SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________
April 18, 1997
Date of Report (Date of Earliest Event Reported)
NIAGARA CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22206 59-3182820
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
667 Madison Avenue
New York, New York
(Address of Principal Executive Offices)
10021
(Zip Code)
(212) 317-1000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 18, 1997, Niagara Corporation, a Delaware
corporation (the "Registrant"), and Niagara Cold Drawn Corp., a
Delaware corporation and wholly owned subsidiary of the
Registrant ("Niagara"), entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with Quanex Corporation, a
Delaware corporation ("Quanex"), pursuant to which, and at a
closing occurring simultaneously therewith (the "Closing"),
Niagara purchased from Quanex all of the outstanding shares of
capital stock (the "Shares") of LaSalle Steel Company, a Delaware
corporation ("LaSalle"). Copies of the Stock Purchase Agreement
and the press release announcing the purchase of the Shares are
attached hereto as Exhibit 10.1 and Exhibit 99.1, respectively.
Pursuant to the Stock Purchase Agreement and in
consideration for the sale of the Shares (i) Niagara delivered to
Quanex at the Closing $65,500,000 in cash and (ii) Quanex or
Niagara, as the case may be, will pay the other an amount based
on changes in LaSalle's stockholder's equity between October 31,
1996 and March 31, 1997. The Stock Purchase Agreement also
provides that Quanex or Niagara, as the case may be, will pay the
other an amount based on the cash activity in the intercompany
account between Quanex and LaSalle from April 1 through April 18,
1997.
The purchase of the Shares was financed in part
pursuant to a revolving credit and term loan agreement (the
"Credit Agreement") entered into on April 18, 1997, by and among
Niagara, LaSalle, Manufacturers and Traders Trust Company,
individually and as Agent ("M&T"), CIBC Inc. and National City
Bank. The Credit Agreement provides for a $40,000,000 term loan
and a $50,000,000 revolving credit facility. A copy of the
Credit Agreement is attached hereto as Exhibit 4.1. The
obligations of Niagara and LaSalle under the Credit Agreement are
guaranteed by the Registrant and secured by substantially all of
the assets of Niagara and LaSalle. In addition, all of the
outstanding capital stock of Niagara and LaSalle was pledged to
M&T, as Agent. In connection with the execution of the Credit
Agreement, Niagara terminated its existing term loan and
revolving credit agreements with M&T.
Principal of the term loan under the Credit Agreement
amortizes in monthly installments commencing on November 1, 1997
and ending on April 1, 2004. The principal repayment
installments on the term loan escalate throughout the term of
such loan. Interest on the term loan is payable in monthly
installments either at a Eurodollar rate (for a period specified
by Niagara from time to time) plus 285 basis points or M&T's
prime rate plus 50 basis points. Revolving credit loans made
pursuant to the Credit Agreement will be based on a percentage of
eligible accounts and inventory and will mature on April 17,
2000. Interest on such loans is payable in monthly installments
and will be either 250 basis points above a Eurodollar rate (for
a period specified by Niagara from time to time) or M&T's prime
rate plus 25 basis points.
The purchase of the Shares was also financed pursuant
to separate Note and Stock Purchase Agreements entered into on
April 18, 1997, by and among the Registrant, Niagara, LaSalle
and, respectively, The Prudential Insurance Company of America,
The Equitable Life Assurance Society of the United States and
United States Fidelity and Guaranty Company (collectively, the
"Note and Stock Purchase Agreements"). The Note and Stock
Purchase Agreements provide for the issuance and sale of (i) an
aggregate of 285,715 shares of the Registrant's common stock, par
value $.001 per share (the "Purchaser Shares") and (ii) 12.5%
Senior Subordinated Notes of Niagara due April 18, 2005 in the
aggregate principal amount of $20,000,000 (the "Notes"). A copy
of the form of Note and Stock Purchase Agreement is attached
hereto as Exhibit 4.2.
The Note and Stock Purchase Agreements provide for the
payment of interest on the outstanding principal amount of the
Notes on each April 18 and October 18 until such principal has
been paid in full. Niagara may at any time on or after August
13, 2000 prepay all or part of the amount owing under the Notes
at amounts ranging from 100% to 112.5% of the outstanding
principal amount. Niagara is obligated to prepay the Notes with
the net proceeds from exercises of the Registrant's warrants at
107% of the outstanding principal amount.
The Credit Agreement and the Note and Stock Purchase
Agreements carry restrictions on, among other things,
indebtedness, liens, capital expenditures, dividends, asset
dispositions and changes in control of the Registrant and
Niagara, and require minimum levels of net worth through
maturity. Also included in these agreements are requirements
regarding the ratio of consolidated current assets to
consolidated current liabilities and the ratio of net income
before interest, taxes, depreciation and amortization to cash
interest expense. The Note and Stock Purchase Agreements also
carry restrictions on the Registrant's ability to own certain
property and assets.
Proceeds of the loans under the Credit Agreement and
from the sale of the Purchaser Shares and the Notes were used to
consummate the acquisition of the Shares (including costs) and to
repay and discharge Niagara's indebtedness to M&T under the prior
term loan and revolving credit agreements, and will also be
available for general corporate purposes.
In connection with the execution of the Note and Stock
Purchase Agreements, the Registrant, Niagara, Michael Scharf and
each of the purchasers of the Purchaser Shares entered into a
Stockholders Agreement dated as of April 18, 1997 (the
"Stockholders Agreement"). A copy of the Stockholders Agreement
is attached hereto as Exhibit 4.3. The Stockholders Agreement
provides, among other things, for restrictions on the transfer
of, and registration rights with respect to, the Purchaser
Shares, as well as drag-along rights in connection with certain
transactions effected by Mr. Scharf and tag-along rights in
connection with certain transactions effected by Mr. Scharf or
certain trusts of which Mr. Scharf is a trustee. The
Stockholders Agreement also carries restrictions on certain
changes in the capital structure of the Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial Statements of LaSalle for the years ended October
31, 1996, 1995, and 1994 and for the three months periods
ended January 31, 1997 and 1996 (unaudited) and Independent
Auditors' Report.
- ----------------------------------------------------------------------------
LaSalle Steel Company
Financial Statements for the Years Ended October 31, 1996, 1995 and
1994 and for the Three-Month Periods Ended January 31, 1997 and 1996
(Unaudited) and Independent Auditors' Report
LASALLE STEEL COMPANY
TABLE OF CONTENTS
- ---------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 7
FINANCIAL STATEMENTS:
Balance Sheets, October 31, 1996, 1995 and 1994
and January 31, 1997 (Unaudited) 8
Statements of Income and Retained Earnings for the
Years Ended October 31, 1996, 1995 and 1994 and the
Three-Month Periods Ending January 31, 1997 and 1996
(Unaudited) 9
Statements of Cash Flows for the Years Ended October 31,
1996, 1995 and 1994 and the Three-Month Periods Ending
January 31, 1997 and 1996 (Unaudited) 10
Notes to Financial Statements 11
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Quanex Corporation
Houston, Texas
We have audited the accompanying balance sheets of LaSalle Steel Company (a
wholly owned subsidiary of Quanex Corporation), as of October 31, 1996, 1995
and 1994 and the related statements of income and cash flows for each of the
years then ended. 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 financial statements present fairly, in all material
respects, the financial position of LaSalle Steel Company as of October 31,
1996, 1995 and 1994, and the results of its operations and cash flows for each
of the years then ended.
DELOITTE & TOUCHE LLP
Houston, Texas
February 28, 1997
<TABLE>
<CAPTION>
LASALLE STEEL COMPANY
BALANCE SHEETS,
OCTOBER 31, 1996, 1995 AND 1994 AND JANUARY 31, 1997 (UNAUDITED)
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUARY 31,
ASSETS 1997 1996 1995 1994
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $10 $10 $8 $39
Accounts receivable, net of allowance for doubtful
accounts of $388, $422, $422 and $355, respectively 19,074 13,351 16,500 15,859
Inventories 23,518 23,349 25,532 24,247
Prepaid expenses 157 13 13 97
Deferred income taxes 388
-------------- ------------ ------------- -------------
Total current assets 42,759 36,723 42,053 40,630
-------------- ------------ ------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 1,901 1,901 702 702
Buildings 4,821 4,385 4,182 4,120
Machinery and equipment 25,089 21,049 19,376 18,541
Construction in progress 875 5,243 1,739 599
-------------- ------------ ------------- -------------
32,686 32,578 25,999 23,962
Less accumulated depreciation (16,810) (16,367) (14,916) (13,649)
-------------- ------------ ------------- -------------
15,876 16,211 11,083 10,313
-------------- ------------ ------------- -------------
RECEIVABLE FROM PARENT 22,986 19,022 11,161
DEFERRED INCOME TAXES 10,139 9,710 9,653 9,545
OTHER ASSETS 1,827 1,827 1,924 2,065
-------------- ------------ ------------- -------------
TOTAL $70,601 $87,457 $83,735 $73,714
============== ============ ============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $15,674 $19,266 $21,132 $18,247
Accrued expenses 4,801 6,294 7,258 7,277
Income taxes payable to parent 529 1,120 362 1,311
Deferred income taxes 152 21 75
-------------- ------------ ------------- -------------
Total current liabilities 21,156 26,701 28,827 26,835
-------------- ------------ ------------- -------------
PAYABLE TO PARENT 15,414
DEFERRED PENSION CREDIT 5,456 5,466 6,363 5,234
DEFERRED POSTRETIREMENT WELFARE BENEFITS 27,743 27,595 26,495 25,651
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 100,000 shares authorized;
1,000 shares issued and outstanding 1 1 1 1
Retained earnings 2,099 28,962 23,329 16,834
Adjustment for minimum pension liability (1,268) (1,268) (1,280) (841)
-------------- ------------ ------------- -------------
Total stockholder's equity 832 27,695 22,050 15,994
TOTAL $70,601 $87,457 $83,735 $73,714
============== ============ ============= =============
See notes to financial statements.
LASALLE STEEL COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994 AND
THE THREE-MONTH PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
(In Thousands)
- -------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
JANUARY 31, OCTOBER 31,
----------------------------- ------------------------------------------
1997 1996 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ 38,248 $ 37,625 $158,549 $170,675 $160,010
COST OF SALES 35,219 33,983 143,153 144,778 153,552
SELLING GENERAL AND ADMINISTRATIVE
EXPENSES 1,363 970 5,037 5,662 6,614
-------- -------- -------- -------- --------
OPERATING INCOME 1,666 2,672 10,359 11,461 8,618
-------- -------- -------- -------- --------
ALLOCATED EXPENSES FROM PARENT -
Interest and capital usage 308 200 1,114 770 1,240
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 1,358 2,472 9,245 10,691 7,378
INCOME TAX EXPENSE 528 994 3,612 4,196 2,884
-------- -------- -------- -------- --------
NET INCOME $ 830 $ 1,478 $ 5,633 $ 6,495 $ 4,494
======== ======== ======== ======== ========
BEGINNING RETAINED EARNINGS $ 28,962 $ 23,329 $ 23,329 $ 16,834 $ 12,340
DIVIDEND TO PARENT 27,693
-------- -------- -------- -------- --------
ENDING RETAINED EARNINGS $ 2,099 $ 24,807 $ 28,962 $ 23,329 $ 16,834
======== ======== ======== ======== ========
See notes to financial statements.
LASALLE STEEL COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994 AND
THE THREE-MONTH PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
(In Thousands)
- -----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED Year Ended
JANUARY 31, October 31,
------------------------------ ---------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 830 $ 1,478 $ 5,633 $ 6,495 $ 4,494
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 443 420 1,451 1,267 1,214
Deferred income taxes (298) (2) (320) 318 (541)
Deferred pension costs (10) 65 (779) 550 23
Deferred postretirement welfare benefits 148 244 1,100 844 1,439
Changes in assets and liabilities:
Accounts receivable (5,723) 286 3,149 (641) (2,029)
Inventories (169) (263) 2,183 (1,285) 79
Prepaid expenses (144) (115) 84 (77)
Receivable from/payable to parent 10,707 4,532 (3,964) (7,861) (7,593)
Increase (decrease) in liabilities:
Accounts payable (3,592) (4,980) (1,866) 2,885 2,281
Accrued expenses (1,493) (1,366) (964) (19) 930
Income taxes payable (591) 632 958 (631) 580
-------- -------- -------- -------- --------
Net cash provided by operating activities 108 931 6,581 2,006 800
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -
Payments for purchase of property and equipment (108) (929) (6,579) (2,037) (838)
-------- -------- -------- -------- --------
--------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2 2 (31) (38)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 10 8 8 39 77
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10 $ 10 $ 10 $ 8 $ 39
======== ======== ======== ======== ========
SUPPLEMENTAL NONCASH FINANCING ACTIVITY -
Dividend to parent $ 27,693
See notes to financial statements.
</TABLE>
LASALLE STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994 AND
THE THREE MONTH PERIODS ENDING JANUARY 31,1997 AND 1996
- ------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SALE
LaSalle Steel Company (the "Company"), a wholly owned subsidiary of
Quanex Corporation ("Quanex"), produces cold finished and special
purpose steel bar products. In its Hammond, Indiana and Griffith,
Indiana facilities, the Company produces cold finished bars and chrome
plated bars that satisfy exacting quality and metallurgical
specifications, using high quality hot finished steel bars. The
Company's products are sold directly to customers in the machinery,
industrial equipment, tooling, automotive, construction, material
handling and farm equipment markets and are used to produce items such
as clutch shafts, gear box shafts, ball joints, sprockets and drive
mechanisms. Over one-half of the Company's sales are to service centers
that supply the same industries. During years ended October 31, 1996,
1995 and 1994, sales to one customer accounted for $35,533,000,
$38,500,000 and $40,042,000, respectively, of total net sales.
On January 23, 1997, Quanex entered into a letter of intent for the sale
of the Company's stock to Niagara Corporation ("Niagara") for an
estimated purchase price of $67 million plus an additional amount for
Quanex's additional taxes to be paid in connection with the sale of
LaSalle. The sale is expected to close on or before March 31, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Income taxes
paid to Quanex during the years ended October 31, 1996, 1995 and 1994
totaled $3,173,000 $4,827,000 and $3,029,000, respectively.
INVENTORIES - Inventories are valued at the lower of cost or market.
Costs related to substantially all manufacturing inventories are
determined by the last-in, first-out ("LIFO") method (See Note 3).
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated
at cost and is depreciated using the straight-line method over the
estimated useful lives of the assets. The estimated useful lives of
certain categories are as follows:
Years
Land improvements 10-25
Buildings 10-40
Machinery and equipment 3-18
Depreciation charged to cost of sales was $1,451,000, $1,267,000 and
$1,214,000 for the years ended October 31, 1996, 1995 and 1994,
respectively.
During 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long- Lived Assets to Be Disposed
Of." The statement establishes accounting standards related to the
impairment of long-lived assets, such as property, plant, equipment, and
intangibles. The Company will adopt SFAS No. 121 in fiscal 1997 and does
not expect a significant impact on its financial position or results of
operations.
INCOME TAXES - The Company is included in the consolidated income tax
return of Quanex. For financial reporting purposes, current and deferred
income tax expense has been computed for the Company as if it were a
separate taxpayer in accordance with SFAS No. 109, "Accounting for
Income Taxes." This statement requires the use of the asset and
liability approach for financial accounting and reporting for income
taxes (See Note 4).
USE OF ESTIMATES - The preparation of the financial statements 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reflected in
the balance sheets for cash and cash equivalents, accounts receivable
and accounts payable approximate the respective fair values due to the
short maturities of those instruments.
ENVIRONMENTAL EXPENDITURES - Expenditures that relate to current
operations are expensed or capitalized, as appropriate. Expenditures
that relate to an existing condition caused by past operations, and
which do not contribute to future revenues, are expensed. Liabilities
are recorded when remedial efforts are probable and the costs can be
reasonably estimated. Such estimates are revised as additional
information becomes known.
INTERIM FINANCIAL STATEMENTS - The Company's interim financial
statements are unaudited, but include all adjustments which the Company
deems necessary for a fair presentation of its financial position and
results of operations. All such adjustments are of a normal recurring
nature. Results of operations for interim periods are not necessarily
indicative of results to be expected for the full year. All significant
accounting policies for these financial statements conform to those set
forth above for the audited financial statements for the years ended
October 31, 1996, 1995 and 1994.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
---------------- -------------------------------------------------
1997 1996 1995 1994
(UNAUDITED) (IN THOUSANDS)
Inventories valued at lower of cost (principally
LIFO method) or market:
<S> <C> <C> <C> <C>
Raw materials $8,435 $9,228 $12,407 $10,023
Work in process and finished goods 14,831 13,858 12,683 13,701
Other 252 263 442 523
------------ --------- --------- ------------
Total $23,518 $23,349 $25,532 $24,247
======= ======= ======= =======
</TABLE>
Replacement cost exceeded the LIFO value of inventory by approximately
$1,140,000 at October 31, 1995 and by $0 for all other periods
presented.
4. INCOME TAXES
Income tax expense (benefit) consists of the following:
OCTOBER 31,
--------------------------------------------------
1996 1995 1994
(In Thousands)
Current $ 3,932 $ 3,878 $ 3,425
Deferred (320) 318 (541)
------------- ----------- -----------
Total $ 3,612 $ 4,196 $ 2,884
============= =========== ===========
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's net deferred tax asset
are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------
<S> <C> <C> <C>
1996 1995 1994
(In Thousands)
Deferred tax assets:
Postretirement benefit obligations $ 10,761 $ 10,333 $ 10,004
Other employment benefit obligations 1,418 1,908 1,980
Other 362 396 329
----------- ----------- -----------
12,541 12,637 12,313
----------- ----------- -----------
Deferred tax liabilities:
Property, plant and equipment 1,767 1,703 1,644
Inventory 1,085 1,356 736
----------- ----------- -----------
2,852 3,059 2,380
----------- ----------- -----------
Net deferred tax asset $ 9,689 $ 9,578 $ 9,933
=========== ========== ============
Income tax expense differs from the amount computed by applying the
statutory federal income tax rate to earnings before income taxes for
the following reasons:
OCTOBER 31,
--------------------------------------------------
<S> <C> <C> <C>
1996 1995 1994
(In Thousands)
Income tax expense at statutory federal tax rate $ 3,236 $ 3,742 $ 2,582
State income taxes, net of federal effect 362 421 289
Other 14 33 13
---------- ---------- ----------
Total $ 3,612 $ 4,196 $ 2,884
========== ========== ==========
5. PENSION PLANS AND RETIREMENT BENEFITS
The Company sponsors a noncontributory defined benefit pension plan,
which covers substantially all hourly employees of the Company. The plan
pays benefits to employees at retirement using formulas based upon years
of service and job classification. Substantially all of the Company's
salaried employees are covered under a pension plan sponsored by Quanex.
This plan pays benefits to employees at retirement using formulas based
on years of service and compensation. The Company's funding policy is
generally to make the minimum annual contributions required by
applicable regulations.
The plans' funded status was as follows:
Assets Exceed Accumulated Accumulated Benefit Obligation
Benefit Obligation Exceeds Assets
--------------------------------------- -----------------------------------
October 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1996 1995 1994
(In Thousands)
Assets available for benefits $ 6,709 $ 5,913 $ 5,192 $ 7,135 $ 5,012 $ 4,016
-------- -------- -------- -------- -------- --------
Projected benefit obligation
Vested (6,537) (5,299) (4,067) (8,800) (7,212) (6,336)
Nonvested (16) (40) (37) (1,605) (2,132) (1,263)
-------- -------- -------- -------- -------- --------
Accumulated benefit obligation (6,553) (5,339) (4,104) (10,405) (9,344) (7,599)
Effect of future salary increases (2,535) (2,270) (2,227) (167) (85) (173)
-------- -------- -------- -------- -------- --------
Total projected benefit obligation (9,088) (7,609) (6,331) (10,572) (9,429) (7,772)
-------- -------- -------- -------- -------- --------
Assets less than projected benefit obligation $ (2,379) $ (1,696) $ (1,139) $ (3,437) $ (4,417) $ (3,756)
======== ======== ======== ======== ======== ========
Consisting of:
Amounts to be offset against future pension costs:
Assets in excess of obligation at adoption $ 192 $ 218 $ 234 $ 68 $ 92 $ 116
Obligation (increase) decrease due to plan
amendments 65 77 87 (1,827) (1,924) (2,065)
Actuarial gains (losses) (442) 40 582 (2,312) (2,275) (1,668)
Minimum liability adjustment
3,906 4,022 3,444
Amounts recognized in balance sheets:
Deferred pension credit (2,194) (2,031) (1,938) (3,272) (4,332) (3,296)
Accrued contribution to pension funds (104) (287)
--------- --------- -------- --------- --------- ---------
Total $(2,379) $(1,696) $(1,139) $(3,437) $(4,417) $(3,756)
======== ======== ======== ======== ======== ========
</TABLE>
In accordance with the provisions of SFAS No. 87, the Company recorded
additional minimum pension liabilities as of October 31, 1996, 1995 and
1994, representing the excess of the accumulated benefit obligations
over the fair value of plan assets and accrued pension liabilities. The
Company recorded additional pension liabilities of $3,906,000,
$4,022,000 and $3,444,000, intangible assets of $1,827,000, $1,924,000
and $2,065,000; and stockholder's equity reductions, net of income
taxes, of $1,268,000, $1,280,000 and $841,000 at October 31, 1996, 1995
and 1994, respectively.
The projected unit credit method was used to determine the actuarial
present value of the accumulated benefit obligation and the projected
benefit obligation. For 1996, 1995 and 1994, the discount rates were
7.5%, 7.5% and 8.0%, respectively. The expected long-term rate of return
on assets was 10% each year for the three-year period ended October 31,
1996. The assumed rate of increase in future compensation levels was
4.5% in 1996 and 1995, and 5% in 1994. The plans invest primarily in
marketable equity and debt securities. Net pension costs for the
above-defined benefit plans were as follows:
YEARS ENDED OCTOBER 31,
-----------------------------------------
1996 1995 1994
(IN THOUSANDS)
Benefits earned during the year $ 889 $ 819 $ 808
Interest cost on projected benefit
obligation 1,337 1,172 906
Return on plan assets (1,411) (1,242) 36
Net amortization and deferral 511 488 (837)
_______ _______ ________
Total $ 1,326 $ 1,237 $ 913
Quanex has various defined contribution plans in effect which cover
certain eligible employees of the Company. The Company makes
contributions to the plan subject to certain limitations outlined in the
plans. Contributions to and amounts charged to compensation expense for
these plans were approximately $248,000, $244,000 and $148,000 during
fiscal 1996, 1995 and 1994, respectively.
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits for
eligible retired employees. Employees may become eligible for those
benefits if they reach normal retirement age while working for the
Company. The Company continues to fund benefit costs on a pay-as-you-go
basis; and, for fiscal year 1996, the Company made benefit payments
totaling $1,109,000, compared to $1,268,000 and $875,000 in fiscal 1995
and 1994, respectively.
The following table sets forth the funded status of the Company's
projected postretirement benefits other than pensions, reconciled with
amounts recognized in the Company's consolidated balance sheets at:
<TABLE>
<CAPTION>
October 31,
-------------------------------------------------
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (13,876) $ (16,097) $ (15,082)
Fully eligible active plan participants (2,958) (2,923) (2,704)
Other active plan participants (5,450) (7,060) (6,486)
------------ ------------- -------------
(22,284) (26,080) (24,272)
------------ ------------- -------------
Plan assets at fair value
Accumulated postretirement benefit obligation
in excess of plan assets (22,284) (26,080) (24,272)
Unrecognized prior service cost (credit) (1,948) (2,153) (2,358)
Unrecognized net (gain) loss from past
experience different from that assumed
and from changes in assumption (3,363) 1,738 979
------------ ------------- -------------
Accrued postretirement benefit cost $ (27,595) $ (26,495) $ (25,651)
============ ============= =============
OCTOBER 31,
----------------------------------------------------------
1996 1995 1994
(IN THOUSANDS)
Net periodic postretirement benefit cost:
Service cost - benefits attributed to service
during the period $ 397 $ 384 $ 497
Interest cost on accumulated postretirement
benefit obligation 1,936 1,925 1,857
Net amortization and deferral (124) (197) (40)
------------ ------------ ------------
Net periodic postretirement benefit cost $ 2,209 $ 2,112 $ 2,314
============ ============ ============
</TABLE>
The assumed health care cost trend rate was 9.3% in 1996, decreasing
uniformly to 5.5% in the year 2003 and remaining level thereafter. The
assumed discount rate used to measure the accumulated postretirement
benefit obligation was 7.5%, 7.5% and 8.0% at October 31, 1996, 1995 and
1994, respectively.
The health care cost trend rate assumption has a significant effect on
the amount of the obligation and periodic cost recorded. For example, if
the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of October 31, 1996
would be increased by 11.3%. The effect of this change on the sum of the
service cost and interest cost for the year ended October 31, 1996 would
be an increase of 12.1%.
7. RELATED PARTY TRANSACTIONS
The Company transfers all cash receipts, which are primarily collections
on customer accounts, to Quanex. Quanex transfers cash to the Company to
fund all payables, payroll, and other cash outflows of the Company. At
October 31, 1996, 1995 and 1994, the Company had recorded net
receivables from its parent of $22,986,000, $19,022,000 and $11,161,000,
respectively. In January 1997, the Company declared a dividend to its
parent in the amount of $27,693,000, which when taken in conjunction
with normal cash transfers from Parent for operations, gave rise to a
$15,414,000 payable to Parent at January 31, 1997.
Quanex allocates corporate charges for interest and capital usage to the
Company monthly based on 1.08% (13% on an annualized basis) of the prior
two months average equity balance. Amounts allocated in the years ended
October 31, 1996, 1995 and 1994 were $1,114,000 $770,000 and $1,240,000,
respectively.
The Company purchases certain raw materials from other
divisions/subsidiaries of Quanex. During the years ending October 31,
1996, 1995 and 1994, purchases from other Quanex divisions/subsidiaries
totaled $2,290,000, $2,134,000 and $2,956,000, respectively. Amounts
payable to other Quanex divisions/subsidiaries at October 31, 1996, 1995
and 1994 were $120,000, $183,000, and 131,000, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to extensive federal, state and local
environmental laws and regulations. These laws, which are constantly
changing, govern the discharge of materials in the environment and may
require the Company to make environmental expenditures on an on-going
basis. Environmental expenditures are expensed or capitalized depending
on their future economic benefit. Under applicable state and federal
laws, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), also known as
"Superfund," the Company may be responsible for all or part of the costs
required to remove or remediate previously disposed of wastes or
hazardous substances at the locations the Company owns or operates or at
which it arranged for disposal of such materials. The Company's most
significant involvement at Superfund sites is described below.
During fiscal 1987, the Company paid approximately $200,000, of which
approximately $130,000 has subsequently been refunded by other
potentially responsible parties, in connection with a removal action at
the Conservation Chemical Co. of Illinois site in the State of Indiana
in accordance with an order of the Environmental Protection Agency (the
"EPA") pursuant to Section 106 of CERCLA. This matter relates to
hazardous substances sold to owners of the waste site by a company whose
assets were purchased by Quanex and transferred to the Company. The
Company was named in this matter by the EPA as a potentially responsible
party. The Company and other parties named by the EPA as potentially
responsible parties took various actions to comply with the EPA's order.
The Company believes that the response actions contemplated by the EPA
removal order have been substantially completed. In 1989, the Company
withdrew from the group of potentially responsible parties because its
only connection to the site was the purchase of assets, without
contractually assuming liabilities, from a company that allegedly sent
waste to the site. Since that time, the Company has had no involvement
with the site. The need for, or extent of, any further cleanup therefore
is unknown by the Company. Even if the Company is unsuccessful in
asserting its defenses, it was one of numerous parties contributing
cleanup funds and it has no reason to believe that those other parties
generally would not be able to pay costs apportioned to them. For all of
these reasons, the Company does not believe that its liability, if any,
with respect to this facility, will have a material adverse effect on
its business or financial position.
The EPA has placed on the Superfund National Priorities List the Lenz
Oil site in the State of Illinois to which a company, whose assets were
purchased by Quanex and transferred to the Company, had previously sent
used petroleum products. The State of Illinois previously had sent a
letter to the Company allegedly stating that those materials had been
disposed of improperly at that site. The Company, in conjunction with a
group of parties who received similar letters, entered into a consent
decree pursuant to which action was taken to address the matters
referred to in the letter from the State of Illinois. The Company paid
approximately $8,000 out of a $2.5 million group settlement. The Company
is currently participating in a group that is assessing site conditions
and further remediation options. Further liability could be asserted
against the Company as a result of the EPA's actions. The company that
sold its assets to Quanex is one of many companies that had sent
materials to this facility. It is Quanex's understanding that such
company contributed approximately 0.041% of the total volume of
materials handled at this facility. The Company has no reason to believe
that the other companies involved will not be financially able to
contribute to any possible future cleanup efforts at this site, or that
the basis for allocation of liability will substantially change. As a
result of the foregoing, the Company does not believe that its
liability, if any, with respect to this facility, will have a material
adverse effect on its business or financial position.
The EPA also has placed on the National Priorities List the
Douglasville, or Berks Associates, Disposal Site in the Commonwealth of
Pennsylvania to which the Company may have sent used petroleum products.
The EPA currently is administering a multistage cleanup at the site.
Liability has been asserted against the Company by a group of
potentially responsible parties for contribution toward cleanup costs
incurred at the facility. It is the Company's understanding that many
companies sent wastes to this site and that the Company is alleged to
have contributed a tiny portion of the total materials. The group of
defendants and third-party defendants include a number of large
companies and several agencies of the federal government that the
Company has no reason to believe will not be financially able to
contribute their expected share. These parties have expressed a
willingness to participate in settlement efforts. Pursuant to settlement
negotiations, the Company currently is classified as a de minimis
contributor with a 0.01% share of past costs and a 0.00071% share of
future costs. The Company anticipates that its pro-rata share of the
federal government's costs will not exceed $10,000. Based on the
foregoing, the Company does not believe that its liability, if any, with
respect to this site, will have a material adverse effect on its
business or financial position.
******
(b) Pro Forma Financial Information.
The required pro forma financial information is not yet
available and will be filed as an amendment to this Form 8-K
not later than July 2, 1997.
(c) Exhibits.
4.1 Revolving Credit and Term Loan Agreement, dated as of
April 18, 1997, by and among Niagara Cold Drawn Corp.,
LaSalle Steel Company, Manufacturers and Traders Trust
Company (individually and as Agent), CIBC Inc. and
National City Bank.
4.2 Form of Note and Stock Purchase Agreement, dated as of
April 18, 1997, by and among Niagara Corporation,
Niagara Cold Drawn Corp., LaSalle Steel Company and
each of The Prudential Insurance Company of America,
The Equitable Life Assurance Society of the United
States and United States Fidelity and Guaranty Company.
4.3 Stockholders Agreement, dated as of April 18, 1997,
among Niagara Corporation, Niagara Cold Drawn Corp.,
Michael J. Scharf, The Prudential Insurance Company of
America, the Equitable Life Assurance Society of the
United States and the United States Fidelity and
Guaranty Company.
10.1 Stock Purchase Agreement, dated April 18, 1997, by and
among Niagara Corporation, Niagara Cold Drawn Corp. and
Quanex Corporation.
99.1 Press Release dated April 18, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
NIAGARA CORPORATION
By:/s/Michael Scharf
Name: Michael Scharf
Title: President
Date: May 2, 1997
EXHIBIT INDEX
Exhibit No. Description Page No.
4.1 Revolving Credit and Term Loan
Agreement, dated as of April 18, 1997,
by and among Niagara Cold Drawn Corp.,
LaSalle Steel Company, Manufacturers and
Traders Trust Company (individually and
as Agent), CIBC Inc. and National City
Bank.
4.2 Form of Note and Stock Purchase
Agreement, dated as of April 18, 1997,
by and among Niagara Corporation,
Niagara Cold Drawn Corp., LaSalle Steel
Company and each of The Prudential
Insurance Company of America, The
Equitable Life Assurance Society of the
United States and United States Fidelity
and Guaranty Company.
4.3 Stockholders Agreement, dated as of
April 18, 1997, among Niagara
Corporation, Niagara Cold Drawn Corp.,
Michael J. Scharf, The Prudential
Insurance Company of America, The
Equitable Life Assurance Society of the
United States and United States Fidelity
and Guaranty Company.
10.1 Stock Purchase Agreement, dated April
18, 1997, by and among Niagara
Corporation, Niagara Cold Drawn Corp.
and Quanex Corporation
99.1 Press Release dated April 18, 1997.
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BY AND AMONG
NIAGARA COLD DRAWN CORP.,
LASALLE STEEL COMPANY
AND
MANUFACTURERS AND TRADERS TRUST COMPANY,
CIBC INC.
AND
NATIONAL CITY BANK
AND
MANUFACTURERS AND TRADERS TRUST COMPANY, AS AGENT
__________________________________________
Dated as of April 18, 1997
TABLE OF CONTENTS
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . 2
1.2 UCC Definitions . . . . . . . . . . . . . . . . . 19
1.3 Other Definitional Provisions . . . . . . . . . . 19
SECTION 2 AMOUNT AND TERMS OF THE CREDIT . . . . . . . . . 19
2.1 Revolving Credit Loan . . . . . . . . . . . . . . 19
2.2 Term Loan . . . . . . . . . . . . . . . . . . . . 22
2.3 Interest and LIBOR Rate Elections . . . . . . . . 23
2.4 Prepayment . . . . . . . . . . . . . . . . . . . 25
2.5 Special Provisions Governing LIBOR Rate Loans -
Increased Costs . . . . . . . . . . . . . . . . . 26
2.6 Required Termination and Repayment of LIBOR Rate
Loans . . . . . . . . . . . . . . . . . . . . . . 26
2.7 Non-Receipt of Funds by Agent . . . . . . . . . . 28
2.8 No Liability for Good Faith Action . . . . . . . 28
2.9 Taxes . . . . . . . . . . . . . . . . . . . . . . 28
2.10 Method of Payment . . . . . . . . . . . . . . . . 30
SECTION 3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . 31
3.1 Financial Condition . . . . . . . . . . . . . . . 31
3.2 No Change . . . . . . . . . . . . . . . . . . . . 32
3.3 Corporate Existence; Compliance with Law . . . . 32
3.4 Ownership of Borrower Equity Interests. . . . . . 33
3.5 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . 33
3.6 No Legal Bar . . . . . . . . . . . . . . . . . . 34
3.7 No Litigation . . . . . . . . . . . . . . . . . . 34
3.8 No Default . . . . . . . . . . . . . . . . . . . 34
3.9 Ownership of Property; Liens . . . . . . . . . . 34
3.10 Solvency . . . . . . . . . . . . . . . . . . . . 35
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . 35
3.12 Federal Regulations . . . . . . . . . . . . . . . 35
3.13 Investment Company Act . . . . . . . . . . . . . 35
3.14 Environmental Matters . . . . . . . . . . . . . . 35
3.15 ERISA . . . . . . . . . . . . . . . . . . . . . . 36
3.16 Acquisition Agreement . . . . . . . . . . . . . . 37
3.17 Acquisition . . . . . . . . . . . . . . . . . . . 37
3.18 Collateral Locations . . . . . . . . . . . . . . 37
3.19 Licenses and Permits . . . . . . . . . . . . . . 37
3.20 Subordinated Debt Offering . . . . . . . . . . . 37
3.21 Employee Controversies . . . . . . . . . . . . . 37
3.22 Patents, Trademarks and Licenses . . . . . . . . 37
3.23 Full Disclosure . . . . . . . . . . . . . . . . . 38
3.24 Survival of Warranties . . . . . . . . . . . . . 38
SECTION 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . 38
4.1 Conditions to Extension of Credit . . . . . . . . 38
4.2 Conditions to Subsequent Extension of Credit . . 42
SECTION 5 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . 42
5.1 Financial Statements . . . . . . . . . . . . . . 43
5.2 Certificates; Other Information . . . . . . . . . 44
5.3 Conduct of Business and Maintenance of Existence 45
5.4 Compliance . . . . . . . . . . . . . . . . . . . 45
5.5 Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . 45
5.6 Notices . . . . . . . . . . . . . . . . . . . . . 46
5.7 Motor Vehicle Titles . . . . . . . . . . . . . . 47
5.8 Corporate Standing. . . . . . . . . . . . . . . 47
5.9 Discharge of Indebtedness and Obligations; Leases. 47
5.10 Maintenance of Properties; Insurance . . . . . . 48
5.11 Fair Labor Standards Act. . . . . . . . . . . . 48
5.12 Changes in Management, Ownership and Control . . 48
5.13 Guarantees By Subsidiaries . . . . . . . . . . . 48
5.14 Use of Proceeds . . . . . . . . . . . . . . . . . 49
SECTION 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . 49
6.1 Indebtedness . . . . . . . . . . . . . . . . . . 49
6.2 Limitation on Liens . . . . . . . . . . . . . . . 50
6.3 Financial Covenants . . . . . . . . . . . . . . . 50
6.5 Payment of 12.5% Subordinated Debt Notes . . . . 51
6.6 Amendment or Modification of Subordinated Debt . 51
6.7 Limitation on Contingent Obligations . . . . . . 52
6.8 Prohibition of Fundamental Changes . . . . . . . 52
6.9 Prohibition on Sale of Assets . . . . . . . . . . 52
6.10 Loans, Advances and Investments . . . . . . . . . 53
6.11 Compliance with ERISA . . . . . . . . . . . . . . 53
6.12 Dividends . . . . . . . . . . . . . . . . . . . . 54
6.13 Subsidiaries and Affiliates . . . . . . . . . . . 54
6.14 Affiliate Transactions . . . . . . . . . . . . . 54
SECTION 7 EVENTS OF DEFAULT . . . . . . . . . . . . . . . 54
7.1 Events of Default . . . . . . . . . . . . . . . . 54
7.2 Effect of Event of Default . . . . . . . . . . . 57
7.3 Right of Set Off . . . . . . . . . . . . . . . . 59
SECTION 8 THE AGENT . . . . . . . . . . . . . . . . . . . 59
8.1 Authorization and Action . . . . . . . . . . . . 59
8.2 Liability of Agent . . . . . . . . . . . . . . . 59
8.3 Rights of Agent as a Bank . . . . . . . . . . . . 60
8.4 Independent Credit Decisions . . . . . . . . . . 60
8.5 Indemnification . . . . . . . . . . . . . . . . . 60
8.6 Successor Agent . . . . . . . . . . . . . . . . . 61
8.7 Sharing of Payments, Etc. . . . . . . . . . . . . 61
SECTION 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . 62
9.1 Increased Costs/Capital Adequacy . . . . . . . . 62
9.2 Assignments, Participation, etc . . . . . . . . . 63
9.3 Amendments, Waivers and Consents . . . . . . . . 65
9.4 Notices . . . . . . . . . . . . . . . . . . . . . 66
9.5 No Waiver; Cumulative Remedies . . . . . . . . . 67
9.6 Survival of Representations and Warranties . . . 68
9.7 Payment of Expenses and Taxes; Indemnity . . . . 68
9.8 Successors and Assigns . . . . . . . . . . . . . 69
9.9 Counterparts . . . . . . . . . . . . . . . . . . 69
9.10 Governing Law . . . . . . . . . . . . . . . . . . 69
9.11 Inconsistent Provisions . . . . . . . . . . . . . 69
9.12 Further Assurances . . . . . . . . . . . . . . . 69
9.13 Waiver of Jury Trial . . . . . . . . . . . . . . 69
9.14 Consent to Jurisdiction . . . . . . . . . . . . . 69
9.15 Headings . . . . . . . . . . . . . . . . . . . . 70
LIST OF SCHEDULES
3.4(a) Capitalization of Borrowers
3.9 Liens
3.14 Environmental Matters
3.15 ERISA
3.18 Borrowers' Facilities
3.21 Employee Controversies
4.1 Mortgaged Real Property
6.1 Indebtedness
6.7 Contingent Obligations
6.10 Investments
EXHIBITS
Exhibit A Borrowing Base Certificate
Exhibit B Notice of Borrowing
Exhibit C Notice of Continuation of Term Loan as
LIBOR Rate Loan
Exhibit D Notice of Continuation of Revolving Credit
Loan(s) as LIBOR Rate Loan(s)
Exhibit 2.9(c) Section 2.9(c)(ii) Certificate
REVOLVING CREDIT AND TERM LOAN AGREEMENT
AGREEMENT dated as of April 18, 1997 by and among NIAGARA
COLD DRAWN CORP., a Delaware corporation, having its principal
office at 110 Hopkins Street, Buffalo, New York, ("NCDC"),
LASALLE STEEL COMPANY, a Delaware corporation, having its
principal office at 1412 150th Street, Hammond, Indiana
("LaSalle") (NCDC and LaSalle being collectively referred to as
the "Borrowers", and individually as a "Borrower"), MANUFACTURERS
AND TRADERS TRUST COMPANY, a New York banking corporation having
its principal office at One M&T Plaza, Buffalo, New York ("M&T"),
CIBC INC., a Delaware banking corporation having its principal
office at 425 Lexington Avenue, New York, New York ("CIBC") and
NATIONAL CITY BANK, a Delaware corporation, having its principal
office at National City Center, 1900 East Ninth Street,
Cleveland, Ohio ("National") (M&T, CIBC and National being
collectively referred to herein as the "Banks", individually as a
"Bank"), and M&T, as administrative, collateral and documentation
agent for the Banks (M&T to be referred to in such capacity as
"Agent").
WHEREAS, pursuant to a Revolving Credit Agreement and a Term
Loan Agreement, each dated as of January 31, 1996, by and between
M&T and NCDC, M&T provided certain credit facilities to NCDC
(collectively, the "1996 Credit Facilities"); and
WHEREAS, pursuant to a Stock Purchase Agreement by and among
Niagara Corporation, a Delaware corporation ("Niagara"), NCDC and
Quanex Corporation, a Delaware corporation ("Quanex"), dated as
of April 18, 1997, NCDC is acquiring all of the issued and
outstanding capital stock of LaSalle (the "Acquisition"); and
WHEREAS, in order to repay all existing indebtedness of NCDC
to M&T under the 1996 Credit Facilities, to partially fund the
Acquisition and to provide general working capital to the
Borrowers thereafter, the Borrowers have requested the Banks to
make available a term loan in the amount of FORTY MILLION DOLLARS
($40,000,000.00) and a revolving credit facility in an aggregate
amount of FIFTY MILLION DOLLARS ($50,000,000.00); and
WHEREAS, the Banks, subject to the terms and conditions of
this Agreement, are willing to make available to the Borrowers
the requested term loan and revolving credit facility.
NOW, THEREFORE, the Borrowers, jointly and severally, and
the Banks, severally, but not jointly, agree as follows:
SECTION 1 DEFINITIONS
1.1 Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, shall, except where the
context otherwise requires, have the following meanings:
"Acquisition": has the meaning set forth in the third
paragraph of this Agreement.
"Acquisition Agreement": the Stock Purchase Agreement
dated April 18, 1997 by and among NCDC, Niagara, and Quanex
providing for the Acquisition.
"Adjusted Prime Rate": means (a) with respect to any
Revolving Credit Loan, the Prime Rate plus 25 basis points, and
(b) with respect to the Term Loan, the Prime Rate plus 50 basis
points.
"Affiliate": with respect to a Person, means (a) any
Person which directly or indirectly controls, or is controlled
by, or is under common control with another Person, (b) another
Person (a "parent") that directly or indirectly beneficially owns
or holds ten percent (10%) or more of the voting stock of such
Person, or any current shareholder of such parent owning ten
percent (10%) or more of the outstanding voting stock of such
parent, or any member of such shareholder's immediate family, or
(c) any Person who is an officer or director of such Person, or
any member of the immediate family of such officer or director.
The term "control" means the possession of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise.
"Agent": has the meaning set forth in the first
paragraph of this Agreement.
"Agreement": this Revolving Credit and Term Loan
Agreement, as supplemented, amended or modified from time to
time.
"Assignment of Leases and Rents": the assignment
agreements described in Subsection 4.1(d).
"Authorized Officers": shall mean the Chairman of the
Board, President or Executive Vice President of NCDC, and the
Chairman of the Board, President or Executive Vice President of
LaSalle.
"Banks" and "Bank": have the meanings set forth in the
first paragraph of this Agreement.
"Borrowers" and "Borrower": have the meanings set
forth in the first paragraph of this Agreement.
"Borrowing Base": as of a particular time, the sum of
(a) eighty-five percent (85%) of Eligible Accounts, plus (b)
sixty percent (60%) of Eligible Inventory at such time.
"Borrowing Base Certificate": as of a particular time,
means a certificate in form and substance acceptable to Agent,
executed by an Authorized Officer of each Borrower, certifying as
to the amount of the Borrowing Base at such time, the form of
which is attached hereto as Exhibit A.
"Borrowing Date": as defined in Subsection 2.1(c).
"Business Day": (a) for all purposes other than as
covered by clause (b) below, any day excluding Saturday, Sunday
and any day on which Agent is authorized by law or other
governmental action to close, and (b) with respect to all notices
and determinations in connection with LIBOR, any day which is a
Business Day described in clause (a) and which is also a day for
trading by and between banks in U.S. dollar deposits in the
London interbank market.
"Capital Expenditures": of any Person, means at any
time, all expenditures for any fixed assets or improvements, or
for replacements, substitutions or additions thereto, which have
a useful life of more than one (1) year, including, but not
limited to, the direct or indirect acquisition of such assets by
way of increased product or service charges, offset items or
otherwise, and additions to assets subject to capitalized leases
recorded in accordance with GAAP, but excluding expenditures for
capital assets funded by proceeds of casualty insurance policies.
"Capitalized Lease": of any Person means any lease the
obligations under which have been, or are required to be, in
accordance with GAAP, recorded on the books of such Person as a
capital lease liability.
"Cash Interest Expense": for a Person, means, for any
period, the sum of the aggregate interest expense (excluding all
amounts attributable to non-cash items of interest expense) of
such Person for such period in respect of Indebtedness of such
Person, as determined in accordance with GAAP.
"Change in Control": means the occurrence of any one
or more of the following events or circumstances:
(a) a Tag-Along Trigger Event shall have occurred;
(b) any Person (other than (i) Niagara, (ii) any
trustee or other fiduciary holding securities under a Plan of
Niagara, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) any corporation
owned, directly or indirectly, by the stockholders of Niagara in
substantially the same proportions as their ownership of
Niagara's common stock, (v) Gilbert Scharf, (vi) the Michael J.
Scharf 1987 Grantor Income Trust, (vii) the Scharf Family 1989
Trust, or (viii) Michael J. Scharf (each an "excluded person")),
is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly
or indirectly, of securities of Niagara representing twenty
percent (20%) or more of the combined voting power of Niagara's
then outstanding voting securities;
(c) during any period of not more than twenty four
(24) consecutive calendar months, individuals who at the
beginning of such period constitute the board of directors of
Niagara, any new director (other than a director designated by a
person who has entered into an agreement with Niagara to effect a
transaction described in clause (b), (c), or (e) of this
definition) whose election by such board or nomination for
election by Niagara's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of such period, or whose
election or nomination for election was previously so approved
(other than approval given in connection with an actual or
threatened proxy or election contest), cease for any reason to
constitute at least a majority of such board;
(d) the stockholders of Niagara approve a merger or
consolidation of Niagara with any other corporation or other
Person, other than (i) a merger or consolidation that would
result in the voting securities of Niagara outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving or parent entity) eighty percent
(80%) or more of the combined voting power of the voting
securities of Niagara or such surviving or parent entity
outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of Niagara (or similar transaction) in which no
Person other than an "excluded person" (as defined in clause (b)
of this definition) acquires twenty percent (20%) or more of the
combined voting power of Niagara's then outstanding securities;
(e) the stockholders of Niagara approve a plan of
complete liquidation of Niagara or an agreement for the sale or
disposition by Niagara of all or substantially all of Niagara's
assets (or any other transaction having a similar effect); or
(f) NCDC ceases to be a wholly-owned Subsidiary of
Niagara; or
(g) Michael J. Scharf shall cease to own at least sixty
six and two thirds percent (66 2/3%) of the issued and
outstanding shares of Niagara's voting stock owned by Michael J.
Scharf at the date of this Agreement; provided, however, that for
the purposes of this Agreement, voting stock owned by the Michael
J. Scharf 1987 Grantor Income Trust and the Scharf Family 1989
Trust shall be deemed to be owned by Michael J. Scharf. As of
the date of this Agreement, Michael J. Scharf owns (after taking
into effect the ownership of Niagara voting stock by such
trusts), eighteen and seventy one hundredths percent (18.71%) of
the issued and outstanding voting stock of Niagara.
"Code": the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time, and any
regulations promulgated thereunder.
"Collateral: means all property which is subject to or
is to be subject to a Lien granted by the Collateral Documents.
"Collateral Documents": the collective reference to the
Security Agreements, the Guaranty Agreements, the Mortgages, the
Assignments of Leases and Rents, and the Environmental
Indemnification Agreement.
"Consolidated", "Consolidating" or "Consolidated
Basis": for any Persons, means the consolidation of the accounts
of such Persons in accordance with GAAP, including principles of
consolidation.
"Consolidated Current Assets": means Current Assets
that would be reflected on the Consolidated balance sheet of
Borrowers and their Subsidiaries in accordance with GAAP.
"Consolidated Current Liabilities": means Current
Liabilities that would be reflected on the Consolidated balance
sheet of Borrowers and their Subsidiaries in accordance with
GAAP.
"Consolidated Liabilities": means Liabilities that
would be reflected on the Consolidated balance sheet of Borrowers
and their Subsidiaries in accordance with GAAP.
"Consolidated Net Income": means Net Income that would
be reflected on the Consolidated income statement of Borrowers
and their Subsidiaries in accordance with GAAP.
"Consolidated Net Worth": means Net Worth that would
be reflected on the Consolidated balance sheet of Borrowers and
their Subsidiaries in accordance with GAAP.
"Contingent Obligation": as to any Person, means any
obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary
obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure
the owner of such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation
shall not include endorsements of instruments for deposit or
collection in the ordinary course of business.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which such Person is or purports to
be a party or by which it or any of its property is or purports
to be bound.
"Credit": all extensions of credit set forth in Section
2 of this Agreement.
"Current Assets": means all assets treated as current
assets in accordance with GAAP consistent with those used in the
preparation of the financial statements referred to in
Subsections 5.1(a) and 5.1(b).
"Current Liabilities": means all liabilities treated as
current in accordance with GAAP consistent with those used in the
preparation of the financial statements referred to in
Subsections 5.1(a) and 5.1(b).
"Default": any Event of Default or any condition or
event which, after notice or lapse of time, or both, would become
an Event of Default.
"Dividend": with respect to a Person means (a) any
declaration of payment, or payment, of cash, property, securities
or obligations, to any holder of an equity or capital interest in
such Person (other than a payment solely in the form of stock of
such Person), or (b) any payment on account of, or action to set
apart assets for, or action to create a sinking or other
analogous fund for, the purchase, redemption, retirement or other
acquisition of any shares of any class of stock of such Person.
"Eligible Accounts": trade accounts receivable created
or acquired by Borrowers and their Subsidiaries in the ordinary
course of business which (a) are, and at all times continue to
be, subject to a perfected Lien of Agent pursuant to the Security
Agreements, (b) are not unpaid more than ninety (90) days from
invoice date, (c) are owing from account debtors with a principal
office located in the United States or Canada, (d) are not
subject to a contra offset, and (e) are, and at all times
continue to be, otherwise acceptable to Agent.
"Eligible Assignee": (a) a commercial bank organized
under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least Two Hundred
Fifty Million Dollars ($250,000,000); (b) a commercial bank
organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development, or
a political subdivision of any such country, and having a
combined capital and surplus of at least Two Hundred Fifty
Million Dollars ($250,000,000); (c) any Affiliate of any Bank, or
(d) an insurance company organized under the laws of the United
States, or any state thereof, and having a combined capital and
surplus of at least Two Hundred Fifty Million Dollars
($250,000,000).
"Eligible Inventory": Borrowers' and their
Subsidiaries' inventory (a) of raw materials and saleable
finished goods manufactured or acquired by Borrowers or their
Subsidiaries in the ordinary course of business, (b) stored in a
location or locations and in a manner acceptable to the Agent,
(c) valued at the lower of cost or market value on a FIFO basis,
(d) in which inventory the Agent holds, and at all times
continues to hold, a perfected Lien pursuant to the Security
Agreements, and (e) which inventory is, and at all times
continues to be, acceptable to the Agent.
"Environmental Indemnification Agreement": means the
agreement described in Subsection 4.1(e).
"ERISA": the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA shall
be construed to also refer to any successor sections.
"Eurocurrency Reserve Requirement": means, for any
LIBOR Rate Loan for the LIBOR Rate Period therefor, the daily
average of the stated maximum rate (expressed as a decimal) at
which reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained during such LIBOR Rate
Period under Regulation D by a Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D) but without
benefit or credit of proration, exemptions or offsets that might
otherwise be available from time to time under Regulation D.
Without limiting the effect of the foregoing, the Eurocurrency
Reserve Requirement shall reflect (a) any other reserves required
to be maintained against any category of liabilities that
includes deposits by reference to which the LIBOR for LIBOR Rate
Loans is to be determined; or (b) any category of extension of
credit or other assets that include LIBOR Rate Loans.
"Event of Default": any of the events described in
Subsection 7.1.
"Excess Cash Flow": means, with respect to the
Borrowers and their Subsidiaries calculated on a combined basis,
for any Fiscal Year, the difference between:
(a) the sum, without duplication, of (i) Consolidated Net
Income, (ii) depreciation, (iii) Cash Interest Expense, (iv)
any non-recurring items of income as determined by the
Agent, and (v) amortization expense; and
(b) the sum, without duplication, of (i) scheduled principal
payments of Indebtedness, (ii) Cash Interest Expense, (iii)
Capital Expenditures, (iv) any non-recurring expense items
as determined by the Agent, (v) all payments made in
accordance with the proviso to Subsection 6.12, and (vi)
cash payments made with respect to Taxes.
"Fiscal Year": any period of twelve (12) consecutive
calendar months ending on the last day of December, or, upon the
prior consent of the Agent, any period of twelve (12) consecutive
calendar months ending on another date.
"GAAP": the generally accepted accounting principles
applied in the preparation of the audited financial statements of
Niagara, the Borrowers, and the Subsidiaries of Borrowers as (a)
shall be consistent with the then-effective principles
promulgated or adopted by the Financial Accounting Standards
Board ("FASB") and/or the American Institute of Certified Public
Accountants ("AICPA") and any predecessors and successors
thereof, so as to properly reflect the financial condition, and
the results of operations and changes in financial position of
Niagara, and of the Borrowers and their Subsidiaries, except that
any accounting principle or practice required to be changed by
FASB or AICPA in order to continue as a generally accepted
accounting principle or practice may be so changed, and (b) shall
be concurred in by the Independent Public Accountants. In the
event of a change in GAAP, Agent and Borrowers will thereafter
negotiate in good faith to revise covenants in this Agreement
affected thereby in order to make such covenants consistent with
GAAP then in effect.
"Governmental Authority": any nation or government, any
state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
"Guarantors": means, collectively, Niagara, and each
Subsidiary of the Borrowers.
"Guaranty Agreements": the Niagara Guaranty and the
unconditional continuing guaranty agreements executed by each
Subsidiary of the Borrowers pursuant to Subsection 5.13.
"Indebtedness": of any Person, at a particular time,
means all items which, in conformity with GAAP, would be
classified as liabilities on a balance sheet of such Person as at
such time and which constitute (a) indebtedness for borrowed
money or for the deferred purchase price of property or services
in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or any commitment
by which such Person assures a credit against loss, (including,
without limitation, all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced
by bonds, debentures, notes or other similar instruments,
including, without limitation, the 12.5% Subordinated Notes, but
excluding trade payables incurred in the ordinary course of
business payable within ninety (90) days of the date thereof),
(b) obligations with respect to any conditional sale agreement or
title retention agreement, (c) indebtedness arising under
acceptance facilities, in connection with surety or other similar
bonds, and the outstanding amount of all letters of credit issued
for the account of such Person and, without duplication, all
drafts drawn thereunder, (d) all liabilities secured by any
security interest in any property owned by such Person even
though it has not assumed or otherwise become liable for the
payment thereof, (e) obligations under Capitalized Leases in
respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person assures a creditor against loss,
(f) obligations with respect to interest rate protection
agreements, and (g) any asserted withdrawal liability of any
Person or a commonly controlled entity under a Multiemployer
Plan.
"Initial Stockholders": means and includes:
(a) Michael Scharf, his wife, his children and
his grandchildren;
(b) the estate of, following the date of the
appointment of any of the following is effective, the
executors or administrators and any other similar
representative of the person or property of any of the
Persons named in clause (a);
(c) any trusts for the benefit of any, all or any
group of the foregoing persons;
(d) any partnerships all the partners of which,
and all corporations, limited liability companies or
similar Persons all of the equity interests in which,
are owned solely by the foregoing Persons, or any of
them or any group of them; and
(e) their respective successors and assigns.
"Independent Public Accountant": refers to BDO Seidman
LLP or any other nationally-recognized public accounting firm
selected by the Borrowers and consented to by the Agent, such
consent not to be unreasonably withheld.
"Interest Coverage Ratio": for any period with respect
to any Person, means, the ratio of:
(a) the sum for such period of: (i) Net Income, plus
(ii) the aggregate amount deducted in determining such Net
Income, representing (w) all Taxes of such Person, (x) interest
expense, (y) depreciation, and (z) amortization expense, in each
case as determined in accordance with GAAP,
to
(b) Cash Interest Expense for such period.
"Investments": investments as described in Subsection
6.10.
"Issuable Share": means and includes at any time,
(a) a share of issued and outstanding Niagara
common stock; and
(b) a Right, and (without duplication) all shares
of Niagara common stock issuable upon exercise of such
Right, in each case at such time.
For purposes of this definition, a Right to acquire one share of
Niagara common stock shall constitute one Issuable Share, and a
Person shall be deemed to own an Issuable Share if such Person
has a Right to acquire such share whether or not such Right is
exercisable at such time.
