) or similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable to
-10-
<PAGE>
trade creditors arising in the ordinary course of business), (d) all Capitalized
Lease Obligations of such Person, (e) all indebtedness of others secured by a
Lien on any asset of such Person, whether or not such indebtedness is assumed by
such Person or guaranteed by such Person, (f) all indebtedness of others
guaranteed by such Person to the extent of such guarantee, (g) Attributable Debt
of such Person, (h) preferred stock issued by a Subsidiary of such Person, (i)
Redeemable Stock issued by such Person, and (j) obligations under interest rate
swaps and caps and currency swaps or options and other similar hedging
agreements (other than such arrangements entered into in the ordinary course of
business); and the amount of any such Indebtedness on the date of determination
thereof shall be the outstanding balance of any such unconditional obligations
as described above and the maximum liability of any such contingent obligation
at such date and, with respect to clauses (h) and (i), the amount of
----------- ---
Indebtedness shall equal the liquidation preference.
"Indemnified Liabilities" is defined in Section 10.4.
----------------------- ------------
"Indemnified Parties" is defined in Section 10.4.
------------------- ------------
"Insurance Proceeds" means the proceeds of any insurance policy insuring
------------------
the Improvements (as such term is defined in each Mortgage).
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
-----------------------
March 24, 1998, between the Administrative Agent and the administrative agent
under the Revolving Credit Agreement, as amended, supplemented or otherwise
modified from time to time.
"Interest Period" means, as to any LIBO Rate Loan, the period commencing on
---------------
the Borrowing date of such Term Loan or on the date on which any Term Loan is
converted into or continued as a LIBO Rate Loan, and ending on the date one,
two, three, six or, if available in the Administrative Agent's reasonable
determination, nine or twelve months thereafter as selected by the Borrower in
its Borrowing Request or its Conversion/Continuation Notice; provided however
-------- -------
that:
(i) if any Interest Period would otherwise end on a day that is not
a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period for any Term Loan shall extend beyond the
Stated Maturity Date for such Term Loan;
(iv) no Interest Period applicable to a Term Loan or portion thereof
shall extend beyond any date upon which is due any scheduled principal
payment in respect of the Term Loans unless the aggregate principal amount
of Term Loans represented by Base Rate Loans, or by LIBO Rate Loans having
Interest Periods that will expire on or before such date, equals or exceeds
the amount of such principal payment; and
-11-
<PAGE>
(v) there shall be no more than five Interest Periods in effect at
any one time.
"Interest Rate Contracts" means interest rate swap agreements, interest
-----------------------
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Inventory" means, with respect to any Person, goods held by such Person
---------
for sale or lease or to be furnished under contracts of service or goods so
furnished by such Person, raw material, work in process or material used or
consumed in a business.
"Investment" of any Person means, collectively, any direct or indirect
----------
loan, advance or other extension of credit, capital contribution, or transfer of
cash, property or other assets to, or any acquisition of Capital Stock,
securities or other evidences of Indebtedness including by way of guarantee or
similar arrangement, of, any other Person. For the purposes of Sections 7.2.3
--------------
and 7.2.9, (i) "Investment" shall include the fair market value of the net
-----
assets of any Subsidiary at the time that such Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the net assets of any
Unrestricted Subsidiary that is designated a Restricted Subsidiary shall be
deducted from the aggregate amount of Investments in computing the net amount of
Investments and (iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors of the Borrower,
and evidenced by a Board Resolution.
"Lender Assignment Agreement" means a Lender Assignment Agreement
---------------------------
substantially in the form of Exhibit H hereto.
---------
"Lenders" is defined in the preamble.
------- --------
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the
---------
interest rate per annum for deposits in Dollars, if any, for a period equal to
the relevant Interest Period which appears on Telerate page 3750 at
approximately 11:00 a.m., London time, prior to the commencement of such
Interest Period. If such a rate does not appear on Telerate Page 3750, the LIBO
Rate shall be the rate of interest per annum determined by the Administrative
Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the
rates of interest per annum at which Dollar deposits in the approximate amount
of the Term Loan to be made or continued as, or converted into, a LIBO Rate Loan
by the Administrative Agent and having a maturity comparable to such Interest
Period would be offered to the Administrative Agent in the London interbank
market at its request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period (for purposes of
determining the LIBO Rate, if the Administrative Agent does not hold any Term
Loans, such determination shall be made as if the Administrative Agent held a
Term Loan in the amount of $1,000,000.)
"LIBO Rate Loan" means a Term Loan bearing interest, at all times during an
--------------
Interest Period applicable to such Term Loan, at a rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Term Loan to be made,
----------------------------
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, the rate of interest per annum (rounded upwards to the next 1/100th of
1%) determined by the Administrative Agent as follows:
-12-
<PAGE>
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such Lender
------------
designated as such in Schedule II hereto or designated in the Lender Assignment
-----------
Agreement or such other office of a Lender as shall be so designated from time
to time by notice from such Lender to the Borrower and the Administrative Agent,
whether or not outside the United States, which shall be making or maintaining
LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
------------------------
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
property. The Borrower shall be deemed to own subject to a Lien any property
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such property.
"Life Insurance Policies" means those certain life insurance policies
-----------------------
obtained in 1984, 1985 and 1986 by Kilsby-Roberts Holding Co. ("KR") from
--
Phoenix Mutual Life Insurance Company covering participants in the KR employee
stock ownership plan and certain other KR executives, as in effect on the date
of this Agreement.
"Loan Documents" means this Agreement, the Term Notes, each Borrowing
--------------
Request, the Fee Letter, the Security Documents, the Intercreditor Agreement and
each other agreement, document or instrument delivered in connection with this
Agreement or any other Loan Document, whether or not specifically mentioned
herein or therein.
"Management Agreement" means that certain Management Agreement, dated March
--------------------
8, 1993, between the Parent and the Borrower.
"Margin Stock" has the meaning ascribed to such term in Regulation U of the
------------
Federal Reserve Board or any regulation substituted therefor, as in effect from
time to time.
"Material Adverse Effect" means (a) a material adverse effect on the
-----------------------
business, assets, debt service capacity, tax position, liabilities (including
environmental liabilities), financial condition, operations or prospects of the
Borrower and its Restricted Subsidiaries, taken as a whole, (b) a material
adverse effect upon the ability of the Borrower or any other Obligor to perform
its respective material obligations under the Loan Documents to which it is or
will be a
-13-
<PAGE>
party or (c) an impairment of the validity or enforceability of, or a
material impairment of the rights, remedies or benefits available to the Agents,
the Arranger or the Lenders under this Agreement or any other Loan Document.
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage" means each mortgage, deed of trust, or similar security
--------
instrument, substantially in the form of Exhibit D attached hereto, which from
---------
time to time affects any property that secures the Borrower's obligations under
this Agreement, as such instrument may be amended, supplemented or otherwise
modified from time to time.
"Mortgaged Property" means the Collateral and the Trust Premises as such
------------------
terms are defined in each Mortgage.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA, that is maintained for employees of the Borrower or any
ERISA Affiliate.
"Net Award" means any awards or proceeds in connection with the
---------
condemnation, taking, exercise of the right of eminent domain or a change of
grade of any Collateral or Trust Premises, as such terms are defined in each
Mortgage.
"Net Proceeds" means, from any Asset Disposition by any Person, cash
------------
received therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes actually paid or provided for as a
liability as a consequence of such Asset Disposition, (ii) appropriate amounts
to be provided by such Person as a reserve, in accordance with GAAP, against any
liabilities associated with the asset sold or disposed of in such Asset
Disposition and retained by such Person after such Asset Disposition, and (iii)
all payments made by such Person on any Indebtedness which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such asset sale or by applicable law, be repaid out of the
proceeds from such asset sale.
"Obligations" means all obligations (monetary or otherwise) of the Borrower
-----------
and each other Obligor arising under or in connection with this Agreement, the
Term Notes, and each other Loan Document.
"Obligor" means the Borrower or any other Person (other than any Agent, the
-------
Arranger, or any Lender) obligated under any Loan Document.
"Occupational Safety and Health Law" means the Occupational Safety and
----------------------------------
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
"Offering Memorandum" means the offering memorandum of the Borrower, dated
-------------------
March 19, 1998, in connection with the offer and sale of the Senior Notes.
-14-
<PAGE>
"Officers' Certificate" means a certificate executed by the Chairman of the
---------------------
Board, Vice Chairman, the President or a Vice President (regardless of vice
presidential designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Borrower and delivered to the
Administrative Agent.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
------------------
for the Borrower and who shall be reasonably acceptable to the Administrative
Agent.
"Organic Document" means, relative to any Obligor, its certificate of
----------------
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements to which such Obligor is a party applicable to any of its
authorized shares of Capital Stock.
"Outstanding Note Indenture" is defined in the third recital.
-------------------------- -------------
"Outstanding Notes" is defined in the third recital.
----------------- -------------
"Overadvance Payment" means a payment of Revolving Loans (as defined in the
-------------------
Revolving Credit Agreement) that becomes due and payable pursuant to Section
2.5(a) of the Revolving Credit Agreement.
"Parent" is defined in the first recital.
------ -------------
"Parent Closing Date Certificate" means a certificate of an Authorized
-------------------------------
Officer of the Parent substantially in the form of Exhibit G hereto, delivered
---------
pursuant to Section 5.12.
------------
"Parent Notes" is defined in the third recital.
------------ -------------
"Participant" is defined in Section 10.11.2.
----------- ---------------
"Pension Plan" means a "pension plan", as such term is defined in section
------------
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Plan), and to which the Borrower or any corporation, trade or business that is,
along with the Borrower, an ERISA Affiliate, may have any liability, including
any liability by reason of being deemed to be a contributing sponsor under
section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
----------
relating to Term Loans, as set forth in Schedule II hereto or set forth in the
-----------
Lender Assignment Agreement as such percentage may be adjusted from time to time
pursuant to Lender Assignment Agreement(s) executed by such Lender and its
Assignee Lender(s) and delivered pursuant to Section 10.11.
-------------
"Permitted Investment Amount" is defined in Section 7.2.9.
--------------------------- -------------
"Permitted Liens" means as of any particular time, any one or more of the
---------------
following:
(i) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Borrower or
its Restricted Subsidiaries, as the case may be, in conformity with
GAAP;
-15-
<PAGE>
(ii) statutory Liens or landlords' and carriers',
warehousemen's, mechanics', materialmen's, repairmen's, or other like
Liens arising in the ordinary course of business and not overdue for a
period of more than 60 days or which are being contested in good faith
by appropriate proceedings;
(iii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other types of social
security benefits;
(iv) any attachment or judgment Lien not giving rise to a
Default or an Event of Default;
(v) the Lien on the funds deposited on the Closing Date with
the trustee under the Outstanding Note Indenture (such funds not to
exceed approximately $162,500,000 plus earnings thereon) for the
purpose of defeasing or redeeming all Outstanding Notes on or prior to
April 23, 1998;
(vi) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return-of-money bonds and
other obligations of like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money);
(vii) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with
the business of the Borrower;
(viii) leases or subleases granted to others not interfering
with the ordinary conduct of the business of the Borrower;
(ix) title defects or irregularities which do not in the
aggregate materially impair the use of such properties by the
Borrower,
(x) Liens in respect of the Life Insurance Policies incurred
in connection with the Life Insurance Policy loans permitted under
clause (f) of Section 7.2.1;
------ --- -------------
(xi) Capitalized Lease Obligations permitted under Section
-------
7.2.1,
-----
(xii) any other Liens imposed by operation of law which do not
materially affect the Borrower's ability to perform its obligations
under the Term Notes, this Agreement and each other Loan Document;
(xiii) Liens existing on the date of this Agreement and renewals
and extensions thereof;
(xiv) Liens securing obligations under the Revolving Credit
Agreement encumbering inventory (including raw materials, work-in-
process, supplies and finished goods), accounts receivable (including
sellers' rights relating thereto, all contracts and contract rights
relating thereto and all books and records relating thereto), all
collection accounts, deposit accounts and other bank accounts
-16-
<PAGE>
relating to collection of the foregoing, together with the proceeds
and products of all of the foregoing;
(xv) Liens granted to secure obligations under or in respect
of the Term Notes and the Obligations;
(xvi) purchase money mortgages and purchase money security
interests incurred in the normal and ordinary course of the Borrower's
and its Restricted Subsidiaries' business to the extent related to
Indebtedness incurred pursuant to clause (i) of Section 7.2.1.;
---------- --------------
(xvii) until April 1, 1998, Liens granted to secure Indebtedness
under the Heller Documents;
(xviii) Liens securing Indebtedness of any entity existing at
the time such assets are acquired by the Borrower or a Restricted
Subsidiary, whether by merger, consolidation, purchase of assets or
otherwise (whether or not such Liens are created, incurred or assumed
in contemplation of the acquisition thereof by the Borrower or a
Restricted Subsidiary), provided such Liens do not extend to any other
--------
assets of the Borrower or any other Restricted Subsidiaries, and Liens
securing refinancings of such Indebtedness provided that such Liens do
not extend to any assets other than assets securing such Indebtedness
to be refinanced;
(xix) Liens securing reimbursement obligations with respect to
letters of credit which encumber documents and other property relating
to such letters of credit and the products and proceeds thereof;
(xx) Liens arising pursuant to Sale and Leaseback Transactions
engaged in pursuant to and in accordance with Section 7.2.11;
--------------
(xxi) Liens securing Indebtedness or other obligations of any
Receivables Entity, provided such Liens do not encumber any assets
--------
other than assets of such Receivables Entity;
(xxii) Liens securing Indebtedness incurred pursuant to clause
------
(o) of Section 7.2.1; and
--- -------------
(xxiii) Liens other than those described above with respect to
obligations not in excess of $5,000,000 in the aggregate at any time;
provided, however, "Permitted Liens" shall not include any Lien that encumbers
- -------- -------
any Collateral or the Capital Stock of any Restricted Subsidiary of the
Borrower.
"Permitted Transactions" means (i) reasonable and customary fees,
----------------------
compensation and benefits paid to officers, directors, employees or consultants
of the Borrower or any Restricted Subsidiary or their respective Affiliates for
services rendered to the Borrower or any Restricted Subsidiary in the ordinary
course of business consistent with past practice, (ii) transfers of goods and
services by or among the Borrower and its Restricted Subsidiaries and their
respective
-17-
<PAGE>
Affiliates in the ordinary course of business consistent with past practice,
provided that if any such transaction or series of related transactions involves
- --------
in excess of $3,000,000, the Board of Directors of the Borrower shall determine
in good faith by resolution that such transaction is on terms fair and
reasonable to the Borrower, (iii) transactions pursuant to agreements with
Affiliates which are currently in effect in accordance with their terms, and
(iv) dividends and distributions to Parent permitted under Section 7.2.3, (v)
-------------
any transactions between the Borrower or any Restricted Subsidiary and the ESOP
(or any successor thereto); (vi) advances to employees, officers, directors,
agents and representatives for travel and other reasonable and ordinary business
expenses, (vii) advances and loans to employees and officers in connection with
their relocation, (viii) payments to Stainless Insurance Ltd. in respect of
insurance services provided to the Borrower or any Restricted Subsidiary, and
(ix) payments to any Receivables Subsidiary for services performed or
reimbursement of expenses in connection with the financing or refinancing of
Receivables.
"Person" means any natural person, corporation, partnership, firm,
------
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plainfield Mortgage" is defined in Section 5.9.
------------------- -----------
"Plan" means any Pension Plan or Welfare Plan.
----
"Quarterly Payment Date" means the last Business Day of each March, June,
----------------------
September and December, commencing with June, 1998.
"Receivable" means a right to receive payment arising from a sale or lease
----------
of goods or services by a Person pursuant to an arrangement with another Person
pursuant to which such other Person is obligated to pay for goods or services
under terms that permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.
"Receivables Financing" means any financing of Receivables of the Borrower
---------------------
or any Restricted Subsidiary that have been transferred to a Receivables Entity
in a Financing Disposition.
"Receivables Entity" means (x) any Receivables Subsidiary or (y) any other
------------------
Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts and/or other receivables, and/or related assets.
"Receivables Subsidiary" means a Subsidiary of the Borrower that (a) is
----------------------
engaged solely in the business of acquiring, selling, collecting, financing, or
refinancing Receivables, accounts (as defined in the Uniform Commercial Code as
in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all proceeds thereof and all rights
(contractual and other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and (b) is
designated as a "Receivables Subsidiary" by the Board of Directors of the
Borrower.
-18-
<PAGE>
"Redeemable Stock" means any series or class of Capital Stock of any Person
----------------
which by its terms is redeemable at the option of the holder or is subject to
mandatory redemption prior to the maturity of the Term Notes.
"Refinancing Transactions" means, collectively, the transactions
------------------------
contemplated in connection with the execution and delivery of the Revolving
Credit Agreement, this Agreement and the Senior Note Indenture and the issuance
of the Senior Notes and Term Notes.
"Register" is defined in Section 10.11.1.
-------- ---------------
"Release" means a "release", as such term is defined in CERCLA.
-------
"Reportable Event" means any of the events described in Section 4043 of
----------------
ERISA with respect to a Pension Plan as to which the 30-day notice requirement
has not been waived by the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA and any Person succeeding to the functions
thereof.
"Required Lenders" means, at any time, (i) prior to the Closing Date
----------------
hereunder, Lenders having at least 51% of the sum of the Term Loan Commitments
and (ii) on and after the Closing Date, Lenders holding at least 51% of the
principal amount of the Term Loans.
"Resource Conservation and Recovery Act" means the Resource Conservation
--------------------------------------
and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to
-- ----
time.
"Restoration" means the reconstruction, rebuilding, restoration or
-----------
replacement of any Improvements, Collateral or Trust Premises, as such terms are
defined in each Mortgage, in accordance with the terms of each Mortgage.
"Restricted Payments" means, collectively, with respect to any Person (i)
-------------------
the declaration or payment of any dividend or other distribution on shares of
such Person's or a Restricted Subsidiary's Capital Stock (except dividends or
distributions in additional shares of Capital Stock, other than Redeemable
Stock, or any dividend or distribution by a Restricted Subsidiary to the
Borrower or one of its Wholly Owned Restricted Subsidiaries), (ii) any payment
on account of the purchase, redemption, retirement or other acquisition of any
shares of the Borrower or a Restricted Subsidiary's Capital Stock or any option,
warrant or other right to acquire such shares, or (iii) any defeasance,
redemption, repurchase or other acquisition or retirement for value prior to
scheduled maturity, scheduled repayment, or scheduled sinking fund payment of
any Indebtedness subordinate in right of payment to the Term Notes; provided,
--------
however, that the following items shall not be deemed to be Restricted Payments:
- -------
(i) payments by the Borrower pursuant to the Tax Allocation Agreement or any
(ii) payments by the Borrower to Parent pursuant to the terms of the Management
Agreement, provided that the 5% service fee referred to in Section 5(b) of the
Management Agreement shall not exceed $200,000 per annum.
"Restricted Subsidiary" means (i) any Subsidiary of the Borrower which
---------------------
exists on the date of this Agreement and (ii) any other such Subsidiary which
the Borrower has not classified as an Unrestricted Subsidiary. The Borrower by
resolution of its Board of Directors may classify a Subsidiary as an
Unrestricted Subsidiary until such time as the Borrower may, by further
resolution of its Board of Directors, classify such Subsidiary as a Restricted
Subsidiary.
-19-
<PAGE>
"Revolving Credit Agreement" means the Amended and Restated Credit
--------------------------
Agreement dated as of March 24, 1998 (amending and restating the Credit
Agreement dated as of March 3, 1993), between Earle M. Jorgensen Holding
Company, Inc., the Borrower and BT Commercial Corporation, as agent, and the
lenders named therein, as further amended, supplemented, restated or otherwise
modified from time to time (including any renewals or refinancings thereof) in
accordance with the provisions hereof and thereof pursuant to which the lenders
thereunder have agreed to provide the Borrower and/or any of its Subsidiaries
with an initial aggregate revolving commitment of not less than $220,000,000.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
---
Inc.
"Sale and Leaseback Transaction" of any Person means an arrangement with
------------------------------
any other Person or to which such other Person is a party providing for the
leasing by such Person of any property or asset of such Person which has been or
is being sold or transferred by such Person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such other Person or to any Person to whom funds have been
or are to be advanced by such other Person on the security of such property or
asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Security Agreement" means the security agreement dated as of March 24,
------------------
1998, between the Borrower, the Administrative Agent and the Restricted
Subsidiaries of the Borrower from time to time party thereto, substantially in
the form of Exhibit E attached hereto.
---------
"Security Documents" means (i) each Mortgage, (ii) the Security Agreement,
------------------
and (iii) all security agreements, mortgages, deeds of trust, pledges,
collateral assignments or any other instrument evidencing or creating any
security interest in favor of the Administrative Agent in all or any portion of
the Collateral, in each case as amended, supplemented or otherwise modified from
time to time.
"Senior Indebtedness" means Indebtedness of the Borrower which is not by
-------------------
its terms subordinated to the Term Notes.
"Senior Note Indenture" means the Indenture dated as of March 24, 1998,
---------------------
among the Borrower and United States Trust Company of New York, as Trustee, as
the same may be amended, restated, amended and restated or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"Senior Note Offering" is defined in the second recital.
-------------------- --------------
"Senior Notes" means the 9 1/2% Senior Notes due 2005 of the Borrower
------------
issued pursuant to the Senior Note Offering and the Senior Note Indenture,
including, without limitation, any senior secured notes of the Borrower with
substantially identical terms exchanged therefor pursuant to a registration
statement under the Securities Act of 1933, as amended.
"Stated Maturity Date" means, in the case of all Term Loans, March 31,
--------------------
2004.
"Stockholders Agreement" is defined in Section 7.2.3.
---------------------- -------------
-20-
<PAGE>
"Subordinated Indebtedness" means Indebtedness of the Borrower subordinated
-------------------------
in right of payment to the Obligations.
"Subsidiary" means, with respect to any Person, (i) any corporation or
----------
other entity of which a majority of the total voting power of the shares of
Capital Stock or other ownership interests having voting power to elect a
majority of the Board of Directors or other Persons performing similar functions
is at the time owned directly or indirectly by such Person or (ii) any
partnership or joint venture at least a majority of the voting power of which is
directly or indirectly owned by such Person, whether in the form of membership,
general, special or limited partnership interest or otherwise.
"Surviving Entity" is defined in Section 7.2.5.
---------------- -------------
"Syndication Agent" is defined in the preamble and includes each other
----------------- --------
Person as shall have subsequently been appointed as the successor Syndication
Agent pursuant to Section 9.4.
-----------
"Tax Allocation Agreement" means that certain Tax Allocation Agreement, as
------------------------
signed and dated as of March 8, 1993, between the Parent and the Borrower.
"Taxes" is defined in Section 4.6.
----- -----------
"Telerate Page 3750" means the display designated as "Page 3750" on the
------------------
Telerate Service (or such other page as may replace Page 3750 on the service or
such other service as may be nominated by British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
interest settlement rates for Dollar deposits).
"Term Loan" is defined in Section 2.1.1.
--------- -------------
"Term Loan Commitment" is defined in Section 2.1.1.
-------------------- -------------
"Term Loan Commitment Amount" means $100,000,000.
---------------------------
"Term Loan Commitment Termination Date" means the earliest of (i) March 31,
-------------------------------------
1998, if the Term Loans have not been made on or prior to such date, (ii) the
Closing Date (immediately after the making of the Term Loans on such date), and
(iii) the date on which any Commitment Termination Event occurs.
"Term Note" means a promissory note of the Borrower payable to the order of
---------
any Lender, in the form of Exhibit A hereto (as such promissory note may be
---------
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Term Loans, and also means all other promissory notes accepted from time to time
in substitution therefor or renewal thereof.
"Total Amount" is defined in Section 7.2.1.
------------ -------------
"Transaction" means, collectively, the transactions described in the second
----------- ------
and third recitals.
----- --------
-21-
<PAGE>
"Transaction Documents" means the Senior Note Indenture, the form of Senior
---------------------
Note, the Revolving Credit Agreement and all other agreements, documents,
instruments, certificates, filings, consents, approvals, board of directors
resolutions and opinions furnished pursuant to or in connection with the
Transaction and the transactions contemplated hereby or thereby, including pay-
off letters and releases, each as amended, supplemented, amended and restated or
otherwise modified from time to time as permitted in accordance with the terms
hereof or of any other Loan Document.
"Trust Moneys" means all cash or Cash Equivalents received by the
------------
Administrative Agent: (a) in exchange for the release of property from the Lien
of any of the Security Documents; (b) as compensation for or proceeds of the
sale of all or any part of the Collateral taken by eminent domain or purchased
by, or sold pursuant to any order of, a governmental authority or otherwise
disposed of; (c) as proceeds of insurance upon any, all or part of the
Collateral (other than any liability insurance proceeds payable to the
Administrative Agent for any loss, liability or expense incurred by it); (d) as
proceeds of any other sale or other disposition of all or any part of the
Collateral by or on behalf of either of the Administrative Agent or any
collection, recovery, receipt, appropriation or other realization of or from all
or any part of the Collateral pursuant to the Security Documents or otherwise;
or (e) for application under this Agreement as provided in this Agreement or any
other Security Document, or whose disposition is not otherwise specifically
provided for in this Agreement or in any other Security Document.
"type" means, relative to any Term Loan, the portion thereof, if any, being
----
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time in
---
the State of New York.
"United States" or "U.S." means the United States of America, its fifty
------------- ----
states and the District of Columbia.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower which the
-----------------------
Borrower by resolution of its Board of Directors shall classify as an
Unrestricted Subsidiary and any such Subsidiary of an Unrestricted Subsidiary
until such time as (i) the Borrower may, by further resolution of its Board of
Directors classify such Subsidiary as a Restricted Subsidiary or (ii) the
Borrower or any of its Restricted Subsidiaries becomes directly or indirectly
liable in respect of any contractual obligation or Indebtedness of such
Unrestricted Subsidiary. A Subsidiary of the Borrower may only be classified as
an Unrestricted Subsidiary if immediately after such classification, there would
not be a Default or Event of Default under this Agreement and the Borrower and
its Restricted Subsidiaries would have only Investments in such Subsidiary which
would be permitted by Section 7.2.9. An Unrestricted Subsidiary of the Borrower
-------------
may only be reclassified as a Restricted Subsidiary if immediately after giving
effect to such reclassification, there would be no Default or Event of Default
under this Agreement and the Borrower and Restricted Subsidiaries could create,
assume, guarantee or suffer to exist $1.00 of additional Indebtedness (other
than Permitted Indebtedness). Any valid classification shall be effective as of
the date specified in the applicable resolution of the Borrower's Board of
Directors, which shall not be prior to the date such resolution is made.
"Welfare Plan" means a "welfare plan", as such term is defined in Section
------------ ------------
3(l) of ERISA.
-22-
<PAGE>
"Wholly Owned Restricted Subsidiary" means, with respect to any Person, a
----------------------------------
Restricted Subsidiary all of whose capital stock (other than directors'
qualifying shares) or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions and other equity interests are at the time owned directly or
indirectly by such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
--------------------
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
----------------
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
---------------------------------------
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with GAAP, as in effect
from time to time and, unless otherwise expressly provided herein, and which
shall be computed or determined on a consolidated basis and without duplication.
SECTION 1.5. Use of UCC Terms. Unless the context otherwise requires, the
----------------
terms "accounts receivable", "inventory" and "general intangibles" shall have
the meanings ascribed thereto in the UCC.
SECTION 1.6. Officers' Certificates and Opinions. Every Officers'
-----------------------------------
Certificate or Opinion of Counsel with respect to compliance with a condition or
covenant provided for in this Agreement or any other Loan Document shall be
addressed to the Administrative Agent and each of the Lenders and shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinion contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
-23-
<PAGE>
Absent any actual knowledge obtained pursuant to a written notice delivered by
any party hereto in accordance with the terms hereof to the contrary, the
Administrative Agent may rely on any such certificate without further inquiry.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions of
-----------
this Agreement (including Article V), each Lender severally agrees to make Term
---------
Loans pursuant to the Term Loan Commitments described in this Section 2.1.
-----------
SECTION 2.1.1. Term Loan Commitments. On the Closing Date, which shall be a
---------------------
Business Day occurring prior to the Term Loan Commitment Termination Date, each
Lender will make loans (relative to such Lender, its "Term Loans") to the
----------
Borrower equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Term Loans requested by the Borrower to be made on such day with
the commitment of each such Lender to make the Term Loans described in this
Section referred to as its "Term Loan Commitment". No amounts paid or prepaid
--------------------
with respect to any Term Loans may be reborrowed.
SECTION 2.1.2. Lenders Not Permitted or Required to Make the Term Loans. No
--------------------------------------------------------
Lender shall be permitted or required to, and the Borrower shall not request any
Lender to, make any Term Loan on the Closing Date if, after giving effect
thereto, the aggregate original principal amount of all the Term Loans
(a) of all Lenders would exceed the Term Loan Commitment Amount, or
(b) of such Lender would exceed such Lender's Percentage of the Term
Loan Commitment Amount.
SECTION 2.2. Borrowing Procedures and Funding Maintenance. By delivering
--------------------------------------------
a Borrowing Request to the Administrative Agent on or before 10:00 a.m. (New
York time) on a Business Day, the Borrower may request, on not less than one
Business Day's notice (in the case of Base Rate Loans) or three Business Days'
notice (in the case of LIBO Rate Loans), that a Borrowing be made on the Closing
Date. On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Term Loans, and shall be made on the
Business Day, specified in such Borrowing Request. On or before 11:00 a.m. (New
York time) on such Business Day each Lender shall deposit with the
Administrative Agent same day funds in an amount equal to such Lender's
Percentage of the requested Borrowing. Such deposit will be made to an account
which the Administrative Agent shall specify from time to time by notice to the
Lenders. To the extent funds are received from the Lenders, the Administrative
Agent shall make such funds available to the Borrower by wire transfer to the
accounts the Borrower shall have specified in its Borrowing Request. No
Lender's obligation to make any Term Loan shall be affected by any other
Lender's failure to make any Term Loan.
SECTION 2.3. Continuation and Conversion Elections. By delivering a
-------------------------------------
Continuation/Conversion Notice to the Administrative Agent on or before 10:00
a.m. (New York time) on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice (in the case of a
conversion of LIBO Rate Loans to Base Rate Loans)
-24-
<PAGE>
or three Business Days' notice (in the case of a continuation of LIBO Rate Loans
or a conversion of Base Rate Loans into LIBO Rate Loans) nor more than five
Business Days' notice that all, or any portion in a minimum amount of $5,000,000
or any larger integral multiple of $1,000,000, be, in the case of Base Rate
Loans, converted into LIBO Rate Loans or a minimum amount of $1,000,000 or any
larger integral multiple of $250,000, in the case of LIBO Rate Loans, converted
into Base Rate Loans or continued as LIBO Rate Loans (in the absence of delivery
of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period with
respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to a Base Rate Loan); provided, however, that (x) each such conversion
-------- -------
or continuation shall be pro rated among the applicable outstanding Term Loans
of all Lenders, and (y) no portion of the outstanding principal amount of any
Term Loans may be continued as, or be converted into, LIBO Rate Loans when any
Default has occurred and is continuing.
SECTION 2.4. Funding. Each Lender may, if it so elects, fulfill its
-------
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
--------
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
- -------
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
----------- --- --- ---
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.5. Loan Accounts. (a) The Term Loans made by each Lender shall
-------------
be evidenced by one or more loan accounts or records maintained by such Lender
in the ordinary course of business. The loan accounts or records maintained by
the Administrative Agent and each Lender shall be conclusive absent manifest
error of the amount of the Term Loans made by the Lenders to or for the account
of the Borrower and the interest and payments thereon. Any failure so to record
or any error in doing so shall not, however, limit or otherwise affect the
obligation of the Borrower hereunder to pay any amount owing with respect to the
Term Loans.
(b) Upon the request of any Lender made through the Administrative Agent,
solely to facilitate the pledge or assignment pursuant to Section 10.11.1 of its
---------------
Term Loans to any Federal Reserve Bank or, in the case of a Lender that is an
investment fund, to a trustee or any other representative of holders of
obligations or securities issued by such investment fund as security for such
obligations or securities, the Term Loans made by such Lender may be evidenced
by one or more Term Notes, in addition to loan accounts. Each such Lender is
irrevocably authorized by the Borrower to endorse on the schedules annexed to
its Term Note(s) the date, amount and maturity of each Term Loan made, continued
or converted by it and the amount of each payment of principal made by the
Borrower with respect thereto. Each such Lender's record shall be conclusive
absent manifest error; provided, however, that the failure of a Lender to make,
-------- -------
or an error in making, a notation thereon with respect to any Term Loan shall
not limit or otherwise affect the obligations of the Borrower hereunder or under
any such Term Note to such Lender.
-25-
<PAGE>
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
---------------------------------------
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
--------------------------
full the unpaid principal amount of each Term Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Term Loans; provided, however, that
-------- -------
(i) any such prepayment shall be made pro rata among Term Loans
--- ----
of the same type and, if applicable, having the same Interest Period
of all Lenders;
(ii) the Borrower shall comply with Section 4.4 in the event
-----------
that any LIBO Rate Loan is prepaid on any day other than the last day
of the Interest Period for such Term Loan;
(iii) all such voluntary prepayments shall require at least one
Business Day's notice in the case of Base Rate Loans and three
Business Days' notice in the case of LIBO Rate Loans, but no more than
five Business Days' notice, in each case in writing to the
Administrative Agent; and
(iv) all such voluntary partial prepayments shall be, in the
case of LIBO Rate Loans, in an aggregate minimum amount of $5,000,000
or any larger integral multiple of $1,000,000 and, in the case of Base
Rate Loans, in an aggregate minimum amount of $1,000,000 or any larger
integral multiple of $250,000 or in the aggregate principal amount of
all Term Loans of the type then outstanding; and
(v) any voluntary prepayment of Term Loans made on or prior to
the third anniversary of the Closing Date shall be subject to the
payment of a premium, as set forth below:
(A) 3.0% of the principal amount of Term Loans prepaid
pursuant to this clause (a) of this Section 3.1.1 on or prior to
---------- -------------
the first anniversary of the Closing Date;
(B) 2.0% of the principal amount of Term Loans prepaid
pursuant to this clause (a) of this Section 3.1.1 subsequent to
---------- -------------
the first anniversary and prior to or on the second anniversary
of the Closing Date; and
(C) 1.0% of the principal amount of Term Loans prepaid
pursuant to this clause (a) of this Section 3.1.1 subsequent to
---------- -------------
the second anniversary and prior to or on the third anniversary
of the Closing Date;
-26-
<PAGE>
provided further, however, that, notwithstanding the foregoing subclauses
---------------- ------- ----------
(i), (ii), (iii), (iv) and (v) of this clause (a) or any other provision of
--- ---- ----- ---- --- ----------
this Agreement (including Section 4.8), the Borrower may purchase all or
-----------
any portion of the Term Loans of any Lender pursuant to an agreement
between such Lender and the Borrower and such purchase shall not be deemed
to be a voluntary prepayment hereunder (provided that (x) an Event of
Default has not then occurred and is not then continuing or would not occur
as a result of such purchase, (y) the Administrative Agent acknowledges
receipt of a copy of such agreement and (z) the Term Loans so purchased or
held by any Affiliate of the Borrower are disregarded and not deemed
outstanding (as to which the Borrower hereby agrees) for purposes of (1)
the making of, or the application of, any payments to the Lenders hereunder
or under any other Loan Document, (2) the making of any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any
other Loan Document or (3) the determination of Required Lenders, or for
any similar or related purpose hereunder or under any other Loan Document);
(b) shall make a mandatory prepayment of the Term Loans on account of
Net Proceeds in accordance with Section 7.2.6;
-------------
(c) shall, (i) on each Quarterly Payment Date occurring prior to the
Stated Maturity Date, make a scheduled repayment of the aggregate
outstanding principal amount, if any, of all Term Loans in an amount equal
to $250,000 and (ii) on the Stated Maturity Date, make a scheduled
repayment of the outstanding principal amount of all Term Loans in the
amount of $94,250,000 (in each case as such amounts may have otherwise been
reduced pursuant to this Agreement).
(d) shall, subject to Section 3.1.2, make a mandatory prepayment in
-------------
full of all of the Term Loans upon the occurrence of a Change of Control;
and
(e) shall, immediately upon the acceleration of the Stated Maturity
Date of any Term Loans pursuant to Section 8.2 or Section 8.3, repay all
----------- -----------
outstanding Term Loans, unless, pursuant to Section 8.3, only a portion of
-----------
all Term Loans are so accelerated (in which case the portion so accelerated
shall be so prepaid).
Each prepayment of any Term Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by clause (a)(v) of this Section
-------------
and/or Section 4.4.
-----------
SECTION 3.1.2. Application. Amounts prepaid and repaid shall be applied
-----------
as set forth in this Section.
(a) Subject to clauses (b) and (c) below, each prepayment or
----------- ---
repayment of principal of the Term Loans shall be applied, to the extent of
such prepayment or repayment, first, to the principal amount thereof being
-----
maintained as Base Rate Loans, and second, to the principal amount thereof
------
being maintained as LIBO Rate Loans.
(b) Each prepayment of any Term Loans made pursuant to clause (a) of
----------
Section 3.1.1 shall be applied, to the extent of such prepayment, in the
-------------
inverse order of the scheduled repayments of such Term Loans, as set forth
in clause (c) of Section 3.1.1 with respect to such Term Loans.
---------- -------------
-27-
<PAGE>
(c) Each prepayment of Term Loans made pursuant to clause (b) or
----------
clause (d) of Section 3.1.1 shall be applied to the outstanding principal
---------- -------------
amount of all Term Loans, except that, (i) with respect to the amount of
any such prepayment, the Administrative Agent will as soon as is
practicable (but in any event no later than the date on which the Borrower
has provided such prepayment to the Administrative Agent) provide notice of
such prepayment to each Lender prior to the distribution of the funds from
such prepayment, and (ii) each Lender will have the right to refuse any
such prepayment by giving written notice of such refusal to the
Administrative Agent within three Business Days after such Lender's receipt
of notice from the Administrative Agent of such prepayment. In addition,
any prepayment of Term Loans shall be applied to the remaining amortization
payments in the inverse order of the scheduled repayments of such Term
Loans, as set forth in clause (c) of Section 3.1.1 with respect to such
---------- -------------
Term Loans.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
-------------------
amount of the Term Loans shall accrue and be payable in accordance with this
Section 3.2.
- -----------
SECTION 3.2.1. Rates. Each Base Rate Loan shall accrue interest on the
-----
unpaid principal amount thereof for each day from and including the day upon
which such was made or converted to a Base Rate Loan to but excluding the date
such Term Loan is repaid or converted to a LIBO Rate Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Term Loan on such day. Each LIBO Rate Loan shall accrue
interest on the unpaid principal amount thereof for each day during each
Interest Period applicable thereto at a rate per annum equal to the sum of the
LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin
for such Term Loan on such day. All LIBO Rate Loans shall bear interest from
and including the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Default Rates. Upon the occurrence and continuance of (i)
-------------
any Default described in Section 8.1.1 or (ii) any Event of Default, all Term
-------------
Loans shall bear, and the Borrower shall pay, but only to the extent permitted
by law, interest (after as well as before judgment) thereon at a rate per annum
equal to the rate that would otherwise be applicable to such Term Loans pursuant
to Section 3.2.1 plus 2.0%.
-------------
SECTION 3.2.3. Payment Dates. Interest accrued on each Term Loan shall be
-------------
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Term Loan;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the Closing Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed three
months, at intervals of three months after the first day of such Interest
Period);
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(e) with respect to the principal amount of any Base Rate Loans
converted into LIBO Rate Loans on a day when interest would not otherwise
have been payable pursuant to clause (c), on the date of such conversion;
----------
and
(f) on that portion of any Term Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3, immediately
----------- -----------
upon such acceleration.
Interest accrued on Term Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
----
Section 3.3. All such fees shall be non-refundable.
- -----------
SECTION 3.3.1. Arrangement, Structuring and Commitment Fees. The Borrower
--------------------------------------------
shall pay on the Effective Date to the Arranger and the Syndication Agent for
their account the arrangement and structuring fee mutually agreed upon by the
Borrower, the Arranger and the Syndication Agent.
SECTION 3.3.2. Administrative Agent Fee. The Borrower agrees to pay an
------------------------
annual administration fee to the Administrative Agent, for its own account, in
the amounts mutually agreed to between the Borrower and the Administrative Agent
pursuant to the Fee Letter, payable in advance on the Closing Date and annually
thereafter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If the Required Lenders shall
--------------------------
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower) that the introduction of
or any change in or in the interpretation of any law makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
such Lender to make, continue or maintain any Term Loan as, or to convert any
Term Loan into, a LIBO Rate Loan of a certain type, the obligations of all
Lenders to make, continue, maintain or convert any such Term Loans shall, upon
such determination, forthwith be suspended until the Required Lenders shall
notify the Administrative Agent that the circumstances causing such suspension
no longer exist, and all LIBO Rate Loans of such type shall automatically
convert into Base Rate Loans at the end of the then current Interest Periods
with respect thereto or sooner, if required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have
--------------------
determined that (i) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent in its relevant
market, or (ii) by reason of circumstances affecting the Administrative Agent's
relevant market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans, then, upon notice from the
Administrative Agent to the Borrower and the Lenders, the obligations of all
Lenders under Section 2.3 and Section 2.4 to make or continue any Term Loans as,
----------- -----------
or to convert any Term Loans into, LIBO Rate Loans shall forthwith be suspended
until the Administrative Agent shall
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notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
-----------------------------------
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Term Loans as, or of converting (or of its obligation to convert)
any Term Loans into, LIBO Rate Loans. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such notice,
and such notice shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
--------------
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Term Loan as, or
to convert any portion of the principal amount of any Term Loan into, a LIBO
Rate Loan) as a result of (i) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to Section 3.1
-----------
or otherwise, (ii) Borrower's failure to borrow any Term Loans as LIBO Rate
Loans in accordance with the Borrowing Request therefor, or (iii) Borrower's
failure to continue, or to convert Base Rate Loans into LIBO Rate Loans in
accordance with the Continuation/Conversion Notice therefor, then, upon the
written notice of such Lender to the Borrower (with a copy to the Administrative
Agent), the Borrower shall, within five days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
-----------------------
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Term Loan Commitment or the Term Loans made by such Lender is
reduced to a level below that which such Lender or such controlling Person could
have achieved but for the occurrence of any such circumstance, then, in any such
case upon notice from time to time by such Lender to the Borrower, the Borrower
shall immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
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SECTION 4.6. Taxes. All payments by the Borrower of principal of, and
-----
interest on, the Term Loans and all other amounts payable hereunder shall be
made free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's net
income or receipts (such non-excluded items being called "Taxes"). In the event
-----
that any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt
or other documentation satisfactory to the Administrative Agent evidencing
such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lenders
and the Administrative Agent, as the case may be, such additional amount or
amounts as is necessary to ensure that the net amount actually received by
each Lender and the Administrative Agent, as the case may be, will equal
the full amount such Lender and the Administrative Agent, as the case may
be, would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent, for the account of the
respective Lenders and the Administrative Agent, as the case may be, the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Lenders and the Administrative Agent, as the case may be, for any
incremental Taxes, interest or penalties that may become payable by any Lender
and the Administrative Agent, as the case may be, as a result of any such
failure. For purposes of this Section 4.6, a distribution hereunder by the
-----------
Administrative Agent or any Lender to or for the account of any Lender and the
Administrative Agent, as the case may be, shall be deemed a payment by the
Borrower.
Each Lender that is organized under the laws of a jurisdiction other than
the United States shall, prior to the due date of any payments under the Term
Notes, execute and deliver to the Borrower and the Administrative Agent, on or
about the first scheduled payment date in each Fiscal Year, one or more (as the
Borrower or the Administrative Agent may reasonably request) United States
Internal Revenue Service Forms 4224 or Forms 1001, or, in the case of any such
Lender that is not legally entitled to deliver either such form, (x) a
certificate of a duly authorized officer of such Lender to the effect that such
Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, (B) a "10 percent shareholder" of the Borrower
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within the meaning of Section 881(c)(3)(B) of the Code, or (C) a controlled
foreign corporation receiving interest from a related person within the meaning
of Section 881(c)(3)(C) of the Code and (y) two duly completed copies of
Internal Revenue Service Form W-8 or applicable successor form, or such other
forms or documents (or successor forms or documents), appropriately completed,
as may be applicable to establish the extent, if any, to which a payment to such
Lender is exempt from withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
---------------------------
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement, the Term Notes or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of the Lenders or
--- ----
Agents, as applicable, entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m. (New York time) on the date
due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
Funds received after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent shall promptly remit in same day funds to each Lender, Agent or Arranger,
as the case may be, its share, if any, of such payments received by the
Administrative Agent for the account of such Lender, Agent or Arranger, as the
case may be. All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days (or, in the case of interest on a Base Rate Loan that is
not calculated at the Federal Funds Rate, 365 days or, if appropriate, 366
days). Whenever any payment to be made shall otherwise be due on a day which is
not a Business Day, such payment shall (except as otherwise required by clause
------
(i) of the definition of the term "Interest Period" with respect to LIBO Rate
- --- ---------------
Loans) be made on the next succeeding Business Day and such extension of time
shall be included in computing interest and fees, if any, in connection with
such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment
-------------------
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Term Loan (other than pursuant to the terms of
Sections 4.3, 4.4 and 4.5) in excess of its pro rata share of payments then or
- ------------ --- --- --- ----
therewith obtained by all Lenders entitled thereto, such Lender shall purchase
from the other Lenders such participations in the Term Loans made by them as
shall be necessary to cause such purchasing Lender to share the excess payment
or other recovery ratably with each of them; provided, however, that if all or
-------- -------
any portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of (i) the amount of such selling Lender's required repayment to the
purchasing Lender in respect of such recovery, to (ii) the total amount so
--
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section may, to the fullest extent permitted by law,
exercise all its rights of payment (including pursuant to Section 4.9) with
-----------
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the
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Lenders entitled under this Section to share in the benefits of any recovery on
such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any Event
------
of Default described in Section 8.1.9 with respect to any Obligor or, with the
-------------
consent of the Required Lenders, upon the occurrence of any other Event of
Default, to the fullest extent permitted by law, have the right to appropriate
and apply to the payment of the Obligations then owing to it (whether or not
then due), and (as security for such Obligations) the Borrower hereby grants to
each Lender a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter maintained with
or otherwise held by such Lender; provided, however, that any such appropriation
-------- -------
and application shall be subject to the provisions of Section 4.8. Each Lender
-----------
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender; provided, however, that the
-------- -------
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable law
or otherwise) which such Lender may have.
SECTION 4.10. Replacement of Lender. Each Lender agrees that, upon the
---------------------
occurrence of any event set forth in Section 4.1, 4.3 or 4.5, such Lender will
----------- --- ---
use reasonable efforts to book and maintain its Loans through a different
lending office or to transfer its Term Loans to an Affiliate with the objective
of avoiding or minimizing the consequences of such event; provided that such
--------
booking or transfer is not otherwise disadvantageous to such Lender as
determined by such Lender in its sole and absolute discretion. If any Lender
has demanded to be paid additional amounts pursuant to Section 4.3 or 4.5 and
----------- ---
the payment of such additional amounts are, and are likely to continue to be,
more onerous in the reasonable judgment of the Borrower than with respect to the
other Lenders, then the Borrower shall have the right at any time when no
Default shall have occurred and be continuing to seek one or more financial
institutions which are not Affiliates of the Borrower (each, a "Replacement
-----------
Lender") to purchase with the written consents of the Syndication Agent and the
- ------
Administrative Agent (which consents shall not be (x) required if such proposed
Replacement Lender is already a Lender, an Affiliate of a Lender or an Approved
Fund or (y) unreasonably delayed or withheld) the outstanding Term Loans of such
Lender (the "Affected Lender"), and if the Borrower locates a Replacement
---------------
Lender, the Affected Lender shall, upon
(i) prior written notice to the Administrative Agent,
(ii) (A) payment to the Affected Lender of the purchase price agreed
between it and the Replacement Lender (or, failing such agreement, a
purchase price in the amount of the outstanding principal amount of the
Affected Lender's Term Loans and accrued interest thereon to the date of
payment) by the Replacement Lender plus (B) payment by the Borrower of all
amounts (other than principal and interest) then due to the Affected Lender
or accrued for its account hereunder or under any other Loan Document,
(iii) satisfaction of the provisions set forth in Section 10.11.1,
---------------
and
(iv) payment by the Borrower to the Affected Lender and the
Administrative Agent of all reasonable out-of-pocket expenses in connection
with such assignment and assumption (including the processing fees
described in Section 10.11.1),
---------------
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assign and delegate all its rights and obligations under this Agreement and any
other Loan Document to which it is a party (including its outstanding Term
Loans) to the Replacement Lender (such assignment to be made without recourse,
representation or warranty), and the Replacement Lender shall assume such rights
and obligations, whereupon the Replacement Lender shall in accordance with
Section 10.11.1 become a party to each Loan Document to which the Affected
- ---------------
Lender is a party and shall have the rights and obligations of a Lender
thereunder and the Affected Lender shall be released from its obligations
hereunder and each other Loan Document to the extent of such assignment and
delegation.
ARTICLE V
CONDITIONS TO TERM LOAN EXTENSION
The obligation of each Lender to fund its Term Loans shall be subject to
the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Article V.
---------
SECTION 5.1. Resolutions, etc. The Agents shall have received from the
----------------
Borrower and each other Obligor a certificate, dated the Closing Date, of its
Secretary or Assistant Secretary as to (i) resolutions of its Board of Directors
then in full force and effect authorizing the execution, delivery and
performance of each Loan Document to be executed by it, and (ii) the incumbency
and signatures of those of its officers authorized to act with respect to each
Loan Document executed by it, upon which certificate each Agent and each Lender
may conclusively rely until it shall have received a further certificate of the
Secretary or Assistant Secretary of the Borrower or such other Obligor canceling
or amending such prior certificate.
SECTION 5.2. Borrowing Request. The Agents shall have received a Borrowing
-----------------
Request for the Term Loans to be made on the Closing Date.
SECTION 5.3. Issuance of the Senior Notes. The Agents shall have received
----------------------------
evidence satisfactory to each of them that the Borrower shall have received
gross proceeds from the issuance of the Senior Notes which, when added to the
aggregate principal amount of Term Loans to be borrowed hereunder, equal to
$205,000,000, and the Agents shall be satisfied with all terms and provisions of
all documentation relating to such Senior Notes.
SECTION 5.4. Revolving Credit Agreement. The Agents shall have received
--------------------------
copies of fully executed versions of the Revolving Credit Agreement, certified
to be true and complete copies thereof by an Authorized Officer of the Borrower,
and be satisfied with the terms of such Revolving Credit Agreement. As of the
Closing Date, each condition to the closing contemplated by the Revolving Credit
Agreement shall have been satisfied or waived. There shall exist at and as of
the Closing Date (after giving effect to the transactions contemplated by the
Revolving Credit Agreement) no conditions that would constitute a default or
event of default under the Revolving Credit Agreement.
SECTION 5.5. Payment of Outstanding Indebtedness, etc. (a) The Borrower
----------------------------------------
shall have deposited funds not exceeding approximately $162,500,000 with the
trustee under the Outstanding Note Indenture for the purpose of defeasing or
redeeming all Outstanding Notes on or prior to April 23, 1998, pursuant to
documents (including the documents described in Section 8.01 of the Outstanding
Note Indenture) in form and substance satisfactory to the Agents.
