<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
- ----- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the fiscal year ended
-------------------------------------
OR
- -----
X TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from JANUARY 1, 1998 to SEPTEMBER 30, 1998
----------------- -------------------
Commission file number 0-3855
------------
LACLEDE STEEL COMPANY
---------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 43-0368310
- ----------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE METROPOLITAN SQUARE
211 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 425-1400 Securities
registered pursuant to Section 12(b) of the Act: ---------------
Name of each exchange on
Title of each class which registered
NONE NONE
- --------------------------------- -----------------------------------
Securities registered pursuant to Section 12(g) of the Act:
$.01 PAR VALUE, COMMON STOCK
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months 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 any amendment to
this Form 10-K. [X]
At the date of filing of this report there were 4,056,140 shares of $.01
par value common stock outstanding. At December 29, 1998 the aggregate market
value of voting stock held by non-affiliates of the Registrant was approximately
$437,000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------------
NONE
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PART I
--------------------
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS
Laclede Steel Company is a manufacturer of a wide range of carbon and
alloy steel products, including pipe and tubular products, hot rolled products
(primarily special quality bars), wire products, and welded chain. The Company
converts its semi-finished steel into products through its rolling mills and
finishing plants. The Company produces wire products and welded chain utilizing
rods purchased on the open market. Each of the Company's finishing facilities is
located near its end markets and is specialized by product to optimize
efficiency.
PROCEEDINGS UNDER CHAPTER 11
On November 30, 1998, the Company and its subsidiaries, Laclede Chain
Manufacturing Company and Laclede Mid America, Inc., filed voluntary petitions
seeking reorganization under Chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code") in the United States Bankruptcy Court for the Eastern
District of Missouri (the "Bankruptcy Court"). These petitions are being jointly
administered under Case Numbers 98-53121-399, 98-53122-399 and 98-53123-399,
pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The
Company is in possession of its properties and assets and continues to operate
with its existing directors and officers as debtors-in-possession. As
debtors-in-possession, the Company is authorized to operate its business, but
may not engage in transactions outside of the normal course of business without
approval, after notice and hearing, of the Bankruptcy Court.
Pursuant to the provisions of the Bankruptcy Code, as of the
petition date, actions to collect pre-petition indebtedness owed by the Company
are stayed and other pre-petition contractual obligations may not be enforced
against the Company. In addition, as debtors-in-possession, the Company has the
right, subject to the Bankruptcy Court's approval and certain other conditions,
to assume or reject any pre-petition executory contracts and unexpired leases.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process. The Bankruptcy Court has approved
payment of certain pre-petition liabilities such as employee wages and benefits.
Furthermore, the Bankruptcy Court has allowed for the retention of legal and
financial professionals.
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The Bankruptcy Court has approved an $85 million debtor-inpossession
financing facility to be provided by a Bank Group led by BankAmerica Business
Credit (the "DIP Facility"). The Company expects that the DIP Facility will
provide it with the cash and liquidity to conduct its operations while it
prepares a reorganization plan. The Company intends to present a plan of
reorganization to the Bankruptcy Court to reorganize the Company's businesses
and to restructure the Company's obligations. Under the provisions of the
Bankruptcy Code, the Company has the exclusive right to file such plan at any
time during the 120 day period following November 30, 1998. The exclusive filing
time period may be extended by the Bankruptcy Court at the Company's request.
GENERAL
The Company is one of three full-line domestic producers of continuous
weld pipe in the United States. In addition, the Company believes it is an
important North American producer of oil tempered wire, which is used for
applications such as mechanical springs and overhead garage door springs. Oil
tempered wire has metallurgical properties that typically command a price
premium over commodity grades of wire, and therefore produces higher profit
margins. The Company's manufactured and imported chain products give it a
significant position in the truck and automobile tire chain and the hardware and
industrial chain markets. The Company's special quality bars are primarily sold
to forgers for finishing into a variety of products.
The Company produces semi-finished steel at its Alton, Illinois Plant.
Annual steelmaking capacity is estimated at 780,000 net tons. The Company
purchases rods for its wire mill and the welded chain operation. On February 10,
1997 the Company sold the assets of its electric weld structural tubing
operation located in Benwood, West Virginia. Sales of structural tubing
accounted for approximately 6% of consolidated net sales in 1996.
At December 31, 1996 Ivaco Inc. of Montreal, Canada owned 2,018,650
shares of the Company's common stock or 49.8% of the total number of shares
outstanding. On September 26, 1997, a subsidiary of Ivaco Inc. sold one-half of
the Ivaco investment in the Company to Midwest Holdings, Inc., a wholly-owned
subsidiary of Birmingham Steel Corporation ("Midwest Holdings"). The securities
of the Company sold consisted of 1,009,325 common shares and 183,334 shares of
the Company's Series A preferred stock. The preferred shares are convertible
into 859,834 common shares of the Company. The transaction was effected through
the sale of a wholly-owned subsidiary of Ivaco which contained such shares to
Midwest Holdings. In connection with the transaction Ivaco, among other things,
gave Midwest Holdings the voting
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rights on Ivaco's remaining investment in the Company's common stock and, in any
additional common stock Ivaco may own as a result of the conversion of Ivaco's
remaining Series A preferred stock, subject to certain limitations. In addition,
Ivaco agreed not to sell any portion of its remaining investment in the Company
prior to September 24, 1998 and has provided Midwest Holdings with a limited
right of first refusal with respect to such interests until September 24, 2002.
On July 29, 1998, Robert A. Garvey, Joseph Alvarado and William R. Lucas, Jr.,
each of them an officer of Birmingham Steel, resigned as directors of the
Company. Following this action, no representatives of Birmingham Steel held
positions on the Company's Board of Directors. In addition, on September 24,
1998, Midwest Holdings notified LCL Holdings I, pursuant to Section 2 (the
"Voting Agreement") of the Purchase Agreement, it was canceling the Voting
Agreement and the Proxy which was granted to Midwest Holdings by LCL Holdings I
on September 26, 1997, relating to the 1,009,325 Holdings I Common Shares and
the 183,333 Holdings I Preferred Shares owned by LCL Holdings I (collectively,
the "Shares"), as to any and all of such Shares. At September 30, 1998
Birmingham Steel Corporation and affiliates owned 1,029,325 shares of the
Company's common stock or 25.4% of the total number of shares outstanding and
Ivaco Inc. owned 1,009,325 shares or 24.9% of the outstanding shares.
(B) FINANCIAL INFORMATION
The following table sets forth certain financial information relating
to Registrant's operations:
<TABLE>
<CAPTION>
NINE MONTH
TRANSITION PERIOD
ENDED YEAR ENDED DECEMBER 31,
-----------------------
SEPT. 30, 1998 1997 1996
-------------- ---- ----
<S> <C> <C> <C>
(Thousands of Dollars)
Net Sales $232,289 $325,029 $335,381
======== ======== ========
Net Loss $(83,812) $ (3,007) $ (9,985)
======== ======== ========
Identifiable Assets $216,191 $313,820 $331,110
======== ======== ========
</TABLE>
(C) DESCRIPTION OF BUSINESS
The following table lists the Company's wide range of steel products:
Pipe and Tubular Products: Continuous Weld Pipe
- A53 Standard and Extra Heavy
- API 5L Line Pipe
- Coupling Stock
- Fence Pipe
- Rigid Conduit Shells
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(C) DESCRIPTION OF BUSINESS (Cont'd.)
Hot Rolled Products: Carbon and Alloy SBQ Bars
Forging Billets
Special Shapes
Special Processing
Wire Products: Cold Drawn Wire
- High Carbon
- Low Carbon
Heat Treated Wire
- Carbon Oil Tempered
- Alloy Oil Tempered
- Annealed
Chain: Welded Chain
The following table presents, for the periods indicated, the percentage
of the Company's total sales by product class:
<TABLE>
<CAPTION>
Nine Month
Transition Period
Ended Year Ended Dec. 31,
Product Sept. 30, 1998 1997 1996
------- -------------- ---- ----
<S> <C> <C> <C>
Pipe and tube 35.5% 38.0% 41.1%
Hot Rolled 44.0% 37.8% 35.1%
Wire 11.8% 14.8% 13.6%
Chain 8.7% 9.4% 10.2%
----- ----- -----
Total 100% 100% 100%
===== ===== =====
</TABLE>
Pipe and Tubular Products. The Company's tubular products consist
primarily of continuous butt weld ("CBW") pipe which is sold in the U.S. and
Canada to distributors and manufacturers. Pipe products are produced and
finished at the Company's Alton and Fairless Hills, Pennsylvania Plants and
finished at the Vandalia, Illinois Facility. In February 1997 the Company sold
the assets of its electric resistance weld tubing operation located in Benwood,
West Virginia. This product accounted for approximately 6% of consolidated net
sales in 1996.
The Company is one of only three full line producers of CBW pipe in the
United States, due in part to the Company's long-term lease from former
competitor USX Corporation of its pipe manufacturing facilities at the Fairless
Facility.
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In 1996 the Company completed the planned modifications to the Melt
Shop at the Alton Plant by installation of a Ladle Furnace Facility that allowed
the Company to shift the remaining portion of its steel production used in pipe
making from the ingot process to the more efficient continuous cast method.
In February 1997, the Company sold the assets of its electric weld
structural and mechanical tubing operation, located in Benwood, West Virginia.
After collection of a related note receivable, cash proceeds from the sale of
these assets, which consist primarily of equipment and inventory, totaled
approximately $11.0 million. The Company used the funds from the sale to improve
its working capital position. Sale of these assets did not affect the Company's
primary tubular business, continuous weld pipe.
Hot Rolled Products. The Company's hot rolled products are produced at
the Alton Plant and consist primarily of special quality ("SBQ") bars sold to
manufacturers to be cold drawn or forged.
Wire Products. The Company is a major manufacturer of wire products.
These products include high and low carbon wire, oil tempered wire, and annealed
wire. The Company believes it is an important participant in the oil tempered
wire market. Wire products are currently manufactured and finished at the
Company's Fremont, Indiana Facility. The Fremont Facility is the Company's
stand-alone oil tempered wire plant which the Company believes to be a
state-of-the-art facility. The Company closed its Memphis, Tennessee wire mill
in 1998 and sold a large portion of the assets.
Chain Products. Laclede Chain Manufacturing Company, one of the
Company's wholly owned subsidiaries, produces welded chain and also imports a
significant amount of chain for resale. Laclede Chain generated in excess of $20
million in sales in the first nine months of 1998. Approximately 50% of its
annual sales are attributable to sales of anti-skid devices for trucks and
automobiles. The balance of the Company's chain products sales is in the
hardware and industrial chain business.
At September 30, 1998 the Company had an estimated sales backlog of
approximately $30 million. Long-term sales commitments do not represent a
significant portion of the business. Research and development activities of the
Company have not been material.
The Company manufactures steel from steel scrap generated in the course
of its steel production and purchased in the open market from numerous scrap
suppliers. Since it does not produce its own raw materials, the Company is
subject to the fluctuation in prices and availability of scrap. See Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
for additional discussion.
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In the months ahead management will be reviewing all of the operations
to develop a plan to improve the long-term profitability of the Company and
maximize cash flow. The Company will also be exploring alternatives to
strengthen the balance sheet of the Company.
Capital Improvements. While the Company has expanded and improved its
downstream finishing facilities, it has also completed important capital
improvements to the steelmaking operations at the Alton Plant. The primary
objective of these improvements was to substantially reduce production costs and
provide access to new markets. For further information and for discussion of
future capital expenditure plans, please refer to MD&A.
COMPETITION
The Company believes that the principal competitive factors affecting
its business are price, quality and customer service. Price sensitivity in
markets for the Company's products is driven by competitive factors and the cost
of steel production.
Domestic. The Company faces competition from regional minimill
companies and fully integrated steel mills, and such competition can be expected
to continue. Moreover, the addition of new sheet capacity in the industry has
had and will continue to have a favorable impact on production costs of the
Company's tubular product competitors. The Company also expects increased
competition in its bar product business as announced increases in capacity
materialize.
Foreign. The Company also faces competition from foreign steel
producers. Foreign competition increased in 1998 to unprecedented levels and may
further increase in the future, due to factors such as changes in currency
exchange rates, repeal of duties on foreign-produced steel or the enactment of
restrictive or burdensome regulations or taxes that affect domestic but not
foreign steel manufacturers. Many foreign steel producers are owned, controlled
or subsidized by their governments and their decisions with respect to
production and sales may be influenced more by political and economic policy
considerations than by prevailing market conditions.
ENVIRONMENTAL MATTERS
In general, the Company is subject to a broad range of federal, state
and local environmental regulations, including those governing discharges into
the air and water, the handling and disposal of solid and/or hazardous wastes
and the remediation
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of contamination associated with the release of hazardous substances. The
domestic steel industry, including the Company, has spent substantial amounts to
comply with these requirements. Although the Company believes it is in
substantial compliance with the various environmental regulations applicable to
its business, there can be no assurance that future changes in environmental
regulations will not require the Company to incur significant costs in order to
comply with such future regulations.
Specifically, like all electric arc furnace (EAF) steel producers, the
Company generates EAF dust as part of the steelmaking process. For some time,
the EPA has classified EAF dust as a designated hazardous waste. Over a period
of years, the Company accumulated approximately 145,000 tons of this material
on-site at the Alton Plant, pending development of technology for economical
treatment. The Company received approval of a modified closure plan for
disposition of this existing EAF dust with the Illinois EPA, and has completed
the closure of all piles in place.
In December 1997, the Company idled its High Temperature Metal Recovery
facility ("HTMR") after the facility was damaged in an accident. This facility
was used to dispose of the Company's EAF dust generated in the Alton Facility.
During 1998, management disposed of the EAF dust through alternative methods. In
1998 Management evaluated the HTMR facility and the decision was made to
permanently shut-down the operation.
Employees. As of September 30, 1998, the Company employed approximately
1,300 employees, approximately 250 of whom are classified as management,
administrative and sales personnel.
The Company's 665 hourly employees at the Alton Plant are covered by a
collective bargaining agreement that expires in September of 2001. None of the
Company's other employees are covered by a collective bargaining agreement. The
Company has never experienced a strike, and it believes that its relations with
its employees are good. The compensation for the majority of the Company's
employees is based partially on productivity in accordance with various
incentive plans.
ITEM 2. PROPERTIES.
The Company's steelmaking facilities are located on a 400- acre site in
Alton, Illinois, and consist of two electric furnaces with a combined rated
production capacity of over 780,000 net tons per year, a ladle metallurgy
facility, a continuous bloom casting facility, a roughing mill and 14-inch
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bar mill, 8-inch bar mill, 22-inch strip mill and facilities for the manufacture
of continuous butt-weld pipe. The Company also has a pipe finishing plant in
Vandalia, Illinois, a chain manufacturing plant in Maryville, Missouri, and a
wire oil tempering facility in Fremont, Indiana. The Company operates a pipe
mill in Bucks County, Pennsylvania which is leased from USX Corporation. The
lease expires September 30, 2001 with an option to renew until September 30,
2006.
The Company's property is well maintained and adequate for production
of its existing product line. The majority of the Company's properties are owned
in fee. For its executive offices the Company presently leases space in the
Metropolitan Square Building in downtown St. Louis under a lease expiring on
April 30, 2004.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries, Laclede Chain Manufacturing
Company and Laclede Mid America, Inc., filed voluntary petitions seeking
reorganization under Chapter 11 of the United States Bankruptcy Code on November
30, 1998. Additional information related to the filing is set forth under Part
1, Item 1 and Part II, Item 7 of this Form 10-K and Note 1 of the Notes to
Consolidated Financial Statements. Such information is incorporated herein by
reference.
There are other various claims pending involving the Company and its
subsidiaries with respect to environmental, hazardous substance, product
liability, personal injury, and other matters arising out of the routine conduct
of it business. Such claims which arose prior to November 30, 1998 are subject
to the automatic stay of the United States Bankruptcy Code.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
None
PART II
------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Laclede's common stock is traded on the OTC Bulletin Board System and
the symbol is LCLD. As of January 5, 1999 there were approximately 515
stockholders of record.
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. (Cont'd.)
<TABLE>
<CAPTION>
Market
Price Range 1998 1997
----------- ---- ----
Quarter High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First $ 5-5/8 $ 3 $ 5 $ 3-1/8
Second 5-1/4 3-1/4 4-5/8 3-5/8
Third 3-3/8 1/4 5-3/16 3-1/2
Fourth 5/8 1/8 6 3-7/8
</TABLE>
Dividends Per
Share Paid on
Common Stock 1998 1997
------------ ---- ----
None None
Payment of dividends on common stock was limited by the Company's Loan
and Security Agreement and is prohibited by the DIP Facility. See Note 6 to the
Company's Consolidated Financial Statements. In addition, the Certificate of
Designation for the Company's outstanding Series A Preferred Stock provides that
the Company shall not declare or pay any dividends on the Company's common stock
unless full cumulative dividends have been paid or declared on the Series A
Preferred Stock. At this date, full cumulative dividends have not been paid or
declared on the Series A Preferred Stock.
On July 30, 1996, the Company sold 416,667 shares of Series A Preferred
Stock to Ivaco Inc. and the executive officers of the Company for an aggregate
sales price of approximately $6,250,000. There were no underwriters and no
underwriting discount or commission and the net proceeds to the Company, after
expenses, was $6,090,000. The sale of the Series A Preferred Stock to Ivaco Inc.
and the executive officers of the Company was exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) as a transaction not involving
any public offering because of the limited number of offerees, each of whom was
a sophisticated investor and fully informed as to the risks involved. On October
28, 1996, at a special meeting of stockholders, the Company's stockholders
approved a recapitalization of the Series A Preferred Stock such that each share
of the preferred stock became convertible into the Company's Common Stock at the
option of the holder at a conversion price of $3.20 into 4.69 shares of common
stock.
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ITEM 6. SELECTED FINANCIAL DATA.
FIVE-YEAR FINANCIAL SUMMARY
---------------------------
<TABLE>
<CAPTION>
(In Thousands of Dollars Except Per Share Data)
Nine Month
Transition Period Year Ended Dec. 31,
Ended ----------------------------------------
Sept. 30, 1998 1997 1996 1995 1994
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $ 232,289 $325,029 $335,381 $320,350 $341,289
Net Earnings (Loss)* $ (83,812) $ (3,007) $ (9,985) $(10,137) $ 4,462
Basic and Diluted Net
Earnings (Loss) per share* $ (20.73) $ (0.83) $ (2.50) $ (2.50) $ 1.10
Other Financial Data
Total assets $ 216,191 $313,820 $331,110 $349,778 $343,251
Working capital (78,734) 55,899 62,001 87,759 88,906
Capital expenditures 3,848 3,016 10,726 13,847 14,747
Long-term debt -- 109,157 107,889 118,791 100,801
Stockholders' equity (deficit) (103,019) 21,101 17,245 16,518 53,743
Stockholders' equity (deficit)
per common share $ (25.40) $ 5.20 $ 4.25 $ 4.07 $ 13.25
Cash dividends per common
share $ -- $ -- $ -- $ -- $ --
</TABLE>
* Includes restructuring, asset impairment and other charges which
reduced net earnings in 1998 by $27.6 million or $6.83 per share and in
1996 by $1.6 million or $.38 per share and in 1995 by $11.4 million or
$2.81 per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview
The Company has experienced continuing operating losses since 1995. In
early 1998, management developed a plan to reorganize operations and improve
operating efficiencies. This plan included the consolidation of Wire and Tubular
Operations, improvement in operations in the Melt Shop and Bar Mill at the Alton
Plant, and consolidation of certain administrative functions. As a first step,
in May 1998, the Board of Directors approved the program to consolidate Wire
Operations by authorizing the shutdown of the Memphis Wire Plant and the
transfer of all oil tempered wire production to the Fremont facility. The
Memphis Wire Plant had incurred significant losses over the past several years.
The shutdown of the Memphis Plant and consolidation of Wire Operations in the
Fremont Plant was completed in the third quarter of 1998.
The Company's tubular products are currently produced at the Alton and
Fairless Plants, with finishing operations also performed at the Vandalia Plant.
With current production and shipping requirements, the Alton and Fairless Plants
are each
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operating at levels substantially below capacity. Management's plan includes
consolidation of pipe-making operations, at either the Alton or Fairless Plants,
in order to improve production efficiencies and reduce the overall costs.
The Company is also developing a program to improve the operating
efficiency of the Melt Shop and 14" Bar Mill at the Alton Plant. Realization of
these improvements requires the cooperation of the United Steelworkers' Union
and the Company has been discussing the situation with the Union on an ongoing
basis.
In connection with the development of its reorganization plan the
Company has made a number of changes in senior management, including replacement
of the President and C.E.O. and Vice President of Operations.
The Company's ability to carry out its plan to reorganize operations
and improve operating efficiency was affected by greater than anticipated losses
due to the deterioration in steel demand and selling prices since the end of
1997, particularly in the third quarter of 1998. As a result of losses and their
effect on financial covenants in the Company's Loan and Security Agreement, the
Company amended such covenants or obtained waivers from the Banks in both the
first and second quarters of 1998. The operating losses for the third quarter of
1998 again resulted in a violation of the financial covenants in the Loan and
Security Agreement. In addition, the Company failed to make required payments on
the 1976 Pollution Control Revenue Bonds, due on October 1, 1998, and is in
default under the terms of the financing agreement for such bonds.
In order to preserve its operational strength and the assets of its
businesses, on November 30, 1998, the Company sought protection of the federal
bankruptcy laws by filing a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code. Under Chapter 11 the Company will continue to
conduct business in the ordinary course under the protection of the Bankruptcy
Court, while a reorganization plan is developed to restructure its obligations
and its operations. There can be no assurance that the reorganization plan will
be successful.
OPERATING RESULTS 1996 TO 1998
On October 22, 1998 the Company changed its fiscal year end from
December 31 to September 30 of each year effective September 30, 1998.
Accordingly, results of operations for the transition period cover a nine month
period.
The net loss for 1998 was $83.8 million. In 1998 the Company recorded
asset impairment and other charges of $27.6 million, including a loss of
approximately $4.6 million related to the shutdowns of its Memphis plant, and
$15.4 million related
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to the HTMR facility. In the first nine months of 1998 the Company also recorded
charges in connection with the retirements of several officers of the Company.
Included in this amount is approximately $5.8 million in primarily non-cash
settlement and curtailment expenses relating to the Company's Key Employee
Retirement Plan.
The Company also recorded a provision for income taxes of $31.1
million, reflecting a valuation allowance for deferred tax assets. See Note 5 to
the Consolidated Financial Statements for additional discussion.
The net loss for 1997 was $3.0 million. In the first quarter of 1997
the Company realized an after-tax gain of $.6 million on the sale of its Benwood
Facility.
The net loss for 1996 was $10.0 million which included a $1.6 million
($1.0 million after tax) charge for an early retirement incentive in the fourth
quarter discussed in Note 7 to the Consolidated Financial Statements.
The change in net sales for the last three fiscal periods is analyzed
as follows:
<TABLE>
<CAPTION>
(In Thousands)
----------------------------------------------
Nine Months Ended
Sept. 30, 1998 Vs.
Nine Months Ended
Sept. 30, 1997 1997 Vs. 1996 1996 Vs. 1995
------------------ ------------- -------------
<S> <C> <C> <C>
Increase (Decrease)
in net sales $(13,067) $(10,352) $ 15,031
-------- -------- --------
Comprised of:
Increase (Decrease)
in volume $(5,562) $(13,107) $ 32,192
Increase (Decrease)
in price $(7,505) $ 2,755 $(17,161)
</TABLE>
In the 1998 transition period, the decrease in net sales of $13.1
million compared to nine months ended September 30, 1997 reflects a 2.6%
decrease in steel shipments which primarily occurred in the third quarter.
In the third quarter of 1998 steel shipments declined 14.0% when
compared to the third quarter of 1997. This reflects the overall decline in
demand for steel products and the unprecedented increase in foreign imports.
For the nine months ended September 30, 1998 pipe and tubular selling
prices declined about 4.5%. This was partially offset by higher price
realizations on hot rolled and wire products.
Cost of products sold increased $10.1 million in the first nine months
of 1998 versus the comparable period of 1997, despite the decrease in shipping
volume. This reflects the impact of the
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<PAGE> 14
Company's inventory reduction program on production and maintenance costs per
ton. In addition, the Company's gross margins were negatively impacted by the
shutdown of the Memphis Wire Operations, as well as increases in workers'
compensation expenses and provision for slow moving and obsolete inventories.
In 1997 net sales decreased by $10.4 million compared to 1996
reflecting a 3.4% decrease in steel shipments and an overall increase in sales
prices. Lower shipments are primarily a result of the sale of the Benwood
electric weld structural tubing operation. The overall increase in sales prices
reflects an improved product mix in shipments of continuous weld pipe and higher
prices for oil tempered wire. SBQ bar prices, which began to decline in 1995,
remained at lower levels throughout 1997.
Cost of products sold decreased by $17.4 million in 1997 versus 1996
reflecting a 3.4% decline in shipments, the effect of cost reductions
implemented in late 1996, and lower costs for the Company's basic raw material,
ferrous scrap. The Company also continued to benefit from the productivity gains
which it began to experience in most of its operations in the second half of
1996.
The Company's 1997 fourth quarter results, however, were affected by
negotiations with the Steelworkers' Union for a new contract at the Alton Plant.
During the first half of October hourly employees at the Alton Plant worked
without a contract while the Company continued negotiations with the Union.
During the period significant non-recurring expenses were incurred in
preparation for a potential strike. While the Company and the Union were able to
reach an agreement without a work stoppage, the uncertain situation contributed
to poor productivity in October. In the fourth quarter of 1997 the Company also
recorded inventory write-downs of $3.4 million, primarily related to tubular
products and semi-finished steel. This adjustment, which reduces the carrying
cost to estimated net realizable value, was based on a review of year-end
inventory.
In 1996 and 1997 scrap prices declined, with average scrap prices in
1997 about 4% lower than 1995. Average scrap prices decreased slightly in the
first nine months of 1998 vs. 1997
In addition to demand for steel, there are other factors affecting the
supply of scrap that could be considered structural changes, including the
growth in electric furnace production which is almost totally dependent on
ferrous scrap as a raw material.
Selling, general and administrative expenses increased slightly in the
nine months ended September 30, 1998 due to higher professional fees related to
restructuring.
- 14 -
<PAGE> 15
Selling, general and administrative expenses were lower in 1997
compared to 1996 primarily as a result of reductions in the salaried workforce.
Interest expense increased in 1998 primarily due to interest charges
related to past due payable obligations.
The 1997 decrease in interest expense compared to 1996 is due to a
decrease in average borrowings outstanding.
General inflation has not had a significant effect on the Company's
sales and revenues, which are more related to factors such as domestic steel
capacity, currency levels, demand for the Company's products, and the impact of
foreign steel imports. Imported steel typically has the greatest impact on the
Company's tubular products.
Subsequent Event
The Company announced on January 14, 1999 that, in accordance with its
Labor Agreement, it had given formal notice to the United Steelworkers of
America of its intention to permanently discontinue the operations of its Alton,
Illinois Tube Mill. Although the Company informed officials of the Union of
its intention, at this date, the Company remains willing to explore other
alternatives with the Union. The Company expects to meet with the Union in the
near future to determine whether there are realistic alternatives to closing
the Alton Tube Mill. The shutdown of the Alton Tube Mill would not occur
before April 15, 1999.
The Company has been studying a plan to consolidate its pipe operations
at either the Alton Plant or its Fairless, Pennsylvania Pipe Mill since the
summer of 1998. The Company believes consolidation of pipe operations would
allow it to operate more efficiently and reduce excess pipe-making capacity.
The preliminary decision to concentrate operations at the Fairless Plant
reflects the Company's belief that Fairless Pipe Mill's capabilities are better
than those of the Alton Tube Mill, and the prohibitive cost of relocating
related equipment. Shutdown of the Alton Tube Mill could affect the employment
of as many as 200 employees of the Alton Plant. After a final decision is made
one of the Company's pipe-making facilities may be sold or abandoned, and
recording of an impairment charge is likely at that time.
DIVISIONS AND SUBSIDIARIES
The Company's subsidiary, Laclede Mid America Inc. operates an oil
tempered wire facility in Fremont, Indiana. In 1998 the Fremont Plant
increased its production of certain higher grades of oil tempered wire,
utilizing technology developed in connection with the project to produce wire
for suspension springs.
The Company's wholly-owned subsidiary, Laclede Chain Manufacturing
Company, operates a manufacturing plant in Maryville, Missouri and a warehouse
and sales operation in Portland, Oregon. The Laclede Chain operation made a
significant contribution to consolidated earnings in the fourth quarter of 1996.
Fourth quarter 1997 results for Laclede Chain were substantially below
expectations. This is a direct result of unusually mild weather in the Northwest
in November and December, and its impact on traction chain sales.
Under an agreement with USX Corporation the Company leases the Pipe
Mill Operations located at the Fairless Works in Bucks County, Pennsylvania.
Shipments of continuous weld pipe from the Fairless Plant represented 31% of
tubular products sales in 1997 and 33% in the first nine months of 1998.
The Company also operates a tubular finishing plant in Vandalia,
Illinois. The Vandalia facility processes semi-finished pipe produced at the
Alton Pipe Mill. Shipments of continuous weld pipe from the Vandalia Plant
represented 45% of tubular products sales in 1997 and 40% in the first nine
months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
For the nine month transition period ended September 30, 1998 operating
activities provided $4.5 million in cash. Cash flow from financing activities
used $5.5 million in cash, reflecting a $4.1 million reduction in revolving
credit borrowings under the Company's Loan and Security Agreement, and $1.4
million in long-term debt payments.
- 15 -
<PAGE> 16
Investing activities provided $1.0 million in cash flow in the
nine-months ended September 30, 1998. In January 1998 the Company completed the
sale and leaseback transaction for the Ladle Metallurgy Facility at the Alton
Plant. This note receivable collection under the sale and leaseback transaction
provided the Company with $3.6 million in cash. In September 1998 the Company
completed the sale of a portion of the Memphis Wire Plant, realizing
approximately $1.2 million in cash. Capital expenditures for the nine months
ended September 30, 1998 totaled $3.8 million.
At September 30, 1998, $72.5 million in borrowings were outstanding
under the Company's revolving credit portion of its Loan and Security Agreement,
with unused availability of $4.1 million. Amounts available under this facility
were utilized in October 1998 to cover outstanding short-term commitments,
primarily trade accounts payable.
On November 30, 1998, the Company obtained an $85.0 million thirteen
month debtor-in-possession financing facility from its existing lenders, which
replaced its existing Bank Credit Facility. On December 23, 1998 the court
issued an Order approving the new facility.
The $85.0 million DIP Facility provides for revolving credit loans
based on accounts receivable and inventory levels with advance rates comparable
to the prior Bank Credit Facility. Under terms of the DIP Facility, the Company
also has access to additional availability in excess of that provided under the
previous agreement. As of December 31, 1998 the Company had unused availability
under its DIP Facility of approximately $11.0 million.
In connection with the DIP Facility, as amended, the Company must
maintain compliance with several restrictive financial covenants, including the
maintenance of specified levels of operating cash flow and minimum operating
contributions from the Alton Steel operations, as defined.
The Company's projections indicate that availability under the
debtor-in-possession facility should be adequate to finance its operations
through 1999 and all planned capital expenditures, which will not exceed $6.5
million during the thirteen-month term of the facility ending December 31, 1999.
Although the Company believes that the anticipated cash flow from
future operations and borrowings under the DIP Facility should provide
sufficient liquidity for the Company to meet its debt service requirements,
satisfy covenants under the DIP Facility and fund ongoing operations, there can
be no assurance these or other possible sources will be adequate.
- 16 -
<PAGE> 17
YEAR 2000 MATTERS
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in normal business activities.
The Company has been focused on the Year 2000 issue since
1996. The first phase of the Company's Year 2000 management was to designate a
project leader, identify specific plant and business operation team leaders and
create a list of business and information systems and non-information systems
that required assessment. The second phase was to form teams to evaluate
identified systems for Year 2000 compliance. The Company has completed phase one
and two and begun phase three, which is to develop a schedule to achieve
compliance and begin to repair and/or replace non-compliant systems. The Company
expects to be Year 2000 compliant in all material respects by the fourth quarter
of calendar 1999.
Business and Information Systems ("IT Systems"): The Company
believes that its mainframe business computer system is fully Year 2000
compliant except for its accounts receivable software which is scheduled to be
brought into compliance during the first quarter of calendar 1999. The Company
also has twenty desktop computers that will require replacement during 1999.
Non-IT Systems: There are a number of non-IT system issues at
the Company's Alton, Illinois facility. Several systems related to the electric
melt shop will require software upgrades or replacement including the power
measurement software, the ladle metallurgy furnace, the castor control system
and the chemical analysis equipment. The Alton facility's 14-inch mill also has
a number of systems that will require software upgrades or replacement including
the process logic control system and the mill's tracking device and monitor
equipment. In addition, the Company has been unable to independently evaluate
several systems related to the Alton 14-inch mill and is awaiting response from
various equipment or software vendors as to Year 2000 compliance.
No material Year 2000 compliance issues have been identified
at the Company's Fremont Wire Mill, Fairless Hills Pipe Mill or the Vandalia
Pipe Finishing Facility.
For the nine month period ended September 30, 1998,
expenditures related to Year 2000 issues were immaterial. The Company estimates
that additional expenses of $250,000 will be necessary to fully upgrade or
replace all non-Year 2000 compliant systems. All costs associated with this
conversion are being expensed as incurred.
- 17 -
<PAGE> 18
Customers and Vendors: The Company has communicated with its
significant customers and vendors to understand their Year 2000 issues and how
they might prepare themselves to manage these issues as they relate to the
Company. To date, no significant customers or vendors have informed the Company
that a material Year 2000 issue exists which would have a material effect on the
Company. One of the Company's primary sources of electricity, however, has
informed the Company that the utility's critical systems will not be Year 2000
compliant until September 1999. If such utility were unable to achieve full Year
2000 compliance before December 31, 1999, and electricity is unavailable at such
date, such facility of the Company would be unable to conduct manufacturing
operations which would be a material adverse event.
The Company is in the process of developing a comprehensive
contingency plan to address Year 2000 compliance matters that would interfere
with or interrupt its manufacturing process. Although this plan has not been
finalized, initial recommendations from the Company's Year 2000 project leader
include the intentional shut-down of the Alton facility immediately prior to
Saturday, January 1, 2000 and a systematic start-up of each separate operating
unit within the Alton facility on the next scheduled day of plant operations.
During calendar 1999, the Company will continually review its
progress against its Year 2000 plans and conclude on the appropriate and
feasible contingency plans to reduce its exposure to Year 2000 related issues.
Based on the Company's current assessment, the costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. If the Company or its customers or vendors
identify Year 2000 issues in the future, however, and are unable to resolve such
issues in a timely manner, it could result in a material financial risk.
Accordingly, the Company plans to devote the necessary resources to resolve all
significant Year 2000 issues in a timely manner.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The foregoing Management's Discussion and Analysis and other portions
of this report on Form 10-K, contain various "forwardlooking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Sections 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events, including the
following: statements regarding the overall demand for steel; statements
regarding the ability to maintain sales prices; statements regarding
productivity improvement programs; statements regarding the Company's
profitability; statements regarding future borrowing capacity; statements
regarding Year 2000 compliance and statements regarding future pension funding
requirements. In addition, statements containing expressions
- 18 -
<PAGE> 19
such as "believes," "anticipates" or "expects" used in the Company's periodic
reports on Forms 10-K, 10-Q and 8-K filed with the SEC are intended to identify
forward-looking statements. Forward-looking statements by the Company and its
management are based on estimates, projections, beliefs and assumptions of
management and are not guarantees of future performance. The Company disclaims
any obligation to update or revise any forward-looking statement based on the
occurrence of future events, the receipt of new information, or otherwise. The
Company cautions that these and similar statements included in this report and
in previously filed periodic reports including reports filed on Forms 10-K, 10-Q
and 8-K and further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statement,
including, without limitation, the following: decline in sales prices for steel
products; increases in the cost of steel scrap; failure to obtain significant
benefits from the Company's cost reduction and productivity improvement
programs; increased domestic or foreign steel competition; decreases in the
market value of the Company's qualified pension plan assets; increases in
financing costs, labor relations, and adverse developments arising from the
Chapter 11 proceedings and adverse developments in the timing or results from
the Company's current business plan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The index to the Financial Statements of the Company and the
independent auditors' report of Deloitte & Touche LLP appear on pages 27 and 53.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
-----------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) Certain information with respect to each of the directors of
the Company is set forth below, including any positions they
hold with the Company and their business experience the past
five years:
NAME, AGE, OTHER POSITIONS WITH THE COMPANY, SERVED AS
PRINCIPAL OCCUPATION AND DIRECTORSHIPS OF A DIRECTOR
OTHER COMPANIES SINCE
- ---------------------------------------------- ----------
Michael H. Lane, 55 . . . . . . . . . . . . . . 1997
Vice President-Finance, Treasurer and Secretary
of the Company (January 1983 to date).
- 19 -
<PAGE> 20
NAME, AGE, OTHER POSITIONS WITH THE COMPANY, SERVED AS
PRINCIPAL OCCUPATION AND DIRECTORSHIPS OF A DIRECTOR
OTHER COMPANIES SINCE
- ---------------------------------------------- ----------
Wayne P. E. Mang, 61 . . . . . . . . . . . . . 1997
President and Chief Operating Officer, Russel
Metals (steel product processor and
distributor) (1982 to 1997). Director of
Wainbee Holdings, Inc., Maverick Tube
Corporation and International Trading Group
Philip R. Morgan, 50 . . . . . . . . . . . . . 1997
President, Chief Executive Officer and
Director, Morgan Construction Company
(supplier of steel rolling mill technology
and equipment) (1986 to date).
Robert H. Quenon, 70 . . . . . . . . . . . . . 1992
Mining Consultant (1991 to date); Chairman
of the Board, Federal Reserve Bank of
St. Louis (1993 to 1995); Chairman (1990
to 1991) and President and Chief Executive
Officer (1983 to 1990) of Peabody Holding
Company, Inc. (coal mining and sales);
Director of Ameren Corporation.
George H. Walker III, 67 . . . . . . . . . . . 1990
Chairman of the Board, Stifel Financial
Corp. (investment banking firm) and its
principal subsidiary, Stifel, Nicolaus &
Company, Incorporated (stock brokerage
firm) (1979 to date); Director of Laidlaw
Corp., EAC Corporation, Western & Southern
Life Insurance Company and Macroeconomic
Advisers.
The executive officers of the Company and their ages are as follows:
NAME AGE POSITION
---- --- --------
Thomas E. Brew, Jr. 56 President and Chief
Executive Officer
Michael H. Lane 55 Vice President-Finance,
Treasurer and Secretary
Larry J. Schnurbusch 51 Vice President-Administration
Ralph M. Cassell 56 Vice President
Thomas W. Calhoun 45 Vice President & General
Manager-Tubular Products
- 20 -
<PAGE> 21
Thomas E. Brew, Jr. of Argus Management Corporation was
elected President and Chief Executive Officer by the Board of
Directors on February 26, 1998. Mr. Brew has been Executive Vice
President of Argus Management Corporation (a consulting firm)
since July 1997. From November 1994 until July 1997 Mr. Brew was
President, CEO and Chairman of the Board of Directors of Kurzweil
Applied Intelligence, Inc. (a software development company).
Prior to 1994 Mr. Brew served as Executive Vice President of
Argus Management Corporation.
Michael H. Lane was elected Vice President-Finance,
Treasurer and Secretary of the Company in 1983. Mr. Lane was
elected to the Board of Directors in 1997.
Larry J. Schnurbusch was elected Vice President-Administration in 1993.
Prior to 1993, he served as Director of Corporate Administration of the Company.
Ralph M. Cassell was appointed President Laclede Wire
Company (Laclede Mid America) and Laclede Chain Manufacturing
Company on October 28, 1998. Mr. Cassell is Vice President of
Laclede Steel Company. Prior to October 1998 Mr. Cassell served
as Vice President and General Manager of Laclede Wire Company and
also as Director Quality Management for Laclede Steel Company.
Thomas W. Calhoun was appointed Vice President and General
Manager of Tubular Products on April 8, 1998. Prior to joining
Laclede, Mr. Calhoun was the Vice President responsible for The
Heidtman Steel Products, Inc., Granite City, IL facility.
ITEM 11. EXECUTIVE COMPENSATION.
The following table presents summary information concerning
compensation for services rendered to the Company during the nine month period
ending September 30, 1998 and each of the last three fiscal years by those
persons who at September 30, 1998 were the Chief Executive Officer and the other
executive officers.
- 21 -
<PAGE> 22
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Other Annual All Other
Name and Nine Bonus Compensation Compensation
Principal Position Months Year Salary($) ($)(1) ($)(2) ($)(3)
- ------------------ ------ ---- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Brew, Jr.(4) 1998 $439,808(4) $ -- $ -- $ --
President and Chief
Executive Officer
John B. McKinney(5) 1998 $273,375 $ -- $ -- $18,956
Retired President and 1997 364,500 -- 29,025 39,761
Chief Executive Officer 1996 364,500 -- 288,923 39,471
1995 364,500 -- 562,528 36,848
Michael H. Lane(6) 1998 $182,628 $ -- $ -- $17,252
Vice President- 1997 243,504 -- 13,101 19,773
Finance, Treasurer 1996 243,504 -- 190,293 19,767
and Secretary 1995 243,504 -- 339,222 14,964
J. W. Hebenstreit(5) 1998 $163,002 $ -- $ -- $ 7,520
Retired Vice 1997 243,504 -- 10,223 17,746
President-Operations 1996 243,504 -- 156,875 17,678
1995 243,504 -- 312,005 12,915
Larry J. Schnurbusch 1998 $133,506 $ -- $ 90,384 $10,212
Vice President- 1997 178,008 -- 75,724 11,477
Administration 1996 178,008 -- 122,503 11,431
1995 178,008 -- 125,771 6,943
Ralph M. Cassell 1998 $120,030 $ -- $ -- $ 3,332
Vice President 1997 111,000 28,860 -- 3,733
1996 108,000 -- -- 3,668
1995 99,000 -- -- 1,293
</TABLE>
(1) No bonuses were earned under the Company's Discretionary Incentive
Compensation Plan for the years reported. Mr. Cassell's 1997 bonus was
earned based on results from wire operations.
(2) Amounts reported as Other Annual Compensation consist primarily of
income tax payments related to Company contributions to the Key
Employee Retirement Plan. Such contributions represent taxable income
to Plan participants and, under the terms of the Plan, the Company is
obligated to reimburse participants for the payment of such taxes.
Certain perquisites which the executive officers received in 1995,
1996, 1997 and 1998 the aggregate amount of which did not exceed the
lesser of $50,000 or 10% of any such officer's salary and bonus, are
not included in other Annual Compensation.
(3) The amounts shown represent life insurance premiums paid by the Company
on behalf of the executive officers and matching amounts paid by the
Company under a defined contribution plan.
- 22 -
<PAGE> 23
(4) Payments were made to Argus Management Corporation, which employs Mr.
Brew who was engaged by the Board of Directors in February 1998. He is
the Executive Vice President of Argus Management Corporation.
(5) Mr. McKinney and Mr. Hebenstreit retired from the Company prior to
September 30, 1998 but were paid according to their employment
contracts through October 31, 1998.
(6) Mr. Lane has entered into an amendment to his employment agreement with
the Company, see "Employment Contracts" below.
The Company did not grant any stock appreciation rights or stock
options in 1998 and all aspects of prior plans have expired.
BENEFIT PLANS
-------------
The Company maintains the Laclede Salaried Employees' Pension Plan (the
"Pension Plan"), a defined benefit plan which provides a monthly pension to
salaried employees of the Company (excluding employees covered by a collective
bargaining agreement) who retire or terminate with vested rights in accordance
with the provisions of the Pension Plan. Benefits are based upon years of
credited service and covered compensation, offset by the participant's Primary
Insurance Amount under the Federal Social Security Act. The Company also
maintains the Key Employee Retirement Plan (the "Supplement Plan"), the purpose
of which is to provide additional retirement income to certain key employees of
the Company, including certain of the executive officers. Under the Supplement
Plan, the eligible employees were guaranteed that the total amount received by
them each year during retirement from the Pension Plan, Federal Social Security
and the Supplement Plan would be equal to 70% of the average of their highest
aggregate three consecutive calendar year salary and bonus during their last 10
years of employment with the Company ("Salary Level"), assuming retirement at
age 60. In connection with a Company-wide cost reduction program initiated in
1996, in October 1996 the executive officers agreed to a reduction in retirement
benefits under the Supplement Plan by a change in the percentage of Salary Level
benefits from 70 to 65%. If the employee retires prior to age 60, the applicable
percentage of the Salary Level will be reduced 2.5% for each year of retirement
age below age 60.
- 23 -
<PAGE> 24
The aggregate annual benefits payable pursuant to the Pension Plan, the
Supplement Plan and Federal Social Security at various assumed salary levels and
retirement ages are summarized as follows:
<TABLE>
<CAPTION>
Estimated Annual Retirement
Benefit at the Respective Ages Listed
-------------------------------------
Salary Level* 50 53 56 60
- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
175,000 . . . . . . . . . . . . . . . $ 85,313 $ 93,844 $102,375 $113,750
225,000 . . . . . . . . . . . . . . . 109,688 120,656 131,625 146,250
275,000 . . . . . . . . . . . . . . . 134,063 147,469 160,875 178,750
325,000 . . . . . . . . . . . . . . . 158,438 174,281 190,125 211,250
375,000 . . . . . . . . . . . . . . . 182,813 201,094 219,375 243,750
425,000 . . . . . . . . . . . . . . . 207,188 227,906 248,625 276,250
475,000 . . . . . . . . . . . . . . . 231,563 254,719 277,875 308,750
525,000 . . . . . . . . . . . . . . . 255,938 281,531 307,125 341,250
575,000 . . . . . . . . . . . . . . . 280,313 308,344 336,375 373,750
625,000 . . . . . . . . . . . . . . . 304,688 335,156 365,625 406,250
675,000 . . . . . . . . . . . . . . . 329,063 361,969 394,875 438,750
</TABLE>
* Salary level assumes the average of the highest average aggregate three
consecutive calendar year earnings for eligible executive officers
during the last ten years of their employment.
Messrs. Lane and Schnurbusch have accumulated 26 and 30 credited years
of service respectively. The current salary level for the executive officers
eligible for benefits under the Supplement Plan is: Mr. Lane, $326,193 and Mr.
Schnurbusch, $221,627; Messrs. McKinney and Hebenstreit had accumulated 41 and
30 credited years of service, respectively, as of the date of their retirement.
The salary level eligible for benefits at retirement for Mr. McKinney was
$547,243 and for Mr. Hebenstreit was $326,193.Upon termination of employment, a
covered employee or his beneficiary at any time prior to commencement of
benefits under the Supplement Plan may select the payment of all benefits due
under the Supplement Plan in one lump sum payment. The Supplement Plan's funds
are held and invested by a trustee. Pursuant to the November 14, 1990 amendment
to the Supplement Plan (the "1990 Amendment") the funds held under the
Supplement Plan for Messrs. McKinney, Hebenstreit and Lane were transferred to
separate trusts under which the employees participating in the Supplement Plan
were the direct beneficiaries. Because such trusts were fully funded, the
Company had no further payment requirements as a result of the retirement of Mr.
McKinney and Mr. Hebenstreit, and has no payment requirement with respect to
future termination of employment of Mr. Lane. The Company's payment requirements
to any other executive officer are subject to the jurisdiction of the Bankruptcy
Court and no further payments are anticipated.
The Company also maintains the Laclede Steel Company Salaried
Employees' Profit Sharing Plan (the "Profit Sharing Plan") for the purposes of
encouraging eligible employees to develop initiative and productivity and
providing the employees with additional retirement benefits. The Profit Sharing
Plan is intended to qualify as a cash deferred compensation arrangement under
Section 401(k) of the Internal Revenue Code. Salaried employees of the Company
are eligible to participate in the Profit Sharing Plan.
- 24 -
<PAGE> 25
COMPENSATION OF DIRECTORS
-------------------------
Directors who are not otherwise employed by the Company receive a
$1,125 monthly retainer and a per diem fee of $1,125, plus expenses, for Board
or committee meetings attended. The Chairman of the Board receives a $2,250
monthly retainer fee.