"Internal Revenue Service": the United States Internal
Revenue Service, or any successor or analogous organization.
"knowledge", "knows": with respect to any Borrower, or
any Subsidiary of a Borrower, means the actual knowledge of any
executive or managerial employee of such Borrower or Subsidiary,
or knowledge that any such persons should have known in the
proper performance of their duties.
"LaSalle": has the meaning set forth in the first
paragraph of this Agreement.
"Liabilities": of any Person, means, at any time, all
amounts which, in accordance with GAAP, would be included as
liabilities on a balance sheet of such Person at such time.
"LIBOR": for any LIBOR Rate Period, the per annum rate,
as determined by the Agent from any broker, quoting service or
commonly available source utilized by the Agent, at which United
States dollar deposits in immediately available funds are offered
in the London interbank eurodollar market at 11:00 a.m. Greenwich
Mean Time (or as soon thereafter as practicable) on the date that
is two (2) Business Days before the first day of such LIBOR Rate
Period for delivery on the first day of such LIBOR Rate Period
for a period equal to such LIBOR Rate Period.
"LIBOR Increment": with respect to (a) the Revolving
Credit Loan, 250 basis points, and (b) the Term Loan, 285 basis
points.
"LIBOR Interest Determination Date": a Business Day
which is two (2) Business Days prior to the commencement of each
LIBOR Rate Period during which the LIBOR rate will be applicable.
"LIBOR Rate Election": each election by the Borrowers
with respect to the LIBOR Rate Period for each LIBOR Rate Loan as
described in Subsection 2.3(b).
"LIBOR Rate Loan": the outstanding and unpaid
principal balance of the Term Loan, and the outstanding and
unpaid principal balance of each Revolving Credit Loan, bearing
interest at the LIBOR, plus the applicable LIBOR Increment.
"LIBOR Rate Period": the one (1) month, two (2) months,
three (3) months, or six (6) months period selected by a Borrower
pursuant to Subsection 2.3 of this Agreement on which the LIBOR
is in effect for a LIBOR Rate Loan, but in no event may a LIBOR
Rate Period extend beyond the Maturity Date of the Term Loan, or
beyond the Revolving Credit Termination Date for a Revolving
Credit Loan. If a LIBOR Rate Period would end on a day that is
not a Business Day, such LIBOR Rate Period shall be extended to
the next Business Day, unless such Business Day would fall in the
next calendar month, in which event such LIBOR Rate Period shall
end on the immediately preceding Business Day.
"License", "Licenses": means, individually and
collectively, with respect to a Person, each license, permit,
consent, certificate, certification, registration, declaration,
approval, and filing with any Governmental Authority or body, or
other person or entity, required for or in connection with such
Person's business.
"Lien": any mortgage, deed of trust, security
interest, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority
or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement
under the Uniform Commercial Code or comparable law of any
jurisdiction other than any financing statement filed in
connection with consignments or leases not intended as security).
"Loan" or "Loans": individually and collectively the
Term Loan and each Revolving Credit Loan.
"Loan Documents": the collective reference to this
Agreement, the Revolving Credit Note, the Term Loan Note, the
Collateral Documents, and all other agreements, instruments, and
documents executed by or on behalf of the Borrowers or any of the
Guarantors, and delivered to the Agent in connection with the
transactions contemplated by this Agreement.
"M&T": has the meaning set forth in the first
paragraph of this Agreement.
"Majority Banks": at any time the Banks holding at
least fifty one percent (51%) of the then aggregate Revolving
Credit Commitment and Term Loan Commitment, provided, that if the
Revolving Credit Commitment and the Term Loan Commitment shall
have been terminated in full, "Majority Banks" shall mean the
Banks holding, or holding participation interests pursuant to
Subsection 9.2(d) in, at least fifty one percent (51%) of the
aggregate of the then outstanding and unpaid principal amounts of
the Notes.
"Maturity Date": the maturity date of the Term Loan
Note as described in Subsection 2.2(b).
"Metcalf & Eddy Reports": means, collectively (a) the
Metcalf & Eddy Environmental Assessment, Final Report, LaSalle
Steel Company, Fluid Power Operations, November 8, 1996, (b) the
Metcalf & Eddy Sampling Report, Final Submittal, LaSalle Steel
Company, Fluid Power Operations, November 8, 1996, and (c)
Metcalf & Eddy letter dated February 27, 1997, entitled "Update
on Compliance Review for LaSalle Steel Properties."
"Mortgages": the collective reference to each
agreement described in Subsection 4.1(d).
"Multiemployer Plan": has the meaning assigned to such
term under section 3(37) of ERISA.
"1993 Warrants": means the Redeemable Common Stock
Purchase Warrants issued pursuant to the 1993 Warrant Agreement.
"1993 Warrant Agreement": means the Warrant Agreement,
made as of August 13, 1993, between Niagara (under its former
name, International Metals Acquisition Corporation) and
Continental Stock Transfer & Trust Company, as warrant agent, as
such agreement may be amended, restated or otherwise modified
from time to time.
"1993 Warrant Call Option Event": means any event or
circumstance (including, without limitation, that, as of any
date, the last sales price of the common stock of Niagara has
been at least 181.81% of the then effective exercise price of the
1993 Warrants on each of 20 consecutive trading days ending on
the third business day prior to such date) that, pursuant to the
terms of the 1993 Warrant Agreement, permits Niagara to exercise
its option under the 1993 Warrant Agreement to call all or a
portion of the 1993 Warrants for redemption.
"1993 Warrant Forced Exercise Net Proceeds Amount":
means, as of any date of determination after the occurrence of a
1993 Warrant Call Option Event, an amount equal to:
(a) the aggregate amount of the proceeds payable
to Niagara in respect of the exercise of 1993 Warrants
exercised by or on behalf of the holders of 1993
Warrants during the period commencing with the
occurrence of such 1993 Warrant Call Option Event and
ending immediately prior to such date of determination,
minus
(b) the aggregate amount of the redemption price
required by the terms of the 1993 Warrant Agreement to
be paid by Niagara in respect of any 1993 Warrants
called for redemption, and actually redeemed, by
Niagara during such period.
"1996 Credit Facilities": has the meaning set forth in
the first paragraph of this Agreement.
"NCDC": has the meaning set forth in the first
paragraph of this Agreement.
"NCDC Pledge Agreement": the agreement evidencing the
pledge of all issued and outstanding capital stock of LaSalle to
the Agent as described in Subsection 4.1(c)(iv).
"Net Income": of any Person, means, with respect to
any period, all amounts which, in conformity with GAAP, would be
included under net income on an income statement of such Person
for such period.
"Net Worth": for any Person, means, at any time, the
amounts that would, in accordance with GAAP, be shown as
shareholders' equity on a balance sheet of such Person at such
time, excluding any amount attributable to (a) any deferred
charge or prepaid expense of such Person, except for any prepaid
interests, tax or insurance premium, (b) any treasury stock of
such Person, (c) any unamortized debt discount or expense of such
Person, (d) any Investment of such Person, except for
Investments permitted by Subsection 6.10, or (e) any Investment
of such Person which is a security in a Subsidiary of such Person
in excess of the lesser of the cost or fair market value of such
security.
"Niagara": has the meaning set forth in the third
paragraph of this Agreement.
"Niagara Guaranty": the unconditional continuing
guaranty agreement of Niagara as described in Subsection 4.1(f).
"Niagara Pledge Agreement": the agreement evidencing
the pledge of all issued and outstanding capital stock of NCDC to
the Agent as described in Subsection 4.1(c)(iii).
"Note" or "Notes": individually and collectively the
Revolving Credit Note and the Term Loan Note.
"Notice of Borrowing": the notice of a proposed
borrowing delivered by a Borrower to Agent, as described in
Subsection 2.1(c).
"Obligations": the obligations described in Subsection
7.1(e)(i).
"Offering Memorandum": means Copy No. 8 of the
Confidential Information Memorandum for Niagara Cold Drawn Corp.
of $27,000,000 Senior Subordinated Notes with Common Stock
prepared by CIBC Wood Gundy Securities Corp., together with all
Exhibits thereto, as supplemented by a revised Exhibit A
(Financial Projections) thereto dated March 7, 1997.
"Patent Assignment Agreements": the agreements of the
Borrowers described in Subsection 4.1(c)(ii).
"PBGC": the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Issuable Shares Amount": means that number
of Issuable Shares (appropriately adjusted for any
reclassification (by combination, subdivision or otherwise) or
dividend payable in Niagara common stock or Rights) equal to
twenty five percent (25%) of the Issuable Shares beneficially
owned by the Initial Shareholders, taken as a group, on the date
of this Agreement.
"Person": any natural person, corporation, firm,
trust, partnership, business trust, joint venture, association,
government, governmental agency or authority, or any other
entity, whether acting in an individual, fiduciary, or other
capacity.
"Plan": a "pension plan", as such term is defined in
ERISA, which is subject to Title IV of ERISA (other than a
Multiemployer Plan) and to which the Borrower or any corporation,
trade or business that is, along with the Borrower, a member of a
controlled group of corporations or a controlled group of trades
or businesses (as described in sections 414(b) and 414(c),
respectively, of the Code or section 4001 of ERISA) may have any
liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of
being deemed to be a contributing sponsor under section 4069 of
ERISA.
"Prime Rate": the rate of interest publicly announced
by M&T from time to time as its prime rate and as a base rate for
calculating interest on certain loans. The Prime Rate may or may
not be the most favorable rate charged by M&T to its customers
from time to time.
"Prime Rate Conversion Loan": following the absence of
the LIBOR pursuant to Subsection 2.6, the outstanding and unpaid
principal balance of the Term Loan, and the outstanding and
unpaid principal of each Revolving Credit Loan, in each such case
bearing interest at the Adjusted Prime Rate, pursuant to
Subsection 2.6(c).
"Prime Revolver Loan": the outstanding and unpaid
principal balance of each Revolving Credit Loan bearing interest
at the Adjusted Prime Rate, pursuant to Subsection 2.1(c).
"Principal Office": refers to the Agent's office at One
M&T Plaza, Buffalo, New York 14203.
"Proportionate Revolving Credit Commitment": the
amount of each Bank's portion of the Revolving Credit Commitment
expressed as a percentage; (a) with respect to M&T, its
Proportionate Revolving Credit Commitment shall equal fifty
percent (50%); (b) with respect to CIBC, its Proportionate
Revolving Credit Commitment shall equal thirty three and thirty
three one hundredths percent (33.33%); and (c) with respect to
National, its Proportionate Revolving Credit Commitment shall
equal sixteen and sixty seven one hundredths percent (16.67%).
"Proportionate Term Loan Commitment": the amount of
each Bank's portion of the Term Loan Commitment expressed as a
percentage; (a) with respect to M&T, its Proportionate Term Loan
Commitment shall equal fifty percent (50%); (b) with respect to
CIBC, its Proportionate Term Loan Commitment shall equal thirty
three and thirty three one hundredths percent (33.33%); and (c)
with respect to National, its Proportionate Term Loan Commitment
shall equal sixteen and sixty seven one hundredths percent
(16.67%).
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Requirement of Law": with respect to any matter or
Person means any law, rule, regulation, order, decree or other
requirement having the force of law relating to such matter or
Person, and, where applicable, any interpretation thereof by any
authority having jurisdiction with respect thereto or charged
with the administration thereof.
"Revolving Credit Commitment": the commitments of the
Banks to provide the Revolving Credit Loans in an aggregate
amount not to exceed the lesser of (a) Fifty Million Dollars
($50,000,000), or (b) the Borrowing Base.
"Revolving Credit Loan", "Revolving Credit Loans":
individually and collectively the loans described in Subsection
2.1.
"Revolving Credit Note": the promissory noted
described in Subsection 2.1(b).
"Revolving Credit Termination Date": means (a) with
respect to each Prime Revolver Loan, the date that is the last
day of the thirty (30) day period commencing with such Prime
Revolver Loan's Borrowing Date, but in no event later than April
17, 2000, and (b) with respect to the Revolving Credit Commitment
and the Revolving Credit Note, April 17, 2000.
"Right": means and includes any warrant (including,
without limitation, any 1993 Warrant), option or other right, to
acquire common stock of Niagara and including, without
limitation, any right pursuant to the provisions of any security
convertible or exchangeable into common stock of Niagara.
"Security Agreements": the agreements described in
Subsection 4.1(c).
"Solvent": with respect to a Person means (a) the fair
market value of the assets of such Person is greater than the
total amount of liabilities (including contingent liabilities) of
such Person, (b) the present fair saleable value of the assets of
such Person is not less than the amount that will be required to
pay the liabilities of such Person on its existing debts as they
become absolute and matured, (c) such Person is able to realize
upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in
the normal course of business, (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities
mature, and (e) such Person does not have reasonably small
capital, after giving due consideration to the prevailing
practice in the industry in which such Person is engaged.
"Stockholders' Agreement": the Stockholders Agreement
of Niagara, NCDC, Michael Scharf and the purchasers of the 12.5%
Subordinated Notes, dated as of April 18, 1997.
"Subordinated Debt": the Indebtedness of NCDC under
the separate Note and Stock Purchase Agreements dated as of April
18, 1997 by and among Niagara, NCDC, LaSalle and each of the
persons indicated therein (collectively, the "Subordinated Debt
Agreement") and under the 12.5% Subordinated Notes issued by NCDC
in connection therewith.
"Subordinated Debt Offering": the offering by NCDC of
subordinated notes bearing interest at 12.5% per annum and due on
April 18, 2005 (the "12.5% Subordinated Notes") in a principal
amount equal to Twenty Million Dollars ($20,000,000) pursuant to
the Subordinated Debt Agreement.
"Subsidiary": of any Person means any corporation,
limited liability company, partnership, joint venture or other
entity of which at least fifty percent (50%) of the voting stock
or other applicable ownership interest is owned by such Person,
directly or indirectly, including through one or more
Subsidiaries. When used in connection with the Borrowers, the
term "Subsidiary" shall not refer to NCDC as a subsidiary of
Niagara, or to LaSalle as a subsidiary of NCDC.
"Tag-Along Trigger Event": shall be deemed to have
occurred at any time when the Initial Stockholders, taken as a
group (and without giving effect to sales, transfers or other
dispositions of Issuable Shares by any Initial Stockholder to any
other Initial Stockholder), shall have sold, transferred or
otherwise disposed of a number of Issuable Shares which (after
giving effect to all prior or contemporaneous transfers,
dispositions, purchases and acquisitions) is more than the
Permitted Issuable Shares Amount in any sale, transfer or
disposal (or series of sales, transfers or disposals (whether
related or not)) after the Closing Date, provided that in
connection with any sale, transfer or other disposal if:
(a) immediately prior thereto, the aggregate
amount of Issuable Shares so sold, transferred or
otherwise disposed of by the Initial Stockholders since
the Closing Date is less than the Permitted Issuable
Shares Amount, and
(b) any of the Initial Stockholders sell Issuable
Shares in such transaction that, together with all
other Issuable Shares sold, transferred or otherwise
disposed of by the Initial Stockholders since the date
hereof equal or exceed the Permitted Issuable Shares
Amount,
then, for the purposes of this Agreement, the "Tag-Along Trigger
Event" shall be deemed to have occurred immediately prior to such
sale, transfer or other disposal.
"Taxes": any present or future tax, duty, levy,
impost, assessment or other charge of whatever nature now or
hereafter imposed by any Governmental Authority, but excluding
therefrom (a) a tax imposed on or measured by the net income
(including a franchise tax based on net income) of a Bank or its
lending offices by the United States or by the jurisdiction (or
political subdivision or taxing authority thereof or therein) in
which such Bank is incorporated or in which such Bank's principal
office or lending offices are located or are resident, (b) in the
case of any Bank organized under the laws of any jurisdiction
other than the United States or any state thereof (including the
District of Columbia), any taxes imposed by the United States by
means of withholding at the source unless such withholding
results from a change in applicable law, treaty or regulations or
the interpretation or administration thereof (including, without
limitation, any guideline or policy not having the force of law)
by any authority charged with the administration thereof
subsequent to the date such Bank becomes a Bank with respect to
the Loan or portion thereof affected by such change, (c) any
taxes to which a Bank is subject (to the extent of the tax rate
then in effect) on the date this Agreement is executed or would
be subject to such taxes on such date if a payment hereunder had
been received by such Bank on such date and with respect to any
Bank that becomes a party hereto after the date hereof, any taxes
to which such Bank is subject on the date it becomes a party
hereto (other than taxes which each of the other Banks is
entitled to reimbursements for pursuant to the terms of this
Agreement) and (d) taxes to which a Bank becomes subject
subsequent to the date referred to in clause (c) above as a
result of a change in the residence, place of incorporation, or
principal place of business of such Bank, a change in the branch
or lending office of such Bank participating in the transactions
set forth herein or other similar circumstances or as a result of
the recognition by such Bank of gain on the sale, assignment or
participation by such Bank of the participating interests in its
creditor positions hereunder.
"Term Loan": the loan described in Subsection 2.2.
"Term Loan Commitment": the commitments of the Banks
to provide the Term Loan in an aggregate amount equal to Forty
Million Dollars ($40,000,000).
"Term Loan Note": the promissory note described in
Subsection 2.2(b).
"Unused Revolving Credit Fee": the fee payable by
Borrowers as described in Subsection 2.1(f).
1.2 UCC Definitions. Unless otherwise defined in
Subsection 1.1 or elsewhere in this Agreement, capitalized words
shall have the meanings set forth in the New York Uniform
Commercial Code as in effect on the date of this Agreement.
1.3 Other Definitional Provisions. (a) All terms defined
in this Agreement shall have the meanings defined herein when
used in any Loan Document, unless otherwise specifically provided
for therein.
(b) As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not
defined in Subsection 1.1, and accounting terms partly defined in
Subsection 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section, subsection, and schedule
references are to this Agreement unless otherwise specified.
(d) The definitions of all terms defined in this
Agreement shall be equally applicable to both the singular and
plural forms of the terms defined.
SECTION 2 AMOUNT AND TERMS OF THE CREDIT
2.1 Revolving Credit Loan.
(a) Amounts to be Loaned. Subject to the terms and
conditions of this Agreement and relying upon the representations
and warranties herein set forth, each Bank severally agrees to
lend to the Borrowers prior to the Revolving Credit Termination
Date, such sum or sums of money (individually, a "Revolving
Credit Loan" and collectively, the "Revolving Credit Loans") as
the Borrowers may request in an aggregate principal amount at any
time outstanding not to exceed such Bank's Proportionate
Revolving Credit Commitment. Notwithstanding anything to the
contrary contained in this Agreement, or in any Loan Document, in
no event shall a Bank make any Revolving Credit Loan or Revolving
Credit Loans to Borrowers, either individually or collectively,
in an aggregate amount exceeding its Proportionate Revolving
Credit Commitment.
(b) Revolving Credit Note. All Revolving Credit Loans
made by the Banks under this Agreement shall be evidenced by, and
repaid with interest in accordance with, a single promissory note
of the Borrowers, in form and content acceptable to Agent, dated
the date of this Agreement ("Revolving Credit Note"). The Agent
shall set forth on a schedule attached to and made a part of the
Revolving Credit Note or on any separate similar schedule or on
any continuation of any such schedule (including, but not limited
to, any similar schedule maintained in computerized records)
annotations evidencing (i) the date and principal amount of each
Revolving Credit Loan, (ii) the aggregate of all principal
amounts of all Revolving Credit Loans, (iii) the amounts of any
repayments of principal of the Revolving Credit Loans, (iv) the
outstanding principal amount of the Revolving Credit Note, (v)
the applicable LIBOR Rate Period for each Revolving Credit Loan
that is a LIBOR Rate Loan, (vi) the applicable LIBOR and LIBOR
Increment for each Revolving Credit Loan that is a LIBOR Rate
Loan, (vii) the applicable Adjusted Prime Rate for each Revolving
Credit Loan that is a Prime Revolver Loan, and (viii) the
aggregate amounts of all payments under or repayments of
principal of the Revolving Credit Note. Each such annotation
shall, in the absence of manifest error, be conclusive and
binding upon the Borrowers. No failure of the Agent to make and
no error by the Agent in making any annotation on such attached
schedule or any such similar schedule shall affect the
obligations of the Borrowers to repay the principal amount of
each Revolving Credit Loan or the outstanding principal amount of
the Revolving Credit Note, the obligation of the Borrowers to pay
interest on the outstanding principal amount of each Revolving
Credit Loan or on the outstanding principal amount of the
Revolving Credit Note, or any other obligation of the Borrowers
to the Agent pursuant to this Agreement.
(c) Notice and Manner of Borrowing. Each Borrower
requesting a Revolving Credit Loan shall give the Agent notice (a
"Notice of Borrowing", in the form of Exhibit B hereto) at least
(i) three (3) Business Days prior to the date it desires any
Revolving Credit Loan to be made that will be a LIBOR Rate Loan,
and (ii) one (1) Business Day prior to the date it desires any
Revolving Credit Loan to be made that will be a Prime Revolver
Loan, specifying: (A) the date on which such Revolving Credit
Loan will be advanced (such Loan's "Borrowing Date"), (B) the
principal amount of such Revolving Credit Loan, and (C) if a
LIBOR Rate Loan, the duration of the LIBOR Rate Period elected by
such Borrower in such Notice of Borrowing. Each Notice of
Borrowing shall be irrevocable and shall be given to the Agent by
not later than 11:00 a.m. (Eastern Standard Time or Eastern
Daylight Savings Time, as the case may be) on the day which is
not less than the number of Business Days specified above for
such notice. Each Borrowing Date shall be a Business Day, and
for LIBOR Rate Loans shall be the proposed commencement date of
the applicable LIBOR Rate Period of such LIBOR Rate Loan. After
receiving a Notice of Borrowing, the Agent shall promptly notify
each Bank by telephone of such Notice of Borrowing and such
Bank's Proportionate Revolving Credit Commitment for the
principal amount of such Revolving Credit Loan. Each Bank shall,
before 11:00 a.m. (Eastern Standard Time or Eastern Daylight
Savings Time, as the case may be) on the Borrowing Date, deposit
with the Agent such Bank's Proportionate Revolving Credit
Commitment for the principal amount of such Revolving Credit Loan
in immediately available funds. Upon fulfillment of all
applicable conditions set forth herein and after receipt by the
Agent of such funds, the Agent shall pay or deliver all funds so
received to the order of the Borrower that delivered the Notice
of Borrowing at the Principal Office of the Agent. Each
Revolving Credit Loan that is a LIBOR Rate Loan which does not
utilize the Revolving Credit Commitment in full shall be in an
amount of not less than One Hundred Thousand Dollars ($100,000)
and, if in an amount greater than One Hundred Thousand Dollars
($100,000), shall be in whole multiples of Fifty Thousand Dollars
($50,000). Each Revolving Credit Loan that is a Prime Revolver
Loan which does not utilize the Revolving Credit Commitment in
full shall be in an amount of not less than Fifty Thousand
Dollars ($50,000) and, if in an amount greater than Fifty
Thousand Dollars ($50,000), shall be in whole multiples of Ten
Thousand Dollars ($10,000).
(d) Credit Termination. Within the limits of the
Revolving Credit Commitment and subject to the terms of this
Agreement (specifically including Subsection 2.1(e)), the
Borrowers may borrow, prepay the principal amount of any
Revolving Credit Loan pursuant to Subsection 2.4, and reborrow
amounts of the Revolving Credit Commitment under this Subsection
2.1 that were previously prepaid; provided, however, no further
Revolving Credit Loans shall be made on or after the Revolving
Credit Termination Date, at which date the Revolving Credit Loans
must be paid in full.
(e) Mandatory Repayment of Prime Revolver Loans.
Notwithstanding anything to the contrary in this Agreement or in
the Revolving Credit Note, the Borrowers shall repay the
outstanding and unpaid principal balance of each Prime Revolver
Loan, together with all applicable interest, to the Agent no
later than the applicable Revolving Credit Termination Date for
such Prime Revolver Loan.
(f) Unused Revolving Credit Fee. The Borrowers
agree to pay to the Agent a fee (the "Unused Revolving Credit
Fee") on the average daily unused portion of the Revolving Credit
Commitment from the date of the Revolving Credit Note until the
Revolving Credit Termination Date at the rate of three eights of
one percent (3/8%) per annum calculated on the basis of a year of
360 days, payable, in arrears, on the first day of each calendar
quarter during the term of the Revolving Credit Commitment,
commencing on the date of the Revolving Credit Note and ending on
the Revolving Credit Termination Date.
2.2 Term Loan.
(a) Amounts to be Loaned. Subject to the terms and
conditions of this Agreement, and relying upon the
representations and warranties herein set forth, each Bank
severally agrees to make a loan (the "Term Loan") to the
Borrowers on the date of this Agreement in an aggregate principal
amount not to exceed such Bank's Proportionate Term Loan
Commitment. Notwithstanding anything to the contrary contained
in this Agreement or in any Loan Document, in no event shall a
Bank lend to the Borrowers, either individually or collectively,
an amount of the Term Loan in excess of its Proportionate Term
Loan Commitment.
(b) Term Loan Note. The Term Loan shall be evidenced
by, and repaid with interest in accordance with, a single
promissory note of the Borrowers in form and content acceptable
to Agent, and dated the date of this Agreement ("Term Loan
Note"). Interest on the outstanding and unpaid principal amount
of the Term Loan Note will be payable from the date of the Term
Loan Note as hereinafter provided, and the principal amount of
the Term Loan Note shall be repaid commencing six (6) months from
the date of the Term Loan Note in seventy-eight (78) consecutive
monthly installments commencing November 1, 1997 with subsequent
installments being due on the first day of each calendar month
thereafter and one final installment due and payable on April 1,
2004 (the "Maturity Date") in the amount necessary to repay in
full the unpaid principal amount of the Term Loan Note.
The amount of each installment of principal repayment
of the Term Loan shall be as follows:
Installment Date Principal Repayment
November 1, 1997 through
and including April 1, 1998 $166,666
May 1, 1998, through
and including April 1, 1999 $333,333
May 1, 1999 through
and including April 1, 2000 $416,666
May 1, 2000 through
and including April 1, 2001 $500,000
May 1, 2001 through
and including April 1, 2002 $583,333
May 1, 2002 through
and including April 1, 2003 $666,666
May 1, 2003 through
and including March 1, 2004 $750,000
April 1, 2004 Outstanding Balance
of Term Loan
(c) Mandatory Principal Repayment from Excess Cash
Flow. Notwithstanding anything to the contrary in this Agreement
or in the Term Loan Note, in addition to any scheduled payments
of principal to be made by the Borrowers, the Borrowers shall
apply fifty percent (50%) of the amount of any Excess Cash Flow
in any Fiscal Year to repay the outstanding and unpaid principal
balance of the Term Loan Note. Excess Cash Flow shall be
determined at the end of each Fiscal Year based on the audited
consolidating financial statements of Borrowers and their
Subsidiaries to be supplied to Agent pursuant to Subsection
5.1(b), and the amount of any Excess Cash Flow shall be paid by
Borrowers to Agent within one hundred forty (140) days of the end
of such Fiscal Year. All amounts of Excess Cash Flow applied by
the Borrowers to the outstanding and unpaid principal balance of
the Term Loan Note pursuant to this Subsection shall be used to
reduce the installments of the principal amount of the Term Loan
Note pro rata.
(d) Mandatory Principal Repayment from Excess Warrant
Exercise Proceeds. Notwithstanding anything to the contrary in
this Agreement or in the Term Loan Note, in addition to any
scheduled payments of principal to be made by the Borrowers, upon
the occurrence of a 1993 Warrant Call Option Event and
corresponding payment of the 1993 Warrant Forced Exercise Net
Proceeds Amount (and any applicable prepayment compensation
pursuant to the applicable provisions of the Subordinated Debt
Agreement) (the aggregate amount of the 1993 Warrant Forced
Exercise Net Proceeds Amounts and any applicable prepayment
compensation to be referred to as the "Subordinated Debt Warrant
Prepayment") to the holders of the 12.5% Subordinated Notes, the
Borrowers shall, within three (3) Business Days of the payment in
full of the Subordinated Debt Warrant Prepayment to the holders
of the 12.5% Subordinated Notes, apply the amount of the proceeds
relating to the exercise of the 1993 Warrants in excess of the
Subordinated Debt Warrant Prepayment to repay the outstanding and
unpaid principal balance of the Term Loan Note. The amount of
the proceeds relating to the exercise of the 1993 Warrants
applied by the Borrowers to the outstanding and unpaid principal
balance of the Term Loan Note pursuant to this Subsection shall
be used to reduce the installments of the principal amount of the
Term Loan Note pro rata.
2.3 Interest and LIBOR Rate Elections.
(a) Computation and Payment of Interest.
(i) LIBOR RATE LOANS. The Borrowers shall pay
interest to the Agent on the outstanding and unpaid principal
amount of each LIBOR Rate Loan at the rate per annum equal to the
sum of (A) the LIBOR for such Loan for such Loan's LIBOR Rate
Period, plus (B) the applicable LIBOR Increment for such Loan.
Interest on each LIBOR Rate Loan shall be payable in arrears in
immediately available funds to the Agent at the Agent's Principal
Office on the first day of each month in the LIBOR Rate Period
with respect to such LIBOR Rate Loan.
(ii) PRIME REVOLVER LOANS. The Borrowers shall
pay interest to the Agent on the outstanding and unpaid principal
amount of each Prime Revolver Loan at the rate per annum equal to
the Adjusted Prime Rate. Any change in the Prime Rate shall be
effective as of the opening of business on the day on which such
change in the Prime Rate becomes effective. Interest on each
Prime Revolver Loan shall be payable in immediately available
funds to the Agent at the Agent's Principal Office (A) no later
than the last day of the thirty (30) day period commencing with
such Loan's Borrowing Date, or (B) if such Prime Revolver Loan is
prepaid pursuant to the provisions of Subsection 2.4(b), on the
date that such prepayment is made to Agent.
(iii) Interest on the Notes shall be computed on
the basis of a 360-day year for the actual number of days
elapsed.
(b) LIBOR Rate Elections. At the end of the initial
LIBOR Rate Period for each LIBOR Rate Loan, and at the end of
each subsequent LIBOR Rate Period for each LIBOR Rate Loan, the
Borrowers shall, as to each such LIBOR Rate Loan, make an
election (in the form of Exhibit C hereto with respect to the
Term Loan, and in the form of Exhibit D hereto with respect to
each Revolving Credit Loan that is a LIBOR Rate Loan) (the "LIBOR
Rate Election") at least three (3) Business Days prior to the
commencement of the LIBOR Rate Period described in such LIBOR
Rate Election, that specifies (i) the Business Day that is to be
the commencement date for the LIBOR Rate Period described in the
LIBOR Rate Election, and (ii) the duration of the LIBOR Rate
Period elected by such Borrower in such LIBOR Rate Election;
provided, however, that (A) for each Revolving Credit Loan that
is a LIBOR Rate Loan, any such LIBOR Rate Period may not extend
beyond the Revolving Credit Termination Date, (B) for the Term
Loan, the LIBOR Rate Period may not extend beyond the Maturity
Date, and (C) such LIBOR Rate Election need not be honored by
Agent if (I) any Event of Default occurs or exists before, and
remains uncured at, the time such LIBOR Rate Election is received
by the Agent, (II) for each Revolving Credit Loan that is a LIBOR
Rate Loan, [a] if the outstanding and unpaid principal balance of
such LIBOR Rate Loan is not at least One Hundred Thousand Dollars
($100,000), or [b] if such LIBOR Rate Period would overlap more
than seven (7) other LIBOR Rate Periods, or (III) with respect to
the Term Loan, if the LIBOR Rate Election does not apply to the
entire outstanding and unpaid principal balance of the Term Loan
Note. If a Borrower shall fail to make a LIBOR Rate Election
with respect to any LIBOR Rate Loan prior to the period for
providing such LIBOR Rate Election as described above, or if
Borrower's LIBOR Rate Election is not honored by Agent pursuant
to subclause (C) immediately above, such Borrower shall be deemed
to have elected a one (1) month LIBOR Rate Period for such Loan
pursuant to a properly submitted LIBOR Rate Election.
(c) Default Rate. After maturity of any Loan, whether
by acceleration or otherwise, the Borrowers shall pay interest at
a per annum rate equal to three percent (3%) above the interest
rate otherwise in effect thereon until such Loan is paid in full.
After maturity, whether by acceleration or otherwise, interest
shall be payable on demand. In no event shall the rate of
interest exceed the maximum rate permitted by applicable law. If
the Borrowers pay interest in excess of the amount permitted by
applicable law with respect to a Note, any such excess payment
received, collected or applied as interest by the Agent shall be
deemed to have been a mistake and automatically canceled and, if
received by the Agent, shall be refunded to the Borrowers.
(d) Late Charge. Upon failure to make any payment of
interest or principal on the Notes within ten (10) days of the
due date thereof, the Borrowers agree to pay to Agent, upon
demand by Agent, a late charge equal to three percent (3%) of the
amount of any such overdue amount of principal or interest. The
assessment and/or collection of late charges shall in no way
impair the right of Agent or the Banks to pursue any other
remedies hereunder.
2.4 Prepayment.
(a) LIBOR Rate Loans. The Borrowers shall have the
right to prepay without premium all or any portion of the
outstanding and unpaid principal balance of any LIBOR Rate Loan
on the expiration day of such Loan's LIBOR Rate Period. If any
LIBOR Rate Loan is prepaid at any other time, the Borrowers
shall, upon not less than ten (10) days prior written notice, pay
to Agent an amount equal to (i) the interest which would have
otherwise been payable on the amount prepaid during the remaining
term of the LIBOR Rate Period, less (ii) interest on the amount
prepaid for such term computed at an interest rate equal to the
yield-to-maturity which could be obtained on United States
Treasury Obligations, purchased in the market at the time of
prepayment, having a remaining term and coupon rate comparable to
the remaining term of the LIBOR Rate Period, and comparable to
the applicable interest rate, as determined by Agent in good
faith, and certified to the Borrower, such certificate to be
conclusive, absent manifest error. Any permitted partial
prepayment of principal of a LIBOR Rate Loan shall be in the
amount of One Hundred Thousand Dollars ($100,000.00) or a whole
multiple thereof. All payments applied by the Borrowers to the
outstanding and unpaid principal balance of the Term Loan Note
pursuant to this Subsection shall be used to reduce the
installments of the principal amount of the Term Loan Note pro
rata in the order of their maturities.
(b) Prime Revolver Loans. The Borrowers shall have
the right to prepay without premium the entire outstanding and
unpaid principal balance of each Prime Revolver Loan upon not
less than one (1) days' written notice to the Agent.
2.5 Special Provisions Governing LIBOR Rate Loans -
Increased Costs.
(a) In the event that on any LIBOR Interest
Determination Date, Agent shall have determined (which
determination shall be final, conclusive and binding) that:
(i) by reason of conditions in the London
interbank market or of conditions affecting the position of the
Banks in such market occurring after the date hereof, adequate
fair means do not exist for establishing LIBOR; or
(ii) by reason of (A) any applicable law or
governmental rule, regulation, guideline or order (or any written
interpretation thereof and including any new law or governmental
rule, regulation, guideline or order but excluding any of the
foregoing relating to taxes referred to in Subsection 2.9 of this
Agreement), or (B) other circumstances affecting the Banks or the
London interbank market or the position of the Banks in such
market (such as, but not limited to, official reserve
requirements), LIBOR does not represent the effective pricing to
the Banks for U.S. dollar deposits of comparable amounts for the
relevant period due to such increased costs;
then Agent shall give a notice by telephone, confirmed in
writing, to the Borrowers of such determination.
(b) Thereafter, the Borrowers shall pay to Agent upon
written request therefor, such additional amount as Agent in its
sole discretion, shall reasonably determine to be required to
compensate the Banks for such increased costs. A certificate as
to such additional amounts submitted to the Borrowers by Agent
shall set forth in reasonable detail the calculation of such
amounts and absent manifest error, be final, conclusive and
binding upon all parties hereto.
2.6 Required Termination and Repayment of LIBOR Rate Loans.
(a) In the event Agent shall have reasonably
determined, at any time (which determination shall be final,
conclusive and binding), that the making or continuation of any
or all of LIBOR Rate Loans by the Banks:
(i) has become unlawful by compliance by a Bank
in good faith with any applicable law, governmental rule,
regulation, guideline or order, or
(ii) would cause a Bank severe hardship as a
result of a contingency occurring after the date of this
Agreement which materially and adversely affects the London
interbank market (such as, but not limited to, disruptions
resulting from political or economic events);
then, and in either such event, Agent shall on such date (and in
any event as soon as possible after making such determination)
give telephonic notice to the Borrowers, confirmed in writing, of
such determination, identifying which of the LIBOR Rate Loans are
so affected.
(b) The Borrowers shall, upon the termination of the
then current LIBOR Rate Period applicable to each LIBOR Rate Loan
so affected or, if earlier, when required by law, repay each such
affected LIBOR Rate Loan, together with all interest accrued
thereon.
(c) In lieu of the repayment required by Subsection
2.6(b), the Borrowers may, by giving notice in writing or by
telephone to Agent, and after Borrowers' payment of any increased
costs of the Banks relating to the period for which the
outstanding Loans shall remain LIBOR Rate Loans (such increased
costs to be determined by Agent in its sole discretion pursuant
to Subsection 2.5(b)), request Agent to convert the Term Loan and
each Revolving Credit Loan that is so affected into a Prime Rate
Conversion Loan at the Adjusted Prime Rate at the end of the then
current LIBOR Rate Period (or at such earlier time as repayment
would otherwise be required to be made pursuant to Section
2.6(b)). Such notice shall pertain only to the LIBOR Rate Loan
or LIBOR Rate Loans that will be affected by the events described
in Subsection 2.6(a).
(d) In the event any LIBOR Rate Loan is converted to a
Prime Rate Conversion Loan pursuant to the provisions of
Subsection 2.6(c), interest on each such Prime Rate Conversion
Loan shall be payable by Borrowers on the outstanding and unpaid
principal balance of such Prime Rate Conversion Loan on the first
day of each month and at the maturity of such loan. Any change
in the Prime Rate shall be effective as of the opening of
business on the day on which such change in the Prime Rate
becomes effective.
(e) Following the conversion of any LIBOR Rate Loans
to Prime Rate Conversion Loans pursuant to this Subsection 2.6,
in the event the Agent, in its sole discretion, determines that
the events or circumstances described in Subsection 2.6(a) no
longer exist, (i) the Agent will so notify the Borrowers in
writing, (ii) within ten (10) days of Agent's delivery of such
notice, each Borrower shall make a LIBOR Rate Election with
respect to the outstanding and unpaid principal balance of the
Term Loan Note, and one or more LIBOR Rate Elections with respect
to the outstanding and unpaid principal balance of the Revolving
Credit Note, and (iii) each Prime Rate Conversion Loan shall
convert to a LIBOR Rate Loan pursuant to the applicable LIBOR
Rate Election on the commencement date of the LIBOR Rate Period
described in the applicable LIBOR Rate Election and shall bear
interest at LIBOR plus the applicable LIBOR Increment pursuant to
the provisions of Subsection 2.3(a)(i).
2.7 Non-Receipt of Funds by Agent. Unless the Agent shall
have received notice from a Bank prior to the Borrowing Date of
any Revolving Credit Loan that such Bank will not make available
to the Agent the amount of such Bank's Proportionate Revolving
Credit Commitment with respect to such Loan, the Agent may assume
that such Bank has made such amount available to the Agent on the
date of such Borrowing Date. If and to the extent any Bank shall
not have so made the amount of its Proportionate Revolving Credit
Commitment available to the Agent, such Bank agrees to repay to
the Agent forthwith on demand such corresponding amount together
with interest and administrative charges thereon, for each day
such amount is made available to the Borrowers until such amount
is repaid to the Agent, at the customary rates set by the Agent
for the correction of errors among banks. If such Bank shall
repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Bank's Proportionate Revolving
Credit Commitment with respect to such Loan for purposes of this
Agreement and the Revolving Credit Note. If such Bank does not
repay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower (or
Borrowers, as the case may be), and the Borrower (or Borrowers)
shall immediately repay such corresponding amount to the Agent
with interest thereon, for each day from the date such amount is
made available to the Borrower (or Borrowers) until the date such
amount is repaid to the Agent, at the rate of interest applicable
at the time to such proposed Revolving Credit Loan. Any
repayment made pursuant to the preceding sentence shall not be
subject to the provisions set forth in the second and third
sentences of Subsection 2.4(a). Subject to the terms and
conditions herein, any such repayment by the Borrower (or
Borrowers, as the case may be) may, but need not, be made with
proceeds of another loan, not subject to this Agreement, extended
to the Borrower (or Borrowers, as the case may be) by one of the
Banks.
2.8 No Liability for Good Faith Action. Neither Agent nor
any Bank shall incur any liability to either of the Borrowers for
(a) acting upon any Notice of Borrowing, any LIBOR Rate Election
Notice, or upon any telephonic notice which Agent believes in
good faith to have been given by an Authorized Officer, or (b)
otherwise acting in good faith.
2.9 Taxes.
(a) Except as provided in Subsection 2.9(c), if any
Taxes shall be imposed by any taxing authority of or in the
United States, or any foreign country, or any political
subdivision of any thereof, in respect of any of the transactions
contemplated by this Agreement (including, but not limited to,
execution, delivery, performance, enforcement, or payment of
principal or interest of or under the Revolving Credit Note, the
Term Loan Note, or this Agreement, or the making of a Loan), the
Borrowers:
(i) will pay on written request therefor all such
Taxes, including interest and penalty, if any, to the relevant
taxing authority; and
(ii) will promptly furnish Agent with evidence of
any such payment.
(b) Subject to Subsections 9.1 and 9.2, if any Bank or
any holder of the Revolving Credit Note or the Term Loan Note is
required by law to make any payment on account of Taxes in
respect of any of the transactions contemplated by this Agreement
(including, but not limited to, execution, delivery, performance,
enforcement, or payment of principal or interest of or under the
Revolving Credit Note, the Term Loan Note, or this Agreement, or
the making of a Loan), such Bank or holder shall notify the
Borrowers and the Borrowers will promptly, following receipt of a
certificate as to the amount of any such payment of Taxes by such
Bank or such holder (showing calculations thereof in reasonable
detail), indemnify and hold each such Bank or holder harmless and
indemnified against any liability or liabilities with respect to
or in connection with any such Taxes or the payment thereof or
resulting from any delay or omission to pay such Taxes (other
than a delay or omission attributable to such Bank's or holder's
failure to timely notify the Borrowers), computed in a manner
consistent with this Subsection 2.9(b).
(c) Each Bank that is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) agrees
to deliver to the Borrowers and Agent on or prior to the date of
this Agreement, or in the case of a Bank that is an Assignee of
an interest under this Agreement pursuant to Subsection 9.2
(unless the respective Bank was already a Bank hereunder
immediately prior to such assignment), on the date of such
assignment to such Bank, (i) two accurate and complete original
signed copies of IRS Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments to be
made under this Agreement and under any Note, or (ii) if the Bank
is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either IRS Form 1001 or 4224 pursuant to
clause (i) above, (A) a certificate substantially in the form of
Exhibit 2.9(c) (any such certificate, a "Section 2.9(c)(ii)
Certificate"), and (B) two accurate and complete original signed
copies of IRS Form W-8 (or successor form) certifying to such
Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this
Agreement and under any Note. In addition, each Bank agrees that
from time to time after the date of this Agreement, when a lapse
in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it
will deliver to the Borrowers and Agent two new accurate and
complete original signed copies of IRS Form 4224 or 1001, or Form
W-8 and a Section 2.9(c)(ii) Certificate, as the case may be, and
such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption
from or reduction in United States withholding Tax with respect
to payments to be made under this Agreement and any Note, or it
shall immediately notify the Borrowers and Agent of its inability
to deliver any such form or certificate. Notwithstanding
anything to the contrary contained in Subsection 2.9(a), but
subject to Subsection 9.2, (x) each Borrower shall be entitled,
to the extent it is required to do so by law, to deduct or
withhold income or similar Taxes imposed by the United States (or
any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the
account of any Bank or any holder of the Revolving Credit Note or
the Term Loan Note which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for United
States Federal income tax purposes to the extent that such Bank
or holder has not provided to the Borrowers IRS forms that
establish a complete exemption from such deduction or
withholding, and (y) any Bank or any holder of the Revolving
Credit Note or the Term Loan Note that has not provided to the
Borrowers the IRS forms required to be provided to the Borrowers
pursuant to this Subsection 2.9(c) shall not be entitled to
indemnification under this Subsection 2.9 with respect to any
deduction or withholding which would not have been required if
such Bank or holder had provided such forms.
(d) Each Bank agrees that, as promptly as practicable
after it becomes aware of the occurrence of any event or the
existence of any condition that would cause the Borrowers to make
a payment in respect of any Taxes pursuant to Subsection 2.9(a)
or a payment in indemnification for any Taxes pursuant to
Subsection 2.9(b), it will use reasonable efforts to make, fund
or maintain the Loan (or portion thereof) of such Bank with
respect to which the aforementioned payment is or would be made
through another lending office of such Bank if as a result
thereof the additional amounts which would otherwise be required
to be paid by the Borrowers in respect of such Loans (or portions
thereof) would be materially reduced, and if, as determined by
such Bank, in its reasonable discretion, the making, funding or
maintaining of such Loans (or portions thereof) through such
other lending office would not otherwise materially adversely
affect such Loans or such Bank. The Borrowers agree to pay all
reasonable expenses incurred by any Bank in utilizing another
lending office of such Bank pursuant to this Subsection 2.9(d).
2.10 Method of Payment. Repayment of the principal amount
of each Loan, payment of all interest owing in connection with
any Loan, and payment of all other amounts owing by the Borrowers
to the Agent pursuant to this Agreement, the Revolving Credit
Note, or the Term Loan Note shall be made in lawful money of the
United States to the Agent at its Principal Office in immediately
available funds. No such repayment or payment shall be deemed to
have been received by the Agent until received by the Agent at
its Principal Office, and any such repayment or payment received
by the Agent at its Principal Office after 12:00 noon on any day
shall be deemed to have been received by the Agent at its
Principal Office on the next succeeding Business Day. Each
Borrower hereby authorizes the Agent to charge from time to time
against the operating account of such Borrower with M&T the
amount of any such repayment or payment. Whenever any repayment
or payment to be made under this Agreement or under any Note
shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the
computation of the payment of interest and late fees.
SECTION 3 REPRESENTATIONS AND WARRANTIES
The Borrowers hereby jointly and severally represent and warrant
to the Banks as follows:
3.1 Financial Condition.
(a) The Borrowers have heretofore delivered to Agent
the following financial statements:
(i) the audited financial statements of NCDC for
the fiscal years of NCDC ending December 31, 1994, December 31,
1995 and December 31, 1996;
(ii) the audited financial statements of LaSalle
for the fiscal years of LaSalle ending October 31, 1994, October
31, 1995 and October 31, 1996;
(iii) the unaudited financial statements of NCDC
for the fiscal quarter ended March 31, 1997; and
(iv) the unaudited financial statements of LaSalle
for the period commencing November 1, 1996 and ending January 31,
1997, the month ended February 28, 1997 and the month ended March
31, 1997.
(b) All financial statements and other financial data
which have been furnished to the Agent for the purposes of or in
connection with this Agreement or any transaction contemplated
hereby present fairly the financial condition of NCDC, and to the
best of NCDC's knowledge, LaSalle (other than with respect to the
elimination of the item described as "Receivable due from Parent"
and the corresponding reduction in "Total Shareholder Equity"
described in the audited financial statements of LaSalle for the
period ending October 31, 1996), as the case may be, as of the
dates thereof and the results of its operations for the period(s)
covered thereby. As of the date hereof, all projections which
have been furnished to the Agent for the purposes of or in
connection with this Agreement, or any transaction contemplated
hereby (including, without limitation, the projections included
as part of the Offering Memorandum), taken together, have been
the management of NCDC's best estimate of the future performance
of the Borrowers, based upon historical financial information and
reasonable assumptions of the management of NCDC.
(c) All financial statements and other financial data
which shall hereafter be furnished to the Agent for the purposes
of or in connection with this Agreement, or any transaction
contemplated hereby, will present fairly the financial condition
of the Borrowers and their Subsidiaries, as of the dates thereof
and the results of its operations for the period(s) covered
thereby. All projections which shall hereafter be furnished to
the Agent for the purposes of or in connection with this
Agreement, or any transaction contemplated hereby, will be the
management of each Borrower's best estimate of the future
performance of the Borrowers and their Subsidiaries, based upon
historical financial information and reasonable assumptions of
the management of Borrowers.
3.2 No Change. There have been no material adverse changes
in the business, operations, property or financial or other
condition of Niagara, any Borrower, or any of the Borrowers'
Subsidiaries, as applicable, since the dates of the most current
financial statements referred to in Subsection 3.1(a).
3.3 Corporate Existence; Compliance with Law. Each
Borrower and each of their Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power,
authority and legal right to own or lease and operate its
property and to conduct the business in which it is currently
engaged, (c) is duly qualified, licensed or authorized as a
foreign corporation, and is in good standing or continues to be
authorized under the laws of each jurisdiction where the failure
to so qualify or be authorized and remain in good standing or
authorized could materially and adversely affect the ability of
such Borrower or Subsidiary to own or lease and operate its
property or to conduct the business in which it is currently
engaged or will be engaged upon closing of the Acquisition, and
(d) other than with respect to environmental matters as described
in Subsection 3.14, is in compliance with all Requirements of Law
other than any noncompliance which, individually or in the
aggregate, would not reasonably be expected to have a material
adverse effect on the business, operations, property or other
financial condition of any Borrower or Subsidiary.
3.4 Ownership of Borrower Equity Interests.
(a) Schedule 3.4(a) attached hereto contains a true,
correct and complete statement of: (i) the total number and class
of each class of stock which each Borrower and each Subsidiary of
a Borrower is authorized to issue; and (ii) the total number and
class of each class of stock of each Borrower and of each of
their Subsidiaries which is issued and outstanding together with
the identity of the record and beneficial owner (or owners) of
all the issued and outstanding stock of each Borrower and of each
Subsidiary. All of such issued and outstanding shares of stock
of each Borrower and of each such Subsidiary have been duly
authorized and validly issued.
(b) As of the date of this Agreement Niagara is the
record and beneficial owner of and has good and marketable title
to one hundred percent (100%) of the issued and outstanding
shares of capital stock of NCDC and NCDC is the record and
beneficial owner of and has good and marketable title to one
hundred percent (100%) of the issued and outstanding shares of
capital stock of LaSalle, free and clear of all Liens (other than
any Lien pursuant to the Loan Documents). Other than the equity
interests of NCDC in LaSalle as a result of the consummation of
the Acquisition, as of the date of this Agreement no Borrower has
any equity or ownership interest in any other Person.
3.5 Corporate Power; Authorization; Enforceable
Obligations. Each Borrower has the corporate power and authority
to execute and deliver this Agreement, the Revolving Credit Note,
the Term Loan Note, and each of the Collateral Documents, and to
perform its obligations hereunder and thereunder. Each Borrower
has taken all necessary corporate and shareholder action to
authorize the borrowings on the terms and conditions of this
Agreement, the Revolving Credit Note, and the Term Loan Note. No
consent of any other Person and no authorization of, notice to,
or other act by or in respect of any Governmental Authority, is
required in connection with the borrowings hereunder, except for
filings or recordings in public offices necessary in connection
with the Collateral Documents and for post-closing securities law
filings necessary in connection with the Acquisition. This
Agreement, the Revolving Credit Note, the Term Loan Note and each
of the Collateral Documents have been duly executed and delivered
on behalf of each Borrower (and with respect to the Collateral
Documents, each Subsidiary to the extent applicable) and this
Agreement, the Revolving Credit Note, the Term Loan Note, and
each of the Collateral Documents constitute legal, valid and
binding obligations of each Borrower (and with respect to the
Collateral Documents, each Subsidiary to the extent applicable)
enforceable against each Borrower (and each Subsidiary,
respectively) in accordance with their respective terms, except
as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally.
3.6 No Legal Bar. The execution, delivery and performance
of this Agreement, the Revolving Credit Note, the Term Loan Note,
the Collateral Documents, the borrowings hereunder and the use of
the proceeds thereof (a) will not violate any Requirement of Law
or any Contractual Obligation of any Borrower or Subsidiary,
other than violations which, individually or in the aggregate,
would not reasonably be expected to have a material adverse
effect on the business, operations, property or financial or
other condition of any Borrower or Subsidiary, and (b) will not
result in, or require, the creation or imposition of any Lien not
permitted under Subsection 6.2 on any of the respective
properties or revenues of a Borrower or Subsidiary.
3.7 No Litigation. Other than with respect to
environmental matters as described in Subsection 3.14, no
litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending, or to the
knowledge of any Borrower, threatened, by or against any Borrower
or Subsidiary or any of their respective properties or revenues
(a) with respect to this Agreement, the Revolving Credit Note,
the Term Loan Note, the Collateral Documents or any of the
transactions contemplated hereby or thereby, or (b) which, if
adversely determined, would reasonably be expected to have a
material adverse effect on the business, operations, property or
financial or other condition of any Borrower or Subsidiary. No
judgments are outstanding against either of the Borrowers or any
Subsidiary or binding upon any of their respective assets or
properties which would, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property or financial or other condition of
any Borrower or Subsidiary.
3.8 No Default. No Borrower or Subsidiary is in default
under or with regard to any Contractual Obligation in any respect
which would be materially adverse to the business, operations,
property or financial or other condition of such Borrower or
Subsidiary, or which would materially adversely affect the
ability of such Borrower or Subsidiary to perform its respective
obligations under this Agreement, the Revolving Credit Note, the
Term Loan Note, or any of the Collateral Documents. No Default
or Event of Default has occurred.
3.9 Ownership of Property; Liens. Each Borrower and each
Subsidiary has good record and marketable or insurable title in
fee simple to or valid leasehold interests in, all its real
property, and valid legal title or leasehold interests to all its
personal property, and none of such property is subject to any
Lien, except as permitted in Subsection 6.2, or as set forth on
Schedule 3.9.
3.10 Solvency. Immediately prior to the consummation of the
Acquisition and after giving effect thereto, the Borrowers, both
individually and on a Consolidated basis, shall be, and are,
Solvent.
3.11 Taxes. Each Borrower and each Subsidiary has filed or
caused to be filed all returns for Taxes required to be filed,
and has paid all Taxes shown to be due and payable on said
returns or on any assessments made against it and all other
taxes, fees or other charges imposed on it by any Governmental
Authority other than (a) tax returns and Taxes the failure to
file or pay, as applicable, which individually or in the
aggregate would not reasonably be expected to have a material
adverse effect on the business, operations, property or financial
or other condition of any Borrower or Subsidiary, and (b) the
amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books
of such Borrower or Subsidiary, respectively; and no tax liens
have been filed and no assessments are being formally asserted
with respect to any such taxes, fees or other charges, except for
statutory liens for current taxes not yet due and payable.
3.12 Federal Regulations. Neither Borrower nor any
Subsidiary is engaged, and neither Borrower nor any Subsidiary
will engage, principally or as one of its important activities,
in the business of extending credit for the purpose of
"purchasing" or "carrying" (as each such term is defined in
Regulation U) any Margin Stock. No part of the proceeds of the
Revolving Credit Loan or the Term Loan hereunder will be used for
any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of the Board of Governors of
the Federal Reserve System or of the Investment Company Act of
1940, as amended.
3.13 Investment Company Act. Neither Borrower nor any
Subsidiary is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
3.14 Environmental Matters.
(a) Except as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, to each Borrower's knowledge, each
Borrower and each Subsidiary has duly complied with, and each of
their businesses, operations, assets, equipment, property,
leaseholds, or other facilities are in compliance with, the
provisions of all federal, state and local environmental, health
and safety laws, codes and ordinances, and all rules and
regulations promulgated thereunder.
(b) Except as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, to each Borrower's knowledge, each
Borrower and Subsidiary has been issued and will maintain all
required federal, state and local permits, licenses, certificates
and approvals relating to (i) air emissions, (ii) discharges to
surface water or groundwater, (iii) noise emissions, (iv) solid
or liquid waste disposal, (v) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or
wastes (intended hereby and hereafter to include any and all such
materials listed in any federal, state, or local law, code or
ordinance, and all rules and regulations promulgated thereunder,
as hazardous or potentially hazardous), or (vi) other
environmental, health, or safety matters.
(c) Except as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, neither Borrower nor any Subsidiary
has received any notice of, and neither Borrower knows of or
suspects, facts which might constitute any violations of any
federal, state or local environmental, health or safety laws,
codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its or any Subsidiary's business,
operations, assets, equipment, property, leaseholds or other
facilities.
(d) Except as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14 and except in accordance with a valid
governmental permit, license, certificate, or approval issued to
a Borrower or a Subsidiary, to the best each Borrower's
knowledge, there has been no emission, spill, release, or
discharge into or upon (i) the air, (ii) soils or any
improvements located thereon, (iii) surface water or groundwater,
or (iv) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises, of any toxic or hazardous
substances or wastes at or from any premises owned or occupied by
such Borrower or Subsidiary.
(e) Except as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, there is no complaint, order,
directive, claim, citation, or notice by any governmental
authority or any person or entity pending with respect to (i) air
emissions, (ii) spills, releases, or discharges to soils or
improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal
systems servicing the premises, (iii) noise emissions, (iv) solid
or liquid waste disposal, (v) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or
waste, or (vi) other environmental, health or safety matters
affecting either Borrower or any Subsidiary or their respective
businesses, operations, assets, equipment, property, leaseholds,
or other facilities.
3.15 ERISA. Each Borrower and each Subsidiary is in
material compliance with all applicable provisions of ERISA. No
Borrower has (a) incurred any accumulated funding deficiency
within the meaning of ERISA, (b) except as described in Schedule
3.15, incurred any material unfunded vested liability under any
Plan, (c) incurred any material liability to the PBGC in
connection with any Plan, or (d) engaged in a prohibited
transaction within the meaning of ERISA. Except for the
consummation of the Acquisition, no Reportable Event has occurred
with respect to any Plan.