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(b) The Borrower shall have deposited funds not exceeding $5,100,000 with
TITLESERV Agency of New York, as escrow agent (the "Escrow Agent"), under an
------------
escrow agreement in form and substance satisfactory to the Agents (the "Escrow
------
Agreement"), and Heller Financial, Inc. shall have delivered to the Escrow Agent
- ---------
all mortgage releases, Uniform Commercial Code Form UCC-3 termination statements
and other instruments as may be suitable or appropriate to release all Liens
securing payment of the obligations under the Heller Documents.
SECTION 5.6. Amendment of Notes. The Parent shall have entered into an
------------------
agreement with the holders of the Parent Notes, amending the Parent Notes and
the terms applicable thereto, which agreement (and related documents) shall be
in form and substance satisfactory to the Arranger, the Administrative Agent and
the Syndication Agent and which shall include provisions extending the maturity
date of the Parent Notes to a date no earlier than March 20, 2006.
SECTION 5.7. Transaction Documents. The Arranger, the Syndication Agent
---------------------
and the Administrative Agent shall have received (with copies for each Lender
that shall have expressly requested copies thereof) copies of fully executed
versions of the Senior Note Indenture and all other material Transaction
Documents, certified to be true and complete copies thereof by an Authorized
Officer of the Borrower, and be satisfied with the terms of all such agreements
and documents. The Arranger, the Syndication Agent and the Administrative Agent
shall be reasonably satisfied with all other aspects of the Transaction,
including the aggregate sources and uses of proceeds utilized to consummate the
Transaction.
SECTION 5.8. Additional Security Documents. The Arranger, the Syndication
-----------------------------
Agent and the Administrative Agent shall have received executed versions of the
other Security Documents (other than the Mortgages), duly executed by the
appropriate party thereto, together with:
(a) duly executed UCC-1 financing statements or other documents under
the provisions of the UCC or any other applicable state law in proper form
for filing in each office where such filing is necessary or appropriate to
grant to the Administrative Agent the Liens of the character and priority
contemplated by the Security Documents;
(b) the Agents shall have received from such party certified copies
of Uniform Commercial Code Requests for Information or Copies (Form UCC-
11), or a similar search report certified by a party acceptable to the
Administrative Agent, dated a date reasonably near (but prior to), the
Closing Date, listing all effective financing statements, tax liens and
judgment liens which name such party as the debtor and which are filed in
the jurisdictions in which filings are to be made pursuant to this
Agreement and the other Loan Documents, and in such other jurisdictions as
any Agent may reasonably request, together with copies of such financing
statements (none of which (other than financing statements (i) filed
pursuant to the terms hereof in favor of the Administrative Agent, if such
Form UCC-11 or search report, as the case may be, is current enough to list
such financing statements, (ii) being terminated pursuant to termination
statements that are to be delivered to the Administrative Agent or, in the
case of the Heller Documents, the Escrow Agent on or prior to the Closing
Date, or (iii) in respect of Liens permitted under Section 7.2.2) shall
-------------
cover any of the Collateral described in the Security Agreement); and
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(c) evidence that all other actions necessary to perfect and protect
the Liens created by the Security Documents have been taken.
SECTION 5.9. Mortgages. The Borrower shall have caused to be delivered to
---------
the Administrative Agent, with copies to the Syndication Agent and the
Documentation Agent, the following documents and instruments with regard to each
Mortgaged Property, providing for first priority mortgages (subject to the prior
mortgage in favor of Society National Bank, Indiana with respect to the
Borrower's real property and plant in Plainfield, Indiana, securing a principal
amount not exceeding $4,500,000 (the "Plainfield Mortgage")):
-------------------
(a) a Mortgage, in form and substance satisfactory to the Agents,
duly executed by the owner of such Mortgaged Property, together with
evidence of the due recordation thereof in the appropriate recording office
of the political subdivision where such Mortgaged Property is situated (or
evidence reasonably satisfactory to the Agents that such Mortgage, as
appropriate, has been delivered to a nationally-recognized title insurance
company for recording and that all fees, taxes and other expenses
associated with such recording have been paid);
(b) a mortgagee policy of title insurance (or endorsement thereto, as
appropriate) in favor of the Administrative Agent, issued by such title
insurance company, in such amounts, with such endorsements, affirmative
coverages, and reinsurance agreements as the Agents shall reasonably
require, and otherwise in form and substance reasonably satisfactory to the
Agents, insuring each Mortgage as a first lien on the property and
interests covered thereby subject only to the Plainfield Mortgage and such
other matters as are acceptable to the Agents, together with evidence that
all premiums in respect of such policies have been paid in full and true
and complete copies of all documents referred to therein;
(c) certified perimeter surveys of the real property, other than the
real property subject to the Plainfield Mortgage, covered by each Mortgage
by registered surveyors as of a date and in form and substance acceptable
to the Agents, bearing legal descriptions conforming exactly to those
contained in the title insurance policy referred to in the preceding clause
(b); indicating the length of exterior boundary lines of the Mortgaged
Property, locations of all buildings, utility or other easements, showing
the location of all easements of record, encroachments, if any, and means
of access to the real property from a public way; and the surveyor's
original certification to the Administrative Agent and the title insurance
company issuing the policies described in the preceding clause (b) and in
the case of surveys with respect to the Mortgaged Properties which are
dated more than 30 days prior to the Closing Date, such "affidavits of no
change" as may be required by such title companies to omit the standard
survey exception from such title insurance policies or endorsements;
(d) evidence reasonably satisfactory to the Agents of all filings of
financing statements under the UCC necessary or desirable to perfect the
valid, first-priority lien granted by each Mortgage (or evidence reasonably
satisfactory to the Agents that such financing statements have been
delivered to a nationally recognized title company for filing and that all
fees, taxes and other expenses associated with such filings have been
paid), together with such searches of UCC, judgment and tax lien records as
the Agents shall reasonably require;
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<PAGE>
(e) certificates of insurance with respect to the insurance required
to be maintained in respect of the property covered by each Mortgage
pursuant to the terms of this Agreement and the other Loan Documents,
naming the Administrative Agent as loss payee or additional named insured,
as appropriate; and
(f) such other agreements, instruments, approvals, consents,
opinions, or documents as the Agents request.
SECTION 5.10. Lien Waivers. The Agents shall have received evidence
------------
reasonably satisfactory to each of them that the Borrower has submitted to the
lessors under the leases described in Schedule IV lien waivers and releases in
-----------
form and substance satisfactory to the Agents for execution and acknowledgment
by such lessors, and that the Borrower has used its commercially reasonable
efforts to obtain such executed and acknowledged lien waivers and releases prior
to the Closing Date.
SECTION 5.11. Solvency Opinion. The Agents shall have received an opinion
----------------
from Murray, Devine & Co., Inc. which states that the Borrower is Solvent (as
defined in Section 6.14) and which is otherwise in form and substance
------------
satisfactory to the Agents, dated the Closing Date and addressed to the Agents
and all Lenders.
SECTION 5.12. Closing Date Certificates. The Agents shall have received,
-------------------------
with counterparts for each Lender, the Closing Date Certificates, substantially
in the form of Exhibits F and G hereto, respectively, dated the date hereof and
---------- -
duly executed and delivered by each of:
(a) the chief executive or financial (or equivalent) Authorized
Officer of the Borrower, in which certificate the Borrower shall agree and
acknowledge that the statements made therein shall be deemed to be true and
correct representations and warranties of the Borrower made as of such date
under this Agreement (including that attached thereto are true and complete
copies of documents referred to herein or otherwise relating to the
Transaction, such as, but not limited to, any and all tax sharing
agreements and all agreements referred to in clause (iii) of the definition
------------
of "Permitted Transactions"), and, at the time such certificate is
----------------------
delivered, such statements shall in fact be true and correct; and
(b) the chief executive or financial (or equivalent) Authorized
Officer of the Parent, in which certificate the Parent shall agree and
acknowledge that the statements made therein shall be deemed to be true and
correct representations and warranties of the Parent made as of such date
under this Agreement (including that attached thereto are true and complete
copies of documents referred to herein or otherwise relating to the
Transaction, such as, but not limited to, the agreements referred to in
Section 5.6) and, at the time such certificate is delivered, such
-----------
statements shall in fact be true and correct.
SECTION 5.13. Financial Information, etc. The Agents and the Lenders shall
--------------------------
have received:
(a) the audited consolidated financial statements of the Borrower and
its Subsidiaries for the fiscal years ended March 31, 1997; March 31, 1996;
and March 31, 1995;
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<PAGE>
(b) the unaudited consolidated financial statements of the Borrower
and its Subsidiaries for the Fiscal Quarters ending on or about June 30,
1997, September 30, 1997, and December 31, 1997; and
(c) a pro forma balance sheet of the Borrower as of December 31,
---------
1997, after giving effect to the contemplated Transaction and reflecting
the proposed capital structure as of the Closing Date, which capital
structure shall be satisfactory in all respects to the Agents.
SECTION 5.14. Litigation. There shall exist no pending or threatened
----------
material litigation, proceedings or investigations which (x) contest the
consummation of the Transaction or (y) except as set forth in Item 6.8
--------
("Litigation") of the Disclosure Schedule could reasonably be expected to have a
- ------------
Material Adverse Effect.
SECTION 5.15. Material Adverse Change. Since March 31, 1997, there has not
-----------------------
occurred or arisen any event or condition which has had or is reasonably likely
to have a Material Adverse Effect on the Borrower or its Subsidiaries.
SECTION 5.16. Consents and Approvals, etc. All governmental and third
---------------------------
party approvals necessary or advisable in connection with each aspect of the
Transaction and the continuing operations of the Borrower and its Subsidiaries
shall have been obtained and be in full force and effect or waived, and all
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise
impose adverse conditions on any aspect of the Transaction.
SECTION 5.17. Insurance. The Agents shall have received evidence
---------
reasonably satisfactory to each of them that all insurance required by Section
-------
7.1.4 is in full force and effect with no default by the Borrower or any of its
- -----
Subsidiaries, is fully paid and is not subject to cancellation without 30 days'
prior written notice to the Administrative Agent.
SECTION 5.18. Opinions of Counsel. The Agents shall have received opinions
-------------------
satisfactory to each of them in form and substance, dated the Closing Date and
addressed to the Agents and all Lenders from:
(a) Katten Muchin & Zavis, counsel to the Borrower;
(b) Dwyer Imanaka Schraff Kudo Meyer & Fujimoto, special Hawaiian
counsel to the Borrower;
(c) Bernkopf, Goodman & Baseman, special Massachusetts counsel to the
Borrower;
(d) Moss & Barnett, special Minnesota counsel to the Borrower;
(e) Robinson, Bradshaw & Hinson, special North Carolina counsel to
the Borrower;
(f) Hurtuk & Daroff Co., L.P.A., special Ohio counsel to the
Borrower;
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<PAGE>
(g) McAfee & Taft, special Oklahoma counsel to the Borrower; and
(h) Kelly, Hart & Hallman, special Texas counsel to the Borrower.
SECTION 5.19. Closing Fees, Expenses, etc. The Lenders, the Agents and
---------------------------
the Arranger shall have received, each for their own respective accounts
(including in their capacity as a Lender), as the case may be, all fees, costs
and expenses due and payable pursuant to Sections 3.3 and 10.3).
------------ ----
SECTION 5.20. Satisfactory Legal Form. All documents executed or
-----------------------
submitted pursuant hereto and in connection with the Transaction by or on behalf
of the Borrower or any of its Subsidiaries or any other Obligors shall be
reasonably satisfactory in form and substance to the Agents; the Agents shall
have received all information, approvals, opinions, documents or instruments as
the Agents may request.
SECTION 5.21. No Default. No Default shall have then occurred and be
----------
continuing and there shall exist no event or occurrence which, with the giving
of notice or passage of time (or both), would constitute an Event of Default.
SECTION 5.22. Compliance with Warranties. The representations and
--------------------------
warranties set forth in Article VI and in each other Loan Document shall, in
----------
each case, be true and correct in all material respects with the same effect as
if then made (unless stated to relate solely to an earlier date, in which case
such representations and warranties shall be true and correct as of such earlier
date).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agents to enter into this Agreement
and to make the Term Loans hereunder, the Borrower represents and warrants unto
the Agents and each Lender as set forth in this Article VI.
----------
SECTION 6.1. Organization, etc. Each of the Borrower and its
-----------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation.
Each of the Borrower and its Subsidiaries is in good standing and is duly
qualified to do business in each jurisdiction where, because of the nature of
its activities or properties, such qualification is required, except for those
states in which its failure to qualify to do business would not be reasonably
likely to have a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The Borrower is
-----------------------------------------
duly authorized to execute and deliver this Agreement, the Term Notes, and each
other Loan Document to be executed by it and is duly authorized to borrow monies
hereunder and to perform its obligations under this Agreement, the Term Notes
and each other Loan Document to be executed by it. The execution, delivery and
performance by the Borrower of this Agreement, the Term Notes and each other
Loan Document to which it is a party and the Borrowings hereunder do not and
will not require any consent or approval of any governmental agency or
authority.
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<PAGE>
SECTION 6.3. No Conflicts. The execution, delivery and performance by
------------
the Borrower of this Agreement, the Term Notes and each other Loan Document to
which it is a party do not and will not conflict with (i) any provision of law,
(ii) the Certificate or Articles of Incorporation, as applicable, or bylaws, of
the Borrower, the Parent or any of their respective Subsidiaries, (iii) any
agreement binding upon the Borrower, the Parent or any of their respective
Subsidiaries which conflict is reasonably likely to have a Material Adverse
Effect or (iv) any court or administrative order or decree applicable to the
Borrower, the Parent or any of their respective Subsidiaries which conflict is
reasonably likely to have a Material Adverse Effect, and do not and will not
require, or result in, the creation or imposition of any Lien on any asset of
the Borrower, the Parent or any such Subsidiary, except as provided herein or in
any other Loan Document.
SECTION 6.4. Validity and Binding Effect. This Agreement, the Term Notes
---------------------------
and each other Loan Document contemplated by this Agreement, when duly executed
and delivered, will be legal, valid and binding obligations of the Borrower and
each other Obligor party thereto, as applicable, enforceable against the
Borrower and each such other Obligor in accordance with their respective terms.
SECTION 6.5. No Default. Neither the Borrower nor any Subsidiary of the
----------
Borrower is in default under any agreement or instrument to which the Borrower
or such Subsidiary is a party or by which any of their respective properties or
assets is bound or affected, which default is reasonably likely to have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
SECTION 6.6. Financial Statements. Each of the financial statements of
--------------------
the Borrower referred to in Section 5.13 have been furnished to the Agents, have
------------
been prepared in conformity with GAAP applied on a basis consistent with that of
the preceding Fiscal Year and period, and present fairly the financial condition
of Borrower and its Subsidiaries as of such dates and the results of their
operations for the periods then ended, subject (in the case of the interim
financial statements) to year-end audit adjustments. Since March 31, 1997,
there has not occurred or arisen any event or condition which has had or is
reasonably likely to have a Material Adverse Effect.
SECTION 6.7. Insurance. Item 6.7 ("Insurance") of the Disclosure Schedule
--------- -------- ---------
is a complete and accurate summary of the property and casualty insurance
program carried by the Borrower and its Subsidiaries on the date hereof. Such
Item 6.7 includes name(s) of insurer(s), policy number(s), expiration date(s),
- --------
amount(s) of coverage, type(s) of coverage, the annual premium(s), deductibles
and self-insured retention and describes any retrospective rating plan, fronting
arrangement or any other self-insurance or risk assumption agreed to by the
Borrower or any Subsidiary or imposed upon the Borrower or any Subsidiary by any
such insurer. This summary also includes any self-insurance program that is in
effect. Except as would not have a Material Adverse Effect, neither the
Borrower nor any of its Restricted Subsidiaries has received notice from any
insurer or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
SECTION 6.8. Litigation; Contingent Liabilities. (a) As of the date
----------------------------------
hereof, except for those referred to in Item 6.8 ("Litigation") of the
-------- ----------
Disclosure Schedule, there are no claims, litigation, arbitration proceedings or
governmental proceedings pending or threatened against or
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<PAGE>
affecting the Borrower or any of its Subsidiaries, the results of which are
reasonably likely to have a Material Adverse Effect.
(b) As of the date hereof, other than any liability incident to the
claims, litigation or proceedings disclosed in Item 6.8 or 6.19 of the
-------- ----
Disclosure Schedule or provided for or disclosed in the financial statements
referred to in Section 6.6, neither the Borrower nor any of its Subsidiaries has
-----------
any contingent liabilities which are reasonably likely to have a Material
Adverse Effect.
SECTION 6.9. Liens. None of the Collateral or other property, revenues or
-----
assets of the Borrower or any Restricted Subsidiary is subject to any Lien
except Liens permitted by Section 7.2.2.
-------------
SECTION 6.10. Subsidiaries. As of the date hereof, all of the Borrower's
------------
Subsidiaries are listed in Item 6.10 ("Subsidiaries") of the Disclosure
--------- ------------
Schedule. Item 6.10 of the Disclosure Schedule sets forth, for each such
---------
Subsidiary, a complete and accurate statement of (a) the Borrower's percentage
ownership of each of the Subsidiaries, (b) the state or other jurisdiction of
formation or incorporation of each Subsidiary and (c) each state in which each
Subsidiary is qualified to do business.
SECTION 6.11. Partnerships; Joint Ventures. As of the date hereof, neither
----------------------------
the Borrower nor any of its Subsidiaries is a partner or joint venturer in any
partnership or joint venture other than the partnerships and joint ventures
listed in Item 6.11 ("Partnerships and Joint Ventures") of the Disclosure
--------- -------------------------------
Schedule. Item 6.11 of the Disclosure Schedule sets forth, for each such
---------
partnership or joint venture, a complete and accurate statement of (a) the
Borrower's and each Subsidiary's percentage ownership of each such partnership
or joint venture, (b) the state or other jurisdiction of formation or
incorporation, as appropriate, of each such partnership or joint venture and (c)
each state in which each such partnership or joint venture is qualified to do
business.
SECTION 6.12. Senior Notes. The Senior Notes have been issued and sold to
------------
the initial Purchasers thereof on or prior to the Closing Date in accordance
with and pursuant to the terms of the Offering Memorandum and in compliance with
all laws, including Rule 144A of the Securities Act of 1933, as amended, and all
other applicable federal and state securities laws.
SECTION 6.13. Intellectual Property. The Borrower and each of its
---------------------
Subsidiaries possesses adequate licenses, patents, patent applications,
copyrights, trademarks, trademark applications, trade styles, and tradenames to
continue to conduct its respective business as heretofore conducted by it.
SECTION 6.14. Solvency. On a pro forma basis, immediately after giving
-------- --- -----
effect to the Transaction and all Indebtedness incurred, and to be incurred, and
Liens created and to be created by each Obligor in connection with this
Agreement on the Closing Date, (a) the sum of the assets, at the fair valuation
of the Borrower and its Subsidiaries taken as a whole will exceed their debts,
(b) the Borrower and its Subsidiaries taken as a whole will not have incurred
nor intended to, or believe that they will, incur debts beyond their ability to
pay such debts as such debts mature and (c) the Borrower and its Subsidiaries
taken as a whole do not have unreasonably small capital with which to conduct
their respective businesses. For purposes of this Section 6.14, "debt" means
------------
any reasonably expected liability on a claim, and "claim" means
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<PAGE>
(i) right to payment whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
SECTION 6.15. Contracts; Labor Matters. Except as disclosed in Item 6.15
------------------------ ---------
("Contracts and Labor Matters") of the Disclosure Schedule (including a list of
---------------------------
all collective bargaining or similar agreements): (a) neither the Borrower nor
any of its Subsidiaries is subject to any charge, corporate restriction,
judgment, decree or order, which is reasonably likely to have a Material Adverse
Effect; (b) neither the Borrower nor any of its Subsidiaries has, within the two
(2) year period preceding the date of this Agreement, taken any action which
would have constituted or resulted in a "plant closing" or "mass layoff" within
the meaning of the Federal Worker Adjustment and Retraining Notification Act of
1988 or any similar applicable federal, state or local law; (c) on the date of
this Agreement (i) neither the Borrower nor any of its Subsidiaries is a party
to any labor dispute and (ii) there are no strikes or walkouts relating to any
labor contracts to which the Borrower or any of its Subsidiaries is a party or
is otherwise subject; (d) there is no unfair labor practice complaint pending
against the Borrower or any of its Subsidiaries or, to the knowledge of the
Borrower, threatened against any of them, before the National Labor Relations
Board that is reasonably likely to have a Material Adverse Effect; (e) there is
no grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement pending on the date of this Agreement against
the Borrower or any of the Borrower's Subsidiaries or, to the knowledge of the
Borrower, threatened against any of them that is reasonably likely to have a
Material Adverse Effect; (f) no slowdown or stoppage is pending against the
Borrower or any of its Subsidiaries, or to the knowledge of the Borrower,
threatened against the Borrower or any of the Borrower's Subsidiaries, that is
reasonably likely to have a Material Adverse Effect; and (g) neither the
Borrower nor any of its Subsidiaries is engaged in any unfair labor practice
that is likely to have a Material Adverse Effect.
SECTION 6.16. Pension and Welfare Plans. Each Pension Plan complies, and
-------------------------
has been administered in compliance, in all material respects, with all
applicable statutes and governmental rules and regulations; no Reportable Event
has occurred and is continuing with respect to any Pension Plan; neither the
Borrower nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in section 4203 or
4205 of ERISA, respectively, with respect to which the Borrower or any ERISA
Affiliate has any unsatisfied liability; no steps have been instituted to
terminate any Pension Plan; no contribution failure has occurred with respect to
any Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA; no condition exists or event or transaction has occurred in connection
with any Pension Plan or Multiemployer Plan that is reasonably likely to have a
Material Adverse Effect; neither the Borrower nor any ERISA Affiliate is a
"contributing sponsor" as defined in section 4001(a)(13) of ERISA of a "single-
employer plan" as defined in section 4001(a)(15) of ERISA that has two or more
contributing sponsors at least two of whom are not under common control and no
Multiemployer Plan is insolvent (as defined in Section 4245 of ERISA) or in
reorganization (as defined in Section 4241 of ERISA). Except as listed in Item
----
6.16 ("Pension and Welfare Plans") of the Disclosure Schedule, neither the
- ---- -------------------------
Borrower nor any ERISA Affiliate, to the extent there is joint and several
liability with the Borrower to pay such benefits, has any liability to pay any
welfare benefits under any employee welfare benefit plan within the meaning of
section 3(l) of ERISA to former employees thereof or to current employees with
respect to claims incurred after the termination of their employment other than
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<PAGE>
as required by section 4980B of the Code or Part 6 of Subtitle B of Title 1 of
ERISA. With respect to Multiemployer Plans, the representations and warranties
of this Section 6.16 are made to the best knowledge of the Borrower.
------------
SECTION 6.17. Regulations G, U and X. Neither the Borrower nor any of its
----------------------
Subsidiaries is engaged in the business of purchasing or selling Margin Stock or
extending credit to others for the purpose of purchasing or carrying Margin
Stock, and no part of the proceeds of the Term Loans will be used to purchase or
carry any Margin Stock or for any other purpose which would violate any of the
margin regulations of the Federal Reserve Board.
SECTION 6.18. Compliance. The Borrower and each of its Subsidiaries is in
----------
compliance with all statutes and governmental rules and regulations applicable
to it, the noncompliance with which is reasonably likely to have a Material
Adverse Effect.
SECTION 6.19. Taxes. Each of the Borrower, the Parent and their respective
-----
Subsidiaries has filed all material tax returns which are required to have been
filed and has paid, or made adequate provisions for the payment of, all of its
Taxes which are due and payable, except such Taxes, if any, as are being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP have been
maintained. The federal income tax liability of the Borrower, the Parent and
their respective Subsidiaries has been audited by the Internal Revenue Service
and has been finally determined and satisfied (or the time for audit has
expired) for all tax years up to and including the tax year ended March 31,
1994, except as described in Item 6.19(a) ("Taxes") of the Disclosure Schedule.
------------
The Borrower is not aware of any proposed assessment against the Borrower, the
Parent or any of their respective Subsidiaries for additional Taxes (or any
basis for any such assessment), except as described in Item 6.19 (b) ("Taxes")
--------- ---
of the Disclosure Schedule.
SECTION 6.20. Investment Company Act Representation. Neither the Borrower
-------------------------------------
nor any of its Subsidiaries is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 6.21. Public Utility Holding Company Act Representation. Neither
-------------------------------------------------
the Borrower nor any of its Subsidiaries is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.22. Environmental and Safety and Health Matters. The Borrower
-------------------------------------------
and its Subsidiaries and/or each property, operations and facility that the
Borrower or any such Subsidiary owns, operates or controls
(a) complies in all respects with (i) all applicable Environmental
Laws, except for those laws the failure with which to comply is not
reasonably likely to have a Material Adverse Effect and (ii) all applicable
Occupational Safety and Health Laws, except for those laws the failure with
which to comply is not reasonably likely to have a Material Adverse Effect;
(b) is not subject to any judicial or administrative proceeding
alleging the violation of any Environmental Law or Occupational Safety and
Health Law which is reasonably likely to have a Material Adverse Effect;
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<PAGE>
(c) has not received any written notice (i) that it may be in
violation of any Environmental Law or Occupational Safety and Health Law
which is reasonably likely to have a Material Adverse Effect, (ii)
threatening the commencement of any proceeding under any Environmental Law
or Occupational Safety and Health Law, which is reasonably likely to have a
Material Adverse Effect, or (iii) alleging that it is or may be responsible
for any response, cleanup, or corrective action, including but not limited
to any remedial investigation/feasibility studies, under any Environmental
Law or Occupational Safety and Health Law, which, is reasonably likely to
have a Material Adverse Effect;
(d) to the knowledge of the Borrower is not the subject of federal or
state investigation evaluating whether any investigation, remedial action
or other response is needed to respond to (i) a Release or threatened
Release into the environment of any Hazardous Material which is reasonably
likely to have a Material Adverse Effect or (ii) any allegedly unsafe or
unhealthful condition regulated under any Environmental Law or Occupational
Safety and Health Law which is reasonably likely to have a Material Adverse
Effect;
(e) has not filed any notice under or relating to any Environmental
Law or Occupational Safety and Health Law indicating or reporting (i) any
past or present Release into the environment of, or treatment, storage or
disposal of, any Hazardous Material or (ii) any potentially unsafe or
unhealthful condition, in either case, which is reasonably likely to have a
Material Adverse Effect, and to Borrower's knowledge, there exists no
reasonable basis for such notice irrespective of whether such notice was
actually filed; and
(f) has no contingent liability in connection with any actual Release
into the environment of, or otherwise with respect to, any Hazardous
Material whether on any premises owned or occupied by the Borrower or any
Subsidiary or on any other premises, which is reasonably likely to have a
Material Adverse Effect.
There are no Hazardous Materials on, in or under any property or facilities
owned, operated or controlled by the Borrower or any Subsidiary the presence of
which is reasonably likely to have a Material Adverse Effect, including but not
limited to such Hazardous Materials that may be contained in underground storage
tanks, but excepting such Hazardous Materials used in accordance with all
applicable laws and such Hazardous Materials used in the same manner as an
ordinary consumer (e.g., gasoline in tanks of motor vehicles, small amounts of
----
cosmetic cleaners, etc.).
SECTION 6.23. Related Agreements and Transaction Documents. As of the date
--------------------------------------------
hereof, all representations and warranties of the Parent, the Borrower and each
of their respective Subsidiaries contained in any Loan Document (including each
of the Security Documents) are true and correct as if made on the date hereof
(except for those representations and warranties which are expressly made as of
another specified date) and the Borrower hereby adopts and affirms all such
representations and warranties which the Borrower agrees shall be incorporated
by reference herein and made a part hereof. The funds deposited by the Borrower
with the trustee under the Outstanding Note Indenture and with the Escrow Agent
in connection with satisfaction of the conditions set forth in Sections 5.5(a)
---------------
and (b) shall be sufficient to repay all Indebtedness relating to the
---
Outstanding Notes and all Indebtedness under the Heller
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<PAGE>
Documents, respectively, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, in full.
SECTION 6.24. Ownership of Properties. (a) The real property described in
-----------------------
Schedule III constitutes all of the real estate owned in fee by the Borrower or
- ------------
any of its Restricted Subsidiaries (other than Foreign Subsidiaries) on the date
hereof having a net book value or fair market value of at least $500,000. All
other real property owned in fee by the Borrower or any of its Restricted
Subsidiaries (other than Foreign Subsidiaries) on the date hereof which is not
set forth on such Schedule III does not in the aggregate have a net book value
------------
or fair market value exceeding $2,500,000. The Borrower and its Restricted
Subsidiaries own good and marketable fee title to such real property and all of
their assets, real and personal, tangible and intangible, of any nature
whatsoever, to the extent reflected on the financial statements dated as of
December 31, 1997, free and clear in each case of all Liens or claims, except
for Liens permitted pursuant to Section 7.2.2.
-------------
(b) The leases of real property described in Schedule IV constitute
-----------
all of the leases of real property under which the Borrower or any of its
Restricted Subsidiaries (other than Foreign Subsidiaries) is a lessee on the
date hereof. With respect to such leased real property, the Borrower and its
Restricted Subsidiaries have valid and enforceable leasehold interests in the
properties listed on such Schedule IV on which equipment of the Borrower or any
-----------
of its Restricted Subsidiaries (other than Foreign Subsidiaries) is located,
free and clear of all Liens or claims, except for Liens permitted pursuant to
Section 7.2.2.
- -------------
SECTION 6.25. Accuracy of Information. All factual information heretofore
-----------------------
or contemporaneously furnished by or on behalf of the Borrower in writing to the
Arranger, any Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Borrower to the Arranger,
any Agent or any Lender will be, true and accurate in every material respect on
the date as of which such information is dated or certified, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
Without limiting the effect of the foregoing sentence, all factual information
set forth in the Offering Memorandum is true and accurate in every material
respect as of the date of this Agreement, and such information is not incomplete
by omitting to state any material fact necessary to make such information not
misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the Agents
---------------------
and each Lender that, until all Term Loan Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.1.
-----------
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower
---------------------------------------------
will furnish, or will cause to be furnished, to each Lender and each Agent
copies of the following financial statements, reports, notices and information
(except to the extent any such Lender shall
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<PAGE>
have provided written notice to the Borrower and the Administrative Agent that
it is not to receive any of the following statements, reports, notices and
information):
(a) Annual Audited Financial Statements. As soon as available and in
-----------------------------------
any event within 90 days after the end of each Fiscal Year, a copy of the
audited Financial Statements as of the close of such Fiscal Year and for
such Fiscal Year, together with a comparison to the Financial Statements
for the prior Fiscal Year, in each case accompanied by (A) a report thereon
of the auditors with respect thereto, unqualified as to scope, which report
shall state that such consolidated financial statements fairly present the
consolidated financial position of the Borrower and its consolidated
Subsidiaries as at the date indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP (except as
otherwise stated therein) and that the examination by such auditors has
been made in accordance with generally accepted auditing standards, (B)
such auditors' "Management Letter" to the Parent and/or the Borrower, (C) a
written statement signed by such auditors stating that in the course of the
regular audit of the business of the Parent and of the Borrower, which
audit was conducted by such auditors in accordance with generally accepted
auditing standards, such auditors have not obtained any knowledge of the
existence of any Default or Event of Default, or, if such auditors shall
have obtained from such examination any such knowledge, they shall disclose
in such written statement the existence of the Default or Event of Default
and the nature thereof, it being understood that such auditors shall not be
required hereunder to perform any special audit procedures and shall have
no liability, directly or indirectly, to anyone for failure to obtain
knowledge of any such Default or Event of Default. To the extent that the
Borrower's annual report on Form 10-K contains any of the foregoing items,
the Lenders will accept the Borrower's Form 10-K in lieu of such items.
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 45 days after the end of each Fiscal Quarter of the Borrower
(except the last Fiscal Quarter of any Fiscal Year) (i) Financial
Statements as at the end of such period and for the Fiscal Year to date,
together with a comparison to the Financial Statements for the same periods
in the prior Fiscal Year, all in reasonable detail and duly certified
(subject to the addition of footnotes and audit and normal year-end
adjustments) by the chief executive officer or chief financial officer of
the Borrower as having been prepared substantially in accordance with GAAP.
To the extent that the Borrower's quarterly report on Form 10-Q contains
any of the foregoing items, the Lenders will accept the Borrower's Form 10-
Q in lieu of such items.
(c) Annual Budgets. Within 60 days after the end of each Fiscal Year
--------------
of the Borrower, a copy of an annual budget of the Borrower for the current
Fiscal Year, prepared on a consolidated basis and in conformity with GAAP
applied in a manner consistent with the prior Fiscal Year's budget, signed
by the Borrower's chief financial officer and consisting of at least a
balance sheet, an income statement and a cash flow statement, each
calculated on a quarter by quarter basis.
(d) Officer's Certificate. Together with the financial statements
---------------------
furnished by the Borrower under the preceding clauses (a) and (b), a
----------- ---
certificate of the chief executive or financial officer of the Borrower
stating that a review of the activities of the Borrower and its
Subsidiaries during the preceding fiscal year has been made under the
supervision
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of the signing officer with a view to determining whether each has kept,
observed, performed and fulfilled its obligations under this Agreement and
the other Loan Documents (which certificate shall include a schedule in
form and scope reasonably satisfactory to the Administrative Agent
detailing the receipt and use of Net Cash Proceeds under Section 7.2.6),
-------------
and further stating, as to such officer signing such certificate, that to
the best of his or her knowledge the Borrower has kept, observed, performed
and fulfilled each and every covenant contained in this Agreement and the
other Loan Documents and is not in default in the performance or observance
of any of the terms, provisions and conditions hereof or thereof (or, if a
Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto).
(e) SEC and Other Reports. Copies of each filing and report made by
---------------------
the Parent, the Borrower or any Restricted Subsidiary with or to any
securities exchange or the Securities and Exchange Commission, including
any registration statement and all amendments thereto filed with respect to
the Senior Notes, or as required pursuant to the Senior Note Indenture or
any other document relating thereto, promptly upon the filing or making
thereof.
(f) Notice of Default. Notice of the occurrence of (i) a Default or
-----------------
an Event of Default or (ii) a default by the Parent, the Borrower, any
other Obligor or any Restricted Subsidiary under or with respect to the
Senior Note Indenture, the Revolving Credit Agreement, the Parent Notes or
any other material note, indenture, loan agreement, mortgage, capitalized
lease or other similar agreement to which the Parent, the Borrower, any
other Obligor or any Restricted Subsidiary, as appropriate, is a party or
by which it is bound having obligations outstanding in excess of
$2,500,000.
(g) Notice of Judgment. Notice of the entry of any judgment or
------------------
decree against the Parent, the Borrower, any other Obligor or any
Restricted Subsidiary, if the amount of such judgment exceeds $2,500,000.
(h) Notice of Other Indebtedness. Copies of any material amendments,
----------------------------
waivers or consents, notices of breach or default, notices relating to the
exercise or nonexercise of any remedy available to any Person, notices of
indemnity or other claims, written materials relating to any dispute,
written materials relating to the exercise of any rights derived from or
arising in connection with any Indebtedness having a principal amount in
excess of $2,500,000, including any communications by the Parent, the
Borrower or any Restricted Subsidiary in connection with the Loan Documents
other than any such notice or other written materials already sent to the
Administrative Agent pursuant to any other Section of this Agreement.
(i) Security Documents. Any statement, report, notice and/or
------------------
information required to be delivered to the Administrative Agent pursuant
to any of the Security Documents.
(j) Other Reports. Any information required to be provided pursuant
-------------
to other provisions of this Agreement, and such other reports or
information from time to time reasonably requested by any Agent.
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SECTION 7.1.2. Corporate Existence. Subject to Section 7.2.5, the Borrower
------------------- -------------
shall, subject to provisions herein, do or cause to be done all things necessary
to preserve and keep in full force and effect (i) its corporate existence and
the corporate existence of each of its Subsidiaries, in accordance with their
respective organizational documents (as the same may be amended from time to
time) and (ii) its (and its Subsidiaries) rights (charter and statutory),
licenses and franchises; provided, however, that the Borrower shall not be
-----------------
required to preserve any such right, license or franchise, or the corporate
existence of any Subsidiary, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower and its Subsidiaries taken as a whole and that the loss thereof is
not adverse in any material respect to the Lenders.
SECTION 7.1.3. Maintenance of Properties. The Borrower shall, and shall
-------------------------
cause its Restricted Subsidiaries to, maintain their respective material
properties and assets in normal working order and condition as of the date
hereof (reasonable wear and tear excepted) and make all repairs, renewals,
replacements, additions, betterments and improvements thereto, as shall be
reasonably necessary for the proper conduct of the business of the Borrower and
its Restricted Subsidiaries taken as a whole; provided that nothing herein shall
--------
prevent the Borrower or any of its Restricted Subsidiaries from discontinuing
the use, maintenance or operation of any such properties if such discontinuance
is desirable in the conduct of the business of the Borrower and its Restricted
Subsidiaries taken as a whole.
SECTION 7.1.4. Insurance. The Borrower shall, and shall cause its
---------
Restricted Subsidiaries to, maintain liability, casualty and other insurance
(subject to the customary deductibles and retentions) with responsible insurance
companies in such amounts and against such risks as it customarily carried by
responsible companies engaged in similar businesses and owning similar assets in
the general areas in which the Borrower and its Restricted Subsidiaries operate
(which may include self-insurance in comparable form to that maintained by such
responsible companies).
SECTION 7.1.5. Taxes. The Borrower shall, and shall cause each of its
-----
Subsidiaries to, pay prior to delinquency all material taxes, assessments and
governmental levies except as are being contested in good faith and by
appropriate proceedings diligently conducted and in respect of which appropriate
reserves (in the good faith judgment of management of the Borrower) are being
maintained in accordance with GAAP.
SECTION 7.1.6. Books and Records. The Borrower will, and will cause each
-----------------
of its Subsidiaries to, keep books and records which accurately reflect in all
material respects all of its business affairs and transactions and permit the
Administrative Agent and the Syndication Agent or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
to visit all of its offices, to discuss its financial matters with its officers
and, after notice to the Borrower and provision of an opportunity for the
Borrower to participate in such discussion, its independent public accountant
(and the Borrower hereby authorizes such independent public accountant to
discuss the Borrower's financial matters with each such Agent or its
representatives whether or not any representative of the Borrower is present, so
long as the Borrower has been afforded a reasonable opportunity to be present)
and to examine, and photocopy extracts from, any of its books or other corporate
records. Unless a Default or Event of Default has occurred and is continuing,
the cost and expense of each such visit shall be borne by the applicable Agent,
except that the Administrative Agent may make one such visit each Fiscal Year at
the cost and expense of the Borrower.
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SECTION 7.1.7. Use of Proceeds, etc. The Borrower shall apply the proceeds
--------------------
of the Term Loans in accordance with the terms of the third recital.
-------------
SECTION 7.1.8. Concerning the Collateral and the Loan Documents. (a) In
------------------------------------------------
order to secure the due and punctual payment of the Obligations, including
principal of, premium (if any) and interest (including interest on overdue
principal) on the Term Loans, when and as the same shall become due and payable,
whether on the scheduled payment date therefor, at maturity, by acceleration or
otherwise, and performance of all other obligations of the Borrower to the
Agents and the Lenders under this Agreement and each other Loan Document and of
all obligations of the Borrower's Restricted Subsidiaries under each other Loan
Document, the Borrower and the other Obligors have entered into each of the
applicable Security Documents to which each is a party.
(b) The Borrower shall, and shall cause each Restricted Subsidiary
subject to a Security Document to, perform at their sole cost and expense any
and all acts and execute any and all documents (including, without limitation,
the execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, including any
filings in local real estate land record offices, which are necessary or
advisable and shall do such other acts and execute such other documents as may
be required under any of the Security Documents, from time to time, in order to
grant and maintain valid and perfected Liens on the Collateral in favor of the
Administrative Agent in the priorities purported to be created by the Security
Documents, subject only to Liens permitted hereunder to be senior or pari passu
---- -----
to the Liens of the Administrative Agent, and to fully preserve and protect the
rights of the Agents and the Lenders under this Agreement and the other Loan
Documents. The Borrower shall, and shall cause each Restricted Subsidiary
subject to a Security Document to, pay and satisfy promptly all mortgage and
financing and continuation statement recording and/or filing fees, charges and
taxes relating to this Agreement, the Security Documents and the other Loan
Documents, any amendments thereto and any other instruments of further
assurance.
(c) The Borrower shall, on each anniversary of the Closing Date
beginning in 2003, furnish to the Administrative Agent an Opinion of Counsel,
dated as of such date, either (a) to the effect that, in the opinion of such
counsel, such action has been taken with respect to the recordings,
registerings, filings, re-recordings, re-registerings and refilings of all
financing statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of each of the Security Documents
and reciting with respect to such Liens the details of such action or
referencing prior Opinions of Counsel in which such details are given, and
stating that all financing statements and continuation statements have been
executed and filed that are necessary as of such date and during the succeeding
twelve months fully to preserve and protect the rights of the Administrative
Agent, the Lenders and the Administrative Agent hereunder and under each of the
Security Documents with respect to the Liens, or (b) to the effect that, in the
opinion of such counsel, no such action is necessary to maintain such Liens.
SECTION 7.1.9. Maintenance of Corporate Separateness. The Borrower will,
-------------------------------------
and will cause each of its Subsidiaries to, satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate offices and records.
Neither the Borrower nor any of its Restricted Subsidiaries shall make any
payment to a creditor of any Unrestricted Subsidiary or the Parent in respect of
any liability of
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such Unrestricted Subsidiary or the Parent, respectively, and no bank account of
an Unrestricted Subsidiary or the Parent shall be commingled with any bank
account of the Borrower or any of its Restricted Subsidiaries. Any financial
statements distributed to any creditors of an Unrestricted Subsidiary or the
Parent shall clearly establish the separateness of such Unrestricted Subsidiary
or the Parent, as the case may be, from the Borrower and its Restricted
Subsidiaries. Neither the Borrower nor any of its Subsidiaries shall take any
action, or conduct its affairs in a manner, which is likely to result in the
corporate existence of any Unrestricted Subsidiary or any Restricted Subsidiary
or the Parent being ignored by any court of competent jurisdiction, or in the
assets and liabilities of the Borrower or any Restricted Subsidiary being
substantively consolidated with those of any Unrestricted Subsidiary or the
Parent in a bankruptcy, reorganization or other insolvency proceeding.
SECTION 7.1.10. Working Capital Line. The Borrower shall maintain a
--------------------
revolving credit facility or similar arrangement or arrangements to the extent
necessary to fund the foreseeable capital expenditure and working capital
requirements of it and its Restricted Subsidiaries.
SECTION 7.1.11. Additional Mortgages. The Borrower shall, and shall cause
--------------------
each of its Restricted Subsidiaries to, deliver to the Administrative Agent the
following documents and instruments with regard to real property acquired after
the Closing Date (other than the Excluded Facility) having a net book value or a
fair market value of at least $2,000,000 or which, when added to the net book
value or fair market value of all other real property owned by the Borrower and
its Restricted Subsidiaries that is not subject to a first priority perfected
security interest in favor of the Administrative Agent and the Lenders
(excluding the Designated Facilities, the Excluded Facility and the real
property subject to the Plainfield Mortgage), exceeds $5,000,000, providing for
first priority mortgages (which shall constitute additional security for the
Obligations), subject to Permitted Liens:
(a) a Mortgage, in form and substance satisfactory to the
Administrative Agent duly executed by the Borrower or a Subsidiary of the
Borrower, as appropriate, in form suitable for recordation in the
appropriate recording office of the political subdivision where such
Mortgaged Property is situated;
(b) a mortgagee policy of title insurance (or endorsement thereto,
as appropriate) in favor of the Administrative Agent, issued by a
nationally-recognized title insurance company, in such amounts, with such
endorsements, affirmative coverages, and reinsurance agreements as the
Administrative Agent shall reasonably require, and otherwise in form and
substance reasonably satisfactory to the Administrative Agent, insuring the
Mortgage as a first lien on the property and interests covered thereby
subject only to such other matters as are acceptable to the Administrative
Agent;
(c) certified perimeter surveys of the real property covered by each
Mortgage by registered surveyors as of a date and in form and substance
acceptable to the Administrative Agent, bearing legal descriptions
conforming exactly to those contained in the title insurance policy
referred to in the preceding clause (b); indicating the length of exterior
boundary lines of the Mortgaged Property, locations of all buildings,
utility or other easements, showing the location of all easements of
record, encroachments, if any, and means of access to the real property
from a public way; and the surveyor's original
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certification to the Administrative Agent and the title insurance company
issuing the policies described in the preceding clause;
(d) UCC financing statements necessary or desirable to perfect the
valid, first-priority lien granted by each Mortgage, together with such
searches of UCC, judgment and tax lien records as the Administrative Agent
shall reasonably require;
(e) policies or certificates of insurance with respect to the
insurance required to be maintained in respect of the property covered by
each Mortgage pursuant to the terms of this Agreement and the other Loan
Documents, naming the Administrative Agent as loss payee or additional
named insured, as appropriate; and
(f) such other agreements, instruments, approvals, consents,
opinions, or documents as the Administrative Agent, may reasonably request.
SECTION 7.1.12. Future Subsidiaries. Without limiting the effect of any
-------------------
provision contained herein (including Section 7.2.9), upon any Person becoming a
-------------
Restricted Subsidiary of the Borrower (other than a Foreign Subsidiary),
(a) such Person, if not theretofore a party to the Security
Agreement, shall execute and deliver to the Administrative Agent a
supplement to the Security Agreement for the purpose of becoming a grantor
thereunder, which supplement shall be substantially in the form attached to
the Security Agreement;
(b) the Administrative Agent shall have received from such Person
certified copies of Uniform Commercial Code Requests for Information or
Copies (Form UCC-11), or a similar search report certified by a party
acceptable to the Administrative Agent, dated a date reasonably near (but
prior to) the date of any such Person becoming a Restricted Subsidiary of
the Borrower, listing all effective financing statements, tax liens and
judgment liens which name such Person as the debtor and which are filed in
the jurisdictions in which filings are to be made pursuant to this
Agreement and the other Loan Documents, and in such other jurisdictions as
the Administrative Agent may reasonably request, together with copies of
such financing statements (none of which (other than financing statements
(i) being terminated pursuant to termination statements that are to be
delivered on or prior to the date such Person becomes such Restricted
Subsidiary or (ii) in respect of Liens permitted under Section 7.2.2) shall
-------------
cover any of the collateral described in the Security Agreement); and
(c) the Administrative Agent shall have received from such Person
executed copies of UCC financing statements naming such Person as the
debtor and the Administrative Agent as the secured party, suitable for
filing under the UCC of all jurisdictions as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to perfect the
first priority security interest of the Administrative Agent pursuant to
the Security Agreement entered into by such Person,
together, in each case, with such opinions of legal counsel as the
Administrative Agent may reasonably request, which legal opinions shall be in
form and substance reasonably satisfactory to the Administrative Agent.
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SECTION 7.1.13. Compliance with Statutes, etc. (a) The Borrower will, and
------------------------------
will cause each of the its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable Environmental
Laws) other than those the non-compliance with which (individually or in the
aggregate) would not have a Material Adverse Effect. Neither the Borrower nor
any of its Subsidiaries will generate, use, treat, store, release or dispose of,
or permit the generation, use, treatment, storage, release or disposal of
Hazardous Materials on any of its properties, or transport or permit the
transportation of Hazardous Materials to or from any such properties, except for
quantities used or stored at such properties in material compliance with all
applicable Environmental Laws and required in connection with the normal
operation, use and maintenance of such properties or the operation of the
business of the Borrower and its Subsidiaries. If required to do so under any
applicable Environmental Law, the Borrower agrees to undertake, and agrees to
cause each of its Subsidiaries to undertake, any cleanup, removal, remedial or
other action necessary to remove and clean up any Hazardous Materials from any
such property in accordance with the requirements of all such applicable
Environmental Laws and in accordance with orders and directives of all
governmental authorities; provided that neither the Borrower nor any of its
--------
Subsidiaries shall be required to take any such action where same is being
contested by appropriate legal proceedings in good faith by the Borrower or such
Subsidiary.
(b) At the request of the Administrative Agent, the Syndication Agent
or the Required Lenders at any time and from time to time, but in any event no
more frequently than once a year, the Borrower will provide, at the Borrower's
sole cost and expense, an environmental site assessment report concerning any
Mortgaged Property of the Borrower or any Subsidiary, prepared by an
environmental consulting firm reasonably acceptable to the Administrative Agent,
indicating the presence or release of Hazardous Materials and the potential cost
of any removal or remedial action in connection with any Hazardous Materials on
such Mortgaged Property; provided, however, no such request may be made unless
-------- -------
the Administrative Agent, the Syndication Agent or the Required Lenders
reasonably believe that (i) the Borrower or any of its Subsidiaries is in
material non-compliance with any Environmental Law with respect to such
Mortgaged Property and such non-compliance is reasonably likely to result in a
liability of the Borrower in excess of $5,000,000 (after expected insurance and
indemnity recovery) or (ii) an Event of Default is in existence. If the
Borrower fails to provide the same after 60 days' written notice, the
Administrative Agent may order the same, and the Borrower shall grant and hereby
grants to the Administrative Agent, the Syndication Agent and the Lenders and
their agents access to such Mortgaged Property at all reasonable times and
without unreasonably interfering with the Borrower's operations and specifically
grants such Agents and the Lenders an irrevocable nonexclusive license, subject
to the rights of tenants, to undertake such an assessment all at the Borrower's
sole expense.
SECTION 7.1.14. Lien Waivers. In the event that any of the lien waivers
------------
and releases referred to in Section 5.10 are not obtained on or prior to the
------------
Closing Date or in the event that additional real property is leased by the
Borrower or any of its Restricted Subsidiaries after the Closing Date, the
Borrower shall use its commercially reasonable efforts to obtain such lien
waivers and releases and lien waivers and releases with respect to such
additional leases, in each case executed and acknowledged by the lessors under
the applicable leases and reasonably satisfactory in form and substance to the
Syndication Agent and the Administrative Agent.
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SECTION 7.2. Negative Covenants. The Borrower agrees with the Agents and
------------------
each Lender that, until the Term Loan Commitments have terminated, and all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.2.
-----------
SECTION 7.2.1. Indebtedness. Borrower will not create, incur, assume,
------------
guarantee or otherwise become liable for, and will not permit any of its
Restricted Subsidiaries to create, incur, assume, guarantee or otherwise become
liable for, any Indebtedness (collectively, "incur"); provided, however, the
----- -------- -------
Borrower may incur Indebtedness (other than guarantees of Indebtedness, the
incurrence of which would not be permitted under this Agreement) if, at the time
such Indebtedness is so incurred and after giving effect thereto and the
application of the proceeds therefrom, the Fixed Charge Coverage Ratio of the
Borrower for the four most recent fiscal quarters for which financial
information is available shall not be less than 2.0 to 1.0.