EMPLOYMENT CONTRACTS
--------------------
On November 23, 1998, the Company, Argus Management
Corporation and Mr. Brew entered into a Consulting Agreement (the "Consulting
Agreement"). Pursuant to the Consulting Agreement, Argus Management Corporation
agreed to continue to provide Mr. Brew to act as the President and Chief
Executive Officer of the Company for a weekly fee of $12,000. The Consulting
Agreement may be terminated by either the Company or Argus Management with or
without cause by giving four weeks prior notice. Messrs. McKinney, Hebenstreit,
Lane and Schnurbusch each has an employment agreement with the Company (the
"Employment Agreements"). Although Mr. McKinney left the Company on February 23,
1998, the Company had a contractual obligation to continue to pay his annual
salary of $364,500 and benefits through August 2, 1999, the termination date of
his Employment Agreement. Although Mr. Hebenstreit left the Company on July 31,
1998, the Company had a contractual obligation under his Employment Agreement to
pay his minimum salary of $243,500 through August 2, 1999. The Company
discontinued payments under each of Mr. McKinney and Mr. Hebenstreit's agreement
in November 1998 and intends to reject such employment agreements in connection
with Bankruptcy Court proceedings. On July 29, 1998, Mr. Lane and the Company
entered into an amendment to his Employment Agreement providing that Mr. Lane
will continue as Vice President-Finance, Treasurer and Secretary of the Company
until December 31, 1999. If Mr. Lane remains an employee of the Company until
December 31, 1999 or if Mr. Lane is terminated by the Company without "cause"
(as defined in his Employment Agreement), the Company will pay Mr. Lane two
severance payments, each of which will be equal to one half of his minimum
annual salary of $243,500. Such severance payments shall be paid on January 2,
2000 and April 1, 2000. Effective July 30, 1996, Mr. Schnurbusch's Employment
Agreement provides for a minimum salary of $178,000 for his services as Vice
President-Administration. The Employment Agreement for Mr.
Schnurbusch continues through August 2, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The following information is furnished with respect to each person
known by management of the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock of the Company, each director of the Company, each
executive officer of the Company and all directors and executive officers as a
group. The information is furnished as of December 1, 1998.
- 25 -
<PAGE> 26
<TABLE>
<CAPTION>
Shares of
Series A
Shares of Preferred
Common Stock Stock
Name and Address of Beneficially Percent of Beneficially Percent of
Beneficial Owner Owned (1) Class Owned (1) Class
- ------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Birmingham Steel Corporation (2) 1,029,325 25.38% 183,334 44.00%
1000 Urban Center Drive, Suite 300
Birmingham, AL 35242
Ivaco Inc. (2) . . . . . . 1,009,325 24.88% 183,333 44.00%
Place Mercantile
770 rue Sherbrooke ouest
Montreal, Quebec, Canada H3A 1G1
Ralph M. Cassell . . . . . 50 * -- --
Michael H. Lane . . . . . 10,600 * 5,000 1.20%
Wayne P. E. Mang . . . . . 100 * -- --
Thomas E. Brew, Jr. . . . -- * -- --
Philip R. Morgan . . . . . 1,000 * -- --
Robert H. Quenon . . . . . 300 * -- --
Larry J. Schnurbusch . . . 7,730 * 5,000 1.20%
George H. Walker III . . . 1,000 (3) * -- --
All Directors and Executive
Officers as a Group
(9 persons) . . . . . . . 20,780 * 36,667 2.4%
</TABLE>
* Represents less than one percent of the outstanding
Common Stock of the Company.
(1) Beneficial ownership of shares, as determined in accordance with
applicable Securities and Exchange Commission rules, includes shares as
to which a person directly or indirectly has or shares voting power
and/or investment power. Unless otherwise indicated, each holder has
sole voting and investment power over the shares reported.
(2) On September 26, 1997, a subsidiary of Ivaco Inc. ("Ivaco"), sold
one-half of the Ivaco investment in the Company to a wholly-owned
subsidiary of Birmingham Steel Corporation ("Midwest Holdings"). The
securities of the Company sold consisted of 1,009,325 common shares and
183,334 shares of the Company's Series A preferred stock. The preferred
shares are convertible into 859,834 common shares of the Company. The
transaction was effected through the sale of a wholly-owned subsidiary
of Ivaco which contained such shares to Midwest Holdings. In connection
with the transaction Ivaco, among other things, gave Midwest Holdings
the voting rights on Ivaco's remaining investment in the Company's
common stock and, in any additional common stock Ivaco may own as a
result of the conversion of Ivaco's remaining Series A preferred stock,
subject to certain limitations. In addition, Ivaco agreed not to sell
any portion of its remaining investment in the Company prior to
September 24, 1998 and has provided Midwest Holdings with a limited
right
- 26 -
<PAGE> 27
of first refusal with respect to such interests until September 24,
2002. On July 29, 1998, Robert A. Garvey, Joseph Alvarado and William
R. Lucas, Jr., each an officer of Birmingham Steel, resigned as
directors of the Company. Following this action, no representatives of
Birmingham Steel held positions on the Company's Board of Directors. In
addition, on September 24, 1998, Midwest Holdings notified LCL Holdings
I, pursuant to Section 2 (the "Voting Agreement") of the Purchase
Agreement, it was canceling the Voting Agreement and the Proxy which
was granted to Midwest Holdings by LCL Holdings I on September 26,
1997, relating to the 1,009,325 Holdings I Common Shares and the
183,333 Holdings I Preferred Shares owned by LCL Holdings I
(collectively, the "Shares"), as to any and all of such Shares. This
information is based upon Schedule 13D forms of Ivaco and Birmingham
Steel, filed on September 30, 1997 and October 8, 1998, respectively.
(3) Does not include 1,000 shares of Common Stock owned by Mr.
Walker's wife. Mr. Walker disclaims beneficial ownership of
such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Prior to January 1, 1998, the Company was self-insured for workers'
compensation liabilities. Ivaco Inc. guaranteed a $4.0 million surety bond
covering such liabilities. Claims paid subsequent to December 31, 1997 related
to pre-1998 occurrences will be charged against the surety bond held by Ivaco
Inc.
PART IV
-----------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THIS REPORT
The following is an index of the financial statements and schedules
included in this Report.
(1) FINANCIAL STATEMENTS
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Page
----
Consolidated Statements of Operations for the nine
months ended September 30, 1998 and the years ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . 34
- 27 -
<PAGE> 28
Page
----
Consolidated Balance Sheets, September 30, 1998
and December 31, 1997 . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Stockholders' Equity
(Deficit) Nine Months ended September 30, 1998
and for the years ended December 31, 1997 and 1996 . . . 35
Consolidated Statements of Cash Flows Nine Months
ended September 30, 1998 and for the years ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . 36-37
Notes to Consolidated Financial Statements . . . . . . . . 38-54
Independent Auditors' Report on Financial Statements . . . 31-32
(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
NONE
(3) EXHIBITS
The following is an index of the exhibits included in this Report or
incorporated herein by reference.
(3)(a) Registrant's Certificate of Incorporation as restated
October 28, 1996. (Incorporated by reference to
Exhibit (3) in Registrant's Quarterly Report on Form
10-Q for September 30, 1996.)
(3)(b) By-laws of Registrant amended October 21, 1998.
(4)(a) Registrant's Loan and Security Agreement dated as of
September 7, 1994 amended and restated as of August
20, 1997. (Incorporated by reference to Exhibit
(4)(a) in Registrant's Quarterly Report on Form 10-Q
for September 30, 1997.)
(4)(b) First Amendment dated December 30, 1997 to the
Company's Restated Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(b) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.)
(4)(c) Second amendment effective March 27, 1998 to the
Company's Restated Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(c) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.)
(4)(d) Third Amendment dated August 11, 1998 to the
Company's Restated Loan and Security Agreement.
- 28 -
<PAGE> 29
(4)(e) Registrant's Postpetition Loan and Security
Agreement dated December 1, 1998.
(4)(f) First Amendment to Postpetition Loan and Security
Agreement dated December 23, 1998.
(4)(g) Certificate of Designation of Series A Preferred
Stock dated July 30, 1996. (Incorporated by reference
to Exhibit (4)(i) in the Registrant's Quarterly
Report on Form 10-Q for June 30, 1996.)
(10)(a) Discretionary incentive compensation plan for
Executive Officers of the Registrant. (Incorporated
by reference to Exhibit (10)(a) in Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)
(10)(b) Stock Purchase Agreement dated July 30, 1996
between Ivaco Inc. and Laclede Steel Company.
(Incorporated by reference to Exhibit (10)(a) of
Registrant's Quarterly Report on Form 10-Q for
June 30, 1996.)
(10)(c) Management Stock Purchase Agreements dated July 30,
1996 between Laclede Steel Company and John B.
McKinney, Michael H. Lane, J. William Hebenstreit,
Larry J. Schnurbusch and H. Bruce Nethington.
(Incorporated by reference to Exhibit (10)(b) of
Registrant's Quarterly Report on Form 10-Q for June
30, 1996.)
(10)(d) Restated Employment Agreements dated as of July 30,
1996 between Laclede Steel Company and John B.
McKinney, Michael H. Lane, J. William Hebenstreit,
Larry J. Schnurbusch and H. Bruce Nethington.
(Incorporated by reference to Exhibit (10)(c) of
Registrant's Quarterly Report on Form 10-Q dated June
30, 1996.)
(10)(e) First Amendment dated as of March 24, 1998 to the
Restated Employment Agreement between Laclede Steel
Company and Michael H. Lane. (Incorporated by
reference to Exhibit (10)(e) of Registrant's Annual
Report on Form 10-K dated December 31,
1997.)
(10)(f) Second Amendment dated as of July 29, 1998 to the
Restated Employment Agreement between Laclede Steel
Company and Michael H. Lane. (Incorporated by
reference to Exhibit (10)(a) of Registrant's
Quarterly Report on Form 10-Q dated June 30,
1998.)
- 29 -
<PAGE> 30
(10)(g) Registration Rights Agreement dated July 30, 1996
between Laclede Steel Company and Ivaco Inc., John B.
McKinney, Michael H. Lane, J. William Hebenstreit,
Larry J. Schnurbusch and H. Bruce Nethington.
(Incorporated by reference to Exhibit (10)(d) of
Registrant's Quarterly Report on Form 10-Q dated June
30, 1996.)
(10)(h) Restated Key Employee Retirement Plan dated
October 16, 1996. (Incorporated by reference to
Exhibit (10)(g) in Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1996.)
(10)(i) Asset Purchase Agreement dated January 10, 1997
between Excaliber Tubular Corporation and Laclede
Steel Company. (Incorporated by reference to Exhibit
(10)(h) in Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1996.)
(10)(j) Consulting Agreement dated November 23, 1998 between
Argus Management Corporation, Thomas E. Brew, Jr. and
Laclede Steel Company.
(21) Subsidiaries of Registrant.
Instruments with respect to long-term debt issues
have been omitted where the amount of securities
authorized under such instruments does not exceed 10%
of the total consolidated assets of the Registrant.
Registrant hereby agrees to furnish a copy of any
such instrument to the Commission upon its request.
NOTE
Copies of exhibits will be supplied upon written
request and payment of the Registrant's fee of
$.25 per page requested.
(B) REPORTS ON FORM 8-K
Form 8-K reporting on Item 5 - Other Events, dated September
30, 1998. The Company reported that it failed to make certain
bond payments.
Form 8-K reporting on Item 5 - Other Events, dated October 23,
1998. The Company reported that it changed its fiscal year end
to September 30 of each year.
Form 8-K reporting on Item 3 - Bankruptcy, dated November 30,
1998. The Company reported that it and its subsidiaries,
Laclede Chain Manufacturing Company and Laclede Mid-America
Inc., filed voluntary petitions for relief under Chapter 11 of
the United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Missouri.
- 30 -
<PAGE> 31
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
January 13, 1999 /s/ Thomas E. Brew, Jr.
- -------------------- -----------------------------
Date Thomas E. Brew, Jr.
President
Principal Executive Officer
January 13, 1999 /s/ Michael H. Lane
- -------------------- -----------------------------
Date Michael H. Lane
Vice President-Finance
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this amendment has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
January 13, 1999 /s/ Wayne P. E. Mang
- -------------------- -----------------------------
Date Wayne P. E. Mang
Chairman of the Board
January 11, 1999 /s/ Philip R. Morgan
- -------------------- -----------------------------
Date Philip R. Morgan
Director
January 13, 1999 /s/ Robert H. Quenon
- -------------------- -----------------------------
Date Robert H. Quenon
Director
January 13, 1999 /s/ George H. Walker III
- -------------------- -----------------------------
Date George H. Walker III
Director
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Laclede Steel Company and Chapter 11 Trustee of
Laclede Steel Company:
We have audited the accompanying consolidated balance sheets of Laclede Steel
Company and Subsidiaries (Debtors-in-Possession) as of September 30, 1998 and
December 31, 1997, and the related statements of operations and comprehensive
income (loss), stockholders' equity (deficit) and cash flows for the nine months
ended September 30, 1998 and for each of the two years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Laclede Steel Company and
Subsidiaries at September 30, 1998 and December 31, 1997, and the results of
their operations and their cash flows for the nine months ended September 30,
1998 and each of the two years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
As discussed in Note 1, on November 30, 1998, the Company filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code. The accompanying
consolidated financial statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such consolidated
financial statements do not purport to show (a) as to assets, their realizable
value on a liquidation basis or their availability to satisfy liabilities; (b)
as to prepetition liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as to stockholder
accounts, the effect of any changes that may be made in the capitalization of
the Company; or (d) as to operations, the effect of any changes that may be made
in its business.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1, the
Company's recurring losses from operations, negative working capital,
stockholders' capital deficiency and defaults under the Company's debt
agreements raise substantial doubt about its ability to continue as a going
concern.
- 31 -
<PAGE> 33
Management's plans concerning these matters are also discussed in Note
1. The consolidated financial statements do not include adjustments that might
result from the outcome of this uncertainty.
December 23, 1998
- 32 -
<PAGE> 34
LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 192 $ 186
Accounts receivable - less allowances of $3,172 in 1998
and $2,412 in 1997 39,761 40,282
Prepaid expenses 1,936 1,238
Inventories:
Finished 37,871 45,823
Semi-finished 11,595 18,166
Raw materials 3,478 4,681
Supplies 12,922 14,136
-------- --------
Total inventories
65,866 82,806
-------- --------
Total current assets 107,755 124,512
-------- --------
NONCURRENT ASSETS:
Deferred income taxes -- 45,400
Intangible pension costs 12,271 14,652
Other 7,118 18,238
-------- --------
Total noncurrent assets
19,389 78,290
-------- --------
PLANT AND EQUIPMENT - At cost:
Land 1,544 1,499
Buildings 27,784 27,681
Machinery and equipment 191,250 210,490
-------- --------
220,578 239,670
Less accumulated depreciation 131,531 128,652
-------- --------
Total plant and equipment 89,047 111,018
-------- --------
TOTAL $216,191 $313,820
======== ========
</TABLE>
See notes to consolidated financial statements.
- 33 -
<PAGE> 35
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) SEPTEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 56,357 $ 42,682
Accrued compensation 5,400 6,269
Current portion of long-term debt 106,048 2,356
Accrued costs of pension plans 15,000 13,577
Other 3,684 3,729
--------- ---------
Total current liabilities
186,489 68,613
--------- ---------
NONCURRENT LIABILITIES:
Accrued costs of pension plans 57,328 36,864
Accrued postretirement medical benefits 73,470 75,864
Other 1,923 2,221
--------- ---------
Total noncurrent liabilities 132,721 114,949
LONG-TERM DEBT -- 109,157
--------- ---------
COMMITMENTS AND CONTINGENCIES - Note 9
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, no par value, authorized 2,000,000 shares;
issued and outstanding 416,667 shares (liquidation preference of $6,250) 83 83
Common stock, $.01 par value, authorized 25,000,000 shares;
issued and outstanding 4,056,140 shares 41 41
Capital in excess of par 59,482 59,763
Accumulated deficit (99,119) (15,307)
Accumulated other comprehensive loss (63,506) (23,479)
--------- ---------
Total stockholders' equity (deficit) (103,019) 21,101
TOTAL $ 216,191 $ 313,820
========= =========
</TABLE>
<PAGE> 36
LACLEDE STEEL COMPANY AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------------
1998 1997 1996
<S> <C> <C> <C>
NET SALES $ 232,289 $ 325,029 $ 335,381
COSTS AND EXPENSES:
Cost of products sold 233,585 299,570 316,954
Selling, general and administrative expenses 10,466 13,654 14,201
Depreciation 5,081 7,696 7,743
Interest expense - net 8,183 10,046 11,163
Asset impairments and other charges 27,646 (987) 1,559
--------- --------- ---------
Total costs and expenses 284,961 329,979 351,620
--------- --------- ---------
LOSS BEFORE INCOME TAXES (52,672) (4,950) (16,239)
PROVISION (BENEFITS) FOR INCOME TAXES
31,140 (1,943) (6,254)
--------- --------- ---------
NET LOSS (83,812) (3,007) (9,985)
PREFERRED STOCK DIVIDEND REQUIREMENT (281) (375) (156)
--------- --------- ---------
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS (84,093) (3,382) (10,141)
OTHER COMPREHENSIVE INCOME (LOSS):
Minimum pension liability adjustment (25,637) 11,674 7,707
Income tax provision (credit) 14,390 4,436 2,929
--------- --------- ---------
Total other comprehensive income (loss) (40,027) 7,238 4,778
--------- ---------
COMPREHENSIVE INCOME (LOSS) $(124,120) $ 3,856 $ (5,363)
========= ========= =========
BASIC AND DILUTED NET LOSS PER SHARE $ (20.73) $ (0.83) $ (2.50)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
- 34 -
<PAGE> 37
LACLEDE STEEL COMPANY AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------------
1998 1997 1996
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK:
Beginning balance $ 83 $ 83 $ --
Issuance of 416,667 shares of convertible preferred
stock 83
Ending balance
--------- -------- --------
83 83 83
--------- -------- --------
COMMON STOCK (4,056,140 shares issued):
Beginning balance 41 41 54,081
Reduction in par value of common stock (54,040)
--------- -------- --------
Ending balance 41 41 41
--------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE:
Beginning balance 59,763 60,138 247
Issuance of 416,667 shares of convertible preferred
stock 6,007
Reduction in par value of common stock 54,040
Dividend requirement on convertible preferred stock (281) (375) (156)
--------- -------- --------
Ending balance 59,482 59,763 60,138
--------- -------- --------
ACCUMULATED DEFICIT:
Beginning balance (15,307) (12,300) (2,315)
Net loss (83,812) (3,007) (9,985)
--------- -------- --------
Ending balance (99,119) (15,307) (12,300)
--------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS):
Beginning balance (23,479) (30,717) (35,495)
Other comprehensive income (loss) (40,027) 7,238 4,778
--------- -------- --------
Ending balance (63,506) (23,479) (30,717)
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) $(103,019) $ 21,101 $ 17,245
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
- 35 -
<PAGE> 38
LACLEDE STEEL COMPANY AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- --------------------------
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(83,812) $ (3,007) $ (9,985)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 5,081 7,696 7,743
Asset impairments and other charges 25,260 (987) 1,559
Change in deferred income taxes 31,010 (2,279) (6,424)
Changes in assets and liabilities that provided (used) cash:
Accounts receivable 521 (1,510) (1,485)
Inventories 16,940 3,504 17,173
Accounts payable, accrued expenses and other assets 12,961 (2,983) 10,306
Pension cost less than funding (1,066) (4,977) (5,429)
Accrued postretirement medical benefits (2,394) (3,918) (1,649)
-------- -------- --------
Net cash provided by (used in) operating activities 4,501 (8,461) 11,809
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,848) (3,016) (10,726)
Proceeds from sale of assets 1,422 10,972 4,000
Cash from notes receivable 3,396
Net cash provided by (used in) investing activities 970 7,956 (6,726)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayments) under revolving credit loan (4,087) 390 (8,415)
Proceeds from term loan 4,079
Payments on long-term debt (1,378) (3,329) (2,462)
Proceeds from issuance of convertible preferred stock 6,090
Payment of financing costs (592) (314)
-------- -------- --------
Net cash provided by (used in) financing activities (5,465) 548 (5,101)
-------- -------- --------
</TABLE>
(Continued)
- 36 -
<PAGE> 39
LACLEDE STEEL COMPANY AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------------
1998 1997 1996
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the period $ 6 $ 43 $ (18)
At beginning of period 186 143 161
-------- -------- --------
At end of period $ 192 $ 186 $ 143
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 8,309 $ 10,057 $ 10,476
Income tax payments (refunds) - net $ 130 $ 337 $ (1,317)
</TABLE>
See notes to consolidated financial statements. (Concluded)
- 37 -
<PAGE> 40
LACLEDE STEEL COMPANY AND SUBSIDIARIES
(DEBTORS-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1. BANKRUPTCY PROCEEDINGS
On November 30, 1998, as a result of a decline in Laclede Steel Company's
and subsidiaries (the "Company") results of operations during the nine
months ended September 30, 1998 reflecting, among other factors the
deterioration in steel demand and selling prices since the end of last
year, the Company and its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code and
began operating its businesses as debtors-in-possession under the
supervision of the Bankruptcy Court. A statutory creditors committee has
been appointed in the Chapter 11 case. As part of the Chapter 11
reorganization process, the Company has attempted to notify all known or
potential creditors of the Filing for the purpose of identifying all
prepetition claims against the Company.
In the Chapter 11 case, substantially all of the liabilities as of the
filing date are subject to settlement under a plan of reorganization.
Generally, actions to enforce or otherwise effect repayment of all
prepetition liabilities as well as all pending litigation against the
Company are stayed while the Company continues its business operations as
debtors-in-possession. Schedules will be filed by the Company with the
Bankruptcy Court setting forth the assets and liabilities of the debtors
as of the filing date as reflected in the Company's accounting records.
Differences between amounts reflected in such schedules and claims filed
by creditors will be investigated and amicably resolved or adjudicated
before the Bankruptcy Court. The ultimate amount and settlement terms for
such liabilities are subject to a plan of reorganization, and accordingly,
are not presently determinable.
Under the Bankruptcy Code, the Company may elect to assume or reject real
estate leases, employment contracts, personal property leases, service
contracts and other executory pre-petition contracts, subject to
Bankruptcy Court review. The Company cannot presently determine or
reasonably estimate the ultimate liability that may result from rejecting
leases or from filing of claims for any rejected contracts, and no
provisions have been made for these items.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has experienced operating losses since 1995 and has recently experienced
significant difficulty in generating sufficient cash flows to meet its
obligations and sustain its operations. As such, the Company has been in
violation of various financial covenants and has been in technical default
under its Loan and Security Agreement. In addition, the Company failed to
make required payments on its 1976 Pollution Control Revenue Bonds which
were due on October 1, 1998; consequently, the Company is in default under
the terms of the 1976 Pollution Control Revenue Bonds. Absent the possible
effects of a Chapter 11 reorganization, such conditions raise substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
The Company, as debtors-in-possession, entered into a Loan and Security
Agreement dated as of December 1, 1998 (as amended on December 23, 1998),
with BankAmerica Business Credit, Inc., as agent and lender, under which
the Company may borrow up to $85 million, subject to adequate
- 38 -
<PAGE> 41
collateral levels, to fund ongoing operating requirements (the "DIP
Facility"), which has been approved by the Bankruptcy Court. The DIP
Facility provides for revolving credit based on a formula including
accounts receivable and inventory balances similar to the previous Loan
and Security Agreement. See Note 6 for further description. As of November
30, 1998, the Company had approximately $68.6 million outstanding under
the facility and approximately $11.1 million of unused available funds.
The DIP Facility matures on December 31, 1999.
2. NATURE OF OPERATIONS
The Company is a manufacturer of carbon and alloy steel products,
including pipe products, hot rolled products, wire products and welded
chain. The Company's continuous butt weld pipe is sold in the U.S. and
Canada to distributors and manufacturers. Hot rolled products consist
primarily of special quality bars sold to manufacturers to be cold drawn
or forged. Wire products include high and low carbon wire, oil tempered
wire used for mechanical springs, overhead door springs, automotive
suspension and brake springs, and annealed wire and rod. Laclede Chain
Manufacturing Company, a wholly owned subsidiary, produces chain products
and also imports a significant amount of chain. Approximately one-half of
the chain business is attributable to sales of anti-skid devices for
trucks and automobiles and the balance is in sales of hardware and
industrial chain.
3. CHANGE IN FISCAL YEAR
Effective September 30, 1998 the Company changed its year end from
December 31 to September 30. The consolidated statements of operations and
comprehensive income (loss), stockholders' equity (deficit), and cash
flows are presented for the nine months ended September 30, 1998 and each
of the two years in the period ended December 31, 1997. For comparative
purposes only, the following table presents the condensed results of
operations for the nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ----------------------------------
1998 1997
(UNAUDITED)
<S> <C> <C>
NET SALES $ 232,289 $ 245,356
COSTS AND EXPENSES 284,961 244,202
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES (52,672) 1,154
PROVISION (BENEFITS) FOR INCOME TAXES 31,140 489
--------- ---------
NET INCOME (LOSS) $ (83,812) $ 665
========= =========
BASIC AND DILUTED NET EARNINGS (LOSS) PER SHARE $ (20.73) $ 0.09
========= =========
</TABLE>
4. ACCOUNTING POLICIES
The Company's significant accounting policies are summarized as follows:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Laclede Steel Company and its subsidiaries. All
intercompany accounts and transactions have been eliminated.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with a maturity of three months or less at date of purchase to
be cash equivalents.
- 39 -
<PAGE> 42
INVENTORIES - Inventories of finished and semi-finished products, raw
materials and supplies are stated at the lower of cost, predominantly
moving average, or market. Market determination is based on the net
realizable value of the total of the components of each major category of
inventory.
PLANT AND EQUIPMENT - Plant and equipment, consisting primarily of
steelmaking and related facilities, are carried at cost. Major renewals
and betterments are capitalized, while replacements, rebuilding costs and
repairs are charged to operations.
DEPRECIATION - The Company follows the policy of providing for
depreciation of plant and equipment by charging operations with amounts
sufficient to amortize the cost over the following estimated useful lives:
Buildings and improvements 20 to 45 years
Machinery and equipment 4 to 25 years
Office furniture and equipment 6 to 10 years
Depreciation is computed on the straight-line method for financial
reporting purposes.
IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER INTANGIBLE ASSETS - Management
periodically reviews the carrying value of its long-lived tangible and
intangible assets to determine if an impairment has occurred or whether
changes in circumstances have occurred that would require a revision to
the remaining useful life. In making such determination, management
evaluates the performance, on an undiscounted basis, of the underlying
operations or assets which give rise to such amount. See Note 8 for
further discussion of impairment charges.
INCOME TAXES - Deferred income taxes are provided for the temporary
differences between the tax basis of the Company's assets and liabilities
and their financial reporting amounts at each year end, utilizing
currently enacted tax rates. During 1998, the Company recorded a $72.5
million valuation allowance for the net deferred tax assets. See Note 5
for further discussion and a description of significant temporary
differences.
PER SHARE DATA AND PREFERRED STOCK DIVIDENDS - Per share amounts for the
nine months ended September 30, 1998, and the years ended December 31,
1997 and 1996 have been calculated based on weighted average shares
outstanding of 4,056,140. Net loss per share was computed by dividing the
net loss, after deducting convertible preferred dividend requirements of
$281,000 in 1998, $375,000 in 1997, and $156,000 in 1996, by the weighted
average shares outstanding.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CERTAIN SIGNIFICANT ESTIMATES - Amounts reported for pensions and
postretirement medical benefits and their related deferred tax assets are
subject to significant fluctuation due to changes in interest rates.
CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS - The Company
manufactures steel from steel scrap generated in the course of its steel
production and purchased in the open market from numerous scrap suppliers.
Since it does not produce its own raw materials, the Company is subject to
the fluctuation in prices and availability of scrap.
- 40 -
<PAGE> 43
Approximately 50% of the Company's employees are covered by a collective
bargaining agreement, which expires in September 2001. As discussed above,
under the Bankruptcy Code any executory contract may be rejected by the
Company with the approval of the Bankruptcy Court.
FAIR VALUE OF FINANCIAL INSTRUMENTS - As of December 31, 1997, the fair
value of the Company`s financial instruments, including cash and cash
equivalents, receivables, payables and long-term debt approximated its
carrying value. The fair value of the notes receivable and debt were based
on management's estimates and such instruments carried interest rates
approximating market rates. As discussed in Note 1, the Company filed for
protection under the Bankruptcy Code on November 30, 1998. Although
management continues to believe that the fair value of such items
approximated their carrying values at September 30, 1998, the impact of
the bankruptcy filing on the ultimate value of the Company's financial
instruments is not determinable at this time.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS - During 1998, the Company
adopted Financial Accounting Standards Board ("FASB") Statement No. 130,
Reporting Comprehensive Income, FASB Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, and FASB Statement No.
132, Employers' Disclosures about Pensions and Other Postretirement
Benefits.
FASB Statement No. 130 established standards for reporting and display of
comprehensive income in a full set of financial statements. In addition to
displaying an amount for net income (loss), the Company is now required to
display other comprehensive income (loss), which includes other changes in
equity (deficit).
FASB Statement No. 131 established standards for the way that public
business enterprises report information about operating segments in annual
financial statements and also established standards for related
disclosures about products and services, geographic areas, and major
customers. Management has considered the requirements of this Statement
and as discussed in Note 12, believes the Company operates in one business
segment. Supplement enterprise-wide information has been provided by
product line. Substantially all revenue is generated from sales made in
the U.S.
FASB Statement No. 132 revised employers' disclosures about pensions and
other postretirement benefit plans. This statement did not change the
measurement or recognition of these plans.
5. INCOME TAXES
At December 31, 1997, the Company had net deferred tax assets of $45.4
million. FASB Statement No. 109, Accounting for Income Taxes, requires
that deferred tax assets be reduced by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax assets will
not be realized. In evaluating deferred tax assets as of December 31,
1997, management believed that Company-wide cost reductions and
productivity improvements previously implemented would return the Company
to profitability during 1998, as discussed further below. While the
Company operated at approximately break-even before non-cash charges
during the first quarter of 1998, significant operating losses were
incurred during the second quarter. In view of the significant operating
losses for the last six months of fiscal 1998, management no longer
believes that operating income will be sufficient to realize the Company's
tax benefits. Consequently, a valuation allowance of $72.5 million has
been recorded, of which $48.3 million is reflected in the provision for
income taxes and the remaining amount is reflected as an adjustment to the
minimum pension liability, reported as a reduction of stockholders' equity
(deficit).
As of December 31, 1997, management believed that it was more likely than
not that all of the net operating loss ("NOL") carryforwards would be
utilized prior to their expiration. The NOL
- 41 -
<PAGE> 44
carryforwards, as well as the existing deductible temporary differences,
with the exception of differences relating to the minimum pension
liability adjustment and the postretirement medical benefits, were largely
offset by the existing taxable temporary differences relating to
accelerated depreciation which were scheduled to reverse within the
carryforward period.
Furthermore, any recorded deferred tax assets associated with these future
tax benefits which would not be offset by the reversal of the accelerated
depreciation were expected to be realized by the achievement of future
profitable operations. The Company experienced profitable operations in
1993, 1994 and 1995, exclusive of nonrecurring/unusual charges in
connection with restructuring and modifying the operations of the Company.
While the Company experienced significant operating losses in 1996,
management believed 1997 would have been a profitable year were it not for
the unanticipated losses associated with the union contract negotiations,
the related decrease in productivity in the periods surrounding the
termination of the contract and the year-end inventory write-offs. The
Company has had a history of generating NOL carryforwards and then
utilizing such NOL carryforwards to reduce regular income taxes in future
periods. Therefore, management believed that no valuation allowance was
necessary for the deferred tax assets at December 31, 1997.
Federal and state income taxes are associated with operating income
(loss), as well as other comprehensive income (loss) (additional minimum
pension liabilities). The Company's provision for (benefit from) income
taxes for both statement of operations and other comprehensive income
(loss) is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Current and deferred taxes, exclusive of valuation
allowance $(17,205) $ (1,943) $ (6,254)
Valuation allowance 48,345
-------- -------- --------
Total 31,140 (1,943) (6,254)
-------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS):
Current and deferred taxes, exclusive of valuation
allowance (9,742) 4,436 2,929
Valuation allowance 24,132
-------- -------- --------
14,390 4,436 2,929
-------- -------- --------
Total $ 45,530 $ 2,493 $ (3,325)
======== ======== ========
</TABLE>
- 42 -
<PAGE> 45
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ----------------------------
1998 1997 1996
<S> <C> <C> <C>
Current state income tax provision $ 130 $ 336 $ 170
Deferred income tax provision (benefit) (exclusive of
the effects of the valuation allowance) (17,335) (2,279) (6,424)
Increase in valuation allowance for deferred tax assets
(including an increase to the beginning of period
valuation allowance of $31,010) 48,345
-------- -------- --------
Provision (benefit) for income taxes $ 31,140 $ (1,943) $ (6,254)
======== ======== ========
Deferred tax assets and liabilities are comprised of the following (in
thousands):
SEPTEMBER 30, DECEMBER 31,
1998 1997
Deferred tax assets:
Minimum pension liability adjustment $ 24,132 $ 14,390
Postretirement medical benefits 27,919 30,801
Net operating loss and alternative minimum tax carryovers 40,429 29,981
Allowances on receivables 1,205 979
Other 3,531 3,559
-------- --------
Total deferred tax assets 97,216 79,710
-------- --------
Deferred tax liabilities:
Depreciation (24,739) (29,621)
Other -- (4,689)
-------- --------
Total deferred tax liabilities (24,739) (34,310)
-------- --------
Net deferred tax asset 72,477 45,400
Valuation allowance (72,477) --
Net deferred tax asset $ -- $ 45,400
======== ========
</TABLE>
- 43 -
<PAGE> 46
In conjunction with the Alternative Minimum Tax Rules ("AMT"), the Company
had available AMT credit carryforwards of approximately $2.5 million,
which may be used indefinitely to reduce regular federal income taxes.
Additionally, for tax purposes, the Company had available as of September
30, 1998, NOL carryforwards for regular federal income tax purposes of
approximately $99.8 million. These NOL carryforwards expire in various
amounts from 2008 through 2013. Subsequent to September 30, 1998, the
Company received a refund of approximately $4.5 million from the Internal
Revenue Service in connection with the carryback of certain losses
incurred in 1997.
The applicable statutory federal income tax rate of 34% for the nine
months ended September 30, 1998 and each of the two years ended December
31, 1997 and 1996 is reconciled to the effective income tax rate as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Federal income tax credit computed at statutory tax rate $(17,908) $(1,651) $(5,503)
Change in valuation allowance 48,345
State income taxes net (399) (819)
Other 703 107 68
-------- ------- -------
Provision (benefit) for income taxes $ 31,140 $(1,943) $(6,254)
======== ======= =======
</TABLE>
Deferred tax assets were decreased in 1997 by $4,436,000 and in 1996 by
$2,929,000 as a result of the tax effects of the minimum pension liability
adjustment. See Note 7 for further discussion.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if the
percentage of stock (by value) of a corporation (the "Loss Corporation")
that is owned by one or more "five-percent shareholders" has increased by
more than 50 percentage points over the lowest percentage of stock owned
by the same shareholders during a three year testing period (an "Ownership
Change"), the use of pre-ownership change net operating losses of the Loss
Corporation following such Ownership Change will be limited based on the
value of the Loss Corporation immediately before the Ownership Change
occurs (a "Section 382 Limitation"). Although the Company believes that
the transactions consummated pursuant to the Purchase Agreement between
Ivaco and Birmingham Steel on September 26, 1997, in which Birmingham
Steel acquired approximately 25% of the Company's common stock from Ivaco,
should not result in an Ownership Change, future transactions involving
persons who are not or who during the ensuing thirty-six month period
become "five-percent shareholders" as defined in Section 382 may trigger
an Ownership Change. If such an Ownership Change occurs, the Company's use
of its existing net operating loss carryovers at such time will be subject
to a Section 382 Limitation based on the value of the Company on the date
of such an Ownership Change.
There are numerous and complex tax issues associated with the Company's
filing for protection under Chapter 11 of the Bankruptcy Code and the
future reorganization, such as potential abandonment of assets, discharge
of indebtedness or sale of property. The impact of these tax issues will
effect the amount of tax attribute carryforwards and deferred taxes;
however, such impact cannot be determined at this time.
- 44 -
<PAGE> 47
6. DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Bank Loan and Security Agreement:
Revolving Loan $ 72,429 $ 76,516
Term Loan 7,629 8,582
Solid Waste Disposal Revenue Bonds:
8.375% Bonds 5,905 6,275
8.5% Bonds 9,430 9,430
8% Pollution Control Revenue Bonds 8,040 8,040
8% Industrial Development Revenue Bonds 615 670
Note Payable 2,000 2,000
-------- --------
106,048 111,513
Less amounts currently due 106,048 2,356
$ -- $109,157
======== ========
</TABLE>
SECURED DEBT - At September 30, 1998, the Company had a Loan and Security
Agreement with three banks, which had been amended and restated to provide
a total credit facility, subject to a borrowing base formula, of up to
$85.0 million and a term loan of $7.6 million. The amount available under
the Revolving Loan was approximately $4.1 million at September 30, 1998.
Interest on the Revolving Loan was payable at either prime plus 2% or a
Eurodollar rate, at the Company's option. Interest on the Term Loan was
payable at either prime plus 2-1/2% or a Eurodollar rate, also at the
Company's option. Under the terms of the Loan and Security Agreement, the
Company granted security interests in accounts receivable and inventory to
the participating banks. The Term Loan was secured by certain plant and
equipment.
In connection with the Company's bankruptcy filing, the Bankruptcy Court
has authorized the Company to borrow funds under an amended and restated
Loan and Security Agreement (the "DIP Facility"). The DIP Facility
provides for revolving credit based on eligible accounts receivable and
inventory similar to the previous Loan and Security Agreement. At November
30, 1998, the petition date, the Company had approximately $68.6 million
outstanding under the facility and approximately $11.1 million of unused
available funds. The Facility matures on December 31, 1999.
Interest is payable monthly on postpetition revolving loans which bear
interest, at the Company's option, at a floating rate (which is based on
2% plus the Bank of America reference rate ("Prime") or a Eurodollar rate
at the Company's option which was approximately 9% at December 31, 1998.
As security for all postpetition obligations and prepetition liabilities,
virtually all assets of the Company and subsidiaries have been granted as
collateral to the Loan and Security Agreement, except for certain assets
of Laclede Chain Manufacturing Company described below.
- 45 -
<PAGE> 48
In connection with the Loan and Security Agreement, as amended, the
Company must maintain compliance with several restrictive financial
covenants, including the maintenance of specified levels of operating cash
flow and minimum operating contributions from the Alton Steel operations,
as defined.
As part of the modifications to the Loan and Security Agreement in
existence at September 30, 1998, the Company received in 1997 the approval
of parties to the Solid Waste Revenue Bonds to eliminate certain negative
financial covenants contained therein and to substitute therefore certain
collateral. Subsequent to that substitution, the only remaining negative
financial covenant with respect to the Solid Waste Revenue Bonds is that
the Company may not without the prior written consent of the Issuer of the
Bonds (i) borrow from its subsidiary, Laclede Chain Manufacturing Company,
or (ii) take cash advances from Laclede Chain Manufacturing Company,
except to the extent that the aggregate principal amount of all such
borrowings and cash advances at any one time do not exceed $7,000,000.
Collateral granted to the Trustee of the Solid Waste Revenue Bonds for the
benefit of the bondholders consists of (i) all of the issued and
outstanding shares of Laclede Chain Manufacturing Company and (ii) all of
Laclede Chain Manufacturing Company's machinery and equipment now owned or
thereafter acquired.
Effective May 22, 1995 a subsidiary of the Company entered into a Note
Agreement for $2,000,000 bearing interest of Citibank NY Prime rate plus
1%. Principal is due upon the original maturity date of May 22, 2001 and
interest is payable monthly. At September 30, the interest rate was 9.5%.
UNSECURED DEBT - In connection with the Pollution Control Bonds, the
Company is required to comply with various covenants relating to limits on
liabilities as defined in the Bond Agreement dated October 1, 1976. At
September 30, 1998, the Company was not in compliance with these
covenants. Additionally, the Company failed to make the required payments
and consequently, effective as of October 1, 1998, the Company was in
default under the Agreement.
The Company was party to a Paying Agent Agreement in which the Paying
Agent assisted the Company in purchasing certain raw material. The terms
of this agreement required the Company to pay a commission of 1.5% on all
purchases plus a fee on the invoice amount. Amounts purchased under this
agreement were included in accounts payable and amounted to $9,877,000 and
$5,984,000 as of September 30, 1998 and December 31, 1997. As of September
30, 1998, this agreement has been terminated by the Paying Agent.
Pursuant to the bankruptcy proceedings, and giving consideration to the
defaults on several of the agreements, all outstanding debt has been
classified as current. Effective November 30, 1998, all outstanding debt
of the Company was stayed and will be subject to compromise.
7. EMPLOYEE BENEFITS
DEFINED BENEFIT PENSION PLANS - The Company has several noncontributory
defined benefit pension plans providing retirement benefits for
substantially all employees. Benefits under the plans are primarily based
on years of service and employee's compensation prior to retirement.
Annual pension plan funding is based on the range of deductible
contributions permitted by ERISA regulations, taking into account the
Company's current income tax situation.
- 46 -
<PAGE> 49
The components of pension cost are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------------------
1998 1997 1996
<S> <C> <C> <C>
Service cost $ 1,265 $ 1,742 $ 2,111
Interest cost on projected benefit obligation 10,184 13,710 13,868
Expected return on plan assets (8,778) (12,068) (12,275)
Net amortization of:
Unrecognized transition obligation 1,398 1,584 1,584
Unrecognized net loss 2,456 3,419 2,747
Unrecognized prior service costs 1,255 1,307 1,544
-------- -------- --------
Net periodic pension cost 7,780 9,694 9,579
Settlement and curtailment losses recognized 5,813 1,559
-------- --------
Total pension cost $ 13,593 $ 9,694 $ 11,138
======== ======== ========
</TABLE>
Included in total pension cost for the nine months ended September 30,
1998 is an expense of $5.8 million recognized in connection with the
write-off of all remaining deferred costs of the Company's Key Employee
Retirement Plan. As discussed in Note 8, several officers of the Company
retired or terminated services during the period. In addition, any
remaining deferred cost associated with the Plan was charged to expense as
a result of the change in the actuarial calculation relating to estimated
future service years for the remaining two employees in the Plan.
In the fourth quarter of 1996, the Company presented an early retirement
incentive offer to certain hourly employees at the Alton Plant.
Approximately 90 employees elected to accept the offer and retired during
the quarter. In accordance with applicable accounting standards, the
Company recorded a noncash charge of $1.6 million representing a pension
curtailment loss and the cost of special termination benefits.
The projected benefit obligations at September 30, 1998 and December 31,
1997 were determined using assumed discount rates of 6.75% and 7.25%,
respectively. For all plans other than the Laclede Hourly Employees
Pension Plan, the average assumed rate of increase in compensation levels
was 2% for all years. Reflecting the Labor Agreement for Alton hourly
employees, a 1% rate of increase in compensation was assumed for all years
for such plan. The weighted average assumed long-term rate of return on
the market-related value of plan assets was 10% for 1998, 9.9% for 1997
and 9.8% for 1996.
- 47 -
<PAGE> 50
A summary of the funded status and changes in the funded status of the Plans, is
as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Change in benefit obligation:
Benefit obligations at beginning of period $200,760 $200,043
Service cost 1,265 1,742
Interest cost 10,184 13,710
Actuarial losses 14,871 7,238
Benefits paid (31,106) (21,973)
-------- --------
Benefit obligations at end of period 195,974 200,760
-------- --------
Change in plan assets:
Fair value of plan assets at beginning of period 148,706 130,333
Actual return (loss) on plan assets (4,169) 25,675
Employer contribution 9,604 14,671
Benefits paid (31,106) (21,973)
-------- --------
Fair value of plan assets at end of period 123,035 148,706
-------- --------
Funded status (72,939) (52,054)
Unrecognized net transition obligation 4,931 6,329
Unrecognized actuarial loss 64,951 45,401
Unrecognized prior service cost 6,589 7,844
-------- --------
Net amount recognized $ 3,532 $ 7,520
======== ========
Amounts recognized in the consolidated balance sheet consist of:
Prepaid pension cost (reflected in other noncurrent assets) $ 83 $ 5,440
Accrued benefit liability (72,328) (50,441)
Intangible asset 12,271 14,652
Accumulated other comprehensive income 63,506 37,869
-------- --------
Net amount recognized $ 3,532 $ 7,520
======== ========
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $194.8 million, $194.0 million
and $121.7 million, respectively, as of September 30, 1998, and $189.6
million, $187.7 million and $137.3 million, respectively, as of December
31, 1997.
In accordance with FASB Statement No. 87, the Company has recorded an
additional minimum pension liability for underfunded plans of $75.8
million at September 30, 1998 and $52.5 million at December 31, 1997,
representing the excess of unfunded accumulated benefit obligations over
previously recorded pension cost liabilities. A corresponding amount is
recognized as an intangible asset except to the extent that these
additional liabilities exceed related unrecognized prior service cost and
net transition
- 48 -
<PAGE> 51
obligation, in which case the increase in liabilities is charged directly
to stockholders' equity (deficit). As of September 30, 1998, $63.5 million
of the excess minimum pension liability resulted in a charge to equity. As
of December 31, 1997, the excess minimum liability was $38.9 million and
the after-tax charge to equity was $23.5 million. A valuation allowance
for the corresponding deferred tax asset resulting from the additional
minimum liability was recorded in 1998 as it does not appear likely that
the deferred tax assets will be realized under present circumstances (See
Note 5).
In October 1998, the Company made a pension contribution of $600,000;
however, the contribution was not sufficient to satisfy the minimum
funding requirements as required by ERISA by approximately $1.3 million.
The Company has filed a post-event notice with the Pension Benefit
Guaranty Corporation ("PBGC"). Due to the Chapter 11 filing, future
contributions to the underfunded defined benefit pension plans are
uncertain.
PROFIT SHARING PLAN - The Company maintains a defined contribution profit
sharing thrift plan covering a majority of its salaried employees. In 1996
the Plan was amended to provide for a minimum Company contribution
regardless of the level of Company profitability. Company contributions
for the nine months ended September 30,1998 amounted to $167,000 and for
the years ended December 31, 1997 and 1996 amounted to $259,000 and
$272,000, respectively.
POSTRETIREMENT MEDICAL BENEFIT PLANS - In addition to providing pension
benefits, the Company provides certain health care and life insurance
benefits for active and retired employees. A significant portion of the
Company's employees may become eligible for the retiree benefits if they
reach retirement age while working for the Company.
The components of net periodic postretirement medical benefit costs are as
follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------------
1998 1997 1996
<S> <C> <C> <C>
Service cost $ 327 $ 452 $ 698
Interest cost 2,872 3,731 4,522
Amortization of unrecognized prior service credits (719) (960)
Amortization of unrecognized net gain (599) (1,420) (1,265)
------ ------- -------
Net periodic cost $1,881 $ 1,803 $ 3,955
====== ======= =======
</TABLE>
- 49 -
<PAGE> 52
A summary of the changes in the status of the plans is as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
<S> <C> <C>
Benefit obligations at beginning of period $ 55,750 $ 53,837
Service cost 327 452
Interest cost 2,873 3,731
Actuarial losses 2,932 3,451
Benefits paid (4,275) (5,721)
-------- --------
Benefit obligations at end of period $ 57,607 $ 55,750
======== ========
Funded status $(57,607) $(55,750)
Unrecognized actuarial gain (8,737) (12,269)
Unrecognized prior service credit (7,126) (7,845)
-------- --------
Accrued postretirement benefit obligation $(73,470) $(75,864)
======== ========
</TABLE>
The assumed discount rates used to measure the accumulated postretirement
benefit obligation were 6.75% at September 30, 1998 and 7.25% at December
31, 1997. The assumed future health care cost trend rate for the September
30, 1998 and December 31, 1997 calculations were 7.14% and 7.9%, gradually
declining over a five-year period to 3.25%. A one percentage point
increase in the health care trend rates would have increased the aggregate
of the service and interest cost components of the net periodic
postretirement benefit cost by $444,000 for the nine months ended
September 30, 1998 and $477,000 and $480,000 for the years ended December
31, 1997 and 1996, respectively, and would have increased the accumulated
postretirement benefit obligation by $5.6 million as of September 30, 1998
and $5.5 million as of December 31, 1997.
A one percentage point decrease in the health care trend rates would have
decreased the aggregate of the service and interest cost components of the
net periodic postretirement benefit cost by $390,000 for the nine months
ended September 30, 1998 and $428,000 and $440,000 for the years ended
December 31, 1997 and 1996, respectively, and would have decreased the
accumulated postretirement benefit obligation by $5.1 million as of each
September 30, 1998 and December 31, 1997.
8. ASSET IMPAIRMENT, OTHER CHARGES AND OTHER SIGNIFICANT EVENTS
In December 1997, the Company idled its High Temperature Metal Recovery
("HTMR") facility after the facility was damaged in an accident. This
facility was previously used to dispose of the EAF dust generated in the
Melt Shop at the Alton Plant. Subsequent to the accident, the Company
disposed of the EAF dust through alternative methods. During 1998,
management completed an evaluation of the HTMR facility to determine the
economic feasibility of repairing and operating the unit, and determined
that the HTMR facility currently could not function on an economically
feasible basis. As there is a limited market for this type of facility,
the entire carrying cost of $15.4 million was written off and recorded as
an impairment loss.