3.16 Acquisition Agreement. The Borrowers have heretofore
furnished to the Agent a true, complete and correct copy of the
Acquisition Agreement, including all schedules and exhibits
thereto, and all closing documents executed and delivered under
the terms of the Acquisition Agreement.
3.17 Acquisition. As of the date of this Agreement, the
Borrowers have consummated the Acquisition in accordance with the
terms of the Acquisition Agreement, and NCDC owns all of the
issued and outstanding capital stock of LaSalle free and clear of
all Liens.
3.18 Collateral Locations. All of the Borrowers' and
Subsidiaries' assets are located only at the locations set forth
in Schedule 3.18 of this Agreement.
3.19 Licenses and Permits. Other than with respect to
environmental matters as described in Subsection 3.14, (a) to
each Borrowers' knowledge, each License of the Borrowers and of
each of their Subsidiaries is in full force and effect, and (b)
each Borrower and each of their Subsidiaries has complied with,
and the business, operations, assets, equipment, property,
leaseholds or other facilities of such Borrower or Subsidiary are
in compliance with, all Requirements of Law relating to the
maintenance of such Licenses, other than any noncompliance which,
individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the business,
operations, property or financial or other condition of any
Borrower or Subsidiary.
3.20 Subordinated Debt Offering. The Borrowers have
heretofore furnished to the Agent a true, complete and correct
copy of the Offering Memorandum, the Subordinated Debt Agreement,
the 12.5% Subordinated Notes, and all schedules and exhibits
thereto, and all closing documents executed and delivered in
connection therewith.
3.21 Employee Controversies. Except as described in
Schedule 3.21 hereto, there are no strikes, work stoppages or
material labor controversies pending or, to each of the
Borrower's knowledge, threatened, between the Borrowers or any of
their Subsidiaries and any of their employees, other than those
which would not, either individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
business, operations, property or financial or other condition of
any Borrower or any of their Subsidiaries.
3.22 Patents, Trademarks and Licenses. Each of the
Borrowers and their Subsidiaries owns or possesses rights to use
all licenses, patents, patent applications, copyrights, service
marks, trademarks and tradenames required to conduct its
business, except where the failure to own or possess any such
right, either individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the
business, operations, property or financial or other condition of
the Borrower or any of their Subsidiaries. No license, patent
or trademark owned or possessed by any Borrower or Subsidiary has
been declared invalid, been limited by order of any court or by
agreement, or is the subject of any infringement, interference or
similar proceeding or challenge, other than those declarations of
invalidity, orders, agreements or proceedings, which, if
adversely concluded, would not, either individually or in the
aggregate, reasonably be expected to have a material adverse
effect on the business, operations, property or financial or
other condition of any Borrower or any of their Subsidiaries.
3.23 Full Disclosure. This Agreement, the financial
statements delivered in connection herewith, the representations
and warranties of the Borrowers herein and in any other document
delivered or to be delivered by or on behalf of the Borrowers or
any of their Subsidiaries, do not and will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained therein or herein, in
light of the circumstances under which they were made, or will be
made, not misleading. There is no material fact which the
Borrowers have not disclosed to the Banks in writing which
materially and adversely affects or, so far as the Borrowers now
foresee, will materially and adversely affect, the assets,
business, prospects, profits, or condition (financial or
otherwise) of any Borrower, any of their Subsidiaries, the rights
of the Banks or the ability of the Borrowers to perform this
Agreement.
3.24 Survival of Warranties. All representations and
warranties contained in this Agreement and the other Loan
Documents shall survive the execution and delivery of this
Agreement until all indebtedness to the Banks has been finally
and indefeasibly paid in full.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions to Extension of Credit. The obligations of
the Banks to extend the Credit is subject to the satisfaction or
waiver prior to or concurrently therewith of the following
conditions precedent:
(a) Notes. (i) The Agent shall have received the
Revolving Credit Note conforming to the requirements hereof and
executed by an Authorized Officer of each Borrower; and (ii) the
Agent shall have received the Term Loan Note conforming to the
requirements hereof and executed by an Authorized Officer of each
Borrower.
(b) Opinions. The Agent shall have received the
opinion of legal counsel to the Borrowers and Niagara, dated the
date of this Agreement and addressed to the Banks, in form and
substance satisfactory to the Agent. Such opinion shall address,
without limitation, such matters incident to the transactions
contemplated by this Agreement, the Revolving Credit Note, the
Term Loan Note, the Collateral Documents, the Acquisition
Agreement, the Acquisition, and the Subordinated Debt Offering as
the Agent shall reasonably require.
(c) Security Agreements. (i) Each Borrower shall
have executed and delivered to the Agent a Security Agreement in
form and content acceptable to the Agent, granting to the Agent a
Lien in all of such Borrower's equipment, inventory, fixtures,
accounts, chattel paper, general intangibles, documents, and
instruments, whether now owned or hereafter acquired, including,
without limitation, pursuant to the Acquisition Agreement,
wherever located, and any and all products and proceeds thereof,
and shall secure the payment of any and all indebtedness and
liabilities, whether now existing or hereafter incurred, of such
Borrower to the Agent; and the Agent shall have received (y)
appropriate financing statements to perfect each such Lien, which
Lien shall be superior in priority to all other Liens, other than
(I) Liens described in Schedule 3.9, and (II) Liens arising after
the date of this Agreement having priority over the Liens of the
Agent by operation of applicable law, and (z) certificate(s)
evidencing all of the issued and outstanding capital stock of
LaSalle, together with duly endorsed stock power(s);
(ii) Each Borrower shall have executed and
delivered to the Agent a Collateral Assignment of Patents and
Trademarks in form and substance acceptable to the Agent (the
"Patent Assignment Agreements");
(iii) Niagara shall have executed and delivered
to the Agent a pledge security agreement (the "Niagara Pledge
Agreement") granting a Lien on and a pledge of all the issued and
outstanding shares of capital stock of NCDC to the Agent to
secure the payment and performance by Niagara of its obligations
under the Niagara Guaranty, and Niagara shall have delivered to
the Agent certificates evidencing all of the issued and
outstanding shares of capital stock of NCDC, together with
appropriate stock powers duly endorsed in blank; and
(iv) NCDC shall have executed and delivered to the
Agent a pledge security agreement (the "NCDC Pledge Agreement")
granting a Lien on and a pledge of all the issued and outstanding
shares of capital stock of LaSalle to the Agent to secure the
payment and performance by the Borrowers of their obligations
under the Loan Documents, and NCDC shall have delivered to the
Agent certificates evidencing all of the issued and outstanding
shares of capital stock of LaSalle, together with appropriate
stock powers duly endorsed in blank.
(d) Mortgages. Each Borrower shall have executed and
delivered to the Agent a mortgage, deed of trust or other
applicable document in form and content acceptable to the Agent,
in its sole discretion, to grant to the Agent a Lien on the real
property ("Mortgage") of Borrowers described in Schedule 4.1
hereof, and the Agent shall have received such other
documentation to perfect each Mortgage, and each such Mortgage
shall be superior in priority to all other Liens. Each Mortgage
shall be supported by a survey acceptable to the Agent and issued
by a licensed surveyor, and by a mortgagee title insurance policy
issued by a licensed title insurance company acceptable to the
Agent, and such policy shall be in form and content satisfactory
to the Agent, insuring the Mortgage to be a valid Lien superior
to all other Liens and encumbrances on the respective real
property, subject only to such exceptions acceptable to the
Agent. In connection with each Mortgage the Borrowers shall be
required to execute and deliver to the Agent an Assignment of
Leases and Rents relating to the subject real property, in form
and content acceptable to the Agent.
(e) Environmental. Each Borrower shall have executed
and delivered to the Agent an Environmental Indemnification
Agreement ("Environmental Indemnification Agreement") in form and
content acceptable to the Agent.
(f) Niagara Guaranty. Niagara shall have executed and
delivered to the Agent an Unconditional and Continuing Guaranty
agreement (the "Niagara Guaranty") in form and content acceptable
to Agent, guaranteeing to the Agent the payment when due of all
Indebtedness and Liabilities of each of the Borrowers to the
Agent and the Banks arising under any of the Loan Documents.
(g) Corporate Documents. The Agent shall have
received a copy (in form and substance satisfactory to the Agent)
certified by the Secretary or an Assistant Secretary of each
Borrower of the resolutions of the Board of Directors of such
Borrower authorizing the execution, delivery and performance of
this Agreement, the Revolving Credit Note, the Term Loan Note,
the Acquisition Agreement, the Subordinated Debt Offering and the
Collateral Documents. The Agent shall have received a copy (in
form and substance satisfactory to the Agent) certified by the
Secretary or Assistant Secretary of Niagara of the resolutions of
the Board of Directors of Niagara, authorizing the execution and
delivery of the Niagara Guaranty and of the Niagara Pledge
Agreement.
(h) Certificate of Incumbency. The Agent shall have
received a certificate (in form and substance satisfactory to the
Agent) of the Secretary or an Assistant Secretary of each
Borrower and of Niagara as to the incumbency and signature of the
officers of each of the Borrowers and Niagara, respectively,
authorized to sign the applicable Loan Documents to be executed
by such Person, and any certificate or other document to be
delivered pursuant to or in connection therewith.
(i) Termination of Liens. Except as permitted under
Subsection 6.2, all holders of existing Liens in assets of either
of Borrowers, shall have executed and delivered to the Agent UCC-
3 Termination Statements in form and content acceptable to the
Agent or shall have otherwise taken action required by the Agent,
to terminate such Liens.
(j) Termination of Indebtedness. The Borrowers shall
have repaid in full the amount of any Indebtedness to the Buffalo
and Erie County Regional Development Corporation and to the
Buffalo Enterprise Development Corporation.
(k) Acquisition Agreement. NCDC shall have acquired
all the issued and outstanding capital stock of LaSalle pursuant
to the terms of the Acquisition Agreement.
(l) Subordinated Debt Offering. The Agent shall have
received true, correct and complete copies of the Offering
Memorandum and all documents executed and delivered in connection
with the Subordinated Debt Offering and evidence satisfactory to
the Agent of receipt by NCDC of cash proceeds in an amount of not
less than Twenty Million Dollars ($20,000,000) less customary
fees and expenses associated therewith, resulting from the
Subordinated Debt Offering.
(m) Certificate of Insurance. The Agent shall have
received certificates of insurance and insurance policies, in
form and content acceptable to the Agent, evidencing the
insurance required to be carried by the Borrowers pursuant to
Subsection 5.10 hereof with endorsements, satisfactory to the
Agent, designating the Agent as an additional insured, a loss
payee and mortgagee and further designating that each such
insurance policy contains a notice of cancellation provision
satisfactory to the Agent.
(n) Payment of Fees. On or before closing hereof, M&T
shall have received the full amount of all fees described in the
Commitment Fee Letter dated March 18, 1997 among the Agent, NCDC
and Niagara.
(o) General Assurances. All other documents and legal
matters in connection with the transactions contemplated by this
Agreement, the other Loan Documents, the Acquisition and the
Subordinated Debt Offering shall be satisfactory in form and
substance to the Agent. The Borrowers shall have delivered such
further documents to the Agent and taken such further action
respecting this Agreement and the other Loan Documents as the
Agent shall reasonably request.
4.2 Conditions to Subsequent Extension of Credit. The
obligation of the Banks to make each Revolving Credit Loan is
subject to the satisfaction prior to or concurrently therewith of
the following conditions precedent:
(a) Subject to any modifications subsequently
disclosed by either Borrower in writing to the Agent, the
representations and warranties made by the Borrowers herein shall
be true and correct in all material respects on and as of the
Borrowing Date for each of the Revolving Credit Loans as if made
on and as of such date (unless such representation and warranty
expressly provides that it is made as of a specific date), and
the representations and warranties made by the Borrowers which
are contained in any certificate, document or financial or other
statement furnished at any time under or in connection herewith
are true and correct in all material respects on and as of the
date made.
(b) The receipt by the Agent of a Borrowing Base
Certificate certifying as to the amount of the Borrowing Base as
of the proposed Borrowing Date of such Revolving Credit Loan
together with such other information as Agent may reasonably
request.
(c) No Default or Event of Default shall have occurred
and be continuing on such proposed Borrowing Date or after giving
effect to the Revolving Credit Loan to be made on such Borrowing
Date.
(d) Guaranties. Each Borrower shall have furnished to
Agent the written unlimited continuing guaranties of each
Subsidiary of a Borrower which may be established after the date
of this Agreement, guarantying payment of any and all
Indebtedness of each Borrower and each other Subsidiary, and of
the Borrowers and their Subsidiaries collectively, to Agent.
Each borrowing by a Borrower hereunder shall constitute a
representation and warranty by the Borrowers as of the date of
each such borrowing that the conditions in this Subsection have
been satisfied.
SECTION 5 AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, so long as any Revolving
Credit Loan or the Term Loan remains outstanding and unpaid or
any other amount is owing to the Agent or any Bank hereunder or
under any Loan Document, the Borrowers shall, and shall cause
each of their Subsidiaries, to do the following:
5.1 Financial Statements. Furnish or cause to be furnished
to the Agent:
(a) as soon as available, but in any event within one
hundred twenty (120) days after the end of each Fiscal Year of
Niagara and the Borrowers, a copy of the audited Consolidated
financial statements of Niagara, the Borrowers and Borrowers'
Subsidiaries, at and as of the end of such Fiscal Year, certified
without qualification or exception by the Independent Public
Accountants; and
(b) as soon as available, but in any event within one
hundred twenty (120) days after the end of each Fiscal Year of
the Borrowers, a copy of the audited Consolidated financial
statements of the Borrowers and Borrowers' Subsidiaries at and as
of the end of such Fiscal Year, certified without qualification
or exception by the Independent Public Accountants; and
(c) as soon as available, but in any event within
fifty (50) days after the end of each calendar quarter, a copy of
Form 10-Q (with all attachments) filed by Niagara with the
Securities and Exchange Commission with respect to such calendar
quarter; and
(d) as soon as available, but in any event not later
than thirty (30) days after the end of each calendar month, a
copy of the unaudited Consolidating balance sheet of the
Borrowers and their Subsidiaries as of the end of such calendar
month and the related Consolidating unaudited statements of
income and retained earnings and cash flow for the period
beginning with the first day of the Borrowers' current Fiscal
Year and ending on the last day of such calendar month, setting
forth in each case in comparative form the figures for the same
period in the previous Fiscal Year; and
(e) as soon as available, but in any event not later
than sixty (60) days after the date of this Agreement, the
audited financial statements of LaSalle at and as of the end of
the five (5) month period commencing November 1, 1996 and ending
on March 31, 1997; and
(f) as soon as available, but in any event not later
than sixty (60) days after the date of this Agreement, a
Consolidating pro forma balance sheet of the Borrowers dated as
of the closing date of this Agreement which reflects (i) cash
proceeds from the Subordinated Debt Offering, and (ii) the assets
and liabilities of the Borrowers after the closing of the
Acquisition pursuant to the Acquisition Agreement.
All such financial statements shall be true, complete and
correct in all material respects and be prepared in reasonable
detail and in accordance with GAAP, including principles of
consolidation, applied consistently throughout the periods
reflected therein (except as approved by such accountants or
officer, as the case may be, and disclosed therein and that the
monthly financial statements shall be prepared without footnotes
in accordance with GAAP).
5.2 Certificates; Other Information. Furnish to the Agent:
(a) upon the request of the Agent, concurrently with
the delivery of any of the financial statements referred to in
Subsections 5.1(a) and 5.1(b), a certificate of the Independent
Public Accountants certifying such financial statements stating
that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in Subsections 5.1(a) and 5.1(b), a
certificate of an Authorized Officer of each Borrower (i) stating
that, to the best of his or her knowledge, such Borrower and such
Borrower's Subsidiaries during such period has observed or
performed all of its covenants and other agreements, and
satisfied every condition contained in this Agreement, the
Revolving Credit Note, Term Loan Note and all other Loan
Documents to be observed, performed or satisfied by it, and that
such Authorized Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate, and
(ii) showing in detail the calculations supporting such statement
in respect of the financial covenants contained in Subsection 6.3
of this Agreement.
(c) as soon as available, but in any event not later
than thirty (30) days after the end of each calendar month, a
Borrowing Base Certificate as of the end of such month, together
with a certificate of an Authorized Officer of each Borrower
containing a current accounts receivable aging of each Borrower
and its Subsidiaries and a monthly inventory report showing
categories and costs of inventory of each Borrower and its
Subsidiaries, and such other information as Agent may reasonably
request.
(d) within sixty (60) days after the end of each
Fiscal Year of the Borrowers, a copy of the projections by each
Borrower's management of the operating budget and cash flow of
such Borrower and its Subsidiaries for the then current Fiscal
Year, such projections to be accompanied by a certificate of an
Authorized Officer of such Borrower to the effect that such
projections have been prepared on the basis of reasonable
assumptions and that such Authorized Officer on the date he or
she renders such certificate has no reason to believe that such
assumptions are unreasonable or misleading in any material
respect.
(e) Promptly upon their becoming available, one copy
of (i) each financial statement, report (including, without
limitation, Niagara's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Securities Exchange Act
of 1934, as amended), notice or proxy statement sent by Niagara
to public securities holders generally, and (ii) each regular or
periodic report, each registration statement and each prospectus
and all amendments thereto filed by Niagara with the Securities
and Exchange Commission or any successor thereto and of all press
releases and other statements made available generally by Niagara
to the public concerning developments that are material.
5.3 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now
conducted by each Borrower, and preserve, renew and keep in full
force and effect each Borrower's corporate existence and take all
reasonable action to maintain all rights, privileges, Licenses,
and franchises necessary or desirable in the normal conduct of
each Borrower's business.
5.4 Compliance. Other than with respect to the
environmental matters as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, (a) at all times conduct its and
each of its Subsidiaries' business and operations, and own and
use its and each of its Subsidiaries' assets, in compliance in
all material respects with each Requirement of Law, (b) at all
times, obtain, make, give or do, and maintain in full force and
effect, each authorization, approval, permit, consent, franchise
and license from, each registration and filing with each
declaration, report and notice to, and each other act by or
relating to, any Person necessary for the conduct of its and each
of its Subsidiaries' business or operations or the ownership or
use of any of its assets, (c) at all times remain in compliance
in all material respects with each such authorization, approval,
permit, consent, franchise and license, with its and each of its
Subsidiaries', respectively, certificate of incorporation, by-
laws or other organizational document, and with each contract
with respect to it and each of Subsidiaries, respectively, and
(d) immediately upon acquiring knowledge of any claim by any
Person that such Borrower or Subsidiary has not met any of the
requirements specified in clauses (a) through (c) of this
Subsection 5.4, provide to the Bank a certificate executed by an
Authorized Officer of such Borrower and specifying the nature of
such event and what action such Borrower or Subsidiary has taken,
is taking or proposes to take with respect thereto. With respect
to the environmental matters as disclosed in the Metcalf and Eddy
Reports or in Schedule 3.14, the Borrowers shall address such
matters to the reasonable satisfaction of the Agent.
5.5 Inspection of Property; Books and Records; Discussions.
Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to
each Borrower's and Subsidiary's business and activities; and
permit representatives of the Agent and/or the Banks, at any
reasonable time and as often as may reasonably be desired, to (a)
visit and inspect any of the Borrowers' or Subsidiaries'
properties, (b) examine and make abstracts from any of the
Borrowers' books and records, including, without limitation an
annual field examination conducted by representatives of the
Agent and/or the Banks, and (c) to discuss the business,
operations, properties and financial and other condition of the
Borrowers with officers and employees of the Borrowers and with
the Independent Public Accountants.
5.6 Notices. Give notice to the Agent of each of the
following promptly after a Borrower knows or reasonably should
know thereof:
(a) the occurrence of any Default or Event of Default,
or the occurrence of any default or event of default under the
terms of the Subordinated Debt Agreement or any Subordinated Debt
Note;
(b) any (i) default or event of default under any
Indebtedness, Contractual Obligation or License of a Borrower or
any of its Subsidiaries which would reasonably be expected to
have a material adverse effect on the business, operations,
property or financial or other condition of a Borrower or such
Subsidiary, or (ii) litigation, investigation or proceeding which
may exist at any time between a Borrower or any of its
Subsidiaries and any Person or any Governmental Authority
involving a claim against a Borrower or such Subsidiary in an
amount in excess of Three Hundred Thousand Dollars ($300,000),
or, which, if adversely determined, would reasonably be expected
to have a material adverse effect on the business, operations,
property or financial or other condition of a Borrower or such
Subsidiary;
(c) the following events, as soon as possible and in
any event within thirty (30) days after a Borrower knows or has
reason to know thereof: (i) the occurrence or expected occurrence
of any Reportable Event with respect to any Plan, or (ii) the
institution of proceedings or the taking or expected taking of
any other action by PBGC or a Borrower to terminate or withdraw
from any Plan, and in addition to such notice, deliver to the
Agent whichever of the following may be applicable: (A) a
certificate of the chief financial officer of such Borrower
setting forth details as to such Reportable Event and the action
that such Borrower proposes to take with respect thereto,
together with a copy of any notice of such Reportable Event that
may be required to be filed with PBGC, or (B) any notice
delivered by PBGC evidencing its intent to institute such
proceedings or any notice to PBGC that such Plan is to be
terminated, as the case may be;
(d) any proposed withdrawal by a Borrower from any
Multiemployer Plan;
(e) any materially adverse change in the business,
operations, property or financial or other condition of a
Borrower;
(f) any material notice, notice of noncompliance, or
notice of default or event of default, delivered to, or received
from, any holder of a 12.5% Subordinated Note or delivered or
received in connection with the Subordinated Debt Agreement;
(g) any representation or warranty contained in this
Agreement or any Loan Document which was or has proven to be
incorrect in any material respect on or as of the date made or
deemed made.
Each notice pursuant to this Subsection shall be accompanied by a
statement of an Authorized Officer of the Borrower providing such
notice, setting forth details of the occurrence referred to
therein and stating what action such Borrower proposes to take
with respect thereto.
5.7 Motor Vehicle Titles. Upon request of the Agent, make
available all title certificates for motor vehicles owned by the
Borrowers and their Subsidiaries and cooperate with the Agent in
recording notice of the Lien of the Agent granted pursuant to the
Security Agreements.
5.8 Corporate Standing. Maintain each Borrower's and each
Subsidiary's existence in good standing, and remain or become
duly licensed or qualified and authorized or in good standing in
each jurisdiction in which the failure so to qualify and remain
authorized or in good standing could materially and adversely
affect the ability of such Borrower or Subsidiary to own or lease
and operate its property or to conduct its business.
5.9 Discharge of Indebtedness and Obligations; Leases.
(a) Cause to be paid and discharged all Indebtedness
and obligations when due and all lawful Taxes, assessments and
governmental charges or levies imposed upon a Borrower, or any
Subsidiary of a Borrower, or upon any property, real, personal or
mixed, belonging to a Borrower or such Subsidiary or upon any
part thereof, before the same shall become in default, as well as
all lawful claims for labor, materials and supplies, which if
unpaid become a lien or charge upon the property or any part of
it; and
(b) Cause to be paid and discharged all amounts due
and owing under operating leases, equipment leases and other
leases of real and personal property, other than any operating
leases, equipment leases or such other leases the nonpayment of
such amounts which, either individually or in the aggregate,
would not reasonably be expected to have a material adverse
effect on the business, operations, property or other financial
condition of any Borrower or Subsidiary.
Notwithstanding the previous Subsections 5.9(a) and 5.9(b), no
Borrower or Subsidiary shall be required to cause to be paid and
discharged any obligation, tax, assessment, charge, levy or claim
so long as its validity is contested in the normal course of
business and in good faith by appropriate and timely proceedings,
and such Borrower or Subsidiary, respectively, sets aside on its
books adequate reserves with respect to each tax, obligation,
assessment, charge, levy or claim so contested.
5.10 Maintenance of Properties; Insurance. (a) Keep and
maintain all property useful and necessary in each of the
Borrowers' and their respective Subsidiaries' businesses in good
repair, working order and condition (other than ordinary wear and
tear) so that the business carried on by such Borrower or
Subsidiary may be properly conducted; (b) keep all of each
Borrower's and each Subsidiary's property so insurable insured at
all times with responsible insurance carriers satisfactory to the
Agent against fire, theft and other risks in coverage, form and
amount satisfactory to the Agent; (c) keep adequately insured at
all times in reasonable amounts with responsible insurance
carriers against liability on account of damage to persons or
property and under all applicable worker's compensation laws;
(d) promptly deliver to the Agent certificates of insurance or
any of those insurance policies required to be carried pursuant
hereto, with appropriate endorsements designating the Agent as a
named insured, loss payee and mortgagee, as reasonably requested
by the Agent; and (e) cause each such insurance policy to contain
a thirty (30) day notice of cancellation or material change in
coverage provision satisfactory to the Agent.
5.11 Fair Labor Standards Act. Comply in all material
respects with the provisions of the Fair Labor Standards Act of
1938, as amended.
5.12 Changes in Management, Ownership and Control.
Immediately upon any change in the employment status, duties or
responsibilities of Michael J. Scharf, Raymond Rozanski or Frank
Archer with respect to their employment with Niagara and/or
either of the Borrowers, as applicable, the Borrowers shall
provide to the Agent a certificate executed by an Authorized
Officer of such Borrower specifying such changes.
5.13 Guarantees By Subsidiaries. If a Borrower forms a
Subsidiary with the Agent's prior written consent in accordance
with the provisions of Subsection 6.13, cause such Subsidiary to
execute and deliver to the Agent, within thirty (30) days of its
organization, a Guaranty Agreement, a General Security Agreement,
and such other agreements, documents and instruments as the Agent
may reasonably request in connection with such Guaranty and
Security Agreement, in form and content acceptable to the Agent.
5.14 Use of Proceeds. The Borrowers represent to and
covenant with the Banks that the proceeds of the Term Loan and
the Revolving Credit Loan will be used to (a) finance the
Acquisition (including the payment of fees and expenses of
Borrowers with respect thereto), and (b) repay in full all
existing Indebtedness of NCDC to M&T arising under the 1996
Credit Facilities. Additionally, the Borrowers represent and
covenant that the proceeds of the Revolving Credit Loan not used
pursuant to the preceding sentence shall be used to fund the
general working capital purposes of the Borrowers and their
Subsidiaries.
SECTION 6 NEGATIVE COVENANTS
The Borrowers hereby agree that, so long as the Revolving
Credit Note or the Term Loan Note remains outstanding and unpaid
or any other amount is owing to the Agent or any Bank hereunder
or under any other Loan Document, the Borrowers, jointly or
severally, shall not directly or indirectly:
6.1 Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness without the prior written consent of the Agent
except:
(a) Indebtedness to the Agent or the Banks;
(b) Indebtedness of NCDC to M&T in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000)
in connection with the financing of the acquisition and
construction of a manufacturing facility in Chattanooga,
Tennessee;
(c) Indebtedness of NCDC arising under the 12.5%
Subordinated Notes, or refinancings thereof if the Agent
determines, in its sole discretion, that the terms and provisions
of any such refinancing do not impair the rights of the Agent or
any Bank under any Loan Document;
(d) Indebtedness (i) of one Borrower to the other
Borrower, (ii) of a Borrower to a Subsidiary of a Borrower, (iii)
of a Subsidiary of a Borrower to a Borrower, or (iv) of a
Subsidiary of a Borrower to a Subsidiary of a Borrower;
(e) Indebtedness of the Borrowers and their
Subsidiaries under all Capitalized Leases and payments under
operating leases, equipment leases or other leases of real or
personal property; provided that the aggregate amount of all
payments under all such Capitalized Leases and leases in any
Fiscal Year does not exceed eight hundred thousand dollars
($800,000); and
(f) Indebtedness described in Schedule 6.1 hereto.
6.2 Limitation on Liens. Create, incur, assume or suffer
to exist, any Lien upon any of the Collateral, whether now owned
or hereafter acquired, except:
(a) Liens for taxes not yet due or which are being
contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto in accordance with GAAP
are maintained on the books of the Borrower contesting such
taxes;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the
ordinary course of business in connection with payments which are
not overdue for a period of more than thirty (30) days or which
are being contested in good faith and by appropriate proceedings;
(c) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) Liens arising from judgments described under
Subsection 7.1(j) that do not constitute an Event of Default;
(f) Liens arising under the terms and provisions
(other than any terms or provisions relating to non-performance
or default by such Borrower or Subsidiary) of any contract with a
Governmental Authority (to the extent applicable);
(g) Liens created or permitted under the terms of any
of the Loan Documents;
(h) Liens securing Indebtedness described in
Subsections 6.1(b) or 6.1(e); and
(i) Liens described in Schedule 3.9 hereto.
6.3 Financial Covenants.
(a) Permit the Consolidated Net Worth of the
Borrowers, as of (i) December 31, 1997 to be less than Thirteen
Million Three Hundred Thousand Dollars ($13,300,000), (ii)
January 31, 1998 and as of the last day of any calendar month
thereafter, to be less than the sum of the following: (A)
Thirteen Million Three Hundred Thousand Dollars ($13,300,000),
plus (B) fifty percent (50%) of the positive Consolidated Net
Income of the Borrowers from the date of this Agreement through
the then concluded calendar month, plus (C) all of the cumulative
net proceeds realized by Borrowers from the issuance or sale of
any capital stock or other equity interests in the Borrowers from
the date of this Agreement (exclusive of the net proceeds
realized by NCDC from the Subordinated Debt Offering) through the
then concluded calendar month; and
(b) Permit, as of the last day of any calendar
quarter, the ratio of Consolidated Current Assets to Consolidated
Current Liabilities of the Borrowers to be less than 1.7 to 1.0;
and
(c) Permit, (i) as of the last day of any calendar
quarter ending during the period commencing with the date of this
Agreement and ending December 31, 1998, the Consolidated Interest
Coverage Ratio of the Borrowers measured for the four (4)
consecutive calendar quarters (or for the number of consecutive
calendar quarters following the date of this Agreement to the
date of such determination, if during the period commencing with
the date of this Agreement and ending on the one (1) year
anniversary thereof) ending on the last day of such calendar
quarter to be less than 1.7 to 1, or (ii) as of the last day of
any calendar quarter commencing after December 31, 1998, the
Consolidated Interest Coverage Ratio of the Borrowers measured
for the four (4) consecutive calendar quarters ending on the last
day of such calendar quarter to be less than 2.1 to 1.
6.4 Capital Expenditures. Make or incur any obligation to
make Capital Expenditures exceeding Six Million Dollars
($6,000,000) in the aggregate for the Borrowers and their
Subsidiaries during any Fiscal Year.
6.5 Payment of 12.5% Subordinated Debt Notes. (a) At any
time make any direct or indirect payment or distribution (whether
in cash, securities or other property) with respect to the 12.5%
Subordinated Notes in the event, and during the period, that any
such payments are prohibited to be made to the holders of the
12.5% Subordinated Notes pursuant to Section 11.3 of the
Subordinated Debt Agreement; and (b) at any time make any payment
of principal of, interest on, or premium or fees with respect to,
any 12.5% Subordinated Note prior to the scheduled payment date
for such payment under the terms of the Subordinated Debt
Agreement or any 12.5% Subordinated Note, whether by prepayment,
acceleration or otherwise; provided, however, that
notwithstanding the provisions of this Subsection 6.5(b), (i) the
Borrowers may make all payments to the holders of the 12.5%
Subordinated Notes pursuant to Section 4.4 of the Subordinated
Debt Agreement, and (ii) subject to the rights of the Agent and
the Banks pursuant to the provisions of Subsection 7.2(a), make
payments to the holders of the 12.5% Subordinated Notes pursuant
to Section 4.6 of the Subordinated Debt Agreement.
6.6 Amendment or Modification of Subordinated Debt. Permit
the Subordinated Debt Agreement, or the 12.5% Subordinated Notes,
to be amended, modified or altered in any respect without the
prior written consent of the Majority Banks.
6.7 Limitation on Contingent Obligations. Create, incur,
assume or suffer to exist any Contingent Obligations, except (a)
existing Contingent Obligations as set forth on Schedule 6.7
hereto, (b) any renewal or refinancing thereof provided the
aggregate monetary liability of the Borrowers, either
individually or in the aggregate, for any such renewed or
refinanced Contingent Obligations does not exceed the applicable
aggregate monetary liability for such Contingent Obligation set
forth in Schedule 6.7, (c) guarantees of Indebtedness permitted
under Subsection 6.1.
6.8 Prohibition of Fundamental Changes. Make or permit to
be made any material change in the character or conduct of either
of Borrower's or any of their Subsidiaries' business or
operations (including any merger or consolidation or
amalgamation), or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series
of transactions, all or substantially all of either of the
Borrower's or any of their Subsidiaries' business or assets or
acquire by purchase or otherwise all or substantially all the
business or assets of, or capital stock or other evidences of
beneficial ownership of, any Person, or make any material change
in either of the Borrower's or any of their Subsidiaries' present
method of conducting business; provided, however, (a) a Borrower
may merge or consolidate with any other Person (other than
another Borrower or a Subsidiary of either of Borrowers), or
acquire the assets or capital stock of any other Person (other
than another Borrower or a Subsidiary of either of Borrowers)
provided the Majority Banks have given their prior written
consent to the terms of such merger, consolidation or acquisition
and such merger, consolidation or acquisition would not otherwise
result in the occurrence of a Default or Event of Default, and
(b) without the prior written consent of the Majority Banks (i) a
Borrower may merge or consolidate with or otherwise acquire the
assets or capital stock of another Borrower or a Subsidiary of
either of the Borrowers, and (ii) any Subsidiary of either of
Borrowers may merge or consolidate with or otherwise acquire the
assets or capital stock of any other Subsidiary or any parent of
such Subsidiary (including a Borrower); provided, however, that
in the event of any such merger, consolidation, acquisition or
other reorganization described in clauses (b)(i) or (ii)
immediately above a Borrower is the surviving entity of such
merger, consolidation, acquisition or reorganization.
6.9 Prohibition on Sale of Assets. Sell, lease, assign,
transfer or otherwise dispose of any of such Borrower's assets,
excluding (a) obsolete, worn out or surplus property, (b)
equipment replaced in the ordinary course of business, and (c)
inventory disposed of in the ordinary course of business.
6.10 Loans, Advances and Investments. Make or commit to
make, any advance, loan, extension of credit or capital
contribution to, or purchase of, any stock, bonds, notes,
debentures or other securities of, or make any other investment
in (by way of transfers of property, acquisitions of evidences of
indebtedness or otherwise), any Person (all such transactions
being herein called "Investments"), except:
(a) advance payments or deposits against purchases
made in the ordinary course of a Borrower's business;
(b) (i) direct obligations of the United States or any
agency thereof with maturities of one year or less from the date
of acquisition, (ii) commercial paper of a domestic issuer rated
at least "A-1" by Standard & Poor's Corporation or "P-1" by
Moody's Investors Services, Inc., (iii) time deposits and
certificates of deposit with maturities of one (1) year or less
from the date of acquisition issued by a Bank or any commercial
bank having capital and surplus in excess of Two Hundred Fifty
Million Dollars ($250,000,000), and (iv) repurchase obligations
within a term of not more than thirty (30) days for underlying
securities of the types described in clauses (i), (ii) and (iii),
above and entered into with any commercial bank meeting the
qualifications specified in clause (iii) above;
(c) existing Investments as set forth in Schedule
6.10;
(d) advances to employees which do not exceed at any
time, in the aggregate, three hundred fifty thousand dollars
($350,000);
(e) advances by a Borrower or a Subsidiary of a
Borrower to another Borrower or Subsidiary;
(f) trade receivables owing to the Borrowers or their
Subsidiaries or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade
terms; and
(g) investments received or arising in connection with
the bankruptcy or reorganization of any supplier or customer of a
Borrower or any Subsidiary in settlement of any obligations to a
Borrower or Subsidiary.
6.11 Compliance with ERISA. (a) Terminate any Plan so as to
result in any material liability to PBGC, (b) engage in any
"prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended) involving any Plan
which would result in a material liability for an excise tax or
civil penalty in connection therewith, (c) incur or suffer to
exist any material "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, involving any
Plan, or (d) allow or suffer to exist any event or condition,
which presents a material risk of incurring a material liability
to PBGC by reason of termination of any such Plan.
6.12 Dividends. Declare or pay, or permit any of the
Subsidiaries of the Borrowers to declare or pay, Dividends to any
Person that is not a Borrower or a Subsidiary of a Borrower;
provided, however, that nothing in this Subsection 6.12 shall be
deemed to prohibit the Borrowers and their Subsidiaries from
making any payment (in the form of a Dividend or otherwise) in
respect of operating charges or management fees assessed by
Niagara to the extent the aggregate amount of all such payments
for operating charges and/or management fees does not exceed, in
any Fiscal Year, One Million Three Hundred Fifty Thousand Dollars
($1,350,000).
6.13 Subsidiaries and Affiliates. Without the prior written
consent of the Agent (a) organize, cause to organize, or acquire
any Subsidiary, or (b) organize, cause to organize, acquire or
invest in any Affiliate.
6.14 Affiliate Transactions. Directly or indirectly, or
permit a Subsidiary to directly or indirectly, enter into, renew
or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with any Affiliate (other than wholly
owned Subsidiaries consented to by the Agent pursuant to Section
6.13), except upon fair and reasonable terms no less favorable to
such Borrower or such Subsidiary than could be obtained, at the
time of such transaction or, if such transaction is pursuant to a
written agreement, at the time of the execution of the agreement
providing therefor, in a comparable arms' length transaction with
a Person that is not an Affiliate.
SECTION 7 EVENTS OF DEFAULT
7.1 Events of Default. The following shall be Events of
Default under this Agreement:
(a) Nonpayment. A Borrower shall fail to pay any
principal of, or interest on, the Revolving Credit Note or the
Term Loan Note within ten (10) days of any applicable due date in
accordance with the terms thereof; or shall fail to pay, within
twenty (20) days after written notice thereof from the Agent, any
other amount payable hereunder in accordance with the terms
hereof or with the terms of any Loan Document; or
(b) Representations. Any representation or warranty
made or deemed made by the Borrowers (individually or
collectively) herein, or in any Loan Document, or which is
contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement or the Loan Documents shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; or
(c) Negative Covenants. A Borrower or any of their
Subsidiaries shall default in the observance or performance of
any covenant or agreement contained in Section 6 of this
Agreement; or
(d) Other Covenants. A Borrower or any Subsidiary of
a Borrower shall default in the observance or performance of any
covenant or agreement contained in this Agreement or in any Loan
Document (and not constituting an Event of Default under any of
the other provisions of this Section 7) and shall fail to fully
cure such default within twenty (20) days after written notice
thereof from the Agent; or
(e) Other Indebtedness. A Borrower, Guarantor, or
Subsidiary of a Borrower or Guarantor, shall (i) default in the
payment of principal of or interest on any Indebtedness in excess
of Three Hundred Thousand Dollars ($300,000) (other than with
respect to the Revolving Credit Note or the Term Loan Note) or on
any Contingent Obligations relating to such Indebtedness (such
Indebtedness and Contingent Obligations being herein called the
"Obligations") beyond the period of grace, if any, provided in
the instrument or agreement under which the Obligations were
created; or (ii) default beyond any applicable period of grace,
in the observance or performance of any other agreement contained
in any such Obligation, or in any instrument or agreement
evidencing, securing or relating thereto, or any other event
shall occur, the effect of which default or other event is to
cause, or permit the holder or holders of such Obligation (or a
trustee or agent on behalf of such holder or holders) to cause,
such Obligation to become due prior to its stated maturity;
provided, however, such default described in clause (i) or (ii)
above shall not constitute an Event of Default so long as the
Borrower, Guarantor or Subsidiary subject to such Obligation, in
good faith, is contesting the collection or enforcement of such
Obligation by appropriate legal proceedings diligently pursued;
or
(f) Change in Control. The occurrence of a Change in
Control; or
(g) Change in Management. Michael J. Scharf shall
cease to be designated as Chief Executive Officer, or act as or
perform the duties of the Chief Executive Officer, of Niagara; or
(h) Insolvency Proceedings. (i) A Borrower,
Guarantor, or any Subsidiary of a Borrower or Guarantor, shall
commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for such Borrower,
Guarantor or Subsidiary, or for all or any substantial part of
its assets, or (ii) a Borrower, Guarantor, or Subsidiary of a
Borrower or Guarantor, shall make a general assignment for the
benefit of its creditors; or (iii) there shall be commenced
against a Borrower, Guarantor, or any Subsidiary of a Borrower or
Guarantor, any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of
an order for relief or any such adjudication or appointment, or
(B) remains undismissed, undischarged or unbonded for a period of
sixty (60) days; or (iv) there shall be commenced against a
Borrower, Guarantor, or any Subsidiary of a Borrower or
Guarantor, any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of such Borrower's,
Guarantor's or Subsidiary's assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60)
days from the entry thereof; or (v) a Borrower, Guarantor, or any
Subsidiary of a Borrower or Guarantor, shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii),
(iii) (iv) or (v) above; or (vi) a Borrower, Guarantor, or any
Subsidiary of a Borrower or Guarantor, shall generally not, or
shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(i) Pension Default. (i) Any Person shall engage in
any "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any
Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any
Plan, which Reportable Event or institution of proceedings is, in
the reasonable opinion of the Agent, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, and,
in the case of a Reportable Event, the continuance of such
Reportable Event unremedied for ten (10) days after notice of
such Reportable Event pursuant to Section 4043(a), (c) or (d) of
ERISA is given or the continuance of such proceedings for ten
(10) days after commencement thereof, as the case may be, (iv)
any Plan shall terminate for purposes of Title IV of ERISA, or
(v) any other event or condition shall occur or exist which,
together with all other events or conditions in clauses (i)
through (iv) above, if any, would subject the Borrower to any
tax, penalty or other liabilities under ERISA in the aggregate
material in relation to the business, operations, property or
financial or other condition of the Borrower taken as a whole.
(j) Judgments. One or more judgments or decrees shall
be entered against a Borrower or Subsidiary involving in the
aggregate, at any one time, a liability (not paid or fully
covered by insurance) of Three Hundred Thousand Dollars
($300,000) or more and all such judgments or decrees shall not
have been vacated, discharged, or stayed pending appeal within
sixty (60) days from the entry thereof; or
(k) Notes; Collateral Documents. (i) Any of the Notes
or the Collateral Documents shall cease to be in full force and
effect at any time, or (ii) the occurrence of any default or
event of default under any of the Collateral Documents, or (iii)
a breach of any term, condition or provision of any of the
Collateral Documents (A) beyond any applicable period of grace
contained in such Collateral Document, or (B) if no such period
of grace exists, beyond twenty (20) days after written notice
thereof from the Agent.
7.2 Effect of Event of Default.
(a) Upon the occurrence and during the continuance, of
any Event of Default specified in Subsection 7.1, the Agent shall
at the request of, or may with the consent of, the Majority
Banks, (i) declare all obligations of the Banks under this
Agreement to be immediately terminated, and (ii) declare all
Indebtedness evidenced by the Revolving Credit Note, the Term
Loan Note and any other Indebtedness of the Borrowers, or any
Subsidiary of the Borrowers, to the Agent or the Banks under this
Agreement or any Loan Document, to be immediately due and
payable, whereupon the Revolving Credit Note, the Term Loan Note
and all such Indebtedness shall become and be forthwith due and
payable, without presentment, demand, protest and all benefits of
valuation and appraisement laws, or other notice of any kind, all
of which are hereby expressly waived by the Borrowers; provided,
however, that if any Event of Default specified in Subsection
7.1(h) shall occur, all Indebtedness evidenced by the Revolving
Credit Note, the Term Loan Note and any other Indebtedness of the
Borrowers, or any Subsidiary or Affiliate of the Borrowers, to
the Agent or the Banks under this Agreement or any Loan Document
shall thereupon become due and payable concurrently therewith,
and the Banks' obligations to lend shall immediately terminate,
without any further action by the Agent or any Bank and without
presentment, demand, protest and all benefits of valuation and
appraisement laws or other notice of any kind, all of which are
hereby expressly waived by the Borrowers.
(b) In addition to (and not in substitution for or
limitation of) the remedies available to the Agent and the Banks
described in Subsection 7.2(a), in the event that the Borrowers
fail to achieve the applicable Consolidated Interest Coverage
Ratio as of any measurement date therefor as described in
Subsection 6.3(c), and fail to achieve the applicable
Consolidated Interest Coverage Ratio as of the next succeeding
measurement date therefor as described in Subsection 6.3(c), the
Agent may cause any or all of the LIBOR Rate Loans then
outstanding to be immediately converted to Loans bearing interest
at the Adjusted Prime Rate applicable to each such Loan. If the
Agent converts any LIBOR Rate Loan to a Loan bearing interest at
the Adjusted Prime Rate pursuant to this Subsection 7.2(b) prior
to the end of the LIBOR Rate Period for such Loan, the Borrowers
shall, upon not less than ten (10) days prior written notice
after the end of the LIBOR Rate Period applicable to such Loan
prior to its conversion, pay to the Agent an amount equal to the
excess of (i) the interest which would have otherwise been
payable on the outstanding and unpaid principal amount of such
Loan during the remaining term of the LIBOR Rate Period, less
(ii) interest on the amount prepaid for such term computed at an
interest rate equal to the yield-to-maturity which could be
obtained on United States Treasury Obligations, purchased in the
market at the time of prepayment, having a remaining term and
coupon rate comparable to the remaining term of the LIBOR Rate
Period, and comparable to the applicable interest rate, as
determined by Agent in good faith, and certified to the Borrower,
such certificate to be conclusive, absent manifest error. In no
event shall the amount determined by subtracting the amount
described in clause (ii), above, from the amount described in
clause (i), above, result in a negative number.
(c) Upon the occurrence and during the continuance of
any other Event of Default, the Agent may, by notice of default
to the Borrowers, declare all amounts owing under or evidenced by
this Agreement, the Revolving Credit Note, the Term Loan Note, or
any Loan Document to be due and payable forthwith, whereupon the
same shall immediately become due and payable. Further, upon the
occurrence of an Event of Default, the Borrowers agree to furnish
promptly to the Agent on behalf of the Banks such security as the
Majority Banks may reasonably request and to execute such
agreements or documents deemed reasonably necessary by Agent and
the Banks to accomplish same. Any acceleration of payment
pursuant to this Subsection 7.2 shall be without presentment,
demand, protest and all benefits of valuation and appraisement
laws or other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Revolving
Credit Note, the Term Loan Note or any Loan Document to the
contrary notwithstanding. The Borrowers agree that the foregoing
rights and remedies herein expressly specified are cumulative and
not exclusive of any rights or remedies which the Agent and the
Banks may or would otherwise have at law or by any instrument
evidencing terms of deposit of any funds or by an assignment or
transfer of collateral or by any other instrument signed or
assented to by the Borrowers (individually or collectively).
7.3 Right of Set Off. In addition to any rights and
remedies of the Banks provided by law, each Bank shall have the
right, without prior notice to the Borrowers, any such notice
being expressly waived by the Borrowers to the extent permitted
by applicable law, upon the occurrence of any Event of Default,
to set-off and apply against any Indebtedness, whether matured or
unmatured, of the Borrowers under this Agreement, the Revolving
Credit Note or the Term Loan Note, any amount owing from such
Bank to the Borrowers, at or any time after, the happening of
such Event of Default.
SECTION 8 THE AGENT
8.1 Authorization and Action. Each Bank hereby irrevocably
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. The duties of
the Agent shall be mechanical and administrative in nature and
the Agent shall not by reason of this Agreement be a trustee or
fiduciary for any Bank. The Agent shall have no duties or
responsibilities except those expressly set forth herein. As to
any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the
Revolving Credit Note or the Term Loan Note), the Agent shall not
be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be
fully protected in so acting or so refraining from acting) upon
the instructions of the Majority Banks, and such instructions
shall be binding upon all Banks and all holders of the Revolving
Credit Note and the Term Loan Note; provided, however, that the
Agent shall not be required to take any action which exposes the
Agent to personal liability or which is contrary to this
Agreement or applicable law.
8.2 Liability of Agent. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any
action taken or omitted to be taken by it or them under or in
connection with this Agreement in the absence of its or their own
gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, the Agent: (a) may treat the
payee of the Revolving Credit Note or the Term Loan Note as a
holder thereof until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (b) consult with legal counsel
(including counsel for the Borrowers, independent public
accountants, and other experts selected by it) and shall not be
liable for any action taken or omitted to be taken in good faith
by it in accordance with the advice of such counsel, accountants
or experts; (c) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements,
warranties or representations made in or in connection with this
Agreement; (d) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms,
covenants or conditions of this Agreement on the part of the
Borrowers or to inspect the property (including the books and
records) of the Borrowers; (e) shall not be responsible to any
Bank for the due execution, legality, validity, enforceability,
genuineness, perfection, sufficiency or value of this Agreement
or any other instrument or document furnished pursuant thereto;
and (f) shall incur no liability under or in respect to this
Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be sent by telegram,
telex, or facsimile transmission) believed by it to be genuine
and to be signed by the proper party or parties.
8.3 Rights of Agent as a Bank. With respect to its
Proportionate Revolving Credit Commitment, its Proportionate Term
Loan Commitment, the Revolving Credit Loans and any portion of
the Term Loan made by it, and the Revolving Credit Note and Term
Loan Note issued to it, the Agent shall have the same rights and
powers under this Agreement as any other Bank and may exercise
the same as though it were not the Agent, and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include the
Agent in its capacity as a Bank. The Agent and its affiliates
may accept deposits from, lend money to, act as trustee under
indentures of and generally engage in any kind of business with
the Borrowers and any person who may do business with or own
securities of the Borrowers, all as if the Agent were not the
Agent without any duty to account therefor to the Banks.
8.4 Independent Credit Decisions. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or
any other Bank and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement. Each Bank also acknowledges that
it will, independently and without reliance upon the Agent or any
other Bank 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. The Agent shall have no duty or responsibility to
provide any Bank with any credit or other information concerning
the affairs, financial condition or business of the Borrowers
which may come into the possession of the Agent or any of its
Affiliates.
8.5 Indemnification. The Banks agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers) ratably
according to the respective amounts of their Proportionate
Revolving Credit Loan Commitments and Proportionate Term Loan
Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way related to or arising out of this
Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Bank shall be liable for any portion
of any of the foregoing resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent (to the extent
not reimbursed by the Borrowers) promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel
fees) incurred by the Agent in connection with the preparation,
administration or enforcement of, or legal advice in respect of
rights or responsibilities under this Agreement.
8.6 Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Borrowers.
Upon any such resignation, the Majority Banks shall have the
right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Banks and shall have
accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the Agent
may, on behalf of the Banks appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United
States of America or any state thereof and having a combined
capital and surplus of at least Two Hundred Fifty Million Dollars
($250,000,000,000). Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed thereto and become vested with all the rights,
powers, privileges, and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation hereunder as Agent the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
8.7 Sharing of Payments, Etc. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) with respect to the Revolving
Credit Loans or the Term Loan in excess of its pro rata share of
such payments shared by all Banks, such Bank shall forthwith
purchase from the other Banks such participation in the Revolving
Credit Loans or the portion of the Term Loan made by them as
shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them; provided, however, if
all or any portion of such excess payment is hereafter recovered
from such purchasing Bank, such purchase from the other Banks
shall be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price to the extent of such recovery
together with an amount equal to such Bank's ratable share
(according to the proportion of (a) the amount of such Bank's
required prepayment, to (b) the total amount so recovered from
the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount
recovered. The Borrowers agree that any Bank purchasing a
participation from another Bank pursuant to this Subsection 8.7
may, to the fullest extent permitted by law, exercise all of its
rights of payment (including the right of set-off) with respect
to such participation as fully as if such Bank were the direct
creditor of the Borrowers in the amount of such participation.
SECTION 9 MISCELLANEOUS
9.1 Increased Costs/Capital Adequacy. Subject to the
provisions of Subsection 2.9, in the event that at any time or
from time to time any Requirement of Law, or any interpretation
or application thereof, or compliance by a Bank with any request
or directive (whether or not having the force of law) from any
central bank or monetary authority or other governmental
authority:
(a) does or shall subject such Bank to any Tax of any
kind whatsoever, or increase in the amount thereof, with respect
to this Agreement, the Revolving Credit Note or the Term Loan
Note, or change the basis of taxation of payments to such Bank of
principal, interest or any other amount payable hereunder, under
the Revolving Credit Note or the Term Loan Note (except for
changes in the rate of tax on the overall net income of such
Bank); or
(b) does or shall impose, modify or hold applicable or
change any reserve (including, without limitation, basic,
supplemental, marginal and emergency reserves), special deposit,
compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any other
acquisition of funds or capital adequacy or maintenance
requirement by such Bank; or
(c) does or shall impose on such Bank any other
material condition or change;
and the result of any of the foregoing is to increase the cost to
such Bank of making or maintaining any of the Loans or to reduce
any amount receivable thereunder, then, in any such case, the
Borrowers shall promptly pay the Agent, upon its demand, such
additional amount which will compensate such Bank for such
additional cost or reduced amount receivable. A certificate
showing in reasonable detail any additional amounts determined by
the Agent to be payable pursuant to this Subsection shall be
submitted by the Agent to the Borrowers and, absent manifest
error, shall be conclusive and binding on the parties hereto.
In the event any Borrower makes any payment to a Bank
pursuant to this Subsection, the Borrowers may replace such Bank
(a "Replaced Bank") by designating another commercial bank which
is an Eligible Assignee and reasonably acceptable to the Agent
(such bank to be referred to as a "Replacement Bank") to which
such Replaced Bank shall assign, in accordance with Subsection
9.2 and without recourse or warranty by, or expense to, such
Replaced Bank, the rights and obligations or such Replaced Bank
hereunder (except for such rights as survive the repayment of the
Loans), and, upon such assignment, such Replaced Bank shall no
longer be a party hereto or ave any rights hereunder and shall be
relieved from all obligations to the Borrowers hereunder, and the
Replacement Bank shall succeed to the rights and obligations of
such Replaced Bank hereunder. Any such assignment shall be
accompanied by payment of amounts that would be payable to the
Agent hereunder if such assignment were a prepayment of all
outstanding Loans of the Replaced Bank.
9.2 Assignments, Participation, etc.
(a) Any Bank may, with the written consent of the
Borrowers and the Agent, which consent shall not be unreasonably
withheld or delayed, at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the
Borrowers or the Agent shall be required in connection with any
assignment and delegation by a Bank to an Affiliate of such Bank,
unless the Borrowers would otherwise be required to make any
payment or payments pursuant to Subsections 2.9 or 9.1 hereof
after the date of any such assignment which payment or payments
the Borrowers would not have been required to make but for such
assignment, in which case such assignment may not be made without
the prior written consent of the Borrowers, which consent shall
not be unreasonably withheld or delayed) (each an "Assignee")
all, or any ratable part of all, of the Loans, its Proportionate
Revolving Credit Commitment and/or Proportionate Term Loan
Commitment (collectively such Bank's "Proportionate Commitments")
and the other rights and obligations of such Bank hereunder;
provided, however, that any such assignment shall be in a minimum
amount equal to the lesser of Five Million Dollars ($5,000,000)
or the full amount of the assignor Bank's Proportionate
Commitments; and provided, further, that the Borrowers may
withhold consent to any such assignment and delegation of less
than all of a Bank's Proportionate Commitments if, after giving
effect to such assignment and delegation, the assignor Bank's
Proportionate Commitments would be less than Ten Million Dollars
($10,000,000), and provided, still further, that the Borrowers,
any Subsidiary thereof and the Agent may continue to deal solely
and directly with such Bank in connection with the interest so
assigned to an Assignee until (i) written notice of such
assignment in form and substance satisfactory to the Borrowers
and the Agent, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been
given to the Borrowers and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to
the Borrowers and the Agent an Assignment and Acceptance in form
and content acceptable to Agent and Borrowers ("Assignment and
Acceptance"); and (iii) such Bank or its Assignee shall have paid
a processing fee of Three Thousand Five Hundred Dollars ($3,500)
to the Agent; and provided, further, that any assignment
hereunder must include an equal percentage of the assignor Bank's
Proportionate Revolving Credit Commitment and Revolving Credit
Loans. At the time of each assignment pursuant to this Section
9.2 to a Person which is not already a Bank hereunder and which
is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for United States Federal income tax
purposes, the respective Assignee shall provide to the Borrowers
and Agent the appropriate IRS forms (and, if applicable, a
Section 2.9(c)(ii) Certificate) described in Section 2.9(c).
(b) From and after the date that the Agent notifies
the assignor Bank that the requirements of subsection 9.2(a) have
been satisfied, (i) 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, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the
extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its additional obligations under the
Loan Documents. Anything herein to the contrary notwithstanding,
any Bank assigning all of its Loans, Proportionate Commitments
and other rights and obligations hereunder to an Assignee shall
continue to have the benefit of all indemnities hereunder
following such assignment.
(c) Immediately upon each Assignee's making its
payment under the Assignment and Acceptance, this Agreement shall
be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the
resulting adjustment of the Proportionate Commitment arising
therefrom. The Proportionate Commitment allocated to each
Assignee shall reduce the Proportionate Commitments of the
assignor Bank pro tanto.
(d) Any Bank may at any time sell to one or more banks
or other institutions (a "Participant") participating interests
in any Loans or Proportionate Commitment of that Bank and the
other interests of that Bank (the "Originating Bank") hereunder
and under the other Loan Documents; provided, however, that (i)
the Originating Bank's obligations under this Agreement shall
remain unchanged, (ii) the Originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the
Borrowers, each Bank and the Agent shall continue to deal solely
and directly with the Originating Bank in connection with the
Originating Bank's rights and obligations under this Agreement
and the other Loan Documents, and (iv) no Bank shall transfer or
grant any participating interest under which the Participant
shall have rights to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan
Document, provided that such Participant shall have the right to
approve any amendment, consent or waiver that would (A) postpone
or delay any date fixed for any payment of principal, interest or
fees due hereunder or under any other Loan Document, (B) extend
the maturity of any Loan, (C) reduce the principal of, or the
rate of interest specified herein on, any Loan, or (D) reduce any
fees or other amounts payable hereunder or under any other Loan
Document, and provided, still further, that the sale of any
participating interest hereunder must include an equal percentage
of the Originating Bank's Revolving Credit Commitment and
Revolving Loans. In the case of any such participation, the
Participant shall not have any rights under this Agreement, or
any of the other Loan Documents, and all amounts payable by the
Borrowers hereunder shall be determined as if such Bank had not
sold such participation; except that, (I) if amounts outstanding
under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as
a Bank under this Agreement, and (II) each Participant shall be
deemed to have the rights and benefits under Section 2 in respect
of its participating interest in any Loan or the Originating
Bank's Proportionate Revolving Credit Commitment or Proportionate
Term Loan Commitment to the same extent as if its participating
interest were held by a Bank under this Agreement; provided, that
no Participant shall be entitled to receive any greater amount
pursuant to such Section than the transferor Bank would have been
entitled to receive in respect of the amount of the participation
transferred by such transferor Bank to such Participant had no
such transfer occurred.