For purposes of calculating the Fixed Charge Coverage Ratio in this
Section, if the Indebtedness to be created, incurred or assumed is Indebtedness
of an entity which is to be acquired by, and made a Restricted Subsidiary of,
the Borrower or of a Restricted Subsidiary (whether or not such Indebtedness was
incurred by such entity in connection with such acquisition), or is Indebtedness
incurred by the Borrower or any Restricted Subsidiary in connection with such
acquisition, then the Fixed Charge Coverage Ratio of the Borrower shall be
determined on a pro forma basis giving effect to both the Fixed Charges related
--- -----
to such additional Indebtedness as well as the Consolidated Cash Flow of the
entity to be acquired. Notwithstanding the foregoing limitations, the incurrence
of the following, without duplication, will not be prohibited:
(a) Indebtedness of the Borrower and its Restricted Subsidiaries
incurred under or in respect of the Revolving Credit Agreement (or any
substitute or replacement facility), provided that the Revolving Credit
Agreement shall be permanently reduced by the amount of any prepayment from
the proceeds of an Asset Disposition pursuant to Section 7.2.6(b)(C) and
-------------------
provided that the aggregate principal amount of such Indebtedness
outstanding at any time pursuant to this clause (a) may not exceed (i) the
----------
greater of (A) $220,000,000 or (B) the sum of 85% of Eligible Accounts
Receivable and 60% of the book value of the Inventory (determined on a
first-in first-out basis) of the Borrower and its Restricted Subsidiaries,
plus (ii) any additional amounts (without duplication) permitted to be
----
incurred by the Borrower and its Restricted Subsidiaries pursuant to clause
------
(p) below (clause (a)(i) and, collectively with clause (a)(ii), the "Total
--- ------------- -------------- -----
Amount"), minus, (iii) the amount then outstanding under any Receivables
------ -----
Financing (as set forth in the books and records of the Borrower and
confirmed by the agent, trustee or other representative of the institution
or group providing such Receivables Financing);
(b) Indebtedness in respect of the Term Notes and all other
Obligations;
(c) Indebtedness evidenced by the Senior Notes;
(d) Indebtedness of the Borrower to any Wholly Owned Restricted
Subsidiary or of any Wholly Owned Restricted Subsidiary to the Borrower or
to any other Wholly Owned Restricted Subsidiary;
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(e) Indebtedness of the Borrower and its Restricted Subsidiaries
outstanding on the date of incurrence of the Term Loans and described in
Item 7.2.1(e) ("Existing Indebtedness") of the Disclosure Schedule;
------------- ---------------------
(f) Indebtedness of the Borrower in connection with Life Insurance
Policy loans;
(g) Indebtedness of the Borrower or any Restricted Subsidiary
evidenced by standby letters of credit, performance bonds, surety bonds,
guarantees and similar obligations incurred in the ordinary course of
business for purposes of insuring the performance of obligations of the
Borrower or such Restricted Subsidiary and in an aggregate principal amount
not to exceed $7,500,000 at any time;
(h) Indebtedness of the Borrower or a Restricted Subsidiary in
respect of Capitalized Lease Obligations; provided, however, that the
-------- -------
aggregate Indebtedness incurred under this clause (h) will not at any time
----------
exceed $12,500,000;
(i) Indebtedness of the Borrower or a Restricted Subsidiary
(including industrial revenue bond Indebtedness) that is secured by a Lien
on property, which Indebtedness constitutes all or part of the purchase
price of the property subject thereto or is incurred prior to, at the time
of or within 180 days after the acquisition of such property for the
purpose of financing all or any part of the purchase price thereof,
provided that such secured Indebtedness does not exceed the purchase price
--------
of such property;
(j) Indebtedness of the Borrower issued in exchange for, or the net
proceeds of which will be used to exchange, refinance or refund outstanding
Indebtedness incurred pursuant to the proviso in the first sentence of this
Section 7.2.1 or pursuant to clauses (b), (c), (e), (o) and (p) so long as
------------- ----------- --- --- --- ---
(i) the principal amount of the Indebtedness issued does not exceed the
principal amount (plus any premium and consent payments required) of the
Indebtedness so exchanged, refinanced or refunded, (ii) where the
Indebtedness to be exchanged, refinanced or refunded is not Senior
Indebtedness, the Indebtedness issued does not have a final maturity or
mandatory redemption payments prior to the earlier of the final maturity of
the Indebtedness being so exchanged, refinanced or refunded or the stated
maturity of the Term Loans, and (iii) where the Indebtedness being so
exchanged, refinanced or refunded is subordinated to the Term Loans, the
Indebtedness is subordinated to the Term Loans in right of payment to the
same extent as the indebtedness so exchanged, refinanced or refunded;
(k) Attributable Debt in respect of Sale and Leaseback Transactions
engaged in pursuant to and in accordance with clause (b) under Section
---------- -------
7.2.11;
------
(l) Indebtedness incurred in connection with Investments in
Unrestricted Subsidiaries; provided that such Investments are permitted
under Section 7.2.9;
-------------
(m) Indebtedness of the Borrower incurred pursuant to Interest Rate
Contracts related to the Revolving Credit Agreement or this Agreement to
the extent the notional principal amount of any such Interest Rate Contract
does not exceed, respectively, the amount of Indebtedness permitted
pursuant to clause (a) above or the amount of Indebtedness hereunder;
----------
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(n) Indebtedness of a Receivables Subsidiary secured by a Lien on all
or part of the assets disposed of in, or otherwise incurred in connection
with, a Financing Disposition; provided, that the aggregate principal
amount of indebtedness outstanding under this clause (n) may not exceed the
----------
Total Amount;
(o) Indebtedness incurred by the Borrower's Canadian subsidiary under
or in respect of a secured bank credit facility, provided that the
--------
aggregate principal amount of such Indebtedness outstanding pursuant to
this clause (o) shall not exceed $10,000,000 and
----------
(p) Indebtedness of the Borrower other than Indebtedness permitted
under clauses (a) through (o), but without duplication as to additional
----------- ---
amounts permitted to be outstanding under clause (a) (ii) above, provided
---------------
that the aggregate amount of such Indebtedness may not exceed $25,000,000
at any time outstanding;
To the extent that Net Proceeds from an Asset Disposition are used to repay,
repurchase or redeem Indebtedness incurred under or in respect of the Revolving
Credit Agreement pursuant to Section 7.2.6. the amount of Indebtedness
--------------
permitted by clauses (a) and (n) of this Section shall be permanently reduced by
----------- ---
the amount of such repayment, repurchase or redemption; provided, however, no
-------- -------
such permanent reduction in borrowing capacity shall be required if such
repayment, repurchase or redemption is made with Net Proceeds refused by a
Lender under clause (c) of Section 3.1.2.
---------------------------
SECTION 7.2.2. Liens. The Borrower will not, and will not permit any of
-----
its Restricted Subsidiaries, directly or indirectly, to create, incur, assume or
permit to exist any Lien except for Permitted Liens upon or with respect to any
of its property, whether owned at the date of this Agreement or thereafter
acquired, or on any income or profits therefrom, or assign or otherwise convey
any right to receive income, unless the Term Loans are secured equally and
ratably simultaneously with or prior to the creation, incurrence or assumption
of such Lien.
SECTION 7.2.3. Restricted Payments, etc. The Borrower will not, and will
------------------------
not permit any of its Restricted Subsidiaries to, directly or indirectly, make
any Restricted Payment, if, after giving effect thereto (a) a Default or an
Event of Default shall have occurred and be continuing or (b) the aggregate
amount of all Restricted Payments made and the amount of Investments then
outstanding pursuant to clause (g)(ii) under Section 7.2.9 by the Borrower and
-------------- -------------
its Restricted Subsidiaries (the amount expended, distributed or invested for
such purposes, if other than in cash, to be determined in good faith by the
Board of Directors of the Borrower and evidenced by a Board Resolution) from and
after the date of this Agreement shall exceed the sum of (i) 50% of Consolidated
Net Income of the Borrower accrued for the period (taken as one accounting
period) commencing with the date of this Agreement to and including the date of
such calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), (ii) 50% of the (A) increase in
depreciation expense resulting from the application of APB 16 purchase
accounting to the acquisition of the Borrower in 1990, and (B) amortization of
goodwill and deferred financing costs existing as of the date of this Agreement,
in each case, for the period specified in clause (i) above, (iii) the aggregate
----------
net cash proceeds, including marketable securities, received by the Borrower or
Parent from the issuance or sale (other than to a Subsidiary of the Borrower or
Parent, as the case may be) of its Capital Stock (other than Redeemable Stock)
or any convertible debt securities that have been converted into shares of
Capital Stock (other than Redeemable Stock), from and after the date of this
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<PAGE>
Agreement, provided that, in the case of any issuance or sale by Parent, such
--------
net cash proceeds are contributed as a capital contribution in exchange for
common stock of the Borrower; (iv) the aggregate amount received by the Borrower
or its Restricted Subsidiaries from an Unrestricted Subsidiary (excluding
amounts received by the Borrower or any Restricted Subsidiary from an
Unrestricted Subsidiary which represents a repayment of the principal portion of
any loan or advance or any return of contributed capital), (v) if there is a
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the
Borrower, such aggregate amount of the net reduction in Investments in clause
------
(g) of Section 7.2.9 not exceeding the amount of Investments previously made by
- --- -------------
the Borrower or any Restricted Subsidiary of the Borrower in such Unrestricted
Subsidiary pursuant to (and in accordance with) such clause (g), to the extent
----------
such amount was included in the calculation of the amount of Restricted
Payments; and (vi) $10,000,000.
The foregoing clause (b) will not prevent (i) the payment of any dividend
----------
on Capital Stock within 60 days after the date of its declaration if such
dividend could have been made on the date of its declaration in compliance with
the foregoing provisions, (ii) the purchase, redemption or retirement or other
acquisition of Capital Stock in exchange for or out of the proceeds of a
substantially concurrent issue and sale (other than to a Subsidiary) of other
shares of Capital Stock (other than Redeemable Stock) of the Borrower, (iii)
cash dividends paid to Parent which dividends are used by Parent to repurchase
Capital Stock of Parent from officers and employees (or their estates) of
Parent, the Borrower or its Subsidiaries upon death, disability or termination
of employment of such officers and employees to the extent required by the terms
of the Stockholders Agreement, as amended, dated as of September 14, 1990 (the
"Stockholders Agreement"), and any extension thereof, among Parent and certain
----------------------
stockholders party thereto on substantially the same terms and conditions as in
effect on the date of this Agreement; provided, however, that the aggregate
-------- -------
amount of all such repurchases in any fiscal year of the Borrower does not
exceed $5,000,000; (iv) cash dividends paid to Parent which dividends are used
by Parent to repurchase shares of its Capital Stock from participants who are
distributed such shares from the ESOP to the extent required by the terms
thereof as in effect on the date of this Agreement, (v) cash dividends paid to
Parent out of the net proceeds to the Borrower of any benefits paid pursuant to
the terms of the Life Insurance Policies; provided, however, that such net
-------- -------
proceeds shall be first used to repurchase Capital Stock of Parent from the
estate of such former officer or employee if such repurchase is required by the
ESOP, the Stockholder Agreement or any other agreement and provided, further,
-------- -------
that the amount of such dividend shall be excluded in the calculation of
Restricted Payments for purposes of clause (b) of the immediately preceding
----------
paragraph, (vi) the purchase, redemption, retirement or other acquisition of any
Indebtedness with the Net Proceeds from Asset Dispositions as permitted under
Section 7.2.6, (vii) the exchanging, refinancing or refunding of Subordinated
- -------------
Indebtedness through the issuance of Subordinated Indebtedness so long as (A)
the principal amount of the new Subordinated Indebtedness to be issued does not
exceed the principal amount (plus any premium and consent payments required) of
the Subordinated Indebtedness so exchanged, refinanced or refunded and (B) the
Subordinated Indebtedness to be issued does not have a final maturity or
mandatory redemption payments prior to the earlier of the final maturity of the
Subordinated Indebtedness being so exchanged, refinanced or refunded or the
stated maturity of the Term Notes, (viii) any securities or other Investments
received in connection with any sale or other disposition of property or assets,
including any Asset Disposition that complies with Section 7.2.6; and (ix)
-------------
Investments in connection with a Financing Disposition by or to any Receivables
Entity, including Investments of funds held in accounts permitted or required by
the arrangements governing such Financing Disposition or any related
Indebtedness.
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<PAGE>
SECTION 7.2.4. Payment Restrictions Affecting Restricted Subsidiaries. The
------------------------------------------------------
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
create, assume or suffer to exist or become effective any consensual encumbrance
or restriction on the ability of any Restricted Subsidiary to (a) pay dividends
or make any other distributions in respect of such Restricted Subsidiary's
Capital Stock or otherwise transfer cash or assets or make loans or advances to
the Borrower or any other Restricted Subsidiary, or pay Indebtedness owing to
the Borrower or any other Restricted Subsidiary, (b) make any loans or advances
to the Borrower or any Restricted Subsidiary, or (c) transfer any of its
property or cash to the Borrower or any Restricted Subsidiary, other than as
permitted by this Agreement, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-assignment
provisions of any agreement or obligation, including a lease governing a
leasehold interest, of the Borrower or a Subsidiary of the Borrower, (iii) this
Agreement and the Security Documents and any amendments, modifications or
refinancing thereof, provided, however, that any such amendments, modifications
-------- -------
or refinancings shall not impose any greater encumbrance or restriction than
those contemplated by this Agreement as in existence on the date of original
issuance of the Term Notes, (iv) the Revolving Credit Agreement, provided,
--------
however, that any amendments to the Revolving Credit Agreement shall not impose
- -------
any greater encumbrance or restriction than those contemplated by the Revolving
Credit Agreement as in existence on the date of original issuance of the Term
Notes, (v) the Senior Note Indenture and any amendments, modifications or
refinancing hereof, provided that any such amendments, modifications or
refinancings shall not impose any greater encumbrance or restriction than those
contemplated by the Senior Indenture as in existence on the date of original
issuance of the Senior Notes, (vi) any Indebtedness incurred pursuant to clause
------
(o) of Section 7.2.1 and any amendments, modifications or refinancing thereof,
- --- -------------
(vii) any instrument governing Indebtedness of a Person acquired by the Borrower
or any Subsidiary of the Borrower at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, (viii) any restriction on the sale or other disposition of
assets or property securing Indebtedness as a result of a Permitted Lien on such
assets or property (including, without limitation, customary restrictions
relating to assets securing any indebtedness hereunder, under the Revolving
Credit Agreement or the Indebtedness incurred pursuant to clause (i) or (o) of
---------- ---
Section 7.2.1), (ix) contracts for the sale of assets, including customary
- -------------
restrictions with respect to agreements for sale of substantially all of the
Capital Stock or assets of such Subsidiary provided, that such restrictions
--------
apply only to the assets being sold and for only so long as such contract
remains in effect, or (x) an agreement relating to Indebtedness of or a
Financing Disposition to or by any Receivables Entity. Nothing contained in
this Section 7.2.4 shall prevent the Borrower or any Restricted Subsidiary from
-------------
(A) creating, incurring, assuming or suffering to exist any Liens otherwise
permitted under Section 7.2.2 or (B) restricting the sale or other disposition
-------------
of property or assets of the Borrower or any of its Restricted Subsidiaries that
secure Indebtedness of the Borrower or any of its Restricted Subsidiaries.
SECTION 7.2.5. Consolidation, Merger, etc. (a) The Borrower will not in a
--------------------------
single transaction or through a series of related transactions consolidate with
or merge with or into another Person or directly or indirectly sell, transfer,
lease or convey all or substantially all of its properties and assets to another
Person unless:
(i) (A) the Borrower is the continuing corporation in the case of a
merger or (B) the resulting, surviving or transferee entity (the "Surviving
---------
Entity") is a corporation or partnership organized under the laws of the
------
United States, any state thereof or the
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<PAGE>
District of Columbia and expressly assumes by all the obligations of the
Borrower under this Agreement, the Term Notes and each other Loan Document
to which the Borrower is a party pursuant to amendments in form and
substance reasonably satisfactory to the Administrative Agent and the
Required Lenders;
(ii) no Default or Event of Default shall have occurred and be
continuing immediately after giving effect to such transaction;
(iii) the Consolidated Net Worth of the Borrower or the Surviving
Entity, as the case may be, on a pro forma basis after giving effect to
such consolidation, merger or sale, transfer, lease or conveyance of assets
(but prior to any purchase accounting adjustments resulting from the
transaction) is not less than the Consolidated Net Worth of the Borrower,
immediately prior to the date of the transaction; and
(iv) immediately after giving effect to such transaction, the
Borrower or the Surviving Entity, as the case may be, on a pro forma basis
would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 7.2.1 as if, in the case of the
-------------
Surviving Entity, such Person were the Borrower.
Notwithstanding the foregoing, clause (iv) shall not prohibit a transaction, the
-----------
principal purpose of which is (as determined in good faith by the Board of
Directors of the Borrower and evidenced by a resolution thereof) to change the
state of incorporation of the Borrower, and such transaction does not have as
one of its purposes the evasion of the restrictions of this section.
SECTION 7.2.6. Asset Dispositions, etc. (a) The Borrower will not, and
-----------------------
will not permit any Restricted Subsidiary to, sell, transfer, lease, convey or
otherwise dispose of any assets (other than (i) an asset disposition or the sale
of Inventory in the ordinary course of business consistent with past practice,
(ii) any Financing Disposition, (iii) any disposition of the Designated
Facilities, or (iv) a transfer, conveyance, sale, lease or other disposition of
all or substantially all of the Borrower's asset permitted under Section 7.2.5)
-------------
unless (A) the Borrower (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such disposition (an "Asset Disposition")
-----------------
at least equal to the fair market value of the assets disposed of (which shall
be determined in good faith by the Board of Directors and evidenced by a Board
Resolution), and the Net Proceeds received by the Borrower for such disposition
consists of at least 75% cash, provided, however, that for the purposes of this
-------- -------
Section 7.2.6, "cash" shall include (1) the amount of any liabilities (other
- -------------
than liabilities that are by their terms subordinated to the Term Notes) of the
Borrower or such Restricted Subsidiary (as shown on the Borrower's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto) that
are assumed by the transferee of any such assets or other property in such Asset
Disposition or are no longer the liability of the Borrower or any Restricted
Subsidiary (and excluding any liabilities that are incurred in connection with
or in anticipation of such Asset Disposition), but only to the extent that such
assumption is effected on a basis under which there is no further recourse to
the Borrower or any of its Restricted Subsidiaries with respect to such
liabilities and (2) any securities, notes or other obligations received by the
Borrower or any such Restricted Subsidiary in connection with such Asset
Disposition that are converted by the Borrower or such Restricted Subsidiary
into cash within 180 days of receipt, (B) to the extent such Asset Disposition
involves Collateral, (1) the consent of the Required Lenders shall be obtained
prior to the consummation of any sale of Collateral subject to such Asset
Disposition (or any related Asset Disposition) having a fair market value in
excess of $5,000,000 and (2) the Borrower shall cause the
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<PAGE>
aggregate cash proceeds received by the Borrower or such Restricted Subsidiary
in respect of Collateral subject to an Asset Disposition (or any related Asset
Disposition), net of the items set forth in clauses (i) through (iii) of the
----------- -----
definition of Net Proceeds (the "Collateral Proceeds"), to be deposited with the
-------------------
Administrative Agent in the Collateral Account as and when received by the
Borrower or any of its Restricted Subsidiaries in accordance with the terms of
the Security Agreement in the event such Collateral Proceeds exceed $5,000,000,
provided, that the consent of the Required Lenders shall not be required with
- --------
respect to the sale of the real property and plant of the Borrower located at
91-104 Kalaeloa Boulevard, Kapolei, Hawaii and the Collateral Proceeds of such
sale shall not be required to be deposited in the Collateral Account, and,
provided further, that no Indebtedness other than the Obligations may be
- -------- -------
permanently repaid or prepaid out of, or on account of, any Collateral Proceeds
(except to the extent any such prepayment is refused by a Lender under clause
------
(c) of Section 3.1.2); and (C) the Net Proceeds (other than the Net Proceeds of
- --- -------------
an Asset Disposition of the Excluded Facility) received by the Borrower or such
Restricted Subsidiary from such Asset Disposition are applied in accordance with
the following paragraphs.
(b) Within 540 days from the date of such disposition, the Net Proceeds
thereof shall be applied (i) in the case of Collateral Proceeds (whether or not
deposited into the Collateral Account), (A) to acquire property, buildings,
fixtures, equipment or other items related to the Borrower's business and in
which the Administrative Agent on behalf of the Lenders will have (subject to
Permitted Liens) a first-priority perfected security interest and (B) otherwise
in accordance with the provisions of the Security Agreement and (ii) in the case
of Net Proceeds other than Collateral Proceeds, (A) to capital expenditures of
the Borrower or the Restricted Subsidiaries, (B) to acquire additional
properties or assets related to the Borrower's business or to make Investments
in entities, which, after giving effect to such Investment, will become
Restricted Subsidiaries or (C) applied to repay, repurchase or redeem
Indebtedness of a Restricted Subsidiary or Indebtedness of the Borrower ranking
on a parity with or senior to the Term Notes; provided, however, that if such
-------- -------
repaid, repurchased or redeemed Indebtedness is Indebtedness incurred under or
in respect of the Revolving Credit Agreement (or any substitute or replacement
facility or any other revolving facility), the amount of borrowing capacity
under such facility shall be permanently reduced by the amount of such
repayment, repurchase or redemption.
(c) The amount of such Net Proceeds not used to or invested as set forth
in paragraph (b) shall be applied by the Borrower, subject to Section 3.1.2 and
------------- -------------
the provisions, if applicable, of the Security Agreement, to the prepayment of
the Term Loans on or prior to the date such Net Proceeds are not so used or
invested at a price equal to 100% of the principal amount thereof, plus accrued
interest thereon to the date of prepayment.
(d) Notwithstanding the foregoing, a prepayment of the Term Loans pursuant
to paragraph (c) may be deferred with respect to an Asset Disposition or series
-------------
of related Asset Dispositions if the Net Proceeds, after giving effect to the
application, if any, as set forth in clauses (i) and (ii) of paragraph (b)
----------- ---- -------------
above, is less than $5,000,000. Such proceeds offer may be deferred until such
time as such Net Proceeds, plus the aggregate amount of Net Proceeds resulting
from any prior or subsequent Asset Disposition(s) since the date of this
Agreement, not otherwise applied as provided in clauses (i) and (ii) of
----------- ----
paragraph (b) above, is at least equal to $7,500,000, at which time the Borrower
- -------------
shall apply all such Net Proceeds to a prepayment of the Term Loans in
accordance with this Section.
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<PAGE>
(e) The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
restriction other than restrictions not more restrictive taken as a whole (as
determined in good faith by the chief financial officer of the Borrower) than
those in effect under Existing Indebtedness and the Revolving Credit Agreement
that would materially impair the ability of the Borrower to comply with the
provisions of this Section.
(f) If at any time any non-cash consideration (other than any such
consideration consisting of inventory, accounts receivable and certain related
assets securing or permitted to secure the Revolving Credit Agreement) is
received by the Borrower or any Restricted Subsidiary, as the case may be, in
connection with any Asset Disposition of assets which includes Collateral, such
non-cash consideration shall be made subject to the Lien of the Security
Documents in the manner contemplated in the Security Agreement to the extent of
the purchase price allocated to the Collateral. If and when any such non-cash
consideration received from any Asset Disposition (whether or not relating to
Collateral) is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset
Disposition hereunder and the Net Proceeds thereof shall be applied in
accordance with this Section 7.2.6 and the Security Documents.
-------------
(g) All Insurance Proceeds and all Net Awards required to be delivered to
the Administrative Agent pursuant to any Security Document shall constitute
Trust Moneys and shall be delivered by the Borrower or a Restricted Subsidiary,
as the case may be, to the Administrative Agent contemporaneously with receipt
by the Borrower or such Restricted Subsidiary and be deposited into the
Collateral Account and applied in accordance with the applicable provisions of
the Security Agreement. Insurance Proceeds and Net Awards so deposited that may
be applied by the Borrower or a Restricted Subsidiary to effect a Restoration of
the affected Collateral under the applicable Security Document may be withdrawn
from the Collateral Account only in accordance with the applicable provisions of
the Security Agreement. Insurance Proceeds and Net Awards so deposited that are
not applied to effect a Restoration of the affected Collateral under the
applicable Security Document may only be withdrawn in accordance with applicable
provisions of the Security Agreement.
(h) Notwithstanding the foregoing, to the extent that any or all of the
Net Proceeds of any disposition of assets is prohibited or delayed by applicable
law from being repatriated to the United States, the portion of such Net
Proceeds so affected will not be required to be applied pursuant to this
provision but may be retained for so long, but only for so long, as the
applicable local law will not permit repatriation to the United States. The
Borrower shall promptly take all reasonable actions required by the applicable
local law to permit such repatriation, and once such repatriation of any
affected Net Proceeds is permitted under applicable local law, such repatriation
will be immediately effected and such repatriated Net Proceeds will be applied
in the manner set forth above as if such disposition of assets had occurred on
the date of repatriation.
SECTION 7.2.7. Modification of Certain Agreements. The Borrower will not,
----------------------------------
and will not permit any Restricted Subsidiary to, amend, modify or supplement,
or permit or consent to any amendment, modification or supplement of, (i) the
Security Documents in any manner or to any extent that would constitute an Event
of Default hereunder or under the Security Documents (provided that this
Agreement and the Security Documents may be amended, modified or supplemented
as set forth in Section 10.1), (ii) the Senior Notes or the Senior Note
------------
Indenture, except to the extent such amendment, modification or supplement would
not have a Material
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<PAGE>
Adverse Effect (it being acknowledged by the Borrower that, without limitation,
any increase in the interest rate on the Senior Notes, any reduction in the
tenor or average life thereof and any modification of (including any addition
to) the covenants, defaults and remedies set forth therein (without a
corresponding modification to the covenants, defaults, defaults and remedies
applicable to the Obligations) which make such provisions more burdensome as a
whole to the Borrower shall be deemed to have a Material Adverse Effect), (iii)
the Revolving Credit Agreement which would (A) add any requirement that the
commitments or outstanding indebtedness thereunder be reduced or cash
collateralized as a result of the receipt by the Borrower or any of its
Subsidiaries of Collateral Proceeds (other than any Collateral Proceeds
resulting in a prepayment of Term Loans that is refused by a Lender under clause
------
(c) of Section 3.1.2), (B) amend, modify or supplement Section 2.3(c), 2.5(a) or
- --- -------------
8.11(a) of the Revolving Credit Agreement and (C) add any provision expressly
restricting the ability of the Borrower to make payments to the Lenders in
accordance with the terms hereof, and (iv) the Tax Allocation Agreement (as
extended), the Management Agreement or the Stockholders Agreement, except to the
extent such amendment, modification or supplement would not have a material
adverse effect on the Lenders.
SECTION 7.2.8. Transactions with Affiliates. The Borrower will not, and
----------------------------
will not permit any of its Restricted Subsidiaries to, enter into transactions
with Affiliates of the Borrower or Parent (other than the Borrower and its
Wholly Owned Restricted Subsidiaries) except for Permitted Transactions,
transactions in respect of Restricted Payments made in accordance with Section
-------
7.2.3. and transactions the terms of which are no less favorable than the terms
- ------
which could be obtained by the Borrower, or, if the Borrower is not a party to
such transaction, such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's length basis between unaffiliated
parties, and for transactions involving aggregate payments in excess of
$3,000,000, the Borrower delivers to the Administrative Agent a resolution of
the Board of Directors of the Borrower (including all, if any, of the
disinterested directors) to the effect that the terms of such transactions are
fair and reasonable to the Borrower, or if the Borrower is not a party to such
transaction, such Restricted Subsidiary.
SECTION 7.2.9. Limitation on Investments. The Borrower will not, and will
-------------------------
not permit any Restricted Subsidiary to, make any Investments in any other
person, except (a) Investments in the Borrower or in any other Restricted
Subsidiary by any Restricted Subsidiary or by the Borrower in a Wholly Owned
Restricted Subsidiary of the Borrower; (b) receivables owing to the Borrower or
its Restricted Subsidiaries created in the ordinary course of business and
payable or dischargeable substantially in accordance with customary trade terms;
(c) Permitted Transactions; (d) Investments made in Cash Equivalents; (e)
Investments permitted to be made pursuant to Section 7.2.6; (f) Investments
-------------
existing on the date of this Agreement and disclosed on Item 7.2.9 of the
----------
Disclosure Schedule; and (g) Investments in Unrestricted Subsidiaries (or an
entity (or entities) which, after giving effect to such Investment, becomes an
Unrestricted Subsidiary) not otherwise permitted by clauses (a) through (f)
----------- ---
above, in an aggregate amount not exceeding at any time outstanding, the sum of
(i) $7,500,000 and (ii) an amount which is equal to the amount of Restricted
Payments permitted at such time to be made pursuant to Section 7.2.3 (the sum of
-------------
(i) and (ii) being referred to as the "Permitted Investment Amount").
---------------------------
SECTION 7.2.10. Impairment of Security Interest. (a) The Borrower will
-------------------------------
not, and will not cause or permit any of its Restricted Subsidiaries to, take or
omit to take any action which action or omission might or would have the result
of impairing the Liens and security interest in favor of the Administrative
Agent for the benefit of the Lenders with respect to the Collateral
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<PAGE>
and the Borrower will not grant to any Person, or suffer any Person to have any
interest whatsoever in the Collateral, in each case other than as otherwise
permitted by this Agreement or the Security Documents.
(b) The Borrower will not, and will not cause or permit any of its
Restricted Subsidiaries to, enter into any agreement or instrument that by its
terms requires that the proceeds received from any sale of Collateral be applied
to repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to this Agreement or any instrument governing
Indebtedness permitted to be secured by a Lien on the Collateral pursuant to
Section 7.2.2. A release of any of the Collateral strictly in accordance with
- -------------
the terms and conditions of this Agreement and the Security Documents will not
be deemed for any purpose to be an impairment of security under this Agreement.
SECTION 7.2.11. Sale and Leaseback. The Borrower will not, and will not
------------------
permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction unless (a) the Borrower would be able to incur Indebtedness (other
than Permitted Indebtedness) in an amount equal to the Attributable Debt with
respect to such Sale and Leaseback Transaction or (b) where the Borrower or such
Restricted Subsidiary receives consideration from such Sale and Leaseback
Transaction at least equal to the fair market value of the property subject
thereto (which shall be determined in good faith by the Board of Directors and
evidenced by a Board Resolution) and applies the Net Proceeds of such Sale and
Leaseback Transaction in accordance with the provisions set forth in Section
-------
7.2.6.
- -----
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events
----------------------------
or occurrences described in this Section 8.1 shall constitute an "Event of
----------- --------
Default".
- -------
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall default
--------------------------
in the payment or prepayment of any principal of, or premium with respect to,
any Term Loan when due, (b) the Borrower shall default (and such default shall
continue unremedied for a period of five or more days) in the payment when due
of any interest with respect to any Term Loan or (c) the Borrower shall default
(and such default shall continue unremedied for a period of five or more days)
after written demand therefor by the Administrative Agent, in the payment when
due of any fees, expenses or any other amounts owing hereunder or under any
other Loan Document.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the
------------------
Borrower, any other Obligor or the Parent made or deemed to be made hereunder or
in any other Loan Document executed by it or any other writing or certificate
(including each Closing Date Certificate) furnished by or on behalf of the
Borrower, any other Obligor or Parent to any Agent, the Arranger or any Lender
for the purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered pursuant to Article V) is or
---------
shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. Any
----------------------------------------------------
Obligor (including the Borrower) shall default in the due performance and
observance of any of its obligations under Section 7.1.2 or Section 7.2.
------------- -----------
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SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The
--------------------------------------------------
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days after the Borrower obtains knowledge of such default or written notice of
such default shall have been given to the Borrower by the Administrative Agent
at the direction of the Required Lenders specifying such default and demanding
that it be remedied.
SECTION 8.1.5. Disaffirmation of Obligations. (a) The Borrower shall
-----------------------------
either deny or disaffirm its obligations under this Agreement or any other Loan
Document or (b) any other Obligor shall either deny or disaffirm its obligations
under any other Loan Document executed by it.
SECTION 8.1.6. Default Under Revolving Credit Agreement. A default shall
----------------------------------------
occur (i) in the payment (other than in the payment of any Overadvance Payment)
when due (subject to any applicable grace period), whether by acceleration or
otherwise, of any Indebtedness of the Borrower or any of its Subsidiaries under
the Revolving Credit Agreement, (ii) in the payment of any Overadvance Payment
and such default shall continue unremedied for a period of 15 Business Days, or
(iii) in the performance or observance of any other obligation or condition with
respect to such Indebtedness and the result of such default described in this
clause (iii) is to entitle the holder or holders of such Indebtedness, or any
- ------------
trustee or agent for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity and either (A) such default described in
this clause (iii) continues unremedied or unwaived for a period of 20 Business
------------
Days or (B) the maturity of any such Indebtedness is accelerated.
SECTION 8.1.7. Default on Other Indebtedness. A default shall occur (i) in
-----------------------------
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1 or 8.1.6, of the Borrower, the Parent or any of their
------------- -----
respective Restricted Subsidiaries having a principal amount in excess of
$2,500,000 individually or $5,000,000 in the aggregate or (ii) in the
performance or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default described in this clause (ii) is to
-----------
accelerate the maturity of any such Indebtedness or permit the holder or holders
of such Indebtedness, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity.
SECTION 8.1.8. Judgments. A final judgment or final judgments for the
---------
payment of money are entered by a court or courts of competent jurisdiction
against the Borrower, the Parent or any of their respective Restricted
Subsidiaries and such judgment or judgments remain undischarged, unvacated,
unbonded or unstayed for a period of sixty days, in an amount equal to or
greater than, in the case of any one such judgment, $2,500,000, and, in the case
of all such judgments, $5,000,000 (in each case to the extent a reputable
insurance company has not acknowledged coverage of such claim in writing).
SECTION 8.1.9. Bankruptcy, Insolvency, etc.
---------------------------
(a) The Borrower, the Parent or any of their respective Restricted
Subsidiaries, pursuant to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
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(ii) consents to the entry of an order for relief against it in
an involuntary case in which it is a debtor,
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing its inability to pay debts as the same
become due; or
(b) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Borrower , the Parent or any of
their respective Restricted Subsidiaries in an involuntary case in which it
is a debtor,
(ii) appoints a Custodian of the Borrower, the Parent or any of
their respective Restricted Subsidiaries or for all or substantially all of
their property,
(iii) orders the liquidation of the Borrower, the Parent or any
of their respective Restricted Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days.
SECTION 8.1.10. Impairment of Security, etc. Any of the Security Documents
---------------------------
ceases to give the Administrative Agent a valid and perfected Lien of the
priority required thereby or the rights, powers and privileges purported to be
created thereby (other than in accordance with their respective terms), or any
of the Security Documents is declared null and void, or the Borrower, or any
other Obligor denies any of its obligations under any of the Security Documents
or any Collateral becomes subject to any Lien other than the Liens created or
permitted by the Security Documents or this Agreement, and such default shall
continue unremedied for a period of at least 15 days after the Borrower obtains
knowledge of such default or written notice of such default shall have been
given to the Borrower by the Administrative Agent.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
-------------------------
described in Section 8.1.9 shall occur with respect to the Borrower, the Term
-------------
Loan Commitments (if not theretofore terminated) shall automatically terminate
and the outstanding principal amount of all outstanding Term Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
--------------------------------
(other than an Event of Default described in Section 8.1.9 with respect to the
-------------
Borrower) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Term Loans and other Obligations to be due
and payable and/or declare the Term Loan Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Term
Loans and other Obligations which shall be so declared due and payable shall be
and become immediately due and payable, without further
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notice, demand or presentment, and/or, as the case may be, the Term Loan
Commitments shall terminate.
ARTICLE IX
THE AGENTS
SECTION 9.1. Appointment of Agents. Each Lender hereby irrevocably
---------------------
appoints DLJ as Syndication Agent and Fleet as its Administrative Agent under
and for purposes of this Agreement, the Term Notes and each other Loan Document.
Each Lender authorizes the Administrative Agent to act on behalf of such Lender
under this Agreement, the Term Notes and each other Loan Document and, in the
absence of other written instructions from the Required Lenders received from
time to time by the Administrative Agent (with respect to which the
Administrative Agent agrees that it will comply, except as otherwise provided in
this Section or as otherwise advised by counsel), to exercise such powers
hereunder and thereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. The provisions of this Article IX are
solely for the benefit of the Agents and Lenders, and neither the Borrower nor
any other Obligor shall have any rights as a third-party beneficiary of any of
the provisions hereof other than with respect to the resignation of the
Syndication Agent or the Administrative Agent. In performing their functions and
duties under this Agreement and each other Loan Document, the Syndication Agent
and the Administrative Agent shall act solely as agents of the Lenders and do
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for the Borrower or any other Obligor.
Notwithstanding any implication to the contrary, the Documentation Agent has no
duties, obligations or responsibilities hereunder or under any other Loan
Document.
SECTION 9.2. Nature of Duties of the Agents. The Agents shall have no
------------------------------
duties, obligations or responsibilities except those expressly set forth in this
Agreement and each other Loan Document. Neither the Agents nor any of their
officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or under each other Loan Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agents shall be mechanical and
administrative in nature; the Agents shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any other Loan Document, expressed or implied,
is intended to or shall be so construed as to impose upon the Agents any
obligations in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. No duty to act, or refrain from acting,
and no other obligation whatsoever, shall be implied on the basis of or imputed
in respect of any right, power or authority granted to any Agent or shall become
effective in the event of any temporary or partial exercise of such rights,
power or authority.
SECTION 9.3. General Immunity. Neither the Agents, the Arranger nor any
----------------
of their directors, officers, agents, attorneys or employees shall be liable to
any Lender for any action taken or omitted to be taken by it or them under this
Agreement or any other Loan Document or in connection herewith or therewith
except for its or their own willful misconduct or gross negligence. Without
limiting the generality of the foregoing, the Agents and the Arranger: (i)
shall not be responsible to the Lenders for any recitals, statements, warranties
or representations
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under this Agreement or any other Loan Document or any agreement or document
relative hereto or thereto or for the financial or other condition of any
Obligor, (ii) shall not be responsible for the authenticity, accuracy,
completeness, value, validity, effectiveness, due execution, legality,
genuineness, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document or any other agreements or any assignments,
certificates, requests, financial statements, projections, notices, schedules or
opinions of counsel executed and delivered pursuant hereto or thereto, (iii)
shall not be bound to ascertain or inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement or any other Loan
Document on the part of Obligors or of any of the terms of any such agreement by
any party hereto or thereto and shall have no duty to inspect the property
(including the books and records) of any Obligor, (iv) shall have no obligation
whatsoever to the Lenders or to any other Person to assure that the Collateral
exists or is owned by the Borrower or another Obligor or is cared for, protected
or insured or that the Liens granted to the Administrative Agent herein or in
any other Loan Document or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected, enforced, realized upon
or are entitled to any particular priority, and (v) shall incur no liability
under or in respect of this Agreement or any other Loan Document or any other
document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, cable, telex, telecopier or similar form of
facsimile transmission) believed by any Agent to be genuine and signed or sent
by the proper party. Each Agent may consult with legal counsel (including
counsel for the Borrower), independent public accountants and other experts
selected by such Agent and shall not be liable for any action taken or omitted
to be taken in good faith in accordance with the advice of such counsel,
accountants or experts.
SECTION 9.4. Successor. The Syndication Agent may resign as such upon one
---------
Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days' prior
notice to the Borrower and all Lenders. If the Administrative Agent at any time
shall resign, the Required Lenders may, with the prior consent of the Borrower
(which consent shall not be unreasonably withheld), appoint another Lender as a
successor Administrative Agent which shall thereupon become the Administrative
Agent hereunder. If no successor Administrative Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 20 days after the retiring Administrative Agent's giving notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall be one of the
Lenders or a commercial banking institution organized under the laws of the
United States or a United States branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall be
entitled to receive from the retiring Administrative Agent such documents of
transfer and assignment as such successor Administrative Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of (i) this
Article IX shall inure to its benefit as to any actions taken or omitted to be
- ----------
taken by it while it was the Administrative Agent under this Agreement and (ii)
Section 10.3 and Section 10.4 shall continue to inure to its benefit.
- ------------ ------------
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SECTION 9.5. Agents in Their Capacity as Lenders. With respect to their
-----------------------------------
obligation (if any) to lend under this Agreement and each other Loan Document,
the Agents shall have the same rights and powers under this Agreement and each
other Loan Document as any Lender and may exercise the same as though it were
not an Agent. "Lender" or "Lenders" shall, unless the context otherwise
indicates, include each Agent in its capacity as a Lender hereunder. The
Agents, any Lender and their respective affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking or trust business
with the Borrower or any other Obligor, as if it were not an Agent or as if it
or they were not a Lender hereunder and without any duty to account therefor to
the other parties to this Agreement; provided, that the obligations of the
--------
Borrower under such transactions shall not be deemed to be Obligations secured
by any Collateral without the prior written agreement of the Required Lenders.
SECTION 9.6. Actions by Each Agent. (a) Actual Knowledge. Each Agent
--------------------- ----------------
may assume that no Event of Default has occurred and is continuing, unless such
Agent has actual knowledge of the Event of Default, has received notice from the
Borrower or the Borrower's independent certified public accountants stating the
nature of the Event of Default, or has received notice from a Lender stating the
nature of the Event of Default and that such Lender considers the Event of
Default to have occurred and to be continuing.
(b) Discretion to Act. The Administrative Agent and the Syndication
-----------------
Agent shall each have the right to request instructions from the Required
Lenders by notice to each Lender. If such Agent shall request instructions from
the Required Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or any other Loan Document, such Agent
shall be entitled to refrain from such act or taking such action unless and
until it shall have received instructions from the Required Lenders, and such
Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against any Agent as a result of such Agent acting or refraining from
acting hereunder or under any other Loan Document in accordance with the
instructions of the Required Lenders, except to the extent that the consent of
such Lender or all of the Lenders to such instructions was required under
Section 10.1 and not given by such Lender or all of the Lenders in accordance
- ------------
with the terms thereof. The Administrative Agent and the Syndication Agent may
each give any notice required under Article VIII hereof without the consent of
------------
any of the Lenders unless otherwise directed by the Required Lenders in writing
and will, at the direction of the Required Lenders, give any such notice
required under Article VIII. Except for any obligation expressly set forth in
------------
this Agreement or any other Loan Document, each of the Administrative Agent and
the Syndication Agent may, but shall not be required to, exercise its discretion
to act or not act, except that such Agent shall be required to act or not act
upon the instructions of the Required Lenders (unless all of the Lenders are
required to provide such instructions as provided in Section 10.1) and those
------------
instructions shall be binding upon such Agent and all Lenders; provided,
--------
however, that such Agent shall not be required to act or not act if to do so
- -------
would expose such Agent to liability or would be contrary to this Agreement or
any other Loan Document or to applicable law.
SECTION 9.7. Right to Indemnity. Each Agent shall be fully justified in
------------------
failing or refusing to take any action under this Agreement or any other Loan
Document or in relation hereto or thereto unless it shall first be indemnified
(upon requesting such indemnification) to its satisfaction by the Lenders
against any and all liability and expense which it may incur by reason of taking
or continuing to take any such action. The Lenders further agree to indemnify
each Agent ratably in accordance with their Percentages for any and all
liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby, or the enforcement of any of the terms hereof or thereof or of any
other documents, and either not indemnified by the Borrower pursuant to Section
-------
10.4 or with respect to which the Borrower has failed to fully honor its
- ----
indemnification obligations under Section 10.4; provided, however, that no such
------------ -------- -------
liability, obligation, loss, damage, penalty, action, judgment, suit, cost,
expense or disbursement results solely from such Agent's gross negligence or
willful misconduct. Each Lender agrees to reimburse each Agent in the amount of
its pro rata share of any out-of-pocket expenses for which such Agent is
entitled to receive, but has not received, reimbursement pursuant to this
Agreement. The agreements in this Section 9.7 shall survive the payment and
-----------
fulfillment of the Obligations and termination of this Agreement.
SECTION 9.8. Administrative Agent. Without limiting the effect of any
--------------------
other provision of this Article IX, each Lender consents and agrees to all of
----------
the terms and provisions of the Security Documents and the Intercreditor
Agreement, as the same may be in effect from time to time or may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions of the Security Documents, the Intercreditor Agreement and this
Agreement, and authorizes and directs the Administrative Agent to act as
mortgagee or secured party with respect thereto.
SECTION 9.9. Suits to Protect Collateral. Subject to the provisions of
---------------------------
the Intercreditor Agreement, the Administrative Agent, acting at the written
direction of the Required Lenders, shall have power to institute and to maintain
such suits and proceeds as the Administrative Agent may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of any of the Security Documents or this Agreement, and such suits and
proceedings as the Administrative Agent may deem expedient to preserve or
protect its interest and the interests of the Lenders in the Collateral
(including the power to institute and maintain suits or proceedings to restrain
the enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Liens of the Administrative Agent in the Collateral or be prejudicial
to the interests of the Lender or the Administrative Agent).
SECTION 9.10. Determinations Relating to Collateral. In the event (i) the
-------------------------------------
Administrative Agent shall receive any written request from the Borrower or any
other Obligor under any Security Document for consent or approval with respect
to any matter relating to any Collateral or the Borrower's or such Obligor's
obligations with respect thereto or (ii) there shall be due to or from the
Administrative Agent under the provisions of any Security Document any
performance or the delivery of any instrument or (iii) the Administrative Agent
shall become aware of any nonperformance by the Borrower or any other Obligor of
any covenant or any breach of any representation or warranty for the Borrower or
any other Obligor set forth in any Security Document, then, in each such event,
the Administrative Agent shall be entitled, at the expense of the Borrower and
subject to Section 9.6(b), to hire experts, consultants, agents and attorneys
--------------
(including internal counsel) to advise the Administrative Agent on the manner in
which the Administrative Agent should respond to such request or render any
requested performance or response to such nonperformance or breach. The
Administrative Agent shall be fully protected in the taking of any action
recommended or approved by any such expert, consultant, agent or
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attorney (including internal counsel) or agreed to by the Required Lenders
pursuant to Section 9.6(b).
--------------
SECTION 9.11. Trust Moneys. To the extent Trust Moneys consist of
------------
insurance proceeds or condemnation or other taking awards, any such moneys which
may be used to effect a restoration of the affected Collateral shall be
permitted to be withdrawn by the Borrower and paid by the Administrative Agent.
SECTION 9.12. Release of Collateral. Each Lender hereby irrevocably
---------------------
authorizes the Administrative Agent, at its option and in its discretion, to
release any Lien granted to or held by or for the benefit of the Administrative
Agent with respect to any Restricted Subsidiary or Collateral (i) upon
termination of the Lenders' obligations to make Term Loans and payment and
satisfaction of all Term Loans and all other Obligations and which the
Administrative Agent has been notified in writing are then due and payable; (ii
constituting Collateral being sold or disposed of if the Borrower certifies to
the Administrative Agent pursuant to an Officers' Certificate that the sale or
disposition is being made in compliance with the terms of this Agreement and the
other Loan Documents (and, absent any actual knowledge of the Administrative
Agent to the contrary, the Administrative Agent may rely conclusively on any
such certificate, without further inquiry); (ii constituting property in which
the Borrower or any other Obligor owned no interest at the time the Lien was
granted and at all times thereafter; or (iv if approved, authorized or ratified
in writing by the Administrative Agent at the direction of the Lenders required
pursuant to Section 10.1. Upon request by the Administrative Agent at any time,
------------
each Lender will confirm in writing the Administrative Agent's authority to
release particular types or items of Collateral pursuant to this Section 9.12.
------------
Upon any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Agreement or any other Security Document, or
consented to in writing by the Required Lenders or all of the Lenders, as
applicable, and upon at least five Business Days' prior written request by the
Borrower, the Administrative Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to the Administrative Agent for the benefit of the
Lenders herein or pursuant hereto upon the Collateral that was sold or
transferred; provided that (i) the Administrative Agent shall not be required to
--------
execute any such document on terms which, in the Administrative Agent's opinion,
would expose the Administrative Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse,
representation or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
the Borrower or any of its Subsidiaries in respect of) all interests retained by
the Borrower or any of its Subsidiaries, including, without limitation, the
proceeds of the sale, all of which shall continue to constitute part of the
Collateral. In the event of any sale or transfer of Collateral, or any
foreclosure with respect to any of the Collateral, the Administrative Agent
shall be authorized to deduct all of the expenses reasonably incurred by the
Administrative Agent from the proceeds of any such sale, transfer or
foreclosure.
SECTION 9.13. Application of Proceeds of Collateral. The Administrative
-------------------------------------
Agent shall apply the proceeds of the Collateral payable to the Administrative
Agent for the benefit of it and the Lenders, first, to the payment of all costs
-----
and expenses incurred by the Administrative Agent in connection with such
collection or otherwise in connection with this Agreement or any other Loan
Document, including and together with any amounts then due and payable to the
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Administrative Agent (in its capacity as such) hereunder (including any amount
then due and payable to the Administrative Agent pursuant to its rights to
indemnification under Sections 10.4 and 9.7), and, second, to the payment in
------------- --- ------
full of the Obligations then due and payable to the Lenders (such payment to be
distributed among the Lenders pro rata in accordance with the amount of such
--- ----
Obligations owed to them on the date of such distribution).
SECTION 9.14. Rights and Remedies to be Exercised by Administrative Agent
-----------------------------------------------------------
Only. In the event any remedy may be exercised with respect to this Agreement
- ----
or any other Loan Document or the Collateral, the Administrative Agent shall
pursue remedies designated by the Required Lenders subject to the proviso set
forth in Section 9.6(b). Each Lender agrees that, except as otherwise provided
--------------
in Section 4.9, it shall have no right individually to realize upon the security
-----------
created by this Agreement or any other Loan Document.
SECTION 9.15. Credit Decisions. Each Lender acknowledges that it has,
----------------
independently of and without reliance upon any Agent, the Arranger or any other
Lender, and based on such Lender's review of the financial information of the
Borrower and each other Obligor, this Agreement, the other Loan Documents (the
terms and provisions of which being satisfactory to such Lender) and such other
documents, information and investigations as such Lender has deemed appropriate,
made its own credit decision to extend its commitments. Each Lender also
acknowledges that it will, independently of and without reliance upon any Agent,
the Arranger or any other Lender, and based on such other documents, information
and investigations as it shall deem appropriate at any time, continue to make
its own credit decisions as to exercising or not exercising from time to time
any rights and privileges available to it under this Agreement or any other Loan
Document. Except as otherwise expressly provided for herein, the Agents shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition, litigation,
liabilities or business of the Parent, the Borrower or any other Obligor.
SECTION 9.16. Copies, etc. The Administrative Agent shall give prompt
-----------
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent (and not concurrently to the Lenders) by the
Borrower pursuant to the terms of this Agreement (unless concurrently delivered
to the Lenders by the Borrower). The Administrative Agent will distribute to
each Lender each document or instrument received for such Lender's account and
copies of all other communications received by the Administrative Agent from the
Borrower for distribution to the Lenders by the Administrative Agent in
accordance with the terms of this Agreement (except to the extent any such
Lender shall have provided written notice to the Administrative Agent that it is
not to receive any such documents, instruments or communications). In the event
such information is so furnished by any Agent, such Agent shall have no duty to
confirm or verify its accuracy or completeness and shall have no liability
whatsoever with respect thereto.
SECTION 9.17. The Syndication Agent and the Administrative Agent.
--------------------------------------------------
Notwithstanding anything else to the contrary contained in this Agreement or any
other Loan Document, the Syndication Agent and the Administrative Agent, in
their respective capacities as such, shall have no duties or responsibilities
under this Agreement or any other Loan Document nor any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Syndication Agent or the Administrative Agent, as applicable, in
such capacity except as are explicitly set forth herein or in the other Loan
Documents.