In June 1998, management implemented its program to consolidate the wire
operations at its Fremont facility and to shut down the Memphis Wire
Plant. In connection with the shut down, the Company recorded a charge of
approximately $6.0 million of which $4.7 million is reflected in the
accompanying
- 50 -
<PAGE> 53
statement of operations and comprehensive income (loss) as asset
impairments and other charges. The impairment loss on property, plant and
equipment reflects the difference between the carrying value at the time
of write-off of approximately $6.3 million and an estimated fair value
less costs to sell of approximately $2.2 million. Operations have ceased
and the majority of the assets have been sold. Net proceeds of
approximately $2.0 million have been received in connection with such
sales. Also included in the charge is $0.5 million relating to the
write-off of goodwill associated with this operation. The remaining
write-off associated with the closing of the Memphis Wire Plant of
approximately $1.4 million relates to inventory losses and termination
shutdown costs incurred which have been reflected in cost of products
sold.
Other charges of $7.6 million represent severance costs and certain
professional fees associated with the Company's potential reorganization.
The Company recorded charges of approximately $6.4 million in connection
with the retirement severance of several officers of the Company during
the nine months ended September 30, 1998. Included in this charge is
approximately $5.8 million in primarily noncash settlement and curtailment
expenses relating to the Company's Key Employee Retirement Plan.
In February 1997, the Company sold the assets of its electric resistance
weld structural and mechanical tubing operation, located in Benwood, West
Virginia. Cash proceeds from the sale of these assets, which consist
primarily of equipment and inventory, totaled approximately $11.0 million.
This transaction resulted in a gain on sale of equipment of approximately
$1.0 million. The Company used the funds from the sale to improve its
working capital position.
In the fourth quarter of 1996, the Company presented an early retirement
incentive offer to certain hourly employees at the Alton Plant.
Approximately 90 employees elected to accept the offer and retired during
the quarter. In accordance with applicable accounting standards, the
Company recorded a non-cash charge of $1.6 million, representing a pension
curtailment loss and the cost of special termination benefits.
9. COMMITMENTS AND CONTINGENCIES:
The Company has operating leases for office space and certain equipment
through 2007. Future minimum lease commitments required under these leases
are as follows (in thousands):
<TABLE>
<CAPTION>
LEASE INCOME
LEASE RECEIVABLE UNDER NET LEASE
COMMITMENTS SUBLEASES OBLIGATION
<S> <C> <C> <C>
1999 $ 5,611 $ 263 $ 5,348
2000 5,430 277 5,153
2001 4,626 291 4,335
2002 2,393 299 2,094
2003 2,161 299 1,862
Thereafter 2,213 175 2,038
------- ------ -------
TOTAL $22,434 $1,604 $20,830
======= ====== =======
</TABLE>
Rent expense under all leases in 1998, 1997, and 1996 was $4.9 million,
$4.3 million, and $3.5 million, respectively. During 1998, the Company
entered into an agreement where it agreed to sublease part of its
headquarters.
- 51 -
<PAGE> 54
In 1996, the Company entered into a sale and leaseback transaction with a
third party for the Ladle Metallurgy Facility at Alton. The third party
agreed to purchase the equipment in 1996 for approximately $4.0 million
cash and a note receivable for approximately $3.6 million which was paid
in January 1998 to complete the lease transaction. The lease term is for
five years starting August 1, 1996 and continuing until June 30, 2001 with
an option to purchase the equipment at the expiration date. In August
1998, the Company made a late payment on the lease, allowing the lessor to
draw upon a letter of credit in the amount of $1.5 million.
There are various claims pending involving the Company with respect to
environmental, hazardous substances, product liability and other matters
arising out of the routine conduct of the business. Such claims which
arose prior to November 30, 1998 are subject to automatic stay of the
Bankruptcy Code. The Company believes it has meritorious defenses and the
ultimate disposition of such matters will not materially affect its
financial position or results of operations.
The Company's tubular products are currently produced at the Alton and
Fairless Plants, with finishing operations also performed at the Vandalia
Plant. With current production and shipping requirements, the Alton and
Fairless Plants are each operating at levels substantially below capacity.
Management's plan includes consolidation of pipe-making operations, at
either the Alton or Fairless Plants, in order to improve production
efficiencies and reduce the overall costs; however, any such plan is
subject to the approval of the Bankruptcy Court.
In August 1998, the Company announced that it planned to discontinue
operation of its 22" Mill at Alton. Since the announcement, the Company
has continued to operate the mill, primarily as a result of the decline
in scrap prices, which has made the operation of the 22" Mill more
economical. Management currently expects to operate the 22" Mill until
such time that it is no longer economical to operate the mill and the
shutdown is approved by the Bankruptcy Court. Based on management's
expectation of future cash flow from these facilities, no impairment
charges are necessary at this time. However in order to improve future
cash flow, one of the Company's pipe-making facilities may be sold or
abandoned in the future, and recording of an impairment charge is likely
at that time.
10. PREFERRED STOCK
In July 1996, the Company issued 416,667 shares of Series A 6% convertible
preferred stock to Ivaco Inc. and the executive officers of the Company
for $6,090,000, after expenses. This transaction resulted in an increase
in capital in excess of par value of $6,007,000. On October 28, 1996, at a
special meeting of the stockholders, an amendment was approved to the
Company's Certificate of Incorporation which reduced the par value of each
share of common stock from $13.33 per share to $.01 per share and
increased the number of authorized common stock shares from 5,000,000
shares to 25,000,000 shares. The stockholders also approved the
recapitalization of the Company's Series A 6% preferred stock. At such
time each share of the preferred stock became convertible into common
stock at the option of the holder at a conversion price of $3.20 into 4.69
shares of common stock. In the event of voluntary or involuntary
liquidation of the Company, the holders of shares of Series A Preferred
Stock are entitled to receive liquidating distributions in the amount of
$15.00 per share plus accrued and unpaid dividends (which total $812,500
or $1.95 per share) before payment is made to holders of common stock. As
of September 30, 1998 and December 31, 1997, Birmingham Steel and Ivaco,
Inc. each owned approximately 44% of the issued shares of convertible
preferred stock.
11. RELATED PARTY TRANSACTIONS
The Company has transactions in the normal course of business with Ivaco
Inc. or affiliated companies. As of September 30, 1998 Ivaco Inc. owned
approximately 25% of the Company's outstanding common stock. For the nine
months ended September 30, 1998, the Company purchased rods totaling
$1,024,000 from affiliates of Ivaco and for the year ended 1997, the
Company purchased $5,502,000. Prior to
- 52 -
<PAGE> 55
January 1, 1998, the Company was self-insured for workers' compensation
liabilities. Ivaco Inc. issued a $4.0 million guaranty bond covering such
liabilities.
The Company also has transactions in the normal course of business with
Birmingham Steel or affiliated companies. As of September 30, 1998
Birmingham Steel beneficially owned approximately 25% of the Company's
outstanding common stock. In 1998 the Company purchased rods and
participated in rod conversion arrangements with affiliates of Birmingham
Steel at market prices, which totaled $3,508,000. Also in 1997, an
affiliate of Birmingham Steel purchased semi-finished steel from the
Company at market prices totaling $643,000.
12. INFORMATION BY PRODUCT LINE
The Company operates in one business segment as a manufacturer of carbon
and alloy steel products. Its primary product lines consist of pipe and
tubular products, wire, hot rolled bars and welded chain. The following
table presents, for the periods indicated, the Company's revenue by
product class (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------------------
1998 1997 1996
<S> <C> <C> <C>
Pipe and tubular $ 82,463 $123,512 $137,841
Hot rolled 102,207 122,861 117,719
Wire 27,410 48,104 45,612
Chain 20,209 30,552 34,209
-------- -------- --------
Total $232,289 $325,029 $335,381
======== ======== ========
</TABLE>
- 53 -
<PAGE> 56
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The results of operations by quarter for 1998 and 1997 were as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997
--------------------------------------- -------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 84,555 $ 76,840 $ 70,894 $ 80,846 $ 78,722 $ 85,788 $ 79,673
Cost of product 77,638 76,718 77,878 73,870 71,180 77,163 77,357
-------- -------- -------- -------- -------- -------- --------
Net sales less cost
of products $ 6,917 $ 122 $ (6,984) $ 6,976 $ 7,542 $ 8,625 $ 2,316
======== ======== ======== ======== ======== ======== ========
Net earnings (loss) $ (2,038) $(65,468) $(16,306) $ 135 $ 9 $ 521 $ (3,672)
======== ======== ======== ======== ======== ======== ========
Basic and fully diluted
net earnings (loss)
per share $ (0.53) $ (16.16) $ (4.04) $ 0.01 $ (0.02) $ 0.11 $ (0.93)
======== ======== ======== ======== ======== ======== ========
</TABLE>
* * * * * *
- 54 -
<PAGE> 1
EXHIBIT 3(b)
Effective October 21, 1998
BY-LAWS
OF
LACLEDE STEEL COMPANY
ARTICLE I
Offices
The general offices of the Company shall be in the City of St.
Louis, State of Missouri, unless the Board of Directors shall otherwise
determine.
ARTICLE II
Stockholders Meetings
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Company for the election of Directors and for the
transaction of such other business as may properly come before the meeting shall
be held in each year on such date as shall be specified by the Board of
Directors, but, unless so specified, shall be held on the third Thursday in May
in each year if not a legal holiday and, if a legal holiday, then on the next
succeeding business day. The annual meeting of stockholders shall be held at the
general offices of the Company in St. Louis, Missouri and shall be convened at
9:00 a.m. unless the Board of Directors shall specify a different place at which
the meeting shall be held or a different hour at which the meeting shall be
convened.
Section 2. Special Meetings. Special meetings of the
stockholders may be called by the President or by resolution of the Board of
Directors whenever deemed necessary. In addition, special meetings of the
stockholders may be called upon the condition, by the person or
<PAGE> 2
persons and for the purpose specified in Section 1 of Article III of these
By-Laws. The business transacted at any special meeting of the stockholders
shall be confined to the purpose or purposes specified in the notice therefor
and to matters germane thereto. Special meetings of the stockholders shall be
held at the general offices of the Company and shall be convened at 9:00 a.m.
unless the Board of Directors or the President or other person or persons, as
the case may be, calling the meeting shall specify a different place at which
the meeting shall be held or a different hour at which the meeting shall be
convened.
Section 3. Notice. Notice of each meeting of the stockholders
stating the place, the date and the hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called shall
be mailed or caused to be mailed not less than ten days nor more than fifty days
before the date of the meeting by the Secretary at the direction of the
president or the Board of Directors or the person or persons calling the
meeting, to each stockholder of record entitled to vote at such meeting at his
address as it appears on the records of the Company. Notice may be waived, and
the presence of any stockholder in person or by proxy at any meeting shall
constitute a waiver of notice of such meeting except where a stockholder attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 4. Quorum. A majority of the outstanding shares
entitled to vote at a meeting represented in person or by proxy shall constitute
a quorum at a meeting of the stockholders. Every decision of a majority of the
shares present, in person or by proxy, entitled to vote, provided a quorum is
present, shall be valid as a corporate act unless by reason of the
2
<PAGE> 3
particular nature of such action a different vote is required by law or by the
Certificate of Incorporation of the Company.
Section 5. Adjournment. Any meeting of the stockholders may
adjourn from time to time until its business is completed. In the absence of a
quorum, a majority of the shares represented in person or by proxy shall have
the right successively to adjourn the meeting to a specified date. Any business
which may have been transacted at the meeting at which the adjournment is taken,
may be transacted at the adjourned meeting. No notice need be given of an
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken, provided that if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 6. Voting. At all meetings of the stockholders each
outstanding share shall be entitled to one vote on each matter submitted to a
vote, but no share belonging to the Company shall be voted. In all elections for
Directors of the Company each stockholder shall be entitled to as many votes as
shall equal the number of votes which (except for this provision) he would be
entitled to cast for the election of Directors with respect to his shares of
stock multiplied by the number of Directors to be elected and he may cast all
such votes for a single Director or may distribute them among the number to be
voted for, or any two or more of them, as he may see fit. A stockholder may vote
either in person or by proxy executed in writing by the stockholder or by his
attorney-in-fact. No proxy shall be valid after three years from the date of its
execution unless otherwise provided in the proxy.
Section 7 . List of Stockholders. At least ten (10) days
before each meeting of the stockholders the Secretary of the Company shall make
a complete list of the stockholders
3
<PAGE> 4
entitled to vote at such meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to examination of any stockholder,
for any purpose germane to the meeting during ordinary business hours, for at
least ten (10) days prior to the meeting at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
Such list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 8. Inspectors. At any meeting of the stockholders at
which Directors are to be elected or vote of the stockholders is to be taken on
any proposition, the President or other person presiding at such meeting may
appoint not less than two persons, who are not Directors, inspectors to receive
and canvass the votes given at such meeting, and certify the results to him. In
all cases where the right to vote upon any share or shares shall be questioned,
it shall be the duty of the inspectors, if any, or persons conducting the vote
to require the stock ledger of the Company as evidence of shares held and the
question shall be determined in accordance with said stock ledger.
Section 9. Presiding Officer. The Chairman of the Board shall
preside at all meetings of the stockholders. In the absence of the Chairman, the
Board of Directors may designate a substitute chairman to preside at any meeting
of stockholders. At any meeting of stockholders, the Chairman, or in his
absence, the substitute chairman, if any, appointed by the Board of Directors,
may, from time to time, during such meeting, appoint a temporary chairman to
preside temporarily at such meeting.
4
<PAGE> 5
Section 10. Special Meetings Called by Stockholders. A Special
Meeting of Stockholders may also be called by holders (the "Requesting Holders")
representing at least 25% of the outstanding shares entitled to vote at any
annual meeting of the stockholders or at any special meeting of the
stockholders. In order to exercise this right, the Requesting Holders must give
notice (the "Notice") to the Secretary of the Company, setting forth (i) the
subject matter to be considered at the Special Meeting (ii) the proposed record
date (the "Record Date") for the special Meeting (which shall be a least 15 days
after delivery of the Notice), (iii) the proposed date (the "Meeting Date") for
the Special Meeting and (iv) such other information as the Requesting Holders
shall reasonably request to be included in the Proxy Statement, Notice of
Special Meeting and Proxy (the "Proxy Materials") to be prepared by the Company
in connection with the Special Meeting. The business conducted at the Special
Meeting shall be limited to the matters set forth in the Notice. The Special
Meeting shall be held at the general offices of the Company unless another place
within the City of St. Louis shall be set by the Company, and shall be convened
at 9:00 A.M. (local time). The Company shall file with the Securities and
Exchange Commission (the "SEC") no later than 10 days after the Company receives
the Notice, preliminary Proxy Material (and use its best efforts to file
definitive Proxy Materials as soon as possible thereafter) or, if no preliminary
Proxy Materials are required to be filed, definitive Proxy Material, which Proxy
Material shall contain in all material respects the request or requests of the
Requesting Holders as set forth in the Notice. No later than two business days
after the definitive Proxy Materials are filed with the SEC, the Company shall
send the Proxy Materials to all stockholders of record on the Record Date. The
Company shall comply with all applicable laws relating to the Special Meeting.
If the number of days between the date of the mailing of the proxy Materials and
the Meeting Date is less than 30 days, the Company shall notify the
5
<PAGE> 6
Requesting Holders and the Meeting Date shall be moved to the 30th day (or, if
not a business day, the next business day thereafter) following the commencement
of the mailing of the Proxy Materials to stockholders unless the Requesting
Holders request that the Meeting Date remain unchanged from the date set forth
in the Notice. If the Company is unable to comply as a matter of law with the
Record Date or the Meeting Date, the Company shall change such date to the first
business day thereafter as is legally permissible. Notwithstanding any provision
in the By-laws to the contrary, this Section 10 of Article II may only be
amended, altered or repealed by a vote of holders of 75% of the outstanding
shares entitled to vote at any annual meeting of the stockholders or at any
special meeting of the stockholders called for that purpose; provided, however,
the Requesting Holders may waive any obligation of the Company hereunder with
respect to the Special Meeting called by such Requesting Holders.
ARTICLE III
Board of Directors
Section 1. Number, Tenure and Vacancies. The property and
business of the Company shall be controlled and managed by a Board of Directors.
The Board of Directors shall consist of nine (9) persons who are stockholders of
the Company. Each director shall hold office until the annual meeting of the
stockholders next succeeding his election and until his successor shall be
elected and qualified. Election of directors shall be by written ballot.
Vacancies on the Board of Directors and newly created directorships resulting
from any increase in the authorized number of directors, shall be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy or to fill a
newly created directorship shall hold office until the next annual meeting, and
until his successor
6
<PAGE> 7
shall be elected and qualified. If at any time, by reason of death or
resignation or other cause, the Company shall have no directors in office, then
any officer or stockholder, or an executor, administrator, trustee or guardian
of a stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
for the purpose of electing directors. Notice of such special meeting shall be
given by the person or persons calling the meeting herein before provided.
Section 2. Regular Meetings of Directors. Regular meetings of
the Board of Directors shall be held on such dates as the Board of Directors
may, from time to time, determine. No notice of any regular meeting of the Board
of Directors need be given.
Section 3. Special Meetings. Special meetings of the Board of
Directors may be called by the President any time and special meetings shall be
called by the President or the Secretary upon the written request of any four
Directors specifying the purpose or purposes for such special meeting. Written
notice of all special meetings of the Board of Directors stating the time, place
and purpose of the meeting shall be mailed on a date which is at least one day
before the date of the meeting and addressed to each Director at his address as
it appears on the records of the Company. Attendance of a Director at any
special meeting shall constitute a waiver of notice thereof except where a
Director attends the meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. A Director, either prior to or after any meeting, may waive notice
thereof, whether or not he attends the meeting, and such waiver may be in
writing or by telegram.
Section 4. Quorum. A majority of the Board of Directors shall
be required to be present at any meeting to constitute a quorum for the
transaction of business and, except as otherwise specifically provided in these
By-Laws, the concurring vote of at least a majority of
7
<PAGE> 8
the Directors at a meeting at which a quorum is present shall be required to
determine all questions coming before the Board. In the absence of a quorum the
Directors present shall have the right successively to adjourn the meeting to a
specified date and no notice need be given of such adjournment. Members of the
Board of Directors may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can here each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Section 5. Presiding Officer. The Board shall by majority vote
select a member of the Board of Directors to serve as Chairman of the Board and
to preside at all meetings of the Board of Directors. In the absence of the
Chairman, the Board of Directors may designate a substitute chairman to preside
at any meeting of the Board of Directors. At any meeting of the Board of
Directors, the Chairman, or in his absence, the substitute chairman designated
by the Board of Directors, may, from time to time, during such meetings, appoint
a temporary chairman to preside at such meetings.
Section 6. Consents. Any action required or permitted to be
taken at any meeting of the Board of Directors, may be taken without a meeting
if all the members of the Board of Directors consent thereto in writing,
provided that the writing or writings shall be filed with the minutes of the
proceedings of the Board of Directors.
Section 7. Compensation. Directors as such shall receive
such compensation as the Board of Directors may from time to time determine.
Section 8. Fixing Record Date. In order to determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to
8
<PAGE> 9
exercise any rights in respect of any change, conversion or exchange of shares
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
ARTICLE IV
Officers
Section 1. Number. The officers of the Company shall consist
of a President, one or more Vice Presidents, a Secretary, an Assistant
Secretary, a Treasurer, and an Assistant Treasurer, and in addition to the
above-named officers such other officers as the Board of Directors may, from
time to time, designate.
Section 2. Term. The officers shall hold office for a period
of one year or until their successors have been duly elected and qualified,
provided, however, that any officer or agent elected by the Board of Directors
may be removed by the Board and any such officer or agent, other than the
President, may be removed by the President, whenever in its or his judgment the
best interest of the Company will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person removed. Any
vacancy occurring among officers may be filled at any time by the Board of
Directors.
Section 3. Consolidation of Offices. Any two or more offices,
except President and a Vice President, President and Secretary, Secretary and
Assistant Secretary, and Treasurer and Assistant Treasurer, may be held by the
same person.
Section 4. Election. All officers shall be elected at the
first meeting of the Board of Directors held after the annual meeting of the
stockholders, or as soon thereafter as possible.
9
<PAGE> 10
Section 5. Compensation. Officers shall receive such
compensation as may be fixed, from time to time, by the Board of Directors and
the fact that any officer shall also be a Director shall not preclude his
receiving compensation for his services as an officer.
ARTICLE V
Duties of Officers
Section 1. President. The President shall be a stockholder and
a member of the Board of Directors. He shall be the chief executive officer of
the Company and shall exercise general management over the affairs of the
Company and its property, subject to control by the Board of Directors. He shall
exercise such other powers and perform such other duties as are prescribed by
law, by these By-Laws, or by the Board of Directors and as are ordinarily
incident to the office of President.
Section 2. Vice President or Vice Presidents. The Vice
President or Vice Presidents shall exercise such powers and perform such duties
as may be elsewhere prescribed by these By-laws and as may be prescribed, from
time to time, by the Board of Directors or by the President.
Section 3. Secretary. The Secretary shall keep the minutes of
all meetings of the stockholders and of the Board of Directors, and shall attend
to the giving and serving of all notices as may be required by law or by these
By-Laws. He shall have in his custody the seal of the Company and shall affix
the same to deed, contracts and other instruments requiring the seal when duly
signed on behalf of the Company and he shall exercise such other powers and
perform such other duties as may be elsewhere prescribed in these By-Laws and as
may be prescribed, from time to time, by the Board of Directors or by the
President and as are ordinarily incident to the office of the Secretary.
10
<PAGE> 11
Section 4. Assistant Secretary. The Assistant Secretary shall
perform the duties of the Secretary in the event of the death, disability or
absence of the Secretary and shall exercise such other powers and perform such
other duties as may be elsewhere prescribed in these By-Laws and as may be
prescribed, from time to time, by the Board of Directors or the President.
Section 5. Treasurer. The Treasurer shall have charge of all
books of account, funds, evidences of indebtedness and other securities of the
Company and shall deposit the funds belonging to the Company in the name of the
Company in such banks or trust companies as may be designated by the Board of
Directors. He shall keep full and accurate accounts of all transactions of the
Company and of money received and paid out. He shall make such reports to the
stockholders, the Board of Directors and the president as they may respectively
direct. He shall exercise such other powers and perform such other duties as may
be elsewhere prescribed in these By-Laws and as may be prescribed, from time to
time, by the Board of Directors or by the President and as are ordinarily
incident to the office of the Treasurer.
Section 6. Assistant Treasurer. The Assistant Treasurer shall
perform the duties of the Treasurer in the event of the death, disability or
absence of the Treasurer, and shall exercise such other powers and perform such
other duties as may be elsewhere prescribed in these By-Laws and as may be
prescribed, from time to time, by the Board of Directors or President.
Section 7. Additional Officers. The additional officers
designated by the Board of Directors shall exercise such powers and perform such
duties as may be prescribed, from time to time, by the Board of Directors or the
President and as are ordinarily incident to the office held by such additional
officers.
11
<PAGE> 12
Section 8. Bonds. At the option of the Board of Directors, the
Treasurer or any other officer shall be required to give bond for the faithful
performance of his duties.
ARTICLE VI
Fiscal Year
The fiscal year of the Company shall commence on the first day
of October in each year.
ARTICLE VII
Certificates of Stock and Transfers
Section 1. Certificates. Each stockholder shall be entitled to
a certificate, certifying the number and character of shares owned by him. The
certificates shall be in such form as shall be approved by the Board of
Directors and shall be signed by, or in the name of the Company, by the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and sealed with the seal of the
Company, which seal may be facsimile, engraved or printed. The signatures of the
officers of the company may be facsimile on any stock certificates which are
countersigned by the Company's transfer agent or the Company's registrar. The
certificates, as they are issued, shall be consecutively numbered and registered
in the order of their issuance and shall be entered on the stock transfer books
of the Company as they are issued. Proper records shall be kept which shall show
the name and address of the owner of each certificate and the number of shares
issued to each stockholder and, in the case of cancellation, shall show the date
of such cancellation.
Section 2. Transfers. The shares of stock shall be
transferable only upon the books of the Company. Every transfer shall be by the
holder thereof in person or by attorney upon surrender and cancellation of the
outstanding certificates for the shares so transferred and
12
<PAGE> 13
upon proof satisfactory to the Company that the person
presenting such certificate is legally entitled to transfer the same.
Section 3. Lost Certificates. In the event of the loss, theft,
or destruction of any stock certificate, a new certificate may be issued only
upon compliance with the following conditions. The owner of such lost, stolen,
or destroyed certificate shall file with the Secretary an affidavit stating the
number of the certificate, the number of shares represented thereby, the facts
with regard to the ownership of the certificate, and the circumstances
surrounding its loss, theft, or destruction. The Secretary shall present such
affidavit to the Board of Directors and if the Board of Directors shall be
satisfied that such certificate has been lost, stolen or destroyed and that a
new certificate ought to be issued in lieu thereof, the Board of Directors may
order a new certificate to be issued to such owner upon his filing with the
Company either (a) a bond in such penal sum and with such conditions and such
surety as the Board of Directors may prescribe, indemnifying the Company, its
Directors and officers against all expense, damage or liability which may be
occasioned by the issuance of a new certificate, or (b) a certificate of the
surety in a lost security blanket bond, which bond shall have been previously
approved by the Board of Directors, assuming liability under such bond, in such
penal sum as the Board of Directors may prescribe, with respect to the issuance
of a new certificate in lieu of the one alleged to have been lost, stolen, or
destroyed.
Section 4. Transfer and Registration Agents. The Board of
Directors may appoint a transfer agent or agents who shall have and exercise
supervision over the transfer of shares of stock and the issuance of stock
certificates, subject to such conditions and regulations as the Board of
Directors may prescribe; and the Board of Directors may appoint a registrar who
13
<PAGE> 14
shall register all transfers of shares of stock and the issuance of stock
certificates, subject to such conditions and regulations as the Board shall
prescribe.
ARTICLE VIII
Seal
The corporate seal of the Company shall be in circular form
and bear the name of the Company arranged on the outer edge, with the word
"Seal" and the word "Delaware" also appearing thereon.
ARTICLE IX
Amendments to By-Laws
These By-Laws, or any of them, may be amended, altered or
repealed and new By-Laws adopted either (a) by the stockholders, (i) by vote of
the holders of two-thirds (2/3) of the outstanding shares entitled to vote at
any annual meeting of the stockholders or at any special meeting of the
stockholders called for that purpose in the case of an amendment, alteration or
repeal of this Article IX or of Section 1 of Article III of these By-Laws, and
(ii) by vote of the holders of a majority of the outstanding shares entitled to
vote at any annual meeting of the stockholders or at any special meeting of the
stockholder called for that purpose in any other case, or (b) by the Board of
Directors, by vote of a three-fourths majority of the whole board of Directors
of the Company except that the Board of Directors may not alter, amend or repeal
Article IX or Section 1 of Article III of these By-Laws.
ARTICLE X
Indemnification of Directors and Others
Section 1. Actions, Suits or Proceedings Other Than By or in
the Right of the Company. The Company shall indemnify any person who was or is a
party or is threatened to be
14
<PAGE> 15
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or on the right of the Company) by reason of the fact that he is or was or
has agreed to become a director, officer, employee or agent of the Company, or
is or was serving or has agreed to serve at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity, against costs, charges, expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonable incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Actions or Suits By or in the Right of the
Corporation. The company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the company to procure a judgment in its favor by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Company, or is or was serving or has agreed to
serve at the request of the Company as a director, officer, employee or agent of
another corporation,
15
<PAGE> 16
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement of
such action or suit and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses which the
Court of Chancery or such other court shall deem proper.
Section 3. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Article, to the
extent that a director, officer, employee or agent of the Company has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of and
claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
Section 4. Determination of Right to Indemnification. Any
indemnification under Sections 1 and 2 of this Article (unless ordered by a
court) shall be paid by the company unless a determination is made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by
16
<PAGE> 17
independent legal counsel in a written opinion, or (3) by the stockholders, that
indemnification of the director, officer, employee or agent is not proper in the
circumstances because he has not met the applicable standard of conduct set
forth in Sections 1 and 2 of this Article.
Section 5. Advance of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees) incurred by a person referred
to in Sections 1 and 2 of this Article in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding provided, however, that the
payment of such costs, charges and expenses incurred by a director or officer in
his capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of such director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director of officer is not entitled to be indemnified by
the Company as authorized in this Article. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee or agent of the Company, authorize the Company's
counsel to represent such person, in any action, suit or proceeding, whether or
not the company is a party to such action, suit or proceeding.
Section 6. Procedure for Indemnification. Any indemnification
under Sections 1, 2 and 3, or advance of costs, charges and expenses under
Section 5 of this Article, shall be
17
<PAGE> 18
made promptly, and in any event within 60 days, upon the written request of the
director, officer, employee or agent. The right to indemnification or advances
as granted by this Article shall be enforceable by the director, officer,
employee or agent in any court of competent jurisdiction, if the Company denies
such request, in whole or in part, or if no disposition thereof is made within
60 days. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Company. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advance of costs, charges and expenses under Section 5 of this Article where the
required undertaking, if any, has been received by the Company) that the
claimant has not met the standard of conduct set forth in Sections 1 and 2 of
the Article but the burden of proving such defense shall be on the Company.
Neither the failure of the Company (including its Board of Directors, its
independent legal counsel, and its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 1 or 2 of this Article, nor the fact that there
has been an actual determination by the Company (including its Board of
Directors, independent legal counsel and its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 7. Other Rights; Continuation of Right to
Indemnification. The indemnification and advancement of expenses provided by
this Article shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled under any law (common or statutory),
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and to action in another capacity while
holding such office or while employed by or acting as agent for the Company and
shall continue as to a person who has ceased to be a director, officer, employee
or agent, and shall inure to the
18
<PAGE> 19
benefit of the estate, heirs, executors and administrators of such person. All
rights to indemnification under this Article shall be deemed to be a contract
between the Company and each director, officer, 5employee or agent of the
Company who serves or served in such capacity at any time while this Article is
in effect. Any repeal or modification of this Article or any repeal or
modification of relevant provisions of the Delaware General Corporation law or
any other applicable laws shall not in any way diminish any rights to
indemnification of such director, officer, employee or agent or the obligations
of the company arising thereunder.
Section 8. Savings Clause. If this Article or any portion
thereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify each director,
officer, employee and agent of the Company as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Company, to the full extent permitted by any applicable portion of the company's
Articles of Incorporation or of this Article which shall not have been
invalidated and to the full extent permitted by applicable law.
19
<PAGE> 1
EXHIBIT 4(d)
AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 7, 1994
AMENDED AND RESTATED
AS OF AUGUST 20, 1997
THIS AMENDMENT NO. 3 dated as of August 11, 1998 (this
"Amendment") is entered into among BANKAMERICA BUSINESS CREDIT, INC., a Delaware
corporation ("BABC"), BNY FINANCIAL CORPORATION, a New York corporation ("BNY")
formerly known as The Bank of New York Commercial Corporation, NATIONSBANK,
N.A., a national banking association ("NB") (BABC, BNY and NB and their
respective successors and assigns being sometimes hereinafter referred to
collectively as the "Lenders" and each of BABC, BNY and NB and its successors
and assigns being sometimes hereinafter referred to individually as a "Lender"),
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as agent for the
Lenders (in such capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a
Delaware corporation (the "Parent"), LACLEDE CHAIN MANUFACTURING COMPANY, a
Delaware corporation ("Laclede Chain"), and LACLEDE MID AMERICA INC., an Indiana
corporation ("Laclede Mid America") (the Parent, Laclede Chain and Laclede Mid
America being sometimes hereinafter referred to collectively as the "Borrowers"
and each of the Parent, Laclede Chain and Laclede Mid America being sometimes
hereinafter referred to individually as a "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of September 7, 1994, amended
and restated as of August 20, 1997 and amended by that certain Amendment No. 1
dated as of December 30, 1997 and that certain Amendment No. 2 dated as of March
27, 1998 (the "Loan Agreement," capitalized terms used herein without definition
having the meanings given such terms in the Loan Agreement); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the
Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 3 below, the Loan
Agreement is amended as follows:
(a) The definition of "Individual Maximum Revolver Amount" in
Section 1.2 is amended to delete the amount "$55,000,000" in clauses (1)(a)(ii),
(2)(a)(ii), and (3)(a)(ii), and to substitute therefor "the Inventory Sublimit
Amount".
<PAGE> 2
(b) The definition of "Maximum Revolver Amount" in Section 1.2
is amended to delete the amount "$55,000,000" in clause (a)(ii), and to
substitute therefor "the Inventory Sublimit Amount".
(c) The definition of "Revolver Facility" in Section 1.2 is
amended to delete the amount "$100,000,000" and to substitute therefor
"$85,000,000".
(d) Section 1.2 is further amended to add the following
definition:
"Inventory Sublimit Amount" means the amount set forth below
for the period indicated:
Period Amount
------ ------
Restructuring Date - August 30, 1998 $55,000,000
August 31, 1998 - September 29, 1998 $51,000,000
September 30, 1998 - October 30, 1998 $50,000,000
October 31, 1998 - November 29, 1998 $49,000,000
November 30, 1998 - December 30, 1998 $48,000,000
December 31, 1998 and thereafter $47,000,000
(e) Section 2.1 is amended to delete the amount "$100,000,000"
in the second line thereof and to substitute therefor "$85,000,000".
(f) Article 7 is amended to add the following Section 7.30:
7.30 Year 2000 Compliance. On the basis of a comprehensive
review and assessment undertaken by the Borrowers of their respective computer
applications and inquiry made of their material suppliers, vendors and
customers, the Borrowers reasonably believe that the "Year 2000 problem" (that
is, the risk that computer applications used by any person may be unable to
recognize and perform properly certain date-sensitive functions involving dates
prior to and any date after December 31, 1999) will not result in a material
adverse change in any of the operations, business, properties or condition
(financial or otherwise) of the Borrowers. The Borrowers have developed adequate
contingency plans to ensure uninterrupted and unimpaired business operations in
the event of a failure of their own or a third party's systems or equipment due
to the Year 2000 problem, including those of suppliers, vendors and customers,
as well as a general failure of or interruption in their communications and
delivery infrastructure.
(g) Section 8.13 is amended to add the following clause (i)
thereto:
"; and (i) deferred payment notes in a principal amount not to exceed
$25,000,000, which amount represents trade payables and other account payable
that the Borrowers failed pay on their originally scheduled payment dates or in
accordance with trade practices".
2
<PAGE> 3
(h) Article 8 is amended to add the following Section 8.29:
8.29 Pre-Tax Losses. The Borrowers shall not permit their
consolidated, cumulative pre-tax losses, determined in each case for the period
beginning July 1, 1998, as at the end of each period listed below, to exceed the
amount set forth opposite such period:
Period Amount
------ ------
July 1, 1998 - July 31, 1998 $1,500,000
July 1, 1998 - August 31, 1998 $1,900,000
July 1, 1998 - September 30, 1998 $1,800,000
July 1, 1998 - October 31, 1998 $1,800,000
July 1, 1998 - November 30, 1998 $1,800,000
July 1, 1998 - December 31, 1998 $1,900,000
Section 2. Amendment Fee; Waivers.
(a) The Borrowers agree, on a joint and several basis, to pay the
Agent, for the ratable account of the Lenders, a fee (the "Amendment Fee") in
the amount of $100,000, which Amendment Fee shall be fully earned by the Lenders
on the date of this Amendment and payable upon the first occurrence of an Event
of Default following the effectiveness of this Amendment. The Agent, the Lenders
and the Borrowers agree that the Amendment Fee shall be financed by the Lenders
as Revolving Loans.
(b) Subject to the fulfillment of the conditions precedent set forth
in Section 3 below, the Lenders and the Agent hereby waive the Events of Default
arising from the Borrowers' failure pursuant to Sections 8.24 and 8.25 to (i)
have a Consolidated Fixed Charge Coverage Ratio, in accordance with Section 8.24
as of June 30, 1998 of not less than 0.55 to 1.00, and (ii) have a Consolidated
Adjusted Net Worth, in accordance with Section 8.25, as of June 30, 1998, of not
less than $26,000,000. In addition, compliance by the Borrowers with (i) the
Consolidated Fixed Charge Coverage Ratio of Section 8.24 solely for the periods
January 1, 1998 through September 30, 1998 and January 1, 1998 through December
31, 1998, and (ii) the Consolidated Adjusted Net Worth covenant of Section 8.25
solely for the quarter ending dates September 30, 1998 and December 31, 1998, is
hereby waived. Such waivers shall not permit the Borrowers to qualify for any
Margin reductions set forth in Section 2 of Amendment No. 2 to the Loan
Agreement without complying with the conditions set forth in such Section 2.
Section 3. Conditions to Amendment. This Amendment shall become
effective upon the receipt by the Agent by facsimile transmission of a
counterpart of this Amendment executed by each Borrower and each Lender, and
execution of this Amendment by the Agent (provided, that each Borrower and each
Lenders shall promptly execute six applicable signature pages hereof and deliver
such pages to the Agent).
Section 4. Representations and Warranties. Each Borrower hereby
represents and
3
<PAGE> 4
warrants that (i) this Amendment constitutes a legal, valid and binding
obligation of such Borrower, enforceable against such Borrower in accordance
with its terms, (ii) the representations and warranties contained in the Loan
Agreement are correct in all material respects as though made on and as of the
date of this Amendment, and (iii) no Event of Default has occurred and is
continuing.
Section 5. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to the Loan Agreement, as
amended hereby, and each reference to the Loan Agreement in any other document,
instrument or agreement executed and/or delivered in connection with the Loan
Agreement shall mean and be a reference to the Loan Agreement, as amended
hereby.
(b) Except as specifically amended above, the Loan Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement, except as specifically set forth herein.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (as opposed to the conflicts
of laws provisions) of the State of Illinois.
Section 8. Legal Fees. The Borrowers agree to pay to the
Agent, for its benefit, on demand, all costs and expenses that the Agent pays or
incurs in connection with the negotiation, preparation, consummation,
administration, enforcement and termination of this Amendment, including,
without limitation, the allocated costs of the Agent's in-house counsel fees.
Section 9. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of August 11, 1998.
LACLEDE STEEL COMPANY
By: /s/ M. H. Lane
--------------------------------
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY
By: /s/ M. H. Lane
--------------------------------
Vice President
LACLEDE MID AMERICA INC.
By: /s/ M. H. Lane
--------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC., as
the Agent
By: /s/ Michael Jasaitis
--------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC., as a
Lender
By: /s/ Michael Jasaitis
--------------------------------
Vice President
5
<PAGE> 6
BNY FINANCIAL CORPORATION, as a Lender
By: /s/ Anthony Viola
--------------------------------
Vice President
NATIONSBANK, N.A., as a Lender
By: /s/ Scott Taylor
--------------------------------
Vice President
6
<PAGE> 1
EXHIBIT 4(e)
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
Dated as of December 1, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
LACLEDE STEEL COMPANY,
LACLEDE CHAIN MANUFACTURING COMPANY
and
LACLEDE MID AMERICA INC.,
as Debtors and Debtors-in-Possession,
as the Borrowers
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
<S> <C> <C>
1.1 Definitions.........................................................................................2
1.2 Accounting Terms...................................................................................23
1.3 Other Terms........................................................................................23
1.4 Computation of Time Periods........................................................................23
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Revolving Loans....................................................................................24
2.2 Letters of Credit..................................................................................28
ARTICLE 3
INTEREST AND FEES
3.1 Interest Rates.....................................................................................34
3.2 Conversion or Continuation.........................................................................34
3.3 Special Provisions Governing LIBOR Loans...........................................................35
3.4 Maximum Interest Rate..............................................................................37
3.5 Funding Fee........................................................................................38
3.6 Facility Fee.......................................................................................38
3.7 Collateral Management Fee..........................................................................38
3.8 Letter of Credit Fee...............................................................................38
3.9 Audit Fees.........................................................................................39
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans....................................................................................39
4.2 Mandatory Prepayments of the Term Loans............................................................39
4.3 Place and Form of Payments; Extension of Time......................................................39
4.4 Payments as Revolving Loans........................................................................40
4.5 Apportionment, Application and Reversal of Payments................................................40
4.6 Indemnity for Returned Payments....................................................................41
4.7 Increased Capital..................................................................................41
4.8 Register; Agent's and Lenders' Books and Records; Monthly Statements...............................41
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE 5
COLLATERAL
5.1 Grant of Security Interest.........................................................................42
5.2 Perfection and Protection of Security Interest.....................................................45
5.3 Location of Collateral.............................................................................46
5.4 Title to, Liens on, and Sale and Use of Collateral.................................................47
5.5 Appraisals.........................................................................................47
5.6 Access and Examination; Confidentiality............................................................47
5.7 Collateral Reporting...............................................................................48
5.8 Accounts...........................................................................................48
5.9 Collection of Accounts; Payments...................................................................49
5.10 Inventory.........................................................................................50
5.11 Equipment.........................................................................................50
5.12 Assigned Contracts................................................................................51
5.13 Documents, Instruments, and Chattel Paper.........................................................52
5.14 Right to Cure.....................................................................................52
5.15 Power of Attorney.................................................................................53
5.16 The Agent's and Lenders' Rights, Duties and Liabilities...........................................53
ARTICLE 6
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records..................................................................................53
6.2 Financial Information..............................................................................54
6.3 Notices to the Lenders.............................................................................56
ARTICLE 7
GENERAL WARRANTIES AND REPRESENTATIONS
7.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents...............58
7.2 Validity and Priority of Security Interest.........................................................58
7.3 Organization and Qualification.....................................................................59
7.4 Corporate Name; Prior Transactions.................................................................59
7.5 Subsidiaries and Affiliates........................................................................59
7.6 Financial Statements and Projections...............................................................59
7.7 Capitalization.....................................................................................60
7.8 [Intentionally left blank].........................................................................60
7.9 Debt...............................................................................................60
7.10 Distributions.....................................................................................60
7.11 Title to Property.................................................................................60
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.12 Real Estate; Leases...............................................................................60
7.13 Proprietary Rights................................................................................61
7.14 Trade Names and Terms of Sale.....................................................................61
7.15 Litigation........................................................................................61
7.16 Restrictive Agreements............................................................................61
7.17 Labor Disputes....................................................................................61
7.18 Environmental Laws................................................................................61
7.19 No Violation of Law...............................................................................63
7.20 No Default........................................................................................63
7.21 ERISA.............................................................................................63
7.22 Taxes.............................................................................................63
7.23 Investment Act, Etc...............................................................................63
7.24 Public Utility Holding Company....................................................................63
7.25 Margin Securities.................................................................................64
7.26 Broker's Fees.....................................................................................64
7.28 Disclosure........................................................................................64
7.29 Bank Accounts.....................................................................................64
7.30 Year 2000 Compliance..............................................................................64
7.31 Pre-Petition Obligations; Defenses................................................................64
ARTICLE 8
AFFIRMATIVE AND NEGATIVE COVENANTS
8.1 Taxes and Other Obligations........................................................................65
8.2 Corporate Existence and Good Standing..............................................................65
8.3 Compliance with Law and Agreements.................................................................65
8.4 Maintenance of Property............................................................................65
8.5 Insurance..........................................................................................65
8.6 Condemnation.......................................................................................66
8.7 Environmental Laws.................................................................................67
8.8 ERISA..............................................................................................68
8.9 Mergers, Consolidations or Sales...................................................................68
8.10 Distributions; Capital Change; Restricted Investments.............................................69
8.11 Transactions Affecting Collateral or Obligations..................................................69
8.12 Guaranties........................................................................................69
8.13 Debt..............................................................................................69
8.14 Prepayment........................................................................................69
8.15 IRB Debt..........................................................................................69
8.16 Transactions with Affiliates......................................................................70
8.17 Investment Banking and Finder's Fees..............................................................70
8.18 Business Conducted................................................................................70
8.19 Liens.............................................................................................70
8.20 Sale and Leaseback Transactions...................................................................70
8.21 New Subsidiaries..................................................................................70
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
8.22 Capital Expenditures..............................................................................70
8.23 [Intentionally left blank]........................................................................70
8.24 Cash Available for Fixed Charges..................................................................71
8.25 Direct Contribution...............................................................................71
8.26 Fiscal Year.......................................................................................71
8.27 Use of Proceeds of Advances.......................................................................71
8.28 Copies of Pleadings...............................................................................72
8.29 Case Matters......................................................................................72
8.30 Further Assurances................................................................................73
ARTICLE 9
CONDITIONS OF LENDING
9.1 Conditions Precedent to Each Loan..................................................................74
9.2 Conditions Precedent to Making of Initial Loans on or after the Entry Date.........................74
ARTICLE 10
DEFAULT; REMEDIES
10.1 Events of Default.................................................................................75
10.2 Remedies..........................................................................................79
ARTICLE 11
TERM AND TERMINATION
11.1 Term and Termination..............................................................................81
ARTICLE 12
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
12.1 No Implied Waivers................................................................................81
12.2 Amendments and Waivers............................................................................81
12.3 Assignments; Participations.......................................................................82
12.4 Binding Effect; Assignment........................................................................84
ARTICLE 13
THE AGENT
13.1 Appointment.......................................................................................84
13.2 Nature of Duties..................................................................................84
13.3 Rights, Exculpation, Etc..........................................................................85
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
13.4 Reliance..........................................................................................86
13.5 Indemnification of the Agent by the Lenders.......................................................86
13.6 Agent in Individual Capacity......................................................................86
13.7 Successor Agent...................................................................................86
13.8 Collateral Matters................................................................................87
13.9 Restrictions on Actions by Lenders; Sharing of Payments...........................................88
13.10 Agency for Perfection............................................................................88
13.11 Payments by Agent to Lenders.....................................................................89
13.12 Concerning the Collateral and the Related Loan Documents.........................................89
ARTICLE 14
MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to Collateral..............................................89
14.2 Severability......................................................................................90
14.3 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.............................90
14.4 Survival of Representations and Warranties........................................................91
14.5 Other Security and Guaranties.....................................................................91
14.6 Fees and Expenses.................................................................................91
14.7 Notices...........................................................................................92
14.8 Indemnity of the Agent and the Lenders by the Borrowers...........................................94
14.9 Waiver of Notices.................................................................................94
14.10 Final Agreement..................................................................................95
14.11 Counterparts.....................................................................................95
14.12 Captions.........................................................................................95
14.13 Right of Setoff..................................................................................95
14.14 Taxes............................................................................................95
14.15 Joint and Several Liability......................................................................96
14.16 Contribution and Indemnification among the Borrowers.............................................97
14.17 Agency of the Parent for each other Borrower.....................................................97
</TABLE>
v
<PAGE> 7
EXHIBITS AND SCHEDULES
EXHIBIT A - Form of Final Order (Defs.)
EXHIBIT B - Form of Borrowing Base Certificate (Defs.)
EXHIBIT C - Financial Statements (Defs., Section 7.6(a))
EXHIBIT D - Additional Facility Related Items (Defs.)