(e) Notwithstanding any other provision contained in
this Agreement or any other Loan Document to the contrary, any
Bank may assign all or any portion of the Loans held by it to any
Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Federal Reserve Board
and any Operating Circular issued by such Federal Reserve Bank,
provided, that any payment in respect of such assigned Loans made
by a Borrower to or for the account of the assigning Bank in
accordance with the terms of this Agreement shall satisfy such
Borrower's obligations hereunder in respect to such assigned
Loans to the extent of such payment. No such assignment shall
release the assigning Bank from its obligations hereunder.
9.3 Amendments, Waivers and Consents. No amendment or
waiver of any provision of this Agreement, the Revolving Credit
Note, the Term Loan Note or any other Loan Document, nor consent
to any departure by a Borrower, Guarantor, or Subsidiary of a
Borrower or Guarantor, therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Agent, and
then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.4 Notices. All notices, requests and demands required to
be given hereunder, or under any other Loan Document, to or upon
the respective parties hereto or thereto to be effective shall,
unless otherwise expressly provided herein or in such Loan
Document, be in writing or by telegraph and shall be deemed to
have been duly given or made, unless otherwise expressly provided
herein: (a) three (3) days after deposited in the mail
(certified or registered mail return receipt requested, the
failure to receive such return receipt having no effect); or (b)
when received, if an express mail or courier service is used;
addressed as follows or to such address or other address as may
be hereafter designated in writing by the respective parties
hereto and any future holder of the Revolving Credit Note or the
Term Loan Note:
NCDC: Niagara Cold Drawn Corp.
667 Madison Avenue
11th Floor
New York, New York 10022
Attn: President
and
Niagara Cold Drawn Corp.
110 Hopkins Street
P.O. Box 399
Buffalo, New York 14240
Attn: President
With a Copy to: Milton Strom, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
LASALLE: LaSalle Steel Company
c/o Niagara Cold Drawn Corp.
667 Madison Avenue
11th Floor
New York, New York 10022
Attn: President
and
LaSalle Steel Company
1412 150th Street
Hammond, Indiana 46327
Attn: President
and
LaSalle Steel Company
c/o Niagara Cold Drawn Corp.
110 Hopkins Street
P.O. Box 399
Buffalo, New York 14240
Attn: President
With a Copy to: Milton Strom, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
M&T: Manufacturers and Traders Trust Company
One Fountain Plaza
Buffalo, New York 14203
Attn: Robert J. Kush
Vice President
With a Copy to: William E. Mathias II, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
CIBC: CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attn: Mr. Justin Sendak
NATIONAL: National City Bank
National City Center
1900 East Ninth Street
Cleveland, Ohio
Attn: Mr. Brian H. Bucher
THE AGENT: Manufacturers and Traders Trust Company
One Fountain Plaza
Buffalo, New York 14203
Attn: Robert Kush
Vice President
With a Copy to: William E. Mathias II, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
9.5 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any Bank,
any right, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided
by law.
9.6 Survival of Representations and Warranties. All
representations and warranties made hereunder or in any Loan
Document shall survive the execution and delivery of this
Agreement, the Revolving Credit Note, the Term Loan Note and any
Loan Document.
9.7 Payment of Expenses and Taxes; Indemnity. The
Borrowers agree (a) to pay or reimburse the Agent and the Banks
on demand for all their out-of-pocket costs and expenses incurred
in connection with the preparation and execution of, and any
amendment, waiver, consent, supplement or modification to, this
Agreement, the Revolving Credit Note, the Term Loan Note, and any
other Loan Document, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the reasonable fees and disbursements of legal counsel to the
Agent and the Banks, (b) to pay or reimburse the Agent and the
Banks on demand for all their costs and expenses incurred in
connection with the enforcement or preservation of any rights
under this Agreement, the Revolving Credit Note, the Term Loan
Note, and any other Loan Document, including, without limitation,
fees and disbursements of legal counsel to the Agent and the
Banks and fees and expenses incurred in connection with annual
field audits, (c) without limitation of the provision of clause
(a) of this Subsection, to pay, indemnify, and to hold the Agent
and the Banks harmless from, any and all recording and filing
fees, intangibles taxes, UCC and other title or lien searches,
stamp and other taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of,
or consummation of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, the Revolving
Credit Note, the Term Loan Note, and any other Loan Document, and
(d) subject to the provisions of Subsection 2.9, to pay,
indemnify, and hold the Agent and the Banks 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 (including,
without limitation, counsel fees and disbursements in connection
with any litigation, investigation, hearing or other proceeding)
with respect or in any way related to the existence, execution,
delivery, enforcement, performance of this Agreement, the
Revolving Credit Note, the Term Loan Note and the Loan Documents
(all of the foregoing, collectively, the "Indemnified
Liabilities"), provided, that the Borrowers shall not have any
obligation hereunder with respect to Indemnified Liabilities
arising directly from the gross negligence or willful misconduct
of the Agent and/or a Bank.
9.8 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrowers, the
Agent, the Banks and their respective successors and assigns,
except that the Borrowers may not assign or transfer any of their
rights under this Agreement without the prior written consent of
the Agent.
9.9 Counterparts. This Agreement may be executed by one or
more the parties to this Agreement on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
9.10 Governing Law. This Agreement, the Revolving Credit
Note, the Term Loan Note, and the other Loan Documents, and the
rights and obligations of the parties under this Agreement, the
Revolving Credit Note, the Term Loan Note and the other Loan
Documents shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard
to principles of conflicts of laws, unless expressly provided for
otherwise in any such document.
9.11 Inconsistent Provisions. The terms of this Agreement,
the Revolving Credit Note, the Term Loan Note and other Loan
Documents shall be cumulative except to the extent they are
specifically inconsistent with each other, in which case the
terms of this Agreement shall prevail.
9.12 Further Assurances. The Borrowers hereby agree that
they will, from time to time at their own expense, promptly
execute and deliver all further instruments, and take all further
action, that may be necessary or appropriate or that the Agent
may reasonably request, in order to enable the Agent or the Banks
to exercise and enforce their rights or the rights of the Banks
under this Agreement, the Revolving Credit Note, the Term Loan
Note and the Collateral Documents and otherwise to carry out the
intent of this Agreement and the Collateral Documents.
9.13 Waiver of Jury Trial. THE AGENT, THE BANKS AND THE
BORROWERS HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, THE REVOLVING CREDIT NOTE, THE
TERM LOAN NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR ACTIONS OF THE AGENT, THE BANKS OR THE BORROWERS.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANKS TO ENTER
INTO THIS AGREEMENT.
9.14 Consent to Jurisdiction. THE BORROWERS, THE AGENT AND
THE BANKS AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR
ARISING OUT OF THIS AGREEMENT, THE REVOLVING CREDIT NOTE, OR THE
TERM LOAN NOTE OR ANY OTHER LOAN DOCUMENT MAY BE COMMENCED IN THE
SUPREME COURT OF NEW YORK IN ERIE COUNTY, OR IN THE DISTRICT
COURT OF THE UNITED STATES IN THE WESTERN DISTRICT OF NEW YORK,
AND THE BORROWERS, THE AGENT AND THE BANKS WAIVE PERSONAL SERVICE
OF PROCESS AND AGREE THAT A SUMMONS AND COMPLAINT COMMENCING AN
ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED
AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL TO THE BORROWERS, THE AGENT OR THE BANKS, OR AS
OTHERWISE PROVIDED BY THE LAWS OF THE STATE OF NEW YORK OR THE
UNITED STATES.
9.15 Headings. Headings to the sections of this Agreement
are solely for the convenience of the parties and are not an aid
in the interpretation of this Agreement or any part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
NIAGARA COLD DRAWN CORP.
By: /s/ Frank Archer
Name: Frank Archer
Title: President
LASALLE STEEL COMPANY
By: /s/ Frank Archer
Name: Frank Archer
Title: President
Proportionate Revolving MANUFACTURERS AND TRADERS TRUST COMPANY
Credit Commitment:
$25,000,000
Proportionate Term By: /s/ Robert J. Kush, Vice President
Loan Commitment: Name: Robert J. Kush
$20,000,000 Title: Vice President
Proportionate Revolving CIBC INC.
Credit Commitment:
$16,665,000
Proportionate Term By: /s/ Stephanie E. Johnson
Loan Commitment Name: Stephanie E. Johnson
$13,335,000 Title: Authorized Signatory
Proportionate Revolving NATIONAL CITY BANK
Credit Commitment:
$8,335,000
Proportionate Term By: /s/ Brian H. Bucher
Loan Commitment Name: Brian H. Bucher
$6,665,000 Title: Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY,
AS AGENT
By: /s/ Robert J. Kush, Vice President
Name: Robert J. Kush
Title: Vice President
NIAGARA CORPORATION
(THE "PARENT")
NIAGARA COLD DRAWN CORP.
(THE "COMPANY")
LASALLE STEEL COMPANY
("LASALLE")
______________________________________
NOTE AND STOCK PURCHASE AGREEMENT
______________________________________
DATED AS OF APRIL 18, 1997
$20,000,000
12.5% SENIOR SUBORDINATED NOTES DUE APRIL 18, 2005
(ISSUED BY THE COMPANY)
285,715 SHARES OF COMMON STOCK
(ISSUED BY THE PARENT)
TABLE OF CONTENTS
(NOT A PART OF THE AGREEMENT)
PAGE
1. SALE AND PURCHASE OF NOTES AND PURCHASER
SHARES . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Notes . . . . . . . . . . 1
1.2 Authorization of Purchaser Shares . . . . . 2
1.3 The Closing . . . . . . . . . . . . . . . . 2
2. WARRANTIES AND REPRESENTATIONS OF THE OBLIGORS . 3
3. CLOSING CONDITIONS . . . . . . . . . . . . . . . 3
4. PAYMENTS ON NOTES . . . . . . . . . . . . . . . 3
4.1 Interest Payments on Notes . . . . . . . . 3
4.2 Payments on Notes at Maturity . . . . . . . 4
4.3 Optional Prepayment . . . . . . . . . . . . 4
4.4 Mandatory Prepayment with Proceeds of
Exercise of 1993 Warrants, etc. . . . . . 4
4.5 Allocation of Partial Prepayments . . . . . 6
4.6 Change in Control, Offer to Prepay, etc. . 6
4.7 Maturity, Surrender, etc. . . . . . . . . . 9
4.8 Purchase of Notes . . . . . . . . . . . . . 9
4.9 Place of Payment . . . . . . . . . . . . . 9
4.10 Home Office Payment . . . . . . . . . . . 9
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . 10
5.1 Registration of Notes . . . . . . . . . . . 10
5.2 Transfer and Exchange of Notes . . . . . . 10
5.3 Replacement of Notes . . . . . . . . . . . 11
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . 11
6.1 Ownership Structure . . . . . . . . . . . . 11
6.2 Maintenance of Properties, Conduct of
Business . . . . . . . . . . . . . . . . . 12
6.3 Compliance with Law . . . . . . . . . . . . 12
6.4 Books and Records . . . . . . . . . . . . . 12
6.5 Corporate Existence, etc. . . . . . . . . . 13
6.6 Payment of Taxes and Claims . . . . . . . . 13
6.7 Insurance . . . . . . . . . . . . . . . . . 13
6.8 Guaranties by Subsidiaries . . . . . . . . 13
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . 14
7.1 No Amendments, etc. re 1993 Warrants . . . 14
7.2 Amendment of Senior Credit Agreement . . . 14
7.3 Indebtedness . . . . . . . . . . . . . . . 15
7.4 Liens . . . . . . . . . . . . . . . . . . . 17
7.5 Net Worth . . . . . . . . . . . . . . . . . 19
7.6 Interest Coverage . . . . . . . . . . . . . 19
7.7 Prohibition on Fundamental Changes . . . . 19
7.8 Asset Dispositions . . . . . . . . . . . . 20
7.9 Loans, Advances and Investments . . . . . . 22
7.10 Dividends, etc. . . . . . . . . . . . . . 23
7.11 Affiliate Transactions . . . . . . . . . . 23
7.12 Parent Holding Company . . . . . . . . . . 23
7.13 Indebtedness, etc. of the Parent . . . . . 24
8. INFORMATION COVENANTS . . . . . . . . . . . . . 25
8.1 Financial and Business Information . . . . 25
8.2 Officer's Certificate . . . . . . . . . . . 29
8.3 Inspection . . . . . . . . . . . . . . . . 29
9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . 30
10. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . 33
10.1 Acceleration . . . . . . . . . . . . . . . 33
10.2 Other Remedies . . . . . . . . . . . . . . 34
10.3 Rescission . . . . . . . . . . . . . . . . 34
10.4 No Waivers or Election of Remedies,
Expenses, etc. . . . . . . . . . . . . . . 35
11. SUBORDINATION . . . . . . . . . . . . . . . . . 35
11.1 General . . . . . . . . . . . . . . . . . 35
11.2 Insolvency, etc. . . . . . . . . . . . . . 35
11.3 Blockage of Payments on Subordinated
Debt . . . . . . . . . . . . . . . . . . . 36
11.4 Subordinated Debt Payments and Remedies . 39
11.5 Turnover of Payments . . . . . . . . . . . 40
11.6 Obligations Not Impaired . . . . . . . . . 40
11.7 Payment of Senior Debt; Subrogation . . . 41
11.8 Reliance of Holders of Senior Debt . . . . 41
11.9 Security . . . . . . . . . . . . . . . . . 41
11.10 Changes in Holders of Senior Debt . . . . 41
12. INTERPRETATION OF AGREEMENT . . . . . . . . . . 42
12.1 Terms Defined . . . . . . . . . . . . . . 42
12.2 Accounting Principles . . . . . . . . . . 63
13. PURCHASER REPRESENTATIONS, ETC. . . . . . . . . 63
13.1 Purchase for Investment . . . . . . . . . 63
13.2 Source of Funds . . . . . . . . . . . . . 64
14. EXPENSES, ETC. . . . . . . . . . . . . . . . . . 65
14.1 Transaction Expenses . . . . . . . . . . . 65
14.2 Survival . . . . . . . . . . . . . . . . . 66
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . 66
16. AMENDMENT AND WAIVER . . . . . . . . . . . . . . 66
16.1 Requirements . . . . . . . . . . . . . . . 66
16.2 Solicitation of Holders of Notes . . . . . 67
16.3 Binding Effect, etc. . . . . . . . . . . . 67
16.4 Notes held by Obligors, etc. . . . . . . . 68
17. NOTICES . . . . . . . . . . . . . . . . . . . . 68
18. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . 69
19. MISCELLANEOUS . . . . . . . . . . . . . . . . . 69
19.1 Successors and Assigns . . . . . . . . . . 69
19.2 Payments, Miscellaneous . . . . . . . . . 69
19.3 Severability . . . . . . . . . . . . . . . 70
19.4 Directly or Indirectly . . . . . . . . . . 70
19.5 Section Headings and Table of Contents,
etc. . . . . . . . . . . . . . . . . . . . 70
19.6 Construction . . . . . . . . . . . . . . . 70
19.7 Counterparts . . . . . . . . . . . . . . . 71
19.8 Governing Law . . . . . . . . . . . . . . 71
19.9 Certain Changes in GAAP . . . . . . . . . 71
Annex 1 -- Information as to Purchasers
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Obligors, etc.
Attachment A -- Warranties and Representations of the
Obligors
Attachment B -- Closing Conditions
Exhibit A -- Form of 12.5% Senior Subordinated Note
due April 18, 2005
Exhibit B1 -- Form of Closing Opinion of Counsel for
the Obligors
Exhibit B2 -- Form of Closing Opinion of Special
Counsel for the Purchasers
Exhibit C1 -- Form of Parent Guaranty Agreement
Exhibit C2 -- Form of LaSalle Guaranty Agreement
Exhibit D -- Form of Stockholders Agreement
Exhibit E -- Originally Scheduled Senior Term Loan
Principal Payments
NIAGARA CORPORATION
NIAGARA COLD DRAWN CORP.
LASALLE STEEL COMPANY
_______________________________
NOTE AND STOCK PURCHASE AGREEMENT
_________________________________
$20,000,000
12.5% SENIOR SUBORDINATED NOTES DUE APRIL 18, 2005
(ISSUED BY THE COMPANY)
285,715 SHARES OF COMMON STOCK
(ISSUED BY THE PARENT)
Dated as of April 18, 1997
[SEPARATELY ADDRESSED TO EACH OF THE
PURCHASERS LISTED IN ANNEX 1]
Ladies and Gentlemen:
NIAGARA CORPORATION a Delaware corporation (together
with its successors and assigns, the "PARENT"), NIAGARA
COLD DRAWN CORP., a Delaware corporation (together with
its successors and assigns, the "COMPANY"), and LASALLE
STEEL COMPANY, a Delaware corporation (together with its
successors and assigns, "LASALLE"), hereby agree with you
as follows:
1. SALE AND PURCHASE OF NOTES AND PURCHASER SHARES
1.1 AUTHORIZATION OF NOTES.
The Company will authorize the issuance and sale
pursuant to the Note and Stock Purchase Agreements of
$20,000,000 in aggregate principal amount of its 12.5%
Senior Subordinated Notes due April 18, 2005 (all such
notes, whether initially issued, or issued in exchange or
substitution for, any such note, in each case in
accordance with the Note and Stock Purchase Agreements,
and as amended, restated or otherwise modified from time
to time, the "NOTES"). The Notes shall be substantially
in the form of Exhibit A and shall have the terms as
herein and therein provided.
1.2 AUTHORIZATION OF PURCHASER SHARES.
The Parent will authorize the issuance of 285,715
shares of Parent Common Stock to be sold pursuant to the
Note and Stock Purchase Agreements (such shares of Parent
Common Stock being referred to herein as the "PURCHASER
SHARES").
1.3 THE CLOSING.
(i) SALE AND PURCHASE OF NOTES. The Company
hereby agrees to sell to you and you hereby agree to
purchase from the Company, in accordance with the
provisions hereof, the aggregate principal amount of
Notes set forth below your name in Annex 1 at a purchase
price of 93.39284065% of the principal amount thereof.
(ii) SALE AND PURCHASE OF PURCHASER SHARES.
The Parent hereby agrees to sell to you and you hereby
agree to purchase from the Parent, in accordance with the
provisions hereof, the aggregate number of Purchaser
Shares set forth below your name in Annex 1 at a purchase
price of $4-5/8 per share.
(iii) THE CLOSING. The closing (the
"CLOSING") of the Company's sale of Notes and the
Parent's sale of Purchaser Shares will occur on April 18,
1997 (the "CLOSING DATE"). The Closing will be held at
10:00 a.m., local time, at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022. At the Closing,
(A) the Company will deliver to you one
or more Notes (as indicated below your name in
Annex 1), in the denominations indicated in Annex 1,
in the aggregate principal amount of your purchase
of Notes, dated the Closing Date and registered as
indicated in Annex 1, and
(B) the Parent will deliver to you one or
more certificates evidencing the number of Purchaser
Shares to be purchased by you, as indicated in Annex
1, and registered as indicated in Annex 1,
against payment by federal funds wire transfer in
immediately available funds of the aggregate purchase
price of the Notes and Purchaser Shares being purchased
by you, as directed by the Parent and the Company in
Annex 2.
(iv) OTHER PURCHASERS. Contemporaneously with
the execution and delivery hereof, the Parent, the
Company and LaSalle are entering into a separate Note and
Stock Purchase Agreement identical (except for the name
and signature of the purchaser) hereto (as they may be
amended, restated or otherwise modified from time to
time, this Agreement and such other separate Note and
Stock Purchase Agreements, collectively, the "NOTE AND
STOCK PURCHASE AGREEMENTS") with each other purchaser
(collectively, the "OTHER PURCHASERS") listed in Annex 1,
providing for the sale to each Other Purchaser of Notes
in the aggregate principal amount, and the number of
shares of Purchaser Shares, set forth below such
Purchaser's name in such Annex. The sales of the Notes
and Purchaser Shares to you and to each Other Purchaser
are to be separate sales.
2. WARRANTIES AND REPRESENTATIONS OF THE OBLIGORS
To induce you to enter into this Agreement and to
purchase and pay for the Notes and the Purchaser Shares
to be delivered to you at the Closing, each of the
Parent, the Company and LaSalle makes the warranties and
representations set forth in Attachment A, effective as
of the date of the Parent's, the Company's and LaSalle's
execution of this Agreement and as of the Closing Date,
which are incorporated herein by reference with the same
force and effect as though set forth herein in full.
3. CLOSING CONDITIONS
Your obligations under this Agreement, including,
without limitation, the obligation to purchase and pay
for the Notes and the Purchaser Shares to be delivered to
you at the Closing, are subject to the conditions
precedent set forth in Attachment B, which are
incorporated herein by reference with the same force and
effect as though set forth herein in full, and the
failure of any one or more of such conditions to be
satisfied shall, at your election, relieve you of all
such obligations. The failure of any one or more of such
conditions to be satisfied shall not operate to relieve
the Parent, the Company or LaSalle of their respective
obligations hereunder or to waive any of your rights
against the Parent, the Company or LaSalle.
4. PAYMENTS ON NOTES
4.1 INTEREST PAYMENTS ON NOTES.
The Company shall pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance of each Note from the date of
such Note at the rate of 12.5% per annum, semi-annually
on April 18 and October 18 in each year, commencing on
the payment date next succeeding the date of such Note,
until the principal amount of such Note in respect of
which such interest shall have accrued shall become due
and payable; and shall pay on demand interest on any
overdue principal (including any overdue prepayment of
principal) and Prepayment Compensation, if any, and (to
the extent permitted by applicable law) on any overdue
installment of interest, at a rate equal to the Default
Rate.
4.2 PAYMENTS ON NOTES AT MATURITY.
The entire outstanding principal amount of, and the
interest then due on, the Notes shall become due and
payable on April 18, 2005.
4.3 OPTIONAL PREPAYMENT.
The Company may, at its option, upon notice as
provided below, prepay at any time on or after August 13,
2000 (or, if a 1993 Warrant Call Option Event shall have
occurred and a prepayment of Notes pursuant to Section
4.4(b) shall have been effected, the Company may, at its
option, upon notice as provided below, prepay at any
time, whether or not on or after August 13, 2000) all, or
from time to time on or after such date any part of, the
Notes (in an amount not less than $1,000,000 in the case
of a partial prepayment), at 100% of the principal amount
so prepaid, plus the Prepayment Compensation determined
for the prepayment date with respect to such principal
amount, together with interest on such Notes accrued to
the date of prepayment. The Company will give each
holder of Notes written notice of each optional
prepayment under this Section 4.3 not less than 30 days
and not more than 60 days prior to the date fixed for
such prepayment. Each such notice shall specify such
date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note
held by such holder to be prepaid (determined in
accordance with Section 4.5), and the interest to be paid
on the prepayment date with respect to such principal
amount being prepaid.
4.4 MANDATORY PREPAYMENT WITH PROCEEDS OF EXERCISE
OF 1993 WARRANTS, ETC.
(i) 1993 WARRANT CALL OPTION EVENT, EXERCISE.
Upon the occurrence of a 1993 Warrant Call Option Event,
the Parent will, at the earliest time permitted under the
terms of the 1993 Warrant Agreement, exercise its option
thereunder to call all of the issued and then outstanding
1993 Warrants for redemption. The Parent will, within
three Business Days of the occurrence of a 1993 Warrant
Call Option Event, give written notice of such
occurrence, and of the exercise required by the preceding
sentence, to each holder of Notes, specifying in such
notice the date fixed for such redemption pursuant to the
terms of the 1993 Warrant Agreement (which redemption
date shall be not earlier than 30 days, and not later
than 90 days, after the occurrence of such 1993 Warrant
Call Option Event).
(ii) PREPAYMENT FOLLOWING 1993 WARRANT CALL
OPTION EVENT. Following the occurrence of any 1993
Warrant Call Option Event, the Company shall, upon notice
as provided in Section 4.4(d), prepay a principal amount
of the Notes equal to 93.457944% of the 1993 Warrant
Forced Exercise Net Proceeds Amount determined as of the
Business Day immediately following the date fixed for
redemption of 1993 Warrants referred to in Section
4.4(a), plus the Prepayment Compensation with respect to
such principal amount (the effect of the foregoing
provisions of this sentence being that the total of such
principal amount of Notes and the Prepayment Compensation
with respect to such principal amount shall be equal to
such 1993 Warrant Forced Exercise Net Proceeds Amount),
together with interest on such Notes accrued to the date
of prepayment.
(iii) PREPAYMENT WITH OTHER NET PROCEEDS OF
EXERCISE OF 1993 WARRANTS. If at any time prior to the
occurrence of a 1993 Warrant Call Option Event the 1993
Warrant Exercise Adjusted Net Proceeds Amount shall
exceed $1,000,000, the Company shall, upon notice as
provided in Section 4.4(d), prepay a principal amount of
the Notes equal to 93.457944% of the 1993 Warrant
Exercise Adjusted Net Proceeds Amount determined as of
the date of such notice, plus the Prepayment Compensation
with respect to such principal amount (the effect of the
foregoing provisions of this sentence being that the
total of such principal amount of Notes and the
Prepayment Compensation with respect to such principal
amount shall be equal to such 1993 Warrant Exercise
Adjusted Net Proceeds Amount), together with interest on
such Notes accrued to the date of prepayment. It is
understood and agreed that the foregoing provisions of
Section 4.4(b) and this Section 4.4(c) may require more
than one prepayment of the Notes under such Sections, and
may require more than one prepayment of the Notes under
this Section 4.4(c) alone.
(iv) NOTICE OF PREPAYMENT. The Company will
give each holder of Notes written notice of each
prepayment under this Section 4.4 not less than 30 days
and not more than 60 days prior to the date fixed for
such prepayment. Each such notice shall specify such
date, a calculation of the related 1993 Warrant Forced
Exercise Net Proceeds Amount or the related 1993 Warrant
Exercise Adjusted Net Proceeds Amount, as the case may
be, in reasonable detail, the aggregate principal amount
of the Notes to be prepaid on such date, the principal
amount of each Note held by such holder to be prepaid
(determined in accordance with Section 4.5), and the
interest to be paid on the prepayment date with respect
to such principal amount being prepaid.
(v) PARENT UNDERTAKING TO MAKE PROCEEDS
AVAILABLE. The Parent will cause all amounts
representing each 1993 Warrant Forced Exercise Net
Proceeds Amount and each 1993 Warrant Exercise Adjusted
Net Proceeds Amount to be made available to the Company
for prepayment of Notes as provided in the foregoing
provisions of this Section 4.4.
(vi) BEST EFFORTS TO PREPAY ANY REMAINING
NOTES. If, following a prepayment of Notes pursuant to
Section 4.4(b), any of the Notes are still outstanding
and the aggregate principal amount of such Notes is
$5,000,000 or less, the Company will use its best efforts
to prepay all of the remaining Notes pursuant to Section
4.3 within 365 days after the occurrence of the 1993
Warrant Call Option Event that led to such prepayment
pursuant to Section 4.4(b) (and, if it is unable to so
prepay all of the remaining Notes by such date, will
continue after such date to use its best efforts to
prepay all of the Notes until such time as the Notes
shall have been paid in full), provided that nothing in
this Section 4.4(f) shall require the Company to borrow
any amount under the Senior Credit Agreement in order to
enable the Company to make a prepayment of Notes
contemplated by this Section 4.4(f).
4.5 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes
pursuant to Section 4.3 or Section 4.4, the principal
amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding in
proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore prepaid.
4.6 CHANGE IN CONTROL, OFFER TO PREPAY, ETC.
(i) NOTICE OF CHANGE IN CONTROL OR CONTROL
EVENT. The Company will, within three Business Days
after any Responsible Officer of the Parent or the
Company has knowledge of the occurrence of any Change in
Control or Control Event, give written notice of such
Change in Control or Control Event to each holder of
Notes (by telecopy transmission and, simultaneously with
the sending of such telecopied notice, by sending a copy
of such notice to each such holder via an overnight
courier of national reputation) unless notice in respect
of such Change in Control (or the Change in Control
contemplated by such Control Event) shall have been given
pursuant to clause (b) of this Section 4.6. If the
Company shall not have received a written response to
such first notice from each holder of Notes within ten
days after the transmission of such telecopy thereof,
then the Company will immediately send a second written
notice via an overnight courier of national reputation to
each holder of Notes who shall have not previously
responded to the Company. If a Change in Control has
occurred, such notices shall contain and constitute an
offer to prepay Notes as described in clause (c) of this
Section 4.6 and shall be accompanied by the certificate
described in clause (g) of this Section 4.6.
(ii) CONDITION TO COMPANY ACTION. Neither the
Parent nor the Company will take any action that
consummates or finalizes a Change in Control unless
(i) at least 30 days prior to such action it shall have
given to each holder of Notes written notice containing
and constituting an offer to prepay Notes as described in
clause (c) of this Section 4.6, accompanied by the
certificate described in clause (g) of this Section 4.6,
and (ii) contemporaneously with such action, it prepays
all Notes required to be prepaid in accordance with this
Section 4.6.
(iii) OFFER TO PREPAY NOTES. The offer to
prepay Notes contemplated by clauses (a) and (b) of this
Section 4.6 shall be a written offer to prepay, in
accordance with and subject to this Section 4.6, all, but
not less than all, the Notes held by each holder on a
date specified in such offer (the "PROPOSED PREPAYMENT
DATE"). If such Proposed Prepayment Date is in
connection with an offer contemplated by clause (a) of
this Section 4.6, such date shall be not less than 30
days and not more than 60 days after the date of the
first notice referred to in clause (a) of this Section
4.6 (if the Proposed Prepayment Date shall not be
specified in such first notice, the Proposed Prepayment
Date shall be the 30th day after the date of such
notice).
(iv) ACCEPTANCE, REJECTION. A holder of Notes
may accept the offer to prepay made pursuant to this
Section 4.6 by causing a notice of such acceptance to be
delivered to the Company at least ten days prior to the
Proposed Prepayment Date. A failure by a holder of Notes
to respond (by such time) to an offer to prepay made
pursuant to this Section 4.6 shall be deemed to
constitute an acceptance of such offer by such holder.
(v) PREPAYMENT. Prepayment of the Notes to be
prepaid pursuant to this Section 4.6 shall be at 100% of
the principal amount of such Notes, plus the Prepayment
Compensation for the date of prepayment with respect to
such principal amount, together with interest on such
Notes accrued to the date of prepayment. The prepayment
shall be made on the Proposed Prepayment Date except as
provided in clause (f) of this Section 4.6.
(vi) DEFERRAL PENDING CHANGE IN CONTROL. The
obligation of the Company to prepay Notes pursuant to the
offers required by clause (b) and accepted in accordance
with clause (d) of this Section 4.6 is subject to the
occurrence of the Change in Control in respect of which
such offers and acceptances shall have been made. In the
event that such Change in Control does not occur on the
Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until and shall be made on
the date on which such Change in Control occurs. The
Parent and the Company shall keep each holder of Notes
reasonably and timely informed of (i) any such deferral
of the date of prepayment, (ii) the date on which such
Change in Control and the prepayment are expected to
occur, and (iii) any determination by the Parent or the
Company that efforts to effect such Change in Control
have ceased or been abandoned (in which case the offers
and acceptances made pursuant to this Section 4.6 in
respect of such Change in Control shall be deemed
rescinded).
(vii) OFFICER'S CERTIFICATE. Each offer to
prepay the Notes pursuant to this Section 4.6 shall be
accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of
such offer, specifying: (i) the Proposed Prepayment Date;
(ii) that such offer is made pursuant to this
Section 4.6; (iii) the principal amount of each Note
offered to be prepaid; (iv) the Prepayment Compensation,
as of the Proposed Prepayment Date, with respect to the
principal amount of each Note offered to be prepaid; (v)
the interest that would be due on each Note offered to be
prepaid, accrued to the Proposed Prepayment Date;
(vi) that the conditions of this Section 4.6 have been
fulfilled; and (vii) in reasonable detail, the nature and
date or proposed date of the Change in Control.
(viii) COMPANY'S OPTION TO FORCE ACCEPTANCE.
Notwithstanding the foregoing provisions of this Section
4.6, in the case of a Change in Control pursuant to
clause (a) of the definition of Change in Control in
connection with which Mr. Scharf has disposed of all of
his Capital Stock, 1993 Warrants and other equity
interests in the Parent (but not less than all of such
Capital Stock, 1993 Warrants and other equity interests),
if each notice to holders of Notes contemplated by clause
(a) of this Section 4.6 that (pursuant to such clause
(a)) contains and constitutes an offer to prepay Notes
contains the following written statement, then each
holder of Notes shall be required to accept, and, upon
delivery of all (but not fewer than all) such notices
containing such express written statement, all of the
holders of Notes shall be deemed to have accepted, for
all purposes of this Section 4.6, the offer to prepay
Notes referred to in the foregoing provisions of this
Section 4.6:
"THE COMPANY HEREBY EXERCISES ITS OPTION,
PURSUANT TO SECTION 4.6(H) OF THE NOTE AND
STOCK PURCHASE AGREEMENTS, TO REQUIRE EACH
HOLDER OF NOTES TO ACCEPT, AND UPON DELIVERY OF
ALL REQUISITE NOTICES CONTAINING THIS EXPRESS
WRITTEN STATEMENT OF EXERCISE OF SUCH OPTION
ALL OF THE HOLDERS OF NOTES SHALL BE DEEMED TO
HAVE ACCEPTED, FOR ALL PURPOSES OF SECTION 4.6
OF THE NOTE AND STOCK PURCHASE AGREEMENTS, THE
OFFER TO PREPAY NOTES REFERRED TO IN THE
PROVISIONS OF SECTION 4.6 OF THE NOTE AND STOCK
PURCHASE AGREEMENTS AND CONTAINED IN AND
CONSTITUTED BY THIS NOTICE."
4.7 MATURITY, SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to
this Section 4, the principal amount of each Note to be
prepaid shall mature and become due and payable on the
date fixed for such prepayment, together with interest on
such principal amount accrued to such date and the
applicable Prepayment Compensation, if any. From and
after such date, unless the Company shall fail to pay
such principal amount when so due and payable, together
with the interest and Prepayment Compensation, if any, as
aforesaid, interest on such principal amount shall cease
to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any
prepaid principal amount of any Note.
4.8 PURCHASE OF NOTES.
Neither the Parent, the Company nor LaSalle will,
nor will they permit any Affiliate to, purchase, redeem,
prepay or otherwise acquire, directly or indirectly, any
of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of
the Note and Stock Purchase Agreements and the Notes.
The Company will promptly cancel all Notes acquired by
any Obligor pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of the Note
and Stock Purchase Agreements, and no Notes may be issued
in substitution or exchange for any such Notes.
4.9 PLACE OF PAYMENT.
Subject to Section 4.10, payments of principal,
Prepayment Compensation, if any, and interest becoming
due and payable on the Notes shall be made in Buffalo,
New York at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to
each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either
the principal office of the Company in the State of New
York or the principal office of a bank or trust company
in the State of New York.
4.10 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder
of any Note, and notwithstanding anything contained in
Section 4.9 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for
principal, Prepayment Compensation, if any, and interest
by the method and at the address specified for such
purpose below your name in Annex 1, or by such other
method or at such other address as you shall have from
time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such
Note or the making of any notation thereon, except that
upon written request of the Company made concurrently
with or reasonably promptly after payment or prepayment
in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request,
to the Company at its principal executive office or at
the place of payment most recently designated by the
Company pursuant to Section 4.9. Prior to any sale or
other disposition of any Note held by you or your nominee
you will, at your election, either endorse thereon the
amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such
Note to the Company in exchange for a new Note or Notes
pursuant to Section 5.2. The Company will afford the
benefits of this Section 4.10 to any Institutional
Investor that is the direct or indirect transferee of any
Note purchased by you under this Agreement and that has
made the same agreement relating to such Note as you have
made in this Section 4.10.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive
office a register for the registration and registration
of transfers of Notes. The name and address of each
holder of one or more Notes, each transfer thereof and
the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due
presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by
any notice or knowledge to the contrary. The Company
shall give or cause to be given to any holder of a Note
that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
5.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal
executive office of (or other place designated by the
Company in a written notice delivered to all holders of
Notes, so long as such place is an office of the Company
or the Parent located in the State of New York) the
Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer,
duly endorsed or accompanied by a written instrument of
transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee
of such Note or part thereof), the Company shall execute
and deliver, at the Company's expense (except as provided
below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to
such Person as such holder may request and shall be
substantially in the form of Exhibit A. Each such new
Note shall be dated and bear interest from the date to
which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in
denominations of less than $250,000, provided that if
necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in
a denomination of less than $250,000.
5.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any Note (which
evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or
mutilation), and
(i) in the case of loss, theft or destruction,
of indemnity reasonably satisfactory to the Company
(provided that if the holder of such Note is, or is a
nominee for, an original Purchaser or another beneficial
owner of a Note with a minimum net worth of at least
$100,000,000, such beneficial owner's own unsecured
agreement of indemnity shall be deemed to be
satisfactory), or
(ii) in the case of mutilation, upon surrender
and cancellation thereof,
the Company at its own expense shall execute and deliver,
in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
6. AFFIRMATIVE COVENANTS
The Parent, the Company and LaSalle covenant and
agree (provided that the Company and LaSalle covenant and
agree only as to themselves and their respective
Subsidiaries, if any) that on and after the Closing Date
and thereafter for so long as any of the Company's
obligations under the Note and Stock Purchase Agreements
and the Notes shall be outstanding:
6.1 OWNERSHIP STRUCTURE.
(i) The Parent will at all times maintain the
Company as a Wholly-Owned Subsidiary of the Parent.
(ii) Subject to Section 7.7(b), the Company
will at all times maintain LaSalle as a Wholly-Owned
Subsidiary of the Company.
6.2 MAINTENANCE OF PROPERTIES, CONDUCT OF BUSINESS.
The Obligors will, and will cause each of their
respective Subsidiaries to, in a manner consistent with
their respective past practices, maintain and keep, or
cause to be maintained and kept, their respective
Properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly
conducted at all times, provided that (a) this Section
shall not prevent the Obligors or any of their respective
Subsidiaries from discontinuing the operation and the
maintenance of any of their respective Properties if such
discontinuance is desirable in the conduct of such
Person's business and such Person has concluded that such
discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect and (b) nothing in this Section shall be
construed to adversely affect the rights of any holders
of Senior Debt with respect to any Property constituting
collateral securing such Senior Debt. The Company and
LaSalle will, and will cause each of their respective
Subsidiaries to, continue to engage in businesses of the
same general types as conducted as of the Closing Date
(as disclosed in the Memorandum) by the Company and
LaSalle.
6.3 COMPLIANCE WITH LAW.
The Obligors will, and will cause each of their
respective Subsidiaries to, comply with all laws,
ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation,
Environmental Laws and the Fair Labor Standards Act of
1938, as amended, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of
their respective Properties or to the conduct of their
respective businesses, in each case to the extent
necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or
failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental
authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect.
6.4 BOOKS AND RECORDS.
The Obligors will, and will cause each of their
respective Subsidiaries to, keep proper books of record
and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to the
Obligors' and such Subsidiaries' businesses and activities.
6.5 CORPORATE EXISTENCE, ETC.
The Obligors will at all times preserve and keep in
full force and effect their respective corporate
existences. Subject to Sections 7.7 and 7.8, the
Obligors will at all times preserve and keep in full
force and effect the corporate existence of each of their
respective Subsidiaries and all rights and franchises of
the Obligors and their respective Subsidiaries unless, in
the good faith judgment of any such Obligor, the
termination of or failure to preserve and keep in full
force and effect such corporate existence, right or
franchise could not, individually or in the aggregate,
have a Material Adverse Effect.
6.6 PAYMENT OF TAXES AND CLAIMS.
The Obligors will, and will cause each of their
respective Subsidiaries to, file all tax returns required
to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and
all other taxes, assessments, governmental charges, or
levies imposed on them or any of their Properties,
assets, income or franchises, to the extent such taxes,
assessments, charges or levies have become due and
payable and before they have become delinquent and all
claims for which sums have become due and payable that
have or might become a Lien on Properties or assets of an
Obligor or any Subsidiary of an Obligor, provided that no
Obligor and no Subsidiary of an Obligor need pay any such
tax or assessment or claims if (a) the amount,
applicability or validity thereof is contested by such
Obligor or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and such Obligor or
such Subsidiary has established adequate reserves
therefor in accordance with GAAP on the books of such
Obligor or such Subsidiary or (b) the nonpayment of all
such taxes, assessments, charges and levies in the
aggregate could not reasonably be expected to have a
Material Adverse Effect.
6.7 INSURANCE.
The Obligors will, and will cause each of their
respective Subsidiaries to, maintain, with financially
sound and reputable insurers, insurance with respect to
their respective Properties and businesses against such
casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in
the same or a similar business and similarly situated.
6.8 GUARANTIES BY SUBSIDIARIES.
If the Company or LaSalle at any time forms or
acquires a Subsidiary, or in any other manner commences
to have a Subsidiary that is not at such time already a
Guarantor under a Subsidiary Guaranty Agreement, the
Company or LaSalle, as the case may be, will cause such
Subsidiary to execute and deliver to each holder of one
or more Notes (not later than the earlier of (x) 30 days
after such formation, acquisition or other commencing to
have or (y) the date on which such Subsidiary becomes a
guarantor of, or otherwise becomes contingently or
otherwise directly or indirectly in respect of, any
Senior Debt) an original guaranty agreement (the LaSalle
Guaranty Agreement and any such other guaranty agreement,
as the same may be amended, restated or otherwise
modified from time to time, being referred to herein
collectively as the "SUBSIDIARY GUARANTY AGREEMENTS"),
substantially in the form of the LaSalle Guaranty
Agreement, and such other resolutions, agreements,
documents and instruments as the Required Holders may
reasonably request in connection with such Subsidiary
Guaranty Agreement. If any Senior Debt is outstanding at
such time, then, except as may be otherwise approved in
writing by the Company or LaSalle, as the case may be,
and the appropriate majority of holders of Senior Debt
(as may be required under the Senior Credit Agreement, or
as otherwise provided for in the Senior Credit
Agreement), each such Subsidiary Guaranty Agreement shall
contain subordination provisions in the form set out in
Section 5 of the LaSalle Guaranty Agreement as in effect
on the Closing Date.
7. NEGATIVE COVENANTS
The Parent, the Company and LaSalle covenant and
agree (provided that the Company and LaSalle covenant and
agree only as to themselves and their respective
Subsidiaries, if any) that on and after the Closing Date
and thereafter for so long as any of the Company's
obligations under the Note and Stock Purchase Agreements
and the Notes shall be outstanding:
7.1 NO AMENDMENTS, ETC. RE 1993 WARRANTS.
Except with the prior written consent of the holders
of at least 80% in principal amount of the Notes at the
time outstanding (exclusive of Notes then owned by the
Parent, the Company, LaSalle or any of their respective
Subsidiaries or Affiliates), the Parent will not agree to
extend the expiration date of the 1993 Warrants beyond
August 13, 2000 or otherwise permit any amendment,
restatement or other modification of the terms of the
1993 Warrant Agreement or the 1993 Warrants.
7.2 AMENDMENT OF SENIOR CREDIT AGREEMENT.
Neither the Parent, the Company nor LaSalle will
enter into any agreement amending or modifying any
provision of the Senior Credit Agreement that would:
(i) accelerate the amount or the time of any
prepayment or payment of the principal amount of
Indebtedness outstanding under the Senior Credit
Agreement;
(ii) provide for per annum interest rates
payable on the Indebtedness outstanding under the Senior
Credit Agreement (except for the Chattanooga Mortgage
Loan Agreement) at any time in excess of 1.00% over the
per annum interest rates that would otherwise be payable
on such Indebtedness at such time in accordance with the
applicable provisions of the Senior Credit Agreement as
in effect on the Closing Date; or
(iii) (A) result in the event of default
provisions and covenant provisions (including,
without limitation, any definitions relating to the
foregoing), taken as a whole, being materially less
favorable to the Company or LaSalle than the event
of default provisions and covenant provisions
(including, without limitation, any definitions
relating to the foregoing), taken as a whole, set
forth in the Senior Credit Agreement on the Closing
Date; or
(B) reduce the commitment of the lenders
under the Senior Credit Agreement to provide
revolving credit loans to the Company or LaSalle; or
(C) provide for conditions precedent to
the obligation of the lenders under the Senior
Credit Agreement to provide revolving credit loans
to the Company or LaSalle from time to time
(including, without limitation, any definitions
relating to the foregoing), which conditions, taken
as a whole, are materially less favorable to the
Company or LaSalle than the conditions precedent
(including, without limitation, any definitions
relating to the foregoing), taken as a whole, set
forth in the Senior Credit Agreement as in effect on
the Closing Date;
without, in each case, obtaining the prior written
consent of the Required Holders to such amendment or
change; provided that nothing in this Section 7.2 shall
be construed to restrict any amendment or modification of
the Senior Credit Agreement that has the purpose of
permitting Incurrences of Senior Debt in excess of the
amount of such Incurrences permitted by Section 7.3(a)
but not in excess of the additional amount of such
Incurrences permitted by Section 7.3(b).
7.3 INDEBTEDNESS.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, directly
or indirectly create, incur, assume or otherwise become
liable for, any Indebtedness (collectively,
"INCURRENCES") except:
(i) Senior Debt, provided that, immediately
after giving effect to any Incurrence of Senior Debt
under this clause (a), the outstanding aggregate
principal amount of Senior Debt under this clause (a)
shall not exceed the Adjusted Base Senior Debt Cap;
(ii) Senior Debt in addition to the Senior
Debt permitted under the foregoing clause (a), provided
that:
(A) the outstanding aggregate principal
amount of all Senior Debt Incurred under this clause
(b) shall at no time exceed $101,500,000 minus the
Base Senior Debt Cap; and
(B) immediately after giving effect to
any Incurrence of Senior Debt under this clause (b),
the outstanding aggregate principal amount of all
Senior Debt (whether or not Incurred under this
clause (b)) shall not exceed the lesser of
(I) $101,500,000 minus the Senior
Debt Reduction Amount at such time, or
(II) the product of (1) four
multiplied by (2) Consolidated EBITDA
(calculated giving effect to Pro Forma
Adjustments, if any) for the then most recently
ended period of four consecutive fiscal
quarters of the Company;
(iii) the Indebtedness evidenced by the Notes,
the LaSalle Guaranty Agreement and any other Subsidiary
Guaranty Agreement;
(iv) Indebtedness of the Company to LaSalle or
of LaSalle to the Company;
(v) Indebtedness in existence on the Closing
Date that is described in Part A.16 of Annex 3;
(vi) Indebtedness in addition to the
Indebtedness permitted under the foregoing clauses (a)
through (e), inclusive, provided that, immediately after
giving effect to any Incurrence of Indebtedness under
this clause (f), the outstanding aggregate principal
amount of Indebtedness under this clause (f) shall not
exceed $5,000,000;
(vii) Indebtedness in addition to the
Indebtedness permitted under the foregoing clauses (a)
through (f), inclusive, provided that, immediately after
giving effect to any Incurrence of Indebtedness under
this clause (g), Consolidated Indebtedness shall not
exceed the product of (A) five multiplied by (B)
Consolidated EBITDA (calculated giving effect to Pro
Forma Adjustments, if any) for the then most recently
ended period of four consecutive fiscal quarters of the
Company; and
(viii) Indebtedness as to which 100% of the
proceeds of the Incurrence thereof is used by the Company
or any Subsidiary of the Company concurrently with such
Incurrence to extend (as to time of maturity), refund,
refinance or replace Indebtedness that was previously
Incurred by such Person pursuant to clause (b) or clause
(g) of this Section 7.3, provided that (i) the principal
amount of any Indebtedness that is Incurred under this
clause (h) shall not exceed the principal amount of the
Indebtedness being so extended, refunded, refinanced or
replaced with the proceeds thereof, and (ii) the terms
and provisions of all instruments, agreements and other
documents governing or otherwise relating to any
Indebtedness that is Incurred under this clause (h) shall
not be more onerous to the Company or any of its
Subsidiaries than the terms and provisions of the
instruments, agreements and other documents governing or
otherwise relating to the Indebtedness being so extended,
refunded, refinanced or replaced.
For the purpose of any determination of compliance with
clause (b) or clause (g) of this Section 7.3, it shall be
assumed that (whether or not it is actually the case
that) the maximum permissible principal amount of
Indebtedness under clause (a) and clause (f) of this
Section 7.3 is outstanding at the time of such
determination.
7.4 LIENS.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, create,
incur, assume or suffer to exist, any Lien upon any of
their respective Properties, whether now owned or
hereafter acquired, except:
(i) Liens for taxes not yet due or that are
being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto in
accordance with GAAP are maintained on the books of the
Person contesting such taxes;
(ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business in connection with
payments that are not overdue for a period of more than
30 days or that are being contested in good faith and by
appropriate proceedings;
(iii) pledges or deposits in connection with
workmen's compensation, unemployment insurance and other
social security legislation;
(iv) deposits to secure the performance of
bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(v) Liens arising from judgments described
under Section 9(i) that do not constitute an Event of
Default;
(vi) Liens securing Senior Debt created under
the terms of the Senior Security Documents;
(vii) leases or subleases granted to others,
easements, rights-of-way, restrictions and other similar
charges or encumbrances affecting real Property, in each
case incidental to, and not interfering with, the
ordinary conduct of the business of the Company, LaSalle
or any such Subsidiary, provided that such Liens do not,
in the aggregate, materially detract from the value of
such Property;
(viii) any Lien created to secure all or any
part of the purchase price, or to secure Indebtedness
incurred or assumed to pay all or any part of the
purchase price or cost of construction, of Property (or
any improvement thereon) acquired or constructed by the
Company or any of its Subsidiaries after the Closing
Date, provided that
(A) any such Lien shall extend solely to
the item or items of such Property (or improvement
thereon) so acquired or constructed and, if required
by the terms of the instrument originally creating
such Lien, other Property (or improvement thereon)
which is an improvement to or is acquired for
specific use in connection with such acquired or
constructed Property (or improvement thereon) or
which is real Property being improved by such
acquired or constructed Property (or improvement
thereon),
(B) the principal amount of the
Indebtedness secured by any such Lien shall at no
time exceed an amount equal to the lesser of (A) the
cost to the Company or such Subsidiary of the
Property (or improvement thereon) so acquired or
constructed and (B) the Fair Market Value (as
determined in good faith by the Company) of such
Property (or improvement thereon) at the time of
such acquisition or construction, and
(C) any such Lien shall be created
contemporaneously with, or within 60 days after, the
acquisition or construction of such Property; and
(ix) Liens, not otherwise permitted by clauses
(a) through (h), inclusive, of this Section 7.4, provided
that the aggregate amount of Indebtedness secured by all
such other Liens under this clause (i) shall not at any
time exceed $5,000,000.
7.5 NET WORTH.
The Company will not permit the Consolidated Net
Worth of the Company and its Subsidiaries, as of the last
day of any calendar month, to be less than the sum of the
following: (a) $8,000,000, plus (b) 50% of the positive
Consolidated Net Income of the Company and its
Subsidiaries from the Closing Date through the then most
recently concluded calendar month, plus (c) all of the
cumulative net proceeds realized by the Company or
LaSalle from the issuance or sale of any Capital Stock or
other equity interests in the Company or LaSalle from the
Closing Date through the then most recently concluded
calendar month (provided that nothing in this clause (c)
shall be construed to permit non-compliance with Section
6.1 without the prior written consent of the Required
Holders).
7.6 INTEREST COVERAGE.
The Company will not permit, as of the last day of
any calendar quarter, the Consolidated Interest Coverage
Ratio of the Company and its Subsidiaries measured for
the four consecutive calendar quarters (or for the number
of consecutive calendar quarters following the Closing
Date to the date of such determination, if during the
period commencing with the Closing Date and ending on the
one year anniversary thereof) ending on the last day of
such calendar quarter to be less than
(i) for any period ending before or on
December 31, 1998, 1.35 to 1.0, or
(ii) for any period ending after December 31,
1998, 1.5 to 1.0.
7.7 PROHIBITION ON FUNDAMENTAL CHANGES.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, make or
permit to be made any material change in the character or
conduct of the business or operations of the Company,
LaSalle or any such Subsidiary, including any merger or
consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or
dissolution), convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of
transactions, all or substantially all of the business or
assets of the Company, LaSalle or any such Subsidiary or
acquire by purchase or otherwise all or substantially all
the business or assets of, or capital stock or other
evidences of beneficial ownership of, any Person, or make
any material change in the Company's, LaSalle's or any
such Subsidiary's present method of conducting business,
except:
(i) any Subsidiary of the Company (other than
LaSalle) or any Subsidiary of LaSalle may merge into any
other Subsidiary of the Company or of LaSalle or with any
parent of such Subsidiary (so long as the parent is the
survivor of such merger);
(ii) LaSalle may merge into the Company so
long as the Company is the survivor of such merger; and
(iii) the Company, LaSalle or any of their
respective Subsidiaries may acquire the assets or Capital
Stock of any Subsidiary of the Company or LaSalle,
provided that immediately after giving effect to such
acquisition no Default or Event of Default exists or
would exist.
Nothing in this Section 7.7 shall be construed to
prohibit a conveyance, sale, lease, transfer or other
disposition of all or any portion of the Property of any
Subsidiary of the Company, or of all or any portion of
the Capital Stock issued by any Subsidiary of the
Company, so long as such conveyance, sale, lease,
transfer or other disposition is effected in full
compliance with Section 7.8.
7.8 ASSET DISPOSITIONS.
Except as permitted under Section 7.7(c), the
Company will not, and will not permit any of its
Subsidiaries to, make any Asset Disposition unless:
(i) in the good faith opinion of the Company,
such Asset Disposition is in exchange for consideration
having a Fair Market Value not less than that of the
Property exchanged and is in the best interest of the
Company or such Subsidiary; and
(ii) immediately before, and immediately after
giving effect to, such Asset Disposition, no Default or
Event of Default exists or would exist.
In addition, if after giving effect to any Asset
Disposition,
(A) the Disposition Value of all Property
that was the subject of any Asset Disposition
occurring in the fiscal year of the Company then
next ending exceeds 10% of Consolidated Total
Assets, determined as of the end of the then most
recently completed fiscal quarter of the Company,
(B) the Disposition Value of all Property
that was the subject of any Asset Disposition
occurring during the period commencing on the
Closing Date and ending on and including the date of
such Asset Disposition exceeds 30% of Consolidated
Total Assets, determined as of the end of the then
most recently completed fiscal quarter of the
Company,
(C) the sum of the EBITDA Contribution
Percentages of all Property that was the subject of
any Asset Disposition occurring in the fiscal year
of the Company then next ending exceeds 10%, or
(D) the sum of the EBITDA Contribution
Percentages of all Property that was the subject of
any Asset Disposition occurring during the period
commencing on the Closing Date and ending on and
including the date of such Asset Disposition exceeds
30%,
then the Company and its Subsidiaries shall be required
to apply the Net Proceeds Amount with respect to such
Asset Disposition to (y) a Senior Debt Payment
Application or (z) a Property Reinvestment Application,
in each case within six months after such Asset
Disposition; provided that in no event shall the Company
or any of its Subsidiaries make any Asset Disposition if,
immediately after giving effect to such Asset
Disposition,
(I) the Disposition Value of all
Property that was the subject of any Asset
Disposition occurring in the fiscal year of the
Company then next ending would exceed 20% of
Consolidated Total Assets, determined as of the
end of the then most recently completed fiscal
quarter of the Company,
(II) the Disposition Value of all
Property that was the subject of any Asset
Disposition occurring during the period
commencing on the Closing Date and ending on
and including the date of such Asset
Disposition would exceed 40% of Consolidated
Total Assets, determined as of the end of the
then most recently completed fiscal quarter of
the Company,
(III) the sum of the EBITDA
Contribution Percentages of all Property that
was the subject of any Asset Disposition
occurring in the fiscal year of the Company
then next ending would exceed 20%, or
(IV) the sum of the EBITDA
Contribution Percentages of all Property that
was the subject of any Asset Disposition
occurring during the period commencing on the
Closing Date and ending on and including the
date of such Asset Disposition would exceed
40%.
7.9 LOANS, ADVANCES AND INVESTMENTS.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, make, or
commit to make, any advance, loan, extension of credit or
capital contribution to, or purchase of any Capital
Stock, bonds, notes, debentures or other securities of,
or make any other investment in (by way of transfers of
Property, acquisitions of evidences of Indebtedness or
otherwise), any Person (all such transactions being
herein called "INVESTMENTS"), except:
(i) advance payments or deposits against
purchases made in the ordinary course of business of the
Company, LaSalle or any such Subsidiary;
(ii) (i) direct obligations of the United
States of America or any agency thereof with maturities
of one year or less from the date of acquisition, (ii)
commercial paper of a domestic issuer rated at least
"A-1" by Standard & Poor's Ratings Group or "P-1" by
Moody's Investors Services, Inc., (iii) time deposits and
certificates of deposit with maturities of one year or
less from the date of acquisition issued by any
commercial bank having capital and surplus in excess of
$250,000,000, and (iv) repurchase obligations within a
term of not more than 30 days for underlying securities
of the types described in clauses (i), (ii) and (iii),
above and entered into with any commercial bank meeting
the qualifications specified in clause (iii) above;
(iii) Investments existing on the Closing Date
that are disclosed in Part 7.9(c) of Annex 3;
(iv) advances outstanding to employees of the
Company, LaSalle and their respective Subsidiaries that
do not exceed, in the aggregate, $350,000 at any time;
(v) advances by the Company to LaSalle and
advances by LaSalle to the Company;
(vi) Investments in any Person that
concurrently with such Investment becomes a Subsidiary of
the Company or LaSalle; and
(vii) other Investments, not otherwise
permitted by clause (a) through (f), inclusive, of this
Section 7.9, provided that the aggregate amount of all
such other Investments (valued at cost less any net
return of capital through the sale or liquidation thereof
or other return of capital thereon) shall not at any time
exceed $2,500,000.