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SECTION 9.18. Agreement to Cooperate. Each Lender agrees to cooperate with
----------------------
the Agents to the end that the terms and provisions of this Agreement may be
promptly and fully carried out. The Lenders also agree, from time to time, at
the request of the Administrative Agent or the Syndication Agent, to execute and
deliver any and all other agreements, documents or instruments and to take such
other actions, all as may be reasonably necessary or desirable to effectuate the
terms, provisions and intent of this Agreement and the other Loan Documents.
SECTION 9.19. Lenders to Act as Agents. If any Collateral or proceeds
------------------------
thereof at any time comes into the possession or under the control of any
Lender, such Lender shall hold such Collateral or proceeds thereof as agent for
the joint benefit of the Lenders, and will, upon receipt therefor, deliver such
Collateral or proceeds thereof to the Administrative Agent.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement
------------------------
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and, unless
otherwise provided in such other Loan Document with respect to such Loan
Document, consented to by the Borrower and the Required Lenders; provided,
--------
however, that no such amendment, modification or waiver which would:
- -------
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this Section 10.1 or clause (i) of Section 10.10, change
------------ ---------- -------------
the definition of "Required Lenders", reduce any fees described in Section
-------
3.3 or extend the Term Loan Commitment Termination Date shall be made
---
without the consent of each Lender adversely affected thereby;
(c) increase the aggregate amount any Lender would be required to
lend to the Borrower hereunder shall be made without the consent of such
Lender;
(d) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on or fees payable in
respect of any Term Loan (it being understood and agreed that an increase
in the amount of any Indebtedness of the Borrower under this Agreement and
any subsequent pro rata scheduled prepayment of such increased amount
--- ----
pursuant to the terms of this Agreement shall not be deemed to be a
reduction of the scheduled prepayment of the other Indebtedness of the
Borrower under this Agreement to the extent such prepayment is pro rata
--- ----
among all Lenders) or reduce the principal amount of or rate of interest on
any Term Loan shall be made without the consent of the holder of such Term
Loan;
(e) release all or substantially all of the Collateral, except in
each case as otherwise specifically provided in this Agreement or
applicable Security Document (it being understood and agreed that an
increase in the amount of any Indebtedness of the
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Borrower under this Agreement secured ratably by the Collateral shall not
be deemed to be a release of Collateral), shall be made without the consent
of each Lender; or
(f) affect adversely the interests, rights or obligations of any
Agent or the Arranger (in its capacity as Agent or Arranger), unless
consented to by such Agent or Arranger, as the case may be.
No failure or delay on the part of any Agent, any Lender or the holder of any
Term Loan in exercising any power or right under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by any Agent, any Lender or the
holder of any Term Loan under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2. Notices. All notices and other communications provided to
-------
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth in Schedule II hereto or, in the case
-----------
of a Lender that becomes a party hereto after the date hereof, as set forth in
the Lender Assignment Agreement pursuant to which such Lender becomes a Lender
hereunder or at such other address or facsimile number as may be designated by
such party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted (and electronic
confirmation of receipt thereof has been received).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay on
-----------------------------
demand all fees, costs and expenses of each of the Agents (including the
reasonable fees and out-of-pocket expenses of counsel to the Agents and of local
counsel, or foreign legal counsel if any, who may be retained by counsel to the
Agents) in connection with
(a) in the case of the Administrative Agent, the negotiation,
preparation, execution and delivery of the Fee Letter, this Agreement and
of each other Loan Document, including schedules and exhibits, in each
case, to the extent provided in the Fee Letter;
(b) any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby or thereby are consummated;
(c) the filing, recording, refiling or rerecording of
(i) each (A) Mortgage and (B) Uniform Commercial Code financing
statement that is not filed in connection with the closing hereof,
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(ii) all amendments, supplements and modifications to any of the
foregoing Mortgages or Uniform Commercial Code financing statements or
any Mortgage or Uniform Commercial Code financing statement filed in
connection with the closing hereof, and
(iii) any and all other documents or instruments of further
assurance required to be filed or recorded or refiled or rerecorded by
the terms hereof or of any such Mortgage, the Security Agreement or
any other Security Document;
(d) following the Closing Date, the preparation and review of the
form of any document or instrument relevant to this Agreement or any other
Loan Document; and
(e) any due diligence investigation performed following the Closing
Date by either the Arranger or either Agent.
The Borrower further agrees to pay, and to save the Agents and the Lenders
harmless from all liability for, any stamp or other similar taxes which may be
payable in connection with the execution or delivery of this Agreement, the Term
Loans made hereunder or the issuance of the Term Notes or any other Loan
Documents. The Borrower also agrees to reimburse each Agent and each Lender
upon demand for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses (provided one counsel is selected to represent the Agents and
the Lenders, which may include such additional local and/or foreign counsel that
such counsel deems appropriate)) incurred by such Agent or such Lender in
connection with (x) the negotiation of any restructuring or "work-out", whether
or not consummated, of any Obligations, (y) the enforcement of any Obligations
and (z) any litigation relating to the Obligations, this Agreement or any Loan
Document.
SECTION 10.4. Indemnification. In consideration of the execution and
---------------
delivery of this Agreement by each Agent and each Lender and the extension of
the Term Loan Commitments, the Borrower hereby, to the fullest extent permitted
under applicable law, indemnifies, exonerates and holds each Agent, the
Arranger and each Lender and each of their respective Affiliates, and each of
their respective partners, officers, directors, employees and agents, and each
other Person controlling any of the foregoing within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Exchange Act (collectively, the "Indemnified Parties"), free and harmless from
-------------------
and against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (including those of internal counsel) (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
-----------------------
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Term Loan;
(b) the entering into and performance of this Agreement, the Fee
Letter and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the result
of any determination by the Required Lenders pursuant to Article V not to
-------------
fund any Borrowing);
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<PAGE>
(c) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material;
(d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Borrower or
such Subsidiary; or
(e) the investigation, defense, or participation in any action or
other proceeding related to the Indemnified Liabilities regardless of
whether or not such Indemnified Party is a party to any such action or
proceeding;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party solely by reason of the relevant Indemnified
Party's gross negligence or willful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
-------- --------
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
- --- --- --- --- ---- ----
Sections 9.1 and (to the extent set forth therein) 10.13, shall in each case
- ------------ -----
survive any termination of this Agreement, the payment in full of all
Obligations and the termination of all Term Loan Commitments. The
representations and warranties made by the Borrower and each other Obligor in
this Agreement and in each other Loan Document shall survive the execution and
delivery of this Agreement and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any other
------------
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of each
--------
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
---------------------------------------------
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower and each Lender (or
notice thereof satisfactory to the Agents) shall have been received by the
Syndication Agent.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE TERM
-------------------------------
NOTES AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY
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PROVIDED THEREIN, EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement,
the Term Notes and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto. Upon the execution
and delivery of this Agreement by the parties hereto, all obligations and
liabilities of the Arranger shall be terminated and of no further force or
effect.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
----------------------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that (i) the Borrower may not assign
-------- -------
or transfer its rights or obligations hereunder without the prior written
consent of each of the Agents and all Lenders (except as may be otherwise
expressly provided in Section 7.2.5, and (ii) the rights of sale, assignment and
-------------
transfer of the Lenders are subject to Section 10.11.
-------------
SECTION 10.11. Sale and Transfer of Term Loans and Term Notes;
-----------------------------------------------
Participations in Term Loans and Term Notes. Each Lender may assign, or sell
- -------------------------------------------
participations in, its Term Loan and Term Loan Commitment to one or more other
Persons in accordance with this Section 10.11.
-------------
SECTION 10.11.1. Assignments. Any Lender (the "Assignor Lender"),
----------- ---------------
(a) with written notice to the Syndication Agent and the
Administrative Agent and the written consents of the Borrower and the
Syndication Agent (which consents shall not be (i) unreasonably delayed or
withheld or (ii) which consent in the case of the Borrower, shall be deemed
to have been given in the absence of a written notice delivered by the
Borrower to the Administrative Agent, on or before the fifth Business Day
after receipt by the Borrower of such Assignor Lender's request for
consent, stating, in reasonable detail, the reasons why the Borrower
proposes to withhold such consent), may at any time assign and delegate to
one or more commercial banks or other financial institutions (including
funds or trusts regularly engaged in the business of making, purchasing or
investing in commercial loans), and
(b) with notice to the Borrower, the Syndication Agent and the
Administrative Agent, but without the consent of the Borrower, the
Syndication Agent or the Administrative Agent, may assign and delegate to
(x) any of its Affiliates, (y) any Approved Fund or (z) any other Lender or
Affiliates of such other Lender
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or any fraction of such Assignor Lender's total
---------------
Term Loans and Term Loan Commitment and, in the case of Assignee Lenders not
described in clause (b) above, in a minimum aggregate amount of (i) $1,000,000
----------
or (ii) the then remaining amount of such Lender's Term Loans, Term Notes and
Term Loan Commitment; provided, however, that any such Assignee Lender shall
-------- -------
have complied, if applicable, with the provisions contained in the last sentence
of Section 4.6 and provided further, however, that, the Borrower, each other
----------- -------- ------- -------
Obligor and the Agents shall be entitled to continue to deal solely and directly
with such Assignor Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
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(i) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the
Borrower, the Syndication Agent and the Administrative Agent by such
Assignor Lender and such Assignee Lender;
(ii) such Assignor Lender and such Assignee Lender shall have
executed and delivered to the Borrower, the Syndication Agent and the
Administrative Agent a Lender Assignment Agreement, accepted by the
Administrative Agent; and
(iii) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall, except as provided in Section 10.5, be released from its
------------
obligations hereunder and under the other Loan Documents. To the extent any
such assignment and delegation includes an assignment of Term Notes, within ten
Business Days after its receipt of notice that the Administrative Agent has
accepted an executed Lender Assignment Agreement, the Borrower shall execute and
deliver to the Administrative Agent if requested by the relevant Assignee Lender
in accordance with Section 2.5(b) (for delivery to such relevant Assignee
--------------
Lender) a new Term Note evidencing such Assignee Lender's assigned Term Loans
and Term Loan Commitments and, if the Assignor Lender has retained Term Loans
and Term Loan Commitments hereunder and has requested a replacement Term Note in
accordance with Section 2.5(b), a replacement Term Note in the principal amount
--------------
of the Term Loans and Term Loan Commitments retained by the Assignor Lender
hereunder (such Term Note to be in exchange for, but not in payment of, that
Term Note then held by such Assignor Lender). Each such Term Note shall be
dated the date of the predecessor Term Note. The Assignor Lender shall mark the
predecessor Term Note "exchanged" and deliver it to the Borrower. Accrued
interest on that part of the predecessor Term Note evidenced by the new Term
Note, and accrued fees, shall be paid as provided in the Lender Assignment
Agreement. Accrued interest on that part of the predecessor Term Note evidenced
by the replacement Term Note shall be paid to the Assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Term Note and in this Agreement. Such Assignor Lender or such
Assignee Lender must also pay a processing fee to the Administrative Agent upon
delivery of any Lender Assignment Agreement in the amount of $1,000, unless (A)
such assignment and delegation is by a Lender party to this Agreement on the
Closing Date and such assignment and delegation is pursuant to the primary
syndication of the Term Loans and is notified to the Administrative Agent within
ten Business Days of the Closing Date, (B) such assignment and delegation is by
a Lender to its Affiliate or to a Federal Reserve Bank as provided below or (C)
such fee is waived by the Administrative Agent. Any attempted assignment and
delegation not made in accordance with this Section 10.11.1 shall be null and
---------------
void. Nothing contained in this Section 10.11.1 shall prevent or prohibit any
---------------
Lender from pledging its rights (but not its obligations to make Loans) under
this Agreement and/or its Loans and/or its Term Note hereunder to a Federal
Reserve Bank in
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support of borrowings made by such Lender from such Federal Reserve Bank and any
Lender that is an investment fund that invests in commercial loans may, without
the consent of the Syndication Agent, the Administrative Agent or the Borrower,
pledge all or any portion of its interest and rights (but may not delegate any
of its duties or obligations hereunder or under any other Loan Document,
including its Term Loan Commitment, if any) to any trustee or any other
representative of holders of obligations owed or securities issued by such
investment fund as security for such obligations or securities.
The Borrower hereby designates the Administrative Agent to serve as the
Borrower's agent, solely for the purpose of this paragraph, to maintain a
register (the "Register") on which the Administrative Agent will record each
-------
Lender's Term Loan Commitment, the Term Loans made by each Lender, and each
repayment in respect of the principal amount of the Term Loans of each Lender
and annexed to which the Administrative Agent shall retain a copy of each Lender
Assignment Agreement delivered to the Administrative Agent pursuant to this
Section 10.11.1. Failure to make any recordation, or any error in such
- ---------------
recordation, shall not affect the Borrower's obligations in respect of such Term
Loans. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders shall
treat each Person in whose name a Term Loan is registered as the owner thereof
for all purposes of this Agreement, notwithstanding notice or any provisions
herein to the contrary. A Lender's Term Loan Commitment and the Term Loans made
pursuant thereto may be assigned or otherwise transferred in whole or in part
only by registration of such assignment or transfer in the Register. Any
assignment or transfer of a Term Lender's Loan Commitment or the Term Loans made
pursuant thereto shall be registered in the Register only upon delivery to the
Administrative Agent of a Lender Assignment Agreement duly executed by the
assignor thereof. No assignment or transfer of a Lender's Term Loan Commitment
or the Term Loans made pursuant thereto shall be effective unless such
assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one or
--------------
more commercial banks or other Persons (each such commercial bank and other
Person being herein called a "Participant") participating interests in any of
-----------
the Term Loans, Term Loan Commitments or other interests of such Lender
hereunder; provided, however, that
-------- -------
(a) no participation contemplated in this Section shall relieve such
Lender from its Term Loan Commitments or its other obligations hereunder
or under any other Loan Document;
(b) such Lender shall remain solely responsible for the performance
of its Term Loan Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each of the other
Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender, is an Approved Fund or is itself a Lender, shall be entitled to
require such Lender to take or refrain from taking any action hereunder or
under any other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's consent,
agree to (i) any reduction in the interest rate or amount of fees that
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such Participant is otherwise entitled to, (ii a decrease in the principal
amount, or an extension of the final Stated Maturity Date, of any Term Loan
in which such Participant has purchased a participating interest or (ii a
release of all or substantially all of the collateral security under the
Loan Documents except as otherwise specifically provided in a Loan
Document; and
(e) the Borrower shall not be required to pay any amount under
Section 4.6, that is greater than the amount which it would have been
-----------
required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6 (provided such Participant complies with all
- ------------ --- --- ---
requirements therein regarding the execution and delivery certain Internal
Revenue Service forms or other certificates), 4.8, 4.9, 10.3 and 10.4, shall be
--- --- ---- ----
considered a Lender.
SECTION 10.12. Other Transactions. Nothing contained herein shall preclude
------------------
any Agent or any other Lender from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 10.13. Confidentiality. Each Lender agrees to maintain, in
---------------
accordance with its customary procedures for handling confidential information,
the confidentiality of all information provided to it by or on behalf of the
Borrower or any Subsidiary, or by the Administrative Agent or the Syndication
Agent on the Borrower's or such Subsidiary's behalf, under this Agreement or any
other Loan Document ("Confidential Information"), and neither it nor any of its
------------------------
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection with
other business now or hereafter existing or contemplated with the Borrower or
any Subsidiary, except to the extent such information (a) was or becomes
generally available to the public other than as a result of disclosure by the
Lender or (b) was or becomes available on a non-confidential basis from a source
other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Lender; provided,
--------
however, that any Lender may disclose such information (i) at the request or
- -------
pursuant to any requirement of any governmental authority to which the Lender is
subject or in connection with an examination of such Lender by any such
governmental authority; (ii) pursuant to subpoena or other court process; (iii)
when required to do so in accordance with the provisions of any applicable
requirement of law; (iv) to the extent reasonably required in connection with
any litigation or proceeding to which the Administrative Agent, any Lender or
their respective Affiliates may be party; (v) in connection with the exercise of
any remedy hereunder or under any other Loan Document; (vi) to such Lender's
independent auditors and other professional advisors who have been advised that
such information is confidential pursuant to this Section 10.13; (vii) to any
-------------
Participant or Assignee Lender, actual or potential, provided that such Person
--------
shall have agreed in writing to keep such information confidential to the same
extent required of the Lenders hereunder; and (viii) to its Affiliates who have
been advised that such information is confidential pursuant to this Section
-------
10.13. Unless prohibited by applicable law or court order, each Lender and the
- -----
Administrative Agent shall notify the Borrower of any request by any
governmental authority (other than any request in connection with an examination
of the financial condition of such Lender) for disclosure of Confidential
Information prior to such disclosure; provided that in
--------
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<PAGE>
no event shall any of the Agents or any Lender be obligated to return any
materials furnished by the Borrower or any of its Subsidiaries. This Section
shall supersede any confidentiality letter or agreement with respect to the
Borrower or the Facilities entered into prior to the date hereof. Each Lender's
obligations under this Section 10.13 shall survive for three years after the
-------------
date it ceases to be a Lender hereunder.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
-------------------------------------------
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE
BORROWER RELATING THERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY (TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE COURTS OF THE STATE OF NEW YORK,
NEW YORK COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
-------- -------
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, AND
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR
THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.
THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE AGENTS, THE LENDERS AND THE
--------------------
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE
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BORROWER RELATING THERETO. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
-80-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
EARLE M. JORGENSEN COMPANY
By: /s/ Charles P. Gallopo
----------------------
Name: Charles P. Gallopo
Title: Vice President and Chief
Financial Officer
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as a Lender
By:
----------------------
Name:
Title:
BANKERS TRUST COMPANY, as the
Documentation Agent and as a Lender
By:
----------------------
Name:
Title:
FLEET NATIONAL BANK, as
the Administrative Agent
By: /s/ James T. Anderson
---------------------
Name: James T. Anderson
Title: Managing Director
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
EARLE M. JORGENSEN COMPANY
By:
----------------------
Name:
Title:
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as a Lender
By: /s/ Harold J. Philipps
----------------------
Name: Harold J. Philipps
Title: Managing Director
BANKERS TRUST COMPANY, as the
Documentation Agent and as a Lender
By:
----------------------
Name:
Title:
FLEET NATIONAL BANK, as
the Administrative Agent
By:
----------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
EARLE M. JORGENSEN COMPANY
By:
----------------------
Name:
Title:
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as a Lender
By:
----------------------
Name:
Title:
BANKERS TRUST COMPANY, as the
Documentation Agent and as a Lender
By: /s/ Basil Palmeri
-----------------
Name: Basil Palmeri
Title: Vice President
FLEET NATIONAL BANK, as
the Administrative Agent
By:
----------------------
Name:
Title:
<PAGE>
EXHIBIT 4.8
[EXECUTION COPY]
================================================================================
AMENDMENT
to
RESTRUCTURING AGREEMENT
between
EARLE M. JORGENSEN HOLDING COMPANY, INC.
and
KELSO
INVESTMENT ASSOCIATES IV, L.P.
_______________________________
Dated as of March 24, 1998
_______________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
1. Prepayment of Principal and Interest of the Series A Notes, Cancellation of
the Series A Notes and Issuance of the Notes....................................... 2
1.1. Prepayment of Principal and Interest of the Series A Notes.................. 2
1.2. Cancellation of the Series A Notes and Issuance of the Notes................ 2
1.3. Closing..................................................................... 2
2. Conditions to Closing.............................................................. 3
2.1. Representations and Warranties.............................................. 3
2.2. Performance; No Default..................................................... 3
2.3. Compliance Certificate...................................................... 3
2.4. Absence of Litigation....................................................... 3
2.5. Indenture, Special Term Loan Agreement and Amended and Restated
Credit Agreement............................................................ 3
2.6. Proceedings................................................................. 3
3. Representations and Warranties of Holding.......................................... 3
3.1. Organization, Standing, Etc................................................. 3
3.2. Qualification............................................................... 4
3.3. Authorization............................................................... 4
3.4. No Violation; Conflicts..................................................... 4
3.5. Governmental Consent........................................................ 4
3.6. Compliance with Margin Regulations.......................................... 4
4. Terms of Notes, Etc................................................................ 4
4.1. Terms of Notes.............................................................. 4
5. Amendments to the Business and Financial Covenants................................. 5
5.1. Corporate Existence, Etc.; Business......................................... 5
5.2. Indebtedness................................................................ 5
5.3. Limitation on Restrictions on Distributions from Subsidiaries............... 6
5.4. Liens....................................................................... 6
5.5. Asset Dispositions.......................................................... 7
5.6. Transactions with Affiliates................................................ 7
5.7. Restriction on Fundamental Changes.......................................... 7
5.8. Payment of Dividends........................................................ 8
5.9. Indenture, Special Term Loan Agreement and Amended and Restated
Credit Agreement............................................................ 8
5.10. Events of Default........................................................... 8
</TABLE>
(i)
<PAGE>
<TABLE>
<C> <S> <C>
6. Definitions........................................................................ 9
7. Survival of Representations and Warranties......................................... 9
8. Parties............................................................................ 9
9. Notices, Etc....................................................................... 10
10. Further Assurances................................................................. 10
11. Miscellaneous...................................................................... 10
12. Savings Clause..................................................................... 10
13. Severability....................................................................... 10
</TABLE>
(ii)
<PAGE>
EXHIBITS
- --------
Exhibit A Form of Holding Note No. R-12
Exhibit B Form of Holding Note No. R-13
(iii)
<PAGE>
AMENDMENT TO RESTRUCTURING AGREEMENT
------------------------------------
THIS AMENDMENT TO RESTRUCTURING AGREEMENT (this "Amendment") is made and
entered into as of March 24, 1998, by and between Earle M. Jorgensen Holding
Company, Inc., a Delaware corporation ("Holding"), and Kelso Investment
Associates IV, L.P., a Delaware limited partnership ("KIA IV").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Holding is the sole stockholder of Earle M. Jorgensen Company, a
Delaware corporation (the "Company");
WHEREAS, pursuant to that certain Restructuring Agreement dated as of March
3, 1993 (the "Restructuring Agreement") between Holding and KIA IV, KIA IV
agreed to acquire from Holding, and Holding agreed to issue to KIA IV,
$55,000,000 in aggregate principal amount of Series A Variable Rate Senior Notes
(the "Series A Notes") and certain warrants for the purchase of shares of common
stock of Holding;
WHEREAS, pursuant to that certain Indenture dated as of March 24, 1998 (the
"Indenture") between the Company and the United States Trust Company of New
York, and as set forth in that certain Offering Memorandum of the Company dated
March 19, 1998 (the "Offering"), the Company shall issue $105,000,000 in
aggregate principal amount of 9.5% Senior Notes due 2005 (the "Senior Notes");
WHEREAS, concurrent with the closing of the Offering, the Company shall (i)
-
enter into the Special Term Loan Agreement (as hereinafter defined) pursuant to
which the Company shall borrow $100,000,000, and (ii) enter into the Amended and
--
Restated Credit Agreement (as hereinafter defined) pursuant to which the Company
shall refinance its existing credit facility providing up to $220,000,000 in
revolving credit and letter of credit availability;
WHEREAS, the Company shall use a portion of the net proceeds of the
Offering, and borrowings under the Special Term Loan Agreement and the Amended
and Restated Credit Agreement, to pay a dividend to Holding in the amount of
$45,419,439.60, thereby enabling Holding (i) to make a prepayment of $40,000,000
-
in principal amount of the Series A Notes (which principal amount constitutes
interest paid in kind on the Series A Notes), and (ii) to make a payment of
--
approximately $5,419,439.60 for unpaid interest accrued from January 1, 1998 to
the Closing Date (as hereinafter defined) on the Series A Notes;
WHEREAS, concurrent with Holding's redemption of such Series A Notes and
its payment of such accrued and unpaid interest, Holding and KIA IV have agreed
to extend the maturity of the remaining Series A Notes to March 20, 2006 and to
make such other incidental amendments to the Restructuring Agreement as shall be
necessary for the Company to comply with the terms
<PAGE>
of the Indenture, the Special Term Loan Agreement and the Amended and Restated
Credit Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
1. Prepayment of Principal and Interest of the Series A Notes,
-----------------------------------------------------------
Cancellation of the Series A Notes and Issuance of the Notes.
- ------------------------------------------------------------
1.1. Prepayment of Principal and Interest of the Series A Notes.
----------------------------------------------------------
Subject to the terms and conditions hereof, at the Closing (as hereinafter
defined), Holding shall pay to KIA IV the aggregate sum of Forty-Five Million
Four Hundred Nineteen Thousand Four Hundred Thirty-Nine Dollars and 60/100
($45,419,439.60) (the "Prepayment Amount") in immediately available funds, by
wire transfer as specified by KIA IV, which Prepayment Amount shall be applied
as follows:
(a) Forty Million Dollars ($40,000,000) shall be applied to
prepay, in part, the principal amount of the Series A Notes issued as
interest paid in kind on the Series A Notes; and
(b) Five Million Four Hundred Nineteen Thousand Four Hundred
Thirty-Nine Dollars and 60/100 ($5,419,439.60) shall be applied to pay for
unpaid interest accrued from January 1, 1998 to the Closing Date on the
Series A Notes.
1.2. Cancellation of the Series A Notes and Issuance of the Notes.
------------------------------------------------------------
Subject to the terms and conditions hereof, at the Closing:
(a) KIA IV shall deliver to Holding all of the then outstanding Series
A Notes, free and clear of any Lien, and Holding shall cancel all such
Series A Notes;
(b) Holding shall issue and deliver to KIA IV $55,000,000 in aggregate
principal amount of its Series A Notes, substantially in the form of the
note attached hereto as Exhibit A ("Holding Note No. R-12"), dated as of
---------
the Closing Date and registered in the name of KIA IV (or in the name of
its nominee); and
(c) Holding shall issue and deliver to KIA IV $37,181,453.70 in
aggregate principal amount of its Series A Notes, substantially in the form
of the note attached hereto as Exhibit B ("Holding Note No. R-13"), dated
---------
as of the Closing Date and registered in the name of KIA IV (or in the name
of its nominee). (Holding Note No. R-12 and Holding Note No. R-13,
together with any Secondary Notes (as defined), shall hereinafter be
referred to as the "Notes").
1.3. Closing. The closing of the transactions described in Section 1
-------
(the "Closing") shall take place at the offices of Kelso & Company, 320 Park
Avenue, 24th Floor,
2
<PAGE>
New York, New York 10022, at 10:00 a.m., Eastern Standard Time, on March 24,
1998 or at such other place, time or date as may be mutually agreed upon by the
parties hereto (the "Closing Date").
2. Conditions to Closing. The obligation of KIA IV to consummate the
---------------------
transactions contemplated hereby is subject to the fulfillment to its
satisfaction, prior to or at the Closing, of the following conditions:
2.1. Representations and Warranties. The representations and
------------------------------
warranties of Holding contained in this Amendment and those otherwise made in
writing by or on behalf of Holding in connection with the transactions
contemplated by this Amendment shall be correct on and as of the date hereof and
shall be repeated and shall be true and correct on and as of the Closing Date
with the same effect as though made on and as of such date.
2.2. Performance; No Default. Holding shall have performed and
-----------------------
complied with all agreements and conditions contained in this Amendment required
to be performed or complied with by it prior to or at the Closing and at the
time of the Closing no Default shall have occurred and be continuing.
2.3. Compliance Certificate. Holding shall have delivered to KIA IV
----------------------
an Officers' Certificate, dated as of the Closing Date, certifying that the
conditions specified in Sections 2.1 and 2.2 have been fulfilled.
2.4. Absence of Litigation. No litigation or proceeding shall exist
---------------------
with respect to the Indenture, the Special Term Loan Agreement, the Amended and
Restated Credit Agreement or this Amendment or any other agreements, documents
or transactions related thereto or hereto, which would in the opinion of KIA IV
be reasonably likely to have a material adverse effect on the ability of Holding
to perform its obligations under this Amendment or the Notes or on the validity
or enforceability of this Amendment or the Notes.
2.5. Indenture, Special Term Loan Agreement and Amended and Restated
---------------------------------------------------------------
Credit Agreement. KIA IV shall be reasonably satisfied with the terms of the
- ----------------
Indenture, the Special Term Loan Agreement and the Amended and Restated Credit
Agreement. The Indenture, the Special Term Loan Agreement and the Amended and
Restated Credit Agreement shall have been duly executed and delivered by all
parties thereto and there shall not exist any default or event of default
thereunder and all the conditions to lending contained in the Special Term Loan
Agreement and the Amended and Restated Credit Agreement shall have been
satisfied.
2.6. Proceedings. All corporate and other proceedings taken or to be
-----------
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in form and substance to KIA IV and its
counsel, and KIA IV shall have received such other documents relating thereto as
KIA IV may reasonably request.
3. Representations and Warranties of Holding. Holding represents and
-----------------------------------------
warrants to KIA IV as follows:
3
<PAGE>
3.1. Organization, Standing, Etc. Holding is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted.
3.2. Qualification. Holding is duly qualified and in good standing as
-------------
a foreign corporation authorized to do business in each jurisdiction (other than
the jurisdiction of its incorporation) in which the nature of its activities or
the character of the properties it owns or leases makes such qualification
necessary.
3.3. Authorization. Holding has the corporate power and authority and
-------------
the legal right to make, deliver and perform its obligations under this
Amendment and the Notes and has taken all necessary corporate action to
authorize the transactions contemplated hereby and thereby. This Amendment has
been, and on or prior to the Closing Date the Notes shall have been, duly
authorized, executed and delivered by Holding. This Amendment constitutes, and
when executed and delivered the Notes shall constitute, legal, valid and binding
obligations of Holding, enforceable against Holding in accordance with their
respective terms.
3.4. No Violation; Conflicts. The execution and delivery of this
-----------------------
Amendment and the Notes and the performance by Holding of their respective terms
will not (a) violate any law or regulation or any order or decree of any court
-
or governmental instrumentality applicable to Holding or any of the
Subsidiaries; (b) conflict with or constitute a material default under, or give
-
rise to any right of termination or acceleration under, any material indenture,
mortgage, deed of trust or loan agreement, or any other material agreement,
lease or other instrument, to which Holding or any of the Subsidiaries is a
party or by which any of their property or assets are bound or to which they may
be subject; or (c) violate any provision of the Certificate of Incorporation or
-
By-Laws of Holding or any of the Subsidiaries.
3.5. Governmental Consent. No consent, approval or authorization of,
--------------------
or declaration or filing with, any Governmental Authority on the part of Holding
or any of the Subsidiaries is required for the valid execution and delivery of
this Amendment, the Notes, the valid offer and issuance of the Notes pursuant to
this Amendment or the consummation of the transactions contemplated by this
Amendment or the Notes.
3.6. Compliance with Margin Regulations. The issuance of the Notes
----------------------------------
hereunder and the consummation of the transactions contemplated hereby will not
violate or be inconsistent with Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board of
Governors.
4. Terms of Notes, Etc.
-------------------
4.1. Terms of Notes. The terms of the Notes, including the payments
--------------
required upon the maturity thereof, the interest rates applicable thereon, and
mandatory and optional pre payments with respect thereto, are contained in the
form of such Notes set forth in Exhibit A and Exhibit B, respectively.
--------- ---------
4
<PAGE>
5. Amendments to the Business and Financial Covenants. The Business and
--------------------------------------------------
Financial Covenants of Holding contained in Section 10 of the Restructuring
Agreement are amended as follows:
5.1. Corporate Existence, Etc.; Business. Section 10.1 of the
-----------------------------------
Restructuring Agreement is deleted in its entirety and the following is inserted
in lieu thereof:
10.1 Corporate Existence, Etc.; Business. Holding will at all times
-----------------------------------
preserve and keep in full force and effect its corporate existence and
rights and franchises deemed material to its business, and those of each of
the Subsidiaries, except as otherwise specifically permitted by Section 5.7
(Restriction on Fundamental Changes), Section 1003 of the Indenture
(Corporate Existence), Section 7.1.2 of the Special Term Loan Agreement
(Corporate Existence) and Section 7.3 of the Amended and Restated Credit
Agreement (Corporate Franchises). Holding will not, and will not permit
any of the Subsidiaries to, engage in any lines of business other than the
businesses in which they are currently engaged and any line of business
reasonably related thereto.
5.2. Indebtedness. Section 10.2 of the Restructuring Agreement is
------------
deleted in its entirety and the following is inserted in lieu thereof:
10.2 Indebtedness. Holding will not, and will not permit any of the
------------
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
or otherwise become or remain liable with respect to any Indebtedness,
except:
(a) Indebtedness of any of the Subsidiaries under the Special Term Loan
Agreement and the Amended and Restated Credit Agreement;
(b) Indebtedness of the Company represented by the Senior Notes;
(c) Other Indebtedness of any of the Subsidiaries to the extent permitted
under the Indenture, the Special Term Loan Agreement and the Amended and
Restated Credit Agreement;
(d) Indebtedness of Holding under Article 12 of the Amended and Restated
Credit Agreement (Guaranty);
(e) Indebtedness represented by the Notes; and
(f) Indebtedness evidenced by promissory notes issued by Holding to pay
the purchase price of shares of Capital Stock of Holding held by any
employee or former employee stockholders in accordance with the terms of
the ESOP or the Stockholders Agreement to the extent such payments are
permitted under Section 10.3 of the Restructuring Agreement.
5
<PAGE>
5.3. Limitation on Restrictions on Distributions from Subsidiaries.
-------------------------------------------------------------
Section 10.4 of the Restructuring Agreement is deleted in its entirety and the
following is inserted in lieu thereof:
10.4 Limitation on Restrictions on Distributions from Subsidiaries.
-------------------------------------------------------------
Holding will not permit any Subsidiary to create or otherwise cause or
permit to exist or become effective any consensual encumbrance or
restriction which by its terms encumbers or restricts the ability of any
Subsidiary to (a) pay dividends or make any other distributions on its
-
Capital Stock or pay any Indebtedness or other obligation owed to Holding
or any other Subsidiary, (b) make any loans or ad vances to Holding or (c)
- -
transfer any of its property or assets to Holding, except any such
encumbrance or restriction:
(i) in the case of any Subsidiary (other than the Company), to the extent
permitted under the terms of Section 1014 of the Indenture (Limitation on
Restricted Subsidiary Dividends), Section 7.2.4 of the Special Term Loan
Agreement (Payment Restrictions Affecting Restricted Subsidiaries) and
Section 8.14 of the Amended and Restated Credit Agreement (Limitations on
Restrictions Affecting Subsidiaries) and as set forth in Section 8.6 of the
Amended and Restated Credit Agreement (Dividends, etc.);
(ii) in the case of the Company, the restrictions set forth in Section
1009 of the Indenture (Limitation on Restricted Payments), Section 1015 of
the Indenture (Limitation on Transactions with Affiliates), as explicitly
set forth in Section 7.2 of the Special Term Loan Agreement and as
explicitly set forth in Article 8 of the Amended and Restated Credit
Agreement; and
(iii) existing under or by reason of Applicable Law.
5.4. Liens. Section 10.5 of the Restructuring Agreement is deleted
-----
in its entirety and the following is inserted in lieu thereof:
10.5 Liens. Holding will not, and will not permit any of the Subsidiaries
-----
to, directly or indirectly, create, incur, assume or permit to exist any
Lien on or with respect to any property or asset (including any document or
instrument in respect of goods and accounts receivable) of Holding or any
of the Subsidiaries, whether now owned or hereafter acquired, or any income
or profits therefrom or rights in respect thereof, except:
(a) in the case of any Subsidiary, to the extent permitted under the
terms of Section 1011 of the Indenture (Limitation on Liens), Section 7.2.2
of the Special Term Loan Agreement (Liens) and Section 8.2 of the Amended
and Restated Credit Agreement (Liens, etc.); and
6
<PAGE>
(b) in the case of Holding, any Lien for Taxes, the payment of which is
not at the time required by Section 10.6 (Payment of Taxes) of the
Restructuring Agreement.
5.5. Asset Dispositions. Section 10.7 of the Restructuring Agreement
------------------
is deleted in its entirety and the following is inserted in lieu thereof:
10.7 Asset Dispositions. Holding will not, and will not permit any of the
------------------
Subsidiaries to, sell, transfer, lease, convey or otherwise dispose of any
assets, except as otherwise permitted under this Amendment and, in the case
of any Sub sidiary, as permitted under the terms of the Indenture, the
Special Term Loan Agreement or the Amended and Restated Credit Agreement.
5.6. Transactions with Affiliates. Section 10.8 of the Restructuring
----------------------------
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:
10.8 Transactions with Affiliates. Holding will not, and will not permit
----------------------------
any of the Subsidiaries to, directly or indirectly, enter into any
transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of Holding or
any of the Subsidiaries, unless (a) such transaction is not otherwise
-
prohibited by this Amendment, (b) such transaction is in the ordinary
-
course of business and (c) the Board of Directors of Holding determines
-
that such transaction is on fair and reasonable terms no less favorable to
Holding or any Subsidiary, as the case may be, than those terms which might
be obtained at the time in a comparable arm's-length transaction with a
Person who is not an Affiliate or, if such transaction is not one which by
its nature could be obtained from such other Person, is on fair and
reasonable terms and was negotiated in good faith on an arm's-length basis,
provided that this Section 10.8 shall not restrict (i) Restricted Payments
-------- -
permitted by Sections 10.3(a) and 10.3(c), (ii) payments pursuant to the
--
terms of any Contractual Obligations in effect on the Closing Date (which
Contractual Obligations shall not be subsequently amended without the prior
written consent of KIA IV); or (iii) in the case of any Subsidiary, the
---
transactions and payment of the fees and expenses permitted or required to
be paid under this Amendment, the Indenture, the Special Term Loan
Agreement and the Amended and Restated Credit Agreement.
5.7. Restriction on Fundamental Changes. Section 10.10 of the
----------------------------------
Restructuring Agreement is deleted in its entirety and the following is inserted
in lieu thereof:
10.10 Restriction on Fundamental Changes. Holding will not, and will not
----------------------------------
permit any of the Subsidiaries to, enter into any merger, consolidation,
reorgani zation or recapitalization, reclassify its Capital Stock,
liquidate, wind up or dissolve or sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or
substantially all of its or their business or assets, whether now owned or
hereafter acquired, except, in the case of any Subsidiary,
7
<PAGE>
as specifically permitted under the Indenture, the Special Term Loan
Agreement and the Amended and Restated Credit Agreement and so long as no
Default or Event of Default shall exist after giving effect to such merger,
consolidation or sale.
5.8. Payment of Dividends. Section 10.11 of the Restructuring
--------------------
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:
10.11 Payment of Dividends. Holding will cause the Company and each
--------------------
other Subsidiary to declare, make and pay dividends or other distributions
on account of their respective Capital Stock in the maximum amount
permitted under the Indenture, the Special Term Loan Agreement and the
Amended and Restated Credit Agreement, provided that any such dividend is
--------
not violation of the corporation law of the jurisdictions in which the
Company and each such other Subsidiary were organized; and provided,
--------
further, that in the case of any foreign Subsidiary, Holding may elect not
-------
to cause such foreign Subsidiary to pay a dividend if, in the good faith
judgment of Holding and such foreign Subsidiary, the payment of such
dividend would have adverse tax consequences to the Company and each other
Subsidiary, taken as a whole.
5.9. Indenture, Special Term Loan Agreement and Amended and Restated
---------------------------------------------------------------
Credit Agreement. Section 10.12 of the Restructuring Agreement is deleted in
- ----------------
its entirety and the following is inserted in lieu thereof:
10.12 Indenture, Special Term Loan Agreement and Amended and Restated
---------------------------------------------------------------
Credit Agreement. Without the prior written consent of KIA IV, Holding
----------------
will not, and will not permit the Company to, amend, restate, supplement or
otherwise modify the terms and provisions of the Indenture, the Special
Term Loan Agreement or the Amended and Restated Credit Agreement in effect
as of the Closing Date, including, without limitation, the terms and
provisions of Sections 1009 and 1015 of the Indenture, Sections 7.2.3 and
7.2.8 of the Special Term Loan Agreement and Sections 8.6 and 8.7 of the
Amended and Restated Credit Agreement (Dividends, etc.; and Transactions
with Affiliates), whether in connection with a restructuring or refinancing
of the indebtedness of the Company thereunder or otherwise, so as to
further restrict the ability of the Company or any other Subsidiary to
declare, make or pay dividends or other distributions on their respective
Capital Stock.
5.10. Events of Default. Section 11.1(k) of the Restructuring
-----------------
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:
(k) any default shall have occurred under the Indenture, the Special Term
Loan Agreement or the Amended and Restated Credit Agreement and such
default shall continue for more than the grace period, if any, specified
therein and shall not have been waived pursuant thereto.
8
<PAGE>
6. Definitions. The definitions contained in Section 12 of the
-----------
Restructuring Agreement are supplemented and amended as follows:
"AMENDED AND RESTATED CREDIT AGREEMENT" refers to The Amended and Restated
Credit Agreement, dated as of March 3, 1993, and amended and restated as of
March 24, 1998, among Holding, the Company, various financial institutions
specified therein, and BT Commercial Corporation, as agent, and all security
agreements and ancillary agreements referred to therein, in each case as such
agreements may be amended, restated, supplemented or otherwise modified from
time to time, including any amendment extending the maturity of or effecting a
refinancing or restructuring of the indebtedness of the Company thereunder.
"AMENDMENT" refers to this Amendment to Restructuring Agreement, together
with all exhibits hereto, as amended from time to time.
"INDENTURE" refers to the Indenture, dated as of March 24, 1998, between
the Company and the United States Trust Company of New York, as specified in the
third recital to this Amendment.
"NOTES" refers to Holding Note No. R-12, Holding Note No. R-13 and the
Secondary Notes, as specified in Section 1.2(c).
"SPECIAL TERM LOAN AGREEMENT" refers to the Term Loan Agreement, dated as
of March 24, 1998, among the Company, DLJ Capital Funding, Inc., as syndication
agent, and Fleet National Bank, as administrative agent, and the lenders party
thereto, and all security agreements and ancillary agreements referred to
therein, in each case as such agreements may be amended, restated, supplemented
or otherwise modified from time to time.
7. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Amendment or made in writing by or on behalf of
Holding in connection with the transactions contemplated by this Amendment shall
survive the execution and delivery of this Amendment, any investigation at any
time made by KIA IV or on KIA IV's behalf, the issuance of the Notes to KIA IV
under this Amendment and any disposition or payment of the Notes. All
statements contained in any certificate or other instrument delivered by or on
behalf of Holding pursuant to this Amendment or in connection with the
transactions contemplated by this Amendment shall be deemed representations and
warranties of Holding under this Amendment.
8. Parties. This Amendment shall inure to the benefit of and be binding
-------
upon the parties hereto, each subsequent holder of a Note and each of their
respective successors and assigns. Nothing expressed or mentioned in this
Amendment is intended or shall be construed to give any Person, other than the
parties hereto, each subsequent holder of a Note and their re spective
successors and assigns, any legal or equitable right, remedy or claim under or
in respect of this Amendment or any provisions herein contained. This Amendment
and all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto, any
9
<PAGE>
subsequent holder of a Note and each of their respective successors and assigns,
and for the benefit of no other Person.
9. Notices, Etc. Except as otherwise provided in this Amendment and the
------------
Restructuring Agreement, notices and other communications under this Amendment
and the Restructuring Agreement shall be in writing and shall be delivered by
hand, or mailed certified or registered mail with postage prepaid, or faxed,
addressed, (a) if to Holding, c/o Earle M. Jorgensen Company, 3050 East Birch
-
Street, Brea, California 92621, fax number: (714) 577-3765 to the attention of
Mr. Charles P. Gallopo, Vice President and Chief Financial Officer, or at such
other address or to the attention of such other officer as Holding shall have
furnished to KIA IV in writing or (b) if to KIA IV, c/o Kelso & Company, Inc.,
-
320 Park Avenue, 24th Floor, New York, New York 10022, fax number: (212) 223-
2379 to the attention of Mr. Matelich with a copy to Richard D. Bohm, Esq.,
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, fax number:
(212) 909-6836 or at such other address, or to the attention of such other
officer, as KIA IV shall have furnished to Holding in writing or (c) if to any
-
other holder of any Note, at such address or such fax number as such other
holder shall have furnished to Holding in writing, or, until any such other
holder so furnishes to Holding an address or fax number, then to and at the
address of the last holder of such Note who has furnished an address to Holding.
Any notice so addressed shall be deemed to be given three Business Days after
being mailed by certified or registered mail or on the next Business Day after
being faxed.
10. Further Assurances. At any time or from time to time upon the request
------------------
of KIA IV, Holding shall execute and deliver, and shall cause the Subsidiaries
to execute and deliver, such further documents and do such other acts as KIA IV
may reasonably request in order to effect fully the purpose of this Amendment
and the Notes and to provide for payment with respect to the Notes in accordance
with the terms of this Amendment and the Notes.
11. Miscellaneous. This Amendment shall be binding upon and inure to the
-------------
benefit of and be enforceable by the respective successors and assigns of the
parties hereto, whether so expressed or not, and, in particular, shall inure to
the benefit of and be enforceable by any holder or holders at the time of the
Notes or any part thereof. This Amendment and the Notes shall be construed and
enforced in accordance with and governed by the law of the State of New York
without regard to the conflicts of law rules of such state. The headings in
this Amendment are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. Except as otherwise indicated, references
to any "Section" mean a "Section" of this Amendment. This Amendment may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
12. Savings Clause. Except as amended herein, each provision of the
--------------
Restructuring Agreement and the Stock Pledge Agreement and the Warrants shall
continue valid, binding and in full force and effect and the Notes shall be
entitled to the full benefit and protection of the Stock Pledge Agreement.
13. Severability. If any provision of this Amendment shall be held
------------
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Amendment
10
<PAGE>
shall remain in full force and effect. Any provisions of this Amendment held
invalid or unenforceable only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first above written.
EARLE M. JORGENSEN HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Charles P. Gallopo
-------------------------------------------------
Name: Charles P. Gallopo
Its: Vice President and Chief Financial Officer
KELSO INVESTMENT ASSOCIATES IV, L.P.,
a Delaware limited partnership
By: Kelso Partners IV, L.P., a Delaware limited
partnership
Its: General Partner
By: /s/ George E. Matelich
------------------------------------------
Name: George E. Matelich
------------------------------------------
Its: General Partner
11
<PAGE>
Exhibit A
---------
Form of Holding Note No. R-12
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). ANY SALE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION
OF THIS NOTE (OTHER THAN TO THE ISSUER HEREOF) MAY BE MADE ONLY IN COMPLIANCE
WITH THE TERMS OF THE RESTRUCTURING AGREEMENT, DATED AS OF MARCH 3, 1993, AND
AMENDED AS OF MARCH 24, 1998, REFERRED TO BELOW AND ONLY IF MADE EITHER (A)
-
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B)
-
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
No. R-12 New York, N.Y.
$55,000,000 March 24, 1998
Earle M. Jorgensen Holding Company, Inc.
SERIES A VARIABLE RATE
SENIOR NOTE
FOR VALUE RECEIVED, the undersigned, Earle M. Jorgensen Holding
Company, Inc., a Delaware corporation ("Holding"), promises to pay to Kelso
Investment Associates IV, L.P., a Delaware limited partnership, or registered
assigns (the "Holder"), the principal sum of $55,000,000 on March 20, 2006 or
such earlier date as the principal may become due and payable pursuant to the
terms hereof (whether at stated maturity or at a date fixed for prepayment or
upon acceleration or otherwise), with interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) accruing from the date
hereof at a rate per annum reset on January 1 and July 1 of each year (each an
"Interest Payment Date"), equal to the greater of (a) 18% and (b) the lesser of
- -
(i) the prime rate (as publicly announced by Morgan Guaranty Trust Company of
-
New York in New York City as its prime rate) as of the immediately preceding
Interest Payment Date, plus 8% and (ii) 20% (together with interest on any
--
overdue principal, including any overdue prepayment of principal, at the rate
described below) on the unpaid balance of such principal amount, payable in
arrears semiannually on each Interest Payment Date, commencing July 1, 1998.
Notwithstanding the foregoing, if and to the extent that on any Interest
Payment Date the aggregate interest payments due under the Notes (as defined
below) then outstanding exceeds the Excess Cash Flow (as defined below) of
Holding for the preceding six-month period, Holding shall apply all such Excess
Cash Flow to the payment of interest due under the Notes and, in lieu of payment
in cash of such excess interest, issue an additional note (a "Secondary Note")
in an aggregate principal amount equal to the amount of such excess interest,
and interest shall accrue thereon from the date of issuance. Each of the other
terms of such Secondary Note shall be identical to the terms of this Note. Each
issuance of Secondary Notes in lieu of payment of interest in cash shall be made
pro rata with respect to all of the Notes then outstanding.
- --- ----
Holding shall pay interest on any amount of principal which is not paid
when due, whether at stated maturity or at a date fixed for prepayment or upon
acceleration or otherwise, from the date on which such amount is due until such
amount is paid in full, at the rate borne
<PAGE>
by this Note plus 2% per annum, and it shall pay interest on overdue
installments of interest at the same rate, to the extent lawful, on demand.
This Note is one of Holding's Series A Variable Rate Senior Notes (the
"Notes") originally issued in an aggregate principal amount of $55,000,000
pursuant to a Restructuring Agreement, dated as of March 3, 1993, and amended as
of March 24, 1998, between Holding and Kelso Investment Associates IV, L.P., as
from time to time amended (the "Agreement"). The holder of this Note is
entitled to the benefits of the Agreement. In addition, the holder of this Note
is entitled to the following benefits:
Mandatory Prepayment
- --------------------
Holding shall apply all of the Net Cash Proceeds (as defined below) from
any Capital Markets Transaction (as defined below) to prepay the principal
amount of the Notes (in whole or in part, pro rata, in relation to the aggregate
--- ----
outstanding principal amount of all of the Notes), on the date on which such Net
Cash Proceeds are received by Holding (the "Mandatory Prepayment Date"). In
addition, Holding is obligated to pay on the Mandatory Prepayment Date interest
accrued on the principal amount of the Notes being so prepaid to the date so
paid.
In addition, if upon any Interest Payment Date, the Excess Cash Flow of
Holding for the preceding six-month period exceeds the unpaid and accrued
interest on the Notes as of such Interest Payment Date, then upon such Interest
Payment Date, Holding shall apply such excess first to prepay the principal
amount of any Secondary Notes then outstanding (in whole or in part, pro rata,
--- ----
in relation to the aggregate outstanding principal amount of all of such
Secondary Notes) and, then, after all such Secondary Notes have been prepaid in
full, to prepay the principal amount of all other Notes then outstanding (in
whole or in part, pro rata, in relation to the aggregate outstanding principal
--- ----
amount of all such Notes), in any case, together with all interest accrued on
the principal amount of the Notes being so prepaid to the date so paid.
"Excess Cash Flow" means, for any period for which such amount is being
determined, the aggregate amount of cash received by Holding from the Company or
any Subsidiary during such period, pursuant to a dividend, distribution or
otherwise, together with any cash proceeds from any non-cash dividends and
distributions received by Holding from the Company or any Subsidiary, minus, for
-----
such period, the sum of (A) all Taxes paid by Holding pursuant to the Tax
-
Sharing Agreement to be entered into by Holding, the Company and one or more
other Subsidiaries, on or before the Closing Date, (B) all compensation paid to
-
employees of Holding pursuant to the Management Agreement to be entered into by
Holding and the Company on or before the Closing Date, and (C) to the extent not
-
included in (A) or (B) above, all Restricted Payments made pursuant to any of
clauses (a) through (c) of section 10.3 of the Agreement.