EXHIBIT E - Form of Notice of Borrowing (Section 2.1(b))
EXHIBIT F - Form of Notice of Conversion/Continuation (Section
3.2(b))
EXHIBIT G - Form of Assignment and Acceptance (Section 12.3(a)
and (d))
SCHEDULE 2.2 - Existing Letters of Credit (Sections 2.2(a))
SCHEDULE 5.3 - Locations of Collateral (Section 5.3)
SCHEDULE 7.2 - Permitted Liens (Defs., Sections 5.4, 7.2)
SCHEDULE 7.4 - Trade Names (Sections 7.4, 7.14)
SCHEDULE 7.5 - Subsidiaries and Affiliates (Sections 7.5, 8.21)
SCHEDULE 7.9 - Debt (Section 7.9)
SCHEDULE 7.12 - Real Property and Leases; Permitted Sales (Defs.,
Sections 7.11, 7.12)
SCHEDULE 7.13 - Proprietary Rights (Defs., Section 7.13)
SCHEDULE 7.15 - Litigation (Section 7.15)
SCHEDULE 7.17 - Labor Contracts and Disputes (Section 7.17)
SCHEDULE 7.18 - Environmental Matters (Sections 7.18, 8.7)
SCHEDULE 7.21 - Employee Benefit Plans (Section 7.21)
SCHEDULE 7.29 - Bank Accounts (Section 7.29)
SCHEDULE 7.31 - Pre-Petition Obligations (Section 7.31)
<PAGE> 8
This LOAN AND SECURITY AGREEMENT (the "Agreement") is dated as
of December 1, 1998 among BANKAMERICA BUSINESS CREDIT, INC., a Delaware
corporation ("BABC"), BNY FINANCIAL CORPORATION, a New York corporation ("BNY")
formerly known as Bank of New York Commercial Corporation, NATIONSBANK, N.A., a
national banking association ("NB") (BABC, BNY and NB and their respective
successors and assigns being sometimes hereinafter referred to collectively as
the "Lenders" and each of BABC, BNY and NB and its successors and assigns being
sometimes hereinafter referred to individually as a "Lender"), BANKAMERICA
BUSINESS CREDIT, INC., a Delaware corporation, as agent for the Lenders (in such
capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a Delaware corporation,
as debtor and debtor-in-possession (the "Parent"), with an office at One
Metropolitan Square, 211 North Broadway, St. Louis, Missouri 63102-2750, and
LACLEDE CHAIN MANUFACTURING COMPANY, a Delaware corporation, as debtor and
debtor-in-possession ("Laclede Chain"), with an office at One Metropolitan
Square, 211 North Broadway, St. Louis, Missouri 63102-2750, and LACLEDE MID
AMERICA INC., an Indiana corporation, as debtor and debtor-in-possession
("Laclede Mid America"), with an office at One Metropolitan Square, 211 North
Broadway, St. Louis, Missouri 63102-2750 (the Parent, Laclede Chain and Laclede
Mid America being sometimes hereinafter referred to collectively as the
"Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America being
sometimes hereinafter referred to individually as a "Borrower"). In
consideration of the mutual conditions and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt of which is
hereby acknowledged, the Lenders, the Agent and the Borrowers hereby agree as
follows:
RECITALS
A. The Borrowers, the Lenders and the Agent are parties to a
certain Loan and Security Agreement dated as of September 7, 1994, and amended
and restated as of August 20, 1997, as amended pursuant to a certain Amendment
No. 1 dated as of December 30, 1997, Amendment No. 2 dated as of March 27, 1998
and Amendment No. 3 dated as of August 11, 1998 (such Loan and Security
Agreement, as so amended, being hereinafter referred to as the "Original
Agreement"), providing for certain loans and other financial accommodations by
the Lenders and the Agent to the Borrowers.
B. On November 30, 1998, each of the Borrowers filed with the
United States Bankruptcy Court for the Eastern District of Missouri, Eastern
Division, a voluntary petition for relief under Chapter 11 of title 11 of the
United States Code, 11 U.S.C. Section 101 et seq., and each of the
Borrowers has continued in possession of its assets pursuant to Sections 1107
and 1108 thereof.
C. In connection with the Borrowers' bankruptcy filings, at
the request of the Borrowers, the Bankruptcy Court entered an enter interim
order on December 2, 1998 (as such order may be modified or supplemented from
time to time with the express written joinder or consent of the Lenders and the
Agent, collectively, the "Interim Order"), authorizing, among other things, the
Borrowers to borrow funds from the Lenders under this Agreement in a maximum
aggregate principal amount as set forth in the Interim Order subject to the
terms and conditions of the Interim Order, this Agreement, the Loan Documents
(as defined herein), and the "Final Order" (as defined below).
<PAGE> 9
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of each Borrower's now owned or hereafter
acquired or arising accounts, and any other rights to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned by
performance.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
"Adequate Protection Payments" means the adequate protection
payments to be made by the Borrowers with respect to the Pre-Petition
Obligations pursuant to the Final Order in an amount not less than $355,000 per
month.
"Additional Facility" means an amount equal to $5,100,000,
such amount to be reduced at the time of sale or disposition of, or other
realization upon, any Additional Facility Related Item, in an amount equal to
the Net Proceeds of such sale, disposition or realization.
"Additional Facility Related Item" means each of the items of
property or other matters identified on Exhibit D.
"Affiliate" means: (a) any Person which, directly or
indirectly, controls, is controlled by or is under common control with, any
Borrower; (b) any Person which beneficially owns or holds, directly or
indirectly, five percent (5.0%) or more of any class of Voting Stock of any
Borrower; or (c) any Person, five percent (5.0%) or more of any class of the
Voting Stock (or if such Person is not a corporation, five percent (5.0%) or
more of the equity interest) of which is beneficially owned or held, directly or
indirectly, by any Borrower. Control (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as used herein, means
the possession, directly or indirectly, of the power in any form to direct or
cause the direction of the management and policies of the Person in question.
"Agent" means BankAmerica Business Credit, Inc., in its
capacity as agent for the Lenders, and shall include any successor Agent
appointed pursuant to Section 13.7.
"Agent Advances" has the meaning specified in Section 2.1(j).
"Agent's Liens" means the Liens granted to the Agent, for the
ratable benefit of the Secured Creditors, pursuant to this Agreement, the
Original Agreement and the other Loan Documents, the Initial Order, the Final
Order or any other order entered by the Bankruptcy Court or any other court in
the Case.
"Agreed Pre-Petition Outstanding Balance" means $37,310,720.
2
<PAGE> 10
"Alton Mortgage" means that certain Mortgage, Security
Agreement, Financing Statement and Assignment of Rents and Leases dated as of
August 20, 1997 and executed by the Parent in favor of the Agent, pursuant to
what the Parent has granted to the Agent, for the ratable benefit of the Secured
Creditors, a mortgage Lien on its Real Estate located in Alton, Illinois and
identified therein.
"Alton Steel Operations" means the operations of the Parent's
Alton Steel division located in Alton, Illinois, which consist primarily of the
melt shop and the 14-inch and 8-inch rolling mills.
"Assigned Contracts" means, collectively, all of each
Borrower's rights and remedies under, and all moneys and claims for money due or
to become due to such Borrower under any material contracts and any and all
amendments, supplements, extensions, and renewals thereof including, without
limitation, all rights and claims of such Borrower now or hereafter existing:
(i) under any insurance, indemnities, warranties, and guarantees provided for or
arising out of or in connection with any of the foregoing agreements; (ii) for
any damages arising out of or for breach or default under or in connection with
any of the foregoing agreements; (iii) to all other amounts from time to time
paid or payable under or in connection with any of the foregoing agreements; or
(iv) to exercise or enforce any and all covenants, remedies, powers and
privileges thereunder.
"Assignment and Acceptance" has the meaning specified in
Section 12.3(a).
"Availability" means, at any time, (a) the Maximum Revolver
Amount minus (b) the sum of (i) the unpaid balance of Post-Petition Revolving
Loans at that time, (ii) the aggregate amount of Pending Revolving Loans at such
time, (iii) the aggregate undrawn amount of all outstanding Letters of Credit,
and (iv) the aggregate amount of any unpaid reimbursement obligations in respect
of the Letters of Credit. In determining pursuant to Section 2.1(a), 2.1(g),
2.1(h) or 2.1(j) whether Revolving Loans to be made on any date would exceed
Availability on such date, such proposed Revolving Loans shall be counted as
either Revolving Loans or Pending Revolving Loans for purposes of calculating
Availability on such date, but shall not be counted as both Revolving Loans and
Pending Revolving Loans.
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.).
"Bankruptcy Court" means the United States Bankruptcy Court
for the Eastern District of Missouri, Eastern Division, or such other court
having original jurisdiction over the Case.
"Bankruptcy Plan" means any plan filed pursuant to Section
1121 of the Bankruptcy Code with respect to any Borrower.
"Base LIBO Rate" means, during any Interest Period, the rate
of interest per annum notified to the Agent by Bank of America as the rate of
interest at which Dollar deposits in the approximate amount of the Loans to be
made or continued as, or converted into, LIBOR Loans by the
3
<PAGE> 11
Lenders and having a maturity comparable to such Interest Period would be
offered to major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the
commencement of such Interest Period.
"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate
set by Bank of America based upon various factors including Bank of
America'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.)
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by Bank of America shall take effect
at the opening of business on the day specified in the public announcement of
such change. Each Interest Rate based upon the Base Rate shall be adjusted
simultaneously with any change in the Base Rate.
"Base Rate Loan" means a Post-Petition Revolving Loan during
any period in which it bears interest at the rate provided in Section 3.1(i).
"Benefit Plan" means a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower or an ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of Revolving Loans
made on the same day by the Lenders (or by BABC in the case of a Borrowing
funded by Settlement Loans) or by the Agent in the case of a Borrowing
consisting of an Agent Advance.
"Borrowing Base Certificate" means a certificate of the chief
financial officers of the Borrowers substantially in the form of Exhibit B (or
another form mutually acceptable to the Agent and the Borrowers) setting forth
calculations of Availability, including a calculation of each component thereof,
(a) with respect to Accounts, as of the close of business on a day no more than
two (2) Business Days prior to the date of such certificate, and (b) with
respect to Inventory, (i) prior to the twentieth (20th) day of any month, as of
the close of business on the last Business Day of the second preceding month,
and (ii) on or after the twentieth (20th) day of any month, as of the close of
business on the last Business Day of the immediately preceding month, all in
such detail as shall be satisfactory to the Agent. All calculations of
Availability in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrowers and certified to the
Agent; provided, that the Agent shall have the right to review and adjust, in
the exercise of its reasonable credit judgment, any such calculation (1) to
reflect its reasonable estimate of declines with respect to the Collateral
described therein, and (2) to the extent that such calculation is not in
accordance with this Agreement.
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in San Francisco, California are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBO Rate or LIBOR Loans,
4
<PAGE> 12
any day that is a Business Day pursuant to clause (a) above and that is also a
day on which trading is carried on by and between banks in the London interbank
market.
"Capital Expenditures" means, for any fiscal period, (a) the
cost of any fixed asset or improvement, or replacement, substitution, or
addition thereto, acquired during such period and having a useful life of more
than one year, including, without limitation, those costs arising in connection
with the direct or indirect acquisition of such assets by way of increased
product or service charges or offset items or in connection with a Capital Lease
plus (b) the amount of any cash expended during such period in consummating any
Quasi Asset Acquisition.
"Capital Lease" means any lease of property by the Parent or
any of its consolidated Subsidiaries which, in accordance with GAAP, is or
should be capitalized on the lessee's balance sheet or for which the amount of
the asset and liability thereunder, as if so capitalized should be disclosed in
a footnote to such balance sheet.
"Carveout" means the "Carveout" of up to $750,000 as defined
in the Interim Order and the Final Order.
"Case" shall mean the bankruptcy case captioned "Laclede Steel
Company, a Delaware corporation, et al.", and related cases with respect to the
Borrowers, bearing case numbers 98-53121-399, 98-53123-399, and 98-53124-399 and
arising upon the filing by each Borrower of a voluntary petition with the
Bankruptcy Court on November 30, 1998.
"Cash Available for Fixed Charges" means, with respect to any
fiscal period of the Parent and its consolidated Subsidiaries, net pre-tax
earnings (or loss) for such period, determined in accordance with GAAP (but
excluding gain or loss arising from extraordinary items), and reported on the
Financial Statements for such fiscal period, plus, to the extent deducted in
computing net earnings, (a) interest expense, including interest on the IRB
Debt, and Adequate Protection Payments, (b) depreciation expense, and (c)
amortization expense, minus, (1) to the extent included in computing net
earnings, gain arising from any other noncash non-recurring transaction and (2)
Capital Expenditures incurred during such period.
"Clean Up Costs" means costs resulting from implementation of
Parent's modified closure plan for disposition of electric arc furnace dust at
its Alton, Illinois plant.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.
"Collateral" means, collectively, the Parent Collateral, the
Laclede Chain Collateral and the Laclede Mid America Collateral.
"Collateral Management Fee" has the meaning specified in
Section 3.7.
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 12.3, as such Commitment
5
<PAGE> 13
may be adjusted from time to time in accordance with the provisions of Section
12.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Committee" means, collectively, the official committee of
unsecured creditors (if any) appointed for any Borrower in the Case.
"Consensual Plan" shall mean a plan of reorganization or
liquidation for any Borrower that has been accepted by the class containing the
Agent and the Lenders and has not been modified pursuant to Section 1127 of the
Bankruptcy Code or otherwise without the necessary votes or consents of the
Agent and the Lenders.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
"Dated Account" means an Account owing to Laclede Chain and
containing terms permitting payment to be made more than thirty (30) days after
the date of the original invoice issued by Laclede Chain with respect to the
sale giving rise thereto but requiring payment within two hundred ten (210) days
after such date.
"Debt" means all liabilities, obligations and indebtedness of
the Parent and its Subsidiaries to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, fixed or
otherwise, and including, without in any way limiting the generality of the
foregoing: (i) the Parent's or any Subsidiary's liabilities and obligations to
trade creditors; (ii) all of the Obligations; (iii) all of each Borrower's
obligations for borrowed money, including, but not limited to, the IRB Debt;
(iv) all obligations and liabilities of any Person secured by any Lien on the
Parent's or any Subsidiary's property, even though the Parent or such Subsidiary
shall not have assumed or become liable for the payment thereof; provided,
however, that all such obligations and liabilities which are limited in recourse
to such property shall be included in Debt only to the extent of the value of
such property as shown on a balance sheet of the Parent and its consolidated
Subsidiaries prepared in accordance with GAAP; (v) all obligations or
liabilities created or arising under any Capital Lease or conditional sale or
other title retention agreement with respect to property used or acquired by the
Parent or any Subsidiary, even if the rights and remedies of the lessor, seller
or lender thereunder are limited to repossession of such property; provided,
however, that all such obligations and liabilities which are limited in recourse
to such property shall be included in Debt only to the extent of the value of
such property as shown on a balance sheet of the Parent and its consolidated
Subsidiaries prepared in accordance with GAAP; (vi) all obligations and
liabilities under Guaranties; and (vii) the Parent's or any Subsidiary's
liabilities and obligations arising as a result of the issuance of letters of
credit.
"Default" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event, or any
combination thereof, would constitute an Event of Default.
"Direct Contribution" means, with respect to any fiscal period
of the Parent, the net income of the Alton Steel Operations for such period.
Such net income for any fiscal period
6
<PAGE> 14
shall be the amount of net sales minus the sum of direct costs, manufacturing
overhead, direct selling expense, direct general and administrative expense and
interest expense on the Obligations, with such interest expense for any fiscal
period being an amount equal to the total interest on the Obligations for such
fiscal period (including interest accrued on the Pre-Petition Obligations)
multiplied by a fraction, the numerator of which is the average monthly amount
of Accounts and Inventory attributable to the Alton Steel Operations for such
period, and the denominator of which is the aggregate average monthly amount of
Accounts and Inventory for all of the Borrowers for such period.
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for such stock) of the same class; or (b) the redemption or other
acquisition of any capital stock (or any options or warrants for such stock) of
such corporation.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
"Eligible Accounts" means at any time, those Accounts which
when scheduled to the Lenders and at all times thereafter, do not violate the
negative covenants and other provisions of this Agreement and do satisfy the
affirmative covenants and other provisions of this Agreement and which the Agent
deems eligible (based on criteria which the Agent establishes), in the exercise
of its reasonable credit judgment, as the basis for Revolving Loans; provided,
however, upon the reasonable request of the applicable Borrower, the Agent will
notify such Borrower of the reason for deeming an Account not to be an Eligible
Account. Without limiting the foregoing, no Account shall be an Eligible Account
if:
(1) Such Account is (a) due or unpaid more than one hundred
twenty (120) days after the date of the original invoice issued by the
applicable Borrower with respect to the sale giving rise thereto, in
the case of an Account owing to the Parent or Laclede Mid America or an
Account owing to Laclede Chain other than a Dated Account, or (b) past
due, in the case of a Dated Account; or
(2) Such Account is owed by an Account Debtor which is
obligated to any Borrower on Accounts more than fifty percent (50.0%)
of the aggregate unpaid balance of which are (a) due or unpaid more
than one hundred twenty (120) days after the date of the original
invoice issued by the applicable Borrower with respect to the sale
giving rise thereto, in the case of an Account owing to the Parent or
Laclede Mid America or an Account owing to Laclede Chain other than a
Dated Account, or (b) past due, in the case of a Dated Account, unless
in either case the Majority Lenders have approved the continued
eligibility thereof; or
(3) Such Account arises out of a sale not made in the ordinary
course of the applicable Borrower's business or out of a sale to a
Person which is an Affiliate of the
7
<PAGE> 15
applicable Borrower or controlled by an Affiliate of the applicable
Borrower, unless the Majority Lenders have approved the eligibility of
Accounts attributable to such sales, provided that no Account with
respect to which Ivaco or any of its affiliates is the Account Debtor
shall be rendered ineligible solely as a result of the terms of this
clause (3), except to the extent that the sum of the unpaid balances of
all such Accounts with respect to which Ivaco or any of its affiliates
is the Account Debtor exceeds $250,000 (but any such Accounts owing
from Ivaco or any of its affiliates may be rendered ineligible as a
result of the terms of the next succeeding clause (4) or as a result of
the application of any other ineligibility criteria provided for
herein); or
(4) Such Account is subject to any right of setoff by the
Account Debtor and such Account Debtor has not entered into an
agreement with the Agent which is acceptable to the Agent with respect
to the waiver of rights of setoff; or such Account Debtor has disputed
liability or made any claim with respect to any other Account due from
such Account Debtor to the applicable Borrower; or
(5) Such Account arises out of a sale to an Account Debtor
which (i) has filed or has had filed against it a petition for
bankruptcy or any other petition for relief under the Bankruptcy Code
or any other bankruptcy or insolvency law, has made an assignment for
the benefit of creditors, has suffered a receiver or trustee to be
appointed with respect to its affairs or with respect to all or any
material portion of its assets, or, in the case of an Account Debtor
which is an individual, has been adjudicated mentally incompetent, to
the extent, in the case of any such event described in this clause (i),
that the relevant proceeding is continuing on the date of the
applicable eligibility determination, (ii) has suspended its business
operations or become insolvent, to the extent that such suspension or
insolvency is continuing on the date of the applicable eligibility
determination, or (iii) in the case of any Account Debtor which is an
individual, is deceased; or
(6) Such Account arises out of a sale to an Account Debtor
having its chief executive office or principal place of business
outside the United States or Canada, unless the sale is on letter of
credit or acceptance terms satisfactory to the Agent; or
(7) Such Account arises out of a sale to a customer on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis; or
(8) The Agent believes in good faith and in the exercise of
its reasonable judgment, that the prospect of collection of such
Account is materially impaired; or
(9) The Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable
Borrower assigns its right to payment of such Account to the Agent in
accordance with the terms of the Assignment of Claims Act of 1940, as
amended (31 U.S.C. Section 3727 et seq.); or
(10) The goods giving rise to such Account have not been
shipped and delivered to and accepted by the Account Debtor or the
services giving rise to such
8
<PAGE> 16
Account have not been performed by the applicable Borrower, and, if
applicable, accepted by the Account Debtor, or the Account Debtor
revokes its acceptance of such goods or services; or
(11) Such Account is owed by an Account Debtor which is
obligated to the applicable Borrower respecting Accounts the aggregate
unpaid balance of which exceeds five percent (5.0%) of the aggregate
unpaid balance of all Accounts owed to the Borrowers at such time by
all of the Borrowers' Account Debtors, to the extent that the Majority
Lenders have not approved the eligibility of such Accounts; or
(12) Such Account is an Account with respect to which the
Account Debtor is located in any state requiring the filing of a Notice
of Business Activities Report or similar report in order to permit the
applicable Borrower to seek judicial enforcement in such state of
payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities
Report or similar report for the then current year; or
(13) Such Account is evidenced by chattel paper or
instruments; or
(14) Such Account arises out of a contract or order which, by
its terms, forbids, restricts or makes void or unenforceable the
granting of a Lien by the applicable Borrower to the Agent with respect
to such Account; or
(15) With respect to such Account, a check or other instrument
for the payment of money, tendered in full or partial satisfaction of
such Account, has been presented for payment and returned uncollected
more than two (2) times for any reason; or
(16) With respect to a Dated Account, the applicable Borrower
has extended the time for payment of such Account without the consent
of the Agent; or
(17) The perfection, enforceability or validity of the Agent's
Lien on such Account, or, except as set forth in clause (9) above, the
Agent's or the Lenders' ability to obtain direct payment of the
proceeds of such Account, is governed by any federal, state or local
statutory requirements other than those of the UCC; or
(18) The Account Debtor is any state, municipality or other
political subdivision of the United States of America or any
department, agency, public corporation or other instrumentality thereof
and as to which the Agent determines that its Lien therein is not or
cannot be perfected; or
(19) Such Account is not subject to a first priority and
perfected security interest in favor of the Agent; or
(20) Such Account is owed by an Account Debtor which is an
employee of the applicable Borrower; or
9
<PAGE> 17
(21) Any representation or warranty contained in this
Agreement with respect to such Account is at any time determined to
have been false or misleading in any material respect when made or
deemed to have been made.
If any Account at any time ceases to be an Eligible Account by
reason of any of the foregoing exclusions or any failure to meet any other
eligibility criteria established by the Agent in the exercise of its reasonable
credit judgment upon notice to the applicable Borrower, such Account shall
promptly be excluded from the calculation of Eligible Accounts.
"Eligible Inventory" means Inventory, valued at the lower of
cost or market value, with cost determined under the weighted moving average
cost method, which the Agent deems eligible (based on criteria which the Agent
establishes), in the exercise of its reasonable credit judgment, as the basis
for Revolving Loans; provided, however, upon the reasonable request of the
applicable Borrower, the Agent will notify such Borrower of the reason for
deeming Inventory not to be Eligible Inventory. Without limiting the foregoing,
no Inventory shall be Eligible Inventory if: (a) it is obsolete or
unmerchantable; (b) it is located outside the United States; (c) it is located
at premises not owned by the applicable Borrower, unless the owner of such
premises, and any mortgagee with respect thereto, shall have executed and
delivered to the Agent such agreements, instruments and documents as the Agent,
in the exercise of its reasonable discretion, shall request in connection with
the maintenance by such Borrower of Inventory on such premises; (d) it is not
subject to a first priority and perfected security interest in favor of the
Agent; (e) it is material handling, packaging or shipping materials; (f) it is
bill-and-hold or defective Inventory or Inventory delivered to the applicable
Borrower on consignment; or (g) it is Inventory which in any way fails to meet
or violates any applicable representation, warranty or covenant contained in
this Agreement relating directly or indirectly to such Inventory.
If any Inventory at any time ceases to be Eligible Inventory
by reason of any of the foregoing exclusions or any failure to meet any other
eligibility criteria established by the Agent in the exercise of its reasonable
credit judgment upon notice to the applicable Borrower, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.
"Entry Date" means the date on which the Interim Order is
entered by the Bankruptcy Court.
"Environmental Laws" means all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidance, orders and consent
decrees or other binding determination of any Public Authority relating to
occupational health and safety, the handling, use, storage, discharge or
disposal of Contaminants and other environmental matters applicable to any
Borrower and/or its business and facilities (whether or not owned by such
Borrower). Such laws and regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended; the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as amended; the Clean Water Act, 42 U.S.C. Section 466 et
seq., as amended; the Clean Air Act, 46 U.S.C. Section 7401 et seq., as amended;
state and federal lien and environmental cleanup programs; the Occupational
Safety and Health Act, 29 U.S.C. Section 651 et seq.; and U.S. Department of
Transportation regulations, each as from time to time hereafter in effect.
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<PAGE> 18
"Environmental Lien" means a Lien in favor of any Public
Authority for (1) any liability under any Environmental Laws, or (2) damages
arising from, or costs incurred by such Public Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of each Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), other than motor vehicles
with respect to which a certificate of title has been issued, including, without
limitation, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by such Borrower and all of such Borrower's rights
and interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future additions
and accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means (i) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as any Borrower; (ii) a partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with any Borrower; or (iii) a member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
any Borrower, any corporation described in clause (i) above or any partnership,
trade or business described in clause (ii) above.
"Estates" means, collectively, the bankruptcy estates of the
Borrowers in the Case created pursuant to Section 541 of the Bankruptcy Code.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Event of Default" has the meaning specified in Section 10.1.
"Facility Fee" has the meaning specified in Section 3.6.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Funds Rate" means, 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
11
<PAGE> 19
the Federal Reserve Bank of New York, or, 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 Agent from three (3) federal funds brokers
of recognized standing selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Final Order" means the final order of the Bankruptcy Court
entered on or before December 29, 1998 approving the Loans made and to be made
to the Borrowers by the Lenders on and after the Entry Date in accordance with
this Agreement (which order shall be substantially in the form of the Final
Order attached hereto as Exhibit A) as the same may be modified or supplemented
from time to time with the express written joinder or consent of the Lenders and
the Agent.
"Final Order Date" means the date of the entry of the Final
Order.
"Financial Statements" means, according to the context in
which it is used, the financial statements attached hereto as Exhibit C, or any
financial statements required to be given to the Lenders pursuant to Sections
6.2(a) or (b), or any combination thereof.
"Fiscal Year" means the fiscal years of the Parent and its
Subsidiaries for financial accounting purposes, which fiscal years are based
upon a calendar year.
"Fixed Assets" means Equipment and Real Estate of any
Borrower.
"Fremont Mortgage" means that certain Mortgage, Security
Agreement, Financing Statement and Assignment of Rents and Leases dated as
August 20, 1997 and executed by Laclede Mid America in favor of the Agent,
pursuant to which Laclede Mid America has granted to the Agent, for the ratable
benefit of the Secured Creditors a mortgage Lien on its Real Estate located in
Fremont, Indiana and identified therein.
"Funding Date" means the date any Revolving Loans (including
Settlement Loans and Agent Advances) are to be made hereunder.
"Funding Fee" has the meaning specified in Section 3.5.
"GAAP" means at any particular time with respect to the Parent
and its Subsidiaries, generally accepted accounting principles as in effect at
such time, consistently applied.
"General Intangibles" means all of each Borrower's now owned
or hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of such Borrower of every kind and
nature (other than Accounts), including, without limitation, all contract
rights, Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent applications,
trademarks, service marks, trade names, trade secrets, goodwill, copyrights,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, any funds which may become due to such Borrower in connection
with the termination
12
<PAGE> 20
of any Plan or other employee benefit plan or any rights thereto and any other
amounts payable to such Borrower from any Plan or other employee benefit plan,
rights and claims against carriers and shippers, rights to indemnification,
business interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof, proceeds of insurance
covering the lives of key employees on which such Borrower is beneficiary, and
any letter of credit, guarantee, claim, security interest or other security held
by or granted to such Borrower to secure payment by an account debtor of any of
the Accounts.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity Securities
or other property or services.
"IDR Bonds" means those certain Industrial Development Revenue
Bonds (Laclede Steel Company Project) Series 1976 issued pursuant to a certain
Indenture of Trust dated as of October 1, 1976, between the City of Alton,
Illinois, and St. Louis Union Trust Company, as Trustee.
"Intercompany Notes" means, collectively, the Laclede Chain
Intercompany Note and the Laclede Mid America Intercompany Note.
"Interest Period" means, with respect to each LIBO Rate Loan,
the interest period applicable to such LIBO Rate Loan as determined pursuant to
Section 3.3(b).
"Interest Rate" means each or any of the interest rates set
forth in Section 3.1.
"Interim Order" has the meaning specified in the Recitals.
"Interim Period" means the period commencing on the Entry Date
and terminating upon the earlier of (a) December 29, 1998 or (b) the Final Order
Date.
"Inventory" means all of each Borrower's now owned and
hereafter acquired inventory, goods, merchandise, repair parts, and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all returned goods, raw materials, other
materials and supplies of any kind, nature or description which are or might be
consumed in such Borrower's business or used in connection with the packing,
shipping, advertising, selling or finishing of such goods, merchandise and such
other personal property, and all documents of title or other documents
representing them.
"Inventory Sublimit Amount" means the amount set forth below
for the period indicated:
13
<PAGE> 21
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
December 1998 $44,000,000
January 1999 43,500,000
February 1999 43,000,000
March 1999 42,500,000
April 1999 42,000,000
May 1999 41,500,000
June 1999 41,000,000
July 1999 40,500,000
August 1999 40,000,000
September 1999 39,500,000
October 1999 39,000,000
November 1999 38,500,000
</TABLE>
"IRB Debt" means Debt of the Parent evidenced by the Solid
Waste Disposal Bonds, the Pollution Control Bonds and the IDR Bonds, or any of
them.
"IRB Debt Payment" means any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any of
the IRB Debt, or any payment of a claim, for the rescission of the purchase or
sale of, or for material damage arising from the purchase or sale of, any of the
IRB Debt or a claim for reimbursement, indemnification or contribution arising
out of or related to any such claim for damages or rescission.
"IRS" means the Internal Revenue Service or any successor
agency.
"Ivaco" means Ivaco Inc., a corporation organized and existing
under the federal laws of Canada.
"Laclede Chain" has the meaning specified in the introductory
paragraph hereof.
"Laclede Chain Collateral" has the meaning specified in
Section 5.1(b).
"Laclede Chain Intercompany Note" means that certain
promissory note dated September 7, 1994 in the maximum principal amount of
$15,000,000, executed by Laclede Chain, payable to the Parent and pledged and
endorsed to the Agent, in a manner satisfactory to the Agent, evidencing amounts
outstanding from time to time as a result of certain loans and other advances
made by the Parent to Laclede Chain.
"Laclede Mid America" has the meaning specified in the
introductory paragraph hereof.
"Laclede Mid America Collateral" has the meaning specified in
Section 5.1(c).
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<PAGE> 22
"Laclede Mid America Intercompany Note" means that certain
promissory note dated September 7, 1994 in the maximum principal amount of
$10,000,000, executed by Laclede Mid America, payable to the Parent and pledged
and endorsed to the Agent, in a manner satisfactory to the Agent, evidencing
amounts outstanding from time to time as a result of certain loans and other
advances made by the Parent to Laclede Chain.
"Latest Projections" means: (a) on the Entry Date and
thereafter until the Lenders receive new projections pursuant to Section 6.2(e),
the projections of the Parent's and its consolidated Subsidiaries' combined
financial condition, results of operations, and cash flow, for the period
commencing on October 31, 1998 and ending on December 31, 1999 and delivered to
the Lenders prior to the Entry Date; and (b) thereafter, the projections most
recently received by the Lenders pursuant to Section 6.2(e).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof.
"Letter of Credit" has the meaning specified in Section
2.2(a).
"Letter of Credit Fee" has the meaning specified in Section
3.8.
"LIBO Rate" means, for any Interest Period with respect to
LIBOR Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/16th of 1.0%) determined by the Agent as
follows:
LIBO Rate = Base LIBO Rate
-----------------------------
1.00 - LIBOR Reserve Percentage
"LIBOR Interest Rate Determination Date" means each date of
calculating the LIBO Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Loan shall be the second Business Day prior to the first day of the
related Interest Period for such LIBOR Loan.
"LIBOR Loan" means a Post-Petition Revolving Loan during any
period in which it bears interest at the rate provided in Section 3.1(ii).
"LIBOR Reserve Percentage" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1.0%) in effect on such day (whether or not applicable to
any Lender) under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
Liabilities having a term comparable to such Interest Period.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
15
<PAGE> 23
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Loan Documents" means this Agreement, the Original Agreement,
the Term Loan Notes, the Patent and Trademark Agreements, the Mortgages and any
other agreements, instruments, and documents heretofore, now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the Obligations, the
Collateral, or any other aspect of the transactions contemplated by this
Agreement or the Original Agreement.
"Loans" means, collectively, all loans and advances provided
for in Article 2.
"Majority Lenders" means Lenders whose Pro Rata Shares
aggregate at least seventy-five percent (75.0%).
"Maximum Revolver Amount" means, at any time,
(a) the lesser of
(i) the Revolver Facility minus the amount of
Pre-Petition Obligations outstanding at such time; or
(ii) (A) eighty-five percent (85.0%) of the Net
Amount of the Eligible Accounts; plus (B) the lesser
of (1) sixty-five percent (65.0%) of the value of
Eligible Inventory; and (2) the Inventory Sublimit
Amount; provided, that in computing the amount of
Eligible Inventory, the amount of Inventory
consisting of supplies included in Eligible Inventory
shall be limited to $12,769,000; plus (C) the amount
of the Additional Facility at such time; minus (D)
the amount of Pre-Petition Revolving Loans
outstanding at such time;
minus
(b) the sum of
(i) reserves for accrued interest on the
Post-Petition Obligations;
(ii) the maximum amount of the Carveout; and
(iii) all other reserves which the Agent deems
necessary in the exercise of reasonable credit judgment to
maintain with respect to any Borrower's account, and which are
reasonably related to the preservation or protection of the
value of the Collateral or the business value of such
Borrower, including, without limitation, any reserves for any
amounts which the Agent or any Lender may be obligated to pay
in the future for the account of such Borrower.
"Mortgages" means the Alton Mortgage, the Vandalia Mortgage,
the Fremont Mortgage, and the Parent Fremont Mortgage.
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<PAGE> 24
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the
gross amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
"Net Proceeds" means, with respect to any sale or disposition
of Fixed Assets or any Additional Facility Related Items, the face amount of the
sale or disposition price, whether paid in cash or otherwise, minus the
applicable Borrower's reasonable expenses of sale or disposition and any sales
or other conveyance taxes incurred by any Borrower in connection therewith.
"Notice of Borrowing" has the meaning specified in Section
2.1(b).
"Notice of Conversion/Continuation" has the meaning specified
in Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by each Borrower to
the Agent and/or any Lender, arising under or pursuant to this Agreement, the
Original Agreement or any of the other Loan Documents, whether or not evidenced
by any note, or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Agent and/or any Lender in such Borrower's debts owing to others), absolute
or contingent, due or to become due, primary or secondary, as principal or
guarantor, and including, without limitation, all principal, interest, charges,
expenses, fees, attorneys' fees, filing fees and any other sums chargeable to
such Borrower hereunder or under any of the other Loan Documents. "Obligations"
includes, without limitation, all debts, liabilities, and obligations now or
hereafter owing from each Borrower to the Agent and/or any Lender under or in
connection with the Letters of Credit.
"OCC" means the Office of the Comptroller of the Currency.
"Parent" has the meaning specified in the introductory
paragraph hereof.
"Parent Collateral" has the meaning specified in Section
5.1(a).
"Parent Fremont Mortgage" means that certain Mortgage,
Security Agreement, Financing Statement and Assignment of Rents and Leases dated
as of August 20, 1997 and executed by Parent in favor of the Agent, pursuant to
which the Parent has granted to the Agent, for the ratable benefit of the
Secured Creditors a Lien on its Real Estate located in Fremont, Indiana and
identified therein.
"Participating Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement pursuant to Section 12.3(e), and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
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<PAGE> 25
"Patent and Trademark Agreements" means the Patent Security
Agreement and the Trademark Security Agreement, each dated as of September 7,
1994, executed and delivered by the Borrowers to the Agent pursuant to Section
5.2 to evidence and perfect the Agent's security interest in each Borrower's
present and future patents, trademarks, and related licenses and rights, for the
benefit of the Secured Creditors, and with respect to (1) the Parent, the
additional Patent Security Agreement and Trademark Security Agreement, each
dated as of the August 20, 1997, executed and delivered by the Parent to the
Agent, and (2) Laclede Chain, the additional Trademark Security Agreement and
the Notice of Amendment to Patent Security Agreement, each dated as of August
20, 1997, executed and delivered by Laclede Chain to the Agent.
"Payment Account" means each blocked bank account established
pursuant to Section 5.9, to which the funds of any Borrower (including, without
limitation, proceeds of Accounts and other Collateral) are deposited or
credited, and which is maintained in the name of the Agent or such Borrower, as
the Agent may determine, on terms acceptable to the Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.
"Permitted Liens" means:
(a) Liens for taxes not yet payable or statutory Liens for
taxes in an amount not to exceed $100,000, provided that the payment of such
taxes which are due and payable is being contested in good faith and by proper
proceedings diligently pursued, and that reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor
and that a stay of enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) Pre-Petition Permitted Liens upon Equipment granted in
connection with the acquisition of such Equipment by the applicable Borrower
(including, without limitation, pursuant to Capital Leases), provided that (i)
the cost of each such acquisition constituted a Capital Expenditure permitted by
Section 8.22 of the Original Agreement, (ii) the Debt incurred to finance each
such acquisition was permitted by Section 8.13 of the Original Agreement, and
(iii) each such Lien attaches only to the Equipment acquired with the Debt
secured thereby;
(d) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
18
<PAGE> 26
(e) Liens which arise by operation of law under Article 2 of
the Uniform Commercial Code in favor of unpaid sellers of goods or prepaying
buyers of goods, or liens in items of any accompanying documents or proceeds of
either arising by operation of law under Article 4 of the Uniform Commercial
Code in favor of a collecting bank;
(f) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons, provided
that the payment thereof is not at the time required by Section 8.1;
(g) Reservations, exceptions, encroachments, easements, rights
of way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of the Parent's or any
Subsidiary's business;
(h) Liens in existence on the Petition Date and reflected on
Schedule 7.2;
(i) Judgment and other similar Liens arising in connection
with court proceedings, provided that (A) the existence of such Liens is being
contested in good faith and by proper proceedings diligently pursued, (B)
reserves or other appropriate provision, if any, as are required by GAAP have
been made therefor, (C) a stay of enforcement of any such Liens is in effect,
(D) the priority of any such Liens is subordinate to that of the Agent's Liens,
and (E) the existence of any judgment or court proceedings upon which such Liens
are based does not otherwise constitute an Event of Default under this
Agreement; and
(j) Liens granted to the trustee for the holders of the Solid
Waste Disposal Bonds in the capital stock and Fixed Assets of Laclede Chain.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, Public Authority, or any other entity.
"Petition Date" means November 30, 1998.
"Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which any Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pollution Control Bonds" means those certain Pollution
Control Revenue Bonds (Laclede Steel Company Project) Series 1976 issued
pursuant to a certain Indenture of Trust dated as of October 1, 1976, between
the City of Alton, Illinois, and St. Louis Union Trust Company, as Trustee.
"Post-Petition Collateral" means all Collateral acquired,
created or generated by any Borrower after the Petition Date which does not
constitute Pre-Petition Collateral.
"Post-Petition Obligations" means those Obligations of the
Borrowers which have arisen or arise on or after the Petition Date.
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<PAGE> 27
"Post-Petition Revolving Loans" means Revolving Loans made
pursuant to this Agreement.
"Pre-Petition Collateral" mean all Collateral which exists as
of the Petition Date, and all accessions, substitutions, replacements, products
and proceeds thereof.
"Pre-Petition Obligations" means those Obligations of the
Borrowers which arose prior to the Petition Date.
"Pre-Petition Permitted Liens" means Liens which were
Permitted Liens under the Original Agreement (other than those in favor of the
Agent) which existed pursuant to applicable law and were perfected, valid,
enforceable and non-avoidable as of the Petition Date.
"Pre-Petition Revolving Loans" means Revolving Loans made
pursuant to the Original Agreement.
"Premises" means the land identified by addresses on Schedule
7.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditament, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which any Borrower
has any interests on the Petition Date.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments.
"Proprietary Rights" means all of each Borrower's now owned
and hereafter arising or acquired: licenses, franchises, permits, patents,
patent rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including, without limitation, those patents, trademarks, service
marks and copyrights set forth on Schedule 7.13 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present and future infringement of any of the foregoing.
"Public Authority" means the government of any country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or any department, agency, public corporation or other
instrumentality of any of the foregoing.
"Quasi Asset Acquisition" means any acquisition by any
Borrower of the Securities of any Person, which Securities are being acquired in
lieu of the assets of such Person.
"Real Estate" means all of the present and future interests of
any Borrower, as owner, lessee, or otherwise, in the Premises, including,
without limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.
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<PAGE> 28
"Redeemable Preferred Stock" means the Parent's six percent
(6.0%) redeemable preferred capital stock, no par value per share, 416,667
shares of which were issued on August 1, 1996, and which was recapitalized on
October 28, 1996.
"Register" has the meaning specified in Section 12.3(c).
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Reportable Event" means any of the events described in
Section 4043 of ERISA.
"Restricted Investment" means any acquisition of property by
the Parent or any of its Subsidiaries in exchange for cash or other property,
whether in the form of an acquisition of stock, debt Security, or other
indebtedness or obligation, or the purchase or acquisition of any other
property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) Fixed Assets to be used in the business of
the Parent or such Subsidiary, so long as the acquisition costs thereof
constitute Capital Expenditures permitted hereunder; (b) goods held for sale or
lease or to be used in the provision of services by the Parent or such
Subsidiary in the ordinary course of business; (c) current assets arising from
the sale or lease of goods or the rendition of services in the ordinary course
of business of the Parent or such Subsidiary; (d) direct obligations of the
United States of America, or any agency thereof, or obligations guaranteed by
the United States of America, provided that such obligations mature within one
year from the date of acquisition thereof; (e) certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States or
any state thereof having capital and surplus aggregating at least $100,000,000;
(f) commercial paper given a rating of "A2" or better by Standard & Poor's
Rating Services or "P2" or better by Moody's Investors Service, Inc. and
maturing not more than 90 days from the date of creation thereof; (g) money
market preferred capital stock given a rating of "A" or better by Standard &
Poor's Rating Services or Moody's Investors Service, Inc.; and (h) tax exempt
floating rate option tender bonds backed by a letter of credit issued by a bank
given a rating of "AA" or better by Standard & Poor's Rating Services or "Aa" or
better by Moody's Investors Service, Inc. and having a maturity of one year or
less.
"Revolver Facility" means (a) $85,000,000, or (b) the
agreement by the Lenders and the Agent to provide Post-Petition Revolving Loans
and Letters of Credit up to such amount subject to the terms of this Agreement,
as the context may require.
"Revolving Loans" means revolving loans made by Lenders, or by
the Agent or BABC on behalf of the Lenders, pursuant to this Agreement or the
Original Agreement.
"Secured Creditors" means the Agent and the Lenders.
"Security" has the meaning specified in Section 2(1) of the
Securities Act of 1933, as amended.
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"Settlement Loan" and "Settlement Loans" have the meanings
specified in Section 2.1(h).
"Solid Waste Bond Loan Agreement" means that certain Loan
Agreement dated as of September 1, 1990 between Southwestern Illinois
Development Authority and the Parent, together with all amendments thereto.
"Solid Waste Disposal Bonds" means those certain Solid Waste
Disposal Revenue Bonds (Laclede Steel Company Project) Series 1990 issued
pursuant to a certain Indenture of Trust dated as of September 1, 1990, between
Southwestern Illinois Development Authority and Boatmen's Trust Company, as
Trustee.
"Solvent" means when used with respect to any Person that (a)
the fair value of all its assets is in excess of the total amount of its debts
(including contingent liabilities); (b) it is able to pay its debts as they
mature; (c) it does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage; and (d) it is not "insolvent" as such term is defined in Section 101(32)
of the Bankruptcy Code.
"Stated Termination Date" means December 31, 1999.
"Subsidiary" means any corporation of which more than fifty
percent (50.0%) of the outstanding Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions), is at the time, directly or indirectly through one or more
intermediaries, owned by the applicable Borrower and/or one or more of its
Subsidiaries.
"Supporting Letter of Credit" has the meaning specified in
Section 2.2(j).
"Term Loans" means the Term Loans made pursuant to, and as
defined in, the Original Agreement.
"Term Loan Notes" the Term Loan Notes issued pursuant to, and
as defined in, the Original Agreement.
"Termination Date" means the earliest to occur of (i) the
Stated Termination Date, (ii) December 31, 1998, if the Final Order shall not
have been entered on or before such date, (iii) the effective date of a plan of
reorganization in the Case, provided that such plan has been confirmed by an
order of the Bankruptcy Court on or before such date, (iv) the date the Revolver
Facility is terminated either by the Majority Lenders pursuant to Section 10.2,
and (v) the date this Agreement is otherwise terminated for any reason
whatsoever.
"Termination Event" means: (1) a Reportable Event with respect
to any Benefit Plan ; (2) the withdrawal of any Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which such Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (3) the imposition of an obligation on any Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written notice
of intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (4) the institution by the PBGC
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of proceedings to terminate a Benefit Plan; (5) any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Benefit Plan; (6) the partial or
complete withdrawal of any Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (7) the cessation of operations which results in the termination of
employment of twenty percent (20.0%) of Benefit Plan participants who are
employees of any Borrower and its ERISA Affiliates.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of Illinois or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"Unused Letter of Credit Subfacility" means an amount equal to
$10,000,000 minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) the aggregate unpaid reimbursement obligations with
respect to all Letters of Credit.
"Vandalia Mortgage" means that certain Mortgage, Security
Agreement, Financing Statement and Assignment of Rents and Leases dated as of
September 7, 1994 and executed by the Parent in favor of the Agent, pursuant to
which the Parent has granted to the Agent, for the ratable benefit of the
Secured Creditors, a mortgage Lien on its Real Estate located in Vandalia,
Illinois and identified therein, as modified by (i) that certain Mortgage
Modification Agreement dated as of February 15, 1995, and (ii) that certain
Second Mortgage Modification Agreement dated as of August 20, 1997.
"Voting Stock" means Securities of any class or classes of a
corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
1.2 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. Any
references herein to exhibits, schedules, sections or articles are references to
exhibits, schedules, sections or articles of this Agreement, unless otherwise
specified. Wherever appropriate in the context, terms used herein in the
singular also include the plural, and vice versa, and each masculine, feminine,
or neuter pronoun shall also include the other genders.
1.4 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding". Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Agreement to months and years shall be to
calendar months and calendar years unless otherwise specified.
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ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Revolving Loans. (a) Amounts. Subject to the satisfaction
of the conditions precedent set forth in Article 9, each Lender severally
agrees, upon the Parent's request from time to time, to make Post-Petition
Revolving Loans to the Borrowers, in amounts not to exceed (except with respect
to Settlement Loans or Agent Advances) such Lender's Pro Rata Share of
Availability at such time. The Lenders, however, in their discretion, may elect
to make Revolving Loans or participate (as provided for in Section 2.2(f)) in
the credit support or enhancement provided through the Agent to the issuers of
Letters of Credit in excess of Availability on one or more occasions, but if
they do so, neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Maximum Revolver Amount or to be obligated to exceed
such limits on any other occasion. If the sum of outstanding Post-Petition
Revolving Loans, the aggregate amount of Pending Revolving Loans, the undrawn
amount of outstanding Letters of Credit and any unpaid reimbursement obligations
in respect of Letters of Credit exceeds the Maximum Revolver Amount, the
Lenders, or any of them, may refuse to make or otherwise restrict the making of
Revolving Loans on such terms as the Lenders, or such Lender, may determine
until such excess has been eliminated.
(b) Notice of Borrowing. Whenever the Borrowers desire to
borrow Revolving Loans under this Section 2.1, the Parent shall deliver to the
Agent a written request substantially in the form of Exhibit E hereto (a "Notice
of Borrowing") signed by an authorized officer of the Parent, no later than (i)
11:00 a.m. (San Francisco, California time) on the requested Funding Date, in
the case of requests for Base Rate Loans, or (ii) 11:00 a.m. (San Francisco,
California time) four (4) Business Days in advance of the requested Funding
Date, in the case of requests for LIBOR Loans. The Notice of Borrowing shall,
with respect to any Revolving Loans requested, specify (i) the requested Funding
Date (which shall be a Business Day), (ii) the aggregate amount of the requested
Revolving Loans, (iii) whether the Revolving Loans requested are to be Base Rate
Loans or LIBOR Loans, and (iv) if the requested Revolving Loans are to be LIBOR
Loans, the requested Interest Period. With respect to any request for Base Rate
Loans, in lieu of delivering the above-described Notice of Borrowing the Parent
may give the Agent telephonic notice of such request by the required time;
provided, however, that such telephonic notice shall be confirmed in writing by
delivery to the Agent (A) immediately of a telecopy of a Notice of Borrowing
which has been signed by an authorized officer of the Parent, and (B) promptly
of a Notice of Borrowing containing the original signature of an authorized
officer of the Parent mailed to the Agent via United States mail on the date
such notice is given. In the event that the terms of any confirmatory Notice of
Borrowing referred to in the proviso contained in the immediately preceding
sentence shall conflict with the telephonic notice with respect to which it was
delivered, the terms of such telephonic notice shall govern. Notwithstanding
anything in this Section 2.1(b) to the contrary, any Revolving Loans to be made
on the Entry Date shall initially be Base Rate Loans.
(c) Reliance upon Authority. On or prior to the Entry Date and
thereafter prior to any change with respect to any of the information contained
in the following clauses (i) and (ii), the Parent shall deliver to the Agent a
writing setting forth (i) the account of each Borrower to which the Agent is
authorized to transfer the proceeds of the Revolving Loans requested pursuant to
this Section 2.1, and (ii) the names of the officers authorized to request
Revolving Loans on behalf of the Parent, and shall provide the Agent with a
specimen signature of each such officer. The Agent shall be entitled to rely
conclusively on such officer's authority to request Revolving Loans on behalf of
the Borrowers, the
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proceeds of which are to be transferred to any of the accounts specified by the
Parent pursuant to the immediately preceding sentence, until the Agent receives
written notice to the contrary. The Agent shall have no duty to verify the
identity of any individual representing himself as one of the officers
authorized by the Parent to make such requests on its behalf.