7.10 DIVIDENDS, ETC.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, declare
or pay Dividends to any Person that is not the Company,
LaSalle or any of their respective Subsidiaries; provided
that nothing in this Section 7.10 shall be deemed to
prohibit any one or more of the Company, LaSalle and
their respective Subsidiaries from at any time declaring
or paying any Dividend or from at any time making any
payment (in the form of a Dividend or otherwise) in
respect of operating charges or management fees assessed
by the Parent to the extent the aggregate amount of all
such payments of Dividends or for operating charges
and/or management fees made or declared during the period
commencing January 1, 1997 and ending immediately after
giving effect to such payment or declaration does not
exceed 50% of Consolidated Net Income for such period;
provided, further, that nothing in this Section 7.10
(including the limitation expressed in the immediately
preceding proviso) shall be deemed to prohibit any one or
more of the Company, LaSalle and their respective
Subsidiaries from at any time declaring or paying any
Dividend or from at any time making any payment (in the
form of a Dividend or otherwise) in respect of operating
charges or management fees assessed by the Parent to the
extent the aggregate amount of all such payments of
Dividends or for operating charges and/or management fees
made or declared does not exceed, in any Fiscal Year,
$1,350,000.
7.11 AFFILIATE TRANSACTIONS.
Neither the Company nor LaSalle will, nor will they
permit any of their respective Subsidiaries to, directly
or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase,
sale, lease or exchange of Property or assets, or the
rendering of any service) with any Affiliate (other than
Wholly-Owned Subsidiaries of the Company), except upon
fair and reasonable terms no less favorable to the
Company, LaSalle or such Subsidiary than could be
obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the
time of the execution of the agreement providing
therefor, in a comparable arms'-length transaction with a
Person that is not an Affiliate.
7.12 PARENT HOLDING COMPANY.
The Parent will not at any time before the 1993
Warrant Provisions Termination Date own any Property or
assets other than:
(i) the Capital Stock of the Company;
(ii) Capital Stock of any other Person that at
such time is a direct or indirect Subsidiary of the
Parent;
(iii) Property or assets in the form of cash,
cash equivalents or any Investments in intangibles (other
than intangibles constituted by Capital Stock or other
equity interests in any Person if such Person is a
general partnership or other entity the holders of such
Capital Stock or other equity interests of which are not,
pursuant to applicable law, ordinarily protected from
being liable in respect of the liabilities of such
Person); and
(iv) Property or assets in the form of
tangibles (excluding the Property or assets referred to
in the immediately preceding clause (c)) held by the
Parent, provided that the aggregate amount of all such
Property and assets (valued at book value in accordance
with GAAP) does not at any time exceed $2,500,000.
7.13 INDEBTEDNESS, ETC. OF THE PARENT.
The Parent will not at any time before the 1993
Warrant Provisions Termination Date create, incur, assume
or suffer to exist any Indebtedness of the Parent for
borrowed money (including, without, limitation, any
Guaranty by the Parent of Indebtedness for borrowed
money), if the principal amount of such Indebtedness for
borrowed money equals or exceeds $1,000,000, unless the
terms of such Indebtedness expressly provide, for the
third-party benefit of the holders of the Notes, that any
and all 1993 Warrant Exercise Net Proceeds Amounts
realized by or on behalf of the Parent as a result of any
exercise of 1993 Warrants shall be available exclusively
for purposes of prepayment of the Notes pursuant to
Section 4.4 of the Note and Stock Purchase Agreements.
In no event will the Parent at any time before the 1993
Warrant Provisions Termination Date enter into any
agreement, or otherwise become bound by the provisions of
any agreement, instrument or other document, that
restricts the ability of the Parent to satisfy its
obligation, pursuant to Section 4.4, to make any 1993
Warrant Exercise Net Proceeds Amount available solely for
the purpose of the prepayment of Notes by the Company in
accordance with Section 4.4. For the purposes of the
foregoing, the Senior Credit Agreement as in effect on
the Closing Date and as the Senior Credit Agreement
(other than Section 6.5 of the Senior Credit Agreement,
as in effect on the Closing Date) may be amended in
accordance with Section 7.2, and the Parent's Guaranty of
the Company's Indebtedness under the Senior Credit
Agreement as such Guaranty is in effect on the Closing
Date, shall not be deemed to breach this Section 7.13;
the Chattanooga Mortgage shall not be deemed to breach
this Section 7.13 so long as it does not restrict the
ability of the Parent to satisfy its obligation, pursuant
to Section 4.4, to make any 1993 Warrant Exercise Net
Proceeds Amount available solely for the purpose of the
prepayment of Notes by the Company in accordance with
Section 4.4.
8. INFORMATION COVENANTS
The Parent, the Company and LaSalle covenant and
agree that on and after the Closing Date and thereafter
for so long as any of the Company's obligations under the
Note and Stock Purchase Agreements and the Notes shall be
outstanding:
8.1 FINANCIAL AND BUSINESS INFORMATION.
The Company and the Parent shall deliver to each
holder of Notes that is an Institutional Investor:
(i) QUARTERLY STATEMENTS -- within 45 days
after the end of each quarterly fiscal period in each
fiscal year (other than the last quarterly fiscal period
of each such fiscal year) of the Parent or the Company,
as the case may be, duplicate copies of,
(A) (I) a consolidated balance sheet of
the Parent and its Subsidiaries and
(II) consolidated and consolidating
balance sheets of the Company and its
Subsidiaries,
in each case as at the end of such quarter, and
(B) (I) consolidated statements of
income, changes in shareholders' equity and
cash flows of the Parent and its Subsidiaries
and
(II) consolidated and consolidating
statements of income, changes in shareholders'
equity and cash flows of the Company and its
Subsidiaries,
in each case for such quarter and (in the case of
the second and third quarters) for the portion of
the fiscal year ending with such quarter,
setting forth in each case in comparative form the
figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial
Officer of the Parent or the Company, as the case may be,
as fairly presenting, in all material respects, the
financial position of the companies being reported on and
their results of operations and cash flows, subject to
changes resulting from year-end adjustments;
(ii) ANNUAL STATEMENTS -- within 90 days after
the end of each fiscal year of the Company or the Parent,
as the case may be, duplicate copies of,
(A) (I) a consolidated balance sheet of
the Parent and its Subsidiaries and
(II) consolidated and consolidating
balance sheets of the Company and its
Subsidiaries,
in each case as at the end of such fiscal year, and
(B) (I) consolidated statements of
income, changes in shareholders' equity and
cash flows of the Parent and its Subsidiaries
and
(II) consolidated and consolidating
statements of income, changes in shareholders'
equity and cash flows of the Company and its
Subsidiaries,
in each case for such year,
setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied
by
(A) in the case of such consolidated
statements, an opinion thereon of independent
certified public accountants of recognized
national standing, which opinion shall state
that such financial statements present fairly,
in all material respects, the financial
position of the companies being reported upon
and their results of operations and cash flows
and have been prepared in conformity with GAAP,
and that the examination of such accountants in
connection with such financial statements has
been made in accordance with generally accepted
auditing standards, and that such audit
provides a reasonable basis for such opinion in
the circumstances, and
(B) a certificate of such
accountants stating that they have reviewed
this Agreement and stating further whether, in
making their audit, they have become aware of
any condition or event that then constitutes a
Default or an Event of Default, and, if they
are aware that any such condition or event then
exists, specifying the nature and period of the
existence thereof (it being understood that
such accountants shall not be liable, directly
or indirectly, for any failure to obtain
knowledge of any Default or Event of Default
unless such accountants should have obtained
knowledge thereof in making an audit in
accordance with generally accepted auditing
standards or did not make such an audit);
(c) SEC AND OTHER REPORTS -- promptly upon
their becoming available, one copy of (i) each financial
statement, report (including, without limitation, the
Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act), notice or
proxy statement sent by the Parent or any Subsidiary to
public securities holders generally, and (ii) each
regular or periodic report, each registration statement
(without exhibits except as expressly requested by such
holder), and each prospectus and all amendments thereto
filed by the Parent or any Subsidiary with the Securities
and Exchange Commission or any successor thereto and of
all press releases and other statements made available
generally by the Parent or any Subsidiary to the public
concerning developments that are Material;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT --
promptly, and in any event within five Business Days
after a Responsible Officer of the Parent or the Company
becoming aware of the existence of any Default or Event
of Default or that any Person has given any notice or
taken any action with respect to a claimed default under
any Financing Document or that any Person has given any
notice or taken any action with respect to a claimed
default of the type referred to in Section 9.1(f), a
written notice specifying the nature and period of
existence thereof and what action the Parent or the
Company is taking or proposes to take with respect
thereto;
(e) ERISA MATTERS -- promptly, and in any
event within five Business Days after a Responsible
Officer of the Company or the Parent becoming aware of
any of the following, a written notice setting forth the
nature thereof and the action, if any, that the Parent or
an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any
reportable event, as defined in section 4043(c) of
ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such
regulations as in effect on the Closing Date; or
(ii) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of
ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by
the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken
by the PBGC with respect to such Multiemployer Plan;
or
(iii) any event, transaction or condition
that could result in the incurrence of any liability
by the Parent or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of
the rights, Properties or assets of the Parent or
any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if
such liability or Lien, taken together with any
other such liabilities or Liens then existing, could
reasonably be expected to have a Material Adverse
Effect;
(f) NOTICES FROM GOVERNMENTAL AUTHORITY --
promptly, and in any event within 15 days of receipt
thereof, copies of any notice to the Parent or any
Subsidiary from any federal or state Governmental
Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to
have a Material Adverse Effect;
(g) ACTIONS, PROCEEDINGS -- promptly after a
Responsible Officer of the Parent or the Company becomes
aware of the commencement thereof, notice of any action
or proceeding relating to the Parent or any Subsidiary in
any court or before any Governmental Authority or
arbitration board or tribunal as to which there is a
reasonable possibility of an adverse determination and
that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect;
(h) CHANGES IN MANAGEMENT, OWNERSHIP AND
CONTROL -- promptly, and in any event within five
Business Days after a Responsible Officer of the Company
or the Parent becoming aware of any substantial change in
the employment status, duties or responsibilities of Mr.
Scharf, Mr. Raymond Rozanski or Mr. Frank Archer with
respect to their employment with any Obligor, such
Obligor shall provide to each holder of Notes a
certificate executed by a Responsible Officer of such
Obligor specifying such changes;
(i) RULE 144A -- promptly upon request, to any
holder of Notes and any "qualified institutional buyer"
(as defined in Rule 144A) to whom any Note may be offered
or sold by such holder, the information required under
paragraph (d)(4) of Rule 144A (or any similar successor
provision of Rule 144A) to permit compliance with Rule
144A in connection with a resale of such Note;
(j) REQUESTED INFORMATION DELIVERED TO SENIOR
LENDERS -- promptly upon request, to any holder of Notes,
copies of any financial statements or other data and
information as may from time to time be provided (or that
is required to be provided) to any of the lenders, or the
agent therefor, under the Senior Credit Agreement; and
(k) OTHER REQUESTED INFORMATION -- with
reasonable promptness, such other data and information
relating to the business, operations, affairs, financial
condition or Properties of the Parent, the Company,
LaSalle or any of their respective Subsidiaries or
relating to the ability of the Obligors to perform their
obligations under the Financing Documents as from time to
time may be reasonably requested by any such holder of
Notes.
8.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a
holder of Notes pursuant to Section 8.1(a) or Section
8.1(b) shall be accompanied by a certificate of a Senior
Financial Officer of the Parent or the Company, as the
case may be, setting forth:
(a) COVENANT COMPLIANCE -- the information
(including detailed calculations) required in order to
establish whether the Parent and the Company were in
compliance with the requirements of Sections 7.3 through
7.10, inclusive, and Section 7.12 during the quarterly or
annual period covered by the statements then being
furnished (including with respect to each such Section,
where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in
existence); and
(b) EVENT OF DEFAULT -- a statement that such
officer has reviewed the relevant terms hereof and has
made, or caused to be made, under his or her supervision,
a review of the transactions and conditions of the
Parent, the Company, LaSalle and their respective
Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being
furnished to the date of the certificate and that such
review has not disclosed the existence during such period
of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event
existed or exists (including, without limitation, any
such event or condition resulting from the failure of the
Parent, the Company, LaSalle or any of their respective
Subsidiaries to comply with any Environmental Law),
specifying the nature and period of existence thereof and
what action the Parent or the Company shall have taken or
proposes to take with respect thereto.
8.3 INSPECTION.
The Parent, the Company and LaSalle shall permit the
representatives of each holder of Notes that is an
Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of
Default then exists, at the expense of such holder and
upon reasonable prior notice to the Parent, to visit the
principal executive office of the Parent, the Company or
LaSalle, to discuss the affairs, finances and accounts of
the Parent, the Company, LaSalle and their respective
Subsidiaries with the Parent's, the Company's or
LaSalle's officers, and (with the consent of the Parent,
the Company or LaSalle, which consent will not be
unreasonably withheld) their respective independent
public accountants, and (with the consent of the Parent,
the Company or LaSalle, which consent will not be
unreasonably withheld) to visit the other offices and
Properties of the Parent, the Company, LaSalle and each
Subsidiary, all at such reasonable times during normal
business hours and as often as may be reasonably
requested in writing and in a manner so as not to
materially interfere with the conduct of the business of
the Parent, the Company, LaSalle and such Subsidiaries;
and
(b) DEFAULT -- if a Default or Event of
Default then exists, at the expense of the Parent, the
Company and LaSalle, to visit and inspect any of the
offices or Properties of the Parent, the Company, LaSalle
or any of their respective Subsidiaries, to examine all
their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and
to discuss their respective affairs, finances and
accounts with their respective officers and independent
public accountants (and by this provision the Parent, the
Company and LaSalle authorize said accountants to discuss
the affairs, finances and accounts of the Parent, the
Company, LaSalle and their respective Subsidiaries), all
at such times and as often as may be requested.
9. EVENTS OF DEFAULT
An "EVENT OF DEFAULT" shall exist if any of the
following conditions or events shall occur and be
continuing:
(a) the Company defaults in the payment of any
principal or Prepayment Compensation, if any, on any Note
when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any
interest on any Note for more than five days after the
same becomes due and payable; or
(c) any Obligor defaults in the performance of
or compliance with any term contained in any of Sections
7.1 through 7.13, inclusive, or Section 8.1(d); or
(d) any Obligor defaults in the performance of
or compliance with any term contained in any Financing
Document (other than those terms referred to in
paragraphs (a), (b) and (c) of this Section 9) and such
default is not remedied within 30 days after the earlier
of (i) a Responsible Officer of an Obligor obtaining
actual knowledge of such default and (ii) any Obligor
receiving written notice of such default from any holder
of a Note; or
(e) any representation or warranty made in
writing by or on behalf of any Obligor or by any officer
of any Obligor in any Financing Document or in any
writing furnished in connection with the transactions
contemplated by any Financing Document proves to have
been false or incorrect in any material respect on the
date as of which made or deemed made; or
(f) (i) any Obligor or any Subsidiary thereof
is in default (as principal or as guarantor or other
surety) in the payment of any principal of or
premium or make-whole amount or interest on any
Indebtedness (other than Indebtedness under the
Financing Documents) beyond any period of grace
provided with respect thereto, or
(ii) any Obligor or any Subsidiary
thereof is in default in the performance of or
compliance with any term of any evidence of any
Indebtedness (other than Indebtedness under the
Financing Documents), or of any mortgage, indenture
or other agreement relating thereto or any other
condition exists, and as a consequence of such
default or condition such Indebtedness has become,
or has been declared, due and payable before its
stated maturity or before its regularly scheduled
dates of payment, or
(iii) as a consequence of the occurrence
or continuation of any event or condition, any
Obligor or any Subsidiary thereof has become
obligated to purchase or repay Indebtedness before
its regular maturity or before its regularly
scheduled dates of payment;
provided that the aggregate amount of Indebtedness with
respect to which one or more of the conditions or events
referred to in one or more of clauses (i), (ii) and
(iii) of this Section 9(f) exceeds $5,000,000; or
(g) any Obligor or any Significant Subsidiary
thereof (i) is generally not paying, or admits in writing
its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or
other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial
part of its Property, (v) is adjudicated as insolvent or
to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of
competent jurisdiction enters an order appointing,
without consent by any of the Obligors or any of their
respective Significant Subsidiaries, a custodian,
receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial
part of its Property, or constituting an order for relief
or approving a petition for relief or reorganization or
any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or
liquidation of any Obligor or any Significant Subsidiary
thereof, or any such petition shall be filed against any
Obligor or any Significant Subsidiary thereof and such
petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the
payment of money aggregating in excess of $100,000 are
rendered against one or more of the Obligors and their
respective Subsidiaries and which judgments are not,
within 60 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60
days after the expiration of such stay; or
(j) if
(i) any Plan shall fail to satisfy the
minimum funding standards of ERISA or the Code for
any plan year or part thereof or a waiver of such
standards or extension of any amortization period is
sought or granted under section 412 of the Code, or
(ii) a notice of intent to terminate any
Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to
terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified any Obligor or
any ERISA Affiliate that a Plan may become a subject
of any such proceedings, or
(iii) the aggregate "amount of unfunded
benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed
$100,000, or
(iv) any Obligor or any ERISA Affiliate
shall have incurred or is reasonably expected to
incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, or
(v) any Obligor or any ERISA Affiliate
withdraws from any Multiemployer Plan, or
(vi) any Obligor or any Subsidiary
thereof establishes or amends any employee welfare
benefit plan that provides post-employment welfare
benefits in a manner that would increase the
liability of such Obligor or such Subsidiary
thereunder,
and any such event or events described in clauses (i)
through (vi) above, either individually or together with
any other such event or events, could reasonably be
expected to have a Material Adverse Effect (as used in
this Section 9(j), the terms "employee benefit plan" and
"employee welfare benefit plan" shall have the respective
meanings assigned to such terms in section 3 of ERISA);
or
(k) any Financing Document shall cease to be
in full force and effect (other than in accordance with
its terms) or shall be declared by a court or
Governmental Authority of competent jurisdiction to be
void, voidable or unenforceable against any one or more
Obligors party thereto, or any Obligor asserts any of the
foregoing in writing or before any court or Governmental
Authority.
10. REMEDIES ON DEFAULT, ETC.
10.1 ACCELERATION.
(a) If an Event of Default with respect to the
Company described in paragraph (g) or (h) of Section 9
(other than an Event of Default described in clause (i)
of paragraph (g) or described in clause (vi) of
paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred,
all the Notes then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred
and is continuing, any holder or holders of more than 51%
in principal amount of the Notes at the time outstanding
may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then
outstanding to be immediately due and payable.
(c) If any Event of Default described in
paragraph (a) or (b) of Section 9 has occurred and is
continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any
time, at its or their option, by notice or notices to the
Company, declare all the Notes held by it or them to be
immediately due and payable.
Subject to the provisions of Section 11, upon any Notes
becoming due and payable under this Section 10.1, whether
automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount
of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Prepayment Compensation determined in
respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately
due and payable, in each and every case without
presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and
the parties hereto agree, that each holder of a Note has
the right to maintain its investment in the Notes free
from repayment by the Company (except as herein
specifically provided for) and that the provision for
payment of Prepayment Compensation by the Company in the
event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such
circumstances.
10.2 OTHER REMEDIES.
Subject to the provisions of Section 11, if any
Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have
become or have been declared immediately due and payable
under Section 10.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific
performance of any agreement contained in any Financing
Document, or for an injunction against a violation of any
of the terms of any Financing Document, or in aid of the
exercise of any power granted by any Financing Document
or by law or otherwise.
10.3 RESCISSION.
At any time after any Notes have been declared due
and payable pursuant to clause (b) or (c) of Section
10.1, the holders of not less than 51% in principal
amount of the Notes then outstanding, by written notice
to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has
paid all overdue interest on the Notes, all principal of
and Prepayment Compensation, if any, on any Notes that
are due and payable and are unpaid other than by reason
of such declaration, and all interest on such overdue
principal and Prepayment Compensation, if any, and (to
the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate,
(b) all Events of Default and Defaults, other than non-
payment of amounts that have become due solely by reason
of such declaration, have been cured or have been waived
pursuant to Section 16, and (c) no judgment or decree has
been entered for the payment of any monies due pursuant
hereto or to the Notes. No rescission and annulment
under this Section 10.3 will extend to or affect any
subsequent Event of Default or Default or impair any
right consequent thereon.
10.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES,
ETC.
No course of dealing and no delay on the part of any
holder of any Note in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise
prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by any Financing
Document upon any holder thereof shall be exclusive of
any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity,
by statute or otherwise. Without limiting the
obligations of the Company under Section 14, the Company
will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs
and expenses of such holder incurred in any enforcement
or collection under this Section 10, including, without
limitation, reasonable attorneys' fees, expenses and
disbursements.
11. SUBORDINATION
11.1 GENERAL.
The Subordinated Debt is subordinate and junior in
right of payment to all Senior Debt to the extent
provided in this Section 11.
11.2 INSOLVENCY, ETC.
In the event of:
(a) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or
other similar proceeding relating to the Company, its
creditors or its Property,
(b) any proceeding for the liquidation,
dissolution or other winding-up of the Company, voluntary
or involuntary, whether or not involving insolvency or
bankruptcy proceedings,
(c) any assignment by the Company for the
benefit of creditors, or
(d) any other marshalling of the assets of the Company,
all Senior Debt shall first be paid in full before any
payment or distribution, whether in cash, Securities or
other Property, shall be made to any holder of any
Subordinated Debt on account of any Subordinated Debt.
Any payment or distribution, whether in cash, Securities
or other Property (other than Securities of the Company
or any other corporation provided for by a plan or
reorganization or readjustment the payment of which is
subordinated, at least to the extent provided in this
Section 11 with respect to Subordinated Debt, to the
payment in full of all Senior Debt at the time
outstanding and to any Securities issued in respect
thereof under any such plan or reorganization or
readjustment), that would otherwise (but for this Section
11) be payable or deliverable in respect of Subordinated
Debt shall be paid or delivered directly to the holders
of Senior Debt in accordance with the priorities then
existing among such holders until all Senior Debt
(including any interest thereon accruing at the contract
rate after the commencement of any such proceedings)
shall have been paid in full.
Each holder of Subordinated Debt shall duly and
promptly take such action as is reasonably necessary to
file appropriate claims or proofs of claims in any of the
proceedings referred to above in this Section 11.2 and to
execute and deliver such other instruments and take such
other actions as may be reasonably necessary to prove or
realize upon such claims and to have the proceeds of such
claims paid as provided in this Section 11.2, and, in the
event any holder of Subordinated Debt shall not have made
any such filing on or prior to the date 10 days before
the expiration of the time for such filing or shall not
have timely executed or delivered any such other
instruments and taken such other actions, the holders of
Senior Debt, acting through an agent or otherwise, are
hereby irrevocably authorized and empowered (but shall
have no obligation) to, as the agent and attorney-in-fact
for such holder for the specific and limited purpose set
forth in this paragraph, file such proof of claim for or
on behalf of such holder, execute and deliver such other
instrument for or on behalf of such holder and take such
other action necessary under applicable law to collect
any amounts due in respect of such claim in such
proceeding. Anything contained in this paragraph
notwithstanding, the right to vote any claim or claims in
respect of any Subordinated Debt in connection with any
proceedings referred to above in this Section 11.2 is
exclusively reserved to the holder of such Subordinated
Debt.
11.3 BLOCKAGE OF PAYMENTS ON SUBORDINATED DEBT.
(a) SENIOR DEBT PAYMENT DEFAULT. In the event
that the Company shall default in the payment of any
principal of, premium, if any, or interest on, or any
fees in respect of, any Senior Debt when the same shall
have become due and payable, whether at maturity, at a
date fixed for prepayment or otherwise, then, unless and
until such default shall have been cured or waived in a
writing received by the Company or shall have ceased to
exist or all such payments shall have been made in full
or the stated maturity of the Senior Debt shall have been
accelerated, no direct or indirect payment or
distribution of any kind or character (in cash,
Securities or other Property or otherwise) shall be made
or agreed to be made on or in respect of any Subordinated
Debt. All payments in respect of the Subordinated Debt
postponed under this Section 11.3(a) shall be immediately
due and payable upon the termination of such postponement
(together with such additional interest as is provided
herein and in the Notes for late payment of principal,
Prepayment Compensation and/or interest); the remittance
in full of such payments by the Company in accordance
with the terms of the Financing Documents and the
acceptance thereof by the holders of the Notes shall be
deemed to constitute a cure by the Company and/or a
waiver by the holders of the Notes of any Event of
Default that existed immediately prior to such remittance
and acceptance to the extent that such Event of Default
existed solely as a consequence of the previous non-
payment of such postponed payments during such period of
postponement.
(b) ACCELERATION OF SENIOR DEBT. In the event
that the holders of any Senior Debt shall declare such
Senior Debt to be due and payable prior to its stated
maturity in accordance with the Senior Credit Agreement,
no payment or distribution of any kind or character
(whether in cash, Securities or other Property) shall be
made on or in respect of any Subordinated Debt, and no
holder of Subordinated Debt shall take or receive from
the Company, directly or indirectly, in cash, Securities
or other Property or by way of set-off or in any other
manner, payment of all or any of the Subordinated Debt
until the earlier of (i) the payment in full of such
Senior Debt or (ii) the rescission or termination of such
declaration by the appropriate majority of holders of
Senior Debt, as required under the Senior Credit
Agreement, or as otherwise provided for in the Senior
Credit Agreement or effected by operation of applicable
law. All payments in respect of the Subordinated Debt
postponed under this Section 11.3(b) shall be immediately
due and payable upon the termination of such postponement
(together with such additional interest as is provided
herein and in the Notes for late payment of principal,
Prepayment Compensation and/or interest); the remittance
in full of such payments by the Company in accordance
with the terms of the Financing Documents and the
acceptance thereof by the holders of the Notes shall be
deemed to constitute a cure by the Company and/or a
waiver by the holders of the Notes of any Event of
Default that existed immediately prior to such remittance
and acceptance to the extent that such Event of Default
existed solely as a consequence of the previous non-
payment of such postponed payments during such period of
postponement.
(c) SENIOR DEBT EVENT OF DEFAULT. In the
event and during the continuance of any "Event of
Default" (after the expiration of any grace period in
respect thereof and the giving of any notice with respect
thereto) under, and as defined in, the Senior Credit
Agreement (a "SENIOR DEBT EVENT OF DEFAULT") and before
the declaration of the Senior Debt to be due and payable
prior to its stated maturity, the holders of such Senior
Debt acting through an agent or otherwise may give to the
Company written notice referring to the Notes and this
Agreement and specifying that it is a notice of a Senior
Debt Event of Default (a "SENIOR DEBT EVENT OF DEFAULT
NOTICE") and, thereafter, no payment or distribution of
any kind or character (whether in cash, Securities or
other Property) shall be made on or in respect of any
Subordinated Debt, and no holder of Subordinated Debt
shall take or receive from the Company, directly or
indirectly, in cash, Securities or other Property or by
way of set-off or in any other manner, payment of all or
any of the Subordinated Debt during the period (a "SENIOR
DEBT EVENT OF DEFAULT BLOCKAGE PERIOD") commencing on the
date of receipt by the Company of such notice and ending
on the earliest of (i) the date of the repayment in full
of such Senior Debt, (ii) the date on which such Senior
Debt shall have been declared due and payable prior to
its stated maturity, (iii) the date on which such Senior
Debt Event of Default shall have been cured or waived and
written notice thereof received by the Company from the
holders of the Senior Debt acting through an agent or
otherwise, (iv) the date on which such holders of such
Senior Debt, acting through an agent or otherwise, shall
have delivered to the Company and each holder of
Subordinated Debt a notice referring to the Notes and the
immediately preceding Senior Debt Event of Default Notice
and stating that such Senior Debt Event of Default Notice
has been withdrawn, or (v) the 180th day following the
giving of such Senior Debt Event of Default Notice
pursuant to this Section 11.3(c). Any number of Senior
Debt Event of Default Notices may be given, provided that
(A) only one Senior Debt Event of Default Notice may be
given with respect to any single occurrence of a Senior
Debt Event of Default, (B) no Senior Debt Event of
Default Notice may be given in respect of any Senior Debt
Event of Default that was continuing during a previous
Senior Debt Event of Default Blockage Period, (C) no
Senior Debt Event of Default Notice shall be effective at
any time to prevent any payment from being made by or on
behalf of the Company for or on account of any
Subordinated Debt (and any such Senior Debt Event of
Default Notice shall be or become null and void ab
initio) if, within the 360-day period ending immediately
prior to the date on which such Senior Default Notice
shall have been delivered to the Company and each holder
of Subordinated Debt, a Senior Debt Event of Default
Blockage Period was in effect for all or part of such
period and (D) not more than five Senior Debt Event of
Default Blockage periods may be imposed under this
Section 11.3(c) during the term of the Notes. All
payments in respect of the Subordinated Debt postponed
during any Senior Debt Event of Default Blockage Period
shall be immediately due and payable upon the termination
thereof (together with such additional interest at the
Default Rate as is provided herein and in the Notes); the
remittance in full of such payments by the Company in
accordance with the terms of the Financing Documents and
the acceptance thereof by the holders of the Notes shall
be deemed to constitute a cure by the Company and/or a
waiver by the holders of the Notes of any Event of
Default that existed immediately prior to such remittance
and acceptance to the extent that such Event of Default
existed solely as a consequence of the previous non-
payment of such postponed payments during such period of
postponement.
(d) ACCELERATION OF SUBORDINATED DEBT. In the
event that any Subordinated Debt is declared due and
payable before its stated maturity, then and in such
event the holders of Senior Debt outstanding at the time
such Subordinated Debt so becomes due and payable shall
be entitled to receive payment in full on all amounts due
or to become due on or in respect of such Senior Debt,
before the Company may make, and before any holder of
Subordinated Debt is entitled to receive, any payment or
distribution of assets of the Company of any kind or
character, whether in cash, Securities or other Property
on account of any Subordinated Debt. All payments in
respect of the Subordinated Debt postponed under this
Section 11.3(d) shall be immediately due and payable upon
the termination of such postponement (together with such
additional interest as is provided herein and in the
Notes for late payment of principal, Prepayment
Compensation and/or interest); the remittance in full of
such payments by the Company in accordance with the terms
of the Financing Documents and the acceptance thereof by
the holders of the Notes shall be deemed to constitute a
cure by the Company and/or a waiver by the holders of the
Notes of any Event of Default that existed immediately
prior to such remittance and acceptance to the extent
that such Event of Default existed solely as a
consequence of the previous non-payment of such postponed
payments during such period of postponement.
(e) NOTICE BY COMPANY. The Company shall give
prompt written notice to each holder of Subordinated Debt
of its receipt of any notice received by it from any
holder of Senior Debt (or any agent acting on its behalf)
under this Section 11.3. The Company shall include with
each notice being given to a holder of Subordinated Debt
under this clause (e) a copy of the applicable notice
received by the Company from any holder or holders of
Senior Debt (or any agent acting on its or their behalf).
All such notices and copies shall be delivered by the
Company as provided for in Section 17.
11.4 SUBORDINATED DEBT PAYMENTS AND REMEDIES.
Nothing contained in this Section 11 shall prevent
the Company from making, or any holder of Subordinated
Debt from accepting, at any time except as expressly
provided in Section 11.2 and Section 11.3, payments of
principal of (and Prepayment Compensation, if any) or
interest on the Notes and other payments in respect
thereof in accordance with the terms thereof. Nothing
contained in this Section 11 is intended to or shall
prevent any holder of Subordinated Debt from exercising
any rights or remedies provided by applicable law, at
equity, hereunder or under the Notes upon a Default or
Event of Default, subject to the rights under the
provisions of Section 11.2 and Section 11.3 of the
holders of Senior Debt to receive cash, Securities or
other Property otherwise payable or deliverable to the
holders of Subordinated Debt, provided that, the
foregoing notwithstanding, no holder of Subordinated Debt
may declare, or join in the declaration of, any
Subordinated Debt to be due and payable prior to its
stated maturity or to otherwise accelerate the maturity
of the principal of its Notes, accrued interest thereon
or Prepayment Compensation or other amounts due
thereunder, or commence, or join in any commencement of,
any administrative, legal or equitable action against the
Company, at any time during any period not in excess of
180 days in respect of which payment on the Subordinated
Debt shall have been suspended pursuant to Section
11.3(a) or Section 11.3(c); for the avoidance of doubt,
the holders of Subordinated Debt may take the actions
referred to in the immediately preceding proviso at any
time when any suspension period in respect of Section
11.3(a) or Section 11.3(c) shall exceed 180 days (or at
any time when any such suspension period shall have ended
if it shall have continued for less than 180 days).
11.5 TURNOVER OF PAYMENTS.
If:
(a) any payment or distribution shall be
collected or received by any holders of Subordinated Debt
in contravention of any of the terms of this Section 11
and prior to the payment in full of the Senior Debt at
the time outstanding; and
(b) any holder of such Senior Debt shall have
notified such holders of Subordinated Debt, within 180
days of any such payment or distribution, of the facts by
reason of which such collection or receipt so contravenes
this Section 11;
then such holders of Subordinated Debt will deliver such
payment or distribution, to the extent necessary to pay
all such Senior Debt in full, to the holders of such
Senior Debt and, until so delivered, the same shall be
held in trust by such holders of Subordinated Debt as the
Property of the holders of such Senior Debt. If after
any amount is delivered to the holders of Senior Debt
pursuant to this Section 11.5, whether or not such amount
has been applied to the payment of Senior Debt, the
outstanding Senior Debt shall thereafter be paid in full
by the Company or otherwise other than pursuant to this
Section 11.5, the holders of Senior Debt shall return to
such holders of Subordinated Debt an amount equal to the
amount delivered to such holders of Senior Debt pursuant
to this Section 11.5 (net of the amount, if any, so
applied to the payment of such Senior Debt).
11.6 OBLIGATIONS NOT IMPAIRED.
No present or future holder of any Senior Debt shall
be prejudiced in the right to enforce the subordination
of the Subordinated Debt by any act or failure to act on
the part of the Company. Nothing contained in this
Section 11 shall impair, as between the Company and any
holder of Subordinated Debt, the obligation of the
Company, which is absolute and unconditional, to pay to
such holder the principal thereof and Prepayment
Compensation, if any, and interest thereon as and when
the same shall become due and payable in accordance with
the terms of this Agreement, or prevent any holder of any
Subordinated Debt from exercising all rights, powers and
remedies otherwise permitted by applicable law or under
this Agreement, all subject to the rights of the holders
of the Senior Debt to receive cash, Securities or other
Property otherwise payable or deliverable to the holders
of Subordinated Debt.
11.7 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full of all Senior Debt, the
holders of Subordinated Debt shall be subrogated to all
rights of any holder of Senior Debt to receive any
further payments or distributions applicable to the
Senior Debt until the Subordinated Debt shall have been
paid in full, and such payments or distributions received
by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property that
otherwise would be paid or distributed to the holders of
Senior Debt shall, as between the Company and its
creditors other than the holders of Senior Debt, on the
one hand, and the holders of Subordinated Debt, on the
other hand, be deemed to be a payment by the Company on
account of Senior Debt and not on account of Subordinated
Debt.
11.8 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance
thereof shall be deemed to acknowledge and agree that the
foregoing subordination provisions are, and are intended
to be, an inducement to and a consideration of each
holder of any Senior Debt, whether such Senior Debt was
created or acquired before or after the creation of
Subordinated Debt, to acquire and hold, or to continue to
hold, such Senior Debt, and such holder of Senior Debt
shall be deemed conclusively to have relied on such
subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt.
11.9 SECURITY.
Each holder of Subordinated Debt agrees with and for
the benefit of each holder of Senior Debt, but not with
or for the benefit of the Company, that until the Senior
Debt is paid in full, it will not take any actions to
obtain or accept, without the consent of the holders of
Senior Debt, any Lien upon any assets of the Company or
any of its Subsidiaries.
11.10 CHANGES IN HOLDERS OF SENIOR DEBT.
Upon the Company's being informed of any new holder
of Senior Debt, the Company shall promptly inform the
holders of Subordinated Debt of the names and addresses
of such new holders. Upon the Company's being informed
of the change in the addresses of any holder or holders
of Senior Debt, the Company shall promptly inform the
holders of Subordinated Debt of the same.
12. INTERPRETATION OF AGREEMENT
12.1 TERMS DEFINED.
As used herein, the following terms have the
respective meanings set forth below or set forth in the
Section hereof following such term:
ACQUISITION -- means the acquisition by the Company
of the outstanding Capital Stock of LaSalle pursuant to
the Acquisition Documents.
ACQUISITION AGREEMENT -- means the Stock Purchase
Agreement, dated April 18, 1997, by and among the Parent,
the Company and Quanex, as the same may be modified from
time to time.
ACQUISITION DOCUMENTS -- is defined in Section B.6.
ADJUSTED BASE SENIOR DEBT CAP -- means, at any time,
the result of (a) the Base Senior Debt Cap, minus (b) the
Senior Debt Reduction Amount at such time.
AFFILIATE -- means at any time, and with respect to
any Person (other than a Purchaser),
(a) any other Person that at such time
directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control
with, such first Person,
(b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of
voting or equity interests of the Parent, the Company or
any of their respective Subsidiaries or any corporation
of which the Parent, the Company and their respective
Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of
voting or equity interests, and
(c) any Person who is an officer or director
of such Person, or any member of the immediate family of
such officer of director.
As used in this definition, "Control" means the
possession, directly or indirectly, of the power to
direct or cause the direction of the management and
policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. Unless the
context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate of the Parent.
AGREEMENT, THIS -- is defined in Section 16.
ASSET DISPOSITION -- means any Transfer except:
(a) any Transfer from a Subsidiary of the
Company to the Company or to a Wholly-Owned Subsidiary of
the Company, so long as immediately before and
immediately after the consummation of any such Transfer
and after giving effect thereto, no Default or Event of
Default exists or would exist; and
(b) any Transfer made in the ordinary course
of business (or, in the case of subclause (ii), as would
generally be considered customary or prudent in the case
of an entity of established reputation engaged in the
same or a similar business and similarly situated) and
involving only Property that is either (i) inventory held
for sale or (ii) equipment, fixtures, supplies or
materials no longer required in the operation of the
business of the Company or any of its Subsidiaries or
that is obsolete.
BASE SENIOR DEBT CAP -- means, at any time,
$91,500,000.
BUSINESS DAY -- means any day other than a Saturday,
a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed.
CAPITALIZED LEASE -- of any Person means any lease
the obligations under which have been, or in accordance
with GAAP are required to be, recorded on the books of
such Person as a capital lease liability.
CAPITAL STOCK -- means any class of capital stock,
share capital or similar equity interest of a Person.
CHANGE IN CONTROL -- means the occurrence of any one
or more of the following events or circumstances:
(a) a Tag-Along Trigger Event (as defined in
the Stockholders Agreement) shall have occurred,
provided, that in the event of the death of Mr. Scharf,
this clause (a) shall not be effective, and shall cease
to be of any further force or effect thereafter;
(b) any "person," as such term is used in
sections 13(d) and 14(d) of the Exchange Act (other than
(i) the Parent, (ii) any trustee or other fiduciary
holding securities under an employee benefit plan of the
Parent, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities,
(iv) any corporation owned, directly or indirectly, by
the stockholders of the Parent in substantially the same
proportions as their ownership of Parent Common Stock,
(v) Gilbert Scharf, (vi) the Scharf Family Trusts, or
(vii) Mr. Scharf (each an "excluded person")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Parent representing 20% or more of the
combined voting power of the Parent's then outstanding
voting securities;
(c) during any period of not more than two
consecutive years, individuals who at the beginning of
such period constitute the board of directors of the
Parent, and any new director (other than a director
designated by a person who has entered into an agreement
with the Parent to effect a transaction described in
clause (b), (c), or (e) of this definition) whose
election by such board of nomination for election by the
Parent's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who
either were directors at the beginning of such period or
whose election or nomination for election was previously
so approved (other than approval given in connection with
an actual or threatened proxy or election contest), cease
for any reason to constitute at least a majority of such
board;
(d) the stockholders of the Parent approve a
merger or consolidation of the Parent with any other
corporation or other Person, other than (i) a merger or
consolidation that would result in the voting securities
of the Parent outstanding immediately prior thereto
continuing to represent (either by remaining outstanding
or by being converted into voting securities of the
surviving or parent entity) 80% or more of the combined
voting power of the voting securities of the Parent or
such surviving or parent entity outstanding immediately
after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of
the Parent (or similar transaction) in which no "person"
(as defined in clause (b) of this definition) other than
an "excluded person" (as defined in clause (b) of this
definition) acquired 20% or more of the combined voting
power of the Parent's then outstanding securities;
(e) the stockholders of the Parent approve a
plan of complete liquidation of the Parent or an
agreement for the sale or disposition by the Parent of
all or substantially all of the Parent's assets (or any
other transaction having a similar effect); or
(f) the Company ceases to be a Wholly-Owned
Subsidiary of the Parent.
CHATTANOOGA MORTGAGE LOAN AGREEMENT -- means a
mortgage loan agreement or deed of trust and any related
agreements, guarantees, documents and instruments to be
executed and delivered by either one or both of the
Company and the Parent in favor of M&T providing for a
term loan in an aggregate principal amount not in excess
of $1,500,000 to be secured by, among other collateral, a
first Lien on real Property located in Chattanooga,
Tennessee.
CLOSING -- is defined in Section 1.3.
CLOSING DATE -- is defined in Section 1.3.
CODE -- means the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
promulgated thereunder from time to time.
COMPANY -- is defined in the introductory paragraph.
COMPANY SUBSIDIARY STOCK -- means the Capital Stock
(or any options or warrants to purchase Capital Stock or
other Securities exchangeable for or convertible into any
Capital Stock) of any Subsidiary of the Company.
CONSOLIDATED, CONSOLIDATING or CONSOLIDATED BASIS --
for any Persons, means the consolidation of the accounts
of such Persons in accordance with GAAP, including
principles of consolidation.
CONSOLIDATED CURRENT ASSETS -- means Current Assets
that would be reflected on the Consolidated balance sheet
of the Company and its Subsidiaries in accordance with
GAAP.
CONSOLIDATED CURRENT LIABILITIES -- means Current
Liabilities that would be reflected on the Consolidated
balance sheet of the Company and its Subsidiaries in
accordance with GAAP.
CONSOLIDATED EBITDA -- means, for any period, the
sum for such period of:
(a) Consolidated Net Income of the Company and
its Subsidiaries, plus
(b) the aggregate amount deducted in
determining such Consolidated Net Income representing (i)
all Federal, state and local income taxes of such
Persons, (ii) depreciation and amortization and (iii)
Interest Expense, in each case as determined in
accordance with GAAP.
CONSOLIDATED INDEBTEDNESS -- means Indebtedness that
would be reflected on the Consolidated balance sheet of
the Company and its Subsidiaries in accordance with GAAP.
CONSOLIDATED LIABILITIES -- means Liabilities that
would be reflected on the Consolidated balance sheet of
the Company and its Subsidiaries in accordance with GAAP.
CONSOLIDATED NET INCOME -- means Net Income that
would be reflected on the Consolidated income statement
of the Company and its Subsidiaries in accordance with
GAAP.
CONSOLIDATED NET WORTH -- means Net Worth that would
be reflected on the Consolidated balance sheet of the
Company and its Subsidiaries in accordance with GAAP.
CONSOLIDATED TOTAL ASSETS -- means the total assets
that would be reflected on the Consolidated balance sheet
of the Company and its Subsidiaries in accordance with
GAAP.
CONTROL EVENT -- means:
(a) the execution by Mr. Scharf or any Obligor
or any Subsidiary or Affiliate of any agreement or letter
of intent with respect to any proposed transaction or
event or series of transactions or events that,
individually or in the aggregate, may reasonably be
expected to result in a Change in Control;
(b) the execution of any written agreement
that, when fully performed by the parties thereto, would
result in a Change in Control; or
(c) the making of any written offer to the
holders of any of the Capital Stock of the Parent, which
offer, if, and only if, accepted by the requisite number
of holders, would result in a Change in Control.
CURRENT ASSETS -- means all assets treated as
current assets in accordance with GAAP consistent with
those used in the preparation of the financial statements
referred to in Section 8.1(a) and Section 8.1(b).
CURRENT LIABILITIES -- means all liabilities treated
as current in accordance with GAAP consistent with those
used in the preparation of the financial statements
referred to in Section 8.1(a) and Section 8.1(b).
DEFAULT -- means an event or condition the
occurrence or existence of which would, with the lapse of
time or the giving of notice or both, become an Event of
Default.
DEFAULT RATE -- means a rate of interest per annum
that is the lesser of (a) the highest rate allowed by
applicable law or (b) the greater of (i) 14.5% per annum
or (ii) 2% over the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York (or its
successor) from time to time in New York City as its
"base" or "prime" rate.
DISPOSITION VALUE -- means, at any time, with
respect to any Property,
(a) in the case of Property that does not
constitute Company Subsidiary Stock, the book value
thereof, valued at the time of such disposition in good
faith by the Company, and
(b) in the case of Property that constitutes
Company Subsidiary Stock, an amount equal to that
percentage of book value of the assets of the Subsidiary
of the Company that issued such stock as is equal to the
percentage that the book value of such Company Subsidiary
Stock represents of the book value of all of the
outstanding Capital Stock of such Subsidiary of the
Company (assuming, in making such calculations, that all
securities convertible into such Capital Stock are so
converted and giving full effect to all transactions that
would occur or be required in connection with such
conversion) determined at the time of the disposition
thereof, in good faith by the Company.
DIVIDEND -- with respect to any Person means (a) any
declaration of payment, or payment, of cash, Property,
securities or obligations, to any holder of an equity or
capital interest in such Person (other than a payment
solely in the form of Capital Stock of such Person), or
(b) any payment on account of, or action to set apart
assets for, or action to create a sinking or other
analogous fund for, the purchase, redemption, retirement
or other acquisition of any shares of any class of
Capital Stock of such Person.
DOLLARS and the symbol $ each mean United States of
America dollars.
EBITDA CONTRIBUTION PERCENTAGE -- means, with
respect of any Property that is, or is proposed to be,
the subject of an Asset Disposition, the percentage of
Consolidated EBITDA contributed by such Property during
the period of four consecutive fiscal quarters of the
Company most recently ended prior to the time of such
Asset Disposition.
ENVIRONMENTAL LAW -- means any and all federal,
state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the
protection of the environment or the release of any
materials into the environment, including but not limited
to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
ERISA -- means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the rules and regulations promulgated thereunder from
time to time in effect.
ERISA AFFILIATE -- means, with respect to any
Person, any trade or business (whether or not
incorporated) that is treated as a single employer
together with such Person under section 414 of the Code.
EVENT OF DEFAULT -- is defined in Section 9.
EXCHANGE ACT -- means the Securities Exchange Act of
1934, as amended from time to time.
FAIR MARKET VALUE -- means, at any time and with
respect to any Property, the sale value of such Property
that would be realized in an arm's-length sale at such
time between an informed and willing buyer and an
informed and willing seller (neither being under a
compulsion to buy or sell).
FINANCING DOCUMENT -- means each of the Note and
Stock Purchase Agreements, the Notes, the Guaranty
Agreements, and the Stockholders Agreement.
FISCAL YEAR -- any period of 12 consecutive calendar
months ending on the last day of December, or, upon the
prior consent of the Required Holders, any period of 12
consecutive calendar months ending on another date.
GAAP -- the generally accepted accounting principles
applied in the preparation of the audited financial
statements of the Parent, the Company, LaSalle and their
respective Subsidiaries as (a) shall be consistent with
the then-effective principles promulgated or adopted by
the Financial Accounting Standards Board ("FASB") and/or
the American Institute of Certified Public Accountants
("AICPA") and any predecessors and successors thereof, so
as to properly reflect the financial condition, and the
results of operations and changes in financial position
of the Parent, the Company, LaSalle and their respective
Subsidiaries, except that any accounting principle or
practice required to be changed by FASB or AICPA in order
to continue as a generally accepted accounting principle
or practice may be so changed, and (b) shall be concurred
in by the Independent Public Accountants.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or any
state or other political subdivision thereof, or
(ii) any jurisdiction in which the
Parent, the Company, any of their respective
Subsidiaries or any other relevant Person conducts
all or any part of its business, or that asserts
jurisdiction over any Properties of the Parent, the
Company, any of their respective Subsidiaries or any
such other Person, or
(b) any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government.
GUARANTOR -- means, at any time, the Parent, LaSalle
or any other Person that at such time is a guarantor with
respect to any of the Indebtedness of the Company under
the Note and Stock Purchase Agreement and the Notes.
GUARANTY -- means, with respect to any Person, any
obligation (except the endorsement in the ordinary course
of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other
obligation of any other Person in any manner, whether
directly or indirectly, including, without limitation,
obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a) to purchase such indebtedness or
obligation or any Property constituting security
therefor;
(b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation,
or (ii) to maintain any working capital or other balance
sheet condition or any income statement condition of any
other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or
obligation;
(c) to lease Properties or to purchase
Properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of
the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such
indebtedness or obligation against loss in respect
thereof.
In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of
such Guaranty shall be assumed to be direct obligations
of such obligor.
GUARANTY AGREEMENTS -- means the Parent Guaranty
Agreement, the LaSalle Guaranty Agreement and, if any,
each other Subsidiary Guaranty Agreement.
HAZARDOUS MATERIALS -- means any and all pollutants,
toxic or hazardous wastes or any other substances that
might pose a hazard to health or safety, the removal of
which may be required or the generation, manufacture,
refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal,
release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized
by any applicable law (including, without limitation,
asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
HOLDER -- means, with respect to any Note, the
Person in whose name such Note is registered in the
register maintained by the Company pursuant to Section
5.1.
INCURRENCES -- is defined in Section 7.3. The verb
"INCUR" shall have the meaning correlative to the
definition of Incurrences.
INDEBTEDNESS -- of any Person, at a particular time,
means all items that, in conformity with GAAP, would be
classified as liabilities on a balance sheet of such
Person as at such time and that constitute (a)
indebtedness for borrowed money or for the deferred
purchase price of Property or services in respect of
which such Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or any commitment by
which such Person assures a credit against loss,
(including, without limitation, all notes payable and
drafts accepted representing extensions of credit and all
obligations evidenced by bonds, debentures, notes or
other similar instruments, including, without limitation,
the Notes and the Senior Debt, but excluding trade
payables incurred in the ordinary course of business
payable within 90 days of the date thereof), (b)
obligations with respect to any conditional sale
agreement or title retention agreement, (c) indebtedness
arising under acceptance facilities, in connection with
surety or other similar bonds, and the outstanding amount
of all letters of credit issued for the account of such
Person and, without duplication, all drafts drawn
thereunder, (d) all liabilities secured by any security
interest in any Property owned by such Person even though
it has not assumed or otherwise become liable for the
payment thereof, (e) obligations under Capitalized Leases
in respect of which such Person is liable, contingently
or otherwise, as obligor, guarantor or otherwise, or in
respect of which obligations such Person assures a
creditor against loss, (f) obligations with respect to
interest rate protection agreements, (g) any asserted
withdrawal liability of any Person or a commonly
controlled entity under a Multiemployer Plan, and (h) any
Guaranty by such Person of any liabilities of any other
Person of the types referred to in the foregoing clauses
(a) through (g). Notwithstanding anything else in this
definition, Indebtedness of any Person shall not include
its liabilities in respect of unsecured trade accounts
payable arising in the ordinary course of business.
INDEPENDENT PUBLIC ACCOUNTANT -- refers to BDO
Seidman LLP or any other nationally-recognized public
accounting firm selected by the Obligors and consented to
by the Required Holders, such consent not to be
unreasonably withheld.
INSTITUTIONAL INVESTOR -- means (a) any original
purchaser of a Note, (b) any holder of a Note holding
more than 5% of the aggregate principal amount of the
Notes then outstanding, and (c) any bank, trust company,
savings and loan association or other financial
institution, any pension plan, any investment company,
any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of
legal form.
INTEREST COVERAGE RATIO -- for any period with
respect to any Person, means, the ratio of:
(a) the sum for such period of: (i) Net Income
plus (ii) the aggregate amount deducted in determining
such Net Income representing (x) all Federal, state and
local income taxes of such Person, (y) depreciation and
amortization and (z) Interest Expense, in each case as
determined in accordance with GAAP,
to
(b) Interest Expense for such period.
INTEREST EXPENSE -- for a Person, means, for any
period, the sum of the aggregate interest expense of such
Person for such period in respect of Indebtedness of such
Person, as determined in accordance with GAAP.
INVESTMENTS -- is defined in Section 7.9.
LASALLE -- is defined in the introductory paragraph.
LASALLE GUARANTY AGREEMENT -- is defined in
Attachment A.
LIABILITIES -- of any Person, means, at any time,
all amounts which, in accordance with GAAP, would be
included as liabilities on a balance sheet of such Person
at such time.
LICENSE, LICENSES -- means, individually and
collectively, with respect to a Person, each license,
permit, consent, certificate, certification,
registration, declaration, approval, and filing with any
Governmental Authority or body, or other person or entity
required for or in connection with such Person's
business.
LIEN -- any mortgage, deed of trust, security
interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or
other title retention agreement, any financing lease
having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement
under the Uniform Commercial Code or comparable law of
any jurisdiction other than any financing statement filed
in connection with consignments or leases not intended as
security).
MATERIAL -- means material in relation to the
business, operations, affairs, financial condition,
assets or Properties of the Parent and its Subsidiaries
taken as a whole.
MATERIAL ADVERSE EFFECT -- means a material adverse
effect on (a) the business, operations, affairs,
financial condition, assets or Properties of the Parent
and its Subsidiaries taken as a whole, or (b) the ability
of any Obligor to perform its obligations under any
Financing Document, or (c) the validity or enforceability
of any Financing Document.
MEMORANDUM -- is defined in Attachment A.
M&T -- means Manufacturers and Traders Trust
Company.
MULTIEMPLOYER PLAN -- means any Plan that is a
"multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
NET INCOME -- of any Person, means, with respect to
any period, all amounts that, in conformity with GAAP,
would be included under net income on an income statement
of such Person for such period.
NET PROCEEDS AMOUNT -- means, with respect to any
Transfer of any Property by any Person, an amount equal
to the difference of
(a) the aggregate amount of the consideration
(valued at the Fair Market Value of such consideration at
the time of the consummation of such Transfer) received
by such Person in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket
costs and expenses actually incurred by such Person in
connection with such Transfer.
NET WORTH -- for any Person, means, at any time, the
amounts that would, in accordance with GAAP, be shown as
shareholders' equity on a balance sheet of such Person at
such time, excluding any positive amount attributable to
(a) any deferred charge or prepaid expense of such
Person, except for any prepaid interest, tax or insurance
premium, (b) any treasury stock of such Person, (c) any
unamortized debt discount or expense of such Person, (d)
any write-up in the value of any asset on the records of
such Person subsequent to the Closing Date, (e) any
Investment of such Person, except for Investments
permitted by Section 7.9, or (f) any Investment of such
Person in any security in a Subsidiary of such Person in
excess of the lesser of the cost or fair market value of
such Security.
1993 WARRANT AGREEMENT -- means the Warrant
Agreement, made as of August 13, 1993, between the Parent
(under its former name, International Metals Acquisition
Corporation) and Continental Stock Transfer & Trust
Company, as warrant agent, as such agreement may be
amended, restated or otherwise modified from time to time
(but subject to Section 7.1).
1993 WARRANT CALL OPTION EVENT -- means any event or
circumstance (including, without limitation, that, as of
any date, the last sales price of the Parent Common Stock
has been at least 181.81% of the then effective exercise
price of the 1993 Warrants on each of 20 consecutive
trading days ending on the third business day prior to
such date) that, pursuant to the terms of the 1993
Warrant Agreement, permits the Parent to exercise its
option under the 1993 Warrant Agreement to call all or a
portion of the 1993 Warrants for redemption.
1993 WARRANT EXERCISE ADJUSTED NET PROCEEDS AMOUNT
-- means, as of any date of determination (whether
before, on or after the occurrence of a 1993 Warrant Call
Option Event), an amount equal to
(a) the aggregate amount of the proceeds paid
to the Parent in respect of the exercise of 1993 Warrants
exercised by or on behalf of the holders of 1993 Warrants
at any time prior to such date of determination, minus
(b) the sum of (i) the aggregate principal
amount of Notes that as of such date of determination
have been prepaid pursuant to Section 4.4(b) or Section
4.4(c), plus (ii) if as of such date of determination any
principal amount of Notes shall have been called for
prepayment pursuant to Section 4.4(b) or Section 4.4(c)
but shall have not yet been prepaid, such principal
amount of Notes called for prepayment but not yet
prepaid, plus (iii) the aggregate amount of the
redemption price required by the terms of the 1993
Warrant Agreement to be paid by the Parent in respect of
any 1993 Warrants called for redemption, and actually
redeemed, by the Parent prior to such date of
determination.
1993 WARRANT FORCED EXERCISE NET PROCEEDS AMOUNT --
means, as of any date of determination after the
occurrence of a 1993 Warrant Call Option Event, an amount
equal to
(a) the aggregate amount of the proceeds
payable to the Parent in respect of the exercise of 1993
Warrants exercised by or on behalf of the holders of 1993
Warrants during the period commencing with the occurrence
of such 1993 Warrant Call Option Event and ending
immediately prior to such date of determination, minus
(b) the aggregate amount of the redemption
price required by the terms of the 1993 Warrant Agreement
to be paid by the Parent in respect of any 1993 Warrants
called for redemption, and actually redeemed, by the
Parent during such period.