"Net Cash Proceeds" means any cash or cash equivalent payments received by
Holding from any Capital Markets Transaction, less any underwriting discount or
private placement fee.
"Capital Markets Transaction" means any sale by Holding of its debt
securities or equity securities (including preferred stock) or any rights,
warrants or options to purchase any such securities, whether by a public
offering or a private placement of any such securities.
2
<PAGE>
Any capitalized term used herein without definition shall have the meaning
specified in the Agreement.
Optional Prepayment
- -------------------
Holding may at any time, at its option upon notice as provided below,
prepay the Notes (in whole or in part, pro rata, in relation to the aggregate
--- ----
outstanding principal amount of all of the Notes), on the date specified in such
notice (each such date being referred to herein as an "Optional Prepayment
Date"), at the principal amount of the Notes so prepaid plus interest thereon
accrued to the Optional Prepayment Date.
Notice of Optional Prepayment
- -----------------------------
Holding shall give each holder of a Note written notice of any Optional
Prepayment Date not less than three Business Days and not more than 30 days
prior to such Optional Prepayment Date. Such notice shall specify the aggregate
principal amount of the Notes to be prepaid and the principal amount of each
Note held by such holder to be prepaid.
Maturity; Surrender, Etc.
- -------------------------
In the case of each prepayment, whether mandatory or optional, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued and unpaid to such date. From and after such date,
unless Holding shall fail to pay such principal amount when so due and payable,
together with the interest, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to
Holding and canceled and shall not be reissued.
Payment on Business Days
- ------------------------
If any payment to be made hereunder or under any Note is due on a day other
than a Business Day, such payment will be made on the next succeeding Business
Day and such extension of time shall be included in computing interest in
connection with such payment.
This Note is a registered Note and is transferable only upon surrender of
this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the holder hereof or his
attorney duly authorized in writing. References in this Note to a "holder" shall
mean the person in whose name this Note is at the time registered on the
register kept by Holding as provided in the Agreement, and Holding may treat
such person as the owner of this Note for the purpose of receiving payment and
for all other purposes, and Holding shall not be affected by any notice to the
contrary.
Except as provided in sections 9.2, 9.4 and 14 of the Agreement, no
subsidiary of Holding shall have any liability for any obligation of Holding
under the Agreement or any Note, or any claim based on, in respect of or by
reason of any such obligation. Each holder of this Note by accepting this Note
hereby waives and releases any such claim, including any claim that
3
<PAGE>
the assets or obligations of Holding, either generally or under the Agreement or
any Note, should be substantively consolidated with the assets or obligations of
any of the subsidiaries of Holding and such waiver and release are partial
consideration for the issuance of this Note.
This Note shall be construed in accordance with and governed by the laws of
the State of New York without regard to the conflict of law rules of such state.
IN WITNESS WHEREOF, Earle M. Jorgensen Holding Company, Inc. has caused
this Note to be duly executed as of the date first above written.
EARLE M. JORGENSEN HOLDING COMPANY, INC.
By: /s/ Charles P. Gallopo
-----------------------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial Officer
4
<PAGE>
Exhibit B
---------
Form of Holding Note No. R-13
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). ANY SALE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION
OF THIS NOTE (OTHER THAN TO THE ISSUER HEREOF) MAY BE MADE ONLY IN COMPLIANCE
WITH THE TERMS OF THE RESTRUCTURING AGREEMENT, DATED AS OF MARCH 3, 1993, AND
AMENDED AS OF MARCH 24, 1998, REFERRED TO BELOW AND ONLY IF MADE EITHER (A)
-
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B)
-
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
No. R-13 New York, N.Y.
$37,181,453.70 March 24, 1998
Earle M. Jorgensen Holding Company, Inc.
SERIES A VARIABLE RATE
SENIOR NOTE
FOR VALUE RECEIVED, the undersigned, Earle M. Jorgensen Holding
Company, Inc., a Delaware corporation ("Holding"), promises to pay to Kelso
Investment Associates IV, L.P., a Delaware limited partnership, or registered
assigns (the "Holder"), the principal sum of $37,181,453.70 on March 20, 2006 or
such earlier date as the principal may become due and payable pursuant to the
terms hereof (whether at stated maturity or at a date fixed for prepayment or
upon acceleration or otherwise), with interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) accruing from the date
hereof at a rate per annum reset on January 1 and July 1 of each year (each an
"Interest Payment Date"), equal to the greater of (a) 18% and (b) the lesser of
- -
(i) the prime rate (as publicly announced by Morgan Guaranty Trust Company of
-
New York in New York City as its prime rate) as of the immediately preceding
Interest Payment Date, plus 8% and (ii) 20% (together with interest on any
--
overdue principal, including any overdue prepayment of principal, at the rate
described below) on the unpaid balance of such principal amount, payable in
arrears semiannually on each Interest Payment Date, commencing July 1, 1998.
Notwithstanding the foregoing, if and to the extent that on any Interest
Payment Date the aggregate interest payments due under the Notes (as defined
below) then outstanding exceeds the Excess Cash Flow (as defined below) of
Holding for the preceding six-month period, Holding shall apply all such Excess
Cash Flow to the payment of interest due under the Notes and, in lieu of payment
in cash of such excess interest, issue an additional note (a "Secondary Note")
in an aggregate principal amount equal to the amount of such excess interest,
and interest shall accrue thereon from the date of issuance. Each of the other
terms of such Secondary Note shall be identical to the terms of this Note. Each
issuance of Secondary Notes in lieu of payment of interest in cash shall be made
pro rata with respect to all of the Notes then outstanding.
- --- ----
Holding shall pay interest on any amount of principal which is not paid
when due, whether at stated maturity or at a date fixed for prepayment or upon
acceleration or otherwise, from the date on which such amount is due until such
amount is paid in full, at the rate borne
<PAGE>
by this Note plus 2% per annum, and it shall pay interest on overdue
installments of interest at the same rate, to the extent lawful, on demand.
This Note is one of Holding's Series A Variable Rate Senior Notes (the
"Notes") originally issued in an aggregate principal amount of $55,000,000
pursuant to a Restructuring Agreement, dated as of March 3, 1993, and amended as
of March 24, 1998, between Holding and Kelso Investment Associates IV, L.P., as
from time to time amended (the "Agreement"). The holder of this Note is
entitled to the benefits of the Agreement. In addition, the holder of this Note
is entitled to the following benefits:
Mandatory Prepayment
- --------------------
Holding shall apply all of the Net Cash Proceeds (as defined below) from
any Capital Markets Transaction (as defined below) to prepay the principal
amount of the Notes (in whole or in part, pro rata, in relation to the aggregate
--- ----
outstanding principal amount of all of the Notes), on the date on which such Net
Cash Proceeds are received by Holding (the "Mandatory Prepayment Date"). In
addition, Holding is obligated to pay on the Mandatory Prepayment Date interest
accrued on the principal amount of the Notes being so prepaid to the date so
paid.
In addition, if upon any Interest Payment Date, the Excess Cash Flow of
Holding for the preceding six-month period exceeds the unpaid and accrued
interest on the Notes as of such Interest Payment Date, then upon such Interest
Payment Date, Holding shall apply such excess first to prepay the principal
amount of any Secondary Notes then outstanding (in whole or in part, pro rata,
--- ----
in relation to the aggregate outstanding principal amount of all of such
Secondary Notes) and, then, after all such Secondary Notes have been prepaid in
full, to prepay the principal amount of all other Notes then outstanding (in
whole or in part, pro rata, in relation to the aggregate outstanding principal
--- ----
amount of all such Notes), in any case, together with all interest accrued on
the principal amount of the Notes being so prepaid to the date so paid.
"Excess Cash Flow" means, for any period for which such amount is being
determined, the aggregate amount of cash received by Holding from the Company or
any Subsidiary during such period, pursuant to a dividend, distribution or
otherwise, together with any cash proceeds from any non-cash dividends and
distributions received by Holding from the Company or any Subsidiary, minus, for
-----
such period, the sum of (A) all Taxes paid by Holding pursuant to the Tax
-
Sharing Agreement to be entered into by Holding, the Company and one or more
other Subsidiaries, on or before the Closing Date, (B) all compensation paid to
-
employees of Holding pursuant to the Management Agreement to be entered into by
Holding and the Company on or before the Closing Date, and (C) to the extent not
-
included in (A) or (B) above, all Restricted Payments made pursuant to any of
clauses (a) through (c) of section 10.3 of the Agreement.
"Net Cash Proceeds" means any cash or cash equivalent payments received by
Holding from any Capital Markets Transaction, less any underwriting discount or
private placement fee.
"Capital Markets Transaction" means any sale by Holding of its debt
securities or equity securities (including preferred stock) or any rights,
warrants or options to purchase any such securities, whether by a public
offering or a private placement of any such securities.
2
<PAGE>
Any capitalized term used herein without definition shall have the meaning
specified in the Agreement.
Optional Prepayment
- -------------------
Holding may at any time, at its option upon notice as provided below,
prepay the Notes (in whole or in part, pro rata, in relation to the aggregate
--- ----
outstanding principal amount of all of the Notes), on the date specified in such
notice (each such date being referred to herein as an "Optional Prepayment
Date"), at the principal amount of the Notes so prepaid plus interest thereon
accrued to the Optional Prepayment Date.
Notice of Optional Prepayment
- -----------------------------
Holding shall give each holder of a Note written notice of any Optional
Prepayment Date not less than three Business Days and not more than 30 days
prior to such Optional Prepayment Date. Such notice shall specify the aggregate
principal amount of the Notes to be prepaid and the principal amount of each
Note held by such holder to be prepaid.
Maturity; Surrender, Etc.
- -------------------------
In the case of each prepayment, whether mandatory or optional, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued and unpaid to such date. From and after such date,
unless Holding shall fail to pay such principal amount when so due and payable,
together with the interest, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to
Holding and canceled and shall not be reissued.
Payment on Business Days
- ------------------------
If any payment to be made hereunder or under any Note is due on a day other
than a Business Day, such payment will be made on the next succeeding Business
Day and such extension of time shall be included in computing interest in
connection with such payment.
This Note is a registered Note and is transferable only upon surrender of
this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the holder hereof or his
attorney duly authorized in writing. References in this Note to a "holder"
shall mean the person in whose name this Note is at the time registered on the
register kept by Holding as provided in the Agreement, and Holding may treat
such person as the owner of this Note for the purpose of receiving payment and
for all other purposes, and Holding shall not be affected by any notice to the
contrary.
Except as provided in sections 9.2, 9.4 and 14 of the Agreement, no
subsidiary of Holding shall have any liability for any obligation of Holding
under the Agreement or any Note, or any claim based on, in respect of or by
reason of any such obligation. Each holder of this Note by accepting this Note
hereby waives and releases any such claim, including any claim that
3
<PAGE>
the assets or obligations of Holding, either generally or under the Agreement or
any Note, should be substantively consolidated with the assets or obligations of
any of the subsidiaries of Holding and such waiver and release are partial
consideration for the issuance of this Note.
This Note shall be construed in accordance with and governed by the laws of
the State of New York without regard to the conflict of law rules of such state.
IN WITNESS WHEREOF, Earle M. Jorgensen Holding Company, Inc. has caused
this Note to be duly executed as of the date first above written.
EARLE M. JORGENSEN HOLDING COMPANY, INC.
By: /s/ Charles P. Gallopo
----------------------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial Officer
4
<PAGE>
EXHIBIT 4.10
[CONFORMED AS EXECUTED]
ACKNOWLEDGMENT, CONSENT AND AMENDMENT
-------------------------------------
Section 1.01. Each of the undersigned hereby:
(a) acknowledge and consent to the execution, delivery and
performance of (i) the Amended and Restated Credit Agreement, dated as of March
3, 1993, amended and restated as of March 24, 1998 (as the same may be amended,
modified, restated, supplemented, extended, renewed or refinanced from time to
time, the "Amended and Restated Credit Agreement"), among Earle M. Jorgensen
Holding Company, Inc. ("Holding"), Earle M. Jorgensen Company (the "Borrower"),
the institutions from time to time party thereto (the "Lenders"), and BT
Commercial Corporation, as Agent (in such capacity, the "Agent"), amending and
restating the Credit Agreement, dated as of March 3, 1993 (as the same may have
been amended, modified, or supplemented from time to time prior to the Amended
and Restated Credit Agreement, the "Existing Credit Agreement"), among Holding,
the Borrower, the Lenders and BT Commercial Corporation and Chemical Bank, as
Agents, and (ii) all of the documents and transactions contemplated by the
Amended and Restated Credit Agreement; and
(b) except as set forth herein, agrees that such execution,
delivery and performance shall not in any way affect such entity's obligations
under any Credit Document (as defined in the Existing Credit Agreement) other
than the Existing Credit Agreement, or any other document executed in connection
therewith other than the Existing Credit Agreement, to which such entity is a
party, including, without limitation, each such entity's respective obligations
(if any) under the Security Agreement (attached hereto as Annex A), which, along
with each other document executed in connection therewith, other than the Credit
Agreement (the "Credit Documents"), are hereby assumed under and made a part by
reference of the Amended and Restated Credit Agreement which obligations on the
date hereof remain absolute and unconditional and are not subject to any
defense, set-off or counterclaim; provided that, in the case of each of the
--------
Credit Documents, the undersigned hereby acknowledge and agree that the
"Obligations" (as defined therein) include all of the Obligations under and as
defined in the Amended and Restated Credit Agreement after giving effect to the
Restatement Effective Date and any increase in the amounts owing to the Lenders
or the Agent (as defined in the Amended and Restated Credit Agreement). Unless
otherwise defined herein, capitalized terms used in this Acknowledgment, Consent
and Amendment shall have the meanings set forth in the Amended and Restated
Credit Agreement.
<PAGE>
Section 1.02. The Security Agreement is hereby further amended by (i) inserting
the text ", amended and restated as of March 24, 1998" immediately after the
reference to "1993" in the first "WHEREAS" clause thereof, (ii) deleting the
text "and Chemical Bank" immediately after the name "BT Commercial Corporation"
in the first "WHEREAS" clause thereof, (iii) deleting the word "Agents" each
time it appears in the first "WHEREAS" clause thereof and inserting the word
"Agent" in lieu thereof, (iv) inserting the text ", extended, renewed"
immediately after the reference to "supplemented" in the first "WHEREAS" clause
thereof, (v) inserting the text "(including books, records, writings, data
bases, information and other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to such items)"
immediately after the reference to "Section 2" in Section 2(d) thereof and (vi)
inserting the text "Notwithstanding anything to the foregoing, Collateral shall
not include Term Collateral (as defined in the Intercreditor Agreement)." as a
new paragraph at the end of Section 2 thereof.
Dated as of March 24, 1998
EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
----------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial
Officer
Accepted and Agreed to:
BT COMMERCIAL CORPORATION
as Agent for the Lenders
By /s/ Basil Palmeri
-----------------
Name: Basil Palmeri
Title: Vice President
2
<PAGE>
EXHIBIT 4.11
[EXECUTION COPY]
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Security Agreement"), dated as of
------------------
March 24, 1998, is made by EARLE M. JORGENSEN COMPANY, a Delaware corporation
(the "Borrower Grantor"), each Restricted Subsidiary (as defined in the Term
----------------
Loan Agreement referred to below) of the Borrower Grantor, a signatory hereto,
and each other Person which may from time to time hereafter become a party
hereto pursuant to Section 7.4 (each, individually, an "Additional Subsidiary
----------- ---------------------
Grantor", and collectively, the "Additional Subsidiary Grantors", and together
- ------- ------------------------------
with each such Restricted Subsidiary, each individually, a "Subsidiary Grantor",
------------------
and collectively, the "Subsidiary Grantors", and together with the Borrower
-------------------
Grantor, each individually, a "Grantor", and collectively, the "Grantors") in
------- --------
favor of Fleet National Bank, as administrative agent (together with any
successor(s) thereto in such capacity, the "Administrative Agent") for each of
--------------------
the Secured Parties.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Term Loan Agreement, dated as of March 24, 1998 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Term Loan Agreement"), among the Borrower Grantor, the various
-------------------
financial institutions as are, or may from time to time become, parties thereto
(each individually a "Lender" and collectively the "Lenders"), the
------ -------
Administrative Agent, Bankers Trust Company, as documentation agent, and DLJ
Capital Funding, Inc., as syndication agent, the Lenders have extended
commitments to make Term Loans to the Borrower Grantor;
WHEREAS, as a condition precedent to the making of the Term Loans under the
Term Loan Agreement, each Grantor is required to execute and deliver this
Security Agreement; and
WHEREAS, each Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
WHEREAS, it is in the best interests of each Grantor to execute this
Security Agreement inasmuch as such Grantor will derive substantial direct and
indirect benefits from the Term Loans made to the Borrower Grantor by the
Lenders pursuant to the Term Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make the Term
<PAGE>
Loans to the Borrower Grantor pursuant to the Term Loan Agreement, each Grantor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
-------------
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Additional Subsidiary Grantor" and "Additional Subsidiary Grantors" are
----------------------------- ------------------------------
defined in the preamble.
--------
"Administrative Agent" is defined in the preamble.
-------------------- --------
"Borrower Grantor" is defined in the preamble.
---------------- --------
"Collateral" is defined in Section 2.1.
---------- -----------
"Collateral Account" is defined in Section 4.3.
------------------ -----------
"Equipment" is defined in clause (a) of Section 2.1.
--------- ---------- -----------
"Grantor" and "Grantors" are defined in the preamble.
------- -------- --------
"Lender" and "Lenders" are defined in the first recital.
------ ------- -------------
"Mobile Assets" means trucks, trailers, and other motor vehicles, together
-------------
with in each case all parts, instruments, accessories and other Equipment
installed in or attached thereto.
"Secured Obligations" is defined in Section 2.2.
------------------- -----------
"Secured Party" and "Secured Parties" means the Lenders, the Agents and
------------- ---------------
each of their respective successors, transferees or assigns.
"Security Agreement" is defined in the preamble.
------------------ --------
"Subsidiary Grantor" and "Subsidiary Grantors" are defined in the preamble.
------------------ -------------------
"Term Loan Agreement" is defined in the first recital.
------------------- -------------
-2-
<PAGE>
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
------
in the State of New York.
SECTION 1.2. Term Loan Agreement Definitions. Unless otherwise
-------------------------------
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Term Loan Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
------------------
in the Term Loan Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Security Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. Each Grantor hereby assigns and
-----------------
pledges to the Administrative Agent for its benefit and the ratable benefit of
each of the Secured Parties, and hereby grants to the Administrative Agent for
its benefit and the ratable benefit of each of the Secured Parties, a security
interest in all of its right, title and interest in and to the following,
whether now owned or hereafter acquired by such Grantor (the "Collateral"):
----------
(a) all equipment, machinery, apparatus or tools in all forms of
such Grantor, including:
(i) all plate processing, cutting, tube honing, burning,
sawing, shearing, grinding, polishing, hot-rolling,
and cold-finishing equipment;
(ii) all bar, tubing and pipe, plate, sheet and other
metal product finishing equipment;
(iii) all lighting and power equipment;
(iv) all heating, ventilating, sprinkling, water, power
and communications equipment;
(v) all cleaning equipment;
(vi) all lift, elevator and escalator equipment;
(vii) all electrical equipment; and
-3-
<PAGE>
(viii) all computer and other electronic data processing
hardware, integrated computer systems, central
processing units, memory units, display terminals,
printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices
and other related computer hardware; and all firmware
associated with all of the foregoing in this clause
------
2.1(a),
------
wherever located, together with all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
and all accessories related thereto, and any of the foregoing which shall
constitute fixtures under applicable law (any and all of the foregoing being the
"Equipment");
---------
(b) all Mobile Assets of such Grantor;
(c) all general intangibles (excluding intellectual property)
relating to the Equipment and the Mobile Assets;
(d) the Collateral Account and all funds held therein and all
certificates and instruments, if any, from time to time
representing or evidencing the Collateral Account;
(e) all investments, if any, from time to time held in the
Collateral Account; all certificates and instruments, if
any, from time to time representing or evidencing such
investments; all securities, instruments, security
entitlements, financial assets and investment property; and
all interest, earnings and proceeds in respect thereof;
(f) all books, records, writings, data bases, information and
other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to,
any of the foregoing in this Section 2.1; and
-----------
(g) all rents, profits, returns, income and proceeds of and from
any and all of the foregoing Collateral (including proceeds
which constitute property of the types described in clauses
-------
(a), (b), (c), (d) (e) and (f), proceeds deposited from time
--- --- --- --- --- ---
to time in the Collateral Account of any Grantor, and, to
the extent not otherwise included, all payments under
insurance (whether or not the Administrative Agent is the
loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include (x) any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained,
which required consents, each Grantor agrees to use its best efforts in
-4-
<PAGE>
obtaining and (y) any inventory (including raw materials, work-in-process,
supplies and finished goods), accounts receivable (including sellers' rights
relating thereto, all contracts and contract rights relating thereto and all
books and records relating thereto), all collection accounts, deposit accounts
and other bank accounts relating to collection of the foregoing, together with
the proceeds and products of all of the foregoing, which secures or is purported
to secure obligations under the Revolving Credit Agreement.
SECTION 2.2. Security for Obligations. This Security Agreement
------------------------
secures the payment of all Obligations of the Borrower Grantor now or hereafter
existing under the Term Loan Agreement, the Term Notes and each other Loan
Document to which the Borrower Grantor is or may become a party, whether for
principal, interest, costs, fees, expenses or otherwise, and all obligations of
each other Grantor and each other Obligor now or hereafter existing under this
Security Agreement and each other Loan Document to which such other Grantor or
such other Obligor is or may become a party (all such obligations of the
Borrower Grantor, such other Grantor and such other Obligor collectively
referred to herein as the "Secured Obligations").
-------------------
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This
-----------------------------------------------
Security Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full in
cash of all Secured Obligations,
(b) be binding upon each Grantor, its successors, transferees
and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the
Administrative Agent and each other Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
----------
assign or otherwise transfer (in whole or in part) any Term Note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender under any Loan Document (including this Security Agreement) or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Section 10.11 and Article IX of the Term Loan
Agreement. Upon the payment in full in cash of all Secured Obligations, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to such Grantor. Upon any such termination, the
Administrative Agent will, at such Grantor's sole expense, execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence such termination. Upon any sale or other transfer of Collateral
permitted by the terms of Section 7.2.6 of the Term Loan Agreement, the security
interest created hereunder in such Collateral (but not in the proceeds thereof)
shall be deemed to be automatically released and the Administrative Agent will,
at such Grantor's sole expense, execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such release.
-5-
<PAGE>
SECTION 2.4. Grantors Remain Liable. Anything herein to the contrary
----------------------
notwithstanding
(a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set
forth therein, and shall perform all of its duties and
obligations under such contracts and agreements to the same
extent as if this Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release any Grantor from any of
its duties or obligations under any such contracts or
agreements included in the Collateral, and
(c) neither the Administrative Agent nor any other Secured Party
shall have any obligation or liability under any such
contracts or agreements included in the Collateral by reason
of this Security Agreement, nor shall the Administrative
Agent or any other Secured Party be obligated to perform any
of the obligations or duties of any Grantor thereunder or to
take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the
--------------------------
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Term Loan
Agreement, any Term Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Term
Note
(i) to assert any claim or demand or to enforce any right
or remedy against the Borrower Grantor, any other
Obligor or any other Person under the provisions of
the Term Loan Agreement, any Term Note, any other
Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing any Secured
Obligations;
(c) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations or
any other extension, compromise or renewal of any Secured
Obligations;
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and
shall not be subject to (and each Grantor hereby waives any
right to or claim of) any defense or setoff, counterclaim,
recoupment or termination
-6-
<PAGE>
whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Secured
Obligations or otherwise;
(e) any amendment to, rescission, waiver, or other modification
of, or any consent to departure from, any of the terms of
the Term Loan Agreement, any Term Note or any other Loan
Document;
(f) any addition, exchange, release, surrender or non-perfection
of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or
consent to departure from any guaranty, for any of the
Secured Obligations; or
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of,
the Borrower Grantor, any other Obligor, or any surety or
any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. Each Grantor hereby
--------------------------------
agrees that it will not exercise any rights which it may acquire by reason of
any payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the prior payment in full in cash of all Secured Obligations.
Any amount paid to any Grantor on account of any payment made hereunder prior to
the payment in full in cash of all Secured Obligations shall be held in trust
for the benefit of the Secured Parties and each holder of a Term Note and shall
immediately be paid to the Secured Parties and each holder of a Term Note and
credited and applied against the Secured Obligations, whether matured or
unmatured, in accordance with the terms of the Term Loan Agreement; provided,
--------
however, that if
- -------
(a) such Grantor has made payment to the Secured Parties and
each holder of a Term Note of all or any part of the Secured
Obligations, and
(b) all Secured Obligations have been paid in full in cash,
each Secured Party and each holder of a Term Note agrees that, at such Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to such Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
such Grantor of an interest in the Secured Obligations resulting from such
payment by such Grantor. In furtherance of the foregoing, for so long as any
Secured Obligations remain outstanding, such Grantor shall refrain from taking
any action or commencing any proceeding against the Borrower Grantor or any
other Obligor (or its successors or assigns, whether in connection with a
bankruptcy proceeding or otherwise) to recover any amounts in respect of
payments made under this Security Agreement to any Secured Party or any holder
of a Term Note.
-7-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to each Secured Party as set forth in
this Article.
SECTION 3.1. Location of Collateral, etc. All of such Grantor's
---------------------------
Equipment and Collateral Accounts of such Grantor are located at the places
specified in Item A and Item B of Schedule I hereto. None of the Equipment has,
------ ------ ----------
within the four months preceding the date of this Security Agreement, been
located at any place other than the places specified in Item A or C of Schedule
---- - - --------
I hereto except as set forth in a footnote thereto. The place(s) of business
- -
and chief executive office of such Grantor and the office(s) where such
Grantor keeps its records concerning the general intangibles relating to the
Equipment, are located at the address set forth in Item C of Schedule I hereto.
------ ----------
Such Grantor has no trade names other than those set forth in Item D of
------
Schedule I hereto. During the four months preceding the date hereof, such
- ----------
Grantor has not been known by any legal name different from the one set forth on
the signature page hereto, nor has such Grantor been the subject of any merger
or other corporate reorganization, except as set forth in Item E of Schedule I
------ ----------
hereto. All Mobile Assets of such Grantor operate out of the locations
specified in Item F of Schedule I hereto.
------ ----------
SECTION 3.2. Ownership, No Liens, etc. Such Grantor owns its
------------------------
Collateral free and clear of any Lien, security interest, charge or encumbrance
except for the security interest created by this Security Agreement and except
as permitted by the Term Loan Agreement. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in favor of
the Administrative Agent relating to this Security Agreement or as have been
filed in connection with Liens permitted pursuant to Section 7.2.2 of the Term
Loan Agreement.
SECTION 3.3. Possession and Control. Such Grantor has exclusive
----------------------
possession and control of its Equipment and Mobile Assets.
SECTION 3.4. Validity, etc. This Security Agreement creates
-------------
(a) a valid first-priority security interest in the Collateral
(other than Mobile Assets), securing the payment of the
Secured Obligations, all filings and other actions necessary
or desirable to perfect and protect such security interest
have been duly taken; and
(b) a valid security interest in each Mobile Asset securing the
payment of the secured Obligations and upon the recordation
or notation of the lien of the Administrative Agent on the
certificate of title in respect of such Mobile Asset, such
security interest will be a valid, first-priority, perfected
security interest.
-8-
<PAGE>
SECTION 3.5. Authorization, Approval, etc. Except as have been
----------------------------
obtained or made and are in full force and effect, no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by such Grantor of the security interest
granted hereby or for the execution, delivery and
performance of this Security Agreement by such Grantor, or
(b) for the perfection of or the exercise by the Administrative
Agent of its rights and remedies hereunder.
SECTION 3.6. Compliance with Laws. Such Grantor is in compliance
--------------------
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which might have a Material Adverse Effect or
which might materially adversely affect the value of the Collateral or the worth
of the Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. General. Each Grantor covenants and agrees that, so
-------
long as any portion of the Secured Obligations shall remain unpaid, such Grantor
will, unless the Required Lenders shall otherwise consent in writing, perform,
comply with and be bound by the obligations set forth in this Article.
SECTION 4.2. As to Equipment and Mobile Assets. Such Grantor hereby
---------------------------------
agrees that it shall
(a) keep all the Equipment at and operate all Mobile Assets out
of the places therefor specified in Section 3.1 or, upon 30
-----------
days' prior written notice to the Administrative Agent, at
such other places in a jurisdiction where all
representations and warranties set forth in Article III
-----------
(including Section 3.4 shall be true and correct, and all
-----------
action required pursuant to the first sentence of Section
-------------- -------
4.7 shall have been taken with respect to the Equipment;
---
(b) cause the Equipment and Mobile Assets to be maintained and
preserved in the same condition, repair and working order as
of the date of this Security Agreement, ordinary wear and
tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any loss or damage
to any of the Equipment or Mobile Assets, as quickly as
practicable after the occurrence thereof, make or cause to
be made all repairs, renewals, replacements, and other
improvements so that its business carried on in connection
therewith may be properly conducted at all
-9-
<PAGE>
times unless the Borrower determines in good faith that the
continued maintenance of any of such properties is no longer
economically desirable; and promptly furnish to the
Administrative Agent a statement respecting any loss or
damage in excess of $250,000 to any of the Equipment or
Mobile Assets; and
(c) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and
supplies) against, the Equipment and the Mobile Assets,
except to the extent the validity thereof is being contested
in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP have been set
aside.
SECTION 4.3. As to the Collateral Account. (a) Promptly upon receipt,
----------------------------
or notice of any pending receipt, of any Collateral Proceeds in respect of an
Asset Disposition (or related Asset Disposition) of at least $5,000,000 to the
extent provided in Section 7.2.6 of the Term Loan Agreement, any Insurance
Proceeds in excess of $500,000 or any Net Awards in excess of $500,000 by any
Grantor, (i) such Grantor will establish (if not already established on or prior
to the date of such Grantor's receipt of any such Collateral Proceeds, Insurance
Proceeds or Net Awards) a deposit account with the Administrative Agent that
will be maintained pursuant to any agreement that the Administrative Agent may
reasonably request, (its "Collateral Account" and, together with the Collateral
------------------
Account of each other Grantor, the "Collateral Account")) and such Grantor shall
------------------
not commingle any Collateral Proceeds, Insurance Proceeds and Net Awards, and
shall hold separate and apart from all other property, all such Collateral
Proceeds, Insurance Proceeds and Net Awards in express trust for the benefit of
the Administrative Agent until delivery thereof is made to the Administrative
Agent; and (ii) such Grantor will ensure that no funds, other than Collateral
Proceeds, Insurance Proceeds and Net Awards, will be paid to its Collateral
Account. The Administrative Agent shall maintain the Collateral Account until
amounts due to all Secured Parties have been paid in full in cash to such
Secured Parties.
(b) The Administrative Agent shall apply such amount of proceeds
as soon as practicable after receipt as follows:
(i) if a Default has occurred or an Event of Default has
occurred and is continuing, and the Secured
Obligations have been accelerated, to the
Administrative Agent in an amount equal to the fees
and expenses incurred by the Administrative Agent
pursuant to Section 6.2(b) which are unpaid as of the
--------------
date of acceleration, and to any Secured Party which
has theretofore advanced or paid any such fees or
expenses owed to the Administrative Agent in the
amount thereof so advanced or paid by such Secured
Party;
(ii) provided that no Default shall have occurred or no
Event of Default shall have occurred or be
continuing, (A) any Trust Moneys constituting
Insurance Proceeds or Net Awards may be withdrawn by
such Grantor pursuant to clause (c) hereof to be
----------
-10-
<PAGE>
applied to effect a Restoration; or (B) in accordance
with Section 7.2.6 of the Term Loan Agreement
governing Asset Dispositions, any Trust Moneys
constituting Collateral Proceeds, may be withdrawn by
such Grantor pursuant to clause (d) hereof.
----------
(c) To the extent that any Trust Moneys consist of either
Insurance Proceeds or Net Awards received by the
Administrative Agent and such Insurance Proceeds or Net
Awards may be applied by any Grantor to effect a Restoration
of the affected Collateral, and such Grantor shall provide
the Administrative Agent with prompt written notice
describing the nature and extent of damage or destruction
and such Grantor's best estimate of the cost of Restoration
or the nature and extent of the partial Taking which may
result and the Insurance Proceeds or Net Awards may be
withdrawn by such Grantor and shall be paid by the
Administrative Agent, upon receipt by the Administrative
Agent of the following:
(i) Officers' Certificate. An Officers' Certificate of
---------------------
such Grantor, dated not more than 30 days prior to the
date of the application for the withdrawal and payment
of such Trust Money that (A) expenditures have been
made, or costs incurred, by such Grantor in a
specified amount to make certain repairs, rebuildings
and replacements of the Collateral, which shall be
briefly described, and stating the fair market value
thereof at the date of the expenditure or incurrence
thereof by such Grantor; (B) there is no outstanding
Indebtedness other than costs for which payment is
being requested, for the purchase price or
construction of such repairs, rebuildings or
replacements, or for labor, wages, materials or
supplies in connection with the making thereof, which,
if unpaid, might become the basis of a vendor's,
mechanic's, laborer's, materialman's statutory or
other similar Lien upon any Collateral; (C) no Default
under the Loan Documents shall have occurred or Event
of Default under the Loan Documents shall have
occurred and be continuing; and (D) all conditions
precedent provided for herein and in the Loan
Documents (if any) relating to such withdrawal and
payment have been complied with.
(ii) Opinion of Counsel. An Opinion of Counsel
------------------
substantially stating that (A) all conditions
precedent provided for herein and in the Loan
Documents (if any) relating to such withdrawal and
payment have been complied with; and (B) the
Administrative Agent has a valid and perfected Lien on
such repairs, rebuildings and replacements, that the
same and every part thereof are subject to no Liens
prior to the Lien of the Loan Documents, except
Permitted Liens.
(iii) Architect's or Engineer's Certificate. An architect's
-------------------------------------
or engineer's certificate stating that (A) the
Collateral is capable of being restored, prior to the
maturity of the Term Loan Agreement, to substantially
the same condition as existed prior to the casualty or
Taking (as defined in the Mortgage); (B) the aggregate
estimated direct and indirect costs of such
Restoration; (C) the estimated time for completion of
such Restoration (which time shall not exceed one year
from the date of the damage, destruction or partial
Taking); and (D) as to any Taking, that the property
-11-
<PAGE>
taken in such Taking, or sold under threat thereof, is
not necessary to such Grantor's customary use or
occupancy of such Collateral.
(iv) Deposit of Excess Amount. In the event that the
------------------------
estimated cost of Restoration as set forth in the
architect's or engineer's certificate (and such
revisions to such estimate as are from time to time
made) exceeds the aggregate amount of net Insurance
Proceeds or Net Awards actually received from time to
time in respect thereof, such Grantor shall deposit
the amount of such excess with the Administrative
Agent.
(v) Final Request Documentation. If such request is the
---------------------------
final request for any payment, in addition to the
documentation required by subclauses (i), (ii) and
-------------- ----
(iii) above, such request shall be accompanied by (A)
-----
a legal opinion or a title insurance policy, binder or
endorsement satisfactory to the Administrative Agent
confirming that there has not been filed with respect
to all or any part of the applicable Collateral any
Lien which is not either discharged of record or
bonded and which could have priority over the Lien of
the applicable Mortgage and (B) an Officers'
Certificate stating that all occupancy certificates,
operating and other permits, licenses, waivers, other
documents, or any combination of the foregoing
required by law in connection with or as a result of
such Restoration have been obtained;
provided, however, that compliance by such Grantor of the provisions set forth
- -------- -------
in clauses (c)(ii) through (c)(v) above shall only be required if the estimated
------- ------- ------
cost of such Restoration exceeds $2,000,000 or such Restoration cannot be
completed within one year from the date of damage, destruction or partial
Taking.
Upon compliance with the foregoing provisions of this Section 4.3(c), the
--------------
Administrative Agent shall pay, to the extent received by it and deposited in
the applicable Collateral Account, not fewer than five nor more than 12 Business
Days, after the receipt of a written request of the applicable Grantor an amount
of Trust Moneys and excess amounts deposited, of the character aforesaid equal
to the amount of the expenditures or costs stated in the Officers' Certificate
required by clause (i) of this Section 4.3(c), or the fair value to such
---------- --------------
Grantor, as the case may be, of such repairs, rebuildings and replacements
covered by such Officers' Certificate, whichever is less. All Insurance
Proceeds or Net Awards not used for Restoration as set forth in this Section 4.3
-----------
(c) or for repayment or prepayment of the Term Loans as set forth in the Term
- ---
Loan Agreement shall be used in the manner provided in Section 4.3(e).
--------------
(d) To the extent Trust Moneys consist of Collateral Proceeds
and any Grantor intends to use such funds to acquire
additional property, buildings, fixtures, equipment and
other items as provided in the Term Loan Agreement, within
540 days from date of receipt of Collateral Proceeds into
the Collateral Account, such Trust Moneys shall be paid by
the Administrative Agent to such Grantor upon receipt of a
request by the Administrative Agent and upon receipt by the
Administrative Agent of the following:
-12-
<PAGE>
(i) Notice. A notice which shall (A) refer to this Section
------ -------
4.3(d), (B) contain all documents referred to below,
------
(C) describe with particularity the Collateral Proceeds
and the Asset Disposition from which such Collateral
Proceeds were received, and (D) describe with
particularity the investment to be made with respect to
the released Collateral Proceeds;
(ii) Officers' Certificate. An Officer's Certificate
---------------------
certifying that (A) the release of the Collateral
Proceeds complies with the terms and conditions of
Section 7.2.6 of the Term Loan Agreement, (B) there is
no Default in effect or Event of Default in effect or
continuing on the date thereof under the Term Loan
Agreement, (C) the release of the Collateral Proceeds
will not result in a Default or Event of Default under
the Term Loan Agreement, (D) the parties executing any
and all documents required under this Section 4.3(d)
--------------
were duly authorized to do so, and (E) all conditions
precedent and covenants provided for in the Term Loan
Agreement (if any) relating to such release and
application of the Collateral Proceeds have been
complied with;
(iii) Real Property Investment. If the Collateral Proceeds
------------------------
are to be invested in real property: (A) a Mortgage or
other instrument or instruments in recordable form
sufficient to grant to the Administrative Agent for the
benefit of the Secured Parties (1) substantially the
same rights and remedies in respect of such real
property as granted thereto under the Mortgages
executed and delivered on the date hereof and (2) a
valid first priority mortgage Lien on such real
property subject to no Liens other than Permitted Liens
permitted under the Mortgages delivered on the date
hereof and, if the real property is a leasehold or
easement interest, such Mortgage or other instrument or
instruments shall include normal and customary
provisions with respect thereto, in each case together
with evidence of the filing of all such financing
statements and other instruments as may be necessary to
perfect such Lien; (B) a policy of title insurance (or
a paid commitment to issue title insurance) insuring
that the Lien of the instruments delivered pursuant to
clause (A) above constitutes a valid and perfected
----------
first priority mortgage Lien on such real property in
an aggregate amount equal to the lesser of the fair
market value of the real property and the then
outstanding principal amount of the Secured
Obligations, together with an Officers' Certificate
stating that any specific exceptions to such title
insurance are Permitted Liens, together with such
endorsements and other opinions of the type included in
the title insurance policy or otherwise delivered to
the Administrative Agent on the date hereof with
respect to such Collateral; (C) in the event such real
property has a fair market value in excess of $500,000,
a survey with respect thereto; (D) an Officers'
Certificate stating that such Grantor has caused there
to be conducted by a reputable expert a review and
analysis of the environmental conditions relating to
such real property and that, in the reasonable and good
faith judgment of the issuer thereof such real property
does not contain any conditions which would cause a
prudent institutional lender to decline to fund loans
secured by such real property, together with a copy of
the written report of such expert; and (E) such further
documents, opinions, certificates
-13-
<PAGE>
or instruments as are customarily provided to
institutional mortgage lenders and as the
Administrative Agent may require.
(iv) Personal Property Investment. If the released
----------------------------
Collateral Proceeds are not invested in real property:
(A) an instrument sufficient to grant to the
Administrative Agent, for the benefit of the Secured
Parties (1) substantially the same rights and remedies
in respect of such personal property interest as
granted thereto under the Security Documents executed
and delivered on the date hereof and (2) a valid first
priority Lien on such personal property interest
subject to no Liens other than Permitted Liens,
together with evidence of the filing of such financing
statements and other instruments as may be necessary to
perfect such Liens; (B) evidence of payment or a
closing statement indicating payments to be made by the
applicable Grantor of all filing fees, recording
charges, transfer taxes and other costs and expenses,
including reasonable legal fees and disbursements of
counsel for the Administrative Agent (and any local
counsel), that may be incurred to validly and
effectively subject such personal property to the Lien
of any Security Document; and
(e) At its option, the Administrative Agent may apply Insurance
Proceeds or Net Awards which are not used as set forth in
Section (c) herein (or for prepayment as provided for in the
-----------
Term Loan Agreement), as follows:
(i) Partial Taking or Condemnation. Funds received shall
------------------------------
be applied (A) to the payment of the reasonable costs
and expenses incurred by the Administrative Agent or
its agents in obtaining the Insurance Proceeds and Net
Awards, including the fees and expenses of attorneys
and insurance and other experts and consultants, the
costs of litigation, arbitration, mediation,
investigations and other judicial, administrative or
other proceedings and all other out-of-pocket expenses;
(B) to the payment of, or the application to, any
Secured Obligation (other than prepayment of the Term
Notes); (C) to fulfill any of the other covenants
contained in any of the Loan Documents as the
Administrative Agent may determine in its sole
discretion; or (D) to the relevant Grantor.
(ii) Total Taking or Condemnation. Funds received shall be
----------------------------
applied (A) first, to the payment of the reasonable
costs and expenses incurred by the Administrative Agent
in obtaining any such Insurance Proceeds or Net Awards,
including the fees and expenses of attorneys and
insurance and other experts and consultants, the costs
of litigation, arbitration, mediation, investigations
and other judicial, administrative or other proceedings
and all other out-of-pocket expenses; (B) second, to
the payment of principal of the Term Notes and any
interest accrued and unpaid thereon; (C) third, to the
payment of any Secured Obligations (other than as
provided in clause (B) above); (D) fourth, to fulfill
----------
any of the other covenants in the Loan Documents as the
Administrative Agent may determine, and (E) fifth, the
balance, if any, to the relevant Grantor.
-14-
<PAGE>
If, prior to the receipt by the Administrative Agent of Insurance Proceeds
or Net Awards, the Collateral shall have been sold on foreclosure, the
Administrative Agent shall have the right to receive such Insurance Proceeds or
Net Awards to the extent of any deficiency found to be due upon such sale, with
legal interest thereon, whether or not a deficiency judgment shall have been
sought or recovered or denied, and the reasonable attorneys' fees, costs and
disbursements incurred by the Administrative Agent in connection with the
collection of such Net Award or Insurance Proceeds.
(f) Trust Moneys shall be invested in Cash Equivalents as
requested by the applicable Grantor and approved by the
Administrative Agent, and all interest thereon shall be
applied as provided in this Section 4.3.
-----------
SECTION 4.4. As to Collateral.
----------------
(a) Until the occurrence and continuance of a Default of the
nature set forth in Section 8.1.9 of the Term Loan
Agreement or an Event of Default, and such time as the
Administrative Agent shall notify such Grantor of the
revocation of such power and authority each Grantor will,
at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any of the Collateral,
including the taking of such action with respect to such
collection as the Administrative Agent may reasonably
request following the occurrence of a Default of the nature
set forth in Section 8.1.9 of the Term Loan Agreement or an
Event of Default or, in the absence of such request, as such
Grantor may deem advisable, and may grant, in the ordinary
course of business (except as otherwise permitted under the
Term Loan Agreement), to any party obligated on any of the
Collateral, any rebate, refund or allowance to which such
party may be lawfully entitled, and may accept, in
connection therewith, the return of goods, the sale or lease
of which shall have given rise to such Collateral. The
Administrative Agent, however, may, at any time following a
Default of the nature set forth in Section 8.1.9 of the Term
Loan Agreement or an Event of Default, whether before or
after any revocation of such power and authority or the
maturity of any of the Secured Obligations, notify any
parties obligated on any of the Collateral to make payment
to the Administrative Agent of any amounts due or to become
due thereunder and enforce collection of any of the
Collateral by suit or otherwise and surrender, release, or
exchange all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the
original period) any indebtedness thereunder or evidenced
thereby. Upon request of the Administrative Agent following
a Default of the nature set forth in Section 8.1.9 of the
Term Loan Agreement or an Event of Default, each Grantor
will, at its own expense, notify any parties obligated on
any of the Collateral to make payment to the Administrative
Agent of any amounts due or to become due thereunder.
(b) The Administrative Agent is authorized to endorse, in the
name of such Grantor, any item, howsoever received by the
Administrative Agent, representing any payment on or other
proceeds of any of the Collateral.
-15-
<PAGE>
SECTION 4.5. Insurance. Each Grantor will maintain or cause to be
---------
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Mobile Assets) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Term Loan Agreement and will, upon the request of the
Administrative Agent, furnish a certificate of a reputable insurance broker
setting forth the nature and extent of all insurance maintained by such Grantor
in accordance with this Section. Without limiting the foregoing, such Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the
Administrative Agent as loss payee.
(b) Each policy for liability insurance shall show the
Administrative Agent as an additional insured.
(c) Each insurance policy shall provide that at least 30 days'
prior written notice of cancellation or of lapse shall be
given to the Administrative Agent by the insured.
(d) Such Grantor shall, if so requested by the Administrative
Agent, deliver to the Administrative Agent a copy of each
insurance policy.
(e) All payments in respect of property insurance if required
pursuant to the terms of a Mortgage or any other Loan
Document to be delivered to the Administrative Agent shall
be deposited to the Collateral Account (as provided in
Section 4.3), and if there shall be no Collateral Account
-----------
shall be paid to such Grantor.
SECTION 4.6. Transfers and Other Liens. Each Grantor shall not:
-------------------------
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by
Section 7.2.6 of the Term Loan Agreement; or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to
secure Indebtedness of any Person or entity, except for the
security interest created by this Security Agreement and
except as permitted by the Term Loan Agreement.
SECTION 4.7. Further Assurances, etc. Each Grantor agrees that, from
-----------------------
time to time at its own expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may request, in order
to perfect, preserve and protect any security interest granted or purported to
be granted hereby or to enable the Administrative Agent to
-16-
<PAGE>
exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, such
Grantor will
(a) at the request of the Administrative Agent, mark
conspicuously each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory
to the Administrative Agent, indicating that such document
or Collateral is subject to the security interest granted
hereby;
(b) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices
(including any assignment of claim form under or pursuant to
the federal assignment of claims statute, 31 U.S.C. (S)
3726, any successor or amended version thereof or any
regulation promulgated under or pursuant to any version
thereof), as may be necessary or desirable, or as the
Administrative Agent may request, in order to perfect and
preserve the security interests and other rights granted or
purported to be granted to the Administrative Agent hereby;
and
(c) furnish to the Administrative Agent, from time to time at
the Administrative Agent's request, statements and schedules
further identifying and describing the Collateral and such
other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in
reasonable detail; and
(d) if a Default of the nature described in Section 8.1.1 of the
Term Loan Agreement or an Event of Default shall occur, then
each Grantor which (i) owns any Mobile Assets or (ii)
acquires any Mobile Assets following such Default or Event
of Default, shall, within 30 days of such Default or Event
of Default or upon such acquisition, as the case may be,
take all steps that are necessary or desirable to ensure
that the security interest granted in favor of the
Administrative Agent in such Mobile Assets will be a valid,
first priority, perfected security interest.
With respect to the foregoing and the grant of the security interest hereunder,
such Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law. A carbon, photographic or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each
-----------------------------------------------
Grantor hereby irrevocably appoints the Administrative Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or
-17-
<PAGE>
otherwise, from time to time in the Administrative Agent's discretion, following
the occurrence and continuation of a Default of the nature set forth in Section
8.1.9 of the Term Loan Agreement or an Event of Default, to take any action and
to execute any instrument which the Administrative Agent may deem necessary or
advisable to accomplish the purposes of this Security Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with
clause (a) above;
----------
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem
necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the
Administrative Agent with respect to any of the Collateral;
and
(d) to perform the affirmative obligations of such Grantor
hereunder (including all obligations of such Grantor
pursuant to Section 4.7).
-----------
Such Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent May Perform. If any Grantor fails
--------------------------------
to perform any agreement contained herein, the Administrative Agent may itself
(but shall not be obligated to) perform, or cause performance of, such
agreement, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by such Grantor pursuant to Section 6.2.
-----------
SECTION 5.3. Administrative Agent Has No Duty. In addition to, and
--------------------------------
not in limitation of, Section 2.4, the powers conferred on the Administrative
-----------
Agent hereunder are solely to protect its interest (on behalf of the Secured
Parties) in the Collateral and shall not impose any duty on it to exercise any
such powers. Except for reasonable care of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is required
---------------
to exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent
-------- -------
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as any Grantor reasonably requests in writing at times other than upon the
occurrence
-18-
<PAGE>
and during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
----------------
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require each Grantor to, and such Grantor hereby
agrees that it will, at its expense and upon request
of the Administrative Agent forthwith, assemble all or
part of the Collateral as directed by the
Administrative Agent and make it available to the
Administrative Agent at a place to be designated by
the Administrative Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels
at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other
terms as the Administrative Agent may deem
commercially reasonable. Each Grantor agrees that, to
the extent notice of sale shall be required by law, at
least ten days' prior notice to such Grantor of the
time and place of any public sale or the time after
which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent
shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private
sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without
further notice, be made at the time and place to which
it was so adjourned.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in
the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts
payable to the Administrative Agent pursuant to Section 6.2)
-----------
in whole or in part by the Administrative Agent for the
ratable benefit of the Secured Parties against,
-19-
<PAGE>
all or any part of the Secured Obligations in such order as
the Administrative Agent shall elect. Any surplus of such
cash or cash proceeds held by the Administrative Agent and
remaining after payment in full in cash of all the Secured
Obligations shall be paid over to the applicable Grantor or
to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 6.2. Indemnity and Expenses.
----------------------
(a) Each Grantor jointly and severally agrees to indemnify the
Administrative Agent from and against any and all claims,
losses and liabilities arising out of or resulting from this
Security Agreement (including enforcement of this Security
Agreement), except claims, losses or liabilities resulting
solely from the Administrative Agent's gross negligence or
wilful misconduct.
(b) Each Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the
Administrative Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization
upon, any of the Collateral, and
(iii) the exercise or enforcement of any of the rights of
the Administrative Agent or the Secured Parties
hereunder, or
(iv) the failure by any Grantor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan
-------------
Document executed pursuant to the Term Loan Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any
---------------
provision of this Security Agreement nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be), and then such waiver
-20-
<PAGE>
or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing or by facsimile
addressed, delivered or transmitted, if to the Borrower Grantor or the
Administrative Agent, to such party at its address or facsimile number set forth
in the Term Loan Agreement and if to a Subsidiary Grantor, addressed to it in
care of the Borrower Grantor at the address or facsimile number of the Borrower
Grantor set forth in the Term Loan Agreement and in each case, to any other
address or facsimile number given to the sender of any notice or communication
pursuant to the terms of this Section 7.3. Any notice, if mailed and properly
-----------
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted (and electronic
confirmation of receipt thereof has been received).