(d) No Liability. The Agent shall not incur any liability to
any Borrower as a result of acting upon any notice referred to in Sections
2.1(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by the Parent to request Revolving Loans on behalf
of the Borrowers or for otherwise acting in good faith under this Section 2.1,
and the crediting of Revolving Loans to the Borrowers' deposit account, or
transmittal to such Person as the Parent shall direct, shall conclusively
establish the obligation of the applicable Borrower to repay such Revolving
Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 2.1(b) shall be irrevocable and
the Borrowers shall be bound to borrow the funds requested therein in accordance
therewith.
(f) Agent's Election. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.1(b), the Agent shall elect, in its discretion,
(i) to have the terms of Section 2.1(g) apply to such requested Borrowing, or
(ii) to request BABC to make a Settlement Loan pursuant to the terms of Section
2.1(h) in the amount of the requested Borrowing; provided, however, that if BABC
declines in its sole discretion to make a Settlement Loan pursuant to Section
2.1(h), the Agent shall elect to have the terms of Section 2.1(g) apply to such
requested Borrowing.
(g) Making of Revolving Loans. (i) In the event that the Agent
shall elect to have the terms of Section 2.1(g) apply to a requested Borrowing
as described in Section 2.1(f), then promptly after receipt of a Notice of
Borrowing pursuant to Section 2.1(b), the Agent shall notify the Lenders, not
later than noon (San Francisco, California time) on the Funding Date applicable
thereto, by telecopy, telephone or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata
Share of the requested Borrowing available to the Agent in same day funds, to
such account of the Agent as the Agent may designate, not later than 1:00 p.m.
(San Francisco, California time) on the Funding Date applicable thereto. After
the Agent's receipt of the proceeds of such Revolving Loans, upon satisfaction
of the applicable conditions precedent set forth in Article 9, the Agent shall
make the proceeds of such Revolving Loans available to the Borrowers on the
applicable Funding Date by transferring same day funds equal to the proceeds of
such Revolving Loans received by the Agent to the account of the Borrowers,
designated in writing by the Parent; provided, however, that the amount of
Revolving Loans so made on any date shall in no event exceed Availability on
such date.
(ii) On any Funding Date in respect of a Borrowing, the Agent
shall be entitled to assume that each Lender has made the amount of such
Lender's Revolving Loan available to the Agent on such Funding Date, unless such
Lender shall have notified the Agent to the contrary. The Agent, in its sole
discretion, based upon such assumption, may make available to the Borrowers a
corresponding amount on such Funding Date. If such corresponding amount had not
in fact been made available to the Agent by any Lender, such Lender and the
Borrowers jointly and severally agree to repay to the Agent forthwith, on
demand, such corresponding amount, together with interest thereon for each day
during the period commencing on the date such amount is made available to the
Borrowers and ending
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on the date such amount is repaid to the Agent, at (1) in the case of the
Borrowers, the Interest Rate applicable from time to time to such Borrowing, and
(2) in the case of a Lender, the Federal Funds Rate. If such Lender repays to
the Agent such corresponding amount, such amount so repaid shall constitute a
Revolving Loan, and if both such Lender and the Borrowers shall have repaid such
corresponding amount, the Agent shall promptly return to the Borrowers such
corresponding amount in same day funds. Nothing in this Section 2.1(g)(ii) shall
be deemed to relieve any Lender of its obligation, if any, hereunder to make a
Revolving Loan on any Funding Date.
(h) Making of Settlement Loans. In the event the Agent shall
elect, with the consent of BABC, to have the terms of this Section 2.1(h) apply
to a requested Borrowing as described in Section 2.1(f), BABC shall make a
Revolving Loan in the amount of such Borrowing (any such Revolving Loan made
solely by BABC pursuant to this Section 2.1(h) being referred to as a
"Settlement Loan" and such Revolving Loans being referred to collectively as
"Settlement Loans") available to the Borrowers on the Funding Date applicable
thereto by transferring same day funds to an account of the Borrowers,
designated in writing by the Parent; provided, that at no time shall the sum of
the principal amounts of all outstanding Settlement Loans exceed $5,000,000.
Each Settlement Loan is a Revolving Loan hereunder and shall be subject to all
the terms and conditions applicable to other Revolving Loans except that all
payments thereon shall be payable to BABC solely for its own account (and for
the account of the holder of any participation interest with respect to such
Revolving Loan created pursuant to subsection (ii) of Section 2.1(k)). The Agent
shall not request BABC to make any Settlement Loan if (i) the Agent shall have
received written notice from any Lender, or otherwise has actual knowledge, that
one or more of the applicable conditions precedent set forth in Article 9 will
not be satisfied on the requested Funding Date for the applicable Borrowing, or
(ii) the requested Borrowing would exceed Availability on such Funding Date.
BABC shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Article 9 have been satisfied or the requested
Borrowing would exceed Availability on the Funding Date applicable thereto prior
to making, in its sole discretion, any Settlement Loan.
(i) [Intentionally left blank]
(j) Agent Advances. (i) Subject to the limitations set forth
in the provisos contained in this Section 2.1(j)(i), the Agent is hereby
authorized by the Borrowers and the Lenders, from time to time in the Agent's
discretion, (1) after the occurrence of a Default or an Event of Default, or (2)
at any time that any of the other applicable conditions precedent set forth in
Article 9 have not been satisfied, to make Revolving Loans to the Borrowers on
behalf of the Lenders which the Agent, in its reasonable business judgment,
deems necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (C) to pay any other amount
chargeable to any Borrower pursuant to the terms of this Agreement, including,
without limitation, costs, fees and expenses as described in Section 14.6 (any
of the advances described in this Section 2.1(j)(i) being hereinafter referred
to as "Agent Advances"); provided, that the Agent shall not make any Agent
Advance to any Borrower if the amount thereof would exceed Availability on the
Funding Date applicable thereto; and provided, further, that the Majority
Lenders may at any time revoke the Agent's authorization contained in this
Section 2.1(j)(i) to make Agent Advances, any such revocation to be in writing
and to become effective upon the Agent's receipt thereof.
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(ii) The Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time. The Agent shall notify each Lender and the Borrowers in
writing of each such Agent Advance, which notice shall include a description of
the purpose of such Agent Advance.
(k) Settlement. The Agent and the Lenders hereby agree that,
except in the case of Settlement Loans and Agent Advances, each Lender's funded
portion of the Revolving Loans is intended to be equal at all times to such
Lender's Pro Rata Share of the outstanding Revolving Loans. The Agent and the
Lenders agree (which agreement shall not be for the benefit of or enforceable by
any Borrower) that in order to facilitate the administration of this Agreement
and the other Loan Documents, settlement among them as to the Revolving Loans,
the Settlement Loans and the Agent Advances shall take place on a periodic basis
in accordance with the following provisions:
(i) The Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so determined by the
Agent, with respect to (1) each outstanding Settlement Loan, (2) each
outstanding Agent Advance, and (3) collections received, by notifying the other
Lenders by telecopy, telephone or other similar form of transmission, of such
requested Settlement, no later than 11:00 a.m. (San Francisco, California time)
on the date of such requested Settlement (the "Settlement Date"). Each Lender
(other than BABC, in the case of Settlement Loans) shall make the amount of such
Lender's Pro Rata Share of the outstanding principal amount of the Settlement
Loans and Agent Advances with respect to which Settlement is requested available
to the Agent, for itself or for the account of BABC, in same day funds, to such
account of the Agent as the Agent may designate, not later than 1:00 p.m. (San
Francisco, California time), on the Settlement Date applicable thereto,
regardless of whether the applicable conditions precedent set forth in Article 9
have then been satisfied. Such amounts made available to the Agent shall be
applied against the amounts of the applicable Settlement Loan or Agent Advance
and, together with the portion of such Settlement Loan or Agent Advance
representing BABC's Pro Rata Share thereof, shall constitute Revolving Loans of
such Lenders. If any such amount is not made available to the Agent by any
Lender on the Settlement Date applicable thereto, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the Federal Funds Rate for the first three (3) days from and after the
Settlement Date and thereafter at the Interest Rate then applicable to the
Post-Petition Revolving Loans.
(ii) Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a Settlement Loan or Agent
Advance), each other Lender shall irrevocably and unconditionally purchase and
receive from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such Settlement Loan or Agent Advance to
the extent of such Lender's Pro Rata Share thereof by paying to the Agent, in
same day funds, an amount equal to such Lender's Pro Rata Share of such
Settlement Loan or Agent Advance. If such amount is not in fact made available
to the Agent by any Lender, the Agent shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the Federal Funds
Rate for the first three (3) days from and after such demand and thereafter at
the Interest Rate then applicable to the Post-Petition Revolving Loans.
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(iii) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any Settlement Loan or
Agent Advance pursuant to subsection (ii) above, the Agent shall promptly
distribute to such Lender at such address as such Lender may request in writing,
such Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such Settlement Loan
or Agent Advance.
(iv) If any payments are received by the Agent which, in
accordance with the terms of this Agreement would be applied to the reduction of
the Post-Petition Revolving Loans, and no Settlement Loans or Agent Advances are
then outstanding, the Agent may pay over such amounts to BABC for application to
BABC's Post-Petition Revolving Loans. If, as of any Settlement Date, collections
received since the then immediately preceding Settlement Date have been applied
to BABC's Post-Petition Revolving Loans other than Settlement Loans and Agent
Advances, as provided for in the immediately preceding sentence, BABC shall pay
to the Agent, for the accounts of the Lenders, to be applied to the outstanding
Post-Petition Revolving Loans of such Lenders, an amount such that each Lender
shall have outstanding, as of such Settlement Date, after giving effect to such
payments, its Pro Rata Share of such Revolving Loans; provided, that the Agent
may net payments due from BABC pursuant to this sentence against payments due to
BABC pursuant to Section 2.1(k)(i) on the applicable Settlement Date, and
require either BABC or the other Lenders, as applicable, to make only the amount
of the payment due after such netting. As of each Settlement Date, BABC with
respect to Settlement Loans, the Agent with respect to Agent Advances, and each
Lender with respect to the Revolving Loans other than Settlement Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the actual average daily amount of funds employed by
BABC, the Agent and the other Lenders since the immediately preceding Settlement
Date.
(l) Notation. The Agent shall record in the Register the
principal amount of the Revolving Loans owing to each Lender, including the
Settlement Loans owing to BABC, and the Agent Advances owing to the Agent, from
time to time. In addition, each Lender is authorized, at such Lender's option,
to note the date and amount of each payment or prepayment of principal of such
Lender's Revolving Loans in its books and records, including computer records,
such books and records constituting rebuttably presumptive evidence, absent
manifest error, of the accuracy of the information contained therein.
(m) Lenders' Failure to Perform. All Post-Petition Revolving
Loans (other than Settlement Loans and Agent Advances) shall be made by the
Lenders simultaneously and in accordance with their Pro Rata Shares. It is
understood that (a) no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Loans hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligation to make any Loans hereunder, and (b)
no failure by any Lender to perform its obligation to make any Loans hereunder
shall excuse any other Lender from its obligation to make any Loans hereunder.
2.2 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Agent agrees to take
reasonable steps to cause to be issued for the account of any Borrower one or
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more stand-by or documentary letters of credit (each such letter of credit,
together with those letters of credit previously issued by NB and reflected on
Schedule 2.2 a "Letter of Credit" and such letters of credit, collectively, the
"Letters of Credit") in accordance with this Section 2.2 from time to time
during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall not have
any obligation to take steps to cause to be issued any Letter of Credit at any
time: (1) if the maximum undrawn amount of the requested Letter of Credit is
greater than the Unused Letter of Credit Subfacility at such time; (2) if the
maximum undrawn amount of the requested Letter of Credit and all commissions,
fees, and charges due from the applicable Borrower in connection with the
opening thereof, exceed Availability at such time; or (3) which has an
expiration date later than the Stated Termination Date or more than one (1) year
from the date of issuance.
(c) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Article 9, the
obligation of the Agent to take reasonable steps to cause to be issued any
Letter of Credit is subject to the following conditions precedent having been
satisfied in a manner satisfactory to the Agent:
(1) the applicable Borrower shall have delivered to the
proposed issuer of such Letter of Credit, at such times and in such
manner as such proposed issuer may prescribe, an application in form
and substance satisfactory to such proposed issuer for the issuance of
the Letter of Credit and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed
Letter of Credit shall be satisfactory to the Agent and such proposed
issuer; and
(2) as of the date of issuance, no order of any court,
arbitrator or Public Authority shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit of
the type and in the amount of the proposed Letter of Credit, and no
law, rule or regulation applicable to money center banks generally and
no request or directive (whether or not having the force of law) from
any Public Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such
Letter of Credit refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. The Parent, for itself or on behalf
of either or both of the other Borrowers, shall give the Agent seven
(7) Business Days' prior written notice, containing the original
signature of an authorized officer of the Parent, of the applicable
Borrower's request for the issuance of a Letter of Credit. Such notice
shall be irrevocable and shall specify the Borrower requesting the
Letter of Credit, the original face amount of the Letter of Credit
requested, the effective date (which date shall be a Business Day) of
issuance of such requested Letter of Credit, whether such Letter of
Credit may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit is to expire (which date shall be a
Business Day), the purpose for which such Letter of Credit is to be
issued, and the beneficiary of the requested Letter of Credit. The
Parent shall attach to such notice the proposed form of the Letter of
Credit that the Agent is requested to cause to be issued.
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(2) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested
effective date of issuance of the Letter of Credit set forth in the
notice from the Parent pursuant to Section 2.2(d)(1), (i) the amount of
the applicable Unused Letter of Credit Subfacility and (ii)
Availability as of such date. If (A) (i) the undrawn amount of the
requested Letter of Credit is not greater than the applicable Unused
Letter of Credit Subfacility and (ii) the issuance of such requested
Letter of Credit and all commissions, fees, and charges due from the
applicable Borrower in connection with the opening thereof would not
exceed Availability as of such date, and (B) the Agent has received a
certificate from the Parent or such Borrower stating that the
applicable conditions set forth in Article 9 have been satisfied, the
Agent shall take reasonable steps to cause such issuer to issue the
requested Letter of Credit on such requested effective date of
issuance.
(3) Notice of Issuance. Promptly after the issuance of any
Letter of Credit, the Agent shall give each Lender written notice, or
telephonic notice confirmed promptly thereafter in writing, of the
issuance of such Letter of Credit.
(4) No Extensions or Amendment. The Agent shall not cause any
Letter of Credit to be extended or amended unless the requirements of
this Section 2.2(d) are met as though a new Letter of Credit were being
requested and issued.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The Borrowers
agree to reimburse the issuer for any draw under any Letter of Credit
immediately upon demand, and to pay the issuer of the Letter of Credit
the amount of all other Obligations and other amounts payable to such
issuer under or in connection with any Letter of Credit immediately
when due, irrespective of any claim, setoff, defense or other right
which any Borrower may have at any time against such issuer or any
other Person.
(2) Revolving Loans to Satisfy Reimbursement Obligations. In
the event that the issuer of any Letter of Credit honors a draw under
such Letter of Credit and the applicable Borrower shall not have repaid
such amount to the issuer of such Letter of Credit pursuant to Section
2.2(e)(1), the Agent shall, upon receiving notice of such failure,
notify each Lender of such failure, and each Lender shall
unconditionally pay to the Agent, for the account of such issuer, as
and when provided hereinbelow, an amount equal to such Lender's Pro
Rata Share of the amount of such payment in Dollars and in same day
funds. If the Agent so notifies the Lenders prior to 11:00 a.m. (San
Francisco, California time) on any Business Day, each Lender shall make
available to the Agent the amount of such payment, as provided in the
immediately preceding sentence, on such Business Day. Such amounts paid
by the Lenders to the Agent shall constitute Revolving Loans which
shall be deemed to have been requested by the applicable Borrower
pursuant to Section 2.1 as set forth in Section 4.4.
(f) Participations.
(1) Purchase of Participations. Immediately upon issuance of
any Letter of Credit in accordance with Section 2.1(d), each Lender
shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and
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participation in the credit support or enhancement provided through the
Agent to such issuer in connection with the issuance of such Letter of
Credit, equal to such Lender's Pro Rata Share of the face amount of
such Letter of Credit (including, without limitation, all obligations
of the applicable Borrower with respect thereto, and any security
therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments. Whenever the
Agent receives a payment from a Borrower on account of reimbursement
obligations in respect of a Letter of Credit as to which the Agent has
previously received for the account of the issuer thereof payment from
a Lender pursuant to this Section 2.2(f)(2), the Agent shall promptly
pay to such Lender such Lender's Pro Rata Share of such payment from
such Borrower in Dollars. Each such payment shall be made by the Agent
on the Business Day on which the Agent receives immediately available
funds paid to such Person pursuant to the immediately preceding
sentence, if received prior to 1:00 p.m. (San Francisco, California
time) on such Business Day and otherwise on the next succeeding
Business Day.
(3) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, any
reimbursement agreement executed in connection therewith, the
application for any Letter of Credit and any credit support or
enhancement provided through the Agent in connection with the issuance
of any Letter of Credit, and such other documentation as may reasonably
by requested by such Lender.
(4) Obligations Irrevocable. The obligations of each Lender to
make payments to the Agent with respect to any Letter of Credit or with
respect to any credit support or enhancement provided through the Agent
with respect to a Letter of Credit, and the obligations of the
Borrowers to make payments to the Agent, for the account of the
Lenders, shall be irrevocable, not subject to any qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement (assuming, in the case of the obligations
of the Lenders to make such payments, that the Agent has caused such
Letter of Credit to be issued in accordance with Section 2.2(d)),
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or
other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of
any Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender, the Agent, the issuer
of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transactions between any Borrower or
any other Person and the beneficiary named in any Letter of
Credit);
(iii) any draft, certificate or any other document
presented under the 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;
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(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of
the Loan Documents; or
(v) the occurrence of any Default or Event of
Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of a Borrower received by the Agent with respect to any
Letter of Credit (or any guaranty by a Borrower or reimbursement obligation of a
Borrower relating thereto) and distributed by the Agent to the Lenders on
account of their respective participations therein is thereafter set aside,
avoided or recovered from the Agent in connection with any receivership,
liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the
Agent, pay to the Agent their respective Pro Rata Shares of such amount set
aside, avoided or recovered, together with interest at the rate required to be
paid by the Agent upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. The Borrowers agree to pay to the
Agent with respect to each Letter of Credit, for the account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with
the terms of, Section 3.8.
(2) Issuer Fees and Charges. The Borrowers shall pay to the
issuer of any Letter of Credit, or to the Agent, for the account of the
issuer of any such Letter of Credit, solely for such issuer's account,
such fees and other charges as are charged by such issuer for letters
of credit issued by it, including, without limitation, its standard
fees for issuing, administering, amending, renewing, paying and
cancelling letters of credit and all other fees associated with issuing
or servicing letters of credit, as and when assessed.
(i) Indemnification; Exoneration.
(1) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 2.2, each Borrower hereby agrees to
protect, indemnify, pay and save the Lenders and the Agent harmless
from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys'
fees) which any Lender or the Agent may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of
Credit or the provision of any credit support or enhancement in
connection therewith.
(2) Assumption of Risk by the Borrowers. As among the
Borrowers, the Lenders and the Agent, the Borrowers assume all risks of
the acts and omissions of, or misuse of any of the Letters of Credit
by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, subject to the
provisions of the applications for the issuance of Letters of Credit,
the Lenders and the Agent shall not be responsible for: (A) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the application for
and issuance of and presentation of drafts with respect to any of the
Letters of Credit, even if it should prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be
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invalid or ineffective for any reason; (C) the failure of
the beneficiary of any Letter of Credit to comply duly with conditions
required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any document
required in order make a drawing under any Letter of Credit or of the
proceeds thereof; (G) the misapplication by the beneficiary of any
Letter of Credit of the proceeds of any drawing under such Letter of
Credit; or (H) any consequences arising from causes beyond the control
of the Lenders or the Agent, including, without limitation, any act or
omission, whether rightful or wrongful, of any present or future de
jure or de facto Public Authority. None of the foregoing shall affect,
impair or prevent the vesting of any rights or powers of the Agent or
any Lender under this Section 2.2(i).
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action
taken or omitted by the Agent or any Lender under or in connection with
any of the Letters of Credit or any related certificates, if taken or
omitted in good faith and without gross negligence, shall not put the
Agent or any Lender under any resulting liability to any Borrower or
relieve any Borrower of any of its obligations hereunder to any such
Person.
(j) Supporting Letter of Credit; Cash Collateral.
(i) If, notwithstanding the provisions of Section 2.2(b) any
Letter of Credit is outstanding upon the termination of this Agreement, then
upon such termination the Borrowers shall deposit with the Agent, for the
ratable benefit of the Secured Creditors, with respect to each Letter of Credit
then outstanding, as the Agent shall specify, either (A) a standby letter of
credit (a "Supporting Letter of Credit") in form and substance satisfactory to
the Agent, issued by an issuer satisfactory to the Agent in an amount equal to
the greatest amount for which such Letter of Credit may be drawn, under which
Supporting Letter of Credit the Agent is entitled to draw amounts necessary to
reimburse the Agent and the Lenders for payments made by the Agent and the
Lenders under such Letter of Credit or under any credit support or enhancement
provided through the Agent with respect thereto, or (B) cash in amounts
necessary to reimburse the Agent and the Lenders for payments made by the Agent
or the Lenders under such Letter of Credit or under any credit support or
enhancement provided through the Agent with respect thereto. Such Supporting
Letter of Credit or deposit of cash shall be held by the Agent, for the ratable
benefit of the Secured Creditors, as security for, and to provide for the
payment of, the aggregate undrawn amount of such Letters of Credit remaining
outstanding.
(ii) The Borrowers shall, upon the request of the Agent, which
may be made at any time that (A) an Event of Default has occurred and is
continuing, or (B) Availability is less than zero, deliver to the Agent cash
collateral for any Letter of Credit outstanding.
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ARTICLE 3
INTEREST AND FEES
3.1 Interest Rates. All outstanding Post-Petition Obligations
shall bear interest on the unpaid principal amount thereof (including, to the
extent permitted by law, on interest thereon not paid when due) from the date
made until paid in full in cash at a rate determined by reference to the Base
Rate or the LIBO Rate and Sections 3.1(i) or (ii), as applicable, but not to
exceed the Maximum Rate described in Section 3.4. Subject to the provisions of
Section 3.2, any of the Post-Petition Revolving Loans may be converted into, or
continued as, Base Rate Loans or LIBOR Loans in the manner provided in Section
3.2. If at any time Post-Petition Revolving Loans are outstanding with respect
to which notice has not been delivered to the Agent in accordance with the terms
of this Agreement specifying the basis for determining the interest rate
applicable thereto, then those Post-Petition Revolving Loans shall be Base Rate
Loans and shall bear interest at a rate determined by reference to the Base Rate
until notice to the contrary has been given to the Agent and such notice has
become effective. Except as otherwise provided herein, the outstanding
Post-Petition Obligations shall bear interest as follows:
(i) For all Post-Petition Revolving Loans and other
Post-Petition Obligations, which are not LIBOR Loans, then at a
fluctuating per annum rate to two percent (2.00%) plus the Base Rate;
(ii) For all Post-Petition Revolving Loans which are LIBOR
Loans, then at a per annum rate equal to four percent (4.00%) plus the
LIBO Rate determined for the applicable Interest Period.
Each change in the Base Rate shall be reflected in the interest rate described
in (i) above as of the effective date of such change. All interest charges shall
be computed on the basis of a year of 360 days and actual days elapsed. Except
as otherwise provided herein, (a) interest accrued on each LIBOR Loan shall be
payable in arrears on the first day of each month hereafter, and (b) interest
accrued on the Base Rate Loans will be payable in arrears on the first day of
each month hereafter.
3.2 Conversion or Continuation. (a) Subject to the provisions
of Section 3.3, (i) the Borrowers shall have the option to convert all or any
part of the outstanding Post-Petition Revolving Loans, in a minimum amount of
$5,000,000 and integral multiples of $5,000,000 in excess of that amount, from
Base Rate Loans to LIBOR Loans at any time; (ii) the Borrowers shall have the
option to convert all or any part of the outstanding Post-Petition Revolving
Loans from LIBOR Loans to Base Rate Loans on the expiration of the Interest
Period applicable thereto; and (iii) the Borrowers shall have the option, on the
expiration of the Interest Period applicable to any outstanding LIBOR Loan, to
continue all or any portion of such LIBOR Loan equal to $5,000,000 and integral
multiples of $5,000,000 in excess of that amount, as a LIBOR Loan; provided,
however, that no outstanding Loans may be converted into or continued as LIBOR
Loans when any Default or Event of Default has occurred and is continuing. Any
conversion or continuation made with respect to less than the entire outstanding
balance of the Post-Petition Revolving Loans must be applied pro rata to the
Revolving Loans, according to the outstanding principal balance of each
Revolving Loan.
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(b) Whenever the Borrowers elect to convert or continue Loans
under this Section 3.2, the Parent, for itself or as agent for the Borrowers,
shall deliver to the Agent a written notice substantially in the form of that
attached hereto as Exhibit F (a "Notice of Conversion/ Continuation"), signed by
an authorized officer of the Parent (i) no later than 11:00 a.m. (San Francisco,
California time) two (2) Business Days in advance of the requested conversion
date, in the case of a conversion into Base Rate Loans, and (ii) no later than
11:00 a.m (San Francisco, California time) four (4) Business Days in advance of
the requested conversion or continuation date, in the case of a conversion into,
or continuation of, LIBOR Loans. The Notice of Conversion/Continuation shall
specify (1) the conversion or continuation date (which shall be a Business Day),
(2) the amount and type of the Loans to be converted or continued, (3) the
nature of the requested conversion or continuation, and (4) in the case of a
conversion into, or continuation of, LIBOR Loans, the requested Interest Period.
Promptly after receipt of a Notice of Conversion/Continuation pursuant to this
Section 3.2(b), the Agent shall notify the Lenders by telecopy, telephone or
other similar form of transmission, of the requested conversion or continuation.
In the event that the Parent should fail to provide a Notice of
Conversion/Continuation with respect to any LIBOR Loans as provided above, such
Loans shall, on the last day of the Interest Period with respect to such Loans,
convert to Base Rate Loans.
(c) The officers of the Parent authorized to request Revolving
Loans for the Parent or on behalf of either or both of the other Borrowers shall
also be authorized to request a conversion or continuation for the Borrowers.
The Agent shall be entitled to rely on such officers' authority until the Agent
is notified to the contrary in writing pursuant to Section 2.2(c). The Agent
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 Parent.
The Agent shall incur no liability to any Borrower in acting upon any notice
referred to in this Section 3.2, which notice the Agent believes in good faith
to have been given by an officer authorized to make such requests on behalf of
the Borrowers, or for otherwise acting in good faith under this Section 3.2 and,
upon such conversion or continuation by the Agent and the Lenders in accordance
with this Agreement, the Borrowers shall have effected the conversion or
continuation of the applicable Loans hereunder.
(d) Any Notice of Conversion/Continuation for conversion to,
or continuation of, Loans made pursuant to this Section 3.2 shall be irrevocable
and the Borrowers shall be bound to convert or continue in accordance therewith.
3.3 Special Provisions Governing LIBOR Loans. Notwithstanding
any other provisions to the contrary contained in this Agreement, the following
provisions shall govern with respect to LIBOR Loans as to the matters covered:
(a) Amount of LIBOR Loans. Each election of, continuation of
or conversion to LIBOR Loans, shall be in a minimum amount of $5,000,000 and in
integral multiples of $5,000,000 in excess of that amount.
(b) Determination of Interest Period. By giving notice as set
forth in Section 3.2(b), the Parent, shall have the option, subject to the other
provisions of this Section 3.3, to specify whether the Interest Period for such
LIBOR Loan shall be a period of one, two, three or four months (or, if
available, as determined by all of the Lenders, six or twelve months). The
determination of Interest Periods shall be subject to the following provisions:
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(i) In the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the
next preceding Interest Period expires.
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if
the next succeeding Business Day occurs in the following calendar
month, then such Interest Period shall expire on the immediately
preceding Business Day.
(iii) No Borrower may select an Interest Period for any LIBOR
Loan, which Interest Period expires later than the Termination Date.
(iv) There shall be no more than five (5) Interest Periods in
effect at any one time.
(c) Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (San Francisco, California time) on the LIBOR Interest Rate
Determination Date, the Agent shall determine (which determination shall, absent
manifest error, be presumptively correct) the Interest Rate for the LIBOR Loans
for which an Interest Rate is then being determined and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to the Parent.
In the event that on any LIBOR Interest Rate Determination Date the Agent shall
have determined (which determination shall, absent manifest error, be
presumptively correct and binding upon all parties) that:
(i) adequate and fair means do not exist for ascertaining the
applicable interest rates by reference to which the LIBO Rate then
being determined is to be fixed; or
(ii) the LIBO Rate for any Interest Period for such Loans will
not adequately reflect the cost to any Lender of making, funding or
maintaining its LIBOR Loan for such Interest Period, the Agent shall
forthwith so notify the Borrowers and the Lenders, whereupon:
(A) each LIBOR Loan will automatically, on the last day
of the then existing Interest Period therefor,
convert into a Base Rate Loan; and
(B) the obligation of the Lenders to make, or to convert
Loans into, LIBOR Loans shall be suspended until the
Agent shall notify the Borrowers and the Lenders that
the circumstances causing such suspension no longer
exist.
(d) Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other Public Authority asserts that it is unlawful, for
any Lender to perform its obligations hereunder to make LIBOR Loans or to fund
or maintain LIBOR Loans hereunder, (i) the obligation of the Lenders to make, or
to convert Loans into or to continue Loans as, LIBOR Loans shall be suspended
until the Agent shall notify the Borrowers and the Lenders that the
circumstances causing such suspension no longer exist and (ii) the Borrowers
shall on the termination of the Interest Period than applicable thereto, or on
such earlier date required by law,
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prepay in full all LIBOR Loans then outstanding together with accrued interest
thereon, or convert all such LIBOR Loans into Base Rate Loans in accordance
with Section 3.2.
(e) Increased Costs. If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of reserve
requirements included in the LIBOR Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Public Authority (whether or
not having the force of law), there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining LIBOR Loans, then
the Borrowers agree that they shall, from time to time, upon demand by such
Lender, pay to such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such increased
cost, submitted to the Borrowers by such Lender, shall, absent manifest error,
be rebuttably presumptive evidence of the correctness of such amount.
(f) Compensation. In addition to such amounts as are required
to be paid by the Borrowers pursuant to the other Sections of this Article 3,
each Borrower agrees to compensate any Lender for all losses, expenses and
liabilities, including, without limitation, any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Lender's LIBOR Loans to the Borrowers,
which such Lender may sustain (i) if for any reason a funding of any LIBOR Loans
does not occur on a date specified therefor in a Notice of Borrowing or Notice
of Conversion/Continuation, or a successive Interest Period does not commence
after notice therefor is given pursuant to Section 3.2, (ii) if any voluntary or
mandatory prepayment of any LIBOR Loans occurs for any reason on a date which is
not the last scheduled day of an Interest Period, (iii) as a consequence of any
required conversion of LIBOR Loans to Base Rate Loans as a result of any of the
events indicated in Section 3.3(d), or (iv) as a consequence of any other
failure by any Borrower to repay LIBOR Loans when required by the terms of this
Agreement.
(g) Booking of LIBOR Loans. The Lenders may make, carry or
transfer LIBOR Loans at, to, or for the account of, any of their respective
branch offices or the office of any of their respective affiliates.
(h) LIBOR Loans After Event of Default. Unless the Majority
Lenders shall otherwise agree, after the occurrence of and during the
continuance of any Event of Default, no Borrower may borrow Revolving Loans as
LIBOR Loans or elect to have any Loans continued as, or converted to, LIBOR
Loans after the expiration of any Interest Period then in effect for such Loans.
3.4 Maximum Interest Rate. In no event shall any Interest Rate
provided for hereunder exceed the maximum rate permissible for corporate
borrowers under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations under this Agreement, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total amount of interest
which would, but for this Section 3.4, have been paid or accrued if the interest
rates otherwise set forth in this Agreement had at all times been in effect,
then the Borrowers
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shall, to the extent permitted by applicable law, pay the Agent, for the account
of the Lenders, an amount equal to the difference between (a) the lesser of (i)
the amount of interest which would have been charged if the Maximum Rate had, at
all times, been in effect or (ii) the amount of interest which would have
accrued had the interest rates otherwise set forth in this Agreement, at all
times, been in effect and (b) the amount of interest actually paid or accrued
under this Agreement. In the event that a court determines that the Agent and/or
any Lender has received interest and other charges hereunder in excess of the
Maximum Rate, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations outstanding, the
Agent and/or such Lender shall refund to the Borrowers such excess.
3.5 Funding Fee. The Borrowers agree, on a joint and several
basis, to pay the Agent, for the ratable account of the Lenders, on the Final
Order Date a funding fee (the "Funding Fee") in the amount of $210,000, which
Funding Fee shall be fully earned by the Lenders on the Final Order Date. The
Agent, the Lenders and the Borrowers agree that the Funding Fee shall be
financed by the Lenders as Post-Petition Revolving Loans.
3.6 Facility Fee. The Borrowers agree, on a joint and several
basis, to pay to the Agent, for the ratable account of the Lenders, a facility
fee (the "Facility Fee") equal to one half of one percent (0.50%) per annum on
the average daily amount by which the Revolver Facility exceeded the sum of
outstanding Pre-Petition Obligations and Post-Petition Obligations, payable on
the first day of each month for the immediately preceding month and on the
Termination Date for the period from the last date for which the Facility Fee
was paid to and including the Termination Date. The Facility Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
As provided for in Section 5.9(c), all payments received by the Agent on account
of Accounts or as proceeds of other Collateral shall be deemed to be credited to
the applicable Borrower's loan account immediately upon receipt for purposes of
calculating the Facility Fee pursuant to this Section 3.6.
3.7 Collateral Management Fee. The Borrowers shall pay to the
Agent, for the ratable benefit of the Lenders, a collateral management fee (the
"Collateral Management Fee") in the amount of $10,000 per month, payable monthly
in advance on the first day of each month.
3.8 Letter of Credit Fee. The Borrowers agree, on a joint and
several basis, to pay to the Agent, for the ratable account of the Lenders, for
each Letter of Credit, a fee (the "Letter of Credit Fee") equal to two percent
(2.00%) per annum of the undrawn amount of each Letter of Credit issued for any
Borrower's account at such Borrower's request, plus all out-of-pocket costs,
fees and expenses incurred by the Agent in connection with the application for,
issuance of, or amendment to any Letter of Credit, which costs, fees and
expenses could include a "fronting fee" required to be paid by the Agent to such
issuer for the assumption of the settlement risk in connection with the issuance
of such Letter of Credit; provided, that the Borrowers shall not be required to
pay to the Agent the amount of any "fronting fee" charged with respect to any
trade or documentary Letter of Credit having an expiration date less than ninety
(90) days from the date of issuance. Solely by way of information, the "fronting
fee" charged by Bank of America as of the Petition Date in connection with
letters of credit issued by it at the request of BABC is one-half of one percent
(.50%) per annum of the undrawn amount of the applicable letter of credit, and
the amount of such "fronting fee" is subject to change at any time. The Letter
of Credit Fee shall be payable in advance (1) upon the issuance of each Letter
of Credit for the number of days remaining in the month during which such Letter
of Credit was issued
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and (2) thereafter, monthly, on the first day of each month during which each
such Letter of Credit remains outstanding. The Letter of Credit Fee shall be
computed on the basis of a 360-day year for the actual number of days elapsed.
3.9 Audit Fees. The Borrowers agree, on a joint and several
basis, to pay to (a) BNY, solely for its own account, and (b) the Agent, solely
for its own account, all costs and fees reasonably incurred by BNY's and the
Agent's respective internal auditors in connection with audits of the Borrowers
performed by such auditors during the term of this Agreement; provided, that BNY
shall be entitled to reimbursement for not more than one (1) auditor per day and
only in the event that such auditor accompanied the Agent on the applicable
audit. Each auditor of BNY and of the Agent shall be billed at a rate of $600
per day plus reasonably incurred out-of-pocket expenses (including travel
expenses).
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. The Borrowers shall repay the outstanding
principal balance of the Post-Petition Revolving Loans, plus all accrued but
unpaid interest thereon, on the Termination Date. The Borrowers may prepay
Post-Petition Revolving Loans at any time, and reborrow subject to the terms of
this Agreement; provided, however, that with respect to any LIBOR Loans prepaid
by any Borrower prior to the expiration date of the Interest Period applicable
thereto, such Borrower agrees to pay to the Lenders the amounts described in
Section 3.3(f). In addition, and without limiting the generality of the
foregoing, the Borrowers shall pay to the Agent, for the account of the Lenders,
the amount by which the sum of outstanding Revolving Loans, the aggregate amount
of Pending Revolving Loans, the aggregate undrawn amounts of all outstanding
Letters of Credit and the amount of all unpaid reimbursement obligations with
respect to the Letters of Credit exceeds the Maximum Revolver Amount (but
without duplication), any such amount to be payable upon demand.
4.2 Mandatory Prepayments of the Term Loans. Prepayments on
the Term Loans shall be required to be made as provided in Sections 5.11(c),
8.5(c), 8.6(b) and 8.9(b). In addition, after the Additional Facility has been
reduced to zero, and if any amounts are received with respect to items (a), (b),
or (f) on Exhibit D, then 50% of such amounts shall be applied to the prepayment
of the Term Loans, applying such amounts ratably to the installments of the Term
Loans in the inverse order of maturity.
4.3 Place and Form of Payments; Extension of Time. All
payments of principal, interest, reimbursement obligations in connection with
Letters of Credit, fees, premium and other sums due to the Agent or the Lenders
shall be made at the Agent's address set forth in or specified pursuant to
Section 14.7. Except for proceeds received directly by the Agent, all such
payments shall be made in immediately available funds. If any payment of
principal, interest, reimbursement obligations in connection with Letters of
Credit, fees, premium, or other sums to be made hereunder becomes due and
payable on a day other than a Business Day, the due date of such payment shall
be extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Interest Rate during such extension.
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4.4 Payments as Revolving Loans. All payments of principal,
interest, reimbursement obligations in connection with Letters of Credit, fees,
premiums and other sums payable hereunder, including all reimbursement for
expenses pursuant to Section 14.6, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this Section 4.4, be paid from the
proceeds of Revolving Loans made hereunder, whether made following a request by
the Parent pursuant to Section 2.1 or a deemed request as provided in this
Section 4.4. Each Borrower hereby irrevocably authorizes the Lenders to make
Revolving Loans (including Settlement Loans by BABC or Agent Advances by the
Agent), upon notice from the Agent as described in the next succeeding sentence,
for the purpose of paying principal, interest, reimbursement obligations in
connection with Letters of Credit, fees, premiums and other sums payable
hereunder, including reimbursing expenses pursuant to Section 14.6, and agrees
that all such Revolving Loans so made shall be deemed to have been requested by
the Parent pursuant to Section 2.1, as of the date of the aforementioned notice.
The Agent shall request Revolving Loans as described in the immediately
preceding sentence by notifying the Lenders (or BABC, in the case of a
Settlement Loan) and the Parent, by telecopy, telephone or other similar form of
transmission, of the amount and Funding Date of the requested Borrowing and that
such Borrowing is being requested pursuant to this Section 4.4. On the requested
Funding Date, as applicable, the Lenders will make the requested Revolving Loans
in accordance with the procedures and subject to the conditions specified in
Section 2.1.
4.5 Apportionment, Application and Reversal of Payments.
Aggregate principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Loans to which such
payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans as otherwise provided in this Agreement, or not
constituting payment of specific fees, and all proceeds of Accounts or other
Collateral received by the Agent, shall be applied, ratably, subject to the
provisions of this Agreement, first, to pay any fees, expense reimbursements or
indemnities then due to the Agent or the Lenders from any Borrower; second, from
and after the entry of the Final Order, to make Adequate Protection Payments;
third to pay interest due in respect of all Post-Petition Revolving Loans,
including Settlement Loans and Agent Advances, and all unpaid reimbursement
obligations in respect of Letters of Credit; fourth, until the outstanding
Pre-Petition Obligations are equal to or less than the Agreed Pre-Petition
Outstanding Balance, to pay the principal of the Pre-Petition Revolving Loans;
fifth, to pay or prepay principal of the Settlement Loans and Agent Advances;
sixth, to pay or prepay principal of the Post-Petition Revolving Loans (other
than Settlement Loans and Agent Advances), with such payments to be applied
first in satisfaction of any Base Rate Loans, and to pay, prepay or provide cash
collateral in respect of outstanding Letters of Credit or any unpaid
reimbursement obligations in respect thereof, as applicable; and seventh, to the
payment of any other Post-Petition Obligation due to the Agent or any Lender by
any Borrower. Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by a Borrower, or unless an Event of Default is
outstanding, neither the Agent nor any Lender shall apply any payments which it
receives to any LIBOR Loan except (a) on the expiration date of the Interest
Period applicable to any such LIBOR Loan, or (b) in the event, and only to the
extent, that there are no outstanding Base Rate Loans. The Agent shall promptly
distribute to each Lender, pursuant to the applicable wire transfer instructions
set forth in Section 13.11, or pursuant to such other instructions as such
Lender may deliver to the Agent in writing, such funds as it may be entitled to
receive. The Agent and the Lenders shall have the continuing and exclusive right
to apply and reverse and reapply any and all such proceeds and payments to any
portion of the Obligations.
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4.6 Indemnity for Returned Payments. If after receipt of any
payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended to
be satisfied shall be revived and continue and this Agreement shall continue in
full force as if such payment or proceeds had not been received by the Agent or
such Lender, and the Borrowers shall be liable to pay to the Agent, and hereby
do indemnify the Agent and the Lenders and hold the Agent and the Lenders
harmless for, the amount of such payment or proceeds surrendered. The provisions
of this Section 4.6 shall be and remain effective notwithstanding any contrary
action which may have been taken by the Agent or any Lender in reliance upon
such payment or application of proceeds, and any such contrary action so taken
shall be without prejudice to the Agent's and the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this Section 4.6 shall survive the termination of this Agreement.
4.7 Increased Capital. If any Lender determines that
compliance by such Lender with any guideline or request from any central bank or
other Public Authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender, or any corporation controlling such Lender, and such Lender reasonably
determines that the amount of such capital is increased by or based upon its
Commitment or its making or maintaining Loans hereunder, or its commitment to
participate (as provided for in Section 2.2(f)) in any credit support or
enhancement provided through the Agent in connection with the issuance of any
Letter of Credit or to otherwise extend credit to the Borrowers hereunder, and
other commitments of this type, then, upon demand by such Lender, the Borrowers
agree to immediately pay to such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender in the light of
such circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to such Lender's commitment to participate
(as provided for in Section 2.2(f)) in any credit support or enhancement
provided through the Agent in connection with Letters of Credit or commitment to
make Loans hereunder. A certificate as to the amount of such increased cost,
submitted to the Borrowers by the applicable Lender shall, absent manifest
error, be conclusive and binding on the Borrowers for all purposes.
4.8 Register; Agent's and Lenders' Books and Records; Monthly
Statements. Each Borrower agrees that the Register and each Lender's books and
records showing the Obligations and the transactions pursuant to this Agreement
and the other Loan Documents shall be admissible in any action or proceeding
arising therefrom, and shall, absent manifest error, constitute rebuttably
presumptive proof thereof, irrespective of whether any Obligation is also
evidenced by a promissory note or other instrument. The Agent will provide to
the Borrowers a monthly statement of Loans, payments, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct, accurate,
and binding on the Borrowers and an account stated (except for reversals and
reapplications of payments made as provided in Section 4.5 and corrections of
errors discovered by the Agent), unless the Borrowers notify the Agent in
writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Borrowers, only the items to which exception is expressly made will be
considered to be disputed by the Borrowers.
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ARTICLE 5
COLLATERAL
5.1 Grant of Security Interest. (a) As security for (A) all
Post-Petition Obligations and (B) the Pre-Petition Indebtedness in an amount
equal to any diminution in value of the Pre-Petition Collateral (in which the
Lenders had valid, perfected, enforceable and non-avoidable liens or security
interests as of the Petition Date) occurring during the pendency of the Case
(whether such diminution is a consequence of the Borrowers' use of the
Pre-Petition Collateral, including the Borrowers' consumption of cash
collateral, economic depreciation of the Pre-Petition Collateral, or otherwise),
and as adequate protection for any use of the Lenders' cash collateral pursuant
to the Interim Order or the Final Order or otherwise, the Parent hereby
reaffirms its grant to the Agent, for the ratable benefit of the Secured
Creditors, pursuant to the Original Credit Agreement (to the extent granted
thereunder), and hereby grants to the Agent, for the ratable benefit of the
Secured Creditors, a continuing security interest in, lien on, and right of
set-off against, all of the following property of the Parent, whether now owned
or existing (subject to the qualifications and restrictions set forth below) or
hereafter acquired or arising, regardless of where located:
(i) Accounts;
(ii) Inventory;
(iii) contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes,
documents, investment property and documents of
title;
(iv) General Intangibles;
(v) Equipment;
(vi) money, Securities (other than the capital stock of
Laclede Chain) and other property of any kind of the
Parent in the possession or under the control of the
Agent or any Lender, any assignee of or participant
in the Obligations, or a bailee of any such party or
such party's affiliates;
(vii) deposit accounts, credits and balances with and other
claims against the Agent or any Lender or any of its
affiliates or any other financial institution in
which the Parent maintains deposits;
(viii) all other real and personal property of the Parent;
(ix) books, records and other property related to or
referring to any of the foregoing, including, without
limitation, books, records, account ledgers, data
processing records, computer software and other
property and General Intangibles at any time
evidencing or relating to any of the foregoing; and
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(x) accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any
insurance policies, claims against third parties, and
condemnation or requisition payments with respect to
all or any of the foregoing.
All of the foregoing, together with the Real Estate covered by any mortgage
liens granted by the Parent to the Agent for the ratable benefit of the Secured
Creditors and all other property of the Parent in which the Agent or any Lender
may at any time be granted a Lien, is herein collectively referred to as the
"Parent Collateral".
(b) As security for (A) all Post-Petition Obligations, and (B)
the Pre-Petition Indebtedness in an amount equal to any diminution in value of
the Pre-Petition Collateral (in which the Lenders had valid, perfected,
enforceable and non-avoidable liens or security interests as of the Petition
Date) occurring during the pendency of the Case (whether such diminution is a
consequence of the Borrowers' use of the Pre-Petition Collateral, including the
Borrowers' consumption of cash collateral, economic depreciation of the
Pre-Petition Collateral or otherwise), and as adequate protection for any use of
the Lenders' cash collateral pursuant to the Interim Order or the Final Order or
otherwise, Laclede Chain hereby reaffirms its grant to the Agent, for the
ratable benefit of the Secured Creditors, pursuant to the Original Credit
Agreement (to the extent granted thereunder), and hereby grants to the Agent,
for the ratable benefit of the Secured Creditors, a continuing security interest
in, lien on, and right of set-off against, all of the following property of
Laclede Chain, whether now owned or existing or hereafter acquired or arising,
regardless of where located:
(i) Accounts;
(ii) Inventory;
(iii) contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes,
documents, investment property and documents of
title;
(iv) General Intangibles;
(v) Equipment;
(vi) money, Securities and other property of any kind of
Laclede Chain in the possession or under the control
of the Agent or any Lender, any assignee of or
participant in the Obligations, or a bailee of any
such party or such party's affiliates;
(vii) deposit accounts, credits and balances with and other
claims against the Agent or any Lender or any of its
affiliates or any other financial institution in
which Laclede Chain maintains deposits;
(viii) all other real and personal property of Laclede
Chain;
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(ix) books, records and other property related to or
referring to any of the foregoing, including, without
limitation, books, records, account ledgers, data
processing records, computer software and other
property and General Intangibles at any time
evidencing or relating to any of the foregoing; and
(x) accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any
insurance policies, claims against third parties, and
condemnation or requisition payments with respect to
all or any of the foregoing.
All of the foregoing, together with all other property of Laclede Chain in which
the Agent or any Lender may at any time be granted a Lien, is herein
collectively referred to as the "Laclede Chain Collateral".