1993 WARRANT PROVISIONS TERMINATION DATE -- means
the first date with respect to which both of the
following conditions shall have been satisfied:
(a) on such date no 1993 Warrants (other than
any 1993 Warrants that shall have expired on or before
such date without being exercised and shall not be
subject to exercise in the future) shall remain
outstanding; and
(b) the Company shall have satisfied in full
all of its prepayment obligations pursuant to Sections
4.4(b) and 4.4(c).
1993 WARRANTS -- means the Redeemable Common Stock
Purchase Warrants issued by the Parent pursuant to the
1993 Warrant Agreement.
NOTE AND STOCK PURCHASE AGREEMENTS -- is defined in
Section 1.3.
NOTES -- is defined in Section 1.1.
OBLIGOR -- means any one or more of the Parent, the
Company and LaSalle.
OFFICER'S CERTIFICATE -- means, with respect to any
Person, a certificate of a Senior Financial Officer or of
any other officer of such Person whose responsibilities
extend to the subject matter of such certificate.
OTHER PURCHASERS -- is defined in Section 1.3.
PARENT -- is defined in the introductory paragraph.
PARENT COMMON STOCK -- means
(a) the common stock, stated value $.001 per
share, of the Parent as constituted on the Closing Date,
and
(b) on any date after the Closing Date, any
stock into which such Parent Common Stock shall have been
changed or any stock resulting from any reclassification
of such Parent Common Stock, and all other stock of any
class or classes (however designated) of the Parent the
holders of which have the right, without limitation as to
amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the
payment of dividends and distributions of any shares
entitled to preference.
PARENT GUARANTY AGREEMENT -- is defined in
Attachment A.
PBGC -- means the Pension Benefit Guaranty
Corporation referred to and defined in ERISA or any
successor thereto.
PERSON -- means an individual, partnership,
corporation, limited liability company, association,
trust, unincorporated organization, or a government or
agency or political subdivision thereof.
PLAN -- means, with respect to any Person, an
"employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has
been established or maintained, or to which contributions
are or, within the preceding five years, have been made
or required to be made, by such Person or any ERISA
Affiliate of such Person or with respect to which such
Person or any such ERISA Affiliate may have any
liability.
PREFERRED STOCK -- means any class of Capital Stock
of a Person that is preferred over any other class of
Capital Stock of such Person as to the payment of
dividends or other equity distributions or the payment of
any amount upon liquidation or dissolution of such
Person.
PREPAYMENT COMPENSATION -- means, with respect to
any principal amount of Notes that is to be prepaid on
any date or that has become or is declared to be
immediately due and payable on any date pursuant to
Section 10, as the context requires, an amount equal to
the Applicable Percentage of such principal amount of
Notes. As used in this definition, "APPLICABLE
PERCENTAGE" means:
(a) in the case of any prepayment of Notes
pursuant to Section 4.3, or in the case of any Notes that
have become or been declared to be immediately due and
payable pursuant to Section 10, as the context requires,
the Table Percentage determined as of such date (provided
that nothing in this definition or elsewhere in this
Agreement shall be construed to permit a prepayment of
Notes pursuant to Section 4.3 prior to August 13, 2000,
unless a 1993 Warrant Call Option Event shall have
occurred and a prepayment of Notes pursuant to Section
4.4(b) shall have been effected);
(b) in the case of any prepayment of Notes
pursuant to Section 4.4, 7.0%; and
(c) in the case of any prepayment of Notes
pursuant to Section 4.6, the greater of (i) the Table
Percentage determined as of such date or (ii) 7.0%.
As used in this definition, "TABLE PERCENTAGE" means, as
of any date, the applicable percentage set forth with
respect to such date in the following table:
IF SUCH DATE IS THEN THE APPLICABLE
PERCENTAGE IS
before or on August 13, 12.5%
2001
after August 13, 2001 9.375%
but before or on August
13, 2002
after August 13, 2002 6.25%
but before or on August
13, 2003
after August 13, 2003 3.125%
but before or on April 18,
2004
after April 18, 2004 0.0%
PRO FORMA ADJUSTMENTS -- means, as applicable, and
in connection with any determination at any time under
Section 7.3(b)(ii) or Section 7.3(g) of Consolidated
EBITDA for the then most recently ended period of four
consecutive fiscal quarters of the Company, adjustments
on a pro forma basis to Consolidated EBITDA for such
period of four consecutive fiscal quarters, as follows:
if an Acquisition (as defined below) shall have been
completed during such period (or after the end of such
period but at or before such time of determination), the
results of operations of the Person that was the subject
of an Acquisition shall be included in the determination
of such Consolidated EBITDA; provided that, for the
purposes of this definition, any such Acquisition shall
be deemed to have occurred immediately prior to the
beginning of such period of four consecutive fiscal
quarters, and any Indebtedness Incurred to finance any
such Acquisition shall be deemed to have been incurred
immediately prior to the beginning of such period. For
purposes of this definition, "ACQUISITION" means any
acquisition, directly or indirectly, by the Company or
any of its Subsidiaries, after the Closing Date, of any
Capital Stock or other equity interests of a Person that
concurrently with such acquisition becomes a Subsidiary
of the Company, or all or substantially all of the assets
of a Person.
PROPERTY -- means, unless otherwise specifically
limited, real or personal property of any kind, tangible
or intangible, choate or inchoate.
PROPERTY REINVESTMENT APPLICATION -- means, with
respect to any Transfer of Property, the application of
an amount equal to the Net Proceeds Amount with respect
to such Transfer to the acquisition by the Company or any
of its Subsidiaries of other Property to be used in the
lines of business of the Company and its Subsidiaries
permitted by this Agreement (including, without
limitation, Property constituted by Capital Stock of any
Person that with such application becomes a Subsidiary of
the Company and engages in such lines of business).
PROPOSED PREPAYMENT DATE -- is defined in Section
4.6(c).
PTCE 95-60 -- is defined in Section 13.2.
PURCHASER -- means each Person identified in Annex
as a purchaser of one or more Notes and shares of
Purchaser Shares.
PURCHASER SHARES -- is defined in Section 1.2.
QPAM EXEMPTION -- means Prohibited Transaction Class
Exemption 84-14 issued by the United States Department of
Labor.
QUANEX -- means Quanex Corporation, a Delaware
corporation.
REQUIRED HOLDERS -- means, at any time, the holders
of at least 51% in principal amount of the Notes at the
time outstanding (exclusive of Notes then owned by the
Parent, the Company or any of their respective
Subsidiaries or Affiliates).
REQUIREMENT OF LAW -- with respect to any matter or
Person means any law, rule, regulation, order, decree or
other requirement having the force of law relating to
such matter or Person, and, where applicable, any
interpretation thereof by any authority having
jurisdiction with respect thereto or charged with the
administration thereof.
RESPONSIBLE OFFICER -- means, with respect to any
Person, any Senior Financial Officer and any other
officer of such Person with responsibility for the
administration of the relevant portion of this Agreement.
RULE 144A -- means Rule 144A promulgated under the
Securities Act, as such rule may be amended from time to
time.
SCHARF FAMILY TRUSTS -- means the Michael J. Scharf
1987 Grantor Income Trust, the Scharf Family 1989 Trust
or any other trust, so long as, in each case, more than
50% of the beneficial interests in each such trust are
held for the benefit of one or more of Mr. Scharf,
Gilbert Scharf and individuals who are members, by blood
or by marriage, of the respective families of Mr. Scharf
and Gilbert Scharf.
SCHARF, MR. -- means Michael J. Scharf.
SECURITIES ACT -- means the Securities Act of 1933,
as amended from time to time.
SECURITY -- means "security" as defined in section
2(1) of the Securities Act.
SENIOR CREDIT AGREEMENT -- has the meaning assigned
to such term in the definition of Senior Credit Agreement
Debt in this Section 12.1.
SENIOR CREDIT AGREEMENT DEBT -- means Indebtedness
(including, without limitation, revolving Indebtedness)
of the Company (a) to M&T, the other financial
institutions for which M&T acts as facility agent and any
Successor Lenders incurred or arising under the Revolving
Credit and Term Loan Agreement, dated as of April 18,
1997 among the Company, LaSalle, M&T and any other
financial institutions listed on the signature pages
thereof, as heretofore and hereafter amended,
supplemented or otherwise modified from time to time and
under or in relation to any other agreements or documents
executed in connection with, and as contemplated by, such
Revolving Credit and Term Loan Agreement, as heretofore
and hereafter amended, supplemented or otherwise modified
from time to time and (b) to M&T incurred or arising
under the Chattanooga Mortgage Loan Agreement (such
agreement and such other agreements and documents
referred to in the foregoing clauses (a) and (b) being
referred to collectively as the "SENIOR CREDIT
AGREEMENT"). Any direct or successive modification,
extension, renewal, refunding or refinancing, including,
without limitation, any reborrowing or reutilizing, of
such Indebtedness shall continue to be deemed to be
Senior Credit Agreement Debt for purposes of this
Agreement (whether the lenders in respect thereof are
M&T, the other financial institutions for which M&T acts
as facility agent and/or one or more Successor Lenders).
Any written agreement entered into between the Company
and one or more of M&T, the other financial institutions
for which M&T acts as facility agent or any Successor
Lender in connection with the direct or successive
extension, renewal, refunding or refinancing of Senior
Credit Agreement Debt shall be deemed included within the
defined term "Senior Credit Agreement".
SENIOR DEBT -- means all of the payment obligations
of the Company in respect of:
(a) the outstanding principal amount of the
Senior Credit Agreement Debt, provided that (i) if any
portion of such Senior Credit Agreement Debt shall not
have been Incurred under and in compliance with clause
(a) or clause (b) of Section 7.3, then such portion of
such principal amount shall not constitute Senior Debt,
and (ii) in no event shall the aggregate outstanding
principal amount of Senior Debt at any time exceed
$101,500,000 minus the Senior Debt Reduction Amount at
such time;
(b) (i) interest, if any, and premium, if
any, on or in respect of the Indebtedness referred to in
clause (a) above, provided that any such interest
accruing subsequent to the commencement of a proceeding
under the Bankruptcy Code in respect of Company shall be
included in this clause (b) only to the extent that it is
at the contract rate of interest (and not the default
rate of interest) under the Senior Credit Agreement and
only to the extent such interest is otherwise allowed in
such proceeding;
(c) the fees, if any (including, without
limitation, commitment fees, agency fees and letter of
credit fees), payable pursuant to the Senior Credit
Agreement in respect of the Indebtedness referred to in
clause (a) above;
(d) any other undertaking of the Company under
the Senior Credit Agreement or any other Senior Security
Document with respect to the payment of costs of
collection, attorneys' fees and any other out-of-pocket
expenses incurred by any holder of Indebtedness (or any
agent in respect thereof) of the type referred to in
clause (a) of this definition in connection with the
enforcement of its rights and remedies with respect to
such Indebtedness, any collateral securing the same or
any guaranties provided therefor; and
(e) any other out-of-pocket fees, costs and
expenses of any holder of Indebtedness (or any agent in
respect thereof) under the Senior Credit Agreement in
respect of the Indebtedness referred to in clause (a)
above.
SENIOR DEBT EVENT OF DEFAULT -- is defined in
Section 11.3(c).
SENIOR DEBT EVENT OF DEFAULT BLOCKAGE PERIOD -- is
defined in Section 11.3(c).
SENIOR DEBT EVENT OF DEFAULT NOTICE -- is defined in
Section 11.3(c).
SENIOR DEBT PAYMENT APPLICATION -- means, with
respect to any Transfer of Property that constitutes an
Asset Disposition, the application by the Company or any
of its Subsidiaries of cash in an amount equal to the Net
Proceeds Amount with respect to such Transfer to pay
principal of Senior Debt, so long as the maximum
permitted principal amount of Senior Debt is, by
operation of clause (b) of the definition of Senior Debt
Reduction Amount, permanently reduced as a result of such
payment of principal, provided that the Company shall
deliver to each holder of Notes, within five Business
Days after any Senior Debt Prepayment Application, a
written notice describing such Transfer, specifying such
Net Proceeds Amount and the principal amount of Senior
Debt so paid, and stating that such application
constitutes a Senior Debt Payment Application within the
meaning of the Note and Stock Purchase Agreements.
SENIOR DEBT REDUCTION AMOUNT -- means, at any time,
the sum of the following amounts:
(a) the Senior Term Loan Reduction Amount at
such time; plus
(b) the aggregate amount of payments, made at
or prior to such time, of principal of Senior Debt
pursuant to any one or more Senior Debt Payment
Applications.
SENIOR FINANCIAL OFFICER -- means, with respect to
any Person, the chief financial officer, the comptroller
or the treasurer of such Person (or another officer
having substantially similar responsibilities).
SENIOR SECURITY DOCUMENTS -- means the Senior Credit
Agreement and all other documents and instruments in
connection therewith, and, for purposes of avoidance of
doubt, all documents and instruments evidencing or
relating to any Indebtedness that shall have extended,
renewed, refunded or refinanced (either directly or
successively) the original Senior Credit Agreement Debt.
SENIOR TERM LOAN -- means the "Term Loan" as such
term is defined in Section 2.2(a) of the Senior Credit
Agreement as in effect on the Closing Date, and any
subsequent term loan or term loans under the Senior
Credit Agreement as in effect from time to time.
SENIOR TERM LOAN REDUCTION AMOUNT -- means, at any
time, an amount equal to the aggregate amount of the
payments of principal of the Senior Term Loan scheduled,
pursuant to Section 2.2(b) of the Senior Credit Agreement
as in effect on the Closing Date, to have been made at or
before such time, whether or not such scheduled payments
of principal have in fact been made at or before such
time (each such scheduled payment of principal is
sometimes referred to herein as a "SCHEDULED PRINCIPAL
PAYMENT") (a copy of Section 2.2(b) of the Senior Credit
Agreement as in effect on the Closing Date is attached to
this Agreement as Exhibit E; such Exhibit shall be
determinative for the purposes of this definition of
Senior Term Loan Reduction Amount), provided that:
(a) the Senior Term Loan Reduction Amount
shall in no event be less than $0 or greater than
$40,000,000;
(b) all or a portion of any one or more
Scheduled Principal Payments may, pursuant to an
amendment, waiver or other modification effected pursuant
to the applicable provisions of the Senior Credit
Agreement, be deferred as to scheduled time of payment,
and for purposes of the first paragraph of this
definition the schedule of Scheduled Principal Payments
referred to in such paragraph and set forth in Exhibit E
shall be deemed to have been changed to give effect to
such amendment, waiver or other modification and such
deferral as to scheduled time of payment, so long as:
(i) in no event shall the scheduled time
of payment of any Scheduled Principal Payment be
changed to a date that is later than April 1, 2005;
(ii) in no event may more than 12
Scheduled Principal Payments be so deferred in whole
or in part (whether pursuant to one or more
amendment, waiver or other modifications) during the
period commencing immediately after giving effect to
the Closing and ending at the first time at which
none of the Company's obligations under the Note and
Stock Purchase Agreements and the Notes shall remain
outstanding; and
(iii) within five Business Days after the
effective date of any such amendment, waiver or
other modification the Company shall deliver to each
holder of Notes a copy of such amendment, waiver or
other modification and a copy of the new schedule of
Scheduled Principal Payments as so amended, waived
or otherwise modified;
(c) in the event that a Scheduled Principal
Payment shall not have been made before or on the
scheduled date therefor set forth in the schedule of
Scheduled Principal Payments (as may be so amended,
waived or otherwise modified), then the increase in the
Senior Term Loan Reduction Amount (in the amount of such
Scheduled Principal Payment) to be effected pursuant to
the first paragraph of this definition shall not be
deemed to be effective until the earlier of (i) the date
that is 15 days after the scheduled date of payment of
such Scheduled Principal Payment and (ii) the date of
actual payment of such Scheduled Principal Payment.
SIGNIFICANT SUBSIDIARY -- means, at any time, any
Subsidiary of any Obligor that satisfies at least one of
the following conditions:
(a) the portion of Consolidated Total Assets
(determined with the assets of such Subsidiary being
valued, for purposes of this clause (a), at the greater
of (i) the book value thereof and (ii) the Fair Market
Value thereof), determined as of the end of the then most
recently ended fiscal year of such Obligor, attributable
to such Subsidiary pursuant to GAAP is at least 10%,
determined at such time, of Consolidated Total Assets; or
(b) the portion of Consolidated Net Income,
determined for the then most recently ended fiscal year
of such Obligor, attributable to such Subsidiary in
accordance with GAAP is at least 10%, determined for such
period, of such Consolidated Net Income.
Solely for the purpose of this definition of Significant
Subsidiary, Consolidated Total Assets and Consolidated
Net Income shall be determined by reference to such
Obligor and its Subsidiaries, rather than by reference to
the Company and its Subsidiaries.
SOURCE -- is defined in Section 13.2.
STOCKHOLDERS AGREEMENT -- is defined in Attachment
A.
SUBORDINATED DEBT -- means all obligations,
liabilities and indebtedness of the Company now or
hereafter existing, whether for principal, Prepayment
Compensation, if any, interest, fees, expenses or
otherwise, under or arising out of the Note and Stock
Purchase Agreements or the Notes.
SUBSIDIARY -- means, with respect to any Person, any
corporation, association or other business entity in
which such Person or one or more of its Subsidiaries, or
such Person and one or more of its Subsidiaries, owns
sufficient equity or voting interests to enable it or
them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or
Persons performing similar functions) of such entity, and
any partnership or joint venture if more than a 50%
interest in the profits or capital thereof is owned by
such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries (unless such
partnership or joint venture can and does ordinarily take
major business actions without the prior approval of such
Person or one or more of its Subsidiaries). Unless the
context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the
Parent.
SUBSIDIARY GUARANTY AGREEMENTS -- is defined in
Section 6.8.
SUCCESSOR LENDER -- means any original or successor
lender to the Company in respect of the Senior Credit
Agreement Debt.
TRANSFER -- means, with respect to any Person, any
transaction in which such Person sells, conveys,
transfers, leases (as lessor) or otherwise disposes of
any of its Property, including, without limitation,
Company Subsidiary Stock, and including, without
limitation, any consolidation, merger or other
transaction the direct or indirect result of which is a
disposition of all or a portion of any equity or other
interest in any Person.
WHOLLY-OWNED SUBSIDIARY -- means, with respect to
any Person, at any time, any Subsidiary of such Person
100% of all of the equity interests (except directors'
qualifying shares) and voting interests of which are
owned by any one or more of such Person and such Person's
other Wholly-Owned Subsidiaries at such time.
12.2 ACCOUNTING PRINCIPLES.
Where the character or amount of any asset or
liability or item of income or expense, or any
consolidation or other accounting computation is required
to be made for any purpose hereunder, it shall be done in
accordance with GAAP as in effect on the date of, or at
the end of the period covered by, the financial
statements from which such asset, liability, item of
income, or item of expense, is derived, or, in the case
of any such computation, as in effect on the date as of
which such computation is required to be determined,
provided, that if any term defined herein includes or
excludes amounts, items or concepts that would not be
included in or excluded from such term if such term was
defined with reference solely to GAAP, such term will be
deemed to include or exclude such amounts, items or
concepts as set forth herein.
13. PURCHASER REPRESENTATIONS, ETC.
13.1 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes and
the Purchaser Shares for your own account or for one or
more separate accounts maintained by you or for the
account of one or more pension or trust funds and not
with a view to the distribution thereof, provided that
the disposition of your or their Property shall at all
times be within your or their control. You understand
that the Notes and the Purchaser Shares have not been
registered under the Securities Act and may be resold
only in compliance with applicable federal and state
securities laws and, with respect to the federal
securities laws, only if registered pursuant to the
provisions of the Securities Act or if an exemption from
registration is available, except under circumstances
where neither such registration nor such an exemption is
required by law, that the Company is not required to
register the Notes and that the Parent is not required to
register the Purchaser Shares except as provided in the
Stockholders Agreement. You agree that each Note will
bear a legend substantially in the form set forth at the
beginning of the form of Note in Exhibit A, provided that
the requirement that each Note bear such a legend shall
terminate as to any Note (and as to any other Note issued
in substitution or exchange therefor) when such Note
shall have been effectively registered under the
Securities Act and disposed of in accordance with the
registration statement covering such Note or transferred
pursuant to Rule 144 (or any successor provision) under
the Securities Act.
13.2 SOURCE OF FUNDS.
You represent that at least one of the following
statements is an accurate representation as to each
source of funds (a "SOURCE") to be used by you to pay the
purchase price of the Notes and the Purchaser Shares to
be purchased by you hereunder:
(a) GENERAL ACCOUNT -- you are an insurance
company and the Source is an "insurance company general
account," as such term is defined in Department of Labor
Prohibited Transaction Class Exemption 95-60 (issued July
12, 1995) ("PTCE 95-60"), and there is no employee
benefit plan, treating as a single plan all plans
maintained by the same employer (and affiliates thereof
as defined in section V(a)(1) of PTCE 95-60) or by the
same employee organization, with respect to which the
amount of the general account reserves and liabilities
for all contracts held by or on behalf of such plan,
exceeds 10% of the total reserves and liabilities of such
general account as determined under PTCE 95-60 (exclusive
of separate account liabilities) plus surplus, as set
forth in the National Association of Insurance
Commissioners Annual Statement filed with your state of
domicile; or
(b) SEPARATE ACCOUNT -- the Source is a
separate account:
(i) 10% POOLED SEPARATE ACCOUNT -- that
is an insurance company pooled separate account,
within the meaning of Department of Labor Prohibited
Transaction Class Exemption 90-1 (issued January 29,
1990), and to the extent that there are any plans
whose assets in such separate account exceed 10% of
the assets of such separate account, you have
disclosed the names of such plans to the Company in
writing; or
(ii) IDENTIFIED PLAN ASSETS -- that is
comprised of employee benefit plans identified by
you in writing and with respect to which the Company
and the Parent hereby warrant and represent that, as
of the Closing Date, neither the Obligors nor any
ERISA Affiliate is a "party in interest" (as defined
in section 3 of ERISA) or a "disqualified person"
(as defined in section 4975 of the Code) with
respect to any plan so identified; or
(iii) GUARANTIED SEPARATE ACCOUNT -- that
is maintained solely in connection with fixed
contractual obligations of an insurance company,
under which any amounts payable, or credited, to any
employee benefit plan having an interest in such
account and to any participant or beneficiary of
such plan (including an annuitant) are not affected
in any manner by the investment performance of the
separate account (as provided by 29 CFR SECTION2510.3-
101(h)(1)(iii)); or
(c) QPAM -- the Source constitutes assets of
an "investment fund" (within the meaning of Part V of the
QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined
with the assets of all other employee benefit plans
established or maintained by the same employer or by an
affiliate (within the meaning of section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions
of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a Person controlling or controlled
by the QPAM (applying the definition of "control" in
section V(e) of the QPAM Exemption) owns a 5% or more
interest in any Obligor and (i) the identity of such QPAM
and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been
disclosed to the Company in writing pursuant to this
Section 13.2(c); or
(d) GOVERNMENTAL PLAN -- the Source is a
governmental plan; or
(e) IDENTIFIED PLANS, ETC. -- the Source is
one or more employee benefit plans, or a separate account
or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company
in writing pursuant to this Section 13.2(e); or
(f) EXEMPT, ETC. -- the Source does not
include assets of any employee benefit plan, other than a
plan exempt from the coverage of ERISA.
As used in this Section 13.2, the terms "employee benefit
plan", "governmental plan", "party in interest" and
"separate account" shall have the respective meanings
assigned to such terms in section 3 of ERISA.
14. EXPENSES, ETC.
14.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby
are consummated, the Parent, the Company and LaSalle will
pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and
each Other Purchaser or holder of a Note in connection
with such transactions (provided that such costs and
expenses in connection with the transactions through and
including the contemplated Closing, but not in connection
with any amendments, waivers or consents, shall be
limited to reasonable out-of-pocket costs and expenses)
and in connection with any amendments, waivers or
consents under or in respect of any Financing Document
(whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs
and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any
rights under the Financing Documents or in responding to
any subpoena or other legal process or informal
investigative demand issued in connection with any of the
Financing Documents, or by reason of being a holder of
any Note, and (b) the costs and expenses, including,
without limitation, financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of any
Obligor or in connection with any work-out or
restructuring of the transactions contemplated by any of
the Financing Documents. The Parent, the Company and
LaSalle will pay, and will save you and each other holder
of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders
(other than those retained by you).
14.2 SURVIVAL.
The obligations of the Parent, the Company and
LaSalle under this Section 14 will survive the payment or
transfer of any Note, the enforcement, amendment or
waiver of any provision of the Financing Documents, and
the termination of the Financing Documents.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained herein
shall survive the execution and delivery of the Financing
Documents, the purchase or transfer by you of any Note or
portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder
of a Note, regardless of any investigation made at any
time by or on behalf of you or any other holder of a
Note. All statements contained in any certificate or
other instrument delivered by or on behalf of any Obligor
pursuant to any of the Financing Documents shall be
deemed representations and warranties of the Parent, the
Company and LaSalle under this Agreement.
16. AMENDMENT AND WAIVER
16.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and
only with) the written consent of the Parent, the
Company, LaSalle and the Required Holders, except that
(a) no amendment or waiver of any of the provisions of
Sections 1, 2, 3 or 13, or any defined term (as it is
used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment
or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Section 10.3 relating to
acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or reduce the
rate or change the time of payment or method of
computation of interest or of the Prepayment Compensation
on, the Notes, (ii) change the definition of Required
Holders or the percentage of the principal amount of the
Notes the holders of which are required to consent to any
such amendment or waiver, or (iii) amend any of Sections
4, 9(a), 9(b), 10 and 16.
16.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide
each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information,
sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and
considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the
provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the
provisions of this Section 16 to each holder of
outstanding Notes promptly following the date on which it
is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) PAYMENT. Neither the Parent, the Company
nor LaSalle will directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental
or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or
as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and
provisions of any of the Financing Documents unless such
remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did
not consent to such waiver or amendment.
16.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in
this Section 16 applies equally to all holders of Notes
and is binding upon them and upon each future holder of
any Note and upon the Parent, the Company and LaSalle
without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly
amended or waived or impair any right consequent thereon.
No course of dealing between any Obligor and the holder
of any Note nor any delay in exercising any rights
hereunder, under any Note or under any other Financing
Document shall operate as a waiver of any rights of any
holder of such Note. As used herein, the term "THIS
AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or
supplemented.
16.4 NOTES HELD BY OBLIGORS, ETC.
Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given
under any Financing Document, or have directed the taking
of any action provided in any Financing Document to be
taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by
the Parent, the Company, LaSalle, any of their respective
Subsidiaries or any of their respective other Affiliates
shall be deemed not to be outstanding.
17. NOTICES
All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if
the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail
with return receipt requested (postage prepaid), or
(c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or
it at the address specified for such communications
in Annex 1, or at such other address as you or it
shall have specified to the Company in writing,
(ii) if to any other holder of any Note,
to such holder at such address as such other holder
shall have specified to the Company in writing,
(iii) if to the Parent, to the Parent at
677 Madison Avenue, New York, NY 10021, Attention:
President, telephone (212) 317-1000, telecopier
(212) 317-1001, or at such other address or
telecopier as the Parent shall have specified to the
holder of each Note in writing,
(iv) if to the Company, to the Company
(with a courtesy copy to the Parent) at 110 Hopkins
Street, P.O. Box 399, Buffalo, NY 14240, Attention:
President, telephone (716) 827-7010, telecopier
(716) 827-8855, or at such other address or
telecopier as the Company shall have specified to
the holder of each Note in writing, or
(v) if to LaSalle, to LaSalle (with
courtesy copies to the Parent and the Company) at
1412 - 150th Street, Hammond, IN 46327, Attention:
President, telephone (219) 853-6000, telecopier
(219) 853-6095, or at such other address or
telecopier as LaSalle shall have specified to the
holder of each Note in writing.
Notices under this Section 17 will be deemed given only
when actually received.
18. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed,
(b) documents received by you at the Closing (except the
Notes and the certificates evidencing the Purchaser
Shares themselves), and (c) financial statements,
certificates and other information previously or
hereafter furnished to you, may be reproduced by you by
any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you
may destroy any original document so reproduced. The
Parent, the Company and LaSalle agree and stipulate that,
to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the
original itself in any judicial or administrative
proceeding (whether or not the original is in existence
and whether or not such reproduction was made by you in
the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. This Section
18 shall not prohibit the Parent, the Company, LaSalle or
any holder of Notes or Purchaser Shares from contesting
any such reproduction to the same extent that it could
contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
19. MISCELLANEOUS
19.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto
bind and inure to the benefit of their respective
successors and assigns (including, without limitation,
any subsequent holder of a Note) whether so expressed or
not.
19.2 PAYMENTS, MISCELLANEOUS.
(a) PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or
Prepayment Compensation or interest on any Note that is
due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the
additional days elapsed in the computation of the
interest payable on such next succeeding Business Day.
(b) PAYMENTS, WHEN RECEIVED. Any payment to
be made to the holders of Notes hereunder or under the
Notes shall be deemed to have been made on the Business
Day such payment actually becomes available to such
holder at such holder's bank prior to 11:00 a.m. (local
time of such bank).
19.3 SEVERABILITY.
Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full
extent permitted by law) not invalidate or render
unenforceable such provision in any other jurisdiction.
19.4 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be
taken by any Person, or that such Person is prohibited
from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such
Person, including, without limitation, actions taken by
or on behalf of any partnership in which such Person is a
general partner.
19.5 SECTION HEADINGS AND TABLE OF CONTENTS, ETC.
The titles of the Sections of this Agreement and the
Table of Contents of this Agreement appear as a matter of
convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to
this Agreement as a whole and not to any particular
Section or other subdivision. Unless otherwise
specified, references to Sections are to Sections of this
Agreement, references to Annexes are to Annexes to this
Agreement, references to Attachments are to Attachments
to this Agreement and references to Exhibits are to
Exhibits to this Agreement.
19.6 CONSTRUCTION.
Each covenant contained herein shall be construed
(absent express provision to the contrary) as being
independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision
herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such
provision shall be applicable whether such action is
taken directly or indirectly by such Person.
19.7 COUNTERPARTS.
This Agreement may be executed in any number of
counterparts, each of which shall be an original but all
of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof,
each signed by less than all, but together signed by all,
of the parties hereto.
19.8 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT
WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE.
19.9 CERTAIN CHANGES IN GAAP.
If at any time any Obligor shall, in its reasonable
judgment and after consulting with its independent
certified accountants, determine that a change in GAAP
shall have occurred after the Closing Date and that such
change will have a material adverse effect on the ability
of such Obligor to comply with any one or more of the
covenants in this Agreement, each holder of Notes will,
upon the written request of such Obligor, negotiate in
good faith with such Obligor, and such Obligor will
negotiate in good faith with each holder of Notes, to
attempt to reach agreement within a reasonable period of
time as to the terms of one or more mutually agreeable
amendments or waivers, in accordance with Section 16,
with respect to such covenants (or the definitions
utilized therein) such that the material adverse effect
of such change in GAAP on the ability of such Obligor to
comply with such covenants is fairly and equitably
adjusted for, taking into account the nature of such
change and the original purpose of such covenants (or the
definitions utilized therein). Each written request by
an Obligor pursuant to the first sentence of this Section
19.9 shall be accompanied by (i) a statement from the
independent certified public accountants of such Obligor
describing the applicable change in GAAP and
demonstrating, on a pro forma basis and in reasonable
detail, the effect that such change would have in respect
of the computations or statements, as the case may be,
required by the applicable covenants herein if such
change had been effective throughout the Fiscal Year then
most recently ended and (ii) a statement of one or more
specific amendment or waiver provisions then proposed by
such Obligor in connection with such change in GAAP.
Unless and until such mutually agreeable amendments or
waivers shall have become effective in accordance with
Section 16, such covenants (and the definitions used
therein) shall remain unchanged and in full force and
effect.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS
SIGNATURE PAGE.]
If this Agreement is satisfactory to you, please so
indicate by signing the acceptance at the foot of a
counterpart hereof and returning such counterpart to the
Company, whereupon this Agreement shall become binding
among us in accordance with its terms.
Very truly yours,
NIAGARA CORPORATION
By_________________________
Name:
Title:
NIAGARA COLD DRAWN CORP.
By_________________________
Name:
Title:
LASALLE STEEL COMPANY
By_________________________
Name:
Title:
[SIGNATURE PAGE FOR NOTE AND STOCK PURCHASE AGREEMENT IN
CONNECTION WITH THE ISSUANCE BY NIAGARA COLD DRAWN CORP.
OF 12.5% SENIOR SUBORDINATED NOTES DUE 2005 AND THE
ISSUANCE BY NIAGARA CORPORATION OF COMMON STOCK]
Accepted:
[PURCHASER]
By________________________________
Name:
Title:
[SIGNATURE PAGE FOR NOTE AND STOCK PURCHASE AGREEMENT IN
CONNECTION WITH THE ISSUANCE BY NIAGARA COLD DRAWN CORP.
OF 12.5% SENIOR SUBORDINATED NOTES DUE 2005 AND THE
ISSUANCE BY NIAGARA CORPORATION OF COMMON STOCK]
ANNEX 1
INFORMATION AS TO PURCHASERS
Purchaser Name THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
Name in which to THE PRUDENTIAL INSURANCE COMPANY OF
register Note(s) AMERICA
Note registration R-1; $8,500,000
number(s);
Principal amount(s)
Stock Certificate No. IMAC 0216; 121,429 shares
No.; Number of
Purchaser Shares
Payment on account
of Note(s)
Method Federal Funds Wire Transfer
Account Bank of New York
information New York, New York
ABA No.: 012-000-018
Account No.: 890-0304-391, Prudential
Managed Account
Accompanying Name of Company: Niagara Cold Drawn
information with Corp.
respect to payment
on the Notes Description of
Security: 12.5% Senior Subordinated
Notes due April 18, 2005
PPN: 65334# AA 4
Ref: !INV _________!
Due date and application (as among
principal, Prepayment Compensation and
interest) of the payment being made:
Address for notices The Prudential Insurance Company of
and communications America
related to payments Three Gateway Center
on the Notes 100 Mulberry Street
Newark, NJ 07102-4077
Attention: Manager, Billings and
Collections
Tel: (201) 802-5260
Fax: (201) 802-8055
Address for all The Prudential Insurance Company of
other notices and America
communications c/o The Prudential Capital Group
One Gateway Center, 11th Floor
7-45 Raymond Boulevard West
Newark, NJ 07102-5311
Attention: Managing Director
Tel: (201) 802-9182
Fax: (201) 802-3200
ANNEX 1
INFORMATION AS TO PURCHASERS (cont.)
Purchaser Name THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
Receipt of Manager, Trade Management
telephonic Tel: (201) 802-7398
prepayment notices Fax: (201) 802-9425
Tax identification 22-1211670
number
ANNEX 1
INFORMATION AS TO PURCHASERS (cont.)
Purchaser Name THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
Name in which to THE EQUITABLE LIFE ASSURANCE SOCIETY OF
register Note(s) THE UNITED STATES
Note registration R-2; $8,500,000
number(s);
Principal amount(s)
Stock Certificate No. IMAC 0217; 121,429 shares
No.; Number of
Purchaser Shares
Payment on account
of Note(s)
Method Federal Funds Wire Transfer
Account The Chase Manhattan Bank, N.A.
information 1251 Avenue of the Americas
New York, New York 10020
ABA No.: 021-00-0021
For the Account of: The Equitable Life
Assurance Society of the
United States
Account No.: 037-2-409417
Accompanying Name of Company: Niagara Cold Drawn
information with Corp.
respect to payment
on the Notes Description of
Security: 12.5% Senior Subordinated
Notes due April 18, 2005
PPN: 65334# AA 4
Due date and application (as among
principal, Prepayment Compensation and
interest) of the payment being made:
Address for notices The Equitable Life Assurance Society of
and communications the United States
related to payments c/o Alliance Capital Management, L.P.
on the Notes 135 West 50th Street 6th Floor
New York, NY 10020
Attention: Treasury Services
Address for all The Equitable Life Assurance Society of
other notices and the United States
communications c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas, 41st Floor
New York, NY 10105
Attention: Alliance Corporate Finance
Group Inc.
(212) 969-1547 - Phone
(212) 969-1529 - Fax
Tax identification 13-5570651
number
ANNEX 1
INFORMATION AS TO PURCHASERS (cont.)
Purchaser Name UNITED STATES FIDELITY AND GUARANTY
COMPANY
Name in which to UNITED STATES FIDELITY AND GUARANTY
register Note(s) COMPANY
Note registration R-3; $3,000,000
number(s);
Principal amount(s)
Stock Certificate No. IMAC 0218; 42,857 shares
No.; Number of
Purchaser Shares
Payment on account
of Note(s)
Method Federal Funds Wire Transfer
Account The Bank of New York
information ABA No.: 021000018
USF&G/IMG, # 368934
IOC 565
Attention: Devika Soi'Emr
Accompanying Name of Company: Niagara Cold Drawn
information with Corp.
respect to payment
on the Notes Description of
Security: 12.5% Senior Subordinated
Notes due April 18, 2005
PPN: 65334# AA 4
Due date and application (as among
principal, Prepayment Compensation and
interest) of the payment being made:
Address for notices Falcon Asset Management, Inc.
and communications F/A United States Fidelity and Guaranty
related to payments Company
on the Notes Attn: Investment Operations
P.O. Box 1138
Baltimore, MD 21203-1138
LB 0102
Address for all Falcon Asset Management, Inc.
other notices and F/A United States Fidelity and Guaranty
communications Company
Attn: Investment Operations
P.O. Box 1138
Baltimore, MD 21203-1138
LB 0102
Address for The Bank of New York
delivery of One Wall Street - 3rd Floor, Window A
securities New York, NY 10286
A/C # 368934
Attn: Devika Soi'Emr
ANNEX 1
INFORMATION AS TO PURCHASERS (cont.)
Purchaser Name UNITED STATES FIDELITY AND GUARANTY
COMPANY
Tax identification 52-0515280
number
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
RE: $20,000,000 12.5% SENIOR SUBORDINATED NOTES DUE 2005
ISSUED BY NIAGARA COLD DRAWN CORP.; 285,715 SHARES
OF COMMON STOCK ISSUED BY NIAGARA CORPORATION
In accordance with Section 1.2(b) of the Note and
Stock Purchase Agreement, the Parent and the Company
direct you to make payment for the Note or Notes and the
Purchaser Shares being purchased by you by payment by
federal funds wire transfer in immediately available
funds of the purchase price thereof to:
Manufacturers and Traders Trust Company
Buffalo, NY
ABA no.: 022000046
Account no.: 9622283
Account name: Niagara Cold Drawn Corp.
Contact person at bank:
Name: Robert Kush
Phone no.: (716) 848-7348
ATTACHMENT A
A. WARRANTIES AND REPRESENTATIONS OF THE OBLIGORS
To induce you to enter into this Agreement and to
purchase and pay for the Notes and Purchaser Shares to be
delivered to you at the Closing, each of the Parent, the
Company and LaSalle makes the following warranties and
representations, effective as of the date of the
Parent's, the Company's and LaSalle's execution of this
Agreement, as of the Closing Date immediately prior to
the Closing and as of the Closing Date immediately after
giving effect to the Acquisition:
A.1 ORGANIZATION; POWER AND AUTHORITY.
Each Obligor is a corporation duly organized,
validly existing and in good standing under the laws of
its jurisdiction of incorporation, and is duly qualified
as a foreign corporation and is in good standing (or,
with respect to the State of Indiana, is duly authorized
to transact business in such State) in each jurisdiction
in which Property is owned, leased or operated or in
which the business it currently transacts makes such
qualification necessary, other than those jurisdictions
as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Each Obligor has the corporate power and authority to own
or hold under lease the Properties it purports to own or
hold under lease, to transact the business it currently
transacts, to execute and deliver each Financing Document
to which it is or is to be a party and to perform the
provisions hereof and thereof.
A.2 AUTHORIZATION, ETC.
The Financing Documents have been duly authorized by
all necessary corporate action on the part of each
Obligor that is a party thereto, and each of the
Financing Documents (other than the Notes) constitutes,
and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of each
Obligor party thereto enforceable against such Obligor in
accordance with its terms, except as such enforceability
may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally
and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law). The Purchaser Shares have been
duly authorized by all necessary corporate action on the
part of the Parent, and such Purchaser Shares when issued
will be validly issued, fully paid, non-assessable and
free and clear of any Lien.
A.3 DISCLOSURE.
The Company, through its agent, CIBC Wood Gundy
Securities Corp., has delivered to you a copy of an
Information Memorandum (including, without limitation,
all appendices thereto and the accompanying Supplemental
Information Volume, collectively, the "MEMORANDUM"),
relating to the transactions contemplated hereby. The
Memorandum fairly describes, in all material respects,
the general nature of the business and principal
Properties of the Parent and the Subsidiaries. Except as
disclosed in Part A.3 of Annex 3 (or, with respect to the
Parent and the Company, in the Parent's Form 10-K for the
fiscal year ended December 31, 1996 of the Parent filed
with the Securities and Exchange Commission, and, with
respect to LaSalle, in the Disclosure Schedule to the
Acquisition Agreement), the Financing Documents, the
Memorandum, the documents, certificates or other writings
delivered to you by or on behalf of the Company or the
Parent in connection with the transactions contemplated
by the Financing Documents and the financial statements
listed in Part A.5 of Annex 3, taken as a whole, do not
contain any untrue statement of a material fact or omit
to state any material fact necessary to make the
statements therein not misleading in light of the
circumstances under which they were made. Except as
disclosed in the Memorandum or as expressly described in
Part A.3 of Annex 3, or in one of the documents,
certificates or other writings identified therein, or in
the financial statements listed in Part A.5 of Annex 3,
since December 31, 1996 with respect to the Parent and
the Company and since October 31, 1996 with respect to
LaSalle, there has been no change in the business,
operations, affairs, financial condition, assets or
Properties of the Parent or any of the Subsidiaries
except changes that individually or in the aggregate
could not reasonably be expected to have a Material
Adverse Effect. There is no fact known to the Parent or
the Company that could reasonably be expected to have a
Material Adverse Effect that has not been set forth
herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on
behalf of the Parent or the Company specifically for use
in connection with the transactions contemplated hereby.
Without limiting any of the Company's and the Parent's
representations and warranties in this Section A.3, it is
understood that neither you, the Parent, nor the Company
has intended that the scope of disclosure made to you in
the materials referred to in this Section A.3 would be
the same as that in, or would address all the matters
customarily addressed in, a registration statement filed
in connection with a public offering under the Securities
Act.
A.4 ORGANIZATION AND OWNERSHIP OF SHARES OF
SUBSIDIARIES; AFFILIATES.
(a) Part A.4 of Annex 3 contains (except as
noted therein) complete and correct lists of (i) the
Subsidiaries, showing, as to each such Subsidiary, the
correct name thereof, the jurisdiction of its
organization and the percentage of shares of each class
of its Capital Stock or similar equity interests
outstanding owned by the Parent and each other
Subsidiary, (ii) the Parent's Affiliates (to the
knowledge of the Parent), other than Subsidiaries of the
Parent (provided, that the Parent expresses no
representation or warranty as to whether or not any
Purchaser may be an Affiliate), (iii) the Parent's
directors and senior officers, and (iv) the Company's
directors and senior officers. The Company is a Wholly-
Owned Subsidiary of the Parent. After giving effect to
the Acquisition, LaSalle will be a Wholly-Owned
Subsidiary of the Company.
(b) All of the outstanding shares of Capital
Stock or similar equity interests of each Subsidiary have
been validly issued, are fully paid and nonassessable and
are owned by the Parent or another Wholly-Owned
Subsidiary of the Parent free and clear of any Lien
(except as otherwise disclosed in Part A.4 of Annex 3).
(c) Each Subsidiary is a corporation or other
legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of
organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing
(or, with respect to the State of Indiana, is duly
authorized to transact business in such State) in each
jurisdiction in which Property is owned, leased or
operated or in which the business it currently transacts
makes such qualification necessary, other than those
jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material
Adverse Effect. Each Subsidiary has the corporate or
other power and authority to own or hold under lease the
Properties it purports to own or hold under lease and to
transact the business it currently transacts.
(d) No Subsidiary is a party to, or otherwise
subject to any legal restriction or any agreement (other
than the Note and Stock Purchase Agreements, the
agreements listed in Part A.4 of Annex 3 and customary
limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar
distributions of profits to the Parent or the Company or
any of the Subsidiaries that owns outstanding shares of
Capital Stock or similar equity interests of such
Subsidiary.
A.5 FINANCIAL STATEMENTS.
The Parent has delivered to each Purchaser copies of
the financial statements of the Parent and the
Subsidiaries listed in Part A.5 of Annex 3. All of said
financial statements (including in each case the related
schedules and notes) fairly present, in all material
respects, the consolidated financial position of the
Parent and the Subsidiaries as of the respective dates
specified in such financial statements and the
consolidated results of their operations and cash flows
for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in
the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments).
A.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the
Obligors of the Financing Documents will not
(a) contravene, result in any breach of, or
constitute a default under, or result in the creation of
any Lien in respect of any Property of the Parent or any
of the Subsidiaries under, any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or
instrument to which the Parent or any of the Subsidiaries
is bound or by which the Parent or any of the
Subsidiaries or any of their respective Properties may be
bound or affected,
(b) conflict with or result in a breach of any
of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Parent or any of
the Subsidiaries, or
(c) violate any provision of any statute or
other rule or regulation of any Governmental Authority
applicable to the Parent or any of the Subsidiaries.
A.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
Except as disclosed in Part A.7 of Annex 3, no
consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or
performance by the Obligors of the Financing Documents.
A.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES
AND ORDERS.
(a) Except as disclosed in Part A.8 of Annex
3, there are no actions, suits or proceedings pending or,
to the knowledge of the Company or the Parent, threatened
against or affecting the Parent or any of the
Subsidiaries or any Property of the Parent or any of the
Subsidiaries in any court or before any arbitrator of any
kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Parent nor any of the
Subsidiaries is in default under any term of any
agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority
or is in violation of any applicable law, ordinance, rule
or regulation (including, without limitation,
Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect.
A.9 TAXES.
Each of the Obligors has filed all tax returns that
are required to have been filed in any jurisdiction, and
has paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon
them or their Properties, assets, income or franchises,
to the extent such taxes and assessments have become due
and payable and before they have become delinquent,
except for any taxes and assessments (a) the amount of
which is not individually or in the aggregate Material or
(b) the amount, applicability or validity of which is
currently being contested in good faith by appropriate
proceedings and with respect to which such Obligor has
established adequate reserves in accordance with GAAP.
Neither the Parent nor the Company knows of any basis for
any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect.
A.10 TITLE TO PROPERTY; LEASES.
The Parent and the Subsidiaries have good and
sufficient title to, or valid leasehold interests in,
their respective Properties that individually or in the
aggregate are Material, including all such Properties
reflected in the most recent audited balance sheet
referred to in Section A.5 or purported to have been
acquired by the Parent or any of the Subsidiaries after
the date of such balance sheet date (except as sold or
otherwise disposed of in the ordinary course of
business), in each case free and clear of Liens
prohibited by the Financing Documents. All leases that
individually or in the aggregate are Material are valid
and subsisting and are in full force and effect in all
material respects.
A.11 LICENSES, PERMITS, ETC.
Except as disclosed in Part A.11 of Annex 3,
(a) the Parent and the Subsidiaries own or
possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without
known conflict with the rights of others;
(b) to the best knowledge of the Parent and
the Company, no product or practice of the Parent or any
of the Subsidiaries infringes in any material respect any
license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other
right owned by any other Person; and
(c) to the best knowledge of the Parent and
the Company, there is no Material violation by any Person
of any right of the Parent or any of the Subsidiaries
with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the
Parent or any of the Subsidiaries.
A.12 COMPLIANCE WITH ERISA.
(a) The Parent and each ERISA Affiliate have
operated and administered each Plan in compliance with
all applicable laws except for such instances of
noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse
Effect. Neither the Parent nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA
other than liability for premiums payable to the PBGC or
the penalty or excise tax provisions of the Code relating
to employee benefit plans (as defined in section 3 of
ERISA) that has not been satisfied in full, and no event,
transaction or condition has occurred or exists that
could reasonably be expected to result in the incurrence
of any such liability by the Parent or any ERISA
Affiliate, or in the imposition of any Lien on any of the
rights, Properties or assets of the Parent or any ERISA
Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to
section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in
the aggregate Material.
(b) Except as set forth in Part A.12 of Annex
3, the present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently
ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to
such benefit liabilities. The term "benefit liabilities"
has the meaning specified in section 4001 of ERISA and
the terms "current value" and "present value" have the
meaning specified in section 3 of ERISA.
(c) The Parent and the ERISA Affiliates have
not incurred withdrawal liabilities (and are not subject
to contingent withdrawal liabilities) under section 4201
or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) Except as set forth in Part A.12 of Annex
3, the accumulated postretirement benefit obligation
(determined as of the last day of the Parent's most
recently ended fiscal year in accordance with Financial
Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the
Parent and the Subsidiaries is not Material.
(e) Part A.12 of Annex 3 sets forth all ERISA
Affiliates of the Parent and all "employee benefit plans"
maintained by the Parent or the Company (or any
"affiliate" thereof) or in respect of which the Notes or
the Purchaser Shares could constitute an "employer
security" ("employee benefit plan" has the meaning
specified in section 3 of ERISA, "affiliate" has the
meaning specified in section 407(d) of ERISA and section
V of PTCE 95-60 and "employer security" has the meaning
specified in section 407(d) of ERISA).
(f) The execution and delivery of the
Financing Documents and the issuance and sale of the
Notes and the Purchaser Shares hereunder will not involve
any transaction that is subject to the prohibitions of
section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the Code. The representation by the Parent and the
Company in the first sentence of this Section A.12(f) is
made in reliance upon and subject to the accuracy of your
representation in Section 13.2 as to the sources of the
funds used to pay the purchase price of the Notes and the
Purchaser Shares to be purchased by you.
A.13 PRIVATE OFFERING BY THE PARENT AND THE
COMPANY.
Neither any Obligor, nor any Person acting on behalf
of any Obligor, has offered the Notes, the Purchaser
Shares or any similar securities for sale to, or
solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof
with, any Person other than you and not more than 75
other Institutional Investors, each of which has been
offered the Notes and the Purchaser Shares at a private
sale for investment. None of the Company, the Parent or
anyone acting on behalf of either one or both of them has
taken, or will take, any action that would subject the
issuance or sale of the Notes and the Purchaser Shares to
the registration requirements of section 5 of the
Securities Act. For purposes of this Section A.13 only,
each reference to the Notes shall be deemed to include a
reference to the Guaranty Agreements.
A.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Parent and the Company will apply the proceeds
of the sale of the Notes and the Purchaser Shares as set
forth in Part A.14 of Annex 3. No part of the proceeds
from the sale of the Notes and the Purchaser Shares
hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose
of buying or carrying or trading in any securities under
such circumstances as to involve any Obligor in a
violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock
does not constitute more than 2% of the value of the
consolidated assets of the Parent and the Subsidiaries
and the Parent does not have any present intention that
margin stock will constitute more than 2% of the value of
such assets. As used in this Section, the terms "margin
stock" and "purpose of buying or carrying" shall have the
meanings assigned to them in said Regulation G.
A.15 CAPITALIZATION.
(a) CAPITALIZATION. Part A.15 of Annex 3
correctly sets forth, after giving effect to the issuance
of Notes and the Purchaser Shares and all other
contemporaneous transactions contemplated hereby on the
Closing Date:
(i) the authorized and outstanding shares
of Capital Stock of the Parent;
(ii) all options, warrants and other
rights to purchase from the Parent any Capital Stock
of the Parent, together with descriptions of the
terms thereof; and
(iii) the number of shares of each class
of Capital Stock of the Parent into which such
options, warrants and rights are exercisable, the
price at which such exercise or conversion may be
made and the percentage of the shares of each class,
on a fully diluted basis, so represented by such
options, warrants or other rights.
All such outstanding shares of Capital Stock of the
Parent have been duly authorized and validly issued and
are fully paid and non-assessable. Immediately upon
issuance in accordance with the provisions of the
Financing Documents, and prior to the imposition of any
Lien upon the Purchaser Shares created by or through any
Purchaser, such Purchaser Shares will be fully paid, non-
assessable and free and clear of any Lien other than
those set forth in the Stockholders Agreement. There are
no obligations (contingent or otherwise) of the Parent to
repurchase or otherwise acquire or retire any shares of
capital stock (or options to purchase the same) of the
Parent, and there are no preemptive rights, subscription
rights, or other contractual rights similar in nature to
preemptive rights with respect to any such Capital Stock,
other than in each case as set forth in the certificate
of incorporation of the Parent as in effect on the
Closing Date and the Stockholders Agreement.
(b) STOCKHOLDERS' AGREEMENTS. Other than the
Stockholders Agreement, there is no other agreement or
understanding between or among the holders of the Capital
Stock of the Parent regarding the Capital Stock of the
Parent or any other matter covered by the Stockholders
Agreement.
A.16 EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Part A.16 of
Annex 3 sets forth a complete and correct list of all
outstanding Indebtedness of the Parent and the
Subsidiaries as of March 31, 1997, since which date there
has been no Material change in the amounts, interest
rates, sinking funds, instalment payments or maturities
of the Indebtedness of the Parent or the Subsidiaries.
Neither the Parent nor any of the Subsidiaries is in
default and no waiver of default is currently in effect,
in the payment of any principal or interest on any
Indebtedness of the Parent or any such Subsidiary and no
event or condition exists with respect to any
Indebtedness of the Parent or any such Subsidiary that
would permit (or that with notice or the lapse of time,
or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of
payment.
(b) Except as disclosed in Part A.16 of Annex
3, neither the Parent nor any of the Subsidiaries has
agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of
its Property, whether now owned or hereafter acquired, to
be subject to a Lien not permitted by Section 7.4.
A.17 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
None of the sale of the Notes by the Company
hereunder, the sale of the Purchaser Shares by the Parent
hereunder, or their use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
A.18 STATUS UNDER CERTAIN STATUTES.
Neither the Parent nor any of the Subsidiaries is
subject to regulation (a) as an "investment company"
under the Investment Company Act of 1940, as amended, (b)
as a "holding company" under the Public Utility Holding
Company Act of 1935, as amended, (c) under the
Transportation Acts, as amended, or (d) as a "regulated
utility" under the Federal Power Act, as amended.
A.19 ENVIRONMENTAL MATTERS.
Neither the Parent nor any of the Subsidiaries has
knowledge of any claim or has received any notice of any
claim, and no proceeding has been instituted raising any
claim against the Parent or any of the Subsidiaries or
any of their respective real Properties now or formerly
owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of
any Environmental Laws, except, in each case, such as
could not reasonably be expected to result in a Material
Adverse Effect. Except as disclosed in reports by
Metcalf & Eddy entitled Environmental Assessment, Final
Report, LaSalle Steel Company; and Sampling Report, Final
Submittal; each dated November 8, 1996 or as disclosed in
Part A.19 of Annex 3, or as otherwise disclosed to you in
writing:
(a) neither the Parent nor any of the
Subsidiaries has knowledge of any facts that would give
rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real
Properties now or formerly owned, leased or operated by
any of them or to other assets or their use, except, in
each case, such as could not reasonably be expected to
result in a Material Adverse Effect;
(b) neither the Parent nor any of the
Subsidiaries has stored any Hazardous Materials on real
Properties now or formerly owned, leased or operated by
any of them or disposed of any Hazardous Materials in a
manner contrary to any Environmental Laws, in each case
in any manner that could reasonably be expected to result
in a Material Adverse Effect; and
(c) all buildings on all real Properties now
owned, leased or operated by the Parent or any of the
Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could
not reasonably be expected to result in a Material
Adverse Effect.
A.20 SOLVENCY.
Immediately prior to the consummation of the
Acquisition and the Closing and after giving effect
thereto, the Obligors, both individually and on a
Consolidated basis, shall be, and are, Solvent. For the
purposes of this representation, "SOLVENT" means, as to
any Person or Persons, both that such Person or Persons
have (i) the ability to pay their debts as they mature in
the ordinary course of business, and (ii) an excess of
assets over liabilities.
A.21 REPRESENTATIONS AND WARRANTIES OF OBLIGORS IN
OTHER FINANCING DOCUMENTS.
Each of the representations and warranties of each
Obligor contained in the other Financing Documents is
true and correct.
A.22 BUSINESS COMBINATION.
A "Business Combination" (as such term is defined in
Article SIXTH of the Restated Certificate of
Incorporation of the Parent, as in effect on the Closing
Date) has occurred.
A.23 ALL DOCUMENTS PROVIDED.
The Company has provided to you true, correct and
complete copies of each of the following, in each case,
as are in effect on the Closing Date and as are to take
effect upon the consummation of the Acquisition:
(a) the Acquisition Agreement, together with
all exhibits and schedules thereto, and of each document
required under the Acquisition Agreement to be delivered
or filed in connection with the consummation of the
Acquisition Agreement;
(b) the Senior Credit Agreement, together with
all exhibits and schedules thereto, and of each document
required under the Senior Credit Agreement to be
delivered or filed in connection with the consummation of
the Senior Credit Agreement;
(c) the 1993 Warrant Agreement, together with
all exhibits and schedules thereto; and
(d) all agreements or other documents that
evidence or otherwise set forth rights with respect to
the capital stock or other equity securities of the
Parent (other than the Note and Stock Purchase Agreements
and the Stockholders Agreement).
ATTACHMENT B
B. CLOSING CONDITIONS
Your obligations under this Agreement, including,
without limitation, the obligation to purchase and pay
for the Notes and the Purchaser Shares to be delivered to
you at the Closing, are subject to the following
conditions precedent:
B.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Skadden, Arps, Slate, Meagher & Flom,
special counsel for the Obligors and Mr. Scharf, and
(b) Hebb & Gitlin, your special counsel,
closing opinions, each dated as of the Closing Date,
substantially in the respective forms set forth in
Exhibit B1 and Exhibit B2 and as to such other matters as
you may reasonably request. This Section B.1 shall
constitute direction by the Parent, the Company and
LaSalle to such counsel named in the immediately
preceding clause (a) to deliver such closing opinion to
you. In addition, you shall have received copies of the
opinions delivered in connection with the consummation of
the Acquisition Agreement, accompanied by letters from
counsel rendering such opinions stating that you are
entitled to rely on such opinions as if they were
addressed to you.