SECTION 7.4. Additional Grantors. Upon the execution and delivery by
-------------------
any other Person of an instrument in the form of Annex I hereto, such
-------
Person shall become a "Subsidiary Grantor" and a "Grantor" hereunder with the
same force and effect as if originally named as a Subsidiary Grantor and a
Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any other Grantor hereunder. The rights and obligations
of each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Security Agreement.
SECTION 7.5. Section Captions. Section captions used in this
----------------
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this
------------
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.7. Counterparts. This Security Agreement may be executed
------------
by the parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. Governing Law, Entire Agreement, etc. THIS SECURITY
------------------------------------
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
-21-
<PAGE>
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
-22-
<PAGE>
IN WITNESS WHEREOF, each Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
-------------------------------
Name: Charles P. Gallopo
Title: Vice President and Chief
Financial Officer
FLEET NATIONAL BANK, as the
Administrative Agent
By /s/ James T. Anderson
-------------------------------
Name: James T. Anderson
Title: Managing Director
<PAGE>
SCHEDULE I
to Security Agreement
Earle M. Jorgensen Company
Item A. Location of Equipment
---------------------
All of the equipment is located at the locations set forth on the
attached Schedule I.C
Item B. Location of Collateral Accounts
-------------------------------
There are no collateral accounts.
Item C. Place(s) of Business and Chief Executive Office
-----------------------------------------------
The places of business and chief executive office are set forth on the
attached Schedule I.C
Item D. Trade Names
-----------
DOMESTIC:
EMJ
Earle M. Jorgensen Holding Company, Inc.
Earle M. Jorgensen Company
Jorgensen Steel and Aluminum
Kilsby Roberts
FOREIGN:
Earle M. Jorgensen (U.K.) Limited (Sold January 29, 1998; names now
---------------------------------
used by purchaser)
Kilsby-Jorgensen Steel & Aluminum Limited
KJ Ltd.
Kilsby Roberts Ltd.
Earle M. Jorgensen (Canada), Inc.
---------------------------------
Kilsby-Jorgensen Steel & Aluminum, Inc.
KJ Inc.
Bowsteel Ltd.
Kilsby-Jorgensen Steel & Aluminum S.A. de C.V. Inc. (Sold September 8,
---------------------------------------------------
1997; names now used by purchaser)
Kilsby-Jorgensen Steel & Aluminum S.A. de C.V. Inc.
<PAGE>
Item E. Merger or Other Corporate Reorganization
----------------------------------------
There are no mergers or other corporate reorganizations.
Item F. Mobile Assets
-------------
All of the Mobile Assets are operated out of the locations listed on
Schedule I.C.
<PAGE>
SCHEDULE I.C
to Security Agreement
Earle M. Jorgensen Company
EQUIPMENT LOCATIONS, PLACES OF BUSINESS AND CHIEF EXECUTIVE OFFICE
------------------------------------------------------------------
Corporate Office Address
(Orange County)
3050 East Birch Street
Brea, California 92621
OWNED PROPERTIES
----------------
City Address
---- -------
1. Boston 59 South Street
(Middlesex County) Hopkinton, MA 01748
2. Charlotte 4015 Westinghouse Blvd.
(Mecklenburg County) Charlotte, NC 28273
3. Chicago 1900 Mitchell Blvd.
(Schaumburg) Schaumburg, IL 60193
(Cook County)
4. Cleveland 2060 Enterprise Parkway
(Summit County) Twinsburg, OH 44087
5. Cleveland Plate 26400 Richmond Road
(Cuyahoga County) Cleveland, OH 44146
6. Dallas Service Center/ 2030 W. Commerce Street
Dallas Plate Dallas, TX 75208
(Dallas County)
7. Honolulu 91-104 Kalaeloa Blvd.
(Honolulu County) Kapolei, HI 96707
8. Honolulu 91-239 Kuhela Street
(Culvert Lot, No equipment) Kapolei, HI 96707
(Honolulu County)
<PAGE>
9. Houston 5311 Clinton Drive
(Harris County) Houston, TX 77020
10. Los Angeles Plate 1929 Martin Luther King Blvd.
(Los Angeles County) Lynwood, CA 90262
11. Los Angeles 10650 Alameda St.
(Los Angeles County) Lynwood, CA 90262
12. Minneapolis 1775 101st Avenue N.E.
(Anoka County) Blaine, MN 55449
13. Phoenix 5445 W. Madison St.
(Maricopa County) Phoenix, AZ 85043
(No Mortgage)
14. Tulsa 7311 E. Pine St.
(Tulsa County) Tulsa, OK 74115
15. Tulsa 3116 E. 31st Street
(Tulsa County) Tulsa, OK 74110
16. Plainfield 2301 Airwest Blvd.
(Hendricks County) Plainfield, IN 46168
17. Kansas City 1701 West 25th Street
(Jackson County) Kansas City, MO 64141
(Held for sale; No Liens)
LEASED PROPERTIES
-----------------
CINCINNATI (Hamilton County)
- ----------
691 Redna Terrace
Cincinnati, OH 45215
CITY OF INDUSTRY (Los Angeles County)
- ----------------
3700 S. Capitol Ave.
City of Industry, CA 91749
2
<PAGE>
DAVENPORT (Scott County)
- ---------
3116 W. 73rd St.
Davenport, IA 52806
302 E. 90th Street, Building 2
Davenport, Iowa 52806
DENVER (Adams County)
- ------
6050 Downing St.
Denver, CO 80216
HAYWARD (Alameda County)
- -------
31100 Wiegman Road
Hayward, CA 94544
KANSAS CITY (Jackson County)
- -----------
1800 N. Universal Ave.
Kansas City, MO 64120
7800 East 12th St.
Kansas City, MO
6817 Stadium Drive
Kansas City, MO
LITTLE ROCK (Pulaski County)
- -----------
5207 Scott Hamilton Dr.
Little Rock, AR 72209
MEMPHIS (Shelby County)
- -------
2076 Whitten Rd.
Memphis, TN 38134
MILWAUKEE (Milwaukee County)
- ---------
11610 W. North Ave.
Wauwautosa, WI 53226
(Office space only)
3
<PAGE>
PHILADELPHIA (Bucks County)
- ------------
58 Cabot Blvd.
Langhorne, PA 19047
PORTLAND (Multinomah County)
- --------
6650 N. Ensign St.
Portland, OR 97217
SEATTLE (King County)
- -------
22011 76th Avenue So.
Kent, WA 98032
ST. LOUIS (St. Louis County)
- ---------
3701 Rider Trail South
Earth City, MO 63045
REDFORD (Wayne County)
- -------
25905 Glendale Street
Redford, MI 48239
(Loading dock; No Liens)
ROCKY HILL (Hartford County)
- ----------
KALA Building
2189 Silas Deane Highway, Suite 14
Rocky Hill, CT
(Hartford Sales Office)
ARLINGTON (Tarrant County)
- ---------
5840 West I-20, Suite 115
Arlington, TX 76017
(Dallas Credit Office)
4
<PAGE>
TULSA (Tulsa County)
- -----
2522 North Columbia Place
Tulsa, OK 74110
(Tulsa Services)
(Due to terminate April 30, 1998)
ROSELLE (Cook County)
- -------
110 East Irving Park Road
Suite 401
Rosemont, IL 60172
(Merchandising)
HEADQUARTERS (Orange County)
- ------------
3050 East Birch Street
Brea, CA 92821
5
<PAGE>
ANNEX I
to Security Agreement
SUPPLEMENT TO SECURITY AGREEMENT
This SUPPLEMENT NO. ___, dated as of ___________ __, ____ (this
"Supplement"), to the Security Agreement, dated as of March 24, 1998 (as
----------
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Security Agreement"), among the initial signatories thereto and each
------------------
other Person which from time to time thereafter became a party thereto pursuant
to Section 7.4 thereof (each, individually, a "Grantor", and, collectively, the
-------
"Grantors"), in favor of FLEET NATIONAL BANK, as administrative agent (together
--------
with any successor(s) thereto in such capacity, the "Administrative Agent") for
--------------------
each of the Secured Parties (such and other capitalized terms being used herein
with the meanings provided, or incorporated by reference, in the Security
Agreement), is made by the undersigned.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to that certain Term Loan Agreement, dated as of March
24, 1998 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Term Loan Agreement"), among Earle M. Jorgensen Company,
-------------------
a Delaware corporation (the "Borrower Grantor"), the various financial
----------------
institutions as are, or may from time to time become, parties thereto (each,
individually, a "Lender", and collectively, the "Lenders"), DLJ Capital Funding,
------ -------
Inc., as the syndication agent, Bankers Trust Company, as the documentation
agent, and the Administrative Agent, the Lenders have committed to make Term
Loans to the Borrower Grantor;
WHEREAS, as a condition precedent to the making and maintenance of the Term
Loans under the Term Loan Agreement, the undersigned is required to execute and
deliver this Supplement;
WHEREAS, the undersigned has duly authorized the execution, delivery and
performance of this Supplement and the Security Agreement;
WHEREAS, the Security Agreement provides that additional parties may become
Grantors under the Security Agreement by execution and delivery of an instrument
in the form of this Supplement;
WHEREAS, pursuant to the provisions of Section 7.4 of the Security
Agreement, the undersigned is becoming an Additional Subsidiary Grantor under
the Security Agreement;
WHEREAS, the undersigned is a Subsidiary of the Borrower Grantor; and
<PAGE>
WHEREAS, the undersigned desires to become a Subsidiary Grantor and a
Grantor under the Security Agreement in order to induce the Secured Parties to
continue to maintain the Term Loans under the Term Loan Agreement as
consideration therefor;
NOW, THEREFORE, the undersigned agrees, for the benefit of each Secured
Party, as follows:
SECTION 1. In accordance with the Security Agreement, the undersigned by
its signature below becomes a Subsidiary Grantor and a Grantor under the
Security Agreement with the same force and effect as if it were an original
signatory thereto as a Subsidiary Grantor and a Grantor and the undersigned
hereby
(a) agrees to all the terms and provisions of the Security Agreement
applicable to it as a Subsidiary Grantor and a Grantor thereunder;
(b) assigns and pledges to the Administrative Agent for its benefit
and the ratable benefit of each of the Secured Parties, and grants to the
Administrative Agent for its benefit and the ratable benefit of each of the
Secured Parties, a security interest in all of the following, whether now
or hereafter existing or acquired by the undersigned (its "Collateral"):
----------
(i) all Equipment of the undersigned;
(ii) all Mobile Assets of the undersigned;
(iii) all general intangibles (excluding intellectual property)
relating to the Equipment and the Mobile Assets of the undersigned;
(iv) all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this clause (b); and
----------
(v) all rents, profits, returns, income and proceeds of and
from any and all of the foregoing Collateral (including proceeds which
constitute property of the types described in subclauses (i) through
--------------
(iv) of this clause (b), proceeds deposited from time to time in the
---- ----------
Collateral Account, and, to the extent not otherwise included, all
payments under insurance (whether or not the Administrative Agent is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral);
provided, however, that notwithstanding the foregoing, "Collateral" shall
-------- -------
not include (x) any general intangibles or other rights arising under any
contracts, instruments, licenses or other documents as to which the grant
of a security interest would
-2-
<PAGE>
constitute a violation of a valid and enforceable restriction in favor of a
Person (other than an Affiliate of a Grantor) on such grant, unless and
until any required consents shall have been obtained, which required
consents the undersigned agrees to use its best efforts in obtaining and
(y) any inventory (including raw materials, work-in-process, supplies and
finished goods), accounts receivable (including sellers' rights relating
thereto, all contracts and contract rights relating thereto and all books
and records relating thereto), all collection accounts, deposit accounts
and other bank accounts relating to collection of the foregoing, together
with the proceeds and products of all of the foregoing, which secures or is
purported to secure obligations under the Revolving Credit Agreement;
(c) agrees that the Schedule attached hereto shall be deemed to be a
Schedule thereto; and
(d) represents and warrants that the representations and warranties
made by it as a Subsidiary Grantor and a Grantor thereunder are true and
correct on and as of the date hereof.
In furtherance of the foregoing, each reference to a "Grantor", "Subsidiary
Grantor" or "Additional Subsidiary Grantor" in the Security Agreement shall be
deemed to include the undersigned.
SECTION 2. The undersigned hereby represents and warrants that this
Supplement has been duly authorized, executed and delivered by the undersigned
and constitutes a legal, valid and binding obligation of the undersigned,
enforceable against it in accordance with its terms.
SECTION 3. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect in accordance with its terms.
SECTION 4. In the event any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired.
SECTION 5. Without limiting the provisions of the Term Loan Agreement (or
any other Loan Document, including the Security Agreement), the undersigned
agrees to reimburse the Administrative Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including reasonable attorneys'
fees and expenses of the Administrative Agent.
SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS SUPPLEMENT, THE SECURITY
AGREEMENT AND THE
-3-
<PAGE>
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7. This Supplement hereby incorporates by reference the provisions
of the Security Agreement, which provisions are deemed to be a part hereof, and
this Supplement shall be deemed to be a part of the Security Agreement.
SECTION 8. This Supplement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement.
SECTION 9. The undersigned hereby acknowledges it has received a copy of
that certain Intercreditor Agreement dated as of March 24, 1998, between the
Administrative Agent and the administrative agent under the Revolving Credit
Agreement and hereby agrees to the terms and provisions thereof.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF ADDITIONAL SUBSIDIARY GRANTOR]
By
-------------------------------------
Name:
Title:
ACKNOWLEDGED AND ACCEPTED BY:
FLEET NATIONAL BANK, as
Administrative Agent
By
-------------------------------------
Name:
Title:
-5-
<PAGE>
SCHEDULE I
to Supplement No. __
Security Agreement
([NAME OF ADDITIONAL SUBSIDIARY GUARANTOR])
Item A. Location of Equipment
---------------------
Description Location
----------- --------
1.
2.
3.
Item B. Location of Collateral Accounts
-------------------------------
Contact
Bank Name and Address Account Number Person
--------------------- -------------- -------
1.
2.
3.
Item C. Place(s) of Business and Chief Executive Office
-----------------------------------------------
Item D. Trade Names
-----------
Item E. Merger or Other Corporate Reorganization
----------------------------------------
Item F. Mobile Assets
-------------
<PAGE>
EXHIBIT 4.12
================================================================================
Earle M. Jorgensen Company,
Mortgagor,
to
Fleet National Bank,
as Administrative Agent,
Mortgagee
___________________________________________________
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
___________________________________________________
Dated as of March 24, 1998
This instrument affects certain real and personal property
located in _______ County,
State of ________.
================================================================================
Record and return to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: George R. Hatzmann, Esq.
This instrument was prepared by the above-named attorney.
Notice: This instrument contains inter alia obligations which may provide for:
----- ----
(a) a variable rate of interest and/or
(b) future and/or revolving credit advances or readvances, which when
made, shall have the same priority as advances or readvances made
on the date hereof whether or not (i) any advances or readvances
were made on the date hereof and (ii) any indebtedness is
outstanding at the time any advance or re-advance is made.
Notwithstanding anything to the contrary contained herein, the maximum
principal indebtedness secured under any contingency by this
instrument shall in no event exceed $100,000,000.00.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
<S> <C> <C>
SECTION 1.1. Payment of Secured Obligations................................ 4
SECTION 1.2. Title to Collateral, etc...................................... 5
SECTION 1.3. Title Insurance............................................... 5
SECTION 1.3.1. Title Insurance Policy........................................ 5
SECTION 1.3.2. Title Insurance Proceeds...................................... 5
SECTION 1.4. Recordation................................................... 6
SECTION 1.5. Payment of Impositions, etc................................... 6
SECTION 1.6. Insurance and Legal Requirements.............................. 6
SECTION 1.7. Security Interests, etc....................................... 7
SECTION 1.8. Permitted Contests............................................ 7
SECTION 1.9. Leases........................................................ 8
SECTION 1.10. Compliance with Instruments................................... 8
SECTION 1.11. Maintenance and Repair, etc................................... 8
SECTION 1.12. Alterations, Additions, etc................................... 8
SECTION 1.13. Acquired Property Subject to Lien............................. 9
SECTION 1.14. Assignment of Rents, Proceeds, etc............................ 9
SECTION 1.15. No Claims Against the Mortgagee............................... 10
SECTION 1.16. Indemnification............................................... 10
SECTION 1.17. No Credit for Payment of Taxes................................ 11
SECTION 1.18. Application of Proceeds of Term Loans......................... 11
SECTION 1.19. No Transfer of the Property................................... 11
SECTION 1.20. Security Agreement............................................ 12
SECTION 1.21. Representations and Warranties................................ 13
SECTION 1.22. Mortgagor's Covenants......................................... 13
ARTICLE II
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
SECTION 2.1. Insurance..................................................... 13
SECTION 2.2. Damage, Destruction or Taking; Mortgagor to Give Notice;
Assignment of Awards.......................................... 13
SECTION 2.3. Application of Proceeds and Awards............................ 14
SECTION 2.4. Total Taking and Total Destruction............................ 15
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
ARTICLE III
EVENTS OF DEFAULT; REMEDIES, ETC.
<C> <S> <C>
SECTION 3.1. Events of Default; Acceleration............................... 16
SECTION 3.2. Legal Proceedings; Foreclosure................................ 17
SECTION 3.3. Power of Sale................................................. 17
SECTION 3.4. Uniform Commercial Code Remedies.............................. 18
SECTION 3.5. Mortgagee Authorized to Execute Deeds, etc.................... 18
SECTION 3.6. Purchase of Collateral by Mortgagee........................... 18
SECTION 3.7. Receipt a Sufficient Discharge to Purchaser................... 18
SECTION 3.8. Waiver of Appraisement, Valuation, etc........................ 18
SECTION 3.9. Sale a Bar Against Mortgagor.................................. 19
SECTION 3.10. Secured Obligations to Become Due on Sale..................... 19
SECTION 3.11. Application of Proceeds of Sale and Other Moneys.............. 19
SECTION 3.12. Appointment of Receiver....................................... 20
SECTION 3.13. Possession, Management and Income............................. 20
SECTION 3.14. Right of Mortgagee to Perform Mortgagor's Covenants, etc...... 20
SECTION 3.15. Subrogation................................................... 21
SECTION 3.16. Remedies, etc., Cumulative.................................... 21
SECTION 3.17. Provisions Subject to Applicable Law.......................... 21
SECTION 3.18. No Waiver, etc................................................ 21
SECTION 3.19. Compromise of Actions, etc.................................... 22
ARTICLE IV
DEFINITIONS
SECTION 4.1. Terms Defined in this Mortgage................................ 22
SECTION 4.2. Use of Defined Terms.......................................... 24
SECTION 4.3. Credit Agreement Definitions.................................. 24
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
ARTICLE V
MISCELLANEOUS
<C> <S> <C>
SECTION 5.1. Further Assurances; Financing Statements...................... 24
SECTION 5.1.1. Further Assurances............................................ 24
SECTION 5.1.2. Financing Statements.......................................... 25
SECTION 5.2. Additional Security........................................... 25
SECTION 5.3. Defeasance; Partial Release, etc.............................. 25
SECTION 5.3.1. Defeasance.................................................... 25
SECTION 5.3.2. Partial Release, etc.......................................... 25
SECTION 5.4. Notices, etc.................................................. 26
SECTION 5.5. Waivers, Amendments, etc...................................... 26
SECTION 5.6. Cross-References.............................................. 26
SECTION 5.7. Headings...................................................... 26
SECTION 5.8. Currency...................................................... 26
SECTION 5.9. Governing Law................................................. 26
SECTION 5.10. Successors and Assigns, etc................................... 26
SECTION 5.11. Waiver of Jury Trial; Submission to Jurisdiction.............. 26
SECTION 5.12. Severability.................................................. 27
SECTION 5.13. Loan Document................................................. 27
SECTION 5.14. Usury Savings Clause.......................................... 27
SECTION 5.15. Secured Obligations Increase.................................. 28
EXECUTION PAGE ................................................................... 31
ACKNOWLEDGMENT ................................................................... 32
Schedule 1-A - Legal Description of the Land
Schedule 1-B - Legal Description of the Land
Schedule 2 - Permitted Encumbrances
</TABLE>
-iii-
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
-------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE
FILING, dated as of March 24, 1998 (this "Mortgage"), made by Earle M. Jorgensen
--------
Company (the "Mortgagor"), having an address at 3050 East Birch Street, Brea,
---------
California 92621 to Fleet National Bank, having an address at 1 Federal Street,
3rd Floor, Boston, Massachusetts 02110, as the Administrative Agent under the
Credit Agreement referred to below (together with its successors and assigns
from time to time acting as Administrative Agent under such Credit Agreement,
the "Mortgagee").
---------
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, the Mortgagor is on the date of delivery hereof the owner of fee
title to the parcel of land described in Schedule 1 hereto (the "Land") and of
---------- ----
the Improvements (such term and other capitalized terms used in this Mortgage
having the respective meanings specified or referred to in Article IV);
----------
WHEREAS, pursuant to the terms, conditions and provisions of the Term Loan
Agreement, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among Earle M.
----------------
Jorgensen Company (the "Borrower"), as borrower, Various Financial Institutions
--------
as the Lenders, DLJ Capital Funding, Inc. ("DLJ"), as Syndication Agent, Bankers
---
Trust Company, as Documentation Agent, and the Mortgagee, the Lenders have
agreed to make Term Loans to the Borrower in the maximum original principal
amount of ONE HUNDRED MILLION AND 00/100 DOLLARS ($100,000,000.00) having a
Stated Maturity Date of March 31, 2004 (such Term Loans are hereinafter referred
to as the "Credit Extensions").
-----------------
WHEREAS, the Mortgagor has duly authorized the execution, delivery and
performance of this Mortgage.
G R A N T:
NOW, THEREFORE, for and in consideration of the premises, and of the mutual
covenants herein contained, and in order to induce the Lenders to make the
Credit Extensions pursuant to the Credit Agreement, and in order to secure the
full, timely and proper payment and performance of and compliance with each and
every one of the Secured Obligations (as hereinafter defined), the Mortgagor
hereby irrevocably grants, bargains, sells, mortgages, warrants, aliens,
demises, releases, hypothecates, pledges, assigns, transfers and conveys to the
Mortgagee and its successors and assigns, forever, all of the following (the
"Collateral"):
- -----------
<PAGE>
(a) Real Estate. Subject to the Permitted Exceptions (as hereinafter
-----------
defined), all of the Land and all additional lands and estates therein now
owned or hereafter acquired by the Mortgagor for use or development with
the Land or any portion thereof, together with all and singular the
tenements, rights, easements, hereditaments, rights of way, privileges,
liberties, appendages and appurtenances now or hereafter belonging or in
any way pertaining to the Land and such additional lands and estates
therein (including, without limitation, all rights relating to storm and
sanitary sewer, water, gas, electric, railway and telephone services); any
and all development rights, air rights, riparian rights, water, water
rights (if any), water stock, all rights in, to and with respect to any and
all oil, gas, coal, minerals and other substances of any kind or character
underlying or relating to the Land and such additional lands and estates
therein and any interest therein; all estate, claim, demand, right, title
or interest of the Mortgagor in and to any street, road, highway or alley,
vacated or other, adjoining the Land or any part thereof and such
additional lands and estates therein; all strips and gores belonging,
adjacent or pertaining to the Land or such additional lands and estates;
and any after-acquired title to any of the foregoing (herein collectively
referred to as the "Real Estate");
-----------
(b) Improvements. All buildings, structures and other improvements
------------
and any additions and alterations thereto or replacements thereof, now or
hereafter built, constructed or located upon the Real Estate; and, to the
extent that any of the following items of property constitutes fixtures
under applicable laws, all furnishings, fixtures, fittings, appliances,
apparatus, equipment, machinery, building and construction materials and
other articles of every kind and nature whatsoever and all replacements
thereof, now or hereafter affixed or attached to, placed upon or used in
any way in connection with the complete and comfortable use, enjoyment,
occupation, operation, development and/or maintenance of the Real Estate or
such buildings, structures and other improvements, including, but not
limited to, partitions, furnaces, boilers, oil burners, radiators and
piping, plumbing and bathroom fixtures, refrigeration, heating,
ventilating, air conditioning and sprinkler systems, other fire prevention
and extinguishing apparatus and materials, vacuum cleaning systems, gas and
electric fixtures, incinerators, compactors, elevators, engines, motors,
generators and all other articles of property which are considered fixtures
under applicable law (such buildings, structures and other improvements and
such other property are herein collectively referred to as the
"Improvements"; the Real Estate and the Improvements are herein
-------------
collectively referred to as the "Property");
--------
(c) Goods. All of Mortgagor's right, title and interest in and to
-----
all building materials, goods, construction materials, appliances
(including, without limitation, stoves, ranges, ovens, disposals,
refrigerators, water fountains and coolers, fans, heaters, dishwashers,
clothes washers and dryers, water heaters, hood and fan combinations,
kitchen equipment, laundry equipment, kitchen cabinets and other similar
equipment), stocks, beds, mattresses, bedding and linens, supplies, blinds,
window shades, drapes, carpets, floor coverings, manufacturing equipment
and machinery, office equipment, growing plants and shrubberies, control
devices, equipment (including window cleaning,
-2-
<PAGE>
building cleaning, swimming pool, recreational, monitoring, garbage, pest
control and other equipment), motor vehicles, tools, furnishings,
furniture, lighting, non-structural additions to the Real Estate and
Improvements and all other tangible property of any kind or character,
together with all replacements thereof, now or hereafter located on or in
or used or useful in connection with the complete and comfortable use,
enjoyment, occupation, operation, development and/or maintenance of the
Property, regardless of whether or not located on or in the Property or
located elsewhere for purposes of storage, fabrication or otherwise (herein
collectively referred to as the "Goods");
-----
(d) Leases. All rights of the Mortgagor in, to and under any and all
------
leases, licenses, occupancy agreements, concessions and other arrangements,
oral or written, now existing or hereafter entered into, whereby any Person
agrees to pay money or any other consideration for the use, possession or
occupancy of, or any estate in, the Property or any portion thereof or
interest therein (herein collectively referred to as the "Leases"), and the
------
right, subject to applicable law, upon the occurrence of any Event of
Default hereunder, to receive and collect the Rents (as hereinafter
defined) paid or payable thereunder;
(e) Plans. All rights of the Mortgagor in and to all plans and
-----
specifications, designs, drawings and other information, materials and
matters heretofore or hereafter prepared relating to the Improvements or
any construction on the Real Estate (herein collectively referred to as the
"Plans");
-----
(f) Permits. All rights of the Mortgagor, to the extent assignable,
-------
in, to and under all permits, franchises, licenses, approvals and other
authorizations respecting the use, occupation and operation of the Property
and every part thereof and respecting any business or other activity
conducted on or from the Property, and any product or proceed thereof or
therefrom, including, without limitation, all building permits,
certificates of occupancy and other licenses, permits and approvals issued
by governmental authorities having jurisdiction (herein collectively
referred to as the "Permits");
-------
(g) Contracts. All right, title and interest of the Mortgagor in and
---------
to all agreements, contracts, certificates, instruments, warranties,
appraisals, engineering, environmental, soils, insurance and other reports
and studies, books, records, and advertising materials, now or hereafter
obtained or entered into, as the case may be, pertaining to the
construction, use, occupancy, physical operation, management, leasing,
maintenance and/or ownership of the Property and all right, title and
interest of the Mortgagor therein (herein collectively referred to as the
"Contracts");
---------
(h) Leases of Furniture, Furnishings and Equipment. To the extent
----------------------------------------------
assignable or transferable, all right, title and interest of the Mortgagor
as lessee in, to and under any leases of furniture, furnishings, equipment
and any other Goods now or hereafter installed in or at any time used in
connection with the Property;
-3-
<PAGE>
(i) Rents. All rents, issues, profits, royalties, avails, income and
-----
other benefits derived or owned, directly or indirectly, by the Mortgagor
from the Property, including, without limitation, all rents and other
consideration payable by tenants, claims against guarantors, and any cash
or other securities deposited to secure performance by tenants, under the
Leases (herein collectively referred to as "Rents");
-----
(j) Proceeds. All of Mortgagor's right, title and interest in and to
--------
all proceeds of the conversion, voluntary or involuntary of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards (herein collectively referred
to as "Proceeds"); and
--------
(k) Other Property. All other property and rights of the Mortgagor
--------------
of every kind and character relating to the Property, and all proceeds and
products of any of the foregoing (provided, however, that in no event shall
the Collateral include or be deemed to include, and in no event shall the
Mortgagee have or be deemed to have a security interest in, any of the
following property of the Mortgagor to the extent it secures, or purports
to secure, the Revolving Credit Agreement as of the date hereof: inventory
(including raw materials, work-in-process, supplies and finished goods),
accounts receivable (including sellers' rights relating thereto, all
contracts and contract rights relating thereto and all books and records
relating thereto), all collection accounts, deposit accounts and other bank
accounts relating to collection of the foregoing, together with the
proceeds and products of all of the foregoing.
AND, without limiting any of the other provisions of this Mortgage, the
Mortgagor expressly grants to the Mortgagee, as secured party, a security
interest in all of those portions of the Collateral which are or may be subject
to the State Uniform Commercial Code provisions applicable to secured
transactions;
TO HAVE AND TO HOLD the Collateral unto the Mortgagee, its successors and
assigns, forever.
FURTHER to secure the full, timely and proper payment and performance of
the Secured Obligations, the Mortgagor hereby covenants and agrees with and
warrants to the Mortgagee as follows:
ARTICLE I
COVENANTS AND AGREEMENTS OF THE MORTGAGOR
-----------------------------------------
SECTION 1.1. Payment of Secured Obligations. (i) The Mortgagor agrees
------------------------------
that:
(a) it will duly and punctually pay and perform or cause to be
paid and performed each of the Obligations at the time and in accordance
with the terms of the Loan Documents, and
-4-
<PAGE>
(b) when and as due and payable from time to time in accordance
with the terms hereof or of any other Loan Documents, pay and perform, or
cause to be paid and performed, all other Secured Obligations.
SECTION 1.2. Title to Collateral, etc. The Mortgagor represents and
------------------------
warrants to and covenants with the Mortgagee that:
(a) as of the date hereof and at all times hereafter while this
Mortgage is outstanding, the Mortgagor (1) is and shall be the owner of
title to the Property and to all other property included in the Collateral,
and (2) has and shall have marketable title in fee simple absolute to the
Property, subject in each case only to this Mortgage, the liens expressly
permitted pursuant to the terms of the Credit Agreement and the
encumbrances set forth in Schedule 2 hereto (collectively, the "Permitted
---------- ---------
Encumbrances");
------------
(b) the Mortgagor has good and lawful right, power and authority
to execute this Mortgage and to convey, transfer, assign, mortgage and
grant a security interest in the Collateral, all as provided herein; and
(c) this Mortgage has been duly executed, acknowledged and
delivered on behalf of the Mortgagor, all consents and other actions
required to be taken by the officers, directors, shareholders and partners,
as the case may be, of the Mortgagor have been duly and fully given and
performed and this Mortgage constitutes the legal, valid and binding
obligation of the Mortgagor, enforceable against the Mortgagor in
accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and (b) general principles of equity.
SECTION 1.3. Title Insurance.
---------------
SECTION 1.3.1 Title Insurance Policy. Concurrently with the execution and
----------------------
delivery of this Mortgage, the Mortgagor, at its expense, has obtained and
delivered to the Mortgagee a loan policy or policies of title insurance in an
amount, and in form and substance, satisfactory to the Mortgagee naming the
Mortgagee as the insured, insuring the title to and the first mortgage lien of
this Mortgage on the Property, with endorsements requested by the Mortgagee.
The Mortgagor has duly paid in full all premiums and other charges due in
connection with the issuance of such policy or policies of title insurance.
SECTION 1.3.2 Title Insurance Proceeds. All proceeds received by and
------------------------
payable to the Mortgagee for any loss under the loan policy or policies of title
insurance delivered to the Mortgagee pursuant to Section 1.3.1, or under any
-------------
policy or policies of title insurance delivered to the Mortgagee in substitution
therefor or replacement thereof, shall be the property of the Mortgagee and
shall be applied by the Mortgagee in accordance with the provisions of Section
-------
2.3.
- ---
-5-
<PAGE>
SECTION 1.4. Recordation. The Mortgagor, at its expense, will at all
-----------
times cause this Mortgage and any instruments amendatory hereof or supplemental
hereto and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and continuations thereof), and each
other instrument delivered in connection with the Credit Agreement or any other
Loan Document and intended thereunder to be recorded, registered and filed, to
be kept recorded, registered and filed, in such manner and in such places, and
will pay all such recording, registration, filing fees, taxes and other charges,
and will comply with all such statutes and regulations as may be required by law
in order to establish, preserve, perfect and protect the lien and security
interest of this Mortgage as a valid, direct first mortgage lien and first
priority perfected security interest in the Collateral, subject only to the
Permitted Encumbrances. The Mortgagor will pay or cause to be paid, and will
indemnify the Mortgagee in respect of, all taxes (including interest and
penalties) at any time payable in connection with the filing and recording of
this Mortgage and any and all supplements and amendments hereto.
SECTION 1.5. Payment of Impositions, etc. Subject to Section 1.8
---------------------------- -----------
(relating to permitted contests), the Mortgagor will pay or cause to be paid
before the same would become delinquent and before any fine, penalty, interest
or cost may be added for non-payment, all taxes, assessments, water and sewer
rates, charges, license fees, inspection fees and other governmental levies or
payments, of every kind and nature whatsoever, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, which at any time may be
assessed, levied, confirmed, imposed or which may become a lien upon the
Collateral, or any portion thereof, or which are payable with respect thereto,
or upon the rents, issues, income or profits thereof, or on the occupancy,
operation, use, possession or activities thereof, whether any or all of the same
be levied directly or indirectly or as excise taxes or as income taxes, and all
taxes, assessments or charges which may be levied on the Secured Obligations, or
the interest thereon (collectively, the "Impositions"). The Mortgagor will
-----------
deliver to the Mortgagee, upon request, copies of official receipts or other
satisfactory proof evidencing such payments.
SECTION 1.6. Insurance and Legal Requirements. Subject to Section 1.8
-------------------------------- -----------
(relating to permitted contests), the Mortgagor, at its expense, will comply, or
cause compliance with
(a) all provisions of any insurance policy covering or
applicable to the Collateral or any part thereof, all requirements of the
issuer of any such policy, and all orders, rules, regulations and other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) applicable to or affecting the Collateral or
any part thereof or any use or condition of the Collateral or any part
thereof (collectively, the "Insurance Requirements"); and
----------------------
(b) all laws, including Environmental Laws, statutes, codes,
acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses, authorizations, directions and requirements
of all governments, departments, commissions, boards, courts, authorities,
agencies, officials and officers, foreseen or unforeseen, ordinary or
extraordinary, which now or at any time hereafter may be applicable to the
Collateral or any part thereof, or any of the adjoining sidewalks, curbs,
-6-
<PAGE>
vaults and vault space, if any, streets or ways, or any use or condition of
the Collateral or any part thereof or any other property of the Mortgagor
(collectively, the "Legal Requirements");
------------------
whether or not compliance therewith shall require structural changes in or
interference with the use and enjoyment of the Collateral or any part thereof.
SECTION 1.7. Security Interests, etc. The Mortgagor will not directly or
-----------------------
indirectly create or permit or suffer to be created or to remain, and will
promptly discharge or cause to be discharged, any deed of trust, mortgage,
encumbrance or charge on, pledge of, security interest in or conditional sale or
other title retention agreement with respect to or any other lien on or in the
Collateral or any part thereof or the interest of the Mortgagor or the Mortgagee
therein, or any Proceeds thereof or Rents or other sums arising therefrom, other
than (a) Permitted Encumbrances, and (b) liens of mechanics, materialmen,
suppliers or vendors or rights thereto incurred in the ordinary course of the
business of the Mortgagor for sums not yet due or any such liens or rights
thereto which are at the time being contested as permitted by Section 1.8. The
-----------
Mortgagor will not postpone the payment of any sums for which liens of
mechanics, materialmen, suppliers or vendors or rights thereto have been
incurred (unless such liens or rights thereto are at the time being contested as
permitted by Section 1.8), or enter into any contract under which payment of
-----------
such sums is postponable (unless such contract expressly provides for the legal,
binding and effective waiver of any such liens or rights thereto), in either
case, for more than 60 days after the completion of the action giving rise to
such liens or rights thereto.
SECTION 1.8. Permitted Contests. After prior written notice to the
------------------
Mortgagee, the Mortgagor at its expense may contest, or cause to be contested,
by appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition,
Legal Requirement or Insurance Requirement or lien of a mechanic, materialman,
supplier or vendor, provided that, (a) in the case of an unpaid Imposition,
-------- ----
lien, encumbrance or charge, such proceedings shall suspend the collection
thereof from the Mortgagor, the Mortgagee, and the Collateral (including any
rent or other income therefrom) and shall not interfere with the payment of any
such rent or income, (b) neither the Collateral nor any rent or other income
therefrom nor any part thereof or interest therein would be in any danger of
being sold, forfeited, lost, impaired or interfered with, (c) in the case of a
Legal Requirement, neither the Mortgagor nor the Mortgagee would be in danger of
any civil or criminal liability for failure to comply therewith, (d) the
Mortgagor shall have furnished such security, if any, as may be required in the
proceedings or as may be reasonably requested by the Mortgagee, (e) the non-
payment of the whole or any part of any Imposition will not result in the
delivery of a tax deed to the Collateral or any part thereof because of such
non-payment, (f) the payment of any sums required to be paid with respect to any
of the Term Notes or under this Mortgage (other than any unpaid Imposition,
lien, encumbrance or charge at the time being contested in accordance with this
Section 1.8) shall not be interfered with or otherwise affected, (g) in the case
- -----------
of any Insurance Requirement, the failure of the Mortgagor to comply therewith
shall not affect the validity of any insurance required to be maintained by the
Mortgagor under
-7-
<PAGE>
Section 2.1, and (h) that adequate reserves, determined in accordance with GAAP,
- -----------
shall have been set aside on the Mortgagor's books.
SECTION 1.9. Leases. The Mortgagor represents and warrants to the
------
Mortgagee that, as of the date hereof, other than as disclosed in writing to the
Mortgagee, there are no written or oral leases or other agreements of any kind
or nature relating to the occupancy of any portion of the Property by any Person
other than the Mortgagor. The Mortgagor will not enter into any such written or
oral lease or other agreement with respect to any portion of the Property
without first obtaining the written consent of the Mortgagee which shall not be
unreasonably withheld, conditioned or delayed.
SECTION 1.10 Compliance with Instruments. The Mortgagor at its expense
---------------------------
will promptly comply with all rights of way or use, privileges, franchises,
servitudes, licenses, easements, tenements, hereditaments and appurtenances
forming a part of the Property and all instruments creating or evidencing the
same, in each case, to the extent compliance therewith is required of the
Mortgagor under the terms thereof. The Mortgagor will not take any action which
may result in a forfeiture or termination of the rights afforded to the
Mortgagor under any such instruments and will not, without the prior written
consent of the Mortgagee, amend any of such instruments.
SECTION 1.11 Maintenance and Repair, etc. Subject to the provisions of
----------------------------
Section 1.12, the Mortgagor will keep or cause to be kept all presently and
- ------------
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in the same order and repair that exists on the
date of recordation hereof, reasonable wear and tear excepted and in such a
fashion that neither the value nor utility of the Collateral will be diminished,
and, at its sole cost and expense but subject to Article II below, will promptly
make or cause to be made all necessary and appropriate repairs, replacements and
renewals thereof, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen, so that its business carried
on in connection therewith may be properly conducted at all times. In the event
of damage or destruction to, or taking of all or part of the Property by eminent
domain, the Mortgagor shall only be obligated to effect repair, restoration and
replacement to the extent insurance or condemnation proceeds are available and
paid to the Mortgagor, or to the extent required by the Credit Agreement. All
repairs, replacements and renewals shall be at least equal in quality, use and
value to the original Improvements. The Mortgagor at its expense will do or
cause to be done all shoring of foundations and walls of any building or other
Improvements on the Property and (to the extent permitted by law) of the ground
adjacent thereto, and every other act necessary or appropriate for the
preservation and safety of the Property by reason of or in connection with any
excavation or other building operation upon the Property and upon any adjoining
property, whether or not the Mortgagor shall, by any Legal Requirement, be
required to take such action or be liable for failure to do so.
SECTION 1.12 Alterations, Additions, etc. So long as no Event of Default
----------------------------
shall have occurred and be continuing, the Mortgagor shall have the right at any
time and from time to time
-8-
<PAGE>
to make or cause to be made reasonable alterations of and additions to the
Property or any part thereof, provided that any alteration
-------- ----
or addition: (a) shall not change the general character or the use of the
Property or materially reduce the fair market value thereof below its value
immediately before such alteration or addition, or impair the usefulness of the
Property; (b) is effected with due diligence, in a good and workmanlike manner
and in compliance with all Legal Requirements and Insurance Requirements; (c) is
promptly and fully paid for, or caused to be paid for, by the Mortgagor; (d) is
made, in case the estimated cost of such alteration or addition exceeds U.S.
$500,000, (i) only after the Mortgagee shall have consented thereto and shall
have reviewed and approved in writing the plans and specifications therefor such
approval not to be unreasonably withheld or delayed, (ii) under the supervision
of a qualified architect or engineer or another professional approved by the
Mortgagee in each case, not to be unreasonably withheld, conditioned or delayed.
SECTION 1.13 Acquired Property Subject to Lien. All property at any time
---------------------------------
acquired by the Mortgagor and provided or required by this Mortgage to be or
become subject to the lien and security interest hereof, whether such property
is acquired by exchange, purchase, construction or otherwise, shall forthwith
become subject to the lien and security interest of this Mortgage without
further action on the part of the Mortgagor or the Mortgagee. The Mortgagor, at
its expense, will execute and deliver to the Mortgagee (and will record and file
as provided in Section 1.4) an instrument supplemental to this Mortgage
-----------
satisfactory in substance and form to the Mortgagee, whenever such an instrument
is necessary under applicable law to subject to the lien and security interest
of this Mortgage all right, title and interest of the Mortgagor in and to all
property provided or required by this Mortgage to be subject to the lien and
security interest hereof.
SECTION 1.14 Assignment of Rents, Proceeds, etc. The assignment, grant
----------------------------------
and conveyance of the Leases, Rents, Proceeds and other rents, income, proceeds
and benefits of the Collateral contained in the Granting Clause of this Mortgage
shall constitute an absolute, present and irrevocable assignment, grant and
conveyance, provided, however, that permission is hereby given to the Mortgagor,
-------- -------
so long as no Event of Default has occurred hereunder, to collect, receive and
apply such Rents, Proceeds and other rents, income, proceeds and benefits as
they become due and payable, but not in advance thereof, and in accordance with
all of the other terms, conditions and provisions hereof, of the Loan Documents,
and of the Leases, contracts, agreements and other instruments with respect to
which such payments are made or such other benefits are conferred. Upon the
occurrence and during the continuance of an Event of Default, such permission
shall terminate immediately and automatically, without notice to the Mortgagor
or any other Person except as required by law, and shall not be reinstated upon
a cure of such Event of Default without the express written consent of the
Mortgagee. Such assignment shall be fully effective without any further action
on the part of the Mortgagor or the Mortgagee and the Mortgagee shall be
entitled, at its option, upon the occurrence and during the continuance of an
Event of Default hereunder, to collect, receive and apply all Rents, Proceeds
and all other rents, income, proceeds and benefits from the Collateral,
including all right, title and interest of the Mortgagor in any escrowed sums or
deposits or any portion thereof or interest therein, whether or not the
Mortgagee takes possession of the Collateral or any part thereof. The
-9-
<PAGE>
Mortgagor further grants to the Mortgagee the right, at the Mortgagee's option,
upon the occurrence and during the continuance of an Event of Default hereunder,
to:
(a) enter upon and take possession of the Property for the purpose of
collecting Rents, Proceeds and said rents, income, proceeds and other
benefits;
(b) dispossess by the customary summary proceedings any tenant,
purchaser or other Person defaulting in the payment of any amount when and
as due and payable, or in the performance of any other material obligation,
under any Lease, contract or other instrument to which said Rents, Proceeds
or other rents, income, proceeds or benefits relate;
(c) let or convey the Collateral or any portion thereof or any
interest therein; and
(d) apply Rents, Proceeds and such rents, income, proceeds and other
benefits, after the payment of all necessary fees, charges and expenses, on
account of the Secured Obligations in accordance with Section 3.11.
------------
SECTION 1.15 No Claims Against the Mortgagee. Nothing contained in this
-------------------------------
Mortgage shall constitute any consent or request by the Mortgagee, express or
implied, for the performance of any labor or the furnishing of any materials or
other property in respect of the Property or any part thereof, or be construed
to permit the making of any claim against the Mortgagee in respect of labor or
services or the furnishing of any materials or other property or any claim that
any lien based on the performance of such labor or the furnishing of any such
materials or other property is prior to the lien and security interest of this
Mortgage. ALL CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS DEALING
------------------------------------------------------------------
WITH THE PROPERTY, OR WITH ANY PERSONS INTERESTED THEREIN, ARE HEREBY REQUIRED
- ------------------------------------------------------------------------------
TO TAKE NOTICE OF THE PROVISIONS OF THIS SECTION.
- ------------------------------------------------
SECTION 1.16 Indemnification. The Mortgagor will protect, indemnify,
---------------
save harmless and defend the Mortgagee, the Lenders, and each of their
respective officers, directors, shareholders, employees, representatives and
agents (collectively, the "Indemnified Parties" and individually, an
-------------------
"Indemnified Party"), from and against any and all liabilities, obligations,
- ------------------
claims, actual damages (excluding consequential and punitive damages),
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted
against any Indemnified Party by reason of (a) ownership of an interest in the
Property, (b) any accident, injury to or death of persons or loss of or damage
to or loss of the use of property occurring on or about the Property or any part
thereof or the adjoining sidewalks, curbs, vaults and vault spaces, if any,
streets, alleys or ways, (c) any use, non-use or condition of the Property or
any part thereof or the adjoining sidewalks, curbs, vaults and vault spaces, if
any, streets, alleys or ways, (d) any failure on the part of the Mortgagor to
perform or comply with any of the terms of this Mortgage, (e) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Collateral or any part thereof made or suffered to be made by or
on behalf of the Mortgagor, (f) any
-10-
<PAGE>
negligence or tortious act on the part of the Mortgagor or any of its agents,
contractors, lessees, licensees or invitees, (g) any work in connection with any
alterations, changes, new construction or demolition of or additions to the
Property, or (h) (i) any Contaminant on, in, under or affecting all or any
portion of the Property, the groundwater, or any surrounding areas, (ii) any
material misrepresentation, inaccuracy or breach of any warranty, covenant or
agreement contained or referred to in Sections 1.20 and 1.21, (iii) any
------------- ----
violation or claim of violation by the Mortgagor of any Environmental, Health or
Safety Requirements of Law, or (iv) the imposition of any lien for damages
caused by or the recovery of any costs for the cleanup, release or threatened
release of any Contaminant. If any action or proceeding be commenced, to which
action or proceeding any Indemnified Party is made a party by reason of the
execution of this Mortgage or any other Loan Document, and if an Indemnified
Party is entitled to indemnity by Mortgagor under this instrument, then all sums
reasonably paid by the Indemnified Parties, for the expense of defending such
action or proceeding, if Mortgagor fails to provide the defense required herein,
shall be paid by the Mortgagor to such Indemnified Parties, as the case may be,
as hereinafter provided. The Mortgagor will pay and save the Indemnified Parties
harmless against any and all liability with respect to any intangible personal
property tax or similar imposition of the State or any subdivision or authority
thereof now or hereafter in effect, to the extent that the same may be payable
by the Indemnified Parties solely in respect of this Mortgage, any Loan Document
or any Secured Obligation. All amounts payable to the Indemnified Parties under
this Section 1.16 shall be deemed indebtedness secured by this Mortgage and any
------------
such amounts which are not paid within ten (10) days after written demand
therefor by any Indemnified Party shall bear interest at the rate provided for
in Section 3.2.2 of the Credit Agreement from the date of such demand. In case
-------------
any action, suit or proceeding is brought against any Indemnified Party by
reason of any such occurrence, the Mortgagor, upon request of such Indemnified
Party, will, at the Mortgagor's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted or defended by counsel designated by
the Mortgagor and approved by such Indemnified Party. The obligations of the
Mortgagor under this Section 1.16 shall survive any discharge or reconveyance of
------- ----
this Mortgage and payment in full of the Secured Obligations.
SECTION 1.17 No Credit for Payment of Taxes. The Mortgagor shall not be
------------------------------
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Mortgage.
SECTION 1.18 Application of Proceeds of Term Loans. The Mortgagor (a)
-------------------------------------
will not use or permit to be used any proceeds of the Term Loans, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing" or "carrying" any "margin stock" within the meaning of Regulation U
of the Federal Reserve Board, as amended from time to time, and (b) has or will
apply all of the proceeds of the Term Loans that are paid to it by the Mortgagee
to the purposes permitted by the Credit Agreement.
SECTION 1.19 No Transfer of the Property. Except as permitted by Section
--------------------------- -------
7.2.6(a) of the Credit Agreement, the Mortgagor shall not, without the prior
- --------
written consent of the
-11-
<PAGE>
Mortgagee, which consent may be granted or withheld in the sole and absolute
discretion of the Mortgagee (i) sell, convey, assign or otherwise transfer the
Property or any portion of the Mortgagor's interest therein or (ii) further
encumber the Property or permit the Property to become encumbered by any lien,
claim, security interest or other indebtedness of any kind or nature other than
the Permitted Encumbrances.
SECTION 1.20 Security Agreement. With respect to the items of personal
------------------
property and fixtures referred to and described in the Granting Clause of this
Mortgage and included as part of the Collateral, this Mortgage is hereby made
and declared to be a security agreement encumbering each and every item of
personal property and fixtures now or hereafter owned by Mortgagor and included
herein as a part of the Collateral, in compliance with the provisions of the
Uniform Commercial Code as enacted in the State. In this respect, Mortgagor, as
"Debtor", expressly grants to Mortgagee, as "Secured Party", a security interest
in and to all of the property now or hereafter owned by Mortgagor which
constitutes the personal property and fixtures hereinabove referred to and
described in this Mortgage, including all extensions, accessions, additions,
improvements, betterments, renewals, replacements and substitutions thereof or
thereto, and all proceeds from the sale or other disposition thereof. Mortgagor
agrees that Mortgagee may file this Mortgage, or a reproduction thereof, in the
real estate records or other appropriate index, as, and this Mortgage shall be
deemed to be, a financing statement filed as a fixture filing in accordance with
_____________. Any reproduction of this Mortgage or of any other security
agreement or financing statement shall be sufficient as a financing statement.