(c) As security for (A) all Post-Petition Obligations and (B)
the Pre-Petition Indebtedness in an amount equal to any diminution in value of
the Pre-Petition Collateral (in which the Lenders had valid, perfected,
enforceable and non-avoidable liens or security interests as of the Petition
Date) occurring during the pendency of the Case (whether such diminution is a
consequence of the Borrowers' use of the Pre-Petition Collateral, including the
Borrowers' consumption of cash collateral, economic depreciation of the
Pre-Petition Collateral, or otherwise), and as adequate protection for any use
of the Lenders' cash collateral pursuant to the Interim Order or the Final Order
or otherwise, Laclede Mid America hereby reaffirms its grant to the Agent, for
the ratable benefit of the Secured Creditors, pursuant to the Original Credit
Agreement, and hereby grants to the Agent for the ratable benefit of the Secured
Creditors a continuing security interest in, lien on, and right of set-off
against, all of the following property of Laclede Mid America, whether now owned
or existing (subject to the qualifications and restrictions set forth below) or
hereafter acquired or arising, regardless of where located:
(i) Accounts;
(ii) Inventory;
(iii) contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes,
documents, investment property and documents of
title;
(iv) General Intangibles;
(v) Equipment;
(vi) money, Securities and other property of any kind of
Laclede Mid America in the possession or under the
control of the Agent or any Lender, any assignee of
or participant in the Obligations, or a bailee of any
such party or such party's affiliates;
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(vii) deposit accounts, credits and balances with and other
claims against the Agent or any Lender or any of its
affiliates or any other financial institution in
which Laclede Mid America maintains deposits;
(viii) all other real and personal property of Laclede Mid
America;
(ix) books, records and other property related to or
referring to any of the foregoing, including, without
limitation, books, records, account ledgers, data
processing records, computer software and other
property and General Intangibles at any time
evidencing or relating to any of the foregoing; and
(x) accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing,
including, but not limited to, proceeds of any
insurance policies, claims against third parties, and
condemnation or requisition payments with respect to
all or any of the foregoing.
All of the foregoing, together with all other property of Laclede Mid America in
which the Agent or any Lender may at any time be granted a Lien, is herein
collectively referred to as the "Laclede Mid America Collateral".
(d) As security for all Obligations, (i) the Parent executed and
delivered to the Agent the Vandalia Mortgage, the Alton Mortgage, the Memphis
Mortgage and the Parent Fremont Mortgage to grant to the Agent for the ratable
benefit of the Secured Creditors, a continuing mortgage lien on its Real Estate
located in Vandalia, Illinois, Alton, Illinois, Memphis, Tennessee and Fremont,
Indiana, respectively, and identified in such Mortgages, and (ii) Laclede Mid
America executed and delivered to the Agent the Fremont Mortgage to grant to the
Agent for the ratable benefit of the Secured Creditors, a continuing mortgage
lien on the Real Estate located in Fremont, Indiana, and identified in such
Mortgage. The Parent and Laclede Mid America hereby reaffirm that grant and
grant the liens of the Mortgages to the Agent, for the ratable benefit of the
Secured Creditors, as security for the Post-Petition Obligations and to provide
the Secured Creditors adequate protection (pursuant to Sections 361, 362, 363
and 364 of the Bankruptcy Code and as provided in the Interim Order and the
Final Order) of the security interests and liens granted under or pursuant to
the Original Credit Agreement and for any use of cash collateral pursuant to the
Interim Order, the Final Order or otherwise.
(e) The Agent may, subject to the provisions of Articles 12 and 13, in
its sole discretion, (i) exchange, waive, or release any of the Collateral, (ii)
apply Collateral and direct the order or manner of sale thereof as the Agent may
determine, and (iii) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Agent's
or any Lender's right to take any other action with respect to any other
Collateral.
5.2 Perfection and Protection of Security Interest. Each Borrower
shall, at its expense, perform all steps requested by the Agent at any time to
perfect, maintain, protect, and enforce the Agent's Liens, including, without
limitation: (a) executing and filing financing or continuation statements, and
amendments thereof, in form and substance satisfactory to the Agent; (b)
delivering to the Agent the originals of all instruments, documents, and chattel
paper, and all other Collateral of
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which the Agent determines it should have physical possession in order to
perfect and protect the Agent's security interest therein, including the
Intercompany Notes, duly pledged, endorsed or assigned to the Agent without
restriction; (c) delivering to the Agent warehouse receipts covering any portion
of the Collateral located in warehouses and for which warehouse receipts are
issued; (d) when an Event of Default exists, transferring Inventory to
warehouses designated by the Agent; (e) placing notations on such Borrower's
books of account to disclose the Agent's security interest; (f) delivering to
the Agent all letters of credit on which such Borrower is named beneficiary; and
(g) taking such other steps as are deemed necessary or desirable by the Agent to
maintain and protect the Agent's Liens. To the extent permitted by applicable
law, the Agent may file, without the applicable Borrower's signature, one or
more financing statements disclosing the Agent's Liens. Each Borrower agrees
that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of a Borrower's agents or processors, then such
Borrower shall notify the Agent thereof and shall notify such Person of the
Agent's security interest in such Collateral and, upon the Agent's request,
instruct such Person to hold all such Collateral for the Agent's account subject
to the Agent's instructions. If at any time any Collateral is located on any
operating facility of a Borrower which is not owned by such Borrower, then such
Borrower shall obtain written waivers, in form and substance satisfactory to the
Agent, of all present and future Liens to which the owner or lessor or any
mortgagee of such premises may be entitled to assert against the Collateral.
From time to time, each Borrower shall, upon the Agent's request,
execute and deliver confirmatory written instruments pledging to the Agent, for
the ratable benefit of the Secured Creditors, the Collateral with respect to
such Borrower, but any Borrower's failure to do so shall not affect or limit the
Agent's security interest or the Agent's other rights in and to the Collateral
with respect to such Borrower. So long as this Agreement is in effect and until
all Obligations have been fully satisfied, the Agent's Liens shall continue in
full force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Maximum Revolver Amount or as the basis for any
advance, loan, extension of credit, or other financial accommodation).
5.3 Location of Collateral. Each Borrower represents and warrants to
the Agent and the Lenders that: (a) Schedule 5.3 is a correct and complete list
of such Borrower's chief executive office, the location of its books and
records, the locations of the Collateral with respect to such Borrower, and the
locations of all of its other places of business; and (b) Schedule 5.3 correctly
identifies any of such facilities and locations that are not owned by such
Borrower and sets forth the names of the owners and lessors or sublessors of,
and, to the best of such Borrower's knowledge, the holders of any mortgages on,
such facilities and locations. Each Borrower covenants and agrees that it will
not (i) maintain any Collateral with respect to such Borrower at any location
other than those locations listed for such Borrower on Schedule 5.3, (ii)
otherwise change or add to any of such locations, or (iii) change the location
of its chief executive office from the location identified in Schedule 5.3,
unless it gives the Agent at least thirty (30) days' prior written notice
thereof and executes any and all financing statements and other documents that
the Agent requests in connection therewith. Without limiting the foregoing, each
Borrower represents that all of its Inventory is, and covenants that all of its
Inventory will be, located either (a) on premises owned by such Borrower, (b) on
premises leased by such Borrower, provided that the Agent has received an
executed landlord waiver from the landlord of such premises in form and
substance satisfactory to the Agent, or (c) in a public warehouse, provided that
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the Agent has received an executed bailee letter from the applicable public
warehouseman in form and substance satisfactory to the Agent.
5.4 Title to, Liens on, and Sale and Use of Collateral. Each Borrower
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) all of the Collateral with respect to such Borrower is
and will continue to be owned by such Borrower free and clear of all Liens
whatsoever, except for Permitted Liens; (b) the Agent's Liens in the Collateral
with respect to such Borrower will not be subject to any prior Lien except for
those Permitted Liens, if any, specifically identified on Schedule 7.2; (c) such
Borrower will use, store, and maintain the Collateral with respect to such
Borrower with all reasonable care and will use such Collateral for lawful
purposes only; and (d) such Borrower will not, without the Agent's prior written
approval, sell, or dispose of or permit the sale or disposition of any of the
Collateral with respect to such Borrower except for sales of Inventory in the
ordinary course of business and sales of Equipment as permitted by Sections
5.11(c) or 8.9(b). The inclusion of proceeds in the Collateral shall not be
deemed to constitute the Agent's or any Lender's consent to any sale or other
disposition of the Collateral except as expressly permitted herein.
5.5 Appraisals. Each Borrower shall, at its expense and upon the
Agent's request, provide the Agent with appraisals or updates thereof of any or
all of the Collateral with respect to such Borrower from an appraiser, and
prepared on a basis, satisfactory to the Agent.
5.6 Access and Examination; Confidentiality. (a) The Agent, accompanied
by any Lender which so elects, may at all reasonable times have access to,
examine, audit, make extracts from or copies of and inspect any or all of each
Borrower's records, files, and books of account and the Collateral, and discuss
each Borrower's affairs with such Borrower's officers and management. Each
Borrower will deliver to the Agent any instrument necessary for the Agent to
obtain records from any service bureau maintaining records for such Borrower.
The Agent may, and at the direction of the Majority Lenders shall, at the
Borrowers' expense, make copies of all of each Borrower's books and records, or
require the Borrowers to deliver such copies to the Agent. The Agent may,
without expense to the Agent, use such of the Borrowers' respective personnel,
supplies, and premises as may be reasonably necessary for maintaining or
enforcing the Agent's Liens.
(b) The Agent and each Lender agree to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by any Borrower and
provided to the Agent or such Lender by or on behalf of such Borrower, under
this Agreement or any other Loan Document, and neither the Agent, nor such
Lender nor any of their respective affiliates shall use any such information
other than in connection with or in enforcement of this Agreement and the other
Loan Documents, except to the extent that such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Agent or such Lender, or (ii) was or becomes available on a nonconfidential
basis from a source other than such Borrower, provided that such source is not
bound by a confidentiality agreement with such Borrower known to the Agent or
such Lender; provided, however, that the Agent and any Lender may disclose such
information (A) at the request or pursuant to any requirement of any Public
Authority to which the Agent or such Lender is subject or in connection with an
examination of the Agent or such Lender by any such Public Authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable requirement of law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Agent, any Lender or their respective affiliates may be party; (E) to
the extent reasonably required in connection with the exercise
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of any remedy hereunder or under any other Loan Document; (F) to the Agent's or
such Lender's independent auditors, accountants, attorneys and other
professional advisors; (G) to any affiliate of the Agent or such Lender, or to
any Participating Lender or assignee under any Assignment and Acceptance, actual
or potential, provided that such affiliate, Participating Lender or assignee
agrees to keep such information confidential to the same extent required of the
Agent and the Lenders hereunder; and (H) as expressly permitted under the terms
of any other document or agreement regarding confidentiality to which such
Borrower is party or is deemed party with the Agent or such Lender.
5.7 Collateral Reporting. Each Borrower will provide the Agent with the
following documents at the following times in form satisfactory to the Agent:
(a) on a daily basis, a schedule of such Borrower's Accounts created since the
last such schedule, prepared as of a date no more than two (2) Business Days
prior to the delivery date of such schedule and accompanied by a current
Borrowing Base Certificate; (b) within two (2) Business Days following the
receipt of remittances into such Borrower's lock-box or Payment Account,
sufficient information to enable the Agent to properly apply remittances to the
appropriate Borrower's account in the correct amount; (c) on a monthly basis, by
the fifteenth (15th) day of each month for the immediately preceding calendar
month, an aging of such Borrower's Accounts, together with a reconciliation to
the previous month's aging of such Borrower's Accounts and to such Borrower's
general ledger; (d) on Wednesday of each week, for the week ending the preceding
Friday, a "roll forward" inventory report covering finished and semi-finished
inventory; (e) on a monthly basis by the fifteenth (15th) day of each month for
the immediately preceding calendar month (or more frequently if requested by the
Agent), Inventory reports by category, with additional detail showing additions
to and deletions from the Inventory; (f) upon request, copies of invoices in
connection with such Borrower's Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery documents
in connection with such Borrower's Accounts and for Inventory and Equipment
acquired by such Borrower, purchase orders and invoices; (g) on a monthly basis,
by the twenty-fifth (25th) day of each month, a statement of the balance of each
of the Intercompany Notes as of the last day of the immediately preceding
calendar month; (h) such other reports as to the Collateral of such Borrower as
the Agent or any Lender shall reasonably request from time to time; and (i) with
the delivery of each of the foregoing, a certificate of an officer of such
Borrower certifying as to the accuracy and completeness of the foregoing. If any
of any Borrower's records or reports of the Collateral are prepared by an
accounting service or other agent, each Borrower hereby authorizes such service
or agent to deliver such records, reports, and related documents to the Agent,
for distribution to the Lenders.
5.8 Accounts. (a) Each Borrower hereby represents and warrants to the
Agent and the Lenders, with respect to such Borrower's Accounts, that: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by such Borrower, or rendition of services
by such Borrower, in the ordinary course of such Borrower's business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense, or counterclaim except those known to such Borrower and
disclosed to the Agent and the Lenders pursuant to this Agreement; (iii) no
payment will be received with respect to any Account, and no credit, discount,
or extension, or agreement therefor will be granted on any Account, except as
reported to the Agent and the Lenders in accordance with this Agreement; (iv)
each copy of an invoice delivered to the Agent by a Borrower will be a genuine
copy of the original invoice sent to the Account Debtor named therein; and (v)
all goods described in each
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invoice will have been delivered to the Account Debtor and all services of such
Borrower described in each invoice will have been performed.
(b) No Borrower shall re-date any invoice or sale or make sales on
extended dating beyond that customary in such Borrower's business or extend or
modify any Account. If any Borrower becomes aware of any matter which may
materially affect the collectibility of any Account, including information
regarding the Account Debtor's creditworthiness, such Borrower will promptly so
advise the Agent.
(c) No Borrower shall accept any note or other instrument (except a
check or other instrument for the immediate payment of money) with respect to
any Account without the Agent's written consent. If the Agent consents to the
acceptance of any such instrument, it shall be considered as evidence of the
Account and not payment thereof and the applicable Borrower will promptly
deliver such instrument to the Agent, endorsed by such Borrower to the Agent in
a manner satisfactory in form and substance to the Agent.
(d) Each Borrower shall notify the Agent promptly of any dispute or
claim with an Account Debtor respecting an Eligible Account as to which the
amount in dispute exceeds $250,000, and agrees to settle or adjust such dispute
or claim at no expense to the Agent or any Lender. No discount, credit or
allowance shall be granted to any such Account Debtor without the Agent's prior
written consent, except for discounts, credits and allowances made or given in
the ordinary course of such Borrower's business when no Event of Default exists
hereunder. Each Borrower shall send the Agent a copy of each credit memorandum
in excess of $50,000 as soon as issued. The Agent may, and at the direction of
the Majority Lenders shall, at all times when an Event of Default exists
hereunder, settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which the Agent or the Majority Lenders, as
applicable, shall consider advisable and, in all cases, the Agent will credit
the applicable Borrower's loan account with only the net amounts received by the
Agent in payment of any Accounts.
(e) If an Account Debtor returns any Inventory to any Borrower, then
such Borrower shall promptly determine the reason for such return and shall
issue a credit memorandum to the Account Debtor in the appropriate amount. Each
Borrower shall immediately report to the Agent any return involving an amount in
excess of $50,000. Each such report shall indicate the reasons for the returns
and the locations and condition of the returned Inventory. In the event any
Account Debtor returns Inventory to any Borrower when an Event of Default
exists, such Borrower shall: (i) hold the returned Inventory in trust for the
Agent; (ii) segregate all returned Inventory from all of its other property;
(iii) dispose of the returned Inventory solely according to the Agent's written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Agent's prior written consent. All returned Inventory shall be
subject to the Agent's Liens thereon. Whenever any Inventory is returned, the
related Account shall be deemed ineligible to the extent of the return and the
Maximum Revolver Amount shall be adjusted accordingly.
5.9 Collection of Accounts; Payments. (a) Each Borrower has established
a lock-box service for collections of Accounts at a bank or banks mutually
acceptable to the Agent and such Borrower and pursuant to documentation
satisfactory to the Agent. The applicable Borrower shall instruct all Account
Debtors to make all payments directly to the address or addresses established
for such service. If, notwithstanding such instructions, the applicable Borrower
receives any proceeds of
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Accounts, it shall receive such payments as the Agent's and the Lenders'
trustee, and shall immediately deliver such payments to the Agent in their
original form duly endorsed in blank or deposit them into a Payment Account, as
the Agent may direct. All collections received in any such lock-box or Payment
Account or directly by such Borrower, the Agent or any Lender, and all funds in
any Payment Account or other account to which such collections are deposited,
shall be the sole property of the Agent and the Lenders and subject to the
Agent's and the Lenders' sole control. Laclede Mid America shall not be required
to maintain a lock-box service or Payment Account separate from that of the
Parent, until such time as the Agent may, in its discretion, so direct Laclede
Mid America. The Agent or the Agent's designee may, at any time, notify obligors
that the Accounts have been assigned to the Agent and of the Agent's security
interest therein, and may collect them directly and charge the collection costs
and expenses to the applicable Borrower's loan account as a Revolving Loan as
described in Section 4.4. At the Agent's request, each Borrower shall execute
and deliver to the Agent such documents as the Agent shall require to grant the
Agent access to any post office box in which collections of Accounts are
received.
(b) If sales of Inventory are made for cash, the applicable Borrower
shall immediately deliver to the Agent or deposit into a Payment Account of such
Borrower the identical checks, cash, or other forms of payment which such
Borrower receives.
(c) All payments received by the Agent on account of Accounts or as
proceeds of other Collateral will be the Agent's sole property and will be
credited to the Borrowers' loan account (conditional upon final collection)
after allowing one (1) Business Day for collection; provided, however, that such
payments shall be deemed to be credited to the Borrowers' loan account
immediately upon receipt for purposes of (i) determining Availability, (ii)
calculating the Facility Fee pursuant to Section 3.6, and (iii) calculating the
amount of interest accrued thereon solely for purposes of determining the amount
of interest to be distributed by the Agent to the Lenders.
5.10 Inventory. (a) Each Borrower represents and warrants to the Agent
and the Lenders and agrees with the Agent and the Lenders that all of the
Inventory owned by such Borrower is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of such Borrower's business, and is and will be fit for such purposes. Each
Borrower will keep its Inventory in good and marketable condition, at its own
expense. No Borrower will, without the prior written consent of the Agent,
acquire or accept any Inventory on consignment or approval. Each Borrower agrees
that all Inventory will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. No Borrower will sell any Inventory on a bill-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or other repurchase or
return basis.
(b) Each Borrower will conduct a physical count of its Inventory
constituting pipe not less frequently than once every four (4) months, and shall
upon request promptly supply the Agent, in sufficient copies for distribution by
the Agent to each Lender, with a copy of such count accompanied by a report of
the value of such inventory (valued at the lower of cost or market value). Each
Borrower will maintain such perpetual inventory reporting systems as are in
place on the Petition Date.
5.11 Equipment. (a) The Parent represents and warrants to the Agent and
the Lenders that it has delivered to the Agent and the Lenders, pursuant to the
Original Agreement, a complete and accurate list of the Parent's Equipment owned
by the Parent as of the date of such list.
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The Parent shall, upon the Agent's request from time to time, provide to the
Agent and the Lenders an update of such list, and each of the other Borrowers
shall, upon the Agent's request from time to time after the Petition Date,
provide to the Agent and the Lenders a list with respect to its Equipment, in a
similar format to that described in the immediately preceding sentence. Each
Borrower represents and warrants to the Agent and the Lenders and agrees with
the Agent and the Lenders that all of the Equipment owned by such Borrower is
and will be used or held for use in such Borrower's business, and is and will be
fit for such purposes. Each Borrower shall keep and maintain its Equipment in
good operating condition and repair (ordinary wear and tear excepted) and shall
make all necessary replacements thereof.
(b) Each Borrower shall promptly inform the Agent of any material
additions to or deletions from the Equipment. No Borrower shall permit any
Equipment (i) consisting of Collateral to become a fixture with respect to real
property or to become an accession with respect to other personal property with
respect to which real or personal property the Agent does not have a Lien, (ii)
not consisting of Collateral to become a fixture with respect to real property
or to become an accession with respect to other personal property with respect
to which real or personal property the Agent has a Lien. No Borrower will,
without the Agent's prior written consent, alter or remove any identifying
symbol or number on any of such Borrower's Equipment consisting of Collateral.
(c) No Borrower shall, without the Agent's prior written consent, sell,
lease as a lessor, or otherwise dispose of any of such Borrower's Equipment,
except as permitted in Section 8.9(b); provided, however, that the Parent and
its Subsidiaries may dispose of obsolete or unusable Equipment having an orderly
liquidation value no greater than $1,500,000 in the aggregate during the term of
this Agreement, without the Agent's consent, subject to the conditions set forth
in the next sentence. In the event any of such Equipment is sold, transferred or
otherwise disposed pursuant to the proviso contained in the immediately
preceding sentence, (1) if such sale, transfer or disposition is effected
without replacement of such Equipment, or such Equipment is replaced by
Equipment leased by the applicable Borrower or by Equipment purchased by such
Borrower subject to a Lien, then such Borrower shall deliver all of the cash
proceeds of any such sale, transfer or disposition to the Agent, which proceeds
shall be applied, ratably, to the reduction of the Term Loans (applying such
proceeds ratably to the installments of the Term Loans in the inverse order of
maturity), or (2) if such sale, transfer or disposition is made in connection
with the purchase by the applicable Borrower of replacement Equipment (other
than Equipment subject to a Lien), then such Borrower shall use the proceeds of
such sale, transfer or disposition to finance the purchase by such Borrower of
such replacement Equipment and shall deliver to the Agent written evidence of
the use of the proceeds for such purchase. All replacement Equipment purchased
by the applicable Borrower shall be free and clear of all Liens, claims and
encumbrances.
5.12 Assigned Contracts. Each Borrower shall fully perform all of its
obligations under each of such Borrower's Assigned Contracts, and shall enforce
all of its rights and remedies thereunder as it deems appropriate in its
business judgment; provided, however, that no Borrower shall take any action or
fail to take any action with respect to its Assigned Contracts which would
result in a waiver or other loss of any material right or remedy of such
Borrower thereunder. Without limiting the generality of the foregoing, each
Borrower shall take all action necessary or appropriate to permit, and shall not
take any action which would have any materially adverse effect upon, the full
enforcement of all indemnification rights under its Assigned Contracts. No
Borrower shall, without the Agent's prior written consent, modify, amend,
supplement, compromise, satisfy, release, or discharge any of its
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Assigned Contracts, any collateral securing the same, any Person liable directly
or indirectly with respect thereto, or any agreement relating to any of its
Assigned Contracts or the collateral therefor. Each Borrower shall notify the
Agent in writing, promptly after such Borrower becomes aware thereof, of any
event or fact which could give rise to a claim by it for indemnification under
any of its Assigned Contracts, and shall diligently pursue such right and report
to the Agent on all further developments with respect thereto. Each Borrower
shall remit directly to the Agent for application to the Obligations in such
order as the Majority Lenders shall determine, all amounts received by such
Borrower as indemnification or otherwise pursuant to its Assigned Contracts. If
any Borrower shall fail after the Agent's demand to pursue diligently any right
under its Assigned Contracts, or if an Event of Default then exists, the Agent
may, and at the direction of the Majority Lenders shall, directly enforce such
right in its own or such Borrower's name and may enter into such settlements or
other agreements with respect thereto as the Agent or the Majority Lenders, as
applicable, shall determine. In any suit, proceeding or action brought by the
Agent under any Assigned Contract for any sum owing thereunder or to enforce any
provision thereof, the Borrowers shall indemnify and hold the Agent harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaims, recoupment, or reduction of liability whatsoever of the
obligor thereunder arising out of a breach by the applicable Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing from such Borrower to or in favor of such obligor or
its successors. All such obligations of the applicable Borrower shall be and
remain enforceable only against such Borrower and shall not be enforceable
against the Agent. Notwithstanding any provision hereof to the contrary, each
Borrower shall at all times remain liable to observe and perform all of its
duties and obligations under its Assigned Contracts, and the Agent's or any
Lender's exercise of any of their respective rights with respect to the
Collateral shall not release such Borrower from any of such duties and
obligations. Neither the Agent nor any Lender shall be obligated to perform or
fulfill any of any Borrower's duties or obligations under its Assigned Contracts
or to make any payment thereunder, or to make any inquiry as to the nature or
sufficiency of any payment or property received by it thereunder or the
sufficiency of performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any performance, any payment
of any amounts, or any delivery of any property.
5.13 Documents, Instruments, and Chattel Paper. Each Borrower
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that (a) all documents, instruments, and chattel paper
describing, evidencing, or constituting Collateral with respect to such
Borrower, and all signatures and endorsements thereon, are and will be complete,
valid, and genuine and (b) all goods evidenced by such documents, instruments,
and chattel paper are and will be owned by such Borrower free and clear of all
Liens other than Permitted Liens.
5.14 Right to Cure. The Agent may, in its discretion and at any time,
and shall, at the direction of the Majority Lenders, for the Borrowers' account
and at the Borrowers' expense, pay any amount or do any act required of any
Borrower hereunder or requested by the Agent to preserve, protect, maintain or
enforce the Obligations, the Collateral or the Agent's Liens therein, and which
such Borrower fails to pay or do, including, without limitation, payment of any
judgment against such Borrower, any insurance premium, any warehouse charge, any
finishing or processing charge, any landlord's claim, and any other Lien upon or
with respect to the Collateral. All payments that the Agent makes under this
Section 5.14 and all out-of-pocket costs and expenses that the Agent pays or
incurs in connection with any action taken by it hereunder shall be charged to
the Borrowers' loan account as a Revolving Loan as described in Section 4.4. Any
payment made or other action taken by the Agent
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under this Section 5.14 shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed thereafter as herein provided.
5.15 Power of Attorney. Each Borrower hereby appoints the Agent and the
Agent's designees as such Borrower's attorney, with power: (a) to endorse such
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Agent's or any Lender's possession;
(b) to sign such Borrower's name on any invoice, bill of lading, warehouse
receipt or other document of title relating to any Collateral, on drafts against
customers, on assignments of Accounts, on notices of assignment, financing
statements and other public records; (c) to notify the post office authorities,
when an Event of Default exists, to change the address for delivery of such
Borrower's mail to an address designated by the Agent and to receive, open and
dispose of all mail addressed to the such Borrower; (d) to send requests for
verification of accounts to customers or account debtors; (e) to clear
Inventory, the purchase of which was financed with Letters of Credit, through
customs in such Borrower's name, the Agent's name or the name of the Agent's
designee, and to sign and deliver to customs officials powers of attorney in
such Borrower's name for such purpose; and (f) to do all things necessary to
carry out this Agreement. Each Borrower ratifies and approves all acts of such
attorney. None of the Lenders or the Agent nor the attorneys will be liable for
any acts or omissions or for any error of judgment or mistake of fact or law.
This power, being coupled with an interest, is irrevocable until this Agreement
has been terminated and the Obligations have been fully satisfied.
5.16 The Agent's and Lenders' Rights, Duties and Liabilities. Each
Borrower assumes all responsibility and liability arising from or relating to
the use, sale or other disposition of the Collateral. Neither the Agent, nor any
Lender, nor any of their respective officers, directors, employees or agents
shall be liable or responsible in any way for the safekeeping of any of the
Collateral, or for any loss or damage thereto, or for any diminution in the
value thereof, or for any act of default of any warehouseman, carrier,
forwarding agency or other person whomsoever, all of which shall be at the
Borrowers' sole risk. The Obligations shall not be affected by any failure of
the Agent or any Lender to take any steps to perfect the Agent's Liens or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Borrower from any of the Obligations. The Agent may, and
at the direction of the Majority Lenders shall, without notice to or consent
from any Borrower, sue upon or otherwise collect, extend the time for payment
of, modify or amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of any Borrower for the Obligations or under
this Agreement or any other agreement now or hereafter existing between the
Agent and/or any Lender and any Borrower.
ARTICLE 6
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
6.1 Books and Records. Each Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements
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required to be delivered pursuant to Section 6.2(a). Each Borrower shall, by
means of appropriate entries, reflect in such accounts and in all Financial
Statements proper liabilities and reserves for all taxes and proper provision
for depreciation and amortization of property and bad debts, all in accordance
with GAAP. Each Borrower shall maintain at all times books and records
pertaining to the Collateral in such detail, form and scope as the Agent or any
Lender shall reasonably require, including, but not limited to, records of (a)
all payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, rejections, repossession, stoppage in transit, loss,
damage, or destruction of any Inventory; and (c) all other dealings affecting
the Collateral.
6.2 Financial Information. The Borrowers shall promptly furnish to the
Agent, in sufficient copies for distribution by the Agent to each Lender, all
such financial information as the Agent or any Lender shall reasonably request,
and notify its auditors and accountants that the Agent, on behalf of the
Lenders, is authorized to obtain such information directly from them. Without
limiting the foregoing, the Borrowers will furnish to the Agent, in sufficient
copies for distribution by the Agent to each Lender, in such detail as the Agent
or the Lenders shall request, the following:
(a) As soon as available, but in any event not later than ninety
(90) days after the close of each Fiscal Year, consolidated audited and
consolidating unaudited balance sheets, and statements of income and
expense, cash flow and of stockholders' equity for the Parent and its
consolidated Subsidiaries for such Fiscal Year, and the accompanying notes
thereto, setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting the
financial position and the results of operations of the Parent and its
consolidated Subsidiaries as at the date thereof and for the Fiscal Year
then ended, and prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards by and, in
the case of such statements performed on a consolidated basis.
(b) As soon as available, but in any event not later than
forty-five (45) days after the end of each month, consolidated and
consolidating unaudited balance sheets of the Parent and its consolidated
Subsidiaries as at the end of such month, and consolidated and consolidating
unaudited statements of income and expense and cash flow for the Parent and
its consolidated Subsidiaries for such month and for the period from the
beginning of the Fiscal Year to the end of such month, all in reasonable
detail, fairly presenting the financial position and results of operations
of the Parent and its consolidated Subsidiaries as at the date thereof and
for such periods, and prepared in accordance with GAAP applied consistently
with the audited Financial Statements required to be delivered pursuant to
Section 6.2(a). Such statements shall be certified to be correct by the
chief financial or accounting officer of the Parent, subject to normal
year-end adjustments.
(c) With each of the audited Financial Statements delivered
pursuant to Section 6.2(a), a certificate of the independent certified
public accountants that examined such statement to the effect that they have
reviewed and are familiar with this Agreement and that, in examining such
Financial Statements, they did not become aware of any fact or condition
which then constituted a Default or Event of Default, except for those, if
any, described in reasonable detail in such certificate.
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(d) With each of the annual audited Financial Statements delivered
pursuant to Section 6.2(a), and within forty-five (45) days after the end of
each fiscal quarter, a certificate of the chief financial officer of the
Parent (i) setting forth in reasonable detail the calculations required to
establish that the Borrowers were in compliance with the covenants set forth
in Sections 8.22, 8.24 and 8.25 during the period covered in such Financial
Statements and as at the end thereof, and (ii) stating that, except as
explained in reasonable detail in such certificate, (A) all of the
representations and warranties of the Borrowers contained in this Agreement
and the other Loan Documents are correct and complete in all material
respects as at the date of such certificate as if made at such time, (B) the
Borrowers are, at the date of such certificate, in compliance in all
material respects with all of their respective covenants and agreements in
this Agreement and the other Loan Documents, and (C) no Default or Event of
Default then exists or existed during the period covered by such Financial
Statements. If such certificate discloses that a representation or warranty
is not correct or complete in all material respects, or that a covenant has
not been complied with in all material respects, or that a Default or Event
of Default existed or exists, such certificate shall set forth what action
the applicable Borrower has taken or proposes to take with respect thereto.
(e) Within forty-five (45) days after the end of each fiscal
quarter, consolidated and consolidating projected balance sheets, statements
of income and expense, and statements of cash flow for the Parent and its
consolidated Subsidiaries as at the end of and for the then current fiscal
quarter and as at the end of and for each of the succeeding three (3) fiscal
quarters.
(f) Within forty-five (45) days after the end of each fiscal
quarter, a report of the Capital Expenditures of the Parent and its
consolidated Subsidiaries for such quarter and a statement of cash flow for
the Parent and its consolidated Subsidiaries for the period from the
beginning of the then current Fiscal Year to the end of such quarter,
prepared in accordance with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant to Section 6.2(a).
(g) Promptly after their preparation, copies of any all proxy
statements, financial statements, and reports which any Borrower makes
available to its stockholders.
(h) Promptly after filing with the IRS, a copy of each tax return
filed by the Parent or by any of its Subsidiaries.
(i) Promptly upon the filing or transmission thereof to any third
party, all schedules or reports (and any amendment or supplements thereto)
required or permitted to be filed or transmitted by Bankruptcy Rules 1007 or
1009, or otherwise required or permitted by the United States Department of
Justice, the Office of the United States Attorney General, or the Office of
the United States Trustee.
(j) Concurrently with the delivery to any party listed below, all
written information with respect to the Obligations, the Collateral, or the
Agent's or Lenders' Liens in the
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Collateral delivered to the Committee any representative of the Committee,
or any holder of Debt or stock of any Borrower.
(k) Such additional information as the Agent and/or any Lender may
from time to time reasonably request regarding the financial and business
affairs of the Parent or any Subsidiary, including, without limitation,
projections of future operations on both a consolidated and consolidating
basis.
6.3 Notices to the Lenders. The Borrowers shall notify the Agent,
in writing, in sufficient copies for distribution by the Agent to each Lender,
of the following matters at the following times:
(a) Immediately after becoming aware thereof, any Default or Event
of Default.
(b) Immediately after becoming aware thereof, the assertion by the
holder of any capital stock of any Borrower or of any Debt incurred after
the Petition Date in an outstanding principal amount in excess of $100,000
that a default exists with respect thereto or that such Borrower is not in
compliance with the terms thereof, or the threat or commencement by such
holder of any enforcement action because of such asserted default or
non-compliance.
(c) Immediately after becoming aware thereof, any material adverse
change in the Parent's or any Subsidiary's property, business, operations,
or condition (financial or otherwise).
(d) Immediately after becoming aware thereof, any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Public Authority, which action,
suit, proceeding, counterclaim or investigation seeks damages in excess of
$500,000 (which amount shall not be fully covered by insurance), or which
may otherwise materially and adversely affect the Collateral, the repayment
of the Obligations, the Agent's or any Lender's rights under the Loan
Documents, or the Parent's or any Subsidiary's property, business,
operations, or condition (financial or otherwise).
(e) Immediately after becoming aware thereof, any pending or
threatened strike, work stoppage, material unfair labor practice claim, or
other material labor dispute affecting any Borrower.
(f) Immediately after receipt thereof, any written notice of any
violation by the Parent or any of its Subsidiaries of any Environmental Law,
or written notice that its compliance with any Environmental Law is being
investigated by a Public Authority, where such violation or alleged
non-compliance is reasonably likely to give rise to fines, penalties or
liability in excess of $100,000.
(g) Immediately after receipt thereof, any written notice that the
Parent or any of its Subsidiaries is or may be liable to any Person as a
result of the Release or
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threatened Release of any Contaminant or that the Parent or any Subsidiary
is subject to investigation by any Public Authority evaluating whether any
remedial action is needed to respond to the Release or threatened Release of
any Contaminant which, in either case, is reasonably likely to give rise to
liability in excess of $100,000.
(h) Immediately after receipt thereof, any written notice of the
imposition of any Environmental Lien against any property of the Parent or
any of its Subsidiaries.
(i) Any change in any Borrower's name, state of incorporation, or
form of organization, trade names or styles under which such Borrower will
sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
(j) Within ten (10) Business Days after any Borrower or any ERISA
Affiliate knows or has reason to know, that a Termination Event or a
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred, and, when known, any action taken or threatened by the
IRS, the DOL or the PBGC with respect thereto.
(k) Upon request, or, in the event that such filing reflects a
significant change with respect to the matters covered thereby, within three
(3) Business Days after the filing thereof with the PBGC, the DOL or the
IRS, as applicable, copies of the following: (i) each annual report (form
5500 series), including Schedule B thereto, filed with the PBGC, the DOL or
the IRS with respect to each Benefit Plan, (ii) a copy of each funding
waiver request filed with the PBGC, the DOL or the IRS with respect to any
Benefit Plan and all communications received by any Borrower or any ERISA
Affiliate from the PBGC, the DOL or the IRS with respect to such request,
and (iii) a copy of each other filing or notice filed with the PBGC, the DOL
or the IRS, with respect to each Plan of either Borrower or any ERISA
Affiliate.
(l) Upon request, copies of each actuarial report for any Benefit
Plan or Multiemployer Plan and annual report for any Multiemployer Plan; and
within three (3) Business Days after receipt thereof by any Borrower or any
ERISA Affiliate, copies of the following: (i) any notices of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed to
administer such Benefit Plan; (ii) any favorable or unfavorable
determination letter from the IRS regarding the qualification of a Plan
under Section 401(a) of the Code; or (iii) any notice from a Multiemployer
Plan regarding the imposition of withdrawal liability.
(m) Within three (3) Business Days upon the occurrence thereof:
(i) any changes in the benefits of any existing Plan which increase the
Borrowers' annual costs with respect thereto by an amount in excess of
$250,000, or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any ERISA Affiliate was
not previously contributing; or (ii) any failure by any Borrower or any
ERISA Affiliate to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment
or payment.
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(n) Within three (3) Business Days after any Borrower or any ERISA
Affiliate knows or has reason to know that any of the following events has
or will occur: (i) a Multiemployer Plan has been or will be terminated; (ii)
the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan; or (iii) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
For purposes of subsections (j) through (n) above, each Borrower and any ERISA
Affiliate shall be deemed to know all facts known by the Administrator of any
Plan of which such Borrower or any ERISA Affiliate is the plan sponsor.
Each notice given under this Section shall describe the subject
matter thereof in reasonable detail, and shall set forth the action that the
Parent, its Subsidiary or any ERISA Affiliate, as applicable, has taken or
proposes to take with respect thereto.
ARTICLE 7
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to the Agent and the Lenders
that:
7.1 Authorization, Validity, and Enforceability of this Agreement and
the Loan Documents. Such Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral with respect to such Borrower. Such Borrower has
taken all necessary corporate action to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority (other than the Bankruptcy Court), and no consent of any other Person
(other than the Bankruptcy Court), is required in connection with such
Borrower's execution, delivery and performance of this Agreement and the other
Loan Documents, except for those already duly obtained. Each of this Agreement
and the other Loan Documents to which such Borrower is a party has been duly
executed and delivered by such Borrower, and constitutes the legal, valid and
binding obligation of such Borrower, enforceable against it in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally. Such Borrower's execution, delivery, and performance of this
Agreement and the other Loan Documents do not and will not conflict with, or
constitute a violation or breach of, or constitute a default under, or result in
the creation or imposition of any Lien upon the property of such Borrower by
reason of the terms of (a) any contract, mortgage, Lien, lease, agreement,
indenture, or instrument to which such Borrower is a party or which is binding
upon it, (b) any judgment, law, statute, rule or governmental regulation
applicable to such Borrower, or (c) the Certificate or Articles of Incorporation
or By-laws of such Borrower.
7.2 Validity and Priority of Security Interest. The provisions of this
Agreement, the other Loan Documents, the Interim Order and the Final Order
create legal and valid Liens on all the Collateral in favor of the Agent, for
the ratable benefit of the Secured Creditors, and such Liens constitute
perfected and continuing Liens on all the Collateral, having priority over all
other Liens on
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the Collateral except Permitted Liens, and enforceable against the applicable
Borrower and all third parties. Notwithstanding anything to the contrary
contained herein, (i) the Pre-Petition Obligations are secured by the
Pre-Petition Collateral, and, solely for the purpose of adequate protection
pursuant to Sections 361, 362, 363, and 364 of the Bankruptcy Code as provided
in the Interim Order and the Final Order, the Post-Petition Collateral; (ii) the
Post-Petition Obligations are secured by the Post-Petition Collateral and the
Pre-Petition Collateral; (iii) except with respect to Pre-Petition Permitted
Liens which as a matter of applicable nonbankruptcy law have priority over the
Agent's Liens as of the Petition Date, the Liens securing the Pre-Petition
Obligations have priority over all other Liens against the Collateral; and (iv)
except with respect to the Pre-Petition Permitted Liens and the Carveout, the
Post-Petition Obligations constitute allowed administrative superpriority
expenses in the Case having priority, and the Agent's Liens securing
Post-Petition Obligations have priority, in accordance with the provisions of
Section 364(c) of the Bankruptcy Code, over all administrative expenses, secured
claims and unsecured claims against the Borrowers now existing or hereafter
arising, of any kind or nature whatsoever, including, without limitation, all
administrative expenses of the kind specified in Sections 105, 326, 327, 328,
330, 331, 503, 506(c), 507, 726, or 1114 of the Bankruptcy Code.
7.3 Organization and Qualification. Such Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of, in the case of the Parent or Laclede Chain, the State of Delaware, and, in
the case of Laclede Mid America, the State of Indiana, (b) is qualified to do
business as a foreign corporation and is in good standing in the States of, in
the case of the Parent, Illinois, Michigan, Missouri, Pennsylvania, Tennessee
and Texas, and, in the case of Laclede Chain, Colorado, Missouri, Texas, and
Oregon, and, in the case of Laclede Mid America, Missouri, which are the only
states in which qualification is necessary in order for it to own or lease its
property and conduct its business, and (c) has all requisite power and authority
to conduct its business and to own its property.
7.4 Corporate Name; Prior Transactions. Such Borrower has not, during
the past five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
outside of the ordinary course of business, except as set forth on Schedule 7.4.
7.5 Subsidiaries and Affiliates. Schedule 7.5 is a correct and complete
list of the name and relationship to the Parent of each and all of the Parent's
Subsidiaries and other Affiliates. Each Subsidiary is (a) duly incorporated and
organized and validly existing in good standing under the laws of its state of
incorporation set forth on Schedule 7.5, and (b) qualified to do business as a
foreign corporation and in good standing in the states identified in Section
7.3, which are the only states in which such qualification is necessary in order
for it to own or lease its property and conduct its business.
7.6 Financial Statements and Projections. (a) The Borrowers have
delivered to the Agent and the Lenders the audited balance sheet and related
statements of income, retained earnings, changes in financial position, and
changes in stockholders equity for the Parent and its consolidated Subsidiaries
as of December 31, 1997, and for the Fiscal Year then ended, accompanied by the
report thereon of the Parent's independent certified public accountants,
Deloitte & Touche. The Borrowers have also delivered to the Agent and the
Lenders the unaudited balance sheet and related statements of
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income and changes in financial position for the Parent and its consolidated
Subsidiaries as of September 30, 1998 and for the third quarter and nine-month
period then ended. Such financial statements are attached hereto as Exhibit C.
All such financial statements have been prepared in accordance with GAAP and
present accurately and fairly the financial position of the Parent and its
consolidated Subsidiaries as at the dates thereof and their results of
operations for the periods then ended.
(b) The Latest Projections represent the Borrowers' best estimate of
the future financial performance of the Parent and its consolidated Subsidiaries
for the periods set forth therein. The Latest Projections have been prepared on
the basis of the assumptions set forth therein, which the Borrowers believe are
fair and reasonable in light of current and reasonably foreseeable business
conditions.
7.7 Capitalization. The Parent's authorized capital stock consists of
(a) 5,000,000 shares of common stock, par value $13.33 per share, of which
4,056,140 shares are validly issued and outstanding, fully paid and
non-assessable, and (b) 2,000,000 shares of the Redeemable Preferred Stock, of
which 416,667 shares are validly issued and outstanding, fully paid and
non-assessable. Laclede Chain's authorized capital stock consists of 3000 shares
of common stock, par value $1.00 per share, of which 100 shares are validly
issued and outstanding, fully paid and non-assessable, and are owned
beneficially and of record by the Parent. Laclede Mid America's authorized
capital stock consists of 1000 shares of common stock, par value $1.00 per
share, of which 100 shares are validly issued and outstanding, fully paid and
non-assessable, and are owned beneficially and of record by the Parent.
7.8 [Intentionally left blank]
7.9 Debt. The Parent and its consolidated Subsidiaries have no Debt,
except (a) the Obligations, (b) Debt described on Schedule 7.9, and (c) trade
payables and other contractual obligations arising in the ordinary course of
business.
7.10 Distributions. Since December 31, 1993, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
Securities of the Parent or any of its Subsidiaries, except as expressly
permitted by Section 8.10.
7.11 Title to Property. With respect to those locations listed as
Premises owned by such Borrower on Schedule 7.12, such Borrower has good and
marketable title in fee simple to such Premises, and such Borrower has good,
indefeasible, and merchantable title to all of its other property (including,
without limitation, the assets reflected on the June 30, 1998 Financial
Statements delivered to the Agent and the Lenders, except as disposed of in the
ordinary course of business since the date thereof or as otherwise expressly
permitted hereby), free of all Liens except Permitted Liens.
7.12 Real Estate; Leases. Schedule 7.12 sets forth a correct and
complete list of all Real Estate owned by the Parent or any of its Subsidiaries,
all leases and subleases of real or personal property by the Parent or its
Subsidiaries as lessee or sublessee, and all leases and subleases of real or
personal property by the Parent or its Subsidiaries as lessor, lessee, sublessor
or sublessee. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no default by any
party to any such lease or sublease exists.
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7.13 Proprietary Rights. Schedule 7.13 sets forth a correct and
complete list of all of the Proprietary Rights. None of the Proprietary Rights
is subject to any licensing agreement or similar arrangement except as set forth
on Schedule 7.13. To the best of such Borrower's knowledge, none of the
Proprietary Rights infringes on or conflicts with any other Person's property,
and no other Person's property infringes on or conflicts with the Proprietary
Rights. The Proprietary Rights described on Schedule 7.13 constitute all of the
property of such type necessary to the current and anticipated future conduct of
such Borrower's business.
7.14 Trade Names and Terms of Sale. All trade names or styles under
which the Parent or any of its Subsidiaries will sell Inventory or create
Accounts, or to which instruments in payment of Accounts may be made payable,
are listed on Schedule 7.4.
7.15 Litigation. Except as set forth on Schedule 7.15, there is no
pending or (to the best of such Borrower's knowledge) threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, the Agent's
or any Lender's rights under the Loan Documents, or the property, business,
operations, or condition (financial or otherwise) of the Parent or any of its
Subsidiaries.
7.16 Restrictive Agreements. Neither the Parent nor any of its
Subsidiaries is a party to any contract or agreement, or subject to any charter
or other corporate restriction, which affects its ability to execute, deliver,
and perform the Loan Documents and repay the Obligations or which materially and
adversely affects or, insofar as any Borrower can reasonably foresee, could
materially and adversely affect, the property, business, operations, or
condition (financial or otherwise) of the Parent or such Subsidiary, or would in
any respect materially and adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan Documents, or the
property, business, operations, or condition (financial or otherwise) of the
Parent or such Subsidiary.
7.17 Labor Disputes. Except as set forth on Schedule 7.17, (a) there is
no collective bargaining agreement or other labor contract covering employees of
the Parent or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement and (c) no union or other labor organization is seeking to organize,
or to be recognized as, a collective bargaining unit of employees of the Parent
or any of its Subsidiaries or for any similar purpose, and (d) there is no
pending or (to the best of such Borrower's knowledge) threatened, strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting the Parent or its Subsidiaries or their employees.
7.18 Environmental Laws. Except as otherwise disclosed on Schedule
7.18:
(a) Each of the Parent and its Subsidiaries is currently in material
compliance with, and, to the best of its knowledge, has complied in all
material respects with, all Environmental Laws applicable to its Premises
and business, and neither the Parent nor any such Subsidiary nor any of its
present Premises or operations, or to the best of such Borrower's knowledge,
its past property or operations, are subject to any enforcement order from
or liability agreement with any Public Authority or private Person
respecting (i) material non-compliance with any Environmental Law or (ii)
any material liabilities and costs or remedial action arising from the
Release or threatened Release of a Contaminant.
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(b) Each of the Parent and its Subsidiaries has obtained all
permits necessary for its current operation under Environmental Laws, and
all such permits are in good standing and the Parent is and such
Subsidiaries are in compliance in all material respects with all terms and
conditions of such permits.
(c) Neither the Parent nor any of its Subsidiaries, nor, to the
best of such Borrower's knowledge, any of its predecessors in interest, has
stored, treated or disposed of any hazardous waste on any Premises, as
defined pursuant to 40 CFR Part 261 or any equivalent Environmental Law, so
as to require issuance of a permit.
(d) Neither the Parent nor any of its Subsidiaries has any
contingent liability with respect to non-compliance with any Environmental
Laws or any Release or threatened Release of a Contaminant or the
generation, handling, use, storage, or disposal of any Contaminant, which
contingent liability is reasonably likely to give rise to a violation of
either of the covenants contained in Sections 8.24 or 8.25.
(e) Neither the Parent nor any of its Subsidiaries has received
any summons, complaint, order or similar written notice that it is not
currently in compliance with, or that any Public Authority is investigating
its compliance with, any Environmental Laws or that it is or may be liable
to any other Person as a result of a Release or threatened Release of a
Contaminant.
(f) To the best of the Borrowers' knowledge, none of the present
or past operations of the Parent and its Subsidiaries is the subject of any
investigation by any Public Authority evaluating whether any material
remedial action is needed to respond to a Release or threatened Release of a
Contaminant.