B.2 WARRANTIES AND REPRESENTATIONS TRUE.
The warranties and representations of each of the
Obligors in Attachment A and elsewhere in the Financing
Documents shall be true on the Closing Date with the same
effect as though made on and as of that date.
B.3 COMPLIANCE WITH FINANCING DOCUMENTS AND
STOCKHOLDERS AGREEMENT.
Each of the Obligors shall have performed and
complied with all agreements and conditions contained in
the Financing Documents that are required to be performed
or complied with by each such Obligor on or prior to the
Closing Date, and such performance and compliance shall
remain in effect on the Closing Date. Each Other
Stockholder (as such term is defined in the Stockholders
Agreement) shall have performed and complied with all
agreements and conditions contained in the Stockholders
Agreement that are required to be performed or complied
with by each such Person on or prior to the Closing Date,
and such performance shall remain in effect on the
Closing Date.
B.4 OBLIGORS' CERTIFICATES.
(a) OFFICERS' CERTIFICATES. Each of the
Company and LaSalle shall have delivered to you a
certificate signed by two Senior Financial Officers of
such Obligor and the Parent shall have delivered to you a
certificate signed by one Senior Financial Officer of the
Parent, in each case dated the Closing Date, certifying
that the conditions specified in Section B.2 and Section
B.3 have been fulfilled and as to such other matters as
you may reasonably request.
(b) SECRETARIES' CERTIFICATES. Each Obligor
shall have delivered to you a certificate signed by the
Secretary or an Assistant Secretary of such Obligor
certifying as to true and correct copies attached thereto
of the charter documents and bylaws of such Obligor and
the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and
delivery of the Financing Documents.
B.5 LEGALITY.
The Notes and the Purchaser Shares shall on the
Closing Date qualify as a legal investment for you under
applicable insurance law (without regard to any "basket"
or "leeway" provisions), and the acquisition thereof
shall not subject you to any penalty or other onerous
condition pursuant to any such law or regulation, and you
shall have received such evidence as you may reasonably
request to establish compliance with this condition.
B.6 ACQUISITION AGREEMENT AND RELATED DOCUMENTS.
You shall have received a copy of the Acquisition
Agreement as executed (including any amendment or
modification thereto), together with all exhibits and
schedules thereto, and of each document required under
the Acquisition Agreement to be delivered or filed in
connection with the consummation of the Acquisition
Agreement (collectively, the "ACQUISITION DOCUMENTS"),
certified as true, correct and complete by a Senior
Financial Officer of the Company. All conditions
precedent to the consummation of the Acquisition
Agreement shall have occurred, all governmental
authorizations, consents, approvals, exemptions or other
actions required in connection with the Acquisition
Agreement shall have been duly received or taken, and the
transactions contemplated by the Acquisition Agreement
shall have been duly consummated (or you shall have
received evidence to your satisfaction that such
transactions are closing contemporaneously with the
Closing) substantially in accordance with the terms of
the Acquisition Agreement.
B.7 SENIOR CREDIT AGREEMENT AND RELATED DOCUMENTS.
You shall have received a copy of the Senior Credit
Agreement as executed, together with all exhibits and
schedules thereto, and of each document required under
the Senior Credit Agreement to be delivered or filed in
connection with the consummation of the Senior Credit
Agreement, certified as true, correct and complete by a
Senior Financial Officer of the Company. All conditions
precedent to the consummation of the initial borrowing
under the Senior Credit Agreement shall have occurred,
all governmental authorizations, consents, approvals,
exemptions or other actions required in connection with
the Senior Credit Agreement shall have been duly received
or taken, and the transactions contemplated by the Senior
Credit Agreement shall have been duly consummated (or
shall simultaneously be occurring) substantially in
accordance with the terms of the Senior Credit Agreement.
B.8 STOCKHOLDERS AGREEMENT.
A Stockholders Agreement, in the form of Exhibit D
(the "STOCKHOLDERS AGREEMENT"), shall have been duly
executed and delivered by the Parent, Mr. Scharf and each
Purchaser, and shall be in full force and effect.
B.9 GUARANTY AGREEMENTS.
A Guaranty Agreement, in the form of Exhibit C1 with
respect to the Parent (the "PARENT GUARANTY AGREEMENT"),
and in the form of Exhibit C2 with respect to LaSalle
(the "LASALLE GUARANTY AGREEMENT"), shall have been duly
executed and delivered by the Parent or LaSalle, as the
case may be, and shall be in full force and effect.
B.10 PRIVATE PLACEMENT NUMBER.
The Obligors shall have obtained for the Notes a
Private Placement Number issued by the CUSIP Service
Bureau of Standard & Poor's, a division of McGraw-Hill,
Inc.
B.11 SALE OF OTHER NOTES AND PURCHASER SHARES.
Contemporaneously with the Closing,
(a) the Company shall sell to the Other
Purchasers the Notes, and
(b) the Parent shall sell to the Other
Purchasers the Purchaser Shares
to be purchased by each such Other Purchaser at the
Closing pursuant to the Note and Stock Purchase Agreement
to which it is a party as specified in Annex 1.
B.12 EXPENSES.
All fees and disbursements required to be paid
pursuant to Section 14 shall have been paid in full.
B.13 ENVIRONMENTAL MATTERS.
You shall have received copies of all environmental
reports and other similar information as you shall
request with respect to the Properties of the Obligors.
B.14 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the
issuance and sale of the Notes and the Purchaser Shares
and all documents and papers relating thereto shall be
satisfactory to you and your special counsel. You and
your special counsel shall have received copies of such
documents and papers as you or they may reasonably
request in connection therewith or in connection with
your special counsel's closing opinion, all in form and
substance satisfactory to you and your special counsel.
NIAGARA CORPORATION
STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 18, 1997
TABLE OF CONTENTS
Page
1. TAG-ALONG RIGHTS IN RESPECT OF SALE OF STOCK BY INITIAL
STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Right to Sell Proportionate Number of Shares. . . . 1
1.2 Notice of Proposed Sale. . . . . . . . . . . . . . 2
1.3 Election by Holders. . . . . . . . . . . . . . . . 2
1.4 Pro Rata Cutback of Number of Shares Sold. . . . . 2
1.5 Closing of Sale. . . . . . . . . . . . . . . . . . 3
1.6 Expense of Sale. . . . . . . . . . . . . . . . . . 3
1.7 Election of Rights. . . . . . . . . . . . . . . . . 3
1.8 Remedy. . . . . . . . . . . . . . . . . . . . . . . 3
2. DRAG-ALONG RIGHTS. . . . . . . . . . . . . . . . . . . . 3
2.1 Right to Require Sale. . . . . . . . . . . . . . . 3
2.2 Notice of Drag-Along Sale. . . . . . . . . . . . . 4
2.3 Consummation of Drag-Along Sale. . . . . . . . . . 4
2.4 Expense of Drag-Along Sale. . . . . . . . . . . . . 5
2.5 Coordination of Rights. . . . . . . . . . . . . . . 5
3. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . 5
3.1 Incidental Registration. . . . . . . . . . . . . . 5
3.2 Shelf Registration . . . . . . . . . . . . . . . . 6
3.3 Registration Procedures. . . . . . . . . . . . . . 8
3.4 Reasonable Investigation. . . . . . . . . . . . . . 11
3.5 Registration Expenses. . . . . . . . . . . . . . . 12
3.6 Indemnification; Contribution. . . . . . . . . . . 12
3.7 Holdback Agreements; Registration Rights to
Others. . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Availability of Information. . . . . . . . . . . . 15
4. CERTAIN RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS. . 15
4.1 Restrictions on Transfer to Transferees. . . . . . 15
4.2 Cooperation by the Parent. . . . . . . . . . . . . 15
4.3 Legending of Certificates. . . . . . . . . . . . . 15
4.4 Securities Act Restrictions; Legend. . . . . . . . 16
4.5 Termination of Various Provisions of this
Agreement. . . . . . . . . . . . . . . . . . . . . 16
4.6 Parent Activities and Changes in Capital
Structure. . . . . . . . . . . . . . . . . . . . . 17
4.7 Compensation, etc. . . . . . . . . . . . . . . . . 17
5. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . 18
6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 28
6.1 Warranties and Representations in Note and Stock
Purchase Agreement. . . . . . . . . . . . . . . . . 28
6.2 Notices. . . . . . . . . . . . . . . . . . . . . . 28
6.3 Amendments and Waivers. . . . . . . . . . . . . . . 28
6.4 Governing Law . . . . . . . . . . . . . . . . . . . 29
6.5 Jurisdiction; Jury Trial . . . . . . . . . . . . . 29
6.6 Counterparts . . . . . . . . . . . . . . . . . . . 29
6.7 Descriptive Headings . . . . . . . . . . . . . . . 29
6.8 Severability . . . . . . . . . . . . . . . . . . . 29
Annex 1 -- Names and Addresses of Purchasers
Annex 2 -- Holdings of Initial Stockholders
Exhibit A -- Form of Transferee Undertaking
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of April 18, 1997 (as the
same may be amended, restated or otherwise modified from time to
time, this "AGREEMENT"), among NIAGARA CORPORATION, a Delaware
corporation (together with its successors and assigns, the
"PARENT"), NIAGARA COLD DRAWN CORP., a Delaware corporation (the
"COMPANY"), a wholly-owned subsidiary of the Parent (the Parent
and the Company together are referred to herein as the
"COMPANIES"), each of the PURCHASERS named on Annex 1 hereto (the
"PURCHASERS") and MICHAEL J. SCHARF (together with, following the
date the appointment of any of the following is effective, his
executors or administrators and any other similar representative
of his person or Property and successors and assigns, "MR.
SCHARF").
PRELIMINARY STATEMENTS:
A. The Board of Directors has authorized the issuance of
285,715 shares of Common Stock (the "NEW COMMON STOCK").
B. The Parent, the Company, LaSalle Steel Company, a
Delaware corporation, and each of the Purchasers have entered
into separate Note and Stock Purchase Agreements, dated as of
even date herewith (collectively, as the same may be amended,
restated or otherwise modified from time to time, the "NOTE AND
STOCK PURCHASE AGREEMENT"), pursuant to which the Company has
agreed to issue and sell, and the Purchasers have agreed to
purchase, $20,000,000 in aggregate principal amount of the
Company's 12.5% Senior Subordinated Notes due April 18, 2005 (the
"NOTES"), and the Parent has agreed to issue and sell to the
Purchasers, and the Purchasers have agreed to purchase, the New
Common Stock, for an aggregate consideration for both the Notes
and the New Common Stock of $20,000,000 in cash.
C. On the Closing Date, the Initial Stockholders are the
holders of respective numbers of shares of the issued and
outstanding Parent Common Stock, and the other securities
directly or indirectly exercisable for or convertible into shares
of Parent Common Stock, indicated in Annex 2 to this Agreement.
D. To induce the Purchasers to enter into the Note and
Stock Purchase Agreement and consummate the transactions
contemplated therein, the Companies and Mr. Scharf have agreed to
enter into this Agreement with the Purchasers and create and
define certain rights as among and between themselves as further
specified herein.
AGREEMENT:
1. TAG-ALONG RIGHTS IN RESPECT OF SALE OF STOCK BY INITIAL
STOCKHOLDERS.
1.1 RIGHT TO SELL PROPORTIONATE NUMBER OF SHARES. Mr.
Scharf hereby agrees that he will not, nor will he permit any
other Initial Stockholder to, sell, at any time after the Tag-
Along Trigger Event, all or any portion of the Issuable Shares
owned by it unless, as part of such transaction, each holder of
Purchaser Shares shall have the right (but not the obligation) to
sell a proportionate amount of the Purchaser Shares then held by
such holder at the same Imputed Price, on the same terms and to
the same purchaser or purchasers (in the case of a private sale)
or to the public (in the case of a public sale).
For purposes of this Section 1, the "PROPORTIONATE AMOUNT"
that a holder of Purchaser Shares shall be entitled to sell with
respect to any proposed transaction shall be equal to the product
(calculated as of the date of such proposed transaction) of:
(a) the total number of Purchaser Shares then owned by
such holder; times
(b) the quotient of:
(i) the aggregate number of Issuable Shares
proposed to be sold in such transaction by the Initial
Stockholders; divided by
(ii) the aggregate number of Issuable Shares owned
by the Other Stockholders participating in such sale.
1.2 NOTICE OF PROPOSED SALE. If the Tag-Along Trigger
Event shall have occurred (or will occur or will be deemed to
have occurred in connection therewith), Mr. Scharf shall provide
to each of the holders of the Purchaser Shares written notice of
such intention not less than 45 days prior to the closing of such
proposed sale. Such written notice (the "NOTICE OF SALE") shall:
(a) specify in detail the terms of such proposed sale
(including the type of Security proposed to be sold, the
Imputed Price and, in the event that any Rights are being
sold, the Valuation Agent's calculation of the Imputed Price
from the actual purchase price for such Rights),
(b) state that the Tag-Along Trigger Event has
occurred (or will occur or will be deemed to have occurred
as a result of such sale),
(c) state the date on which such proposed sale is to
be consummated, and
(d) designate Mr. Scharf as the party to whom notice
of the determination to participate in such proposed sale
should be delivered.
1.3 ELECTION BY HOLDERS. Upon receipt of a Notice of Sale,
each holder of Purchaser Shares shall have 20 days to deliver
written notice of its election to participate in such sale and
the number of Issuable Shares which it elects to sell, which
number shall not exceed its proportionate amount.
1.4 PRO RATA CUTBACK OF NUMBER OF SHARES SOLD. In the
event that the Initial Stockholders intending to sell the
Issuable Shares (or an underwriter acting on their behalf) shall
be unable to sell the aggregate number of shares to be sold by
the Other Stockholders participating in such sale and which the
holders of the Purchaser Shares have elected to sell pursuant to
Section 1.1 hereof either because the aggregate amount of such
shares exceeds the amount that the purchaser thereof is willing
to purchase and/or adversely affects the selling price therefor
specified in the Notice of Sale, then the number of Issuable
Shares to be sold by the Other Stockholders and such holders of
Purchaser Shares electing to sell such Issuable Shares shall be
reduced ratably (as between such groups and, with respect to the
Purchasers, as among the members of such group) to the extent
necessary to reduce the total number of Issuable Shares to be
included in such offering to the maximum number which the selling
Other Stockholders (or an underwriter acting on their behalf) can
sell to such purchaser at such price. Whether or not any such
adjustment in the number of Issuable Shares to be sold is
required to be made, Mr. Scharf shall give each such holder which
has elected to sell Issuable Shares written notice of the number
of shares it is permitted to sell pursuant to this Section 1
(after giving effect to the provisions of this Section 1.4) not
less than 15 days prior to the date of such sale.
1.5 CLOSING OF SALE. Each holder of Purchaser Shares
electing to participate in a sale described in any Notice of Sale
shall deliver to the purchaser specified in such Notice of Sale,
against payment of the total purchase price for the Issuable
Shares to be purchased (at the price per share specified in such
Notice of Sale), on the closing date specified in such Notice of
Sale, a certificate or certificates representing the number of
Issuable Shares which it has elected to sell (net of any
reduction pursuant to Section 1.4), together with appropriate
instruments of transfer duly endorsed in blank.
1.6 EXPENSE OF SALE. All expenses and costs of any sale of
Issuable Shares pursuant to this Section 1 (other than the fees
of counsel to the holders of Purchaser Shares related to such
sale) shall be for the account of and paid by Mr. Scharf;
provided, however, that if such sale is being effected pursuant
to a registration statement under the Securities Act or pursuant
to Rule 144 under the Securities Act, then Mr. Scharf shall not
be required to pay any underwriting fees, discounts or
commissions attributable to the sale of Purchaser Shares, the
fees and expenses of more than one counsel representing the
holders of Purchaser Shares or any other selling expenses,
discounts or commissions incurred in connection with the sale of
Purchaser Shares; and provided, further, that nothing in this
Section 1.6 or Section 2.4 shall prevent Mr. Scharf from sharing
any such cost or expense with any Other Stockholder in any manner
agreed to among Mr. Scharf and such Other Stockholders.
1.7 ELECTION OF RIGHTS. To the extent that any holder of
Purchaser Shares has rights under this Section 1 and under
Section 3, such holder shall elect which rights it desires to
exercise hereunder.
1.8 REMEDY. In the event that Mr. Scharf shall permit any
Initial Stockholder to sell, at any time after a Tag-Along
Trigger Event, all or any portion of the Issuable Shares it holds
without the holders of Purchaser Shares being afforded its rights
under this Section 1, then Mr. Scharf agrees that, within 30 days
after written demand by any holder of Purchaser Shares, he will
purchase any and all Purchaser Shares which such holder had the
right to sell in connection with such sale by such Initial
Stockholder, in each case, for an aggregate consideration equal
to the amount such holder of Purchaser Shares would have realized
had such holder been afforded the rights set forth in this
Section 1.
2. DRAG-ALONG RIGHTS.
2.1 RIGHT TO REQUIRE SALE. If Mr. Scharf shall engage in a
Parent Sale on Acceptable Drag-Along Sale Terms (a "DRAG-ALONG
SALE"), each holder of Purchaser Shares shall have the
obligation, upon the written request of Mr. Scharf, given
pursuant to Section 2.2 hereof, to participate in such Drag-Along
Sale by selling all, but not less than all, of the Purchaser
Shares held by it.
2.2 NOTICE OF DRAG-ALONG SALE. At least 30 days before the
proposed date of any Drag-Along Sale, Mr. Scharf shall provide
each holder of Purchaser Shares with written notice thereof.
Such notice shall set forth:
(a) the name and address of the proposed transferee in
the Drag-Along Sale;
(b) the identity of each seller participating in such
transfer and the number of shares of Parent Common Stock,
Rights and other Issuable Shares beneficially owned by such
seller;
(c) the proposed amount and kind of consideration to
be paid for shares of Parent Common Stock, Rights and other
Issuable Shares to be sold in such Drag-Along Sale and the
terms and conditions of payment offered by the proposed
transferee;
(d) the number of outstanding shares of Parent Common
Stock at such time; and
(e) a statement that Mr. Scharf intends to exercise
his rights under this Section 2.
2.3 CONSUMMATION OF DRAG-ALONG SALE. Upon receipt of any
such notice required by Section 2.2 hereof, each holder of
Purchaser Shares shall become obligated to sell, transfer or
dispose of its Purchaser Shares upon the terms and conditions of
such Drag-Along Sale so long as:
(a) such sale remains on Acceptable Drag-Along Sale
Terms;
(b) each Other Stockholder shall simultaneously sell,
transfer or dispose of all of its Issuable Shares at an
identical Imputed Price and upon terms and conditions which
are otherwise identical; and
(c) such sales are consummated within 90 days (or, in
the case of a transaction involving the issuance to the
holders of Purchaser Shares and Other Stockholders of Freely
Tradeable Securities, 180 days) of the date of such notice.
So long as the Drag-Along Sale is conducted in compliance with
this Section 2, each holder of Purchaser Shares waives any rights
it may have, under the Delaware General Corporation Law or
otherwise, to appraisal of its Issuable Shares as a dissenting
stockholder and agrees to vote in favor of and otherwise consent
to such Drag-Along Sale.
2.4 EXPENSE OF DRAG-ALONG SALE. All expenses and costs of
the holders of Purchaser Shares in connection with any Drag-Along
Sale (including, without limitation, the reasonable fees and
disbursements of counsel to the holders of Purchaser Shares
related to such sale), shall be for the account of and paid by
Mr. Scharf or the Parent.
2.5 COORDINATION OF RIGHTS. No holder of Purchaser Shares
shall have any obligation under this Section 2 in respect of
Purchaser Shares to be sold pursuant to a Registration under
Section 3 if such holder had given written notice to the Company
of its intention to effect such sale pursuant to such
Registration not less than five (5) days prior to the date of the
receipt by such holder of the notice referred to in Section 2.2.
3. REGISTRATION RIGHTS.
3.1 INCIDENTAL REGISTRATION.
(a) FILING OF REGISTRATION STATEMENT. If the Parent
at any time proposes to register any of its Parent Common
Stock (an "INCIDENTAL REGISTRATION") under the Securities
Act (other than pursuant to (i) a registration statement on
Form S-4 or Form S-8 or any successor forms thereto, in
connection with an offer made solely to existing Security
holders or employees of the Parent, (ii) a registration of
convertible Securities or other Rights, in respect of which
the only shares of Parent Common Stock being registered are
those issuable upon conversion or exercise of such Rights
and (iii) a registration consisting solely of Parent Common
Stock issued or issuable upon exercise of the Bridge
Warrants), for sale in a Public Offering, it will each such
time give prompt written notice to all holders of
Registrable Securities of its intention to do so, which
notice shall be given to all such holders at least thirty
(30) Business Days prior to the date that a registration
statement relating to such Incidental Registration is
proposed to be filed with the SEC. Upon the written request
of any such holder to include its shares under such
registration statement (which request shall be made within
fifteen (15) Business Days after the receipt of any such
notice and shall specify the Registrable Securities intended
to be disposed of by such holder), the Parent will use its
best efforts to effect the registration of all Registrable
Securities that the Parent has been so requested to register
by such holder; provided, however, that if, at any time
after giving written notice of its intention to register any
Securities and prior to the effective date of the
registration statement filed in connection with such
Incidental Registration, the Parent shall determine for any
reason not to register such Securities, the Parent may, at
its election, give written notice of such determination to
each such holder and, thereupon, shall be relieved of its
obligation to register any Registrable Securities of such
Persons in connection with such Incidental Registration.
(b) SELECTION OF UNDERWRITERS. Notice of the Parent's
intention to register such Securities shall designate the
proposed underwriters of such offering (which shall be one
or more underwriting firms of recognized standing) and shall
contain the Parent's agreement to use its best efforts, if
requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Securities that
the Parent has been so requested to register pursuant to
this Section 3.1, it being understood that the holders of
Registrable Securities shall have no right to select
different underwriters for the disposition of their
Registrable Securities.
(c) PRIORITY ON INCIDENTAL REGISTRATIONS. If the
managing underwriter shall advise the Parent in writing
(with a copy to each holder of Registrable Securities
requesting sale) that, in such underwriter's opinion, the
number of shares of Securities requested to be included in
such Incidental Registration exceeds the number that can be
sold in such offering within a price range acceptable to the
Parent (such writing to state the basis of such opinion and
the approximate number of shares of Securities that may be
included in such offering without such effect), the Parent
will include in such Incidental Registration, to the extent
of the number of shares of Securities that the Parent is so
advised can be sold in such offering:
(i) in the case of any Incidental Registration
initiated by the Parent for the purpose of selling
Securities for its own account:
(A) first, shares that the Parent proposes
to issue and sell for its own account; and
(B) second, Registrable Securities requested
to be sold by the holders of Purchaser Shares
pursuant to this Section 3.1 and all Securities
proposed to be registered by the Other
Stockholders, pro rata among such holders on the
basis of the number of Registrable Shares
requested to be so registered by such holders; and
(ii) in the case of an Incidental Registration
initiated by any Other Stockholder pursuant to demand
or required registration rights in favor of such Other
Stockholder (whether or not the right to such a
registration exists on the date hereof):
(A) first, Registrable Securities requested
to be sold by the Other Stockholders requesting
such Registration;
(B) second, Registrable Securities requested
to be sold by the holders of Purchaser Shares
pursuant to this Section 3.1 and all Securities
proposed to be registered by the Other
Stockholders (other than those referred to in
Section 3.1(c)(ii)(A), pro rata among such holders
on the basis of the number of Registrable Shares
requested to be so registered by such holders; and
(C) third, shares that the Parent proposes
to issue and sell for its own account.
3.2 SHELF REGISTRATION.
(a) FILING AND EFFECTIVENESS. On or prior to the
Shelf Filing Date, the Parent will file a "shelf"
registration statement (the "SHELF REGISTRATION") on an
appropriate form pursuant to Rule 415 under the Securities
Act or any similar rule that may be adopted by the SEC with
respect to dispositions of all of the Registrable Securities
in such manner or manners specified by the holders thereof.
The Parent agrees to cause the Shelf Registration to be
declared effective as promptly as is practicable after such
filing (and in any event, prior to the Shelf Effective Date)
and agrees to keep the Shelf Registration effective (and to
take any and all other actions necessary in order to permit
public resale of the Registrable Securities covered by the
Shelf Registration) for a period (the "SHELF EFFECTIVE
PERIOD") beginning on the date such Shelf Registration shall
first be declared effective under the Securities Act and
ending upon the earlier to occur of the day following the
first day upon which all Registrable Securities may be
resold by the holders of Registrable Securities pursuant to
Rule 144(k) under the Securities Act (or any successor
provision providing a safe harbor for resales without any
restrictions as to the manner of sale, number of shares sold
or availability of public information by holders of
Purchaser Shares who are not Affiliates) and such date as no
Registrable Securities shall remain, subject to the terms
and conditions set forth in this Agreement. The Parent
further agrees, if necessary, to supplement or make
amendments to such Shelf Registration, if required by the
registration form utilized by the Parent for the Shelf
Registration or by the instructions applicable to such
registration form or by the Securities Act, and the Parent
agrees to furnish to the holders of the Registrable
Securities covered by the Shelf Registration copies of any
such supplement or amendment prior to its being used or
filed with the SEC.
(b) APPROVAL OF SHELF REGISTRATIONS. If the Requisite
Holders shall have approved the filing of the Shelf
Registration as provided in Section 3.3(a), but any holder
of Registrable Securities objects to such filing on the
grounds that the disclosure contained in the Shelf
Registration contains any misstatement of a material fact or
omits to state a fact required to be stated therein or
necessary to make the statements therein not misleading,
then such holder shall have the right, in its sole
discretion, to withdraw from the Shelf Registration. If the
Parent receives notice of such withdrawal from any holder
wishing to withdraw from the Shelf Registration, then the
Parent shall not name such holder in the registration
statement or, in the case of withdrawal in connection with
any amendment or supplement to a registration statement in
which such holder is already named, shall amend such
registration statement to delete references to such holder,
and to withdraw the Registrable Securities of such holder,
from the registration statement. The Shelf Registration
shall not be considered effective with respect to any such
withdrawing holder.
(c) SELECTION OF UNDERWRITERS. If any offering
pursuant to the Shelf Registration is in the form of an
underwritten offering, the underwriters of such offering
shall be one or more underwriting firms of recognized
standing selected by the Requisite Holders and reasonably
acceptable to the Parent. In the event of an underwritten
offering pursuant to the Shelf Registration, no securities
of the Parent (other than the Registrable Securities) shall
be included in any such offering without the prior written
consent of all holders of Registrable Securities
participating in such offering.
(d) POTENTIAL MATERIAL EVENTS. Notwithstanding
anything to the contrary in this Section 3.2, at any time
and from time to time after the first date of effectiveness
of the Shelf Registration, the Parent may notify the holders
of Registrable Securities in writing of a Potential Material
Event. From the time of receipt of such notice to the
earliest to occur of:
(i) the public disclosure by the Parent of the
Potential Material Event;
(ii) receipt of written notice from the Parent
that such Potential Material Event no longer exists;
and
(iii) the date 60 days after the date of the
notice of such Potential Material Event;
the holders of Registrable Securities shall not offer or
sell any Registrable Securities pursuant to the Shelf
Registration; provided, however, that the Parent may not
deliver more than one notice of a Potential Material Event
in respect of any one Potential Material Event, and may not
deliver any notice of a Potential Material Event for a
period of 180 days following the expiration or earlier
termination of any other period during which the holders of
Registrable Securities may not by virtue of the provisions
of this Section 3.2(d) sell or offer to sell Registrable
Securities.
3.3 REGISTRATION PROCEDURES. The Parent will use its best
efforts to effect each Registration, and to cooperate with the
sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable,
and the Parent will as expeditiously as possible:
(a) subject, in the case of an Incidental
Registration, to the proviso to Section 3.1(a), prepare and
file with the SEC the registration statement and use its
best efforts to cause the Registration to become effective;
provided, however, that before filing any registration
statement or prospectus or any amendments or supplements
thereto, the Parent will furnish to the holders of the
Registrable Securities covered by such registration
statement, their counsel, and the underwriters, if any, and
their counsel, copies of all such documents proposed to be
filed at least 10 days prior thereto, which documents will
be subject to the reasonable review, within such 10-day
period, of such holders, their counsel and the underwriters;
and the Parent will not file any registration statement or
amendment thereto or any prospectus or any supplement
thereto (including such documents incorporated by reference)
to which the Requisite Holders shall reasonably object
within such 10-day period;
(b) subject, in the case of an Incidental
Registration, to the proviso to Section 3.1(a), prepare and
file with the SEC such amendments and post-effective
amendments to any registration statement and any prospectus
used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such
registration statement; and cause the prospectus to be
supplemented by any required prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(c) furnish to each holder of Registrable Securities
included in such Registration and the underwriter or
underwriters, if any, without charge, at least one signed
copy of the registration statement and any post-effective
amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the
prospectus (including each preliminary prospectus and each
prospectus filed under Rule 424 under the Securities Act),
any amendments or supplements thereto and any documents
incorporated by reference therein, as such holder or
underwriter may reasonably request in order to facilitate
the disposition of the Registrable Securities being sold by
such holder (it being understood that the Parent consents to
the use of the prospectus and any amendment or supplement
thereto by each holder of Registrable Securities covered by
such registration statement and the underwriter or
underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the prospectus
or any amendment or supplement thereto);
(d) notify each holder of the Registrable Securities
of any stop order or other order suspending the
effectiveness of any registration statement, issued or
threatened by the SEC in connection therewith, and take all
reasonable actions required to prevent the entry of such
stop order or to remove it or obtain withdrawal of it at the
earliest possible moment if entered;
(e) if requested by the managing underwriter or
underwriters, if any, or any holder of Registrable
Securities in connection with any sale pursuant to a
registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information
relating to such underwriting as the managing underwriter or
underwriters, if any, or such holder reasonably requests to
be included therein; and make all required filings of such
prospectus supplement or post-effective amendment as soon as
practicable after being notified of the matters incorporated
in such prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is
declared effective, use its best efforts to register or
qualify, and cooperate with the holders of Registrable
Securities included in such Registration, the underwriter or
underwriters, if any, and their counsel, in connection with
the registration or qualification of the Registrable
Securities covered by such Registration for offer and sale
under the securities or "blue sky" laws of each state and
other jurisdiction of the United States as any such holder
or the managing underwriter, if any, reasonably requests in
writing; use its best efforts to keep each such registration
or qualification effective, including through new filings,
or amendments or renewals, during the period such
registration statement is required to be kept effective; and
do any and all other acts or things necessary or advisable
to enable the disposition in all such jurisdictions
reasonably requested of the Registrable Securities covered
by such Registration; provided, however, that the Parent
will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of
process in any such jurisdiction where it is not then so
subject;
(g) in connection with any sale pursuant to a
Registration, cooperate with the holders of Registrable
Securities and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends)
representing Securities to be sold under such Registration,
and enable such Securities to be in such denominations and
registered in such names as the managing underwriter or
underwriters, if any, or such holders may request;
(h) use its best efforts to cause the Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities within the United
States and having jurisdiction over the Parent, the Company
or any other Subsidiary as may reasonably be necessary to
enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such
Securities;
(i) enter into such agreements (including underwriting
agreements in customary form) and take such other actions as
the Requisite Holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each
Registration, a "comfort letter" from the Parent's
independent certified public accountants covering such
matters of the type customarily covered by "cold
comfort letters" as the Requisite Holders and the
underwriters reasonably request; and
(ii) at the time of any underwritten sale pursuant
to the registration statement, a "bring-down comfort
letter," dated as of the date of such sale, from the
Parent's independent certified public accountants
covering such matters of the type customarily covered
by comfort letters as the Requisite Holders and the
underwriters reasonably request;
(k) use its best efforts to obtain, at the time of
effectiveness of each Registration and at the time of any
sale pursuant to each Registration, an opinion or opinions,
favorable to the Requisite Holders in form and scope, from
counsel for the Parent in customary form;
(l) notify each seller of Registrable Securities
covered by such Registration, upon discovery that, or upon
the happening of any event as a result of which, any
prospectus included in such Registration, as then in effect,
includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
promptly prepare, file with the SEC and furnish to such
seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
or prospective purchasers of such Securities, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under
which they are made;
(m) otherwise comply with all applicable rules and
regulations of the SEC, and make generally available to its
security holders (as contemplated by section 11(a) under the
Securities Act) an earnings statement satisfying the
provisions of Rule 158 under the Securities Act no later
than 90 days after the end of the 12-month period beginning
with the first month of the Parent's first fiscal quarter
commencing after the effective date of the registration
statement, which statement shall cover said 12-month period;
(n) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered
by each Registration from and after a date not later than
the effective date of such Registration; and
(o) use its best efforts to cause all Registrable
Securities covered by each Registration to be listed subject
to notice of issuance, prior to the date of first sale of
such Registrable Securities pursuant to such Registration,
on each securities exchange on which the Parent Common Stock
is then listed; and, if the Parent Common Stock is not so
listed, to use its best efforts to cause all Registrable
Securities covered by each Registration to be designated as
National Market System Securities, if the Parent Common
Stock is so designated (and, if the Parent Common Stock is
listed on the NASDAQ National Market or the NASDAQ SmallCap
Market, to cause all Registrable Securities to be so
listed); and, if the Parent Common Stock is not so
designated, to arrange for at least two market makers to
register with the NASD as such with respect to such
Registrable Securities.
The Parent may require each holder of Registrable Securities that
will be included in such Registration to furnish the Parent with
such information in respect of such holder of its Registrable
Securities that will be included in such Registration as the
Parent may reasonably request in writing and as is required by
applicable laws or regulations.
3.4 REASONABLE INVESTIGATION. The Parent shall:
(a) give the holders of Registrable Securities, their
underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the
preparation of the registration statement, each prospectus
included therein or filed with the SEC and each amendment
thereof or supplement thereto;
(b) give each such holder and underwriter reasonable
opportunities to discuss the business of the Parent with its
officers, counsel and the independent public accountants who
have certified its financial statements;
(c) make available for inspection by any holder of
Registrable Securities included in any Registration, any
underwriter participating in any disposition pursuant to any
Registration, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial
and other records, pertinent corporate documents and
properties of the Parent; and
(d) cause the Parent's officers, directors and
employees to supply all information reasonably requested by
any such Person in connection each Registration;
in each such case, as shall be reasonably necessary, in the
opinion of such holder or such underwriter, to enable it to
conduct a "reasonable investigation" within the meaning of
section 11(b)(3) of the Securities Act and to satisfy the
requirement of reasonable care imposed by section 12(a)(2) of the
Securities Act.
3.5 REGISTRATION EXPENSES. The Parent will pay all
Registration Expenses incurred in connection with each
Registration, including, without limitation, any such
Registration not effected by the Parent.
3.6 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE PARENT. The Parent shall
indemnify, to the fullest extent permitted by law, each
holder of Registrable Securities, its officers, directors
and agents, if any, and each Person, if any, who controls
such holder within the meaning of section 15 of the
Securities Act, against all losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses
(under the Securities Act or common law or otherwise), joint
or several, resulting from any violation by the Parent of
the provisions of the Securities Act or any untrue statement
or alleged untrue statement of a material fact contained in
any registration statement or prospectus (and as amended or
supplemented if amended or supplemented) or any preliminary
prospectus or caused by any omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of
any prospectus, in light of the circumstances under which
they were made) not misleading, except to the extent that
such losses, claims, damages, liabilities (or proceedings in
respect thereof) or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any
omission or alleged omission from information concerning any
holder, or as to such holder's plan of distribution with
respect to such holder's Registrable Securities, in each
case furnished in writing to the Parent by such holder
expressly for use therein. If the offering pursuant to any
registration statement provided for under this Section 3 is
made through underwriters, no action or failure to act on
the part of such underwriters (whether or not such
underwriter is an affiliate of any holder of Registrable
Securities) shall affect the obligations of the Parent to
indemnify any holder of Registrable Securities or any other
Person pursuant to the preceding sentence. If the offering
pursuant to any registration statement provided for under
this Section 3 is made through underwriters, the Parent
agrees, to the extent required by such underwriters, to
enter into an underwriting or other agreement providing for
indemnity of such underwriters, their officers, directors
and agents, if any, and each Person, if any, who controls
such underwriters within the meaning of section 15 of the
Securities Act to the same extent as hereinbefore provided
with respect to the indemnification of the holders of
Registrable Securities; provided that the Parent shall not
be required to indemnify any such underwriter, or any
officer or director of such underwriter or any Person who
controls such underwriter within the meaning of section 15
of the Securities Act, to the extent that the loss, claim,
damage, liability (or proceedings in respect thereof) or
expense for which indemnification is claimed results from
such underwriter's failure to send or give a copy of an
amended or supplemented final prospectus to the Person
asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such
amended or supplemented final prospectus prior to such
written confirmation and the underwriter was provided with
such amended or supplemented final prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. In connection
with any registration statement in which a holder of
Registrable Securities is participating, each such holder,
severally and not jointly, shall indemnify, to the fullest
extent permitted by law, the Parent, each underwriter (if
the underwriter so requires) and their respective officers,
directors and agents, if any, and each Person, if any, who
controls the Parent or such underwriter within the meaning
of section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect
thereof) and expenses resulting from any untrue statement or
alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated
in the registration statement or prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of any
prospectus, in light of the circumstances under which they
were made) not misleading, but only to the extent that such
untrue statement is contained in or such omission is from
information so concerning a holder, or as to such holder's
plan of distribution with respect to such holder's
Registrable Securities, in either case furnished in writing
by such holder expressly for use therein; provided, however,
that such holder's obligations hereunder shall be limited to
an amount equal to the proceeds to such holder of the
Registrable Securities sold pursuant to such registration
statement.
(c) CONTROL OF DEFENSE. Any Person entitled to
indemnification under the provisions of this Section 3.6
shall give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification and
unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim,
permit such indemnifying party to assume the defense of such
claim, with counsel reasonably satisfactory to the
indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement
without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and
such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which
shall not be unreasonably withheld); and any underwriting
agreement entered into with respect to any registration
statement provided for under this Section 3 shall so
provide. In the event an indemnifying party shall not be
entitled, or elects not, to assume the defense of a claim,
such indemnifying party shall not be obligated to pay the
fees and expenses of more than one counsel or firm of
counsel for all parties indemnified by such indemnifying
party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of
interest may exist between such indemnified party and any
other of such indemnified parties in respect to such claim.
(d) CONTRIBUTION. If for any reason the foregoing
indemnity is unavailable, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages,
liabilities or expenses:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified
party on the other; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and
the indemnified party on the other but also the
relative fault of the indemnifying party and the
indemnified party as well as any other relevant
equitable considerations.
Notwithstanding the foregoing, no holder of Registrable
Securities shall be required to contribute any amount in
excess of the amount such holder would have been required to
pay to an indemnified party if the indemnity under Section
3.6(b) hereof was available. No Person guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent
misrepresentation. The obligation of any Person to
contribute pursuant to this Section 3.6 shall be several and
not joint.
(e) TIMING OF PAYMENTS. An indemnifying party shall
make payments of all amounts required to be made pursuant to
the foregoing provisions of this Section 3.6 to or for the
account of the indemnified party from time to time promptly
upon receipt of bills or invoices relating thereto or when
otherwise due or payable.
(f) SURVIVAL. The indemnity and contribution
agreements contained in this Section 3.6 shall remain in
full force and effect regardless of any investigation made
by or on behalf of a participating holder of Registrable
Securities, its officers, directors, agents or any Person,
if any, who controls such holder as aforesaid, and shall
survive the transfer of such Securities by such holder.
3.7 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of
Registrable Securities, the Parent agrees, and each holder
of Registrable Securities by acquisition of such Registrable
Securities agrees, to enter into customary holdback
agreements concerning sale or distribution of Registrable
Securities and other equity Securities of the Parent,
except, in the case of any holder of Registrable Securities,
to the extent that such holder is prohibited by applicable
law or exercise of fiduciary duties from agreeing to
withhold Registrable Securities from sale or is acting in
its capacity as a fiduciary or investment adviser. Without
limiting the scope of the term "fiduciary," a holder shall
be deemed to be acting as a fiduciary or an investment
adviser if its actions or the Registrable Securities
proposed to be sold are subject to the Employee Retirement
Income Security Act of 1974, as amended, or the Investment
Company Act of 1940, as amended, or if such Registrable
Securities are held in a separate account under applicable
insurance law or regulation.
(b) If the Parent shall at any time after the date
hereof provide to any holder of any Securities of the Parent
rights with respect to the registration of such Securities
under the Securities Act:
(i) such rights shall not be in conflict with or
adversely affect any of the rights provided in this
Section 3 to the holders of Registrable Securities; and
(ii) if such rights are provided on terms or
conditions more favorable to such holder than the terms
and conditions provided in this Section 3, the Parent
will provide (by way of amendment to this Section 3 or
otherwise) such more favorable terms or conditions to
the holders of Registrable Securities.
3.8 AVAILABILITY OF INFORMATION. The Parent will comply
with the reporting requirements of sections 13 and 15(d) of the
Exchange Act (whether or not it shall be required to do so
pursuant to such Sections) and will comply with all other public
information reporting requirements of the SEC from time to time
in effect. In addition, the Parent shall file such reports and
information, and shall make available to the public and to the
holders of Purchaser Shares such information, as shall be
necessary to permit such holders to offer and sell Registrable
Shares pursuant to the provisions of Rules 144 and 144A
promulgated under the Securities Act. The Parent will also
cooperate with each such holder in supplying such information as
may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by
the SEC as a condition to the availability of an exemption from
the registration provisions of the Securities Act in connection
with the sale of any Issuable Shares. The Parent will furnish to
each such holder, promptly upon their becoming available, copies
of all financial statements, reports, notices and proxy
statements sent or made available generally by the Parent to its
stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Parent
with any securities exchange or with the SEC.
4. CERTAIN RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.
4.1 RESTRICTIONS ON TRANSFER TO TRANSFEREES. No party
hereto shall sell, assign, transfer or otherwise dispose of any
Issuable Shares held by such party to any transferee under any
circumstance, and the Parent shall neither issue nor sell any
additional Issuable Shares to any such transferee, unless such
transferee shall have assumed in writing all of the obligations
of its transferor imposed by this Agreement and shall have agreed
to be bound by each of the terms and provisions of this Agreement
to which such transferor was bound, pursuant to an undertaking
substantially in the form set forth as Exhibit A hereto.
4.2 COOPERATION BY THE PARENT. The Parent shall refuse to
register any transfer of any Issuable Shares held by any party to
this Agreement to any transferee unless the Parent shall have
received from the prospective transferee a written agreement to
be bound by the provisions of this Agreement as required by
Section 4.1 hereof, and such other evidence as the Parent may
reasonably require to establish compliance with such Section 4.1.
The Parent shall be protected in, and shall have no liability to
any Other Stockholder for, and no such holder shall assert any
claim against the Parent for, failing to register any transfer of
any Issuable Shares in an effort to comply with the provisions of
this Agreement, unless such refusal to transfer is made in bad
faith.
The Parent shall refuse to register any transfer by an
Initial Stockholder unless it has received evidence reasonably
satisfactory to it that Mr. Scharf has complied with the
provisions of Section 1 with respect to such transfer.
4.3 LEGENDING OF CERTIFICATES. Each certificate
representing any Issuable Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A STOCKHOLDERS AGREEMENT, DATED
AS OF APRIL 18, 1997, THE PROVISIONS OF WHICH ARE
INCORPORATED HEREIN BY REFERENCE. SUCH STOCKHOLDERS
AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THIS
SECURITY MAY NOT BE SOLD OR TRANSFERRED TO ANY PERSON
WHO HAS NOT EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH
AGREEMENT AND CONTAINS, AMONG OTHER PROVISIONS,
PROVISIONS WHICH LIMIT THE TRANSFER OF THIS SECURITY.
A COPY OF SUCH STOCKHOLDERS AGREEMENT IS AVAILABLE FROM
THE PARENT UPON REQUEST."
4.4 SECURITIES ACT RESTRICTIONS; LEGEND. The Parent shall
not register any transfer of Issuable Shares held by a party
hereto if it has reason to believe that such transfer is being
requested in violation of the registration requirements of
section 5 of the Securities Act. Except as otherwise permitted
by this Agreement, each certificate representing an Issuable
Share held by a party hereto shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN A
TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT."
4.5 TERMINATION OF VARIOUS PROVISIONS OF THIS AGREEMENT.
(a) WITH RESPECT TO SHARES SOLD IN A PUBLIC OFFERING.
Each and all of the provisions of this Section 4 shall
terminate immediately as to any Issuable Shares held by a
party hereto (but this Section 4 shall remain in force with
respect to any other such Issuable Shares):
(i) when such Issuable Shares have been
effectively registered under the Securities Act and
disposed of in accordance with the registration
statement covering such Issuable Shares; or
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor
provision) under the Securities Act; or
(iii) when they shall have been otherwise
transferred and subsequent disposition of them shall
not require registration or qualification under the
Securities Act or any similar state law then in force.
Whenever such restrictions shall terminate as to any such
Issuable Shares, the holder thereof shall be entitled to
receive from the Parent, without expenses (other than
transfer taxes, if any), new Issuable Shares of like tenor
not bearing the applicable legends set forth in Section 4.3
or Section 4.4 hereof.
(b) TAG-ALONG RIGHTS. The provisions of Section 1 of
this Agreement shall terminate immediately with respect to
Purchaser Shares sold in any sale pursuant to Section 1 or
Section 3 of this Agreement or when they shall have been
distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act.
(c) DRAG-ALONG OBLIGATIONS. The provisions of Section
2 of this Agreement shall terminate immediately with respect
to Purchaser Shares sold (but the provisions of Section 2 of
this Agreement shall remain in force with respect to any
remaining Purchaser Shares not so sold) in any sale pursuant
to Section 3 of this Agreement or when they shall have been
distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act.
(d) UPON DRAG-ALONG SALE. Each and all of the
provisions of this Agreement shall terminate immediately as
to all Issuable Shares upon the consummation in full of any
Drag-Along Sale.
4.6 PARENT ACTIVITIES AND CHANGES IN CAPITAL STRUCTURE.
The Parent shall not, without the written consent of the holders
of at least 80% of the Purchaser Shares:
(a) fail to own at any time 100% of the issued and
outstanding capital stock of the Company;
(b) amend the Charter so as to change or modify the
rights or preferences of, or terms or provisions applicable
to, the Parent Common Stock; or
(c) create or authorize any issue of capital stock, or
any class thereof (other than the creation, authorization
and issuance of Parent Common Stock and other than the
creation, authorization and issuance of Preferred Stock
limited to payment of a fixed amount, and not otherwise
entitled to participate in any distribution of any proceeds,
in connection with any liquidation, dissolution, merger,
consolidation or sale of all or substantially all Property
of the Parent or any Parent Sale) not authorized in the
Charter as in effect on the date hereof.
4.7 COMPENSATION, ETC.
(a) RIGHTS, ETC. The Parent will not at any time
issue or grant, or allow to be issued or granted, any Rights
to any employee of the Parent or any employee of any
Subsidiary of the Parent,
(i) for cash consideration (including the
conversion or exercise price with respect to such
Rights) received by the Parent (or to be received by
the Parent upon such conversion or exercise) less than
the Closing Price (on the trading day immediately prior
to the date of such issuance or grant per share) of
Parent Common Stock into which such Rights are
convertible or exercisable, or
(ii) if, after giving effect to such issuance or
grant, the aggregate number of Rights issued or granted
to such employee since the date of organization of the
Parent would exceed one-third of all Rights issued or
granted to all employees of the Parent and its
Subsidiaries since such date or organization
(excluding, in each case, all Rights that shall have
terminated or expired without being converted or
exercised; the numbers of Rights issued or granted to
any employee shall, for purposes of this clause
(a)(ii), be measured by the number of shares of Parent
Common Stock into which such Rights are convertible or
exercisable).
(b) CASH COMPENSATION, ETC. The Parent will not at
any time permit the compensation paid in the form of cash or
cash equivalents to any employee of the Parent, or any
employee of any Subsidiary of the Parent, during any Fiscal
Year to exceed the greater of
(i) $500,000, or
(ii) 5% of Consolidated EBITDA for the immediately
preceding Fiscal Year.
(c) COMPENSATION LIMIT TERMINATION EVENT.
Notwithstanding anything else in this Section 4.7, the
provisions of this Section 4.7 shall terminate immediately
upon the occurrence of any Compensation Limit Termination
Event.
5. DEFINED TERMS.
As used herein, the following terms have the respective
meanings set forth below or set forth in the paragraph,
preliminary statement or Section hereof following such term:
ACCEPTABLE DRAG-ALONG SALE TERMS -- means, with respect to
any sale of all Issuable Shares held by the Other Stockholders,
the following terms:
(a) the sale by the holders of Purchaser Shares shall
be for the same Imputed Price, on the same terms and
conditions and for the same type and amount of consideration
(on a per share basis) as is to be received in the proposed
sale by the Other Stockholders; provided, however, that if
any Other Stockholder shall be entitled to receive from the
purchaser of all Issuable Shares an imputed price greater
than its pro rata share thereof (based upon the aggregate
number of Issuable Shares), then the holders of Purchaser
Shares shall be entitled to receive an Imputed Price per
share not less than the highest consideration per share paid
to any Other Stockholder in connection with such sale;
(b) the consideration to be paid to the holders of
Purchaser Shares in connection with such sale consists
solely of cash, Freely Tradeable Securities or cash and
Freely Tradeable Securities;
(c) each holder of Purchaser Shares shall have
received an opinion, addressed to such holder or stating
that such holder is entitled to rely thereon, of a Valuation
Agent stating that the per share consideration to be paid to
the holders of Purchaser Shares is fair from a financial
point of view;
(d) if any consideration consists of Freely Tradeable
Securities, each holder of Purchaser Shares shall have
received an opinion, addressed to such holder or stating
that such holder is entitled to rely thereon, of a firm of
nationally recognized securities counsel reasonably
acceptable to the Required Holders to the effect that each
such holder may immediately resell any and all such Freely
Tradeable Securities pursuant to a valid exemption under the
Securities Act (provided, however, that such counsel need
express no opinion as to restrictions on such a resale that
might arise under Rule 145 under the Securities Act or any
successor provision that imposes substantially similar
restrictions); and
(e) no holder of Purchaser Shares shall be required to
make any representations or warranties except as to its
title to and authority to convey the shares of Parent Common
Stock to be sold by it in connection with such sale.
AFFILIATE -- means, at any time, a Person (other than a
Subsidiary or a Purchaser):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, the Parent;
(b) that beneficially owns or holds 10% or more of any
class of the Voting Stock of the Parent; or
(c) 10% or more of the Voting Stock (or in the case of
a Person that is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by
the Parent, the Company or another Subsidiary;
at such time.
As used in this definition,
Control -- means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
AGREEMENT -- is defined in the introductory paragraph.
BOARD OF DIRECTORS -- means the board of directors of the
Parent or any committee thereof that, in the instance, shall have
the lawful power to exercise the power and authority of such
board of directors.
BRIDGE WARRANTS -- means the 300,000 bridge warrants
described in section 3.3.6 of the Warrant Agreement made as of
August 13, 1993 between the Parent and Continental Stock Transfer
& Trust Company, as warrant agent thereunder.
BUSINESS DAY -- means a day other than a Saturday, a Sunday
or a day on which banks in the State of New York are required or
permitted by law (other than a general banking moratorium or
holiday for a period exceeding four consecutive days) to be
closed.
CHARTER -- means the certificate of incorporation of the
Parent from time to time in effect and on file with the Secretary
of the State of Delaware.
CLOSING DATE -- means April 18, 1997.
CLOSING EQUITY MARKET CAPITALIZATION -- means, for any
trading day, the sum of:
(a) the product of (i) the Closing Price multiplied by
(ii) the aggregate number of shares of Parent Common Stock
then outstanding (excluding any such shares then held
directly or indirectly by the Parent or any Subsidiary),
plus
(b) the product of (i) the excess, if any, of the
Closing Price over the price at which the Existing Warrants
are then exercisable (if there is no such excess, or if such
excess would be a negative number, or if the Existing
Warrants are no longer exercisable, then the amount referred
to in this clause (b) shall be deemed to be $0), multiplied
by (ii) the aggregate number of Existing Warrants then
outstanding (excluding any such warrants then held directly
or indirectly by the Parent or any Subsidiary).
CLOSING PRICE -- means, on any date with respect to any
share of Parent Common Stock:
(a) the last sale price, regular way, on such date or,
if no such sale takes place on such date, the average of the
closing bid and asked prices on such date, in each case as
officially reported on the principal national securities
exchange on which any Parent Common Stock is then listed or
admitted to trading; and
(b) if no Parent Common Stock is then listed or
admitted to trading on any national securities exchange, but
is listed on the NASDAQ National Market or the NASDAQ
SmallCap Market, as the case may be, the last trading price
of any Parent Common Stock on such date as reported by
NASDAQ, or if there shall have been no trading on such date,
the average of the reported closing bid and asked prices on
such date as shown by NASDAQ.
COMPANIES -- is defined in the introductory paragraph.
COMPANY -- is defined in the introductory paragraph.
COMPENSATION LIMIT TERMINATION EVENT -- means the occurrence
at any time of any one or more of the following events or
conditions:
(a) Consolidated EBITDA (as such term is defined in
the Note and Stock Purchase Agreements) for the period of 12
consecutive months most recently ended at such time shall
have exceeded $30,000,000;
(b) $16,000,000 or more in aggregate principal amount
of the Notes shall have been paid to the holders thereof;
(c) a 1993 Warrant Call Option Event (as such term is
defined in the Note and Stock Purchase Agreements) shall
have occurred and the Company shall have satisfied in full
all of its prepayment obligations pursuant to Sections
4.4(b) of the Note and Stock Purchase Agreements following
such occurrence;
(d) pursuant to Section 4.5 of this Agreement, the
provisions of one or more of Sections 1, 2 and 4 shall have
terminated with respect to 58% or more of the number of
Purchaser Shares issued on the Closing Date; or
(e) if Parent Common Stock is then listed or admitted
to trading on a national securities exchange in the United
States, or if Parent Common Stock is then listed on the
NASDAQ National Market or the NASDAQ SmallCap Market, the
Closing Equity Market Capitalization shall have been more
than $45,000,000 for five consecutive trading days.
DRAG-ALONG SALE -- is defined in Section 2.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC promulgated
thereunder.
EXCLUDED RIGHTS -- means and includes all Rights issued to
employees of the Parent or the Company as compensation or
pursuant to any incentive stock option or similar employee
benefit plan, so long as:
(a) after giving effect to the issuance of such
Rights, the aggregate number of Issuable Shares issuable
upon the exercise of all Rights so issued since the Closing
Date and then remaining outstanding does not exceed 5% of
the number of shares of Parent Common Stock outstanding on a
fully-diluted basis; and
(b) no other holder of any Rights or any Securities
convertible or exchangeable into, shares of Parent Common
Stock or any other Securities of the Parent, shall have the
right to any preemptive, subscription or similar rights in
respect of such issuance.
EXISTING WARRANTS -- means the Redeemable Common Stock
Purchase Warrants issued pursuant to the Warrant Agreement made
as of August 13, 1993 between the Parent and Continental Stock
Transfer & Trust Company, as warrant agent thereunder.
FAIR VALUE -- means, with respect to any share of Parent
Common Stock, the quotient of:
(a) the fair salable value of the Parent, as a going
concern, giving effect to all Property thereof and subject
to all liabilities thereof, that would be realized in an
arm's length sale between an informed and willing buyer and
an informed and willing seller, under no compulsion to buy
or sell, respectively, as of a date that is within 15 days
of the date as of which the determination is to be made,
determined by the Valuation Agent, such determination to be
made without regard to the absence of a liquid or ready
market for such Parent Common Stock; divided by
(b) the total number of shares of Parent Common Stock
outstanding at such time.
FREELY TRADEABLE SECURITIES -- means Securities:
(a) that are of a class:
(i) of Securities issued or fully guaranteed by
the United States of America or any agency thereof and
entitled to the full faith and credit of the United
States of America, for which price quotations are
routinely quoted and for which, in the opinion of the
Required Holders, there is a ready liquid market; or
(ii) both registered pursuant to either section
12(b) or section 12(g) of the Exchange Act and either
listed on a national securities exchange or on the
NASDAQ National Market; and
(b) which may be resold immediately in the public
markets by each and every holder of Purchaser Shares without
requirement of further registration under the Securities
Act.
IMPUTED PRICE -- means:
(a) in the case of a sale of Parent Common Stock, the
price per share paid for such Parent Common Stock; and
(b) in the case of a sale of Rights, the assumed price
per underlying share of Parent Common Stock, as determined
by a Valuation Agent in accordance with generally accepted
financial practice, which would yield the actual purchase
price to be paid for such Rights.
INCIDENTAL REGISTRATION in defined in Section 3.1.
INITIAL STOCKHOLDERS -- means and includes:
(a) Mr. Scharf, his wife, his children and his
grandchildren;
(b) the estate of, following the date the appointment
of any of the following is effective, the executors or
administrators and any other similar representative of the
person or Property of any of the Persons named in clause
(a);
(c) any trusts for the benefit of any, all or any
group of the foregoing persons;
(d) any partnerships all the partners of which, and
all corporations, limited liability companies or similar
Persons all of the equity interests in which, are owned
solely by the foregoing Persons, or any of them or any group
of them; and
(e) their respective successors and assigns.
ISSUABLE SHARE -- means and includes at any time,
(a) a share of issued and outstanding Parent Common
Stock; and
(b) a Right, and (without duplication) all shares of
Parent Common Stock issuable upon exercise of such Right, in
each case at such time.
For purposes of this definition, a Right to acquire one share of
Parent Common Stock shall constitute one Issuable Share, and a
Person shall be deemed to own an Issuable Share if such Person
has a Right to acquire such share whether or not such Right is
exercisable at such time.