In addition, Mortgagor agrees to execute and deliver to Mortgagee, upon
Mortgagee's request, any other security agreement and financing statements, as
well as extensions, renewals, and amendments thereof, and reproductions of this
Mortgage, in such form as Mortgagee may require to perfect a security interest
with respect to said items. Mortgagor shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements Mortgagee may reasonably require. Without the prior
written consent of Mortgagee, Mortgagor shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in the
above-described personal property and fixtures, including any replacements and
additions thereto. Upon the occurrence of an Event of Default under this
Mortgage, or any other violation of the covenants, terms and conditions of the
security agreement contained herein, the Mortgagee shall have and shall be
entitled to exercise any and all of the rights and remedies (i) as prescribed in
this Mortgage, or (ii) as prescribed by general law, or (iii) as prescribed by
the specific statutory provisions now or hereafter enacted and specified in said
Uniform Commercial Code, all at Mortgagee's sole election. Mortgagor and
Mortgagee agree that the filing of any financing statements in the records
normally having to do with personal property shall not in any way affect the
agreement of Mortgagor and Mortgagee that everything located in, on or about, or
used or intended to be used with or in connection with the use, operation or
enjoyment of, the Collateral, which is described or reflected as a fixture in
this Mortgage, is, and at all times and for all purposes and in all proceedings,
both legal and equitable, shall be, regarded as part of the Real Estate conveyed
hereby. Mortgagor warrants that Mortgagor's name, identity and address are as
set forth herein. The mailing address of the Mortgagee from which information
may be obtained concerning the security interest created
-12-
<PAGE>
herein is also set forth herein. This information hereof is provided in order
that this Mortgage shall comply with the requirements of the Uniform Commercial
Code as enacted in ____________ for instruments to be filed as financing
statements. In accordance with ______________, this Mortgage shall remain
effective as a fixture filing until this Mortgage is released or satisfied of
record or its effectiveness otherwise terminates as to the Collateral.
SECTION 1.21 Representations and Warranties. In order to induce the
------------------------------
Mortgagee to enter into the Credit Agreement and the other Loan Documents, the
Mortgagor agrees that all of the representations and warranties set forth in the
Credit Agreement are incorporated into this Mortgage by reference as if fully
set forth herein.
SECTION 1.22 Mortgagor's Covenants. In order to induce the Mortgagee to
---------------------
enter into the Credit Agreement and the other Loan Documents, the Mortgagor
agrees that all of the covenants set forth in the Credit Agreement are
incorporated into this Mortgage by reference as if fully set forth herein.
ARTICLE II
INSURANCE; DAMAGE, DESTRUCTION OR TAKING, ETC.
----------------------------------------------
SECTION 2.1. Insurance. The Mortgagor will, at its expense, maintain or
---------
cause to be maintained insurance in accordance with the terms of the Credit
Agreement.
SECTION 2.2. Damage, Destruction or Taking; Mortgagor to Give Notice;
--------------------------------------------------------
Assignment of Awards. In case of
- --------------------
(a) any damage to or destruction of the Collateral or any part
thereof, or
(b) any taking, whether for permanent or temporary use, of all or
any part of the Collateral or any interest therein or right accruing
thereto, as the result of or in anticipation of the exercise of the right
of condemnation or eminent domain, or a change of grade affecting the
Collateral or any portion thereof (a "Taking"), or the commencement of any
------
proceedings or negotiations which may result in a Taking,
the Mortgagor will promptly give written notice thereof to the Mortgagee,
generally describing the nature and extent of such damage or destruction and the
Mortgagor's best estimate of the cost of restoring the Collateral, or the nature
of such proceedings or negotiations and the nature and extent of the Taking
which might result therefrom, as the case may be. The Mortgagee shall be
entitled to all insurance proceeds payable on account of such damage or
destruction and to all awards or payments allocable to the Collateral on account
of such Taking, and the Mortgagor hereby irrevocably assigns, transfers and sets
over to the Mortgagee all rights of the Mortgagor to any such proceeds, awards
or payments and irrevocably authorizes and empowers the Mortgagee, at its
option, in the name of the Mortgagor or otherwise, to file and prosecute what
would otherwise be the Mortgagor's claim for any such proceeds, award or payment
and to
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<PAGE>
collect, receipt for and retain the same for disposition in accordance with
Section 2.3. The Mortgagor will pay all reasonable costs and expenses
- -----------
incurred by the Mortgagee in connection with any such damage, destruction or
Taking and seeking and obtaining any insurance proceeds, awards or payments in
respect thereof.
SECTION 2.3. Application of Proceeds and Awards. The Mortgagee may, at
-----------------------------------
its option, apply all amounts recovered under any insurance policy required to
be maintained by the Mortgagor hereunder and all awards received by it on
account of any Taking in any one or more of the following ways:
(a) to the payment of the reasonable costs and expenses incurred
by the Mortgagee in obtaining any such insurance proceeds or awards,
including the fees and expenses of attorneys and insurance and other
experts and consultants, the costs of litigation, arbitration, mediation,
investigations and other judicial, administrative or other proceedings and
all other out-of-pocket expenses;
(b) to the payment of the principal of the Credit Extensions and
any interest (including post-petition interest payable in any proceedings
for bankruptcy under applicable law ("Post-Petition Interest") to the
----------------------
extent such interest is a Secured Obligation) accrued and unpaid thereon,
without regard to whether any portion or all of such amounts shall be
matured or unmatured, together with interest at the rate provided for in
the Credit Agreement on any overdue principal and (to the extent permitted
by applicable law) interest; and, in case such amount shall be insufficient
to pay in full all such amounts, then such amount shall be applied, first,
-----
to the payment of all amounts of interest (including Post-Petition Interest
to the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, second, to the payment of all amounts of principal
------
at the time outstanding;
(c) to the payment of, or the application to, any Secured
Obligation (other than as provided in clause (b) above);
----------
(d) to fulfill any of the other covenants contained herein, in
the Credit Agreement, or in any other Loan Document, as the Mortgagee may
determine in its sole discretion;
(e) to the Mortgagor for application to the cost of restoring
the Collateral and the replacement of Goods destroyed, damaged or taken; or
(f) to the Mortgagor.
Notwithstanding the foregoing provisions of this Section 2.3 to the
-----------
contrary (but subject to the provisions of Section 2.4), and if each of the
-----------
following conditions is satisfied, the Mortgagee, upon request of the Mortgagor,
shall apply insurance proceeds or condemnation
-14-
<PAGE>
awards received by it to the restoration or replacement of the Collateral, to
the extent necessary for the restoration or replacement thereof:
(i) there shall then exist no uncured Default;
(ii) the Mortgagor shall furnish to the Mortgagee a certificate
of an architect or engineer reasonably acceptable to the Mortgagee
stating (x) that the Collateral is capable of being restored, prior to
the maturity of the Credit Agreement, to substantially the same
condition as existed prior to the casualty or Taking, (y) the
aggregate estimated direct and indirect costs of such restoration and
(z) as to any Taking, that the property taken in such Taking, or sold
under threat thereof, is not necessary to the Mortgagor's customary
use or occupancy of the Property; and
(iii) in the event that the estimated cost of restoration set
forth in the certificate of such architect or engineer (and such
revisions to such estimate as are from time to time made) exceeds the
net insurance proceeds or condemnation awards actually received from
time to time, the Mortgagor shall deposit the amount of such excess
with the Mortgagee.
In the event that such insurance proceeds or condemnation awards are to be
utilized in the restoration of the Collateral, the Mortgagee shall disburse such
Proceeds and the additional amounts deposited by the Mortgagor for such
restoration after receipt of a written request for disbursement, on not fewer
than five (5) nor more than twelve (12) Business Days notice and, to the extent
applicable, in accordance with the Mortgagee's customary construction loan
procedures and conditions. In the event that such insurance or condemnation
awards are to be utilized to replace the Collateral so destroyed or taken, the
Mortgagee shall disburse such Proceeds after receipt of a written request for
disbursement, on not fewer than five (5) Business Days nor more than twelve (12)
Business Days notice simultaneously with the acquisition of such replacement
property by the Mortgagor. In the event that, after the restoration or
replacement of the Collateral, any insurance or condemnation awards shall
remain, such amount shall be paid to the Mortgagor. Insurance proceeds and
condemnation awards shall be invested in the manner reasonably requested by the
Mortgagor and approved by the Mortgagee, and all interest earned thereon shall
be applied as provided in this Section 2.3. If, prior to the receipt by the
-----------
Mortgagee of such insurance proceeds or condemnation awards, the Collateral
shall have been sold on foreclosure, the Mortgagee shall have the right to
receive said insurance proceeds or condemnation awards to the extent of any
deficiency found to be due upon such sale, with legal interest thereon, whether
or not a deficiency judgment shall have been sought or recovered or denied, and
the reasonable attorneys' fees, costs and disbursements incurred by the
Mortgagee in connection with the collection of such award or payment.
SECTION 2.4. Total Taking and Total Destruction. In the event of a Total
----------------------------------
Destruction or a Total Taking, the Mortgagee shall apply all amounts recovered
under any insurance policy
-15-
<PAGE>
referred to in Section 2.1.1 and all awards received by it on account of any
-------------
such Taking as follows:
(a) first, to the payment of the reasonable costs and expenses
incurred by the Mortgagee in obtaining any such insurance proceeds or
awards, including the fees and expenses of attorneys and insurance and
other experts and consultants, the costs of litigation, arbitration,
mediation, investigations and other judicial, administrative or other
proceedings and all other out-of-pocket expenses;
(b) second, to the payment of the principal of the Credit Extensions
and any interest (including Post-Petition Interest to the extent such
interest is a Secured Obligation) accrued and unpaid thereon, without
regard to whether any portion or all of such amounts shall be matured or
unmatured, together with interest at the rate provided for in the Credit
Agreement on any overdue principal and (to the extent permitted by
applicable law) interest; and, in case such amount shall be insufficient to
pay in full all such amounts, then such amount shall be applied, first, to
-----
the payment of all amounts of interest (including Post-Petition Interest to
the extent such interest is a Secured Obligation) accrued on the Credit
Extensions and unpaid, and second, to the payment of all amounts of
------
principal at the time outstanding;
(c) third, to the payment of, or the application to, any Secured
Obligation (other than as provided in clause (b) above);
----------
(d) fourth, to fulfill any of the other covenants contained herein as
the Mortgagee may determine; and
(e) fifth, the balance, if any, to the Mortgagor.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES, ETC.
---------------------------------
SECTION 3.1. Events of Default; Acceleration. If an "Event of Default"
-------------------------------
(pursuant to and as defined in the Credit Agreement) shall have occurred, then
and in any such event the Mortgagee may at any time thereafter (unless all
Events of Default shall theretofore have been remedied and all costs and
expenses, including, without limitation, attorneys' fees and expenses incurred
by or on behalf of the Mortgagee, shall have been paid in full by the Mortgagor)
declare, by written notice to the Mortgagor, the Term Loans and all other
Secured Obligations to be due and payable immediately or on a date specified in
such notice (provided that, upon the occurrence of any Event of Default
--------
described in Section 8.1.9 of the Credit Agreement, the Term Loans and all other
Secured Obligations shall automatically become due and payable), and on such
date the same shall be and become due and payable, together with interest
accrued thereon, without presentment, demand, protest or notice, all of which
the Mortgagor hereby waives. The Mortgagor will pay on demand all costs and
expenses, including, without limitation, attorneys'
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<PAGE>
fees and expenses, incurred by or on behalf of the Mortgagee in enforcing this
Mortgage, or any other Loan Document, or occasioned by any default hereunder or
thereunder.
SECTION 3.2. Legal Proceedings; Foreclosure. If an Event of Default
------------------------------
shall have occurred, the Mortgagee at any time may, at its election, proceed at
law or in equity or otherwise to enforce the payment and performance of the
Secured Obligations in accordance with the terms hereof and thereof and to
foreclose the lien of this Mortgage as against all or any part of the Collateral
and to have the same sold under the judgment or decree of a court of competent
jurisdiction. The Mortgagee shall be entitled to recover in such proceedings
all costs incident thereto, including attorneys' fees and expenses in such
amounts as may be fixed by the court.
SECTION 3.3. Power of Sale. If an Event of Default shall have occurred,
-------------
the Mortgagee may grant, bargain, sell, assign, transfer, convey and deliver the
whole or, from time to time, any part of the Collateral, or any interest in any
part thereof, at any private sale or at public auction, with or without demand,
advertisement or notice, for cash, on credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Mortgagee in its uncontrolled discretion may determine, or as may be
required by law, and upon such sale the Mortgagee may execute and deliver to the
purchaser(s) instruments of conveyance pursuant to the terms hereof and to
applicable laws. Without limiting the authority granted in this Section 3.3,
-----------
the Mortgagee shall, without demand on the Mortgagor, after the lapse of such
time as may then be required by law, and notice of default and notice of sale
having been given as then required by law, sell the Collateral on the date and
at the time and place designated in the notice of sale, either as a whole or in
separate parcels and in such order as the Mortgagee may determine, but subject
to any statutory right of the Mortgagor to direct the order in which such
property, if consisting of several known lots, parcels or interests, shall be
sold, at public auction to the highest bidder, the purchase price payable in
lawful money of the United States at the time of sale. The Person conducting
the sale may, for any cause deemed expedient, postpone the sale from time to
time until it shall be completed and, in every such case, notice of postponement
shall be given by public declaration thereof by such Person at the time and
place last appointed for the sale; provided that, if the sale is postponed for
-------- ----
longer than one (1) day beyond the day designated in the notice of sale, notice
of sale and notice of the time, date and place of sale shall be given in the
same manner as the original notice of sale. The Mortgagee shall execute and
deliver to the purchaser at any such sale a mortgagee's deed conveying the
property so sold, but without any covenant or warranty, express or implied. The
recitals in such mortgagee's deed of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any Person, including the Mortgagee, may bid
at the sale. The Mortgagee shall apply the proceeds of the sale, to the extent
consistent with this Mortgage, to the payment of (a) the costs and expenses of
exercising the power of sale and of the sale, including the payment of
attorneys' fees and costs, (b) the cost of any evidence of title procured in
connection with such sale, (c) all sums expended under the terms hereof in
conjunction with any default provision hereof, not then repaid, with accrued
interest at the rate provided for in the Credit Agreement from the date of
incurrence, (d) outstanding principal and interest under the Credit Agreement,
(e) all Secured Obligations (other than as provided in clause (d) above). The
----------
Mortgagee shall give the remainder, if any, of the proceeds of the sale to the
Person or Persons legally entitled thereto, or the Mortgagee, in the
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<PAGE>
Mortgagee's discretion, may deposit the balance of such proceeds with any court
or public official authorized to receive such proceeds.
SECTION 3.4. Uniform Commercial Code Remedies. If an Event of Default
--------------------------------
shall have occurred, the Mortgagee may exercise from time to time and at any
time any rights and remedies available to it under applicable law upon default
in the payment of indebtedness, including, without limitation, any right or
remedy available to it as a secured party under the Uniform Commercial Code of
the State. The Mortgagor shall, promptly upon request by the Mortgagee,
assemble the Collateral, or any portion thereof generally described in such
request, and make it available to the Mortgagee at such place or places
designated by the Mortgagee and reasonably convenient to the Mortgagee or the
Mortgagor. If the Mortgagee elects to proceed under the Uniform Commercial Code
of the State to dispose of portions of the Collateral, the Mortgagee, at its
option, may give the Mortgagor notice of the time and place of any public sale
of any such property, or of the date after which any private sale or other
disposition thereof is to be made, by sending notice by registered or certified
first class mail, postage prepaid, to the Mortgagor at least ten (10) days
before the time of the sale or other disposition. If any notice of any proposed
sale, assignment or transfer by the Mortgagee of any portion of the Collateral
or any interest therein is required by law, the Mortgagor conclusively agrees
that ten (10) days notice to the Mortgagor of the date, time and place (and, in
the case of a private sale, the terms) thereof is reasonable.
SECTION 3.5. Mortgagee Authorized to Execute Deeds, etc. The Mortgagor
------------------------------------------
irrevocably appoints the Mortgagee (which appointment is coupled with an
interest) the true and lawful attorney of the Mortgagor, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement hereof, whether pursuant to power of
sale, foreclosure or otherwise, to execute and deliver all such deeds, bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 3.6. Purchase of Collateral by Mortgagee. The Mortgagee may be a
-----------------------------------
purchaser of the Collateral or of any part thereof or of any interest therein at
any sale thereof, whether pursuant to power of sale, foreclosure or otherwise,
and the Mortgagee may apply upon the purchase price thereof the indebtedness
secured hereby owing to the Mortgagee. Such purchaser shall, upon any such
purchase, acquire good title to the properties so purchased, free of the
security interest and lien of this Mortgage and free of all rights of redemption
in the Mortgagor.
SECTION 3.7. Receipt a Sufficient Discharge to Purchaser. Upon any sale
-------------------------------------------
of the Collateral or any part thereof or any interest therein, whether pursuant
to power of sale, foreclosure or otherwise, the receipt of the Mortgagee or the
officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.
SECTION 3.8. Waiver of Appraisement, Valuation, etc. The Mortgagor
--------------------------------------
hereby waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay,
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<PAGE>
extension and redemption laws now or hereafter in force and all rights of
marshaling in the event of any sale of the Collateral or any part thereof or any
interest therein.
SECTION 3.9. Sale a Bar Against Mortgagor. Any sale of the Collateral or
----------------------------
any part thereof or any interest therein under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise, shall forever be a
bar against the Mortgagor.
SECTION 3.10. Secured Obligations to Become Due on Sale. Upon any sale of
-----------------------------------------
the Collateral or any portion thereof or interest therein by virtue of the
exercise of any remedy by the Mortgagee under or by virtue of this Mortgage,
whether pursuant to power of sale, foreclosure or otherwise in accordance with
this Mortgage or by virtue of any other remedy available at law or in equity or
by statute or otherwise, at the option of the Mortgagee, any sums or monies due
and payable pursuant to the Credit Agreement, the Loan Documents and in
connection with the Term Loans and/or the Secured Obligations shall, if not
previously declared due and payable, immediately become due and payable,
together with interest accrued thereon, and all other indebtedness which this
Mortgage by its terms secures.
SECTION 3.11. Application of Proceeds of Sale and Other Moneys. The
------------------------------------------------
proceeds of any sale of the Collateral or any part thereof or any interest
therein under or by virtue of this Mortgage, whether pursuant to power of sale,
foreclosure or otherwise, and all other moneys at any time held by the Mortgagee
as part of the Collateral, shall be applied in such order of priority as the
Mortgagee shall determine in its sole and absolute discretion including, without
limitation, as follows:
(a) first, to the payment of the reasonable costs and expenses of
such sale (including, without limitation, the cost of evidence of title and
the costs and expenses, if any, of taking possession of, retaining custody
over, repairing, managing, operating, maintaining and preserving the
Collateral or any part thereof prior to such sale), all reasonable costs
and expenses incurred by the Mortgagee or any other Person in obtaining or
collecting any insurance proceeds, condemnation awards or other amounts
received by the Mortgagee, all reasonable costs and expenses of any
receiver of the Collateral or any part thereof, and any Impositions or
other charges or expenses prior to the security interest or lien of this
Mortgage, which the Mortgagee may consider it necessary or desirable to
pay;
(b) second, to the payment of any Secured Obligation (other than
those set forth in Section 3.11(c) below);
---------------
(c) third, to the payment of all amounts of principal of and interest
(including Post-Petition Interest to the extent such interest is a Secured
Obligation) at the time due and payable under the Credit Agreement at the
time outstanding (whether due by reason of maturity or by reason of any
prepayment requirement or by declaration or acceleration or otherwise),
including interest at the rate provided for in the Credit Agreement on any
overdue principal and (to the extent permitted under applicable law) on any
overdue
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<PAGE>
interest; and, in case such moneys shall be insufficient to pay in full
such principal and interest, then, first, to the payment of all amounts of
-----
interest (including Post-Petition Interest to the extent such interest is a
Secured Obligation) at the time due and payable and, second, to the payment
------
of all amounts of principal at the time due and payable under the Credit
Agreement; and
(d) fourth, the balance, if any, held by the Mortgagee after payment
in full of all amounts referred to in subdivisions Sections 3.11(a), (b)
---------------- ---
and (c) above, shall, unless a court of competent jurisdiction may
---
otherwise direct by final order not subject to appeal, be paid to or upon
the direction of the Mortgagor.
SECTION 3.12. Appointment of Receiver. If an Event of Default shall have
-----------------------
occurred, the Mortgagee shall, as a matter of right, without notice, and without
regard to the adequacy of any security for the indebtedness secured hereby or
the solvency of the Mortgagor, be entitled to the appointment of a receiver for
all or any part of the Collateral, whether such receivership be incidental to a
proposed sale of the Collateral or otherwise, and the Mortgagor hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
SECTION 3.13. Possession, Management and Income. If an Event of Default
---------------------------------
shall have occurred, in addition to, and not in limitation of, the rights and
remedies provided in Section 1.14, the Mortgagee, upon five (5) days notice to
------------
the Mortgagor, may enter upon and take possession of the Collateral or any part
thereof by force, summary proceeding, ejectment or otherwise and may remove the
Mortgagor and all other Persons and any and all property therefrom and may hold,
operate, maintain, repair, preserve and manage the same and receive all
earnings, income, Rents, issues and Proceeds accruing with respect thereto or
any part thereof. The Mortgagee shall be under no liability for or by reason of
any such taking of possession, entry, removal or holding, operation or
management, except that any amounts so received by the Mortgagee shall be
applied to pay all costs and expenses of so entering upon, taking possession of,
holding, operating, maintaining, repairing, preserving and managing the
Collateral or any part thereof, and any Impositions or other charges prior to
the lien and security interest of this Mortgage which the Mortgagee may consider
it necessary or desirable to pay, and any balance of such amounts shall be
applied as provided in Section 3.11.
------------
SECTION 3.14. Right of Mortgagee to Perform Mortgagor's Covenants, etc.
--------------------------------------------------------
If the Mortgagor shall fail to make any payment or perform any act required to
be made or performed hereunder or under the Credit Agreement or any other Loan
Document, the Mortgagee, without notice to or demand upon the Mortgagor and
without waiving or releasing any obligation or Default, may (but shall be under
no obligation to) at any time thereafter make such payment or perform such act
for the account and at the expense of the Mortgagor, and may enter upon the
Collateral for such purpose and take all such action thereon as, in the
Mortgagee's opinion, may be necessary or appropriate therefor. No such entry
and no such action shall be deemed an eviction of any lessee of the Property or
any part thereof. All sums so paid by the Mortgagee and all costs and expenses
(including, without limitation, attorneys' fees and expenses) so incurred,
together with interest thereon at the rate provided for in Section 3.2.2 of the
-------------
Credit
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<PAGE>
Agreement from the date of payment or incurring, shall constitute additional
indebtedness under the Credit Agreement secured by this Mortgage and shall be
paid by the Mortgagor to the Mortgagee on demand.
SECTION 3.15. Subrogation. To the extent that the Mortgagee, on or after
-----------
the date hereof, pays any sum due under any provision of any Legal Requirement
or any instrument creating any lien prior or superior to the lien of this
Mortgage, or the Mortgagor or any other Person pays any such sum with the
proceeds of the loan evidenced by the Credit Agreement, the Mortgagee shall have
and be entitled to a lien on the Collateral equal in priority to the lien
discharged, and the Mortgagee shall be subrogated to, and receive and enjoy all
rights and liens possessed, held or enjoyed by, the holder of such lien, which
shall remain in existence and benefit the Mortgagee in securing the Secured
Obligations.
SECTION 3.16. Remedies, etc., Cumulative. Each right, power and remedy of
--------------------------
the Mortgagee provided for in this Mortgage, the Credit Agreement or any other
Loan Document, or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Mortgage, the Credit Agreement
or any other Loan Document, or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by the
Mortgagee of any one or more of the rights, powers or remedies provided for in
this Mortgage, the Credit Agreement, or any other Loan Document, or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Mortgagee of any or all such
other rights, powers or remedies.
SECTION 3.17. Provisions Subject to Applicable Law. All rights, powers
------------------------------------
and remedies provided in this Mortgage may be exercised only to the extent that
the exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Mortgage invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law. If any term of this Mortgage
or any application thereof shall be invalid or unenforceable, the remainder of
this Mortgage and any other application of such term shall not be affected
thereby.
SECTION 3.18. No Waiver, etc. No failure by the Mortgagee to insist upon
--------------
the strict performance of any term hereof or of the Credit Agreement, or of any
other Loan Document, or to exercise any right, power or remedy consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term or of any
such breach. No waiver of any breach shall affect or alter this Mortgage, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach. By accepting payment or performance of any amount or
other Secured Obligations secured hereby before or after its due date, the
Mortgagee shall not be deemed to have waived its right either to require prompt
payment or performance when due of all other amounts and Secured Obligations
payable hereunder or to declare a default for failure to effect such prompt
payment.
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<PAGE>
SECTION 3.19. Compromise of Actions, etc. Any action, suit or proceeding
--------------------------
brought by the Mortgagee pursuant to any of the terms of this Mortgage, the
Credit Agreement, any other Loan Document, or otherwise, and any claim made by
the Mortgagee hereunder or thereunder, may be compromised, withdrawn or
otherwise dealt with by the Mortgagee without any notice to or approval of the
Mortgagor.
ARTICLE IV
DEFINITIONS
-----------
SECTION 4.1. Terms Defined in this Mortgage. When used herein the
------------------------------
following terms have the following meanings:
"Borrower" shall have the meaning set forth in the second recital.
-------- --------------
"Collateral" shall have the meaning set forth in the granting clause.
---------- ---------------
"Contracts" shall have the meaning set forth in clause (h) of the granting
--------- ---------- --------
clause.
- ------
"Credit Agreement" shall have the meaning set forth in the second recital.
---------------- --------------
"Credit Extensions" shall have the meaning set forth in the the second
----------------- ------
recital.
- -------
"Default" means any Event of Default or any condition or event which, after
-------
notice or lapse of time, or both, would constitute an Event of Default.
"Environmental Laws" shall have the meaning set forth in the Credit
------------------
Agreement.
"Event of Default" shall have the meaning set forth in the Credit
----------------
Agreement.
"Goods" shall have the meaning set forth in clause (c) of the granting
----- ---------- --------
clause.
- ------
"herein", "hereof", "hereto", and "hereunder" and similar terms refer to
------ ------ ------ ---------
this Mortgage and not to any particular Section, paragraph or provision of this
Mortgage.
"Impositions" shall have the meaning set forth in Section 1.5.
----------- -----------
"Improvements" shall have the meaning set forth in clause (b) of the
------------ ----------
granting clause.
- -------- ------
"Indemnified Parties" shall have the meaning set forth in Section 1.16.
------------------- ------------
"Insurance Requirements" shall have the meaning set forth in paragraph (a)
---------------------- -------------
of Section 1.6.
-----------
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<PAGE>
"Land" shall have the meaning set forth in the first recital.
---- ----- -------
"Leases" shall have the meaning set forth in clause (e) of the granting
------ ---------- --------
clause.
- ------
"Legal Requirements" shall have the meaning set forth in paragraph (b) of
------------------ -------------
Section 1.6.
- -----------
"Lenders" shall have the meaning set forth in the Credit Agreement.
-------
"Loan Documents" shall have the meaning set forth in the Credit Agreement.
--------------
"Mortgage" shall have the meaning set forth in the preamble.
-------- --------
"Mortgagee" shall have the meaning set forth in the preamble.
--------- --------
"Mortgagor" shall have the meaning set forth in the preamble.
--------- --------
"Obligations" shall have the meaning set forth in the Credit Agreement.
-----------
"Obligor" shall mean each Person having any liabilities, obligations,
-------
duties or responsibilities under the Credit Agreement or any Loan Document.
"Permits" shall have the meaning set forth in clause (g) of the granting
------- ---------- --------
clause.
- ------
"Permitted Encumbrances" shall have the meaning set forth in Section 1.2.
---------------------- -----------
"Person" means a corporation, an association, a partnership, an
------
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency or officer.
"Plans" shall have the meaning set forth in clause (f) of the granting
----- ---------- --------
clause.
- ------
"Post-Petition Interest" shall have the meaning set forth in Section 2.3.
---------------------- -----------
"Proceeds" shall have the meaning set forth in clause (k) of the granting
-------- ---------- --------
clause.
- ------
"Property" shall have the meaning set forth in clause (b) of the granting
-------- ---------- --------
clause.
- ------
"Real Estate" shall have the meaning set forth in clause (a) of the
----------- ----------
granting clause.
- -------- ------
"Rents" shall have the meaning set forth in clause (j) of the granting
----- ---------- --------
clause.
- ------
"Secured Obligations" means all Obligations now or hereafter existing under
-------------------
the Credit Agreement, and all obligations (monetary or otherwise) arising under
or in connection with the Term Notes, the Term Loans and each other Loan
Document, whether for principal, interest,
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<PAGE>
costs, fees, expenses or otherwise, and all other obligations of the Mortgagor
and each Obligor under any Loan Document arising or now or hereafter existing or
due or to become due.
"State" means the State of ___________.
-----
"Taking" shall have the meaning set forth in clause (b) of Section 2.2.
------ ---------- -----------
"Term Loans" shall have the meaning set forth in the Credit Agreement.
----------
"Term Notes" shall have the meaning set forth in the Credit Agreement.
----------
"Total Destruction" means any damage to or destruction of the Improvements
-----------------
or any part thereof which, in the reasonable estimation of the Mortgagee shall
require the expenditure of an amount in excess of Twenty Million Dollars
($20,000,000) to restore the Improvements to substantially the same condition of
the Improvements immediately prior to such damage or destruction.
"Total Taking" means a Taking, whether permanent or for temporary use,
------------
which, in the judgment of the Mortgagee, shall substantially interfere with the
normal operation of the Property by the Mortgagor.
SECTION 4.2. Use of Defined Terms. Terms for which meanings are
--------------------
provided in this Mortgage shall, unless otherwise defined or the context
otherwise requires, have such meanings when used in any certificate and any
opinion, notice or other communication delivered from time to time in connection
with this Mortgage or pursuant hereto.
SECTION 4.3. Credit Agreement Definitions. Unless otherwise defined
----------------------------
herein or the context otherwise requires, terms used in this Mortgage, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1. Further Assurances; Financing Statements.
----------------------------------------
SECTION 5.1.1. Further Assurances. The Mortgagor, at its expense, will
------------------
execute, acknowledge and deliver all such instruments and take all such other
action as the Mortgagee from time to time may reasonably request:
(a) to better subject to the lien and security interest of this
Mortgage all or any portion of the Collateral,
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<PAGE>
(b) to perfect, publish notice or protect the validity of the lien and
security interest of this Mortgage,
(c) to preserve and defend the title to the Collateral and the rights
of the Mortgagee therein against the claims of all Persons as long as this
Mortgage shall remain undischarged,
(d) to better subject to the lien and security interest of this
Mortgage or to maintain or preserve the lien and security interest of this
Mortgage with respect to any replacement or substitution for any Collateral
or any other after-acquired property, or
(e) in order to further effectuate the purposes of this Mortgage and
to carry out the terms hereof and to better assure and confirm to the
Mortgagee its rights, powers and remedies hereunder.
SECTION 5.1.2. Financing Statements. Notwithstanding any other provision
--------------------
of this Mortgage, the Mortgagor hereby agrees that, without notice to or the
consent of the Mortgagor, the Mortgagee may file with the appropriate public
officials such financing statements, continuation statements, amendments and
similar documents as are or may become necessary to perfect, preserve or protect
the security interest granted by this Mortgage.
SECTION 5.2. Additional Security. Without notice to or consent of the
-------------------
Mortgagor, and without impairment of the security interest and lien and rights
created by this Mortgage, the Mortgagee and the Lenders may accept from the
Mortgagor or any other Person additional security for the Secured Obligations.
Neither the giving of this Mortgage nor the acceptance of any such additional
security shall prevent the Mortgagee from resorting, first, to such additional
security, or, first, to the security created by this Mortgage, or concurrently
to both, in any case without affecting the Mortgagee's lien and rights under
this Mortgage.
SECTION 5.3. Defeasance; Partial Release, etc.
--------------------------------
SECTION 5.3.1. Defeasance. If the Term Loans and all other amounts owing
----------
pursuant to the Credit Agreement and the other Loan Documents shall be repaid in
full in accordance with the terms thereof, and if the Mortgagor shall pay, in
full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other sums
payable hereunder by the Mortgagor and shall comply with all the terms,
conditions and requirements hereof and of the Secured Obligations, then on such
date, the Mortgagee shall, upon the request of the Mortgagor and at the
Mortgagor's sole cost and expense, execute and deliver such instruments, in form
and substance reasonably satisfactory to the Mortgagee, as may be necessary to
reconvey, release and discharge this Mortgage.
SECTION 5.3.2. Partial Release, etc. The Mortgagee may, at any time and
--------------------
from time to time, without liability therefor, and without prior notice to the
Mortgagor, release or reconvey any part of the Collateral, consent to the making
of any map or plat of the Property, join in
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<PAGE>
granting any easement thereon or join in any extension agreement or agreement
subordinating the lien of this Mortgage, or enter into any other agreement in
connection with the Collateral.
SECTION 5.4. Notices, etc. All notices and other communications provided
------------
to any of the parties hereto shall be in writing or by facsimile and addressed,
delivered or transmitted to such party at the address set forth in this
instrument in the manner set forth in the Credit Agreement.
SECTION 5.5. Waivers, Amendments, etc. The provisions of this Mortgage
------------------------
may be amended, discharged or terminated and the observance or performance of
any provision of this Mortgage may be waived, either generally or in a
particular instance and either retroactively or prospectively, only by an
instrument in writing executed by the Mortgagor and the Mortgagee.
SECTION 5.6. Cross-References. References in this Mortgage and in each
----------------
instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such Section or Article of this Mortgage or such
instrument, as the case may be, and references in any Section, Article or
definition to any clause are, unless otherwise specified, to such clause of such
Section, Article or definition.
SECTION 5.7. Headings. The various headings of this Mortgage and of each
--------
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Mortgage or such instrument or
any provisions hereof or thereof.
SECTION 5.8. Currency. Unless otherwise expressly stated, all references
--------
to any currency or money, or any dollar amount, or amounts denominated in
"Dollars" herein will be deemed to refer to the lawful currency of the United
States.
SECTION 5.9. Governing Law. THIS MORTGAGE SHALL BE DEEMED TO BE A
-------------
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.
SECTION 5.10. Successors and Assigns, etc. This Mortgage shall be
---------------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
SECTION 5.11. Waiver of Jury Trial; Submission to Jurisdiction.
------------------------------------------------
(a) EACH OF THE MORTGAGOR AND THE MORTGAGEE HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS MORTGAGE, THE CREDIT AGREEMENT, ANY LOAN DOCUMENT
OR ANY OTHER RELATED INSTRUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE MORTGAGOR
OR THE MORTGAGEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
MORTGAGEE AND THE LENDERS TO ENTER INTO
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<PAGE>
THE TRANSACTIONS PROVIDED FOR IN THE CREDIT AGREEMENT AND TO MAKE THE
CREDIT EXTENSIONS.
(b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS
MORTGAGE, THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE MORTGAGOR
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE AND CONSENTS THAT IT
MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE IN ACCORDANCE WITH APPLICABLE LAW,
PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED. THE MORTGAGOR
EXPRESSLY WAIVES, TO THE EXTENT IT MAY LAWFULLY DO SO, ANY OBJECTION, CLAIM
OR DEFENSE WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS MORTGAGE, THE CREDIT
AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY SUCH COURT, IRREVOCABLY WAIVES
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER THE PERSON OF THE MORTGAGOR. NOTHING CONTAINED HEREIN
WILL BE DEEMED TO PRECLUDE THE MORTGAGEE FROM BRINGING AN ACTION AGAINST
THE MORTGAGOR IN ANY OTHER JURISDICTION.
SECTION 5.1.2. Severability. Any provision of this Mortgage, the Credit
------------
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall as to such provision and such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Mortgage, the Credit Agreement or such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 5.1.3. Loan Document. This Mortgage is a Loan Document executed
-------------
pursuant to the Credit Agreement and, unless otherwise expressly indicated
herein, shall be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 5.1.4. Usury Savings Clause. It is the intention of the Mortgagor
--------------------
and the Mortgagee to conform strictly to the usury laws governing the Loan
Documents, and any interest payable under the Loan Documents shall be subject to
reduction to the amount not in excess of the maximum non-usurious amount allowed
under such laws, as construed by the courts having jurisdiction over such
matters. In the event the maturity of the Secured Obligations is accelerated by
reason of any provision of the Loan Documents, or by reason of an election by
the Mortgagee resulting from an Event of Default, then earned interest may never
include more than
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<PAGE>
the maximum amount permitted by law, computed from the dates of each advance of
loan proceeds under the Credit Agreement until payment, and any interest in
excess of the maximum amount permitted by law shall be canceled automatically
or, if theretofore paid, at the option of the Mortgagee, shall be rebated to the
Mortgagor, or shall be credited on the principal amount of the Secured
Obligations or, if all principal has been repaid, then the excess shall be
rebated to the Mortgagor. If any interest is canceled, credited against
principal or rebated to the Mortgagor in accordance with the foregoing sentence
and, if thereafter the interest payable hereunder is less than the maximum
amount permitted by applicable law, the rate hereunder shall automatically be
increased to the maximum extent possible to permit repayment to the Mortgagee
and the Lenders as soon as possible of any interest in excess of the maximum
amount permitted by law which was earlier canceled, credited against principal
or rebated to the Mortgagor pursuant to the provisions of the foregoing
sentence.
SECTION 5.15. Secured Obligations Increase. Any and all future advances
----------------------------
under this Mortgage and the Loan Documents shall have the same priority as if
the future advance was made on the date that this Mortgage was recorded. This
Mortgage shall secure the Secured Obligations to be due at the times provided in
the Loan Documents. Notice is hereby given that the Secured Obligations may
increase as a result of any defaults hereunder by Mortgagor due to, for example,
- --------
and without limitation, unpaid interest or late charges, unpaid taxes or
insurance premiums which the Mortgagee elects to advance, defaults under leases
that the Mortgagee elects to cure, attorney fees or costs incurred in enforcing
the Loan Documents or other expenses incurred by the Mortgagee in protecting the
Collateral, the security of this Mortgage or the Mortgagee's rights and
interests.
SECTION 5.16. Collateral. Notwithstanding any provision contained herein
----------
to the contrary, in no event shall the Collateral include or be deemed to
include, and in no event shall the Mortgagee have or be deemed to have a
security interest in, any of the Mortgagor's inventory (including raw materials,
work-in-process, supplies and finished goods), accounts receivable (including
sellers' rights relating thereto, all contracts and contract rights relating
thereto and all books and records relating thereto), all collection accounts,
deposit accounts and other bank accounts relating to collection of the
foregoing, together with the proceeds and products of all of the foregoing,
which secures or is purported to secure obligations under the Revolving Credit
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, by its duly elected officers and
pursuant to proper authority of its board of directors has duly executed,
sealed, acknowledged and delivered this instrument as of the day and year first
above written.
Earle M. Jorgensen Company, a Delaware corporation
By: __________________________________
Name: _________________________
Title: ______ President
By: __________________________________
Name: _________________________
Title: _______ Secretary
[CORPORATE SEAL]
Witnesses as To All Signatures
_____________________________
Name: ___________________
_____________________________
Name: ___________________
DRAFTED BY:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: George R. Hatzmann, Esq.
-29-
<PAGE>
MULTI-STATE CORPORATE ACKNOWLEDGMENT
State of ________________
County of ________________
On this ________________ day of March, 1998, before me, the undersigned officer,
personally appeared:
(a) ________________________________, with a residence at
____________________________.
(b) __________________________________, with a residence at
____________________________.
personally known and acknowledged himself/herself/themselves to me (or proved to
me on the basis of satisfactory evidence) to be the
(a) ________ President, and
(b) ________ Secretary
respectively of _______________________, (hereinafter, the "Corporation")
and that as such officer(s), being duly authorized to do so pursuant to its
bylaws or a resolution of its board of directors, executed, subscribed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the Corporation by himself/herself/themselves in their
authorized capacities as such officer(s) as his/her/their free and voluntary act
and deed and the free and voluntary act and deed of said Corporation.
In Witness Whereof, I hereunto set my hand and official seal.
____________________________________
Notary Public
Notarial Seal My Commission Expires:
-30-
<PAGE>
SCHEDULE 1
Legal Description of the Land
-----------------------------
[ ]
<PAGE>
SCHEDULE 2
Permitted Encumbrances
----------------------
Those liens identified on Schedule B-1 of Title Commitment Number __,
dated as of March __, 1998, issued by_______________, which the Administrative
Agent has agreed to permit as Permitted Encumbrances.
<PAGE>
EXHIBIT 4.13
[CONFORMED AS EXECUTED]
INTERCREDITOR AGREEMENT
-----------------------
THIS INTERCREDITOR AGREEMENT, dated as of the 24th day of March, 1998,
by and among Fleet National Bank in its capacity as administrative agent for
itself and any other "Term Lender" from time to time party to the "Term Loan
Agreement" as those terms are defined below (together with any successor thereto
under the Term Loan Agreement (provided that such successor shall be bound by
the terms hereof), the "Term Administrative Agent"), and BT Commercial
Corporation, in its capacity as agent for itself and any other "Revolver Lender"
from time to time party to the "Revolver Credit Agreement" as those terms are
defined below ("BTCC").
R E C I T A L S
- - - - - - - -
A. Earle M. Jorgensen Company (the "Borrower") has entered into the
Term Loan Agreement, pursuant to which the Term Lenders have made available to
the Borrower a term loan facility in the aggregate principal amount of
approximately $100,000,000;
B. The Borrower has entered into the Revolver Credit Agreement,
pursuant to which the Revolver Lenders have made available to the Borrower a
revolving credit facility in the aggregate amount of $220,000,000;
C. The obligations of the Borrower under the Term Loan Agreement are
secured by mortgages, liens and security interests in substantially all of
Borrower's property, plant and equipment, all as more specifically set forth in
the Term Loan Agreement and the other Term Loan Documents;
D. The obligations of the Borrower under the Revolver Credit
Agreement are secured by inventory, receivables and all assets relating thereto,
as more specifically set forth in the Revolver Credit Agreement and the other
documents delivered in connection therewith; and
E. The Revolver Agent and the Term Administrative Agent wish to enter
into this Agreement setting forth their agreement (i) as to the relative
priorities of the respective mortgages, liens and security interests in the
assets of the Borrower securing the respective obligations of the Borrower under
the Term Loan Documents and the Revolver Credit Documents and (ii) as to certain
related matters.
A G R E E M E N T
- - - - - - - - -
In consideration of the premises and the mutual covenants and
conditions herein contained, the Term Administrative Agent, for itself and on
behalf of the Term Lenders, and the Revolver Agent, for itself and on behalf of
the Revolver Lenders, intending to be legally bound, agree as follows:
<PAGE>
1. Definitions. In addition to those terms elsewhere expressly
-----------
defined in this Agreement, as used herein, the following terms shall be defined
as set forth below:
"Borrower" has the meaning set forth in the Recitals.
--------
"BT Account" means an account, maintained by the Revolver Agent at
----------
Bankers Trust Company, into which all available funds in the Concentration
Account are transferred on every Business Day to be applied to payments of the
Revolver Obligations.
"BTCC" has the meaning set forth in the introductory paragraph.
----
"Business Day" means any day that is not a Saturday, a Sunday, a day
------------
on which banks are required or authorized to be closed in the State of New York
or a day on which the Revolver Agent or the Term Administrative Agent is closed
for business.
"Collateral" means, collectively, the Revolver Collateral and the Term
----------
Collateral.
"Collateral Account of the Term Loan Agreement" means, collectively,
---------------------------------------------
the cash collateral accounts of the Borrower and its Subsidiaries that are
parties to the Term Security Agreement, maintained with, and in the sole
dominion and control of, the Term Administrative Agent for the benefit of the
Secured Parties (as such term is defined in the Term Security Agreement),
established pursuant to the Term Security Agreement.
"Collection Account" means the account, established at an institution
------------------
selected by the Borrower and acceptable to BTCC pursuant to the Collection Bank
Agreement, into which funds on deposit in the relevant Sub-Collection Account
shall be transferred pursuant to the Revolver Credit Agreement.
"Collection Agreements" means agreements between the Borrower, the
---------------------
Revolver Agent and financial institutions selected by the Borrower and
acceptable to BTCC which provide, among other things, for all receipts received
in respect of Revolver Accounts to be transferred at the end of each day from
each Sub-Collection Account to the appropriate Collection Account.
"Concentration Account" means an account established pursuant to a
---------------------
Concentration Account Agreement entered into among the Borrower, the Revolver
Agent and Bankers Trust Company, and into which all available amounts held in
the Collection Accounts shall be wired each Business Day.
"Concentration Account Agreement" means a concentration account
-------------------------------
agreement entered into among the Borrower, the Revolver Agent and Bankers Trust
Company establishing the Concentration Account.
"Disposition" means the sale, assignment, transfer, lease, conveyance
-----------
or other disposition by the Borrower of any Jorgensen Property, including,
without limitation, an involuntary disposition as a result of a casualty or
condemnation.
2
<PAGE>
"Equipment" means any "equipment," as such term is defined in Section
---------
9-109(2) of the UCC, now owned or hereafter acquired by the Borrower or any of
its Subsidiaries that are parties to the Term Security Agreement or in which the
Borrower or such Subsidiary now has or hereafter acquires any rights and
wherever located, and, in any event, shall include, without limitation, all
equipment, machinery, apparatus or tools in all forms, including, without
limitation, (a) all plate processing, cutting, tube honing, burning, sawing,
shearing, grinding, polishing, hot-rolling, and cold-finishing equipment; (b)
all bar, tubing and pipe, plate, sheet and other metal product finishing
equipment; (c) all lighting and power equipment; (d) all heating, ventilating,
sprinkling, water, power and communications equipment; (e) all cleaning
equipment; (f) all lift, elevator and escalator equipment; (g) all electrical
equipment; and (h) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units, display
terminals, printers, features, computer elements, card readers, tape drives,
hard and soft disk drives, cables, electrical supply hardware, generators, power
equalizers, accessories and all peripheral devices and other related computer
hardware; and all firmware associated with all of the foregoing, wherever
located, together with all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
and all accessories related thereto, and any of the foregoing which shall
constitute fixtures under applicable law, provided that the term "Equipment"
--------
shall exclude any items of Revolver Collateral.
"General Intangibles" means any "general intangibles," as such term is
-------------------
defined in the UCC.
"Governmental Agency" means (a) any international, foreign, federal,
-------------------
state, county or municipal government, or political subdivision thereof, (b) any
governmental agency, authority, board, bureau, commission, department or
instrumentality, (c) any court or administrative tribunal, (d) any non-
governmental agency or entity that is vested by a governmental agency with
applicable jurisdiction over a Person, or (e) any arbitration tribunal or other
non-governmental authority to whose jurisdiction a Person has given its general
consent.
"Inventory" means merchandise, inventory and goods, and all additions,
---------
substitutions and replacements thereof, wherever located, together with all
goods, supplies, incidentals, packaging materials, labels, materials and any
other items (other than Term Collateral) used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production -- from raw
materials through work-in-process to finished goods -- and all products and
proceeds of whatever sort and wherever located and any portion thereof which may
be returned, rejected, reclaimed or repossessed by the Collateral Agent from the
Borrower's customers, and shall specifically include all "inventory" as such
term is defined in the UCC, now or hereafter owned by the Borrower, and in no
event shall the term "Inventory" include any items of Term Collateral.
"Jorgensen Property" means any and all Property of the Borrower and
------------------
each of its Subsidiaries, or rights, title or interests of the Borrower or such
Subsidiary in Property, howsoever arising, acquired or obtained, whether now or
hereafter existing, whether tangible or intangible, whether real or personal,
and wherever located.
3
<PAGE>
"Jorgensen Real Property" means (i) all freehold real and immovable
-----------------------
property now owned or hereafter acquired by the Borrower and each of its
Subsidiaries that is a party to a mortgage or a deed of trust delivered pursuant
to the Term Loan Agreement, together with all buildings, erections, improvements
and fixtures now or hereafter constructed or placed thereon or used in
connection therewith, and (ii) all leasehold property now or hereafter leased by
the Borrower or such Subsidiary, together with all buildings, erections,
improvements and fixtures now or hereafter constructed or placed thereon or used
in connection therewith.
"Law" means, when used in connection with any Person, collectively,
---
all international, foreign, federal, state and local statutes, treaties, rules,
regulations, standards, guidelines, ordinances, codes, orders and judgments (or
any official interpretation of any of the foregoing) issued by any Governmental
Agency applicable to that Person.
"Lien" means any mortgage, deed of trust, deed to secure debt, pledge,
----
hypothecation, assignment for security, security interest, encumbrance, lien or
charge of any kind, whether voluntarily incurred or arising by operation of Law,
by statute, by contract, or otherwise, affecting any Property, including any
agreement to grant any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature of a security interest, and/or the
filing of or agreement to give any financing statement (other than a
precautionary financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable Law of any
jurisdiction as in effect on the date hereof with respect to any Property.
"Patent" or "Patents" means one or all of the following now owned or
------ -------
hereafter acquired by the Borrower or in which the Borrower now has or hereafter
acquires any rights, including, without limitation, pursuant to any Patent
License, and wherever located: (a) all letters patent of the United States or
any other country and all applications for letters patent of the United States
or any other country, (b) all reissues, reexaminations, continuations,
continuations-in-part, divisions, and extensions of any of the foregoing, and
(c) all inventions claimed and disclosed in the Patents and any and all trade
secrets and know-how related thereto.
"Patent License" means any written agreement granting any right to
--------------
make, use, sell and/or practice any invention or discovery that is the subject
matter of a Patent now owned or hereafter acquired by the Borrower or in which
the Borrower now has or hereafter acquires any rights.
"Person" means any entity, whether an individual, trustee,
------
corporation, general partnership, limited partnership, joint stock company,
trust, estate, unincorporated organization, business association, tribe, firm,
joint venture, Governmental Agency, or otherwise.
"Proceeds" means "Proceeds," as such term is defined in Section 9-
--------
306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Proceeds of any insurance, indemnity, warranty or guaranty payable to
either the Term Administrative Agent or the Revolver Agent or the Borrower or
any of its Subsidiaries that is a party to a Security Document from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to the Borrower or such Subsidiary from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the
4
<PAGE>
Collateral by any Governmental Agency (or any Person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Receivables" means any "account" as such term is defined in the UCC,
-----------
now or hereafter owned by the Borrower and, in any event, includes, but is not
limited to, all of the Borrower's rights to payment for goods sold or leased or
services performed by the Borrower, whether now in existence or arising from
time to time hereafter, including, without limitation, rights evidenced by an
account, note, contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (a) all security pledged, assigned,
hypothecated or granted to or held by the Borrower to secure the foregoing, (b)
all of the Borrower's right, title and interest in and to any goods, the sale of
which gave rise thereto, (c) all guarantees, endorsements and indemnifications
on, or of, any of the foregoing, (d) all powers of attorney for the execution of
any evidence of indebtedness or security or other writing in connection
therewith, (e) all books, records, ledger cards, and invoices relating thereto,
(f) all notices to Interest Rate Protection Creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.
"Remedial Action" means any claim, proceeding or action to foreclose
---------------
upon, take possession or control of, sell, lease or otherwise dispose of or in
any other manner realize, take steps to realize or seek to realize upon, the
whole or any part of any Jorgensen Property, whether pursuant to the UCC, by
foreclosure, by setoff, by self-help repossession, by notification to account
debtors, by deed in lieu of foreclosure, by exercise of power of sale, by
judicial action or otherwise, or the exercise of any other remedies with respect
to any Jorgensen Property available under any of the Security Documents, or
under applicable Law.
"Revolver Accounts" means, with respect to any Person, all present and
-----------------
future accounts, contract rights and other rights to payment for goods sold or
leased (whether or not delivered) or for services rendered which are not
evidenced by an instrument or chattel paper, whether or not they have been
earned by performance, and any letter of credit, guarantee, security interest or
other security issued or granted to secure payment by an account debtor.