(g) There is not now, nor to the best of such Borrower's knowledge
has there ever been on or in the Premises:
(i) any underground storage tanks or surface impoundments,
(ii) any asbestos containing material, or
(iii) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment.
(h) Within the last six (6) years, neither the Parent nor any of
its Subsidiaries has filed any notice under any requirement of Environmental
Law reporting a spill or accidental and unpermitted release or discharge of
a Contaminant into the environment, which is reasonably likely to lead to
material liabilities and costs.
(i) Neither the Parent nor any of its Subsidiaries has entered
into any negotiations or settlement agreements with any Person (including,
without limitation, the prior owner of its property) imposing material
obligations or liabilities on the Parent or any of its Subsidiaries with
respect to any remedial action in response to the Release of a Contaminant
or environmentally related claim.
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(j) None of the products manufactured, distributed or sold by the
Parent or any of its Subsidiaries contain asbestos containing material.
(k) No Environmental Lien has attached to any Premises of the
Parent or any of its Subsidiaries.
(l) For purposes of this Section 7.18 "material" shall mean costs
or liabilities which could reasonably exceed $750,000.
7.19 No Violation of Law. Neither the Parent nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation would in any respect
materially and adversely affect the Collateral, the repayment of the
Obligations, the Agent's or any Lender's rights under the Loan Documents, or the
property, business, operations, or condition (financial or otherwise) of the
Parent or any of its Subsidiaries.
7.20 No Default. [Intentionally left blank].
7.21 ERISA. Neither the Parent nor any of its Subsidiaries nor any
ERISA Affiliate maintains or contributes to any Plan other than those listed on
Schedule 7.21.
7.22 Taxes. Each of the Parent and each of its Subsidiaries has
filed all tax returns and other reports which it was required by law to file on
or prior to the date hereof and has paid all taxes, assessments, fees, and other
governmental charges, and penalties and interest, if any, against it or its
property, income, or franchise, that are due and payable.
7.23 Investment Act, Etc. Neither the Parent nor any of its
Subsidiaries is an "investment company" nor an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ?
80(a)(l), et seq.), nor is the Parent or any Subsidiary subject to any other
state or federal regulation limiting its ability to incur Debt. The making of
the Post-Petition Revolving Loans and other financial accommodations hereunder
by the Agent and the Lenders, the application of the proceeds and repayment
thereof by the Borrowers and the consummation of the other transactions
contemplated by this Agreement and the Loan Documents do not violate any
provisions of such laws or any rule, regulation or order issued by the
Securities and Exchange Commission or other Public Authority thereunder.
7.24 Public Utility Holding Company. Neither the Parent 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.
7.25 Margin Securities. Neither the Parent nor any of its
Subsidiaries owns any "margin stock," as that term is defined in Regulation U of
the Federal Reserve Board, and the proceeds of the Post-Petition Revolving Loans
and the other financial accommodations made pursuant to this Agreement will be
used only for the purposes contemplated hereunder. None of the Post-Petition
Revolving Loans or the other financial accommodations hereunder will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any Debt or other Person's
indebtedness which was originally incurred to purchase or carry any margin
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security, or for any other purpose which might cause any such loan or other
financial accommodation to be considered a "purpose credit" within the meaning
of Regulation U or X of the Federal Reserve Board. Such Borrower will neither
take nor permit any agent acting on its behalf to take any action which might
cause any transaction, obligation or right created by this Agreement, or any
document or instrument delivered pursuant hereto, to violate any regulation of
the Federal Reserve Board.
7.26 Broker's Fees. No broker or finder is entitled to receive
compensation for services rendered with respect to the transactions described in
this Agreement.
7.27 [Intentionally left blank]
7.28 Disclosure. Neither this Agreement nor any document or
statement furnished to the Agent or any Lender by or on behalf of such Borrower
hereunder contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained herein or
therein not misleading.
7.29 Bank Accounts. Schedule 7.29 contains a complete and accurate
list of all bank accounts maintained by such Borrower with any bank or other
financial institution.
7.30 Year 2000 Compliance. On the basis of a comprehensive review
and assessment undertaken by the Borrowers of their respective computer
applications and inquiry made of their material suppliers, vendors and
customers, the Borrowers reasonably believe that the "Year 2000 problem" (that
is, the risk that computer applications used by any person may be unable to
recognize and perform properly certain date-sensitive functions involving dates
prior to and any date after December 31, 1999) will not result in a material
adverse change in any of the operations, business, properties or condition
(financial or otherwise) of the Borrowers. The Borrowers have developed adequate
contingency plans to ensure uninterrupted and unimpaired business operations in
the event of a failure of their own or a third party's systems or equipment due
to the Year 2000 problem, including those of suppliers, vendors and customers,
as well as a general failure of or interruption in their communications and
delivery infrastructure.
7.31 Pre-Petition Obligations; Defenses. As of the Petition Date,
the amount of the aggregate outstanding principal balance of the Pre-Petition
Obligations is as set forth on Schedule 7.31, and the Borrowers are truly and
justly indebted to the Agent and the Lenders on such Pre-Petition Obligations,
plus all accrued and unpaid interest, fees and expenses on the Pre-Petition
Obligations, without setoff, defense or counterclaim.
ARTICLE 8
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower covenants to the Agent and each Lender that, so long
as any of the Obligations remain outstanding or this Agreement is in effect:
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8.1 Taxes and Other Obligations. Such Borrower shall, and
shall cause each of its Subsidiaries to, (a) file when due all tax returns and
other reports which it is required to file, (b) pay, or provide for the payment,
when due, of all taxes, fees, assessments and other governmental charges against
it or upon its property, income and franchises, make all required withholding
and other tax deposits, and establish adequate reserves for the payment of all
such items, and provide to the Agent and the Lenders, upon request, satisfactory
evidence of its timely compliance with the foregoing and (c) pay when due all
claims of materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons, and all other indebtedness owed by it and perform and discharge in
a timely manner all other obligations undertaken by it, in each case, to the
extent such taxes, fees, assessments, charges, claims or indebtedness constitute
obligations arising after the Petition Date; provided, however, that neither the
Parent nor any of its Subsidiaries need pay any tax, fee, assessment,
governmental charge, or Debt, or discharge any other obligation, that it is
contesting in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves are maintained, so long as no Lien, other than a
Permitted Lien, results from such non-payment.
8.2 Corporate Existence and Good Standing. Such Borrower shall
maintain its corporate existence and its qualification and good standing in all
states necessary to conduct its business and own its property, and shall obtain
and maintain all licenses, permits, franchises and governmental authorizations
necessary to conduct its business and own its property.
8.3 Compliance with Law and Agreements. Except as may be
required or permitted by the provisions of the Bankruptcy Code or by the
Bankruptcy Court during the existence of the Case, such Borrower shall, and
shall cause each of its Subsidiaries to, comply in all material respects with
each judgment, law, statute, rule, and governmental regulation applicable to it
and each contract, mortgage, lien, lease, indenture, order, instrument,
agreement, or document to which it is a party or by which it is bound.
8.4 Maintenance of Property. Such Borrower shall, and shall
cause each of its Subsidiaries to, maintain all of its property necessary and
useful, in the judgment of such Borrower, in the conduct of its business, in
good operating condition and repair, ordinary wear and tear excepted.
8.5 Insurance. (a) Such Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, with financially sound and reputable
insurers, insurance against loss or damage by fire with extended coverage;
theft, burglary, pilferage and loss in transit; public liability and third party
property damage; larceny, embezzlement or other criminal liability; business
interruption; public liability and third party property damage; and such other
hazards or of such other types as is customary for Persons engaged in the same
or similar business, as the Agent, in its discretion, or acting at the direction
of the Majority Lenders, shall specify, in amounts, and under policies
acceptable to the Agent and the Majority Lenders. Without limiting the
foregoing, such Borrower shall also maintain, and shall cause each of its
Subsidiaries to maintain, flood insurance, in the event of a designation of the
area in which any Real Estate is located as "flood prone" or a "flood risk
area," as defined by the Flood Disaster Protection Act of 1973, in an amount to
be reasonably determined by the Agent, and shall comply with the additional
requirements of the National Flood Insurance Program as set forth in said Act.
(b) Such Borrower shall cause the Agent, for the ratable
benefit of the Secured Creditors, to be named in each such policy as secured
party or mortgagee and loss payee or additional
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insured, in a manner acceptable to the Agent. Each policy of insurance shall
contain a clause or endorsement requiring the insurer to give not less than
thirty (30) days' prior written notice to the Agent in the event of cancellation
of the policy for any reason whatsoever and a clause or endorsement stating that
the interest of the Agent shall not be impaired or invalidated by any act or
neglect of the Parent or any of its Subsidiaries or the owner of any premises
for purposes more hazardous than are permitted by such policy. All premiums for
such insurance shall be paid by the Borrowers when due, and certificates of
insurance and, if requested by the Agent or any Lender, photocopies of the
policies, shall be delivered to the Agent, in each case in sufficient quantity
for distribution by the Agent to each of the Lenders. If such Borrower fails to
procure such insurance or to pay the premiums therefor when due, the Agent may,
and at the direction of the Majority Lenders shall, do so from the proceeds of
Revolving Loans as described in Section 4.4.
(c) Such Borrower shall promptly notify the Agent and the
Lenders of any loss, damage, or destruction to the Collateral with respect to
such Borrower or arising from its use, whether or not covered by insurance. The
Agent is hereby authorized to collect all insurance proceeds directly, and to
apply or remit them as follows:
(i) With respect to insurance proceeds relating to property
other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall promptly remit to such Borrower such
proceeds.
(ii) With respect to insurance proceeds relating to Collateral
other than Fixed Assets, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall apply such proceeds, ratably, to the
reduction of the Obligations in the order provided for in Section 4.5.
(iii) With respect to insurance proceeds relating to
Collateral consisting of Fixed Assets, after deducting from such
proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds,
ratably, to the reduction of the Term Loans (applying such proceeds
ratably to the installments of the Term Loans in the inverse order of
maturity), or at the option of the Majority Lenders, may permit or
require the applicable Borrower to use such money, or any part thereof,
to replace, repair, restore or rebuild the relevant Fixed Assets in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction.
8.6 Condemnation. (a) Such Borrower shall, immediately upon
learning of the institution of any proceeding for the condemnation or other
taking of any of its property, notify the Agent and the Lenders of the pendency
of such proceeding, and agrees that the Agent may participate in any such
proceeding, and such Borrower from time to time will deliver to the Agent all
instruments reasonably requested by the Agent to permit such participation.
(b) The Agent is hereby authorized to collect the proceeds of
any condemnation claim or award directly, and to apply or remit them as follows:
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(i) With respect to condemnation proceeds relating to property
other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or
handling thereof, the Agent shall remit to such Borrower such proceeds.
(ii) With respect to condemnation proceeds relating to
Collateral other than Fixed Assets, after deducting from such proceeds
the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds,
ratably, to the reduction of the Obligations in the order provided for
in Section 4.5.
(iii) With respect to condemnation proceeds relating to
Collateral consisting of Fixed Assets, after deducting from such
proceeds the reasonable expenses, if any, incurred by the Agent in the
collection or handling thereof, the Agent shall apply such proceeds,
ratably, to the reduction of the Term Loans (applying such proceeds
ratably to the installments of the Term Loans in the inverse order of
maturity), or at the option of the Majority Lenders, may permit or
require the applicable Borrower to use such money, or any part thereof,
to replace, repair, restore or rebuild the relevant Fixed Assets in a
diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the condemnation.
8.7 Environmental Laws. (a) Such Borrower shall, and shall
cause each of its Subsidiaries to, conduct its business in material compliance
with all Environmental Laws applicable to it, including, without limitation,
those relating to the generation, handling, use, storage, and disposal of any
Contaminant. Such Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and appropriate action to respond to any material non-compliance
with Environmental Laws and shall regularly report to the Agent on such
response.
(b) Without limiting the generality of the foregoing, each
Borrower shall submit to the Agent and the Lenders annually, on or before
September 30 of each year, an update of the status of each environmental
compliance or liability issue: (i) identified on Schedule 7.18; and/or (ii)
identified in any notification provided pursuant to Sections 6.3(f) or (g). To
the extent that any matter reported pursuant to Sections 6.3(f) or (g) is
reasonably likely to give rise to liabilities or costs in excess of $500,000,
the Agent or any Lender may request copies of technical reports prepared by the
applicable Borrower and its communications with any Public Authority, subject to
the confidentiality provisions contained in Section 5.6, to determine whether
such Borrower or any of its Subsidiaries is proceeding reasonably to correct,
cure or contest in good faith any alleged non-compliance or environmental
liability. If, in the reasonable determination of the Agent or the Majority
Lenders, the applicable Borrower or any of its Subsidiaries is not proceeding
reasonably, such Borrower shall, at the Agent's or the Majority Lenders' request
and at such Borrower's expense, subject to the confidentiality provisions
contained in Section 5.6: (a) cause such Borrower to retain an independent
environmental engineer acceptable to the Agent or the Majority Lenders (which
acceptance shall not be unreasonably withheld) to evaluate the site, including
tests if appropriate, where the non-compliance or alleged non-compliance with
Environmental Laws has occurred and prepare and deliver to the Agent, in
sufficient quantity for distribution by the Agent to the Lenders, a report
setting forth the results of such evaluation, a proposed plan for responding to
any environmental problems described therein, and an estimate of the costs
thereof, and (b) provide to the Agent and the Lenders a supplemental report of
such engineer whenever the scope of the environmental problems, or the response
thereto or the estimated costs thereof, shall change in any material respect.
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8.8 ERISA. (a) Such Borrower shall, and shall cause each of
its ERISA Affiliates to, establish, maintain and operate all Plans to comply in
all material respects with the provisions of ERISA, the Code, all regulations
and interpretations promulgated thereunder, and all other applicable laws and
regulations.
(b) Such Borrower shall not, and shall not permit any ERISA
Affiliate, to:
(i) Engage in any prohibited transaction described in Sections
406 of ERISA or 4975 of the Code for which a statutory or class
exemption is not available or a private exemption has not been
previously been obtained from the DOL;
(ii) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code) whether or
not waived;
(iii) Fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(iv) Terminate any Benefit Plan which would result in any
liability of such Borrower or an ERISA Affiliate under Title IV of
ERISA;
(v) Fail to make any contribution or payment to any
Multiemployer Plan which such Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto;
(vi) Fail to pay any required installment under section (m) of
Section 412 of the Code or any other payment required under Section 412
of the Code on or before the due date for such installment or other
payment; or
(vii) Amend a Plan resulting in an increase in current
liability for the plan year such that such Borrower or any ERISA
Affiliate is required to provide security to such Plan under Section
401(a)(29) of the Code.
8.9 Mergers, Consolidations or Sales. (a) Neither the Parent
nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its property, or wind up, liquidate or dissolve,
or agree to do any of the foregoing, except (i) for sales of Inventory in the
ordinary course of its business, (ii) for transfers, sales, assignment or leases
by any Subsidiary of the Parent, other than Laclede Chain and Laclede Mid
America, to any Borrower, of all or any part of its property, consented to in
writing by the Majority Lenders, (iii) for mergers by any Subsidiary of the
Parent with and into any Borrower, consented to in writing by the Majority
Lenders, (iv) for sales by the Parent of its capital stock, (v) for sales by
Laclede Mid America of its newly-issued capital stock in an amount not to exceed
ten percent (10.0%) of all capital stock of Laclede Mid America outstanding
after giving effect to such issuance, (vi) for sales by the Parent or any of its
Subsidiaries of Fixed Assets, subject to compliance with the provisions of
Section 8.9(b), and (vii) as otherwise expressly permitted under this Agreement.
(b) Other than as provided in the proviso in Section 5.11(c),
no sale or other disposition of Fixed Assets shall be permitted except a sale or
other disposition complying with the
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terms of this Section 8.9(b). In the event that any Borrower intends to sell or
otherwise dispose of any Fixed Asset consisting of Collateral, such Borrower
shall give the Agent and the Lenders at least ten (10) Business Days' prior
written notice of such sale. Upon any such sale or other disposition, the entire
amount of Net Proceeds shall be applied on the date of such sale or disposition
to the repayment of the Term Loans, and if the Term Loans have been repaid in
full, to any other Pre-Petition Obligations then outstanding.
8.10 Distributions; Capital Change; Restricted Investments.
Neither the Parent nor any of its Subsidiaries shall (a) directly or indirectly
declare or make, or incur any liability to make, any Distribution, except
Distributions to the Parent by its Subsidiaries, (b) make any change in its
capital structure which could materially and adversely affect the repayment of
the Obligations, or (c) make any Restricted Investment.
8.11 Transactions Affecting Collateral or Obligations. Neither
the Parent nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or any Borrower's ability to
repay the Obligations.
8.12 Guaranties. Neither the Parent nor any of its
Subsidiaries shall make, issue, or become liable on any Guaranty, except
Guaranties in favor of the Agent.
8.13 Debt. Neither the Parent nor any of its Subsidiaries
shall incur or maintain any Debt, other than: (a) the Obligations; (b) trade
payables and contractual obligations to suppliers and customers, and
non-interest bearing current operating liabilities (as determined in accordance
with GAAP), in each case incurred in the ordinary course of business; and (c)
other Debt existing on the Petition Date and reflected in the Financial
Statements attached hereto as Exhibit C.
8.14 Prepayment. Neither the Parent nor any of its
Subsidiaries shall voluntarily prepay any Debt, except the Obligations in
accordance with the terms hereof.
8.15 IRB Debt.
(a) The Parent shall not amend or otherwise change the terms
applicable to any IRB Debt in any manner adversely affecting the interests of
the Lenders without the prior written consent of the Majority Lenders. The
Parent shall not make any payment which would not have been made in the absence
of an amendment or change of terms applicable to any IRB Debt unless such
amendment or change has been approved by the Majority Lenders as provided in the
preceding sentence.
(b) The Parent shall deliver to the Lenders (i) a copy of each
notice or other communication delivered by it or on its behalf to any trustee
under any indenture for any IRB Debt, such delivery to be made at the same time
and by the same means as such notice or other communication is delivered to such
trustee, and (ii) a copy of each notice or other communication received by the
Parent from any such trustee, such delivery to be made promptly after such
notice or other communication is received by the Parent.
8.16 Transactions with Affiliates. Except as set forth below,
neither the Parent nor any of its Subsidiaries shall, sell, transfer,
distribute, or pay any money or property, including, but not
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limited to, any fees or expenses of any nature (including, but not limited to,
any fees or expenses for management services), except actual expenses incurred
and approved in advance in writing by the Agent, to any Affiliate, or lend or
advance money or property to any Affiliate, or invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness,
or any property, of any Affiliate, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate. Notwithstanding
the foregoing, the Parent may maintain outstanding certain loans or other
advances to Laclede Chain and to Laclede Mid America under the Intercompany
Notes.
8.17 Investment Banking and Finder's Fees. Neither the Parent
nor any of its Subsidiaries shall pay or agree to pay, or reimburse any other
party with respect to, any investment banking or similar or related fee,
underwriter's fee, finder's fee, or broker's fee to any Person in connection
with this Agreement. Each Borrower shall defend and indemnify the Agent and the
Lenders against and hold them harmless from all claims of any Person for any
such fees, and all costs and expenses (including without limitation, attorneys'
fees) incurred by the Agent and/or any Lender in connection therewith.
8.18 Business Conducted. Such Borrower shall not engage,
directly or indirectly, in any line of business other than the businesses in
which such Borrower is engaged on the Petition Date.
8.19 Liens. Neither the Parent nor any of its Subsidiaries
shall create, incur, assume, or permit to exist any Lien on any property now
owned or hereafter acquired by any of them, except Permitted Liens.
8.20 Sale and Leaseback Transactions. Neither the Parent nor
any of its Subsidiaries shall, directly or indirectly, enter into any
arrangement with any Person providing for the Parent or such Subsidiary to lease
or rent property that the Parent or such Subsidiary has sold or will sell or
otherwise transfer to such Person.
8.21 New Subsidiaries. Such Borrower shall not, directly or
indirectly, organize, create, acquire or permit to exist any Subsidiary other
than those listed on Schedule 7.5.
8.22 Capital Expenditures. Neither the Parent nor any of its
Subsidiaries shall make or incur any Capital Expenditure (a) other than for
maintenance or repair of Equipment, and (b) if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by the Parent and its Subsidiaries
on a consolidated basis after the Petition Date would exceed $6,500,000.
8.23 [Intentionally left blank]
8.24 Cash Available for Fixed Charges. The Borrowers will
maintain Cash Available for Fixed Charges, determined as of the end of each
period listed below for the period indicated, of not less than the following:
Cash Available for
Period Fixed Charges
------ -------------
Four month period ending 3/31/99 $(1,800,000)
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Seven month period ending 6/30/99 $(1,700,000)
Ten month period ending 9/30/99 $ (100,000)
Thirteen month period ending 12/31/99 $ 1,400,000
8.25 Direct Contribution. The Direct Contribution of the Alton
Steel Operations will not be less than the following amounts for the following
periods:
Period Amount
------ ------
Quarter ending 3/31/99 $(1,250,000)
Quarter ending 6/30/99 $ (250,000)
Quarter ending 9/30/99 $ -0-
Quarter ending 12/31/99 $ (200,000)
8.26 Fiscal Year. The Parent and its Subsidiaries will
maintain a Fiscal Year based upon a year ending September 30 in each year.
8.27 Use of Proceeds of Advances. The Borrowers will use the
proceeds of Post-Petition Revolving Loans solely to fund the Borrowers' working
capital requirements in the ordinary course of their business and for the
Borrowers' other general corporate purposes not prohibited by this Agreement
(including, without limitation, (i) the payment of fees and expenses to
professionals under Sections 330 and 331 of the Bankruptcy Code, (ii) the
payment of administrative expenses of the kind specified in Section 503(b) of
the Bankruptcy Code incurred in the ordinary course of business of the Borrowers
and (iii) the payment of the Obligations in accordance with the terms of this
Agreement). Under no circumstances will the Borrowers use, directly or
indirectly, the proceeds of Post-Petition Revolving Loans to compensate services
rendered or expenses incurred in connection with the assertion of or joinder in
any claim, counterclaim, action, proceeding, application, motion, objection,
defense, or other contested matter, the purpose of which is to seek or the
result of which would be to obtain any order, judgment, determination,
declaration, or similar relief (A) invalidating, setting aside, avoiding, or
subordinating, in whole or in part, the Obligations or the Lenders' liens and
security interests in the Collateral; (B) modifying, staying, vacating, or
amending the Interim Order or the Final Order without the consent of the
Majority Lenders; (C) granting or imposing, under Section 364 of the Bankruptcy
Code or otherwise, liens or security interests on any property, whether equal,
superior, or subordinate, to the Lenders' liens and security interests on that
property, (D) permitting the use of cash collateral as defined in Section 363 of
the Bankruptcy Code, (E) granting any modification, alteration, or impairment in
any manner of the liens, security interests, rights, or remedies granted to the
Agent or the Lenders pursuant to the Interim Order, the Final Order, the
Original Credit Agreement, or this Agreement (including, without limitation, the
Lenders' right to demand payment of all Obligations and to enforce their liens
and security interests in the Collateral), whether by plan of reorganization or
liquidation, order of confirmation, or any financings of, extensions of credit
to, or incurring of debt by any Borrower, whether pursuant to Section 364 of the
Bankruptcy Code or otherwise; or (F) granting a priority for any administrative
expense, secured claim or unsecured claim against any Borrower (now
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existing or hereafter arising of any kind or nature whatsoever, including,
without limitation, any administrative expenses of the kind specified in
Sections 105, 326, 327, 328, 330, 331, 503, 506(c), 507, 726, or 1114 of the
Bankruptcy Code or otherwise) which are equal or superior to the priority of the
Lenders in respect of the Post-Petition Obligations, except for expenses
included within the Carveout.
8.28 Copies of Pleadings. Borrowers shall furnish to the
Lenders concurrently with the filing thereof, copies of all written pleadings,
motions, applications, financial information, petitions, schedules, reports and
other papers and documents filed by or on behalf of any Borrower in the Case
(and all amendments or supplements thereto), including, without limitation, all
United States Trustee reports, all schedules and reports required by Section 521
of the Bankruptcy Code and Bankruptcy Rules 1007 or 1009, and all fee
applications for professionals retained by the Bankruptcy Court pursuant to
Section 327 of the Bankruptcy Code.
8.29 Case Matters. No Borrower shall, so long as any of the
Obligations have not been paid in full in cash, without the consent of the
Majority Lenders:
(a) Seek or consent to any modification, stay, vacation
or amendment of the Interim Order or the Final Order;
(b) Seek or consent to (i) any grant or imposition, or
request that the Court grant or impose, under section 364 of the
Bankruptcy Code or otherwise, liens or security interests on any
Borrower's property, whether equal, superior, or subordinate, to the
Agent's and Lenders' liens and security interests on that Property, and
(ii) any request of the Bankruptcy Court to seek authority for any
Borrower to use cash collateral as defined in section 363 of the
Bankruptcy Code.
(c) Seek or consent to the assertion of any claims or
defenses (including, without limitation, offsets and counterclaims of
any nature or kind) to the validity, perfection, enforceability, and
nonavoidability (under sections 105, 506(c), 542, 543, 544, 545, 547,
548, 549, 550, 551, 552(b), or 553 of the Bankruptcy Code or otherwise)
of the Prepetition Obligations and the Agent's and Lenders' security
interests in and liens on the Prepetition Collateral.
(d) Seek or consent to the assertion of any claim,
counterclaim, action, proceeding, application, motion, objection,
defense, or other contested matter, the purpose of which is to seek or
the result of which would be to obtain any order, judgment,
determination, declaration, or similar relief invalidating, setting
aside, avoiding, or subordinating, in whole or in part, the Obligations
or the Agent's and Lenders' liens and security interests in the
Collateral.
(e) Seek or consent to the modification, alteration, or
impairment in any manner of the liens, security interests, rights, or
remedies granted to the Agent and Lenders pursuant to the Interim
Order, Final Order, the Original Credit Agreement, or this Agreement
(including, without limitation, the Agent's and Lenders' right to
demand payment of all Obligations and to enforce their liens and
security interests in the Collateral), whether by plan of
reorganization or liquidation, order of confirmation, or any financings
of, extensions of credit
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to, or incurring of debt by any Borrower, whether pursuant to Section
364 of the Bankruptcy Code or otherwise.
(f) Seek or consent to any order (i) dismissing the Case
with respect to any Borrower, under Sections 105, 305 or 1112 of the
Code or otherwise; or (ii) converting the Case with respect to any
Borrower, under Sections 105 or 1112 of the Code or otherwise.
(g) Seek or consent to a priority for any administrative
expense, secured claim or unsecured claim against any Borrower (now
existing or hereafter arising of any kind or nature whatsoever,
including, without limitation, any administrative expenses of the kind
specified in Sections 105, 326, 327, 328, 330, 331, 503, 506(c), 507,
726, or 1114 of the Bankruptcy Code or otherwise) which are equal or
superior to the priority of the Agent and the Lenders in respect of the
Post-Petition Obligations, except for those secured by Pre-Petition
Permitted Liens which as a matter of applicable nonbankruptcy law have
priority over the Agent's Liens as of the Petition Date.
(h) Prior to the date on which the Obligations have been
paid in full in cash, pay or incur any administrative expenses except
for such expenses which are administrative expense claims have been
incurred in the ordinary course of the business of the Borrowers;
(i) Make any payments or transfer any property on account
of claims asserted by any of the Borrowers' vendors for reclamation in
accordance with Section 2-702 of any applicable Uniform Commercial Code
and Section 546(c) of the Bankruptcy Code, unless otherwise ordered by
the Bankruptcy Court upon prior notice to the Agent;
(j) Seek to return any Inventory to any vendor pursuant
to Section 546(g) of the Bankruptcy Code.
8.30 Further Assurances. Such Borrower shall execute and
deliver, or cause to be executed and delivered, to the Agent and/or the Lenders
such documents and agreements, and shall take or cause to be taken such actions,
as the Agent may, from time to time, request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
ARTICLE 9
CONDITIONS OF LENDING
---------------------
9.1 Conditions Precedent to Each Loan. The obligation of the
Lenders to make each Post-Petition Revolving Loan, including any Post-Petition
Revolving Loans on the Entry Date, and the obligation of the Agent to cause to
be issued any Post-Petition Letter of Credit and the obligation of the Lenders
to participate in Post-Petition Letters of Credit, shall be subject to the
further conditions precedent that on the date of any such extension of credit:
(a) the following statements shall be true, and the acceptance
by a Borrower of any extension of credit shall be deemed to be a
statement to the effect set forth in clauses (i) and (ii), with the
same effect as the delivery to the Agent and the Lenders of
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a certificate signed by the president and chief financial officer of
such Borrower, dated the date of such extension of credit, stating
that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of
credit as though made on and as of such date, except to the
extent the Agent and the Lenders have been notified by any
Borrower that any representation or warranty is not correct
and the Majority Lenders have explicitly waived in writing
compliance with such representation or warranty; and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes
a Default or an Event of Default;
(b) the Agent and the Lenders shall have received such other
approvals, opinions or documents as they may reasonably request;
(c) no order, judgment or decree of any Public Authority and
no law, rule or regulation applicable to Lender shall purport by its
terms to enjoin, restrain or otherwise prohibit the making of such
Loan;
(d) With respect to any requested Revolving Loan to be made
during the Interim Period, the Interim Order shall be in full force and
effect and shall not have been reversed, stayed, modified, amended or
appealed; and
(e) With respect to any requested Revolving Loan to be made
after the Interim Period, the Final Order shall be in full force and
effect and shall not have been reversed, stayed, modified, amended or
appealed.
provided, however, that the foregoing conditions precedent are not conditions to
each Lender participating in or reimbursing BABC or the Agent for such Lenders'
Pro Rata Share of any Settlement Loan or Agent Advance as provided in Sections
2.1(h), (j) and (k).
9.2 Conditions Precedent to Making of Initial Loans on or
after the Entry Date. The obligation of the Lenders to make their initial
Post-Petition Revolving Loans on or after the Entry Date are subject to the
following conditions precedent having been satisfied in a manner satisfactory to
the Agent and the Lenders:
(a) Each Borrower shall have performed and complied with all
covenants, agreements and conditions contained herein which are
required to be performed or complied with by such Borrower before or on
the Entry Date.
(b) All representations and warranties made hereunder shall be
true and correct as of the Entry Date as if made on such date.
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(c) No Default or Event of Default shall exist on the Entry
Date, or would exist after giving effect to the Loans to be made on
such date.
(d) The Borrowers shall have paid the initial installment of
the Collateral Management Fee, and all fees and expenses of the Agent
and the Lenders payable under the terms of this Agreement (including,
but no limited to, the allocated costs of in-house counsel to the
Agent).
(e) The Interim Order shall have been entered by the
Bankruptcy Court, and the Agent shall have received a certified copy of
the same and such order shall be in full force and effect and shall not
have been reversed, stayed, modified, amended or appealed.
The acceptance by a Borrower of any Loans made on the Entry Date shall be deemed
to be a representation and warranty made by such Borrower to the effect that all
of the conditions to the making of such Loans set forth in Sections 9.2(a) - (e)
have been satisfied, with the same effect as delivery to the Agent and the
Lenders of a certificate signed by the president and chief financial officer of
such Borrower, dated the Entry Date, to such effect.
ARTICLE 10
DEFAULT; REMEDIES
-----------------
10.1 Events of Default. It shall constitute an event of
default ("Event of Default") if any one or more of the following shall occur for
any reason:
(a)
(i) any failure to pay the principal of or premium on
any of the Post-Petition Obligations or the Adequate
Protection Payments when due, whether upon demand or
otherwise, other than such obligation arising under Section
4.1 as a result of the sum of outstanding Revolving Loans, the
aggregate amount of Pending Revolving Loans, the undrawn
amount of outstanding Letters of Credit and any unpaid
reimbursement obligations in respect of Letters of Credit
exceeding the Maximum Revolver Amount;
(ii) any failure to pay the principal of or premium
on any of the Post-Petition Obligations within ten (10)
Business Days following the date such principal is due,
whether upon demand or otherwise, in the case of such
obligation arising under Section 4.1 as a result of the sum of
outstanding Revolving Loans, the aggregate amount of Pending
Revolving Loans, the undrawn amount of outstanding Letters of
Credit and any unpaid reimbursement obligations in respect of
Letters of Credit exceeding the Maximum Revolver Amount; or
(iii) any failure to pay interest on any of the
Post-Petition Obligations, fees, expenses or any of the
Obligations not otherwise specified in the foregoing clauses
(i)
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or (ii), within five (5) Business Days following the date such
interest or item is due, whether upon demand or otherwise;
(b) any representation or warranty made by any Borrower in
this Agreement or by the Parent or any of its Subsidiaries in any of
the other Loan Documents, any Financial Statement, or any certificate
furnished by the Parent or any of its Subsidiaries at any time to the
Agent or any Lender shall prove to be untrue in any material respect as
of the date on which made;
(c)
(i) any failure by the Borrowers to comply with the
covenant contained in Section 8.24 as of the end of any period
indicated therein or the covenant contained in Section 8.25 as
of the end of any period indicated therein;
(ii) any failure by any Borrower to comply with any
of the covenants contained in Sections 5.9, 8.9, 8.10, 8.11,
8.13, 8.14, 8.15, 8.17, 8.19, 8.20, 8.21, 8.22 and 8.23;
(iii) any failure by any Borrower to comply with any
of the other covenants and agreements contained in Article 8,
for more than ten (10) days after the earlier of (i) notice of
such failure by the Agent to such Borrower and (ii) the date
that such Borrower discovers, or reasonably should have
discovered, such failure; provided, however, that no such
grace period shall apply, and an Event of Default shall exist
promptly upon such failure to comply, if such failure to
comply may not, in the Majority Lenders' reasonable
determination, be cured by the applicable Borrower during such
grace period; or if any such agreement, instrument or document
shall terminate (other than in accordance with its terms or
the terms hereof or with the written consent of the Majority
Lenders) or become void or unenforceable without the written
consent of the Majority Lenders;
(d) any failure by any Borrower to comply with any of the
other covenants and agreements contained in this Agreement, the other
Loan Documents (other than the Original Agreement or the Term Loan
Notes), or any other agreement entered into at any time to which any
Borrower and the Agent and/or any Lender are party, for more than
thirty (30) days after the earlier of (i) notice of such failure by the
Agent to such Borrower and (ii) the date that such Borrower discovers,
or reasonably should have discovered, such failure; provided, however,
that no such grace period shall apply, and an Event of Default shall
exist promptly upon such failure to comply, if such failure to comply
may not, in the Majority Lenders' reasonable determination, be cured by
the applicable Borrower during such grace period; or if any such
agreement, instrument or document shall terminate (other than in
accordance with its terms or the terms hereof or with the written
consent of the Majority Lenders) or become void or unenforceable
without the written consent of the Majority Lenders;
(e) default shall occur after the Petition Date with respect
to any Debt incurred after the Petition Date for borrowed money (other
than the Obligations) in an outstanding principal amount which exceeds,
in the aggregate for all such Debt with
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respect to which default shall have occurred, $500,000, or under any
agreement or instrument under or pursuant to which any such Debt or
indebtedness may have been issued, created, assumed, or guaranteed by
the Parent or any of its Subsidiaries, and such default shall continue
for more than the period of grace, if any, therein specified, if the
effect thereof (with or without the giving of notice or further lapse
of time or both) is to accelerate, or to permit the holders of any such
Debt or indebtedness to accelerate, the maturity of any such Debt; or
any such Debt or indebtedness shall be declared due and payable or be
required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof;
(f) An order with respect to the Case shall be entered by the
Bankruptcy Court, or any party shall file an application for an order
with respect to the Case seeking relief, (i) appointing a trustee under
Section 1104 of the Bankruptcy Code, (ii) appointing an examiner or
responsible person, or (iii) dismissing or converting the Case (or any
part thereof) whether pursuant to Section 105, 305, or 1112 of the
Bankruptcy Code, or otherwise.
(g) An order with respect to the Case shall be entered by the
Bankruptcy Court, or any party shall file an application for an order
with respect to the Case seeking relief, confirming a plan of
reorganization or liquidation in the Case other than a Consensual Plan.
(h) An order with respect to the Case shall be entered by the
Bankruptcy Court, or any Borrower shall file an application for an
order with respect to the Case seeking relief, (i) revoking, reversing
or staying, the Interim Order or the Final Order, or modifying,
supplementing or amending the Interim Order or the Final Order in a
manner adverse to the Agent and the Lenders in their sole opinion, (ii)
permitting any administrative expense or any claim (now existing or
hereafter arising, or any kind or nature whatsoever) to have
administrative priority as to any Borrower equal or superior to the
priority of the Agent and the Lenders in respect of the Post-Petition
Obligations, (iii) granting or permitting the grant of a Lien on any of
the Collateral, (iv) invalidating or otherwise challenging any of the
Agent's or Lenders' Liens securing the Pre-Petition Obligations, or
otherwise objecting to, or raising defenses to, the extent, amount,
validity, perfection, priority, or enforceability of any of the
Pre-Petition Obligations or Liens securing any Pre-Petition
Obligations, (v) surcharging under Section 506(c) of the Bankruptcy
Code to any property which secures any of the Pre-Petition Obligations,
or (vi) permitting the use of the Lenders' cash collateral except as
permitted by the Carveout.
(i) An order with respect to the Case shall be entered by the
Bankruptcy Court, or any party shall file an application for an order
with respect to the Case seeking relief, granting relief from the
automatic stay to any creditor of any Borrower with respect to any
claim in an amount equal to or exceeding $100,000 in the aggregate;
provided, however, that it shall not be an Event of Default if relief
from the automatic stay is granted (i) solely for the purpose of
allowing such creditor to determine the liquidated amount of its claim
against a Borrower, or (ii) to permit the commencement of or
prosecution of a proceeding to collect against an insurance company.
(j) The entry of the Final Order shall not have occurred by
the earlier of (1) the date of expiration of the Interim Order, and (2)
December 29, 1998.
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(k) An event shall occur, or fail to occur, the effect of
which is that any party shall be in violation of the Interim Order or
the Final Order, or the Lenders shall be entitled to enforce their
remedies pursuant thereto, including, without limitation, terminating
their commitment hereunder and/or enforcing their security interest and
liens in the Collateral.
(l) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(m) one or more judgments or orders for the payment of money
aggregating in excess of $500,000, which amount shall not be fully
covered by insurance, shall be rendered against the Parent or any of
its Subsidiaries, and either (i) enforcement proceedings shall have
been commenced by any creditor upon any such judgment or order, or (ii)
there shall be any period of 45 consecutive days during which such
judgment remains unpaid or a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect;
(n) any loss, theft, damage or destruction of any item or
items of Collateral occurs which (i) materially and adversely affects
the operation of the business of the Parent or any of its Subsidiaries,
taken as a whole; or (ii) is material in amount and is not adequately
covered by insurance;
(o) there occurs any material adverse change in the property,
business, operation, or condition (financial or otherwise) of the
Parent or any of its Subsidiaries, taken as a whole;
(p) Any Termination Event occurs which the Agent believes
could subject any Borrower or any ERISA Affiliate to a liability in
excess of $500,000;
(q) The plan administrator of any Plan applies under Section
412(d) of the Code for a waiver of the minimum funding standards of
Section 412(a) of the Code and the Agent believes that the substantial
business hardship upon which the application for such waiver is based
could subject any Borrower or any ERISA Affiliate to a liability in
excess of $500,000;
(r) there is filed against the Parent or any of its
Subsidiaries any civil or criminal action, suit or proceeding under any
federal or state racketeering statute (including, without limitation,
the Racketeer Influenced and Corrupt Organization Act of 1970), which
action, suit or proceeding (1) is not dismissed within one hundred
twenty (120) days, and (2) could result in the confiscation or
forfeiture of any material portion of the Collateral;
(s) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens,
pursuant to the Loan Documents, any Loan Document ceases to be in full
force and effect or any Lien with respect to any material portion of
the Collateral intended to be secured thereby ceases to be, or is not,
valid, perfected and prior to all other Liens (other than Permitted
Liens) or is terminated, revoked or declared void; or
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(t) the Parent shall cease to own (i) at least 90% of the
capital stock of Laclede Mid America, or (ii) 100% of the capital stock
of Laclede Chain.
10.2 Remedies. (a) If a Default or an Event of Default exists,
the Agent may, in its discretion, or, at the direction of the Majority Lenders,
shall, do one or more of the following at any time or times and in any order,
without notice to or demand on any Borrower: (i) reduce the Maximum Revolver
Amount, or the amount of the Revolver Facility, or the advance rates against
Eligible Accounts and/or Eligible Inventory used in computing the Maximum
Revolver Amount, or reduce or increase one or more of the other elements used in
computing the Maximum Revolver Amount; (ii) restrict the amount of or refuse to
make Revolving Loans; and (iii) restrict or refuse to arrange for Letters of
Credit. If an Event of Default exists, the Agent may, in its discretion, or
shall, at the direction of the Majority Lenders, do one or more of the
following, in addition to the actions described in the preceding sentence, at
any time or times and in any order, without notice to or demand on any Borrower:
(i) terminate the Commitments and this Agreement; and (ii) declare any or all
Obligations to be immediately due and payable; provided, however, that upon the
occurrence of any Event of Default described in Sections 10.1(f), 10.1(g),
10.1(h), 10.1(i), or 10.11(j) the Commitments shall automatically and
immediately expire and all Obligations shall automatically become immediately
due and payable without notice or demand of any kind.
(b) If an Event of Default exists: (i) the Agent shall have,
in addition to all other rights, the rights and remedies of a secured party
under the UCC; (ii) the Agent may, at any time, take possession of the
Collateral and keep it on the applicable Borrower's premises, at no cost to the
Agent or any Lender, or remove any part of it to such other place or places as
the Agent may desire, or each Borrower shall, upon the Agent's demand, at such
Borrower's cost, assemble the Collateral and make it available to the Agent at a
place reasonably convenient to the Agent; and (iii) the Agent may sell and
deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems advisable, in
its sole discretion, and may, if the Agent deems it reasonable, postpone or
adjourn any sale of the Collateral by an announcement at the time and place of
sale or of such postponed or adjourned sale without giving a new notice of sale.
Without in any way requiring notice to be given in the following manner, each
Borrower agrees that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to such Borrower if such notice
is mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least five (5) Business
Days prior to such action to such Borrower's address specified in or pursuant to
Section 14.7. If any Collateral is sold on terms other than payment in full at
the time of sale, no credit shall be given against the Obligations until the
Agent or the Lenders receive payment, and if the buyer defaults in payment, the
Agent may resell the Collateral without further notice to any Borrower. In the
event the Agent seeks to take possession of all or any portion of the Collateral
by judicial process, each Borrower irrevocably waives: (a) the posting of any
bond, surety or security with respect thereto which might otherwise be required;
(b) any demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (c) any requirement that the Agent retain possession
and not dispose of any Collateral until after trial or final judgment. The
Borrowers agree that the Agent has no obligation to preserve rights to the
Collateral or marshal any Collateral for the benefit of any Person. The Agent is
hereby granted a license or other right to use, without charge, each Borrower's
labels, patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and each Borrower's rights under all
licenses and all franchise
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agreements shall inure to the Agent's benefit. The proceeds of sale shall be
applied first to all expenses of sale, including attorneys' fees, and then, in
the case of a sale of Collateral consisting of Fixed Assets, ratably, to the
reduction of the Term Loans (applying such proceeds ratably to the installments
of the Term Loans in the inverse order of maturity), or, in the case of a sale
of Collateral other than Fixed Assets, ratably, to the reduction of the
Obligations in the order provided for in Section 4.5. The Agent will return any
excess to the applicable Borrower or such other Person as shall be legally
entitled thereto and such Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs, each Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
(d) The Agent and the Lenders may exercise any of the
foregoing remedies without demand and without further application to or order of
the Bankruptcy Court; provided, however, that prior to the Agent's or the
Lenders' exercise of any the remedies set forth in Section 10.2(b) or any of the
other Loan Documents, the Agent shall provide three (3) Business Days prior
written notice to the Parent and its counsel, and counsel of record for the
Committee (if any, and otherwise to the United States Trustee for the Eastern
District of Missouri, Eastern Division).
(e) Notwithstanding the foregoing, upon an Event of Default
resulting from the Borrowers' failure to comply with the covenant set forth in
Section 8.25 (Direct Contribution), the Borrowers agree to immediately cease the
Alton Steel Operations by the end of the month succeeding the end of the fiscal
quarter for which such covenant was breached. The Borrowers shall promptly after
the occurrence of such an Event of Default, deliver a business plan and budget,
reasonably acceptable to the Agent, for the cessation of the Alton Steel
Operations. The Agent's and the Lenders' sole remedies with respect to such an
Event of Default shall be limited to an enforcement of the Borrowers' Agreements
set forth in this Section 10.2(e), but the Agent and the Lenders shall not be
restricted in exercising any applicable remedies with respect to the Alton Steel
Operations as a result of any other Event of Default, including an Event of
Default arising from the Borrowers' failure to comply with this Section 10.2(e).
ARTICLE 11
TERM AND TERMINATION
--------------------
11.1 Term and Termination. The term of this Agreement shall
end on the Termination Date. Upon the effective date of termination of this
Agreement for any reason whatsoever, all Obligations shall become immediately
due and payable. Notwithstanding the termination of this Agreement, until all
Obligations are paid and performed in full in cash, each Borrower shall remain
bound by the terms of this Agreement and shall not be relieved of any of its
obligations hereunder, and the Agent and the Lenders shall retain all their
rights and remedies hereunder (including, without limitation, the security
interest of the Agent, for the ratable benefit of the Secured Creditors, in and
all rights and remedies with respect to all then existing and after-arising
Collateral).
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ARTICLE 12
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
-----------------------------------------------------------
12.1 No Implied Waivers. No act, failure or delay by the Agent
or the Lenders shall constitute a waiver of any of their rights and remedies. No
single or partial waiver by the Agent or the Lenders of any provision of this
Agreement or any other Loan Document, or of breach or default hereunder or
thereunder, or of any right or remedy which the Agent or the Lenders may have,
shall operate as a waiver of any other provision, breach, default, right or
remedy or of the same provisions, breach, default, right or remedy on a future
occasion. No waiver by the Agent or the Lenders shall affect their rights to
require strict performance of this Agreement.
12.2 Amendments and Waivers. No amendment or modification of
any provision of this Agreement shall be effective without the written agreement
of the Majority Lenders and the Borrowers, and no termination or waiver of any
provision of this Agreement, or consent to any departure by any Borrower
therefrom, shall in any event be effective without the written concurrence of
the Majority Lenders, which concurrence the Majority Lenders shall have the
right to grant or withhold at their sole discretion. Notwithstanding the
immediately preceding sentence, any amendment, modification or waiver (i) of any
provision of Articles 2, 3 or 4, which amendment, modification or waiver relates
solely to any increase of the Commitments, the reduction of the interest rates
applicable to any Loans and/or the amount of fees payable hereunder (other than
fees payable solely to the Agent or an issuing bank), (ii) effectuating the
discharge of any Guaranty of any of the Obligations, or (iii) of the definitions
of "Majority Lenders," "Pro Rata Share," or "Maximum Revolver Amount" (or any
term affecting the calculation of the Maximum Revolver Amount in any material
respect) and the provisions contained in this Section 12.2, shall be effective
if, and only if, evidenced by a writing agreed to and signed by all Lenders. No
amendment, modification, termination, or waiver of any provision of Article 13
or any other provision referring to the Agent shall be effective without the
written concurrence of the Agent. The Agent may, but shall have no obligation
to, with the written concurrence of any Lender, execute amendments,
modifications, waivers or consents as attorney-in-fact for such Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on a Borrower in
any case shall entitle such Borrower to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, waiver or consent
effected in accordance with this Section 12.2 shall be binding on each Secured
Creditor, each future Secured Creditor, and, if signed by each Borrower, on the
Borrowers.
12.3 Assignments; Participations.
(a) Each Lender shall have the right, with the Agent's
consent, at any time to assign to one or more commercial banks or other
financial institutions all, or portions in minimum amounts of $25,000,000, of
its Commitment, the Loans owing to it and its rights and obligations with
respect to Letters of Credit; provided, that BABC is hereby granted a right of
first refusal in connection with any such assignment; and provided, further,
that the parties to each such assignment shall execute and deliver to the Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance
entered into with respect to such assignment by the assigning Lender and the
assignee, and accepted by the Agent, in substantially the form of Exhibit G
("Assignment and Acceptance"), and with a processing and recordation fee of
$3,500. Upon such execution, delivery, acceptance and recording,
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from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least two (2) Business Days after the execution
thereof, the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, (A) have the rights and obligations (including, but
not limited to, the obligation to participate in Letters of Credit pursuant to
Section 2.2(f)) of a Lender hereunder and (B) the assigning Lender thereunder
shall cease to be a party hereto.