"Revolver Agent" means BTCC in its capacity as agent for the Revolver
--------------
Lenders under the Revolver Credit Agreement and not in its individual capacity,
any successor agent to BTCC under the Revolver Credit Agreement and any other
agent, trustee or representative of the Revolver Lenders serving in such
capacity from time to time and, if there is no such agent, trustee or
representative, "Revolver Agent" means, collectively, the Revolver Lenders.
"Revolver Collateral" has the meaning set forth in Section 3.1(a).
------------------- --------------
5
<PAGE>
"Revolver Credit Agreement" means (a) the Amended and Restated Credit
-------------------------
Agreement, dated as of March 3, 1993, amended and restated as of March 24, 1998,
among Earle M. Jorgensen Holding Company, Inc., the Borrower, Bankers Trust
Company, as Issuing Bank, and BT Commercial Corporation, as Syndication Agent
and Agent, as such agreement may be amended, amended and restated, renewed,
extended, restructured, refinanced, supplemented, or otherwise modified from
time to time (subject to the Term Loan Agreement); and (b) any credit agreement,
loan agreement, note purchase agreement, indenture or other agreement, document
or instrument refinancing, refunding or otherwise replacing the Revolver Credit
Agreement, or any other agreement deemed a Revolver Credit Agreement under
clause (a) or (b) hereof, whether or not with the same agent, trustee,
representative lenders or holders and, subject to the provisions of the next
succeeding sentence, irrespective of any change in the terms and conditions
thereof (subject to the Term Loan Agreement); provided, that, any such
--------
agreement, document or instrument effecting any such refunding, refinancing or
replacement expressly provides that it is deemed to be a "Revolver Credit
Agreement" hereunder and that the lenders thereunder and their agent(s), if any,
shall be bound by the terms hereof. Without limiting the generality of the
foregoing, the term "Revolver Credit Agreement" shall include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any Revolver Credit Agreement and all refundings, refinancings
and replacements of any Revolver Credit Agreement including any agreement (i)
extending the maturity of any Revolver Obligations; (ii) adding or deleting
issuers, borrowers or guarantors thereunder; (iii) increasing the amount of
Revolver Obligations incurred thereunder or available to be borrowed thereunder;
or (iv) otherwise altering the terms and conditions thereof (subject to the Term
Loan Agreement); provided, that any such agreement, document or instrument
--------
effecting any such refunding, refinancing or replacement expressly provides that
it is deemed to be a "Revolver Credit Agreement" hereunder and that the lenders
thereunder and their agent(s), if any, shall be bound by the terms hereof.
"Revolver Credit Documents" means the Revolver Credit Agreement, the
-------------------------
Revolver Security Documents, and all documents, agreements, instruments and
certificates now or hereafter executed and delivered in connection with the
Revolver Credit Agreement, except as released prior to or in accordance with the
execution of the Revolver Credit Agreement.
"Revolver Interest Rate Obligations" means, collectively, at any time,
----------------------------------
all debts, liabilities and obligations of the Borrower, whether now or hereafter
existing, incurred in connection with the Interest Rate Agreements (as such term
is defined in the Revolver Security Documents as in effect on the date hereof)
entered into with the Interest Rate Protection Creditors (as such term is
defined in the Revolver Security Documents as in effect on the date hereof).
"Revolver Lenders" means, collectively, the holders from time to time
----------------
of the Revolver Obligations.
"Revolver Lenders' Lien" means a Lien now or hereafter granted to, or
----------------------
obtained by, the Revolver Lenders or the Credit Agreement Agent for the benefit
of the Revolver Lenders on any Revolver Collateral as security for the payment
and performance of any Revolver Obligations.
6
<PAGE>
"Revolver Obligations" means, collectively, at any time, (a) all
--------------------
debts, liabilities and obligations of the Borrower, whether now or hereafter
existing, incurred in connection with the Revolver Credit Documents and (b) all
Revolver Interest Rate Obligations, in each case, at such time.
"Revolver Security Documents" means, collectively, any and all
---------------------------
documents executed in connection with the Revolver Credit Agreement or in
furtherance thereof, pursuant to which the Borrower grants to the Revolver
Lenders (whether through the Revolver Agent or otherwise) a Lien on the Revolver
Collateral, as the same may be amended, modified, supplemented or acknowledged
from time to time to the extent, and only to the extent, that such amendment,
modification, supplement or acknowledgment is permitted by the Revolver Credit
Agreement and the Term Loan Agreement.
"Security Documents" means, collectively, the Revolver Security
------------------
Documents and the Term Security Documents.
"Sub-Collection Account" means an account established by the Borrower
----------------------
for the collection of amounts received by the Borrower from any account debtor,
in addition to cash received from any other source, made in respect of Revolver
Accounts.
"Subsidiary" means any Person of which at least a majority of the
----------
capital stock or other ownership interest having ordinary voting power for the
election of directors or other governing body of said Person is owned by the
Borrower, directly or through one or more Subsidiaries.
"Term Administrative Agent" has the meaning set forth in the
-------------------------
introductory paragraph.
"Term Collateral" has the meaning set forth in Section 3.1(b).
---------------
"Term Lenders" mean the financial institutions party from time to time
------------
to the Term Loan Agreement.
"Term Lenders' Lien" means a Lien now or hereafter granted to, or
------------------
obtained by, the Term Lenders or the Term Administrative Agent for the benefit
of the Term Lenders on any Term Collateral, as security for the payment and
performance of any Term Obligations.
"Term Loan Agreement" means (a) the Term Loan Agreement, dated as of
-------------------
March 24, 1998, among the Borrower, DLJ Capital Funding, Inc., as Syndication
Agent, Bankers Trust Company, as Documentation Agent, the Term Administrative
Agent and the Term Lenders party thereto, as such agreement may be amended,
amended and restated, renewed, extended, restructured, refinanced, supplemented,
or otherwise modified from time to time (subject to the Revolver Credit
Agreement); and (b) any credit agreement, loan agreement, note purchase
agreement, indenture or other agreement, document or instrument refinancing,
refunding or otherwise replacing the Term Loan Agreement, or any other agreement
deemed a Term Loan Agreement under clause (a) or (b) hereof, whether or not with
the same agent, trustee, representative lenders or holders and, subject to the
provisions of the next succeeding sentence,
7
<PAGE>
irrespective of any change in the terms and conditions thereof (subject to the
Revolver Credit Agreement); provided, that any such agreement, document or
--------
instrument effecting any such refunding, refinancing or replacement expressly
provides that it is deemed to be a "Term Loan Agreement" hereunder and that the
lenders thereunder and their agent(s), if any, shall be bound by the terms
hereof. Without limiting the generality of the foregoing, the term "Term Loan
Agreement" shall include any amendment, amendment and restatement, renewal,
extension, restructuring, supplement or modification to any Term Loan and all
refundings, refinancings and replacements of any Term Loan including any
agreement (i) extending the maturity of any Term Obligations; (ii) adding or
deleting issuers, borrowers or guarantors thereunder; (iii) increasing the
amount of Revolver Obligations incurred thereunder or available to be borrowed
thereunder; or (iv) otherwise altering the terms and conditions thereof (subject
to the Revolver Credit Agreement); provided, that any such agreement, document
--------
or instrument effecting any such refunding, refinancing or replacement expressly
provides that it is deemed to be a "Term Loan Agreement" hereunder.
"Term Loan Documents" means the Term Loan Agreement and all documents,
-------------------
agreements, instruments and certificates now or hereafter executed and delivered
in connection with the Term Loan Agreement, except as released prior to or in
accordance with the execution of the Term Loan Agreement.
"Term Obligations" means, collectively, at any time all debts,
----------------
liabilities and obligations of the Borrower, whether now or hereafter existing,
arising pursuant to the terms of the Term Loan Documents at such time.
"Term Security Agreement" means the security agreement executed
-----------------------
pursuant to the Term Loan Agreement.
"Term Security Documents" means, collectively, any and all documents
-----------------------
executed in connection with the Term Loan Agreement or in furtherance thereof,
pursuant to which the Borrower grants to the Term Lenders (whether through the
Term Administrative Agent or otherwise) a Lien on the Term Collateral, and, to
the extent permitted pursuant to the terms of this Agreement, as the same may be
amended, modified or supplemented from time to time to the extent, and only to
the extent, that such amendment, modification or supplement is permitted by the
Term Loan Agreement and the Revolver Credit Agreement.
"Trademark" or "Trademarks" means any trademarks and service marks now
--------- ----------
held or hereafter acquired by the Borrower (including, without limitation,
pursuant to any Trademark License), which are registered in the United States
Patent and Trademark Office, as well as any unregistered marks used by the
Borrower in the United States and trade dress including logos and/or designs in
connection with which any of these registered or unregistered marks are used.
"Trademark License" means any written agreement granting any right to
-----------------
use any Trademark or Trademark registration now owned or hereafter acquired by
the Borrower or in which the Borrower now has or hereafter acquires any rights.
8
<PAGE>
"UCC" means the Uniform Commercial Code as in effect on the date
---
hereof in the State of New York, or, if another jurisdiction is specified in
this Agreement, the Uniform Commercial Code as in effect from time to time in
such jurisdiction.
2. Consents. Subject to the terms and conditions of this Agreement
--------
(including, without limitation, Section 4.2 hereof):
-----------
(a) The Revolver Agent, for itself and on behalf of the Revolver
Lenders, consents to (i) the execution and delivery of the Term Loan
Agreement and each Term Security Document, in each case as in effect on the
date hereof, (ii) the incurrence of all Term Obligations and (iii) the
granting of all Term Lenders' Liens; and
(b) The Term Administrative Agent, for itself and on behalf of the
Term Lenders, consents to (i) the execution and delivery of the Revolver
Credit Agreement and each Revolver Security Document, in each case as in
effect on the date hereof, (ii) the incurrence of all Revolver Obligations
and (iii) the granting of all Revolver Lenders' Liens.
3. Priority of Liens; Remedial Actions; Other Agreements.
-----------------------------------------------------
3.1 Priority of Liens. The Revolver Lenders' Liens and the Term
-----------------
Lenders' Liens shall, as between the Revolver Lenders and the Term Lenders, have
the following priorities:
(a) The Revolver Lenders' Liens in all that Jorgensen Property set
forth and described on Schedule A hereto (the "Revolver Collateral") shall
----------
be first priority Liens in such Property.
(b) The Term Lenders' Liens in all that Jorgensen Property set forth
and described on Schedule B hereto (the "Term Collateral") shall be first
----------
priority Liens in such Property.
The foregoing provisions shall be effective at all times during the term of this
Agreement, notwithstanding: (i) the initiation of any bankruptcy, moratorium,
reorganization or other solvency proceeding with respect to the Borrower or the
grantor or pledgor of any Collateral; (ii) the priorities which would otherwise
result from the order of creation, attachment or perfection of any such Lien;
(iii) the taking of possession of any of the Jorgensen Property by the Revolver
Agent, the Term Administrative Agent, any Revolver Lender or any Term Lender;
(iv) the filing of any financing statement or the recording of any mortgage or
other instrument in any recording office; (v) the order in which any of the
Revolver Obligations or the Term Obligations are created; (vi) whether any such
Lien is now perfected, hereafter ceases to be perfected, is avoidable by any
bankruptcy trustee or otherwise is set aside invalidated or lapses; or (vii) any
other matter whatsoever; and shall continue in full force and effect unless and
until this Agreement shall have terminated in accordance with Section 5 hereof.
---------
9
<PAGE>
3.2 Remedial Actions. Unless and until this Agreement shall have
----------------
been terminated in accordance with Section 5 hereof, the Revolver Agent and the
---------
Term Administrative Agent shall have the right, as between themselves, to take
or fail to take Remedial Actions with respect to any Collateral as follows:
(a) The Revolver Agent shall have the sole and exclusive right to
take or fail to take any Remedial Action with respect to the Revolver
Collateral as provided in the Revolver Security Documents or under
applicable Law in any manner deemed appropriate by the Revolver Agent or
the Revolver Lenders in its or their sole discretion, and neither the Term
Administrative Agent nor any Term Lender shall take any Remedial Action
with respect to the Revolver Collateral without the prior written consent
of the Revolver Agent;
(b) The Term Administrative Agent shall have the sole and exclusive
right to take or fail to take any Remedial Action with respect to the Term
Collateral as provided in the Term Security Documents or under applicable
Law in any manner deemed appropriate by the Term Administrative Agent or
the Term Lenders in its or their sole discretion, and neither the Revolver
Agent nor any Revolver Lender shall take any Remedial Action with respect
to the Term Collateral without the prior written consent of the Term
Administrative Agent; and
(c) The Revolver Agent shall have the sole and exclusive right to
adjust settlement of, and collect the Proceeds of, any and all insurance
insuring the Revolver Collateral and the Term Administrative Agent shall
have the sole and exclusive right to adjust settlement of and collect the
Proceeds of, any and all insurance insuring the Term Collateral. Any such
Proceeds received shall be promptly distributed in accordance with Section
3.3 hereof.
Notwithstanding the foregoing, nothing contained in this Section 3.2 shall
-----------
prohibit the Revolver Agent, the Revolver Lenders, the Term Administrative Agent
or the Term Lenders from filing a proof of claim in any case involving the
Borrower, as debtor, under Title 11 of the United States Code, as amended, nor
from intervening or participating in any other judicial proceeding to the extent
necessary to establish or preserve its interests, subject in each case to the
provisions of this Agreement.
3.3 Priority on Distribution of Proceeds of Collateral. In the event
--------------------------------------------------
of:
(a) any distribution of any Jorgensen Property upon the bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any
other action or proceeding involving the readjustment of the obligations
and indebtedness of the Borrower or any of its Subsidiaries that is a party
to a Security Document, or the application of any Jorgensen Property to the
payment thereof;
(b) any distribution of the Jorgensen Property upon the liquidation
or dissolution of the Borrower or any Subsidiary of the Borrower that is a
party to a Security
10
<PAGE>
Document, or the winding up of the assets or business of the Borrower or
any such Subsidiary of the Borrower;
(c) any realization by any of the Revolver Agent, the Term
Administrative Agent, the Revolver Lenders or the Term Lenders with respect
to the Revolver Lenders' Liens or the Term Lenders' Liens, respectively,
whether through a Remedial Action or otherwise; or
(d) any Disposition of any Jorgensen Property, to the extent that any
part of the proceeds of such Disposition are required to be applied to any
of the Revolver Obligations or the Term Obligations or held by the Revolver
Agent or the Term Administrative Agent in accordance with the provisions of
the Revolver Credit Documents, the Term Loan Documents, or the provisions
of this Agreement;
then, in any such event, as between the Revolver Lenders and the Term Lenders
(i) all of the Revolver Collateral and any Proceeds thereof so distributed,
applied or realized upon shall be distributed or paid to (or retained by) the
Revolver Agent for application to the Revolver Obligations to the extent of the
Revolver Lenders' Liens therein, and, after the payment in full in cash of all
Revolver Obligations then due and owing, the remaining amount of such Proceeds
shall be distributed or paid to (or retained by) the Term Administrative Agent
or any Term Lenders for application to the Term Obligations and (ii) all of the
Term Collateral and any Proceeds thereof distributed, applied or realized upon
shall be distributed or paid to (or retained by) the Term Administrative Agent
for application to the Term Obligations to the extent of the Term Lenders' Liens
therein and, after the payment in full in cash of all Term Obligations then due
and owing, the remaining amount of such Proceeds shall be distributed or paid to
(or retained by) the Revolver Agent or any Lender for application to the
Revolver Obligations. Any amounts paid to the Revolver Agent and the Term
Administrative Agent shall be allocated to the Revolver Lenders and the Term
Lenders, respectively, in accordance with the terms of the Revolver Credit
Documents and the Term Loan Documents, respectively.
3.4 Parties to Hold Proceeds in Trust. In the event that:
---------------------------------
(a) the Revolver Agent or any Revolver Lender obtains possession of
any of the Term Collateral or receives any Proceeds from any Remedial
Action with respect to Term Collateral or any Disposition of Term
Collateral described in Section 3.3 hereof or as a result of its Lien on
-----------
any Term Collateral at any time prior to payment in full of all Term
Obligations; or
(b) the Term Administrative Agent or any Term Lender obtains
possession of any of the Revolver Collateral or receives any Proceeds from
any Remedial Action with respect to Revolver Collateral or Disposition of
Revolver Collateral described in Section 3.3 hereof or as a result of its
-----------
Lien on any Revolver Collateral at any time prior to payment in full of all
Revolver Obligations;
then, in any such event, the party receiving such Proceeds shall (unless
otherwise provided by Law) hold the same in trust for the party entitled to
receive the same and promptly notify and pay
11
<PAGE>
over the same to such party for application to the Revolver Obligations (in the
case of the Revolver Agent) and to the Term Obligations (in the case of the Term
Administrative Agent).
3.5 Payment Invalidated. In the event that any of the Revolver
-------------------
Obligations or Term Obligations shall be paid in full in cash and subsequently,
for whatever reason (including but not limited to, an order or judgment for
disgorgement of a preference under Title 11 of the United States Code, or any
similar Law, or the settlement of any claim in respect thereof), formerly paid
or satisfied Revolver Obligations or Term Obligations become unpaid or
unsatisfied, the terms and conditions of this Agreement shall be reinstated,
notwithstanding any prior termination of this Agreement pursuant to Section 5,
---------
and all provisions of this Agreement shall again be operative until all such
obligations are again paid in full in cash.
3.6 Notice of Acceleration; Notice of Remedial Action. Each of the
-------------------------------------------------
Revolver Agent and the Term Administrative Agent agrees to deliver to the other:
(a) In the case of the Revolver Agent, (i) prompt written notice of
the acceleration of the Revolver Obligations pursuant to the Revolver
Credit Documents (such notice to be provided in the same manner and
substantially contemporaneously with any notice provided to the Borrower)
and (ii) prompt written notice of any Remedial Action with respect to
Revolver Collateral; and
(b) In the case of the Term Administrative Agent, (i) prompt written
notice of the acceleration of the Term Obligations pursuant to the Term
Loan Documents (such notice to be provided in the same manner and
substantially contemporaneously with any notice provided to the Borrower)
and (ii) prompt written notice of any Remedial Action with respect to Term
Collateral.
3.7 Contesting Liens. Each of the Revolver Agent, for itself and on
----------------
behalf of the Revolver Lenders, and the Term Administrative Agent, for itself
and on behalf of the Term Lenders, agrees that it shall not contest the
validity, perfection, priority or enforceability of any Revolver Lenders' Lien
in Revolver Collateral, in the case of the Term Administrative Agent and the
Term Lenders, or any Term Lenders' Lien in Term Collateral, in the case of the
Revolver Agent and the Revolver Lenders, so long as such Lien is purported to be
-- ---- --
effective under the Security Document pursuant to which such Lien was purported
to have been created or granted.
3.8 Further Assurances. (a) From time to time during the term
------------------
hereof, each of the Revolver Agent and the Term Administrative Agent, at the
reasonable request of the other party, shall execute and deliver such other
documents and instruments and take such other actions, as shall reasonably be
necessary to carry out the intentions or to facilitate the performance of this
Agreement including, without limitation, in connection with any Remedial Action
of which such Person has received notice in accordance with the terms hereof;
(b) Each of the Revolver Agent and the Borrower hereby acknowledge
and agree that the Revolver Collateral does not include any Collateral Account
of the Term Loan Agreement and covenant to execute and file, within three (3)
weeks of the date hereof, solely at the Borrower's expense (the Borrower hereby
agreeing to comply with the requirements of this
12
<PAGE>
Section 3.8(b) by executing the acknowledgment attached to this Agreement), all
UCC amendments to the Form UCC-1 financing statements evidencing the Revolving
Lenders' Liens necessary to exclude from the description of the collateral
covered thereby each Collateral Account of the Term Loan Agreement. Furthermore,
each of the Revolver Agent and the Borrower acknowledges and agrees that,
notwithstanding the content of any filed Form UCC-1 financing statements
(existing on the date hereof), such Form UCC-1 financing statements do not
include any items of the Term Collateral or perfect a Revolver Lenders' Lien
therein.
3.9 Access to Collateral. (a) Each of the Revolver Agent and the
--------------------
Term Administrative Agent agrees to allow the other and its respective agents
and employees reasonable access to any Jorgensen Property in its possession or
under its control, including, without limitation, any Jorgensen Real Property
and any customer lists, software, data bases, business records data and other
books and records of the Borrower pertaining to any of the Collateral, for the
purposes of any Remedial Action then permitted by this Agreement and the
relevant Security Documents and the Borrower, on its behalf and on behalf of any
of its Subsidiaries party to any Security Documents, by acknowledging receipt of
this Agreement consents to such access. In the event such utilization of the
Term Collateral is solely for the purpose of removing and/or realizing on
Revolver Collateral, the Revolver Lenders shall indemnify the Term Lenders from
all damage to or deterioration of the Term Collateral during such utilization,
normal wear and tear excepted;
(b) In the event such utilization of the Term Collateral is for the
purpose of processing and converting raw materials (including work-in-process)
into finished goods, the Revolver Lenders shall, in addition to the indemnity
referenced in paragraph (a) above, pay to the Term Lenders the incremental costs
(i.e., those costs which are directly attributable to the Revolver Agent's
----
utilization of such Term Collateral over and above any such costs the Term
Lenders would have incurred whether or not the Revolver Agent had so utilized
the Term Collateral) incurred by the Term Lenders on account of utility rates
and similar charges and any increased insurance costs which the Term Lenders are
required to pay as a result of such utilization;
(c) Nothing in this Section 3.10 shall prevent the Term
------------
Administrative Agent or the Revolver Agent from entering into a contract of
sale, transfer or other disposition of, or otherwise foreclosing on, any of the
Term Collateral or Revolver Collateral, respectively, so long as such contract
provides, or such foreclosure is subject to providing, the Revolver Agent or the
Term Administrative Agent, as the case may be, with the same access to such
Collateral (including the execution and delivery of any agreements between third
parties and the Revolver Agent to preserve the Revolver Agent's or any Revolver
Lender's access to the Revolver Collateral during the period described in clause
(f) below) as provided by this Section 3.9.
-----------
(d) The Term Administrative Agent agrees that it shall not take any
action, legal, contractual or otherwise, or commence any legal proceeding to
prevent the Revolver Agent's use of the Term Collateral as provided in this
Section 3.9 or the Revolver Agent's non-exclusive use of any Patents, Patent
- -----------
Licenses or General Intangibles necessary or desirable to convert raw materials
constituting Revolver Collateral into inventory, to the extent that the Borrower
has granted the Revolver Agent the right to use any such property for such
purpose.
13
<PAGE>
(e) The Revolver Agent agrees that it shall not take any action,
legal, contractual or otherwise, or commence any legal proceeding to prevent the
Term Administrative Agent's use of the Revolver Collateral as provided in this
Section 3.9 or the Term Administrative Agent's non-exclusive use of any Patents,
- -----------
Patent Licenses or General Intangibles necessary or desirable to dispose of
equipment constituting Term Collateral, to the extent that the Borrower has
granted the Term Administrative Agent the right to do so.
(f) Notwithstanding anything to the contrary in this Section 3.9, (i)
-----------
the utilization (including, without limitation, the access, occupation and use)
of the Term Collateral by the Revolver Agent shall be permitted for a period not
to exceed (x) ninety (90) days from the date the Revolver Agent takes any
Remedial Action or receives notice from the Term Administrative Agent that the
Term Administrative Agent has taken or intends to take any Remedial Action or
(y) such shorter period as is necessary for the Revolver Agent to complete
Revolver Collateral consisting of work-in-process, to store Revolver Collateral
constituting Inventory and to otherwise remove such Revolver Collateral from the
Jorgensen Real Property in which the Term Administrative Agent is purported to
have a Lien and complete the Revolver Agent's exercise of remedies in respect
thereof.
3.10 Trademark Licenses. (a) The Term Administrative Agent consents
------------------
to the granting by the Borrower to the Revolver Agent of a nonexclusive license
to use each Trademark of the Borrower to enable them to manufacture and sell the
Revolver Collateral. Such license and such right shall be world-wide and
royalty free. The Revolver Agent covenants and agrees that it will use
reasonable efforts after the acceleration of the Revolver Obligations to obtain
possession of the Revolver Collateral and to promptly terminate such license
with respect to any Trademark by notice to the Term Administrative Agent at the
time any such Property (in the judgment of the Revolver Agent) is no longer
necessary or desirable in connection with the manufacture or sale of the
Revolver Collateral.
(b) The Revolver Agent consents to the granting by the Borrower to
the Term Administrative Agent of a nonexclusive license to use each Trademark of
the Borrower to enable the Term Administrative Agent to remove and realize on
the Term Collateral. Such license and such right shall be world-wide and royalty
free.
(c) The Revolver Agent acknowledges that it has no security interests
in any intellectual property, including but not limited to Trademarks and
Trademark Licenses, and, accordingly, shall not have any right to assign,
convey, transfer or grant licenses and sublicenses in the Trademarks and the
Trademark Licenses to any other Person, other than, subject to the limitations
of this Section 3.10, in connection with the uses permitted by Section 3.10(a)
------------ ---------------
above to any Person acquiring any of the Revolver Collateral from the Revolver
Agent in connection with the exercise by the Revolver Agent of its rights as a
secured creditor of the Borrower with respect to such Inventory (unless such
Person agrees to be bound by the terms of this Section 3.10 as if it were the
Revolving Agent), and any purported assignment, conveyance, transfer or grant
(except as expressly permitted herein) shall be void.
(d) The Term Administrative Agent acknowledges that it has no
security interests in any intellectual property, including but not limited to
Trademarks and Trademark
14
<PAGE>
Licenses, and, accordingly, shall not have any right to assign, convey, transfer
or grant licenses and sublicenses in the Trademarks and the Trademark Licenses
to any other Person, other than in connection with the uses permitted by Section
-------
3.10(b) above to any Person acquiring any of the Term Collateral from the Term
- -------
Administrative Agent in connection with the exercise by the Term Administrative
Agent of its rights as a secured creditor of the Borrower with respect to such
Term Collateral (unless such Person agrees to be bound by the terms of this
Section 3.10 as if it were the Term Administrative Agent), and any purported
assignment, conveyance, transfer or grant (except as expressly permitted herein)
shall be void.
4. Reliance, Waivers, Etc.
-----------------------
4.1 Creation of Future Obligations. (a) All of the Revolver
------------------------------
Obligations shall be deemed to have been funded by the Revolver Lenders and
incurred by the Borrower in reliance upon this Agreement, and the Term
Administrative Agent and each Term Lender expressly waive notice to the Term
Administrative Agent or any Term Lender of the acceptance of the agreements set
forth herein, notice of reliance on such agreements and notice of the creation
of any of the Revolver Obligations after the date hereof, and agree that the
Revolver Lenders shall be entitled to rely upon the agreements set forth herein
at all times in creating the Revolver Obligations.
(b) All of the Term Obligations shall be deemed to have been funded
by the Term Lenders and incurred by the Borrower in reliance upon this
Agreement, and the Revolver Agent and each Revolver Lender expressly waive
notice to the Revolver Agent or any Revolver Lender of the acceptance of the
agreements set forth herein, notice of reliance on such agreements and notice of
the creation of any of the Term Obligations after the date hereof and agree that
the Term Lenders shall be entitled to rely upon the agreements set forth herein
at all times in creating the Term Obligations.
4.2 Responsibility for Credit Decisions; No Duty to Inform Other
------------------------------------------------------------
Parties. (a) The Term Administrative Agent has, independently and without
- -------
reliance on the Revolver Agent, any Revolver Lender or the directors, officers,
agents, employees or attorneys of any thereof, and instead in reliance upon
information supplied to it on behalf of the Borrower and upon such other
information as it has deemed appropriate (including, without limitation, all
such information as it deemed advisable with respect to the Borrower's
compliance or non-compliance with any environmental Laws), made its own
independent decision to enter into the Term Loan Documents and to serve as Term
Administrative Agent thereunder; and the Term Administrative Agent shall, for
itself and on behalf of the Term Lenders, independently and without reliance
upon the Revolver Agent, any Revolver Lender or the directors, officers, agents,
employees or attorneys of any thereof, continue to make its own independent
analysis and decisions in acting or not acting under the Term Loan Documents.
(b) The Revolver Agent has, independently and without reliance on the
Term Administrative Agent, any Term Lender or the directors, officers, agents,
employees or attorneys of any thereof, and instead in reliance upon information
supplied to it on behalf of the Borrower and upon such other information as it
has deemed appropriate (including, without limitation, all such information as
it deemed advisable with respect to the Borrower's compliance or non-compliance
with any environmental Laws), made its own independent decision to enter into
the
15
<PAGE>
Revolver Credit Documents and to serve as the Revolver Agent thereunder and the
Revolver Agent shall, for itself and on behalf of the Revolver Lenders,
independently and without reliance upon the Term Administrative Agent, any Term
Lender or the directors, officers, agents, employees or attorneys of any
thereof, continue to make its own independent analysis and decisions in acting
or not acting under the Revolver Credit Documents.
(c) Neither the Revolver Agent nor any Revolver Lender shall have any
present or future duty or responsibility to the Term Administrative Agent or any
Term Lender to advise the Term Administrative Agent or any Term Lender of
information known to the Revolver Agent or any Revolver Lender regarding the
financial condition of the Borrower or of any circumstances bearing upon the
risk of nonpayment of the Revolver Obligations or the Term Obligations and the
Term Administrative Agent and each Term Lender acknowledges that neither the
Revolver Agent nor any Revolver Lender has made any representations or
warranties to the Term Administrative Agent or any Term Lender with respect to
the due execution, delivery, validity or enforceability of the Revolver Credit
Documents, the validity or perfection of the Revolver Lenders' Liens, the
validity or enforceability of the Revolver Obligations, the existence, condition
or value of any of the Revolver Lenders' Collateral or as to any other matter
whatsoever. If, notwithstanding the foregoing, any such information is conveyed
by the Revolver Agent or any Revolver Lender to the Term Administrative Agent or
any Term Lender, neither the Revolver Agent nor any Revolver Lender shall have
any responsibility to the Term Administrative Agent or any Term Lender for the
accuracy or completeness of any such information, nor any continuing duty or
responsibility to advise the Term Administrative Agent or any Term Lender of any
inaccuracy in such information that is subsequently discovered, or of any
updated or subsequent information, whether or not of like kind.
(d) Neither the Term Administrative Agent nor any Term Lender shall
have any present or future duty or responsibility to the Revolver Agent or any
Revolver Lender to advise the Revolver Agent or any Revolver Lender of
information known to the Term Administrative Agent or any Term Lender regarding
the financial condition of the Borrower or of any circumstances bearing upon the
risk of nonpayment of the Term Obligations or the Revolver Obligations and the
Revolver Agent on behalf of itself and each Revolver Lender acknowledges that
neither the Term Administrative Agent nor any Term Lender has made any
representations or warranties to the Revolver Agent or any Revolver Lender with
respect to the due execution, delivery, validity or enforceability of the Term
Loan Documents, the validity or perfection of the Term Lenders' Liens, the
validity or enforceability of the Term Obligations, the existence, condition or
value of any of the Term Collateral or as to any other matter whatsoever. If,
notwithstanding the foregoing, any such information is conveyed by the Term
Administrative Agent or any Term Lender to the Revolver Agent or any Revolver
Lender, neither the Term Administrative Agent nor any Term Lender shall have any
responsibility to the Revolver Agent or any Revolver Lender for the accuracy or
completeness of any such information, nor any continuing duty or responsibility
to advise the Revolver Agent or any Revolver Lender of any inaccuracy in such
information that is subsequently discovered, or of any updated or subsequent
information, whether or not of like kind.
16
<PAGE>
4.3 Order of Enforcement of Remedial Actions. Subject to all of the
----------------------------------------
terms and conditions of this Agreement, including, without limitation, Section
-------
3.3 hereof:
- ---
(a) The Revolver Agent and the Revolver Lenders shall have the right
at any and all times to determine the order in which (i) any Remedial
Action or other recourse is sought against the Borrower or any other
obligor with respect to the Revolver Obligations, and (ii) any or all of
the Revolver Lenders' Liens shall be enforced; and the Term Administrative
Agent, on behalf of itself and each Term Lender, hereby waives any and all
rights to require that the Revolver Agent pursue or exhaust any rights or
remedies with respect to the Borrower or any Jorgensen Property prior to
exercising its rights and remedies with respect to the Revolver Collateral
or in any other manner to require the marshaling of assets or security in
connection with the exercise by the Revolver Agent or any Revolver Lender
of any Remedial Action with respect to the Revolver Obligations and the
Revolver Collateral.
(b) The Term Administrative Agent and the Term Lenders shall have the
right at any and all times to determine the order in which (i) any Remedial
Action or other recourse is sought against the Borrower or any other
obligor with respect to the Term Obligations, and (ii) any or all of the
Term Lenders' Liens shall be enforced; and the Revolver Agent, on behalf of
itself and the Revolver Lenders, hereby waives any and all rights to
require that the Term Administrative Agent pursue or exhaust any rights or
remedies with respect to the Borrower or any Jorgensen Property prior to
exercising its rights and remedies with respect to Term Collateral or in
any other manner to require the marshaling of assets or security in
connection with the exercise by the Term Administrative Agent or any Term
Lender of any Remedial Action with respect to Term Obligations and Term
Collateral.
4.4 Waiver of Liability for Actions Taken with Respect to Obligations
-----------------------------------------------------------------
and Collateral. (a) Except as provided in Section 3.9(b), neither the Revolver
- -------------- --------------
Agent nor any Revolver Lender shall have any liability to the Term
Administrative Agent or any Term Lender for, and the Term Administrative Agent,
on behalf of itself and each Term Lender, hereby waives to the extent permitted
by applicable Law any claim, right, action or cause of action which it may now
or hereafter have against the Revolver Agent or any Revolver Lender (including,
without limitation, any and all claims, rights, actions or causes of action that
the Term Administrative Agent or any Term Lender may otherwise have against the
Agent or any Revolver Lender under Sections 9-207, 9-504 and 9-507 of the UCC)
arising out of, any and all actions which any Revolver Lender or the Revolver
Agent, in good faith, takes or omits to take with respect to the Revolver
Obligations, any obligor with respect to the Revolver Obligations or any
Revolver Collateral, including, without limitation, actions with respect to: the
creation, perfection or continuation of Liens with respect to any Revolver
Collateral; any Remedial Action or Disposition of any Revolver Collateral; the
release of any Revolver Collateral; the custody, valuation, protection,
preservation, use or depreciation of any Revolver Collateral; the realizing upon
or failure to realize upon any Revolver Collateral; or the collection of the
Revolver Obligations. To the extent that any of the foregoing waivers is not
permitted by applicable Law, the Term Administrative Agent agrees that the
applicable standard by which any non-waivable rights, duties or claims are to be
measured shall be that neither the Revolver Agent nor any Revolver Lender shall
have any
17
<PAGE>
liability or responsibility to the Term Administrative Agent or to any Term
Lenders for any actions or omissions other than actions or omissions
constituting gross negligence or willful misconduct.
(b) Neither the Term Administrative Agent nor any Term Lender shall
have any liability to the Revolver Agent or the Revolver Lenders for, and the
Revolver Agent, on behalf of itself and each Revolver Lender, hereby waives any
claim, right, action or cause of action which it may now or hereafter have
against the Term Administrative Agent or any Term Lender (including, without
limitation, any and all claims, rights, actions or causes of action that the
Revolver Agent or any Revolver Lender may otherwise have against the Term
Administrative Agent or any Term Lender under Sections 9-207, 9-504 and 9-507 of
the UCC) arising out of, any and all actions which the Term Administrative Agent
or any Term Lender, in good faith, takes or omits to take with respect to the
Term Obligations, any obligor with respect to the Term Obligations or any Term
Collateral, including, without limitation, actions with respect to: the
creation, perfection or continuation of Liens with respect to any Term
Collateral; any Remedial Action or Disposition of any Term Collateral; the
release of any Term Collateral; the custody, valuation, protection,
preservation, use or depreciation of any Term Collateral; the realizing upon or
failure to realize upon any Term Collateral; or the collection of the Term
Obligations. To the extent that any of the foregoing waivers is not permitted
by applicable Law, the Revolver Agent agrees that the applicable standard by
which any non-waivable rights, duties or claims are to be measured shall be that
neither the Term Administrative Agent nor any Term Lender shall have any
liability or responsibility to the Revolver Agent or to any Revolver Lender for
any actions or omissions other than actions or omissions constituting gross
negligence or willful misconduct.
5. Term. This Agreement shall be irrevocable and shall remain in
----
full force and effect until (i) all of the letters of credit issued pursuant to
the Revolver Credit Agreement have been terminated or cash collateralized and
the loans, notes and unpaid letter of credit drawings, together with interest,
fees and all other Revolver Obligations incurred thereunder are paid in full in
cash, all obligations to extend further advances pursuant to the Revolver Credit
Agreement have been terminated and all Revolver Interest Rate Obligations have
been paid in full and the related agreements terminated, subject to Section 3.5
-----------
hereof or (ii) the loans and notes, together with interest, fees and all other
Term Obligations incurred under the Term Loan Agreement are paid in full in cash
and all obligations to extend further advances pursuant to the Term Loan
Agreement have been terminated, subject to Section 3.5 hereof; provided,
----------- --------
however, that (x) the obligations of the Revolver Agent and the Revolver Lenders
- -------
under Section 3.9(b) shall survive for a period of sixty (60) days following the
--------------
termination of this Agreement and, if any claim thereunder is asserted prior to
the expiration of such sixty (60) day period, shall survive thereafter, solely
as to such claim, until such claim has been fully resolved or until the
expiration of such statute of limitations applicable thereto and (y) as set
forth in Sections 3.9(c), 3.10(a) and 3.10(c), the rights of the Revolver Agent
--------------- ------- -------
pursuant to Sections 3.9 and 3.10 and the rights of the Term Administrative
------------ ----
Agent pursuant to Section 3.10 shall continue to apply in accordance with the
------------
terms thereof notwithstanding any sale of the Revolver Collateral or the Term
Collateral, as applicable. At the time of such termination, (a) if such
termination occurs pursuant to clause (i) of the preceding sentence, the
Revolver Agent shall (x) deliver to the Term Administrative Agent any Collateral
then in its possession unless the Term Administrative Agent advises the Revolver
Agent that possession of such Collateral by the Term Administrative Agent is not
required pur-
18
<PAGE>
suant to the Term Security Documents and (y) terminate or assign to the Term
Administrative Agent any landlords' agreements, warehouse operators' agreements
and similar agreements in favor of the Revolver Agent pertaining to the
Collateral; and (b) if such termination occurs pursuant to clause (ii) of the
preceding sentence, the Term Administrative Agent shall (x) deliver to the
Revolver Agent any Collateral then in its possession unless the Revolver Agent
advises the Term Administrative Agent that possession of such Collateral by the
Revolver Agent is not required pursuant to the Revolver Security Documents and
(y) terminate or assign to the Revolver Agent any landlords' agreements,
warehouse operators' agreements and similar agreements in favor of the Term
Administrative Agent pertaining to the Collateral; and (c) if such termination
occurs pursuant to clauses (i) and (ii) concurrently, then each of the Revolver
Agent and the Term Administrative Agent shall (x) deliver to the Borrower any
Collateral then in its possession and (y) terminate any landlords' agreements,
warehouse operators' agreements and similar agreements in its favor pertaining
to the Collateral.
6. Representations and Warranties. (a) Each of the Revolver Agent
------------------------------
and the Term Administrative Agent represents and warrants to the other that (i)
it has all requisite power and authority to execute, deliver and perform under
this Agreement, (ii) the execution, delivery and performance by it of this
Agreement have been duly authorized by all requisite corporate or other action,
(iii) pursuant to the terms of the Revolver Credit Agreement, the Revolver Agent
has been granted all requisite authority to bind the Revolver Lenders and
pursuant to the terms of the Term Loan Agreement, the Term Administrative Agent
has been granted all requisite authority to bind the Term Lenders by their
respective execution and delivery of this Agreement and (iv) pursuant to the
terms of the Revolver Credit Agreement and the Term Loan Agreement, no further
consent or approval on the part of the Revolver Lenders or the Term Lenders, as
the case may be, is or will be required in connection with the execution,
delivery and performance of this Agreement;
(b) The Revolver Agent represents and warrants that it is a duly
organized and validly existing banking corporation under the laws of the State
of New York;
(c) The Term Administrative Agent represents and warrants that it is
a duly organized and validly existing national banking association.
(d) By its acknowledgment hereof, the Borrower hereby agrees to pay
the reasonable costs and expenses incurred by the Revolver Agent and the Term
Administrative Agent in connection with the termination of this Agreement,
including, but not limited to the termination or assignment of the Revolver
Collateral by the Revolver Agent and the Term Collateral by the Term
Administrative Agent, respectively.
7. Miscellaneous.
-------------
7.1 Notices. Whenever it is provided herein that any notice, demand,
-------
request, consent, approval, declaration or other communication shall or may be
given to or served upon either of the parties by the other, or whenever either
of the parties desires to give or serve upon the other any such communication
with respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and either
shall
19
<PAGE>
be delivered in person with receipt acknowledged, delivered by reputable
overnight courier or telecopied and confirmed immediately in writing by a copy
mailed by registered or certified mail, return receipt requested, postage
prepaid, or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Revolver Agent at:
BT Commercial Corporation
14 Wall Street
New York, New York 10005
Attention: Basil Palmeri
Tel: (212) 618-2628
Fax: (212) 618-2640
if to the Term Administrative Agent at:
Fleet National Bank
One Federal Street, Third Floor
Boston, MA 02110
Attention: Howard Diamond
Tel: (617) 346-0042
Fax: (617) 346-5093
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, on the date of delivery by reputable overnight
courier service, on the date of telecopier transmission (so long as electronic
confirmation of receipt thereof is received) or three (3) Business Days after
the same shall have been deposited with the United States mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
7.2 Entire Agreement; Amendment. This Agreement constitutes the
---------------------------
entire agreement between the Revolver Agent and the Term Administrative Agent
with respect to the subject matter hereof and supersedes all prior negotiations,
understandings and agreements between the Revolver Agent and the Term
Administrative Agent in respect of such subject matter, whether written or oral.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by the Revolver Agent and the Term Administrative Agent.
20
<PAGE>
7.3 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. (a) EACH OF THE
---------------------------------------------
PARTIES HERETO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT.
(b) EACH OF THE PARTIES HERETO SUBMITS FOR ITSELF AND ITS PROPERTY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK
COUNTY OF THE STATE OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF.
7.4 Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
7.5 Survival. The representations and warranties of the parties in
--------
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto until the termination of this Agreement pursuant to Section 5
---------
hereof but subject to Section 3.5 hereof.
7.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which, taken together, shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
-------------
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE.
7.8 Parties. This Agreement shall be binding upon, and shall inure
-------
to the benefit of, the parties hereto, the Revolver Lenders from time to time
party to the Revolver Credit Agreement, the Term Lenders from time to time party
to the Term Loan Agreement and their respective successors and assigns;
provided, however, that any successor Revolver Agent or Term Administrative
- -------- -------
Agent shall expressly assume the obligations of such party hereunder.
7.9 No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement shall he deemed to indicate that this Agreement has been entered into
for the benefit of the Borrower or any other Person except for the parties
hereto, the Revolver Lenders, the Term Lenders and their respective successors
and assigns.
7.10 Legend. Each of the Revolver Credit Documents and the Term Loan
------
Documents shall be made specifically subject to the terms and conditions of this
Agreement.
21
<PAGE>
7.11 Section Titles. The Section titles contained in this Agreement
--------------
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
* * *
22
<PAGE>
SCHEDULE A
----------
REVOLVER COLLATERAL
-------------------
All of the following Jorgensen Property (in the case of items (c), (e)
and (f) below, to the extent necessary to realize on the Revolver Collateral
(including, but not limited to, the sale or marketing of the Revolver
Collateral)), whether now existing or hereafter acquired by the Borrower,
arising or created and wheresoever located unless specifically excluded pursuant
to the relevant Revolver Security Documents:
(a) each and every Receivable;
(b) all Inventory;
(c) all of the Borrower's Collection Accounts and Sub-Collection
Accounts, all moneys, securities and instruments deposited or required to
be deposited in such Collection Accounts and Sub-Collection Accounts;
(d) the Concentration Account and all moneys, securities and
instruments deposited or required to be deposited in such Concentration
Account;
(e) each Collection Agreement to which the Borrower is a party and
each other agreement entered into by the Borrower with any Collection Bank
and all rights of the Borrower under each such agreement;
(f) the Concentration Account Agreement and each other agreement
entered into by such Borrower with the Concentration Account Bank and all
rights of the Borrower under each such agreement;
(g) the BT Account and all moneys, securities, and instruments
deposited or required to be deposited in the BT Account;
(h) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing and not to
any of the Term Collateral; and
(i) all Proceeds and products of any and all of the foregoing,
provided, that, without limitation on any of the foregoing, the term
-------- ----
"Revolver Collateral" shall not include the Term Collateral.
<PAGE>
SCHEDULE B
----------
TERM COLLATERAL
---------------
All of the following Jorgensen Property, whether now existing or hereafter
acquired by the Borrower or any of its present or future Subsidiaries that is a
party to any Term Security Document, arising or created and wheresoever located
unless specifically excluded pursuant to the relevant Term Security Documents,
including, without limitation:
(a) all Equipment;
(b) all general intangibles relating to the Equipment;
(c) each Collateral Account of the Term Loan Agreement and all funds
held therein and all certificates and instruments, if any, from time to
time representing or evidencing any Collateral Account of the Term Loan
Agreement;
(d) all investments, if any, from time to time in any Collateral
Account of the Term Loan Agreement; all certificates and instruments, if
any, from time to time representing or evidencing such investments; all
securities, instruments, security entitlements, financial assets and
investment property; and all interest, earnings and proceeds in respect
thereof;
(e) all Jorgensen Real Property in which a Lien is purported to have
been granted in favor of the Term Administrative Agent pursuant to a Term
Security Document;
(f) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing and not to
any of the Revolver Collateral; and
(g) all rents, profits, returns, income and proceeds of and from any
and all of the foregoing Term Collateral (including proceeds which
constitute property of the types described in clauses (a), (b), (c), (d),
----------- --- --- ---
(e) and (f), proceeds deposited from time to time in any Collateral Account
--- ---
of the Term Loan Agreement of the Borrower or any of such Subsidiary, and,
to the extent not otherwise included, all payments under insurance (whether
or not the Term Administrative Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise, in each case with respect to any of the foregoing Term
Collateral); provided, that, without limitation on any of the foregoing,
--------
the term "Term Collateral" shall not include the Revolver Collateral.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed and sealed by the
undersigned duly authorized signatories of the parties hereto as of the date and
year first above written.
BT COMMERCIAL CORPORATION,
as Revolver Agent
By /s/ Basil Palmeri
-----------------
Name: Basil Palmeri
Title: Vice President
FLEET NATIONAL BANK,
as Term Administrative Agent
By /s/ James T. Anderson
---------------------
Name: James T. Anderson
Title: Managing Director
<PAGE>
Earle M. Jorgensen Company, a Delaware corporation, (a) acknowledges
receipt of a copy of this Agreement and agrees to the provisions hereof; (b)
agrees to cooperate with the parties hereto by granting all Liens, and by taking
all such other actions, as are contemplated by this Agreement; (c) acknowledges
that, as provided by Section 7.9 hereof, it is not a third party beneficiary
-----------
hereof, and has no rights hereunder; (d) acknowledges and consents to the
priority of the liens purported to be established by this Agreement, as in
effect on the effective date of the Term Loan Agreement; (e) agrees not to
object to the enforcement by the Revolver Agent against the Term Administrative
Agent or the Term Administrative Agent against the Revolver Agent of any of the
respective rights granted to them pursuant to Section 3.9(a) hereof, as in
--------------
effect on the effective date of the Term Loan Agreement; (f) agrees to the
provisions in Sections 3.10(a) and 3.10(b), as in effect on the effective date
---------------- -------
of the Term Loan Agreement, pursuant to which the Borrower agrees to certain
sales of Collateral and the commercial reasonableness thereof; and (g) agrees
not to assert any provision hereof as a defense to any Remedial Action (except
to the extent that the provisions of this Agreement are expressly referred to in
or incorporated in the Revolver Credit Documents or the Term Loan Documents as a
limitation on its obligations thereunder or on the Revolver Agent's, Revolver
Lenders', the Term Administrative Agent's or the Term Lenders' rights
thereunder) nor to assert any such provision as a counterclaim or basis for set-
off or recoupment against any party hereto. Such acknowledgments and agreements
by Earle M. Jorgensen Company do not, however, constitute any amendment,
modification, or waiver by them or either of them of any provision of the
Revolver Credit Documents or the Term Loan Documents or any right available to
them or either of them thereunder.
EARLE M. JORGENSEN COMPANY
By /s/ Charles P. Gallopo
----------------------
Name: Charles P. Gallopo
Title: Vice President and Chief Financial
Officer
<PAGE>
EXHIBIT 12.1
EARLE M. JORGENSEN COMPANY
STATEMENT OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1998 1997 1996
------- -------- --------
<S> <C> <C> <C>
Income (loss) before income taxes and extraordinary
loss.............................................. $25,708 $(26,055) $(38,248)
Fixed charges to be added back to earnings:
Interest and debt expense........................ 41,521 41,223 41,153
Rentals (one-third of all rent and related costs
charged to income).............................. 5,804 6,286 5,948
------- -------- --------
Total fixed charges............................ 47,325 47,509 47,101
------- -------- --------
Earnings before income taxes and fixed charges..... $73,033 $ 21,454 $ 8,853
======= ======== ========
Ratio of earnings to fixed charges................. 1.54 .45 .19
======= ======== ========
Amount by which earnings are inadequate to cover
fixed charges..................................... $ -- $(26,055) $(38,248)
======= ======== ========
</TABLE>
<PAGE>
EXHIBIT 21
EARLE M. JORGENSEN COMPANY
LISTING OF THE COMPANY'S SUBSIDIARIES
<TABLE>
<CAPTION>
DATE STATE/
NATURE OF ACQUIRED % COUNTRY OF
NAME BUSINESS OR CREATED OWNED INCORPORATION
---- ----------------- ---------- ----- -------------
<S> <C> <C> <C> <C>
Earle M. Jorgensen (Canada)
Inc. (formerly Kilsby
Jorgensen Steel & Aluminum
Inc.)........................ Metal Distributor 11/13/90 100% Canada
Stainless Insurance Ltd....... Captive Insurance 03/20/96 100% Bermuda
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AS OF
AND FOR THE YEAR ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<CIK> 0000054003
<NAME> EARLE M. JORGENSEN CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 20,763
<SECURITIES> 0
<RECEIVABLES> 105,704
<ALLOWANCES> 406
<INVENTORY> 180,403
<CURRENT-ASSETS> 310,148
<PP&E> 160,028
<DEPRECIATION> 53,385
<TOTAL-ASSETS> 443,821
<CURRENT-LIABILITIES> 153,648
<BONDS> 310,734
0
0
<COMMON> 0
<OTHER-SE> (36,919)
<TOTAL-LIABILITY-AND-EQUITY> 443,821
<SALES> 1,050,005
<TOTAL-REVENUES> 1,050,005
<CGS> 755,381
<TOTAL-COSTS> 755,381
<OTHER-EXPENSES> 131,333
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 41,059
<INCOME-PRETAX> 25,708
<INCOME-TAX> 873
<INCOME-CONTINUING> 24,855
<DISCONTINUED> 0
<EXTRAORDINARY> 9,075
<CHANGES> 0
<NET-INCOME> 15,760
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