(b) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address set forth in
Section 14.7 a copy of each Assignment and Acceptance delivered to and accepted
by it and books and records, including computer records, in which it shall
record the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall constitute rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein, and the Borrowers, the Agent and the Lenders may treat each Person the
name of which is recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for inspection by any
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit G, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt written notice thereof to the
Borrowers.
(e) Each Lender may sell participations in all or any part of
its rights and obligations under this Agreement (including, without limitation,
all or any part of its Commitment, the Loans or its rights in connection with
Letters of Credit, as applicable) to one or more other Persons; provided,
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however, that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Agent, the Borrowers
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. BABC agrees not to sell participations in its rights and obligations
under this Agreement to the extent that such sales reduce that portion of its
Commitment which is not subject to participation interests below $25,000,000
unless, at the option of BNY, such sales are made in conjunction with sales by
BNY, on a pari passu basis, of participations in BNY's rights and obligations
under this Agreement. Notwithstanding anything to the contrary contained in the
first sentence of this Section 12.3(e), any Participating Lender may be given
the right to require the Lender granting such Participating Lender's
participation to vote against (1) the release of all or substantially all of the
Collateral, (2) any amendment, modification or waiver of any provision of
Articles 2, 3 or 4 relating to the principal amount of the Loans or Letters of
Credit, the maturity dates of the Loans, the interest rates borne by the Loans
and the amounts of any fees payable to such Lender under Sections 3.5, 3.6, 3.7
and 3.8. No Participating Lender shall be a "Lender" for any purpose under this
Agreement; provided, however, that each Participating Lender shall have the
rights and obligations of a Lender (including any right to receive payment)
under Sections 3.3(f), 3.5, 3.6, 3.7, 3.8, 4.2, 4.6, 4.7, 13.5, 14.8, 13.9 and
12.3(f); provided, further, that all requests for any such payments shall be
made by any Participating Lender through the Lender granting such participation.
The right of each Participating Lender to receive payment pursuant to the
immediately preceding sentence shall be limited to the lesser of (i) the amounts
actually incurred by such Participating Lender for which payment is provided
under such Sections and (ii) the amounts that would have been payable under such
Sections to the Lender granting the participation had such participation not
been granted. It is expressly agreed that, in connection with any participation
pursuant to this Section 12.3(e), any Lender may provide, on a confidential
basis, to any prospective Participating Lender, such information pertaining to
any Borrower or any guarantor of any of the Obligations as such Lender may deem
appropriate.
(f) If a Participating Lender shall at any time with the
Borrowers' knowledge participate with any Lender in the Loans, each Borrower
hereby grants to such Participating Lender, and such Lender and such
Participating Lender shall have and are hereby given, a continuing Lien on and
security interest in any money, Securities and other property of such Borrower
in the custody or possession of the Participating Lender, including the right of
setoff, to the extent of the Participating Lender's participation in the
Obligations, and such Participating Lender shall be deemed to have the same
right of setoff to the extent of Participating Lender's participation in the
Obligations under this Agreement as it would have if it were a direct lender.
(g) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement held by such Lender,
in favor of any Federal Reserve Bank, in accordance with Regulation A of the
Federal Reserve Board or U.S. Treasury Regulation 31 CFR ? 203.14, and such
Federal Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
12.4 Binding Effect; Assignment. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by any Borrower without the
prior written consent of the Agent and the Lenders. With respect to a Borrower,
successors and assigns
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shall include, without limitation, any receiver, trustee, examiner, responsible
person or like representative of its Estate. The rights and benefits of any
Lender hereunder shall, if such Lender so agrees, inure to any party acquiring
any interest in the Obligations or any part thereof, subject to the provisions
of Section 12.3.
ARTICLE 13
THE AGENT
---------
13.1 Appointment. Each Lender hereby designates and appoints
BankAmerica Business Credit, Inc. as its Agent under this Agreement and the
other Loan Documents, and each Lender hereby irrevocably authorizes the Agent to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are set forth herein or
therein, together with such other powers as are reasonably incidental thereto.
The Agent agrees to act as such on the express conditions contained in this
Article 13. The provisions of this Article 13 are solely for the benefit of the
Agent and the Lenders, and no Borrower shall have any rights as a third party
beneficiary of any of the provisions hereof (other than as expressly set forth
in Section 13.7). In performing its functions and duties under this 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 any Borrower. The Agent may perform any of its duties under
this Agreement, or under the other Loan Documents, by or through its agents or
employees.
13.2 Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. Except as expressly otherwise provided in this Agreement,
the Agent shall have and may use its sole discretion with respect to exercising
or refraining from exercising any discretionary rights or taking or refraining
from taking any actions which the Agent is expressly entitled to take or assert
under this Agreement and the other Loan Documents, including, without
limitation, (a) the determination of the applicability of ineligibility criteria
with respect to the calculation of the Maximum Revolver Amount, (b) the making
of Agent Advances pursuant to Section 2.2(j), and (c) the exercise of remedies
pursuant to Section 10.2, and any action so taken or not taken shall be deemed
consented to by the Lenders. The Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender. Nothing in this
Agreement or any of the other Loan Documents, express or implied, is intended to
or shall be construed to impose upon the Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein. Each Lender shall make its own independent investigation of
the financial condition and affairs of each Borrower in connection with the
making and the continuance of the Loans hereunder, and shall make its own
appraisal of the creditworthiness of each Borrower, and the Agent shall have no
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 date of this Agreement or at any time or
times thereafter; provided, that at the request of any Lender, the Agent shall
request information of any Borrower on behalf of such Lender, to the extent that
such Lender does not independently have the right to make such request of the
Borrower. If the Agent seeks the consent or approval of the Majority Lenders to
the taking or refraining from taking any action hereunder, the Agent shall send
notice thereof to each Lender. The Agent shall promptly notify each Lender (i)
any time that the Agent becomes aware that an Event of Default has occurred and
is continuing and (ii) any time that the Majority Lenders have instructed the
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Agent to act or refrain from acting pursuant hereto. The Agent may employ
agents, co-agents and attorneys-in-fact and shall not be responsible to the
Lenders or any Borrower, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
13.3 Rights, Exculpation, Etc. Neither the Agent nor any of
its officers, directors, employees or agents shall be liable to any Lender for
any action taken or omitted by it or any of them under this Agreement or under
any of the other Loan Documents, or in connection herewith or therewith, except
that (i) the Agent shall be obligated on the terms set forth herein for
performance of its express obligations under this Agreement; (ii) the Agent
shall not be entitled to exercise any of the powers granted to it under this
Agreement or the other Loan Documents in any way inconsistent with its express
obligations to the Lenders under this Agreement; and (iii) no Person shall be
relieved of any liability imposed by law for willful misconduct, intentional
tort or gross (but not mere) negligence. The Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith pursuant to
Section 4.5, and if any such apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Secured Creditor
to whom payment was due but not made shall be to recover from other Secured
Creditors any payment in excess of the amount to which it is determined to have
been entitled. The Agent shall not be responsible to any Lender for any
recitals, statements, representations or warranties contained in this Agreement
or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the other Loan
Documents or any of the transactions contemplated thereby, or for the financial
condition of any Borrower. 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 Agreement or any of the other Loan Documents or the
financial condition of any Borrower, or the existence or possible existence of
any Default or Event of Default; provided, that at the request of any Lender,
the Agent shall make such inquiry of a Borrower on behalf of such Lender, to the
extent that such Lender does not independently have the right to make such
inquiry of such Borrower. The Agent may at any time request instructions from
the Lenders or Majority Lenders with respect to any actions or approvals which
by the terms of this Agreement or of any of the other Loan Documents the Agent
is permitted or required to take or to grant, and if such instructions are
promptly requested, the Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from any action or withholding
any approval under any of the Loan Documents until it shall have received such
instructions from the Lenders or Majority Lenders, as applicable. 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
under this Agreement or any of the other Loan Documents in accordance with the
instructions of the Lenders or Majority Lenders, as applicable.
13.4 Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
13.5 Indemnification of the Agent by the Lenders. To the
extent that the Agent is not reimbursed and indemnified by any Borrower, the
Lenders will reimburse and indemnify the Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
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costs, expenses, advances or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or any of the other Loan Documents
or any action taken or omitted by the Agent under this Agreement or any of the
other Loan Documents, in proportion to each Lender's Pro Rata Share, including,
without limitation, Agent Advances; provided, however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
resulting from the Agent's recklessness or willful misconduct. The obligations
of the Lenders under this Section 13.5 shall survive the resignation of an Agent
pursuant to Section 13.7, the payment in full of the Loans and reimbursement
obligations with respect to Letters of Credit, the termination of all
outstanding Letters of Credit and the termination of this Agreement.
13.6 Agent in Individual Capacity. BABC and its affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Parent and any of
its Subsidiaries and Affiliates as though BABC were not the Agent hereunder, and
without notice to or the consent of the other Lenders. The Lenders acknowledge
that, pursuant to such activities, BABC or its affiliates may receive
information regarding the Parent or its Subsidiaries or Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or any such Subsidiary or Affiliate) and acknowledge that the Agent
shall be under no obligation to provide such information to them; provided, that
in the event that BABC receives any such information which is not subject to
such confidentiality obligations, and while BABC is the Agent hereunder, and the
Lenders are not otherwise provided with such information, then the Agent shall
provide such information to the Lenders. With respect to its Commitment and the
Loans made by it and the Letters of Credit in connection with which it has
purchased a participation interest, BABC shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not the Agent.
13.7 Successor Agent.
(a) The Agent may resign from the performance of all of its
functions and duties under this Agreement at any time by giving thirty (30)
Business Days' prior written notice to each Borrower and each Lender. Such
resignation shall take effect upon the earlier of (i) the acceptance by a
successor Agent of its appointment pursuant to clause (b) below, and (ii) thirty
(30) Business Days following the date of written notice by the Agent to each
Borrower and each Lender pursuant to the immediately preceding sentence.
(b) Upon any notice of resignation, the Majority Lenders shall
appoint from among the Lenders a successor Agent. If a successor Agent shall not
have been so appointed within such thirty (30) Business Day period, the retiring
Agent, with the consent of the Borrowers, shall then appoint a successor Agent
who shall serve as Agent until such time, if any, as the Majority Lenders shall
appoint a successor Agent as provided above. If the Borrowers shall not have
consented to the appointment by the retiring Agent of a successor Agent pursuant
to the immediately preceding sentence, the retiring Agent's resignation shall
nevertheless become effective and the Lenders shall perform all of the duties of
the Agent hereunder until such time, if any, as the Majority Banks shall appoint
a successor Agent.
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(c) Notwithstanding the foregoing, in the event that BABC
assigns all of its Loans to an Affiliate, such Affiliate shall automatically
become the successor Agent hereunder upon the effective date of such assignment.
13.8 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its reasonable business judgment, to release any Agent's Lien upon
any Collateral (i) upon the termination of the Commitments, payment and
satisfaction of all Loans and reimbursement obligations in respect of Letters of
Credit, and the termination of all outstanding Letters of Credit (whether or not
any of such obligations are due) and all other Obligations which have matured
and which the Agent has been notified in writing are then due and payable; (ii)
constituting property being sold or disposed of if the applicable Borrower
certifies to the Agent that the sale or disposition is made in compliance with
Section 5.11 or 8.9 (and the Agent may rely conclusively on any such
certificate, without further inquiry); (iii) constituting property in which the
applicable Borrower owned no interest at the time the Lien was granted or at any
time thereafter; (iv) constituting property leased to the applicable Borrower
under a lease which has expired or been terminated in a transaction permitted
under this Agreement or which will expire imminently and which has not been, and
is not intended by such Borrower to be, renewed or extended; or (v) in
accordance with the terms of Section 5.1(e). Except as provided above, the Agent
will not release any of the Agent's Liens without the prior written
authorization of the Majority Lenders; provided that the Agent may not release
the Agent's Liens on Collateral valued in the aggregate in excess of $500,000
without the prior written authorization of all of the Lenders. Upon request by
the Agent or a Borrower at any time, the Lenders will confirm in writing the
Agent's authority to release any Agent's Liens upon particular types or items of
Collateral pursuant to this Section 13.8(a).
(b) Upon receipt by the Agent of any authorization required
pursuant to Section 13.8(a) from the Majority Lenders or Lenders, as applicable,
of the Agent's authority to release any Agent's Liens upon particular types or
items of Collateral, and upon at least five (5) Business Days' prior written
request by a Borrower, and provided that no Event of Default has occurred and is
then continuing, the Agent shall (and is hereby irrevocably authorized by the
Lenders to) execute such documents as may be necessary to evidence the release
of the Agent's Liens upon such Collateral; provided, however, that (i) the Agent
shall not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of any Borrower in respect of) all interests retained by
such Borrower, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by the applicable
Borrower or is cared for, protected or insured or has been encumbered, or, other
than a duty to act without recklessness, willful misconduct or gross (but not
mere) negligence, that the Agent's Liens have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the pursuant to this
Section 13.8 or pursuant to
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any of the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent may act in
any manner it may deem appropriate, in its reasonable business judgment, given
the Agent's own interest in the Collateral in its capacity as one of the Lenders
and that the Agent shall have no other duty or liability whatsoever to any
Secured Creditor as to any of the foregoing.
13.9 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent of
the Agent, and that it shall, to the extent it is lawfully entitled to do so,
upon the request of the Agent, set off against the Obligations, any amounts
owing by such Lender to any Borrower or any accounts of any Borrower now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by the Agent, take or cause
to be taken any action, including, without limitation, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral, the purpose of which is, or
could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.
(b) Subject to Section 4.5, if, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of any
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from the Agent pursuant to the terms of this Agreement, or (ii) payments
from the Agent in excess of such Lender's ratable portion of all such
distributions by the Agent, such Lender shall promptly (1) turn the same over to
the Agent, in kind, and with such endorsements as may be required to negotiate
the same to the Agent, or in same day funds, as applicable, for the account of
all of the Secured Creditors and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
13.10 Agency for Perfection. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the Agent) obtain
possession of any such Collateral, such Lender shall notify the Agent thereof,
and, promptly upon the Agent's request therefor shall deliver such Collateral to
the Agent.
13.11 Payments by Agent to Lenders. All payments to be made by
the Agent to the Lenders under this Agreement, under this Interim Order or under
the Final Order shall be made by bank wire transfer or internal transfer of
immediately available funds to:
if to BABC: BankAmerica Business Credit, Inc.
ABA #121000358
To: Bank of America, San Francisco
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BankAmerica Business Credit, Inc.
Account No. 1257503561, reference
Laclede
if to BNY: BNY Financial Corporation
ABA #021000018, Account No. 8090653114,
reference Laclede Steel
if to NB: NationsBank of Texas Business Credit
ABA #111 0000 12
Account No. 018 00 19471, reference: Laclede Steel
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to the Agent. Concurrently with each such payment,
the Agent shall identify whether such payment (or any portion thereof)
represents principal or interest on the Revolving Loans or the Term Loans,
Adequate Protection Payments or otherwise.
13.12 Concerning the Collateral and the Related Loan
Documents. Each Lender authorizes and directs the Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit of the Secured Creditors. Each Lender agrees that any action
taken by the Agent or Majority Lenders in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral, and the
exercise by the Agent or the Majority Lenders of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
ARTICLE 14
MISCELLANEOUS
14.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against any Borrower to collect the Obligations without any prior
recourse to the Collateral.
14.2 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
14.3 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS
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(AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS
AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
(b) SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, THE
BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREE TO THE NON-EXCLUSIVE
JURISDICTION OF THE BANKRUPTCY COURT AND WAIVE ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN.
NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL, REAL ESTATE, OR OTHER
SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES
THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 14.7 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS, OR, AT THE AGENT'S AND/OR THE LENDERS' OPTION, BY SERVICE UPON THE
CORPORATION TRUST COMPANY, 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604,
WHICH SUCH BORROWER IRREVOCABLY APPOINTS AS SUCH BORROWER'S AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF ILLINOIS. IN
ADDITION, THE AGENT AND THE LENDERS AGREE TO PROMPTLY FORWARD BY REGISTERED MAIL
ANY PROCESS SO SERVED UPON SAID AGENT TO THE APPLICABLE BORROWER AT ITS ADDRESS
SET FORTH IN SECTION 14.7. EACH BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS
AS AFORESAID.
(d) THE BORROWERS, THE AGENT AND THE LENDERS HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (ii) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM
IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED, IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE BORROWERS, THE AGENT AND THE
LENDERS HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN
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EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) NOTHING IN THIS SECTION 14.3 SHALL AFFECT THE RIGHT OF THE
AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
(f) EACH BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST AGENT
OR ANY LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
14.4 Survival of Representations and Warranties. All of each
Borrower's representations, and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
14.5 Other Security and Guaranties. The Agent, in its sole
discretion, subject to the other terms and provisions contained in this
Agreement, may, without notice or demand and without affecting any Borrower's
obligations hereunder, from time to time: (a) take from any Person and hold
collateral (other than the Collateral) for the payment of all or any part of the
Obligations and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of all
or any part of the Obligations and release or substitute any such endorser or
guarantor, or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any other
Person in any way obligated to pay all or any part of the Obligations.
14.6 Fees and Expenses. The Borrowers agree, on a joint and
several basis, to pay to each Lender the amount of attorneys' and paralegals'
fees (including allocated in-house counsel fees) and disbursements of counsel to
such Lender in connection with the negotiation, preparation and consummation of
this Agreement and the other Loan Documents. Each Borrower shall pay to the
Agent, on demand, all costs and expenses that the Agent pays or incurs in
connection with the Case or the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and the other
Loan Documents, including, without limitation: (a) attorneys', paralegals'
(including allocated in-house counsel fees), and financial advisors? fees and
disbursements of counsel and such advisors to the Agent; (b) costs and expenses
(including attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches and title insurance; (d) taxes, fees and other charges
for recording mortgages, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Agent's Liens; (e) sums paid
or incurred to pay any amount or take any action required of any Borrower under
the Loan Documents that such Borrower fails to pay or take; (f) costs of
appraisals, inspections, and verifications of the Collateral, including, without
limitation, travel, lodging, and meals for inspections of the Collateral and
each Borrower's operations by the Agent's agents up to four (4) times per year
and
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whenever an Event of Default exists; (g) costs and expenses of forwarding
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining Payment Accounts; (h) costs and expenses of preserving and
protecting the Collateral; and (i) costs and expenses (including attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain payment of the
Obligations, enforce the Agent's Liens, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Agent or any Lender arising out
of the transactions contemplated hereby (including without limitation,
preparations for and consultations concerning any such matters). The foregoing
shall not be construed to limit any other provisions of the Loan Documents
regarding costs and expenses to be paid by any Borrower. All of the foregoing
costs and expenses shall be charged to the applicable Borrower's loan account as
Revolving Loans as described in Section 4.4. Notwithstanding anything to the
contrary in the foregoing, the right of the Agent to reimbursement for financial
advisors shall exist only if the Borrowers are not entitled to retain in the
Case financial advisors acceptable to the Agent such as PriceWaterhouseCoopers.
14.7 Notices. Except as otherwise provided herein, all
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, but not limited to, delivery by overnight
mail and courier service, (b) four (4) days after it shall have been mailed by
United States mail, first class, certified or registered, with postage prepaid,
or (c) in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
55 South Lake Avenue
Suite 900
Pasadena, California 91101
Attention: Michael J. Jasaitis
Telecopy No. (626) 578-6069
with copies to:
BankAmerica Business Credit, Inc.
10124 Old Grove Road
San Diego, California 92131
Attention: General Counsel
Telecopy No. (619) 549-7518
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and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: James R. Looman
Telecopy No. (312) 853-7036
If to BNY:
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10104
Attention: Robert V. Love
Telecopy No. (212) 408-4313
If to NB:
NationsBank, N.A.
7800 Forsyth Boulevard, Suite 340
St. Louis, Missouri 63105
Attention: Douglas C. Look
Telecopy No. (314) 466-0313
If to any Borrower:
Laclede Steel Company
or
Laclede Chain Manufacturing Company
c/o Laclede Steel Company
or
Laclede Mid America Inc.
c/o Laclede Steel Company
One Metropolitan Square
211 North Broadway
St. Louis, Missouri 63102-2750
Attention: Michael H. Lane
Telecopy No. (314) 425-1561
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with a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attention: Frank P. Wolff, Jr.
Telecopy No. (314) 259-2020
or to such other address as each party may designate for itself by like notice.
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 not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
14.8 Indemnity of the Agent and the Lenders by the Borrowers.
Each Borrower agrees to (i) reimburse the Agent and the Lenders for any costs
and expenses (including, without limitation, attorneys' and paralegals' fees and
expenses, including allocated in-house counsel fees) incurred by the Agent or
any Lender in defending any suit brought against it by any Borrower or any other
Person in connection with the transactions contemplated by this Agreement, and
(ii) indemnify and hold the Agent and the Lenders and their respective officers,
directors, employees, attorneys and agents (collectively, the "Indemnitees")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever incurred by the Indemnitees, whether direct, indirect
or consequential, as a result of or arising from or relating to any proceeding
by any Person, whether threatened or initiated, asserting any claim for legal or
equitable remedy against any Person under any statute or regulation (including,
without limitation, any federal or state securities or commercial laws or under
any common law or equitable cause or otherwise, including any liability and
costs under Environmental Laws or common law principles arising from or in
connection with the past, present or future operations of any Borrower or its
predecessors in interest, or the past, present or future environmental condition
of any Borrower's property, the presence of asbestos-containing materials at or
on such property, or the Release or threatened Release of any Contaminant from
such property), in any way arising from or in connection with the negotiation,
preparation, execution, delivery, enforcement, performance and administration of
this Agreement or any other document executed in connection herewith, provided
that no Borrower shall have any obligation hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of any
Indemnitee seeking such indemnification. To the extent that the indemnity set
forth in this Section may be unenforceable because it is violative of any law or
public policy, each Borrower shall pay the maximum portion which it is permitted
to pay under applicable law. Any Indemnitee will promptly notify each Borrower
of the commencement of any legal proceeding which may give rise to any
indemnified liability under the foregoing indemnity and shall permit such
Borrower to participate in the defense of such Indemnitee in any such
proceeding. The foregoing indemnity shall survive the resignation of an Agent
pursuant to Section 13.7, the payment of the Obligations and the termination of
this Agreement. All of the foregoing fees, costs and expenses shall be part of
the Obligations, payable upon demand, and secured by the Collateral.
14.9 Waiver of Notices. Unless otherwise expressly provided
herein, each Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, as well as any and all other notices
to which it might otherwise be entitled. No notice to or demand on any
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Borrower which the Agent or any Lender may elect to give shall entitle such
Borrower to any or further notice or demand in the same, similar or other
circumstances.
14.10 Final Agreement. This Agreement, together with the
Interim Order and the Final Order, are intended by the Borrowers, the Agent and
the Lenders to be the final, complete, and exclusive expression of the agreement
between them. This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof.
14.11 Counterparts. This Agreement may be executed in any
number of counterparts, and by the Agent, each Lender and each Borrower in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
14.12 Captions. The captions contained in this Agreement are
for convenience of reference only, are without substantive meaning and should
not be construed to modify, enlarge, or restrict any provision.
14.13 Right of Setoff. Whenever an Event of Default exists,
the Agent and each Lender are hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Agent or such Lender or any
affiliate of the Agent or such Lender to or for the credit or the account of any
Borrower against any and all of the Obligations, whether or not then due and
payable. The Agent and each Lender agree promptly to notify the applicable
Borrower after any such setoff and application made by the Agent or such Lender,
as applicable, provided that the failure to give such notice shall not affect
the validity of such setoff and application.
14.14 Taxes.
(a) Any and all payments by the Borrowers hereunder shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender or the Agent (as the case may be) is
organized or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 14.14) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Borrower shall make such deductions and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").
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(c) The Borrowers will indemnify each Lender and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 14.14) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent (as the case may be) makes written demand
therefor. Each Lender shall, at the time of any written demand for
indemnification under this subsection (c), provide to the Borrowers a receipt
for, or other evidence of the payment of, the Taxes or Other Taxes for which
indemnification is sought.
(d) Within 30 days after the date of any payment of Taxes, the
Borrowers will furnish to the Agent, at its address referred to in Section 14.7,
the original or a certified copy of a receipt evidencing payment thereof. If no
Taxes are payable in respect of any payment hereunder with respect to which a
claim for indemnity has been made hereunder, the Borrowers will furnish to the
Agent, at such address, a certificate from each appropriate taxing authority, or
an opinion of counsel acceptable to the Agent, in either case stating that such
payment is exempt from or not subject to Taxes.
(e) Without prejudice to the survival of any other agreement
of any Borrower hereunder, the agreements and obligations of the Borrowers
contained in this Section 14.14 shall survive the payment in full of principal
and interest hereunder.
14.15 Joint and Several Liability. Each Borrower shall be
liable, on a joint and several basis, for all amounts due to the Agent and/or
any Lender under this Agreement, regardless of which Borrower actually receives
Loans or other extensions of credit hereunder or the amount of such Loans
received or the manner in which the Agent and/or such Lender accounts for such
Loans or other extensions of credit on its books and records. Each Borrower's
Obligations with respect to Loans made to it, and each Borrower's Obligations
arising as a result of the joint and several liability of the Borrowers
hereunder, with respect to Loans made to the other Borrowers hereunder, shall be
separate and distinct obligations, but all such Obligations shall be primary
obligations of each Borrower.
Each Borrower's Obligations arising as a result of the joint
and several liability of the Borrowers hereunder with respect to Loans or other
extensions of credit made to the other Borrowers hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrowers or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrowers, (ii) the absence of any attempt to
collect the Obligations from the other Borrowers, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by the Agent and/or any Lender with respect to any provision of any instrument
evidencing the Obligations of the other Borrowers, or any part thereof, or any
other agreement now or hereafter executed by the other Borrowers and delivered
to the Agent and/or any Lender, (iv) the failure by the Agent and/or any Lender
to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for the Obligations of the
other Borrowers, (v) the Agent's and/or any Lender's election in the Case of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) the disallowance
of all or any portion of the Agent's and/or any Lender's claim(s) for the
repayment of the Obligations of the other Borrowers under Section 502 of the
Bankruptcy Code, or (vii) any other circumstances which might constitute a legal
or equitable discharge or defense of a guarantor or of the other Borrowers. With
respect to each
96
<PAGE> 104
Borrower's Obligations arising as a result of the joint and several liability of
the Borrowers hereunder with respect to Loans or other extensions of credit made
to either of the other Borrowers hereunder, such Borrower waives, until the
Obligations shall have been paid in full and the Loan Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which
the Agent and/or any Lender now has or may hereafter have against any Borrower,
any endorser or any guarantor of all or any part of the Obligations, and any
benefit of, and any right to participate in, any security or collateral given to
the Agent and/or any Lender to secure payment of the Obligations or any other
liability of the Borrowers to the Agent and/or any Lender.
Upon the occurrence and during the continuance of any Event of
Default, the Agent and the Lenders may proceed directly and at once, without
notice, against any Borrower to collect and recover the full amount, or any
portion of the Obligations, without first proceeding against the other Borrowers
or any other Person, or against any security or collateral for the Obligations.
Each Borrower consents and agrees that the Agent and the Lenders shall be under
no obligation to marshal any assets in favor of such Borrower or against or in
payment of any or all of the Obligations.
14.16 Contribution and Indemnification among the Borrowers.
Each Borrower is obligated to repay the Obligations as joint and several
obligors under this Agreement. To the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Obligations
constituting Loans made to another Borrower hereunder or other Obligations
incurred directly and primarily by any other Borrower (an "Accommodation
Payment"), then the Borrower making such Accommodation Payment shall be entitled
to contribution and indemnification from, and be reimbursed by, each of the
other Borrowers in an amount, for each of such other Borrowers, equal to a
fraction of such Accommodation Payment, the numerator of which fraction is such
other Borrower's "Allocable Amount" (as defined below) and the denominator of
which is the sum of the Allocable Amounts of all of the Borrowers. As of any
date of determination, the "Allocable Amount" of each Borrower shall be equal to
the maximum amount of liability for Accommodation Payments which could be
asserted against such Borrower hereunder without (a) rendering such Borrower
"insolvent" within the meaning of Section 101(31) of the Bankruptcy Code ,
Section 2 of the Uniform Fraudulent Transfer Act (the "UFTA") or Section 2 of
the Uniform Fraudulent Conveyance Act (the "UFCA"), (ii) leaving such Borrower
with unreasonably small capital or assets, within the meaning of Section 548 of
the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (iii)
leaving such Borrower unable to pay its debts as they become due within the
meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or
Section 5 of the UFCA. All rights and claims of contribution, indemnification
and reimbursement under this section shall be subordinate in right of payment to
the prior payment in full of the Obligations. The provisions of this section
shall, to the extent expressly inconsistent with any provision in any Loan
Document, supersede such inconsistent provision.
14.17 Agency of the Parent for each other Borrower. Each of
the other Borrowers appoints the Parent as its agent for all purposes relevant
to this Agreement, including (without limitation) the giving and receipt of
notices and the execution and delivery of all documents, instruments and
certificates contemplated herein and all modifications hereto. Any
acknowledgment, consent, direction, certification or other action which might
otherwise be valid or effective only if given or taken by all of the Borrowers
or by Laclede Chain or Laclede Mid America, acting singly, shall be valid and
effective if given or taken only by the Parent, whether or not either of the
other Borrowers joins therein.
97
<PAGE> 105
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
LACLEDE STEEL COMPANY, as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
--------------------------------
Title: Vice President
LACLEDE CHAIN MANUFACTURING
COMPANY, as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
--------------------------------
Title: Vice President
LACLEDE MID AMERICA INC., as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
--------------------------------
Title: Vice President
S-1
<PAGE> 106
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By: /s/ Michael Jasaitis
--------------------------------
Vice President
Commitment: $59,500,000 BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Michael Jasaitis
--------------------------------
Vice President
S-2
<PAGE> 107
Commitment: $21,250,000 BNY FINANCIAL CORPORATION, as a Lender
and as successor to THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Anthony Viola
---------------------------------------
Vice President
S-3
<PAGE> 108
Commitment: $4,250,000 NATIONSBANK, N.A. as a Lender
By: /s/ Scott Taylor
---------------------------------
Vice President
S-4
<PAGE> 1
EXHIIT 4(f)
AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 1, 1998
THIS AMENDMENT NO. 1 dated as of December 23, 1998 (this
"Amendment") is entered into among BANKAMERICA BUSINESS CREDIT, INC., a Delaware
corporation ("BABC"), BNY FINANCIAL CORPORATION, a New York corporation ("BNY")
formerly known as Bank of New York Commercial Corporation, NATIONSBANK, N.A., a
national banking association ("NB") (BABC, BNY and NB and their respective
successors and assigns being sometimes hereinafter referred to collectively as
the "Lenders" and each of BABC, BNY and NB and its successors and assigns being
sometimes hereinafter referred to individually as a "Lender"), BANKAMERICA
BUSINESS CREDIT, INC., a Delaware corporation, as agent for the Lenders (in such
capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a Delaware corporation,
as debtor and debtor-in-possession (the "Parent"), with an office at One
Metropolitan Square, 211 North Broadway, St. Louis, Missouri 63102-2750, and
LACLEDE CHAIN MANUFACTURING COMPANY, a Delaware corporation, as debtor and
debtor-in-possession ("Laclede Chain"), with an office at One Metropolitan
Square, 211 North Broadway, St. Louis, Missouri 63102-2750, and LACLEDE MID
AMERICA INC., an Indiana corporation, as debtor and debtor-in-possession
("Laclede Mid America"), with an office at One Metropolitan Square, 211 North
Broadway, St. Louis, Missouri 63102-2750 (the Parent, Laclede Chain and Laclede
Mid America being sometimes hereinafter referred to collectively as the
"Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America being
sometimes hereinafter referred to individually as a "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of December 1, 1998 (the "Loan
Agreement," capitalized terms used herein without definition having the meanings
given such terms in the Loan Agreement); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Loan Agreement on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the
Agent hereby agree as follows:
Section 1. Amendment of the Loan Agreement. Subject to the
fulfillment of the conditions precedent set forth in Section 2 below, the Loan
Agreement is amended as follows:
(a) The reference in the definition of "Majority Lenders" to
"seventy-five percent (75.0%)" is hereby changed to "seventy-six percent
(76.0%)".
(b) The following provision is added to the end of Section 7.2:
<PAGE> 2
"Notwithstanding anything to the contrary contained herein, nothing in
this Section 7.2 shall be construed as a representation that any of the
Agent's liens or security interests have priority over the Carveout."
(c) Section 8.25 is hereby deleted in its entirety and replaced with
the following:
"The Direct Contribution of the Alton Steel Operations will not be less
than the following amounts for the following periods:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Three months ending 3/31/99 $(1,250,000)
Six months ending 6/30/99 $(1,500,000)
Nine months ending 9/30/99 $(1,500,000)
Twelve months ending 12/31/99 $(1,700,000)
</TABLE>
(d) The following provision is added to the end of Section 8.27:
"Notwithstanding anything to the contrary herein, prior to an Event of
Default, the Committee shall be entitled to use up to $100,000 of
proceeds of Post-Petition Revolving Loans for the purpose of
investigating the validity, extent, priority, and enforceability of the
Pre-Petition Obligations and the Lenders' liens and security interests
in the Pre-Petition Collateral."
(e) The following provision is added to the beginning of Section
8.29(h):
"Except pursuant to order of the Bankruptcy Court after an actual
hearing and sufficient notice thereof to the Agent and the Lenders with
an opportunity to object,"
(f) The proviso contained in Section 10.1(c)(iii) commencing with the
words "provided, however" through the end of Section 10.1(c)(iii) is
hereby deleted.
(g) Section 10.1(f) is hereby deleted in its entirety and replaced with
the following:
"(f) An order with respect to the Case shall be entered by the
Bankruptcy Court, or any party shall file an application for an order
with respect to the Case seeking relief, (i) appointing a trustee under
Section 1104 of the Bankruptcy Code, (ii) appointing an examiner or
responsible person with expanded powers similar to a trustee, or (iii)
dismissing or converting the Case (or any part thereof) whether
pursuant to Section 105, 305, or 1112 of the Bankruptcy
2
<PAGE> 3
Code, or otherwise, and such application shall either have been granted
in whole or in part or, within forty-five (45) after the filing
thereof, shall not have been dismissed with prejudice."
(h) Section 10.1(g) is hereby deleted in its entirety and replaced with
the following:
"(g) An order with respect to the Case shall be entered by the
Bankruptcy Court confirming a plan of reorganization or liquidation in
the Case other than a Consensual Plan, or any party shall file and seek
to prosecute either (i) a plan of reorganization or liquidation in the
Case, or (ii) a direct or indirect amendment of a plan of
reorganization or liquidation in the Case, which plan, or direct or
indirect amendment, does not have the prior written support of the
Majority Lenders (which the Majority Lenders may withhold in their sole
discretion), provided, however, that the foregoing shall not apply to
non-material amendments to a plan which do not affect the Agent or the
Lenders."
(i) Sections 10.1(p) and (q) are hereby deleted in their entirety and
replaced with the following:
"(p) Any Termination Event occurs which the Agent believes
could subject any Borrower or any ERISA Affiliate to an administrative
claim in excess of $500,000;
(q) The plan administrator of any Plan applies under Section
412(d) of the Code for a waiver of the minimum funding standards of
Section 412(a) of the Code and the Agent believes that the substantial
business hardship upon which the application for such waiver is based
could subject any Borrower or any ERISA Affiliate to an administrative
claim in excess of $500,000;"
(j) The following Section 10.1(u) is hereby added to the Loan
Agreement:
"All agreements incorporating the claims and liens of the Lenders from
and after the effective date of a plan for the Debtors shall not have
been filed in form and substance satisfactory to the Lenders with the
Bankruptcy Court on or before fifteen (15) days prior to the voting
deadline for such plan, or a party shall seek to amend or replace any
such agreements after such filing without the written consent of the
Majority Lenders (or, to the extent required herein, without the
written consent of each Lender)."
(k) The reference in Section 10.2(d) to "three (3) Business Days" is
hereby changed to "five days".
(l) The following provision is added to the end of Section 14.7:
"If to the Committee:
3
<PAGE> 4
Mr. Larry Handlesman
Mr. Robert Raskin
Stroock, Stroock & Lavan
180 Maiden Lane
New York, NY 10038
Telecopy No. (212) 806-6006"
Section 2. Conditions to Amendment. This Amendment shall
become effective upon the receipt by the Agent by facsimile transmission of a
counterpart of this Amendment executed by each Borrower and each Lender, and
execution of this Amendment by the Agent (provided, that each Borrower and each
Lender shall promptly execute six applicable signature pages hereof and deliver
such pages to the Agent).
Section 3. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such Borrower
in accordance with its terms, (ii) the representations and warranties contained
in the Loan Agreement are correct in all material respects as though made on and
as of the date of this Amendment, and (iii) no Event of Default has occurred and
is continuing.
Section 4. Reference to and Effect on the Loan Agreement.
(a) Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to the Loan Agreement, as
amended hereby, and each reference to the Loan Agreement in any other document,
instrument or agreement executed and/or delivered in connection with the Loan
Agreement shall mean and be a reference to the Loan Agreement, as amended
hereby.
(b) Except as specifically amended above, the Loan Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any
provision of the Loan Agreement, except as specifically set forth herein.
Section 5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
4
<PAGE> 5
Section 6. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (as opposed to the conflicts
of laws provisions) of the State of Illinois.
Section 7. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of December 23, 1998.
LACLEDE STEEL COMPANY, as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
-------------------------------------
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY, as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
-------------------------------------
Vice President
LACLEDE MID AMERICA INC., as
Debtor and Debtor-in-Possession
By: /s/ M H Lane
-------------------------------------
Vice President
S-1
<PAGE> 7
BANKAMERICA BUSINESS CREDIT, INC., as the Agent
By: /s/ Michael Jasaitis
-------------------------------------
Vice President
BANKAMERICA BUSINESS CREDIT, INC., as a Lender
By: /s/ Michael Jasaitis
-------------------------------------
Vice President
S-2
<PAGE> 8
BNY FINANCIAL CORPORATION, as a Lender
and as successor to THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Anthony Viola
---------------------------------------
Vice President
S-3
<PAGE> 9
NATIONSBANK, N.A., as a Lender
By: /s/ Scott Taylor
---------------------------------
Vice President
S-4
<PAGE> 1
EXHIBIT 10(j)
CONSULTING AGREEMENT BETWEEN LACLEDE STEEL COMPANY
AND ARGUS MANAGEMENT CORPORATION AND THOMAS E. BREW, JR. FOR
THE SERVICES OF THOMAS E. BREW, JR.
This Consulting Agreement is made as of November 23, 1998 by
and between LACLEDE STEEL COMPANY, a Delaware corporation (the "Company") ARGUS
MANAGEMENT CORPORATION, a Massachusetts corporation (the "Consultant"), and with
respect to Paragraphs 6,7,8,9, 10, 11 and 12 THOMAS E. BREW, JR., a resident of
Massachusetts ("Brew").
WHEREAS, the Consultant previously contracted with the Company
to provide consulting services by supplying Brew to serve as President and Chief
Executive Officer of the Company at the rate of Three Hundred Dollars ($300) per
hour plus expenses incurred:
WHEREAS, the Consultant and the Company now wish to modify
such agreement by changing compensation to the Consultant to a weekly rate of
Twelve Thousand Dollars ($12,000) plus expenses incurred:
WHEREAS, Consultant is willing to continue to provide Brew's
services to the Company on the terms and conditions hereinafter set forth:
WHEREAS, Brew is willing to act as the Company's President and
Chief Executive Officer and to be bound by the provisions of Paragraphs
6,7,8,9,10,11 and 12 hereof:
NOW, THEREFORE, in consideration of the mutual terms and
conditions hereof, the Company, the Consultant and to extent set forth herein
Brew hereby agree as follows:
1. Scope of Work. The Company hereby hires Consultant and the
Consultant in connection with such employment hereby agrees provide Brew to act
as the President and Chief Executive Officer of the Company, and if requested by
the Company, as an officer and director of the Company's subsidiaries, upon the
terms and conditions of this Agreement.
2. Services.
a. The Consultant, acting through Brew, shall carry
out those duties traditionally performed by the president and
chief executive officer of a public steel manufacturing and
fabricating company. These duties shall include, without
limitation, principal responsibility for the operation of the
Company's businesses. Brew shall report to the Board of
Directors. Consultant, both acting through Brew and otherwise,
shall act as a fiduciary and in good faith, deal fairly with
the Company, avoid self dealing, and keep all Company matters
strictly confidential.
b. Should the Company enter into a statutory
reorganization during
<PAGE> 2
the term of this Agreement the Consultant, acting through
Brew, shall manage the reorganization process in a manner to
protect the Company and its assets and to reorganize the
Company expeditiously.
c. This Agreement requires the Consultant to
make Brew available to the Company and is the nature of a
personal services contract for Brew's services for the benefit
of the Company.
3. Term. This Agreement shall be for a period of one (1) year,
provided, that either party may terminate this Agreement with or without cause
by giving four (4) weeks prior written notice to the other parties at the
addresses and in the manner set forth in Paragraph 11 hereof. In addition, this
Agreement shall terminate immediately upon the Consultant's inability to provide
Brew to perform the services set forth in Paragraph 2 hereof. This Agreement may
be renewed for any number of successive one (1) year terms.
4. Fee. As payment for services rendered under this Agreement,
the Consultant shall receive a weekly fee of Twelve Thousand Dollars ($12,000)
commencing November 23, 1998, payable weekly during the term of this Agreement.
Consultant is responsible for all tax payments related thereto. Consultant shall
be responsible for all payments to Brew; provided that Brew acknowledges and
represents that for the purposes of this Agreement that such payments are
adequate consideration to Brew to support Brew's contractual obligations
hereunder.
5. Reimbursement of Expenses. Subject to such rules and
procedures as from time to time are specified by the Company, the Company shall
reimburse the Consultant for Brew's weekly travel expenses to and from Brew's
home in Boston, Massachusetts to St. Louis, Missouri for Brew's reasonable
housing expenses while in St. Louis, Missouri and Brew's use of an automobile.
6. Confidentiality/Trade Secrets. Consultant and Brew
acknowledge that their position with the Company is one of the highest trust and
confidence by reason of their access to and contact with the trade secrets and
confidential and proprietary business information of the Company. Both during
the term of this Agreement and thereafter, the Consultant and Brew separately
covenant and agree as follows:
a. each shall use its and his best efforts and
exercise utmost diligence to protect and safeguard the trade
secrets and confidential and proprietary information of the
Company including but not limited to the identity of its
customers and suppliers, its arrangements with customers and
suppliers, and its technical and financial data, records,
compilations of information, processes, recipes and
specifications relating to its customers, suppliers, products
and services;
b. neither shall disclose any of such trade secrets
and confidential and proprietary information, except as may be
required in the course of performing
2
<PAGE> 3
services for the Company under this Agreement or by law; and
c. neither shall use, directly or indirectly, for its
or his own benefit or for the benefit of another, any of such
trade secrets and confidential and proprietary information.
All files, records, documents, drawings, specifications,
memoranda, notes, or other documents relating to the business of the Company,
whether prepared by the Consultant, Brew or otherwise coming into its or his
possession, shall be the exclusive property of the Company and shall be
delivered to the Company and not retained by the Consultant or Brew upon
termination of this Agreement for any reason whatsoever or any other time upon
request of the Company.
7. Discoveries. Brew covenants and agrees that he will fully
inform the Company of and disclose to the Company all inventions, concepts,
designs, improvements, discoveries and processes ("Discoveries") which he may
have during the term of this Agreement and which pertain or relate to the
business of the Company or to any experimental work, products, services or
processes of the Company in progress or planned for the future, whether
conceived by the Consultant or Brew alone or with others, and whether or not
conceived in conjunction with the use of any Company assets. All such
Discoveries shall be the exclusive property of the Company whether or not patent
or trademark applications are filed thereon. The Consultant and Brew shall
execute all documents and do all things necessary to vest the Company with full
and, exclusive title thereto, and protect the same Discoveries against
infringement by others.
8. Nonsolicitation. The Consultant and Brew agree that during
the term of this Agreement and for a period of one (1) year immediately
following the later of (i) any termination of this Agreement, whether voluntary
or involuntary, or (ii) the date the Company ceases to contract with either the
Consultant or Brew, neither the Consultant nor Brew will, either directly or
indirectly, for itself, himself or for any third party solicit, induce, recruit,
or cause another person in the employ of the Company to terminate his/her
employment for the purpose of joining, associating or becoming employed with any
other business or activity. The Company, the Consultant and Brew specifically
acknowledge and agree that the foregoing covenants of the Consultant and Brew
contained in Paragraphs 6, 7 and 8 are reasonable in content and scope and are
given by the Consultant and Brew for adequate consideration.
9. Remedies for Breach of Covenants of the Consultant. The
covenants set forth in Paragraphs 6, 7, and 8, of this Agreement shall continue
to be binding upon the Consultant and Brew, notwithstanding the termination of
this Agreement for any reason whatsoever. Such covenants shall be deemed and
construed as separate agreements independent of any other provisions of this
Agreement and any other agreement between the Company, the Consultant and Brew.
The existence of any claim or cause of action by the Consultant or Brew against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any or all of such
covenants. It is expressly agreed that the remedy at law for the breach of any
such covenant is inadequate and injunctive
3
<PAGE> 4
relief shall be available to prevent the breach or any threatened breach
thereof.
10. Arbitration of Disputes. With the exception of the
injunctive remedy available to the Company under Paragraph 9 hereof which may be
enforced in the Federal District Court for the Eastern District of Missouri or
the Missouri Circuit Court for the City of St. Louis, any dispute or claim
arising out of or relating to this Agreement shall be settled by a single
arbitrator in the City of St. Louis selected in accordance with the then current
commercial arbitration rules of the American Arbitration Association, and
judgment upon any award rendered therein may be entered in any court having
proper jurisdiction. Each party shall bear its or his full cost of any
arbitration, including the expenses and attorneys' fees incurred by it or him
related thereto and including any actions taken by it to appeal or enforce the
judgment rendered therein, regardless of the outcome of such arbitration.
11. Notices. Any notices to be given hereunder by either
party to the other may be effected either by personal delivery in writing or by
mail, registered or certified, postage prepaid, with return receipt requested.
Mailed notices shall be addressed as follows:
a. If to the Company:
LACLEDE STEEL COMPANY
15th Floor
One Metropolitan Square
St. Louis, Missouri 63102
Attention: Vice President-Finance
b. If to the Consultant:
ARGUS MANAGMENT CORPORATION
207 Union Street
Natick, Massachussetts 01760
c. If to Brew:
THOMAS E. BREW, JR.
72 Ferncroft Road
Newton, Massachussetts 02168
Either party may change its address for notice by giving notice in accordance
with the terms of this Paragraph 11.
12. General Provisions.
a. Independent Contractor. Both Consultant and Brew
are independent contractors with respect to services performed
under this Agreement and neither shall be deemed to be agents
or employees of the Company.
4
<PAGE> 5
b. Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Missouri.
c. Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable,
such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part hereof;
and the remaining provisions hereof shall remain in full force
and effect and shall not be affected by the illegal, invalid,
or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as
a part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be
possible and still be legal, valid or enforceable.
d. Entire Agreement. This Agreement sets forth the
entire understanding of the parties and supersedes all prior
agreements or understandings, whether written or oral, with
respect to the subject matter hereof. No terms, conditions,
warranties, other than those contained herein, and no
amendments or modifications hereto shall be binding unless
made in writing and signed by the parties hereto.
e. Binding Effect. This Agreement shall extend to and
be binding upon and inure to the benefit of the parties
hereto, their respective heirs, representatives, successors
and assigns. This Agreement may not be assigned by the
Consultant.
f. Waiver. The waiver by either party hereto of a
breach of any term or provision of this Agreement shall not
operate or be construed as a waiver of a subsequent breach of
the same provision by any party or of the breach of any other
term or provision of this Agreement.
g. Titles. Titles of the paragraphs herein are used
solely for convenience and shall not be used for
interpretation or construing any word, clause, paragraph, or
provision of this Agreement.
h. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the Company and the Consultant have
executed this Agreement as of the date and year first above
written.
5
<PAGE> 6
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES.
CONSULTANT: COMPANY
ARGUS MANAGEMENT CORPORATION LACLEDE STEEL COMPANY
By: /s/ David J. Ferrari By: /s/ Michael H. Lane
------------------------- ----------------------------------
Title: President Title: Vice President-Finance
This Agreement is entered into by Thomas E. Brew Jr. only with respect to
Paragraphs 6, 7, 8, 9, 10, 11 and 12.
BREW
/s/ Thomas E. Brew Jr.
- ------------------------------------
Thomas E. Brew, Jr.
6
<PAGE> 1
EXHIBIT (21)
Subsidiaries of Registrant
--------------------------
Laclede Chain Manufacturing Company - wholly-owned
Laclede Mid-America Inc. - 96.66% owned.