MARKET PRICE -- means, per share of Parent Common Stock, as
of any date of determination, the arithmetic mean of the daily
Closing Prices for the 20 consecutive trading days before such
date of determination; provided that if no Parent Common Stock is
then either listed or admitted to trading on any national
securities exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market, then "MARKET PRICE" means the Fair Value of one
share of Parent Common Stock, as determined by the Valuation
Agent as of the date of determination.
NATIONAL MARKET SYSTEM SECURITY -- has the meaning ascribed
thereto in Rule 11Aa2-1 under the Exchange Act.
NASD -- means the National Association of Securities
Dealers, Inc.
NASDAQ -- means the NASDAQ Stock Market, Inc., a subsidiary
of the NASD.
NASDAQ NATIONAL MARKET -- has the meaning ascribed thereto
in Rule 4200(r) of the NASDAQ.
NASDAQ SMALLCAP MARKET -- has the meaning ascribed thereto
in Rule 4200(t) of the NASDAQ.
NEW COMMON STOCK -- is defined in Preliminary Statement A.
NOTE AND STOCK PURCHASE AGREEMENT -- is defined in
Preliminary Statement B.
NOTES -- is defined in Preliminary Statement B.
NOTICE OF SALE -- is defined in Section 1.2.
OTHER STOCKHOLDERS -- means and includes the Initial
Stockholders and all other holders of the Parent Common Stock
other than:
(a) holders who are not Affiliates and who hold no
shares of Parent Common Stock which are "restricted
securities" (as such term is defined in Rule 144(a)(1) under
the Securities Act); and
(b) holders of Purchaser Shares.
PARENT -- is defined in the introductory paragraph.
PARENT COMMON STOCK -- means the Common Stock, par value
$.001 per share, of the Parent.
PARENT GUARANTY AGREEMENT -- means the Guaranty Agreement,
dated as of the date hereof, entered into by the Parent in favor
of the Purchasers.
PARENT SALE -- means a transfer, sale or other disposition
of, or the execution and delivery by Mr. Scharf of a binding
agreement to transfer, sell or otherwise dispose of, directly or
indirectly, all of the Issuable Shares owned by the Other
Stockholders to a Person other than the Parent, the Company or
any Affiliate or Subsidiary.
PERMITTED ISSUABLE SHARES AMOUNT -- means that number of
Issuable Shares (appropriately adjusted for any reclassification
(by combination, subdivision or otherwise) or dividend payable in
Parent Common Stock or Rights) equal to 25% of the Issuable
Shares beneficially owned by the Initial Stockholders, taken as a
group, on the Closing Date (as indicated in Annex 2 hereto).
PERSON -- means an individual, partnership, corporation,
limited liability company, trust, unincorporated organization, or
a government or agency or political subdivision thereof.
POTENTIAL MATERIAL EVENT -- means and includes the
following:
(a) the possession by the Parent of material non-
public information not ripe for disclosure in a registration
statement; or
(b) any material engagement or activity by the Parent
which would, in the good faith determination of the Board of
Directors, be adversely affected by disclosure in a
registration statement at such time.
PREFERRED STOCK -- means and includes the Preferred Stock,
par value $.001 per share of the Parent, and all other capital
stock of the Parent of any class which is preferred, as to
payment of dividends, payment upon a liquidation or dissolution
of the Parent or both, over the Parent Common Stock.
PROPERTY -- means any and all interests in any kind of
property of asset whatsoever, whether real, personal or mixed and
whether tangible or intangible.
PUBLIC OFFERING -- shall mean, with respect to any Issuable
Shares, any sale in a transaction either registered under, or
requiring registration under, section 5 of the Securities Act.
PURCHASERS -- is defined in the introductory paragraph.
PURCHASER SHARES -- means the shares of Parent Common Stock
issued to the Purchasers pursuant to the terms of the Note and
Stock Purchase Agreement on the Closing Date.
REGISTRABLE SECURITIES -- means, at any time, any Purchaser
Shares, provided that as to any particular Registrable Securities
once issued, such Securities shall cease to be Registrable
Securities:
(a) when a registration statement with respect to the
sale of such Securities shall have become effective under
the Securities Act and such Securities shall have been
disposed of in accordance with such registration statement;
(b) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision)
under the Securities Act;
(c) when they shall have been otherwise transferred
and subsequent disposition of them shall not require
registration or qualification under the Securities Act or
any similar state law then in force; or
(d) when they shall have ceased to be outstanding.
REGISTRATION -- means and includes the Shelf Registration
and each registration of Parent Common Stock in respect of the
which the holders of Purchaser Shares have the right to
participate under Section 3.1.
REGISTRATION EXPENSES -- means all expenses incident to the
Parent's performance of or compliance with compliance with
Section 3.1 through Section 3.4 inclusive, including, without
limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or
blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the
Registrable Securities);
(c) expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with
Depositary Trust Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation,
all salaries and expenses of its officers and employees
performing legal or accounting duties);
(f) fees and disbursements of counsel for the Parent
and its independent certified public accountants (including
the expenses of any management review, cold comfort letters
or any special audits required by or incident to such
performance and compliance);
(g) securities acts liability insurance (if the Parent
elects to obtain such insurance);
(h) the reasonable fees and expenses of any special
experts retained by the Parent in connection with such
Registration;
(i) fees and expenses of other Persons retained by the
Parent; and
(j) fees and expenses of Hebb & Gitlin, a Professional
Corporation, or such other counsel for holders of
Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities or fees and
expenses of more than one counsel representing the holders of
Registrable Securities or any other selling expenses, discounts
or commissions incurred in connection with the sale of
Registrable Securities.
REQUIRED HOLDERS -- means, at any time, the holders (other
than the Parent, the Company or any Affiliate or other
Subsidiary) of at least 51% of the Purchaser Shares at such time
(excluding any Purchaser Shares held directly or indirectly by
the Parent, the Company or any other Subsidiary).
REQUISITE HOLDERS -- means, with respect to any Registration
or proposed Registration of Registrable Securities pursuant to
Section 3 hereof, any holder or holders (other than the Parent,
the Company or any Affiliate or any other Subsidiary) holding at
least 51% of the shares of Registrable Securities (excluding any
shares of Registrable Securities directly or indirectly held by
the Parent, the Company or any Affiliate or other Subsidiary) to
be so registered.
RIGHT -- means and includes any warrant (including, without
limitation, any Existing Warrant), option or other right, to
acquire Parent Common Stock and including, without limitation,
any right pursuant to the provisions of any Security convertible
or exchangeable into Parent Common Stock.
SCHARF, MR. -- is defined in the introductory paragraph.
SEC -- means, at any time, the Securities and Exchange
Commission or any other federal agency at such time administering
the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
SECURITY -- means "security" as defined by section 2(1) of
the Securities Act.
SENIOR CREDIT AGREEMENT -- is defined in the Note and Stock
Purchase Agreement.
SHELF EFFECTIVE DATE -- means December 31, 1997.
SHELF EFFECTIVE PERIOD -- is defined in Section 3.2(a).
SHELF FILING DATE -- means August 15, 1997.
SHELF REGISTRATION -- is defined in Section 3.2(a).
SUBSIDIARY -- means, as to any Person, any corporation in
which such Person or one or more Subsidiaries of such Person or
such Person and one or more Subsidiaries of such Person owns
sufficient voting securities to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority
of the directors (or Persons performing similar functions) of
such corporation. The term "SUBSIDIARY," as used herein without
reference to any Person, shall mean a Subsidiary of the Parent.
TAG-ALONG TRIGGER EVENT -- shall been deemed to have
occurred at any time when the Initial Stockholders, taken as a
group (and without giving effect to sales, transfers or other
dispositions of Issuable Shares by any Initial Stockholder to any
other Initial Stockholder), shall have sold, transferred or
otherwise disposed of a number of Issuable Shares which (after
giving effect to all prior or contemporaneous transfers,
dispositions, purchases and acquisitions) is more than the
Permitted Issuable Shares Amount in any sale, transfer or
disposal (or series of sales, transfers or disposals (whether
related or not)) after the Closing Date, provided that in
connection with any sale, transfer or other disposal if:
(a) immediately prior thereto, the aggregate amount of
Issuable Shares so sold, transferred or otherwise disposed
of by the Initial Stockholders since the Closing Date is
less than the Permitted Issuable Shares Amount, and
(b) any of the Initial Stockholders sell Issuable
Shares in such transaction that, together with all other
Issuable Shares sold, transferred or otherwise disposed of
by the Initial Stockholders since the Closing Date, equal or
exceed the Permitted Issuable Shares Amount,
then, for the purposes of this Agreement, the "TAG-ALONG TRIGGER
EVENT" shall be deemed to have occurred immediately prior to such
sale, transfer or other disposal.
VALUATION AGENT -- means a firm of independent certified
public accountants, an investment banking firm or a securities
rating service (which firm or service shall own no Securities of,
and shall not be an Affiliate, Subsidiary or a related Person of,
the Parent) of recognized national standing retained by the
Parent and reasonably acceptable to the Required Holders.
VOTING STOCK -- means, with respect to any corporation, any
shares of stock of such corporation whose holders are entitled
under ordinary circumstances to vote for the election of
directors of such corporation (irrespective of whether at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
6. MISCELLANEOUS.
6.1 WARRANTIES AND REPRESENTATIONS IN NOTE AND STOCK
PURCHASE AGREEMENT. Mr. Scharf hereby warrants and represents to
the Purchasers that each of the warranties and representations of
the Companies contained in the Note and Stock Purchase Agreement
are true and correct as of the Closing Date.
6.2 NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the
sender on the same day sends a confirming copy of such notice by
a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to any holder of Purchaser Shares, if such
holder is a Purchaser, then at the address set forth in
Annex 1 hereto for such Purchaser, or, if such holder is not
a Purchaser, then at the address provided to the Parent by
such holder or such other address as such holder shall
designate to the Parent in writing;
(ii) if to the Parent, to the Parent at 677 Madison
Avenue, New York, NY 10021, Attention: President, telephone
(212) 317-1000, telecopier (212) 317-1001, or at such other
address or telecopier as the Parent shall have specified to
the holder of each Purchaser Share in writing,
(iii) if to the Company, to the Company (with a
courtesy copy to the Parent) at 110 Hopkins Street, P.O. Box
399, Buffalo, NY 14240, Attention: President, telephone
(716) 827-7010, telecopier (716) 827-8855, or at such other
address or telecopier as the Company shall have specified to
the holder of each Purchaser Share in writing, or
(iv) if to Mr. Scharf, to Mr. Scharf in care of the
Parent at 677 Madison Avenue, New York, NY 10021, Attention:
Michael J. Scharf, telephone (212) 317-1000, telecopier
(212) 317-1001, or at such other address or telecopier as
Mr. Scharf shall have specified to the holder of each
Purchaser Share in writing.
Notices under this Section 6.2 will be deemed given only when
actually received.
6.3 AMENDMENTS AND WAIVERS.
(a) The provisions of Section 6 hereof, and of any
term defined in Section 5 hereof as used in any such
Section, may be amended, modified or supplemented, and
compliance with any such Section hereof waived, only by a
writing duly executed by or on behalf of the Required
Holders and the Companies.
(b) the provisions of Section 3 hereof, and of any
term defined in Section 5 hereof as used in Section 3
hereof, may be amended, modified or supplemented only by a
writing duly executed by or on behalf of the Requisite
Holders and the Parent; and
(c) the provisions of Section 1, Section 2 and Section
4 hereof, and of any term defined in Section 5 hereof as
used in any such Section, may be amended, modified or
supplemented, and compliance with any such Section hereof
waived, only by a writing duly executed by or on behalf of
the Required Holders, Mr. Scharf and the Parent.
6.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW YORK.
6.5 JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS
CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE
OF THE PARTIES HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION PROCEDURE BASED UPON
OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR THE
PARENT COMMON STOCK AND EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 6.5.
6.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
6.7 DESCRIPTIVE HEADINGS. Descriptive headings of the
several sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
6.8 SEVERABILITY. The fact that any given provision of
this Agreement is found to be unenforceable, void or voidable
under the laws of any jurisdiction shall not effect the validity
of the remaining provisions of this Agreement in such
jurisdiction, and shall not effect the enforceability of the
entire Agreement under the laws of any other jurisdiction.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY; NEXT PAGE IS
SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered, all as of the date
and year first above written.
NIAGARA CORPORATION
By: /s/ Michael J. Scharf
Name: Michael J. Scharf
Title: President
NIAGARA COLD DRAWN CORP.
By: /s/ Frank Archer
Name: Frank Archer
Title: President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Kevin J. Kraska
Name: Kevin J. Kraska
Title: Vice President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By: /s/ U. Peter C. Gummeson
Name: U. Peter C. Gummeson
Title: Investment Officer
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
FALCON ASSET MANAGEMENT, INC., AS
ATTORNEY IN FACT FOR UNITED STATES
FIDELITY AND GUARANTY COMPANY
By: /s/ Therese A. Ray
Name: Therese A. Ray
Title: Vice President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
/s/ Michael J. Scharf
MICHAEL J. SCHARF
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
STOCK PURCHASE AGREEMENT
by and among
NIAGARA CORPORATION
NIAGARA COLD DRAWN CORP.
and
QUANEX CORPORATION
APRIL 18, 1997
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated
April 18, 1997, is made by and among NIAGARA CORPORATION, a
Delaware corporation ("Niagara"), NIAGARA COLD DRAWN CORP., a
Delaware corporation and wholly owned subsidiary of Niagara (the
"Buyer"), and QUANEX CORPORATION, a Delaware corporation (the
"Seller," and together with Niagara and the Buyer, the
"Parties").
WHEREAS, the Seller is the beneficial and record owner of
all of the issued and outstanding shares of common stock, par
value $1.00 per share (collectively, the "Shares"), of LaSalle
Steel Company, a Delaware corporation (the "Company");
WHEREAS, the Company is engaged in the business of
manufacturing cold drawn and chrome-plated steel bars for a
variety of applications (the "Business");
WHEREAS, the Buyer desires to purchase, and the Seller
desires to sell, all of the Shares, upon the terms and conditions
set forth herein; and
WHEREAS, prior to Closing (as defined in Section 1.1 hereof)
(i) the Seller obtained the consent to its sale of the Shares to
the Buyer from each of the banks who are parties to the Seller's
Revolving Credit and Term Loan Agreement, dated July 23, 1996
(the "Credit Agreement"), (ii) the Guaranty, dated July 23, 1996,
executed and delivered by the Company in connection with the
Credit Agreement (the "Guaranty"), was terminated and (iii) the
Seller and the Company executed and delivered an agreement (the
"Termination Agreement") terminating each of (x) the Intercompany
Interest Bearing Open Account Agreement, dated February 24, 1993,
by and between the Seller and the Company and (y) the Management
Agreement, dated February 24, 1993, between the Seller and the
Company.
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties set forth herein, and
intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING
1.1 Purchase and Sale Upon the terms and subject to the
conditions hereof, at the closing referred to in Section 1.3
hereof and taking place simultaneously herewith (the "Closing"),
the Seller is selling, assigning, transferring and delivering to
the Buyer, and the Buyer is accepting and purchasing from the
Seller, free and clear of all Encumbrances (as defined in
Section 2.5(b) hereof), the Shares.
1.2 Consideration Upon the terms and subject to the
conditions hereof, in reliance on the representations,
warranties, covenants and agreements of the Seller contained
herein, and in consideration of the aforementioned sale,
assignment, transfer and delivery of the Shares (i) the Buyer is
delivering to the Seller, at the Closing, $65,500,000 (the
"Estimated Purchase Price"), by interbank or wire transfer of
immediately available funds and (ii) on the Adjustment Date (as
defined in Section 1.7(e) hereof), the Buyer or the Seller, as
the case may be, shall make the payment called for in Section
1.7(e) hereof.
1.3 The Closing The Closing of the transactions
contemplated hereby is taking place at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York on April 18, 1997 (the "Closing Date"), simultaneously with
the execution of this Agreement and the other agreements,
documents, instruments and writings (collectively, the "Other
Documents") executed and delivered by the Parties pursuant hereto
or in connection herewith. At the Closing, the actions described
in Sections 1.5 and 1.6 hereof are being taken. All such actions
shall be deemed to have occurred simultaneously.
1.4 Actions Taken Prior to the Closing Prior to the
Closing, the following actions were taken (which occurred in the
order set forth below):
(a) the banks who are parties to the Credit Agreement
executed and delivered their consent to the sale of the Shares to
the Buyer;
(b) the Guaranty was terminated; and
(c) the Seller and the Company entered into the
Termination Agreement, attached hereto as Exhibit A.
1.5 Deliveries by the Seller At the Closing, the Seller is
delivering to the Buyer (unless delivered previously) the
following:
(a) stock certificates representing the Shares
accompanied by stock powers duly endorsed in blank or accompanied
by duly executed instruments of transfer, with all necessary
transfer tax and other revenue stamps affixed thereto;
(b) a receipt for the Estimated Purchase Price;
(c) copies of the Certificates of Incorporation and By-
laws of the Seller and the Company, certified by the Secretaries
of the Seller and the Company, respectively, as being complete
and correct;
(d) the stock books, stock ledgers and minute books of
the Company (all other records of the Company being located on
the premises of the Company);
(e) copies of the resolutions adopted by the Board of
Directors of the Seller, certified by the Secretary of the Seller
as having been duly and validly adopted and as being in full
force and effect, authorizing, among other things, the execution
and delivery by the Seller of this Agreement, the Termination
Agreement and the Other Documents executed and delivered by the
Seller pursuant hereto or in connection herewith, and the
performance by the Seller of its obligations hereunder and
thereunder;
(f) copies of the resolutions adopted by the Board of
Directors of the Company, certified by the Secretary of the
Company as having been duly and validly adopted and as being in
full force and effect, authorizing, among other things, the
termination of the Guaranty and the execution and delivery by the
Company of the Termination Agreement, and the performance by the
Company of its obligations thereunder;
(g) certificates evidencing the good standing of the
Seller and the Company under the laws of the State of Delaware;
(h) the resignations of the officers and directors of
the Company as requested by the Buyer prior to the Closing;
(i) a duly executed Certificate of Non-Foreign Status
duly executed by the Seller, attached hereto as Exhibit B; and
(j) executed counterparts (or, in the case of the
consents referred to in Section 1.4(a) hereof, copies thereof) of
all Consents (as defined in Section 2.6 hereof) obtained by the
Seller and the Company in connection with this Agreement and the
Other Documents.
1.6 Deliveries by Niagara and the Buyer At the Closing,
Niagara or the Buyer, as the case may be, is delivering to the
Seller (unless delivered previously) the following:
(a) the Estimated Purchase Price;
(b) certificates evidencing the good standing of Niagara
and the Buyer under the laws of the State of Delaware;
(c) copies of the Certificates of Incorporation and By-
laws of Niagara and the Buyer, certified by the Secretaries of
Niagara and the Buyer, respectively, as being complete and
correct;
(d) copies of the resolutions adopted by the Board of
Directors of Niagara, certified by the Secretary of Niagara as
having been duly and validly adopted and as being in full force
and effect, authorizing, among other things, the execution and
delivery by Niagara of this Agreement and the Other Documents
executed and delivered by Niagara pursuant hereto or in
connection herewith, and the performance by Niagara of its
obligations hereunder and thereunder; and
(e) copies of the resolutions adopted by the Board of
Directors of the Buyer, certified by the Secretary of the Buyer
as having been duly and validly adopted and as being in full
force and effect, authorizing, among other things, the execution
and delivery by the Buyer of this Agreement and the Other
Documents executed and delivered by the Buyer pursuant hereto or
in connection herewith, and the performance by the Buyer of its
obligations hereunder and thereunder.
1.7 Post-Closing Adjustment
(a) As soon as reasonably practicable, and in any event
within 60 days of the Closing Date, the Seller shall deliver to
Niagara and the Buyer, in accordance with the provisions of
Section 7.9 hereof, the audited balance sheet of the Company as
of March 31, 1997 (the "Closing Financial Statement Date") (once
finalized and binding in accordance with this Section 1.7, the
"Closing Balance Sheet"), together with the related audited
statements of (i) income and retained earnings and (ii) cash
flows, each for the period November 1, 1996 through the Closing
Financial Statement Date (collectively with the Closing Balance
Sheet, once finalized and binding in accordance with this Section
1.7, the "Closing Financial Statements"), prepared (i) from the
books and records of the Company, (ii) in accordance with
generally accepted accounting principles applicable to a fiscal
year end ("GAAP"), (iii) on a basis consistent with (x) the
audited balance sheet of the Company as at October 31, 1996 (the
"1996 Balance Sheet") and the related audited statements of (A)
income and retained earnings and (B) cash flows, each for the
fiscal year then ended and (y) the unaudited balance sheet of the
Company as at January 31, 1997, and the related unaudited
statements of (A) income and retained earnings and (B) cash
flows, each for the three months ending January 31, 1997, (iv)
with respect to pension and post-retirement welfare benefits, on
an ongoing basis using the actuarial assumptions and procedures
used in connection with the 1996 Balance Sheet and without
reflecting any adjustment for settlements, curtailments or
business combinations relating to the sale of the Shares to the
Buyer pursuant to this Agreement and (v) fairly presenting the
financial condition and results of operations of the Company as
of the Closing Financial Statement Date and for the portion of
the fiscal year then ending; provided,however, that the Closing
Balance Sheet (which shall be prepared in accordance with GAAP)
shall not reflect any reserves, provisions, or accruals for any
Taxes (other than deferred income Taxes) relating to any
consolidated federal income Tax Returns or any consolidated,
combined, affiliated or unitary state, local or foreign income
Tax Returns (including, but not limited to, Indiana Corporation
Income Tax Returns filed on a combined basis) which include the
Company, including, but not limited to, such reserves, provisions
or accruals for "Income Taxes Payable to Parent" (which the
Parties acknowledge and agree will be subtracted from any
intercompany receivable to the Company from the Seller or added
to any intercompany payable by the Company to the Seller, as the
case may be, in connection with the preparation and finalization
of the Closing Balance Sheet). The costs and expenses incurred
in connection with the preparation and delivery of the Closing
Financial Statements shall be borne by the Seller.
(b) From time to time following the Closing and until
the Closing Financial Statements have been finalized in
accordance with this Section 1.7, Niagara and the Buyer on the
one hand, and the Seller on the other hand, shall give each
other, and any of its or their independent accountants and
authorized representatives, reasonable access during normal
business hours to the properties, books, records and personnel of
the Seller and the Company, and shall use its or their reasonable
best efforts (which shall not be deemed to require the Seller to
make any unreasonable expenditures) to cause the Company's
independent accountants to make available to each such Party, and
its or their authorized representatives, their work papers
generated in connection with their review and audit of the
Company's financial statements, in each case relating to periods
ending on or prior to the Closing Date, for purposes of
preparing, reviewing and resolving any disputes concerning the
Closing Financial Statements. All such information and access
shall be conducted in a manner which does not unreasonably
interfere with such other Party's business and operations and
shall be subject to the provisions of Section 4.4(a) hereof.
(c) Niagara and the Buyer shall have 45 days following
delivery of the financial statements referred to in Section
1.7(a) hereof during which to submit to the Seller, in accordance
with Section 7.9 hereof, a written statement (a "Buyer's
Statement") setting forth any disputed item (and shall provide,
in reasonable detail, the basis for such dispute) in such
financial statements. In this regard, it is understood and
agreed that Niagara and the Buyer may themselves prepare
financial statements of the Company as of the Closing Date and
for the portion of the fiscal year then ended or submit specific
changes to the financial statements delivered by the Seller to
Niagara and the Buyer pursuant to Section 1.7(a) hereof. The
Seller shall cooperate with Niagara and the Buyer as reasonably
requested in the preparation of any such financial statements.
The costs and expenses incurred in connection with the
preparation and delivery of a Buyer's Statement shall be borne by
the Buyer. If Niagara and the Buyer fail to submit a Buyer's
Statement within such 45-day period, then the financial
statements delivered by the Seller to Niagara and the Buyer
pursuant to Section 1.7(a) hereof shall be deemed the Closing
Financial Statements.
(d) In the event Niagara and the Buyer deliver to the
Seller a Buyer's Statement, the Parties shall consult and attempt
to resolve, as soon as practicable, all disputes set forth
therein. In the event the Parties are unable to resolve any such
dispute within 30 days of the delivery of the Buyer's Statement,
such disputes shall be resolved by Arthur Andersen & Co. (the
"Independent Accounting Firm"). If, for any reason, Arthur
Andersen & Co. cannot serve as the Independent Accounting Firm or
declines to so serve, then such dispute shall be resolved by
Coopers & Lybrand and such accounting firm shall be the
Independent Accounting Firm for purposes of this Agreement. If,
for any reason, Coopers & Lybrand cannot serve as the Independent
Accounting Firm or declines to so serve, then such disputes shall
be resolved by KPMG Peat Marwick and such accounting firm shall
be the Independent Accounting Firm for purposes of this
Agreement. The Independent Accounting Firm shall be instructed
to make its determination as promptly as practicable and such
determination shall be final and binding upon the Parties
enforceable by appropriate judicial proceedings. The fees and
expenses of the Independent Accounting Firm in performing such
function shall be shared equally by Niagara or the Buyer, on the
one hand, and the Seller, on the other hand. The financial
statements delivered by the Seller to Niagara and the Buyer
pursuant to Section 1.7(a) hereof, as modified to reflect the
resolution of disputes by the Parties or by the Independent
Accounting Firm in accordance with this Section 1.7, shall be the
"Closing Financial Statements."
(e) On the tenth business day following the delivery of
the Closing Financial Statements (the "Adjustment Date") either
(i) the Buyer shall pay to the Seller the difference between the
Purchase Price (as defined below) and the Estimated Purchase
Price, if the Purchase Price exceeds the Estimated Purchase Price
or (ii) the Seller shall pay to the Buyer the difference between
the Purchase Price and the Estimated Purchase Price, if the
Estimated Purchase Price exceeds the Purchase Price, in either
case by interbank or wire transfer of immediately available funds
to an account designated in writing by the recipient of such
payment at least two business days prior to the Adjustment Date.
In this regard, it is understood and agreed that any payable to
or receivable from the Seller as of the Closing Financial
Statement Date shall be cancelled without any payment by one
Party to another Party in respect thereof. For purposes of this
Agreement, (i) "Purchase Price" shall mean the sum of (x)
$58,862,000 and (y) Total Equity (as defined below) reduced by
Estimated Total Equity (as defined below); (ii) "Total Equity"
shall mean the sum of (x) total stockholder's equity stated on
the Closing Balance Sheet and (y) the amount of any intercompany
payable from the Company to the Seller stated on the Closing
Balance Sheet reduced by the amount of any intercompany
receivable of the Company from the Seller stated on the Closing
Balance Sheet and (iii) "Estimated Total Equity" shall mean
$4,709,000, which is the total stockholder's equity stated on the
1996 Balance Sheet reduced by the amount of the intercompany
receivable due the Company from the Seller (other than in respect
of Taxes) stated on the 1996 Balance Sheet.
(f) The rights to indemnification in favor of any Buyer
Indemnified Party (as defined in Section 6.3 hereof) pursuant to
Section 6.3(i) hereof (and any limitations on such rights) shall
not be deemed to limit, supersede or otherwise affect the rights
of the Buyer and the Seller for a full purchase price adjustment
pursuant to this Section 1.7, provided that no claim for
indemnification may be made pursuant to Section 6.3(i) hereof
with respect to any Losses (as defined in Section 6.3 hereof) to
the extent that such Losses are included as a liability on the
Closing Balance Sheet.
(g) Within two business days of the Closing Date, the
Seller shall deliver to Niagara and the Buyer, by overnight
delivery (Federal Express) to the addresses set forth in Section
7.9 hereof, a statement (the "Intercompany Statement") of the
results of the cash activity in the intercompany account between
the Seller and the Company (taking into account (i) cash
transfers to and from the Seller and (ii) non-cash billings from
the Seller only to the extent that such billings result from cash
disbursements made by the Seller on behalf of the Company) from
(but not including) the Closing Financial Statement Date through
(and including) the Closing Date (the "Interim Period"), together
with appropriate supporting documentation (including any such
supporting documentation that Niagara or the Buyer may reasonably
request). Within seven business days of the Closing Date, and
notwithstanding the delivery of a Buyer's Intercompany Statement
(as defined below), the Buyer shall pay to the Seller, or the
Seller shall pay to the Buyer, the amount of the intercompany
payable in respect of such activity as set forth on such
statement (the "Intercompany Payment"), in either case by
interbank or wire transfer of immediately available funds to an
account designated in writing by the recipient of such payment at
least one business day prior to such date. From and after the
Closing, the Seller shall promptly deliver all funds and mail of
any kind or form relating to the Business or the Company to the
Company's administrative offices in Hammond, Indiana. Niagara
and the Buyer shall have 30 days following delivery of the
Intercompany Statement during which to submit to the Seller, in
accordance with Section 7.9 hereof, a written statement (a
"Buyer's Intercompany Statement") setting forth any disputed item
(and shall provide, in reasonable detail, the basis for such
dispute) in the Intercompany Statement. In the event Niagara and
the Buyer deliver to the Seller a Buyer's Intercompany Statement,
the Parties shall consult and attempt to resolve, as soon as
practicable, all disputes set forth therein. In the event the
Parties are unable to resolve any such dispute within 15 days of
the delivery of a Buyer's Intercompany Statement, such disputes
shall be resolved by the Independent Accounting Firm. The
Independent Accounting Firm shall be instructed to make its
determination as promptly as practicable and such determination
shall be final and binding upon the Parties enforceable by
appropriate judicial proceedings. The fees and expenses of the
Independent Accounting Firm in performing such function shall be
shared equally by Niagara or the Buyer, on the one hand, and the
Seller, on the other hand. On the fifth business day following
the resolution of all disputes set forth in the Buyer's
Intercompany Statement (either by the Parties or by the
Independent Accounting Firm) in accordance with this Section
1.7(g), the Buyer or the Seller, as the case may be, shall make a
payment to the other in an amount that reflects the resolution of
all such disputes. Such payment shall be made by interbank or
wire transfer of immediately available funds to an account
designated in writing by the recipient of such payment at least
two business days prior to such payment date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Niagara and the Buyer
as follows:
2.1 Organization and Standing Each of the Seller and the
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business and
operations as now being and, in the case of the Company, as
heretofore conducted. The Company received its Certificate of
Authority to transact business in the State of Indiana on January
5, 1982, and is currently duly authorized to transact business in
such State. The Company has filed its most recent annual report
required by Indiana law to be filed with the Indiana Secretary of
State, or is not yet required to file such annual report, and the
Company has not filed an Application for a Certificate of
Withdrawal with the Indiana Secretary of State. The Company is
duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction
set forth on Schedule 2.1 of the disclosure schedule delivered by
the Seller to Niagara and the Buyer concurrently herewith (the
"Disclosure Schedule"), which, in addition to Indiana, are the
only jurisdictions in which the property owned, leased or
operated by the Company or the conduct of the Business makes such
qualification necessary.
2.2 Organizational Documents and Corporate Records (a)
The Seller is concurrently delivering to Niagara and the Buyer
complete and correct copies of the Certificate of Incorporation
and By-laws of the Company as currently in effect. The minute
books of the Company (and with respect to the Business, excerpts
of the minutes of the Seller) have been made available to Niagara
and the Buyer for their inspection, and such minute books (and
excerpts) contain complete and correct records in all material
respects of all meetings (or, in the case of the Seller, all
portions thereof) and consents in lieu of a meeting, of the
respective Boards of Directors (and any committees thereof) and,
in the case of the Company, its stockholders, and accurately
reflect in all material respects all transactions referred to
therein. The stock books and ledgers of the Company have been
made available to Niagara and the Buyer for their inspection, and
such books and ledgers are complete and correct in all material
respects.
(b) The Seller has made available to Niagara and the
Buyer all of the accounting, corporate and financial books and
records relating to the Business. Such books and records are, in
the aggregate, true, accurate and complete in all material
respects and fairly reflect the basis for the Company's financial
condition and results of operations as set forth in the Audited
Financial Statements (as defined in Section 2.7 hereof) and the
Unaudited Financial Statements (as defined in Section 2.7
hereof).
2.3 Equity Investments The Company does not directly or
indirectly own or control any capital stock or other securities
of or other interests or investments in any other individual,
partnership, firm, trust, association, corporation, joint
venture, joint stock company, unincorporated organization,
Governmental Authority (as defined in Section 2.6 hereof), or
other entity (each of which, a "Person") nor does the Company
have any obligation or right to acquire any such capital stock,
securities interest or investment.
2.4 Authorization; Binding Obligation The Seller, and to
the extent it is a party thereto, the Company, have all requisite
corporate power and authority to execute and deliver this
Agreement and the Other Documents executed and delivered by such
parties pursuant hereto or in connection herewith, and to
consummate the transactions contemplated hereby and thereby and
to perform their obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Other Documents
executed and delivered by the Seller and the Company pursuant
hereto or in connection herewith, and the consummation of the
transactions contemplated hereby and thereby by such parties,
have been duly and validly authorized by the Boards of Directors
of such parties, and no other corporate proceedings on the part
of the Seller or the Company are necessary to authorize this
Agreement or the Other Documents executed and delivered by such
parties pursuant hereto or in connection herewith, or for such
parties to consummate the transactions contemplated hereby and
thereby. This Agreement and the Other Documents executed and
delivered by the Seller and the Company pursuant hereto or in
connection herewith have been duly and validly executed and
delivered by such parties and, assuming the due authorization,
execution and delivery by Niagara, the Buyer and any other party
thereto, constitute legal, valid and binding obligations of the
Seller and the Company, as the case may be, enforceable against
such parties in accordance with their respective terms. Except
as and to the extent set forth on Schedule 2.4 of the Disclosure
Schedule, no power of attorney has been granted by the Seller or
the Company and is currently in force with respect to any matter
relating to the Company, the Shares, the Business or the
Company's assets.
2.5 Capitalization; Title to the Shares (a) The
capitalization of the Company consists of 100,000 shares of
common stock, par value $1.00 per share, of which 1,000 shares
are issued and outstanding. The Company has no other classes of
capital stock authorized or outstanding. None of the Company's
shares of capital stock have been reserved for any purpose. All
of the Shares are duly authorized and validly issued, fully paid,
nonassessable and were not issued in violation of any preemptive
rights. There are no (i) options, warrants, calls, commitments
or rights of any character to purchase or otherwise acquire from
the Company shares of capital stock of the Company of any class,
(ii) outstanding securities of the Company that are convertible
into or exchangeable or exercisable for shares of any class of
capital stock of the Company, (iii) options, warrants or other
rights to purchase from the Company any such convertible or
exchangeable securities or (iv) Contracts (as defined in Section
2.13 hereof) of any kind relating to the issuance of any capital
stock of the Company, or any such options, warrants or rights,
pursuant to which, in any of the foregoing cases, the Company is
subject or bound.
(b) Immediately prior to the Closing, the Seller was the
record and beneficial owner of, and had good and marketable title
to, the Shares, free and clear of all Encumbrances (as defined
below). The Shares are not subject to any restrictions on
transferability other than those imposed by the Securities Act of
1933, as amended (the "Securities Act") and applicable state
securities laws. There are no options, warrants, calls,
commitments or rights of any character to purchase or otherwise
acquire Shares from the Seller pursuant to which the Seller may
be obligated to sell or transfer any of the Shares, other than
this Agreement. At the Closing, the Seller is transferring good
and marketable title to the Shares, free and clear of all
Encumbrances. For purposes of this Agreement, "Encumbrances"
shall mean and include all liens (including any liens filed under
the Internal Revenue Code of 1986, as amended (the "Code") or
under the tax laws of any foreign, state or local Governmental
Authority), encumbrances, proxies, voting trust arrangements,
pledges, security interests, collateral security agreements,
financing statements (and similar notices) filed with any
Governmental Authority, claims, charges, mortgages, equities,
title defects, options, restrictive covenants or restrictions on
transfer of any nature whatsoever.
2.6 Consents and Approvals; No Violation Except as and to
the extent set forth on Schedule 2.6 of the Disclosure Schedule,
neither the execution and delivery of this Agreement and the
Other Documents executed and delivered by the Seller and the
Company pursuant hereto or in connection herewith, nor the
consummation by the Seller or the Company of the transactions
contemplated hereby or thereby, nor compliance by the Seller or
the Company with any of the provisions hereof or thereof (a)
conflicts with any provision of the Certificate of Incorporation
or By-laws or other similar organizational documents of the
Company or the Seller, (b) requires any consent, Permit (as
defined in Section 2.14 hereof) or waiver (collectively,
"Consents") of, filing with or notification to, or any other
action by, any Governmental Authority (as defined below) by the
Company or the Seller, (c) violates any law, rule, regulation,
restriction (including zoning), code, statute, ordinance, order,
writ, injunction, judgment or decree (collectively, "Laws") of a
government or political subdivision thereof, whether federal,
state, local or foreign, or any agency, department, commission,
board, bureau, court, tribunal, body, administrative or
regulatory authority or instrumentality of any such government or
political subdivision (collectively, "Governmental Authorities")
applicable to the Company or the Seller, or by which any of their
businesses, properties or assets (including, without limitation,
the Shares) is bound or affected or (d) violates, breaches, or
conflicts with, or constitutes (with or without due notice or
lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or any obligation to
pay or result in the imposition of any Encumbrance upon any of
the property (including, without limitation, the Shares)) under
any of the terms, conditions or provisions of any credit
agreement (including, without limitation, the Credit Agreement),
letter of credit, guaranty obligation (including, without
limitation, the Guaranty), note, bond, mortgage, indenture,
Encumbrance, contract, Permit, Order (as defined in Section 2.14
herein), or other instrument or obligation to which the Seller or
the Company is a party or by which any of their businesses,
properties or assets (including, without limitation, the Shares)
is bound or affected.
2.7 Financial Statements Schedule 2.7 of the Disclosure
Schedule consists of complete and correct copies of (i) the
audited balance sheets of the Company as at October 31 in each of
the years 1994 through 1996, and the related audited statements
of (x) income and retained earnings and (y) cash flows, each for
the fiscal years then ended (together with the notes thereto),
certified by Deloitte & Touche, LLP, the Company's independent
public accountants, and accompanied by their reports thereon
(collectively, the "Audited Financial Statements") and (ii) the
unaudited balance sheet of the Company as at January 31, 1997
(the "January 97 Balance Sheet") and the related unaudited
statements of (x) income and retained earnings and (y) cash
flows, each for the quarter ended January 31, 1997 (collectively
with the January 97 Balance Sheet, the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited
Financial Statements (i) have been prepared from the books and
records of the Company in accordance with GAAP consistently
applied and maintained throughout the periods indicated (except
as indicated in the notes thereto and subject in the case of the
Unaudited Financial Statements to adjustments and accruals
normally made in the preparation of year-end financial
statements) and (ii) and fairly presents the financial condition
and results of operations of the Company, as at the date thereof
and for the periods then ended.
2.8 Absence of Undisclosed Liabilities The Company has no
liabilities or obligations of any nature arising from or relating
to its business and operations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due
or to become due) that are required to be reflected or reserved
against on the 1996 Balance Sheet (or the notes thereto) in
accordance with GAAP which were not reflected or reserved against
on the 1996 Balance Sheet, except for liabilities or obligations
incurred since October 31, 1996 in the ordinary course of
business consistent with past practice. Schedule 2.8 of the
Disclosure Schedule sets forth a complete and correct list of all
obligations (the "Indebtedness") of the Company at the Closing
with respect to borrowed money and letters of credit, and any
notes, bonds or similar instruments or under any capitalized
lease or guarantee of the Company, and the balances due
thereunder. The transfer of the Shares pursuant hereto will not
cause the acceleration of or otherwise adversely affect the terms
or conditions of such obligations.
2.9 Accounts Receivable Schedule 2.9(a) of the Disclosure
Schedule sets forth a complete and correct list of all accounts
and notes receivable ("Accounts Receivable"), together with the
customer name, aging and dollar amount, as of the Closing
Financial Statement Date. All Accounts Receivable reflected on
the 1996 Balance Sheet and the January 97 Balance Sheet, and all
Accounts Receivable as of the Closing Date, are (i) except as and
to the extent set forth on Schedule 2.9(b) of the Disclosure
Schedule, in respect of sales actually made in the ordinary
course of business, (ii) subject to no prior assignment or,
except as and to the extent set forth on Schedule 2.9(c) of the
Disclosure Schedule, Encumbrance and (iii) to the knowledge of
those Persons identified on Schedule 2.9(d) of the Disclosure
Schedule, subject to no counterclaim or setoff.
2.10 Inventory All inventory owned or held by the Company
and used in the conduct of the Business, including manufacturing
supplies, raw materials, components, repair parts, work-in-
progress, finished goods and other similar items, whether raw or
used ("Inventory") which is reflected on the 1996 Balance Sheet
and the January 97 Balance Sheet, and all such Inventory as of
the Closing Financial Statement Date, is valued at the lower of
cost or market value. To the knowledge of those Persons
identified on Schedule 2.10(a) of the Disclosure Schedule, the
Inventory reflected on the 1996 Balance Sheet and the January 97
Balance Sheet, and the Inventory as of the Closing Financial
Statement Date, consists of items salable in the ordinary course
of business except for (i) items of obsolete materials and
materials of below-standard quality, which, in the case of
Inventory reflected on the 1996 Balance Sheet, have been written
off or written down to the Company's best estimate of net
realizable value and (ii) items which, after the Closing
Financial Statement Date, the Company has a right to return to
the respective vendor or supplier. The Inventory reflected on
the 1996 Balance Sheet and the Inventory as of the Closing Date
does not include any materials held by the Company on consignment
from any third parties. All Inventory disposed of by the Company
since October 31, 1996 has been disposed of only in the ordinary
course of the Company's business consistent with past practice.
To the knowledge of those Persons identified on Schedule 2.10(b)
of the Disclosure Schedule, all Inventory is free from any defect
or other deficiency except for items of obsolete materials and
materials of below-standard quality which have been written off
or written down to the Company's best estimate of net realizable
value. The quantities of all Inventory are reasonable under the
current circumstances of the Company's business and operations.
Except as and to the extent set forth on Schedule 2.10(c) of the
Disclosure Schedule, none of the Inventory is in the possession
of others.
2.11 Absence of Certain Changes or Events Except as and to
the extent set forth on Schedule 2.11(a) of the Disclosure
Schedule, since October 31, 1996:
(i) the Company has operated its business in the
ordinary course consistent with past practice;
(ii) there has not been any material adverse change
in the business, results of operations, assets, liabilities,
financial condition or prospects of the Company;
(iii) the Company has not incurred any material
damage, destruction or loss (whether or not covered by
insurance) to its owned or leased property or assets;
(iv) the Company has not transferred, licensed,
sublicensed, disposed of, abandoned or permitted to lapse or
otherwise failed to preserve any material rights to use any
Intellectual Property (as defined in Section 2.19 hereof) or
disclosed to any third party, other than representatives of
Niagara and the Buyer, any trade secret, process or know-how
not theretofore a matter of public knowledge relating to the
Company's business or operations;
(v) the Company has not transferred, disposed of,
abandoned or permitted to lapse or otherwise failed to
preserve any Permit issued by a Governmental Authority;
(vi) the Company has not sold, assigned, leased,
transferred, incurred any Encumbrance on or license with
respect to, or disposed of, abandoned, or conveyed any of
its properties or assets (whether real, personal or mixed,
tangible or intangible) with a book value of $100,000 or
more, except in the ordinary course of business consistent
with past practice;
(vii) the Company has not modified, amended or
terminated any Material Contract (as defined in Section 2.13
hereof) other than Material Contracts that are Designated
Plans, or, to the knowledge of those Persons identified on
Schedule 2.11(b) of the Disclosure Schedule, canceled any
debts or claims or waived any rights of substantial value;
(viii) the Company has not made, or committed to
make, any capital expenditures except capital expenditures
made in the ordinary course of business consistent with past
practice, of which no such expenditure for a single project
exceeds $25,000 and which in the aggregate do not exceed
$100,000 and has no uncommitted capital expenditures for
projects;
(ix) the Company has not incurred any liabilities
or obligations of any nature (whether absolute, accrued or
contingent, for borrowed money or otherwise, and whether due
or to become due) other than (a) Contracts entered into in
the ordinary course of business consistent with past
practice or (b) Contracts which do not involve monetary
obligations by or to the Company of more than $100,000;
(x) the Company has not paid, discharged or
satisfied any Encumbrance or liability (whether absolute,
accrued, contingent or otherwise and whether due or to
become due), other than Encumbrances or liabilities which
are (a) incurred in the ordinary course of business or (b)
reflected or reserved against on (or in the notes to) the
1996 Balance Sheet and the related audited statements of
income and retained earnings, and cash flows;
(xi) the Company has not (a) created or entered
into any employment agreements that are not terminable at
will, (b) granted or agreed to an increase in the
compensation of the current or former employees of the
Company (other than increases for employees who are not and
were not officers of the Company made in the ordinary course
of business and consistent with past practices), (c) created
or entered into a Designated Plan (as defined in Section
2.16 hereof), or (d) amended any Designated Plan to increase
any benefits payable thereunder except as required by the
Code or ERISA (as defined in Section 2.16 hereof);
(xii) the Seller has not created or entered into a
Designated Plan or amended any Designated Plan to increase
benefits payable thereunder except as required by the Code
or ERISA;
(xiii) the Company has not declared, paid or made
or set aside for payment or making, any dividend or other
payment or distribution of any kind in respect of its
capital stock or other securities, or to its securityholder,
or directly or indirectly retired, redeemed, purchased or
otherwise acquired any shares of its capital stock or other
securities;
(xiv) the Company has not issued, authorized or
proposed the issuance of, reclassified, or sold any shares
of its capital stock, or securities convertible into or
exchangeable or exercisable for, or rights, warrants or
options to acquire, any such shares or other convertible
securities or acquired any capital stock or other securities
or interests of any Person, or otherwise made a loan or
advance to or investment in any Person;
(xv) neither the Company nor, with respect to the
Business, the Seller, has made any change in any accounting
methods, principles or practices (including, without
limitation, changes in depreciation or amortization policies
or rates or relating to the establishment or accrual of
reserves) or any material election with respect to Taxes (as
defined in Section 2.18 hereof);
(xvi) except as will be reflected in the Closing
Financial Statements, the Company has not paid, loaned or
advanced any amount to or in respect of, or sold,
transferred or leased any properties or assets (whether
real, personal or mixed, tangible or intangible) in an
amount in excess of $25,000 to, or entered into any
agreement, arrangement or transaction with, the Seller or
any of the Seller's Affiliates (as defined in Section 2.24
hereof);
(xvii) neither the Company nor, with respect to the
Business, the Seller, has instituted, settled or agreed to
settle any litigation, action or proceeding by or before any
Governmental Authority;
(xviii) the Company has not ordered any materials
from the Seller or any Seller's Affiliate; and
(xix) neither the Company nor, with respect to the
Business, the Seller, has agreed, whether in writing or
otherwise, to take any action described in this Section
2.11.
2.12 Properties and Assets (a) The Company has good,
valid, marketable and fee simple title to, or a valid leasehold
interest in, all of the real property owned or leased by the
Company as more particularly described on Schedule 2.12(a)-1 of
the Disclosure Schedule (the "Real Property"). Except as and to
the extent set forth on Schedule 2.12(a)-2 of the Disclosure
Schedule, the Real Property owned or, in respect of the Real
Property leased by the Company, its leasehold interest, is
subject to no Encumbrance, encroachment, building or use
restriction, zoning violation, exception, reservation or
limitation.
(b) Except as and to the extent set forth on Schedule
2.12(b)-1 of the Disclosure Schedule, the Company and the Seller
have not received any written notice advising them of any general
or special assessment relating to the Real Property. There are
no condemnation or eminent domain proceedings pending (for which
written notice has been provided to the Company or the Seller)
or, to the knowledge of those Persons identified on Schedule
2.12(b)-2 of the Disclosure Schedule, threatened, against the
Real Property by any Governmental Authority. There are no
variances, special exceptions, conditions or agreements
pertaining to the Real Property imposed or granted by or entered
into by the Company with, or, to the knowledge of those Persons
identified on Schedule 2.12(b)-3 of the Disclosure Schedule,
enforceable by, any Governmental Authority. Except as and to the
extent set forth on Schedule 2.12(b)-4 of the Disclosure
Schedule, no written notice from any Governmental Authority has
been provided to the Company or the Seller requiring or calling
attention to the need for any work, repair, construction,
alteration or installation on, or in connection with, the Real
Property. To the knowledge of those Persons identified on
Schedule 2.12(b)-5 of the Disclosure Schedule, the current
operations of the Company are permitted uses under applicable
zoning regulations and there is no requirement for any special
exception, variance or other conditional approval to permit the
Company to continue to operate at the respective locations where
the Company currently operates.
(c) Except as and to the extent set forth in Items 3, 4
and 5 on Schedule 2.12(c)-1, the Company has good, valid and
marketable title to, or a valid leasehold interest in, all items
of personal property, buildings, improvements, equipment and all
other assets and properties (whether personal or mixed, tangible
or intangible (and whether or not fully depreciated, amortized or
expensed)) used in the Business, and such items are subject to no
Encumbrance except as and to the extent set forth in Items 1 and
2 on Schedule 2.12(c)-1 of the Disclosure Schedule. All
buildings, improvements, equipment or other material assets
currently used in connection with the business and operations of
the Company are structurally sound, and to the knowledge of those
Persons identified on Schedule 2.12(c)-2 of the Disclosure
Schedule, contain no material defects. Such buildings,
improvements, equipment and other material assets are suitable
for their intended use and are subject to no commitment or other
arrangement for their sale or use by any third party. Except as
and to the extent set forth on Schedule 2.12(c)-3 of the
Disclosure Schedule and except for the Inventory, none of the
Company's tangible assets are in the possession of others.
(d) Except as and to the extent set forth on Schedule
2.12(d) of the Disclosure Schedule, the equipment and other items
of tangible personal property of the Company are in good and
normal operating condition and repair (ordinary wear and tear
excepted).
2.13 Certain Contracts Schedule 2.13(a) of the Disclosure
Schedule sets forth a complete and correct list of all Material
Contracts (as defined below). Complete and correct copies of all
written Material Contracts, including any and all amendments and
other modifications thereto, have been delivered to or been made
available for inspection by Niagara and the Buyer. All Material
Contracts (x) are valid and binding obligations of the Company
and, to the knowledge of those Persons identified on Schedule
2.13(b) of the Disclosure Schedule, the other parties thereto,
(y) are in full force and effect and are enforceable as to the
Company and, to the knowledge of those Persons identified on
Schedule 2.13(c) of the Disclosure Schedule, the other parties
thereto, in accordance with their respective terms and (z) except
for any Material Contract that is a Designated Plan, have not
been amended or terminated except in the ordinary course of
business consistent with past practice. The Company is not in
default under nor has it breached in any respect any Material
Contract. No other party to any Material Contract (i) has, to
the knowledge of those Persons identified on Schedule 2.13(d) of
the Disclosure Schedule, breached or is in default thereunder,
(ii) has given notice that it intends to terminate such Material
Contract or (iii) has altered, in any way adverse to the Company,
its performance under such Material Contract. No event or
condition has occurred (or is alleged by any other party to a
Material Contract to have occurred) which, with or without due
notice or lapse of time or both, would constitute, a breach or
event of default on the part of the Company, would provide a
basis for a valid claim or acceleration under any Material
Contract as against the Company or would prevent the Company from
exercising and obtaining the full benefits of any rights or
options contained therein. For purposes of this Agreement,
"Contracts" shall mean and include all leases, contracts,
agreements, license agreements, purchase orders, invoices, sales
orders, instruments evidencing indebtedness for borrowed money,
mortgages or other documents securing any indebtedness for
borrowed money, commitments and understandings, written or oral,
and all amendments or modifications thereto, to which the Company
is a party or by which the Company, or any of the Company's
business, properties or assets, is bound; and "Material
Contracts" shall mean and include all (a) Contracts evidencing or
relating to indebtedness for borrowed money, (b) Contracts
relating to the Real Property, (c) Contracts for the development
of the Intellectual Property, the license agreements set forth on
Schedule 2.19(b) of the Disclosure Schedule and assignments of
any Intellectual Property, (d) leases of personal property by or
to the Company involving monetary obligations of more than
$25,000 per year, (e) purchase or supply Contracts with terms
extending for a period of more than three months involving
monetary obligations by or to the Company of more than $25,000
per year ( but specifically excluding the informal arrangement
identified on Schedule 2.13(a)-1 of the Disclosure Schedule), (f)
Contracts with any other direct or indirect subsidiary of the
Seller providing for payments in excess of $25,000 or Contracts
with any Seller's Affiliate other than such subsidiaries, (g) any
employment, severance, retention, consulting, non-competition or
confidentiality Contract, (h) Contracts relating to the shipment
or transport of the Company's finished goods involving monetary
obligations exceeding $25,000 per year and (i) Contracts which
otherwise are material to the Business.
2.14 Compliance with Laws and Permits (a) The Business
has been conducted and is now being conducted in all material
respects in compliance with all Laws and orders, judgments,
injunctions, awards, decrees, writs and similar actions
("Orders") of all Governmental Authorities having jurisdiction
over the Company and all franchises, licenses, certificates,
registrations, permits, authorizations, approvals of, and any
required registration with, all Governmental Authorities
("Permits") relating to any of its properties or applicable to
the Business.
(b) To the knowledge of those Persons identified on
Schedule 2.14(a) of the Disclosure Schedule, the Company
possesses all Permits necessary to own and operate its properties
and assets and to conduct its business as it is currently
conducted. To the knowledge of those Persons identified on
Schedule 2.14(b) of the Disclosure Schedule, such Permits are
valid, subsisting and in full force and effect, and the Company
has fulfilled its obligations under each of such Permits, and no
event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would
constitute, a default or violation under any of such Permits or
would permit revocation or termination of any of such Permits.
In respect of any such Permits, no proceeding is pending for
which notice has been provided to the Company or the Seller or,
to the knowledge of those Persons identified on Schedule 2.14(c)
of the Disclosure Schedule, threatened, looking toward revocation
or termination of any such Permits.
2.15 Litigation and Arbitration (a) Neither the Company
nor the Seller is subject to any Order affecting the Company or
the Business. Neither the Company nor, with respect to the
Company, the Seller, is a party to, is bound by, or has any
obligation under any settlement agreement affecting the Business
or any agreement, waiver or Consent tolling any statute of
limitations. Except as and to the extent set forth on Schedule
2.15(a) of the Disclosure Schedule and except for workers
compensation claims, there are no claims, actions, causes of
action, suits, proceedings, inquiries or investigations pending
(for which notice has been provided to the Seller or the Company)
or, to the knowledge of those Persons identified on Schedule
2.15(b) of the Disclosure Schedule, threatened against the
Company or affecting the Business, and no such claim, action,
suit, inquiry, proceeding or investigation has been pending (for
which notice was provided to the Seller or the Company) during
the three-year period preceding the date hereof except as and to
the extent set forth on Schedule 2.15(c) of the Disclosure
Schedule. Schedule 2.15(d) of the Disclosure Schedule sets forth
a complete and correct list of all workers compensation claims in
excess of $10,000 brought by employees of the Company during the
three years prior to the date hereof, together with the amount of
all workers compensation claims brought by employees of the
Company for each such year. None of the Persons identified on
Schedule 2.15(e) of the Disclosure Schedule has knowledge of any
fact or circumstance which could reasonably be expected to result
in any other claim, action, cause of action, suit, proceeding,
inquiry, investigation or Order against the Company or the
Business.
(b) No claim, action, suit, proceeding, inquiry or
investigation set forth on Schedules 2.15(a) or (d) of the
Disclosure Schedule, individually or in the aggregate, if
adversely decided, could have a material adverse affect on the
Company or the Business or prevent the consummation of the
transactions contemplated by this Agreement or the Other
Documents executed and delivered pursuant hereto or in connection
herewith.
2.16 Employee Benefit Plans (a) Schedule 2.16(a) of the
Disclosure Schedule contains a complete and correct list of (i)
all employee welfare benefit and employee pension benefit plans
as defined in Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including,
without limitation, plans that provide retirement income or
result in a deferral of income by employees for periods extending
to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits or benefits in the
event of sickness, accident, disability, death or unemployment
("Plans") and (ii) all other material employee benefit agreements
or arrangements that are not Plans ("Benefit Arrangements"),
including without limitation deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans,
stock purchase plans, stock award plans, golden parachute
agreements, severance pay plans, dependent care plans, cafeteria
plans, employee assistance programs, scholarship programs,
employment contracts, retention incentive agreements, non-
competition agreements, consulting agreements, confidentiality
agreements, vacation policies, and other similar plans,
agreements and arrangements that are currently in effect or were
maintained within three years of the date hereof, or have been
approved before this date but are not yet effective, for the
benefit of directors, officers, employees or former employees (or
their beneficiaries) of the Company (Plans and Benefit
Arrangements being collectively referred to herein as "Designated
Plans"). Schedule 2.16(a) of the Disclosure Schedule identifies
each of the Plans that is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code.
(b) With respect to each Designated Plan, the Seller or
the Company has heretofore delivered to Niagara and the Buyer,
complete and correct copies of each of the following documents:
(i) the Designated Plan and any
amendments thereto (or if the Designated Plan is not a
written Plan, a description thereof);
(ii) the three most recent annual
Form 5500 reports;
(iii) the three most recent actuarial
reports;
(iv) the three most recent reports
prepared in accordance with Statement of Financial
Accounting Standards No. 87;
(v) the most recent summary plan
description;
(vi) the trust agreement, group
annuity contract or other funding agreement that
provides for the funding of the Designated Plan;
(vii) the most recent financial
statement; and
(viii) the most recent determination
letter received from the Internal Revenue Service
("IRS") with respect to each Designated Plan that is
intended to qualify under Section 401 of the Code.
(c) No asset of the Company, or any entity (whether or
not incorporated) that is treated as a single employer together
with the Company under Section 414 of the Code (an "ERISA
Affiliate"), is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code; no Company or
ERISA Affiliate has been required to post any security under
Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event exists that could reasonably be expected to give
rise to any such lien or requirement to post any such security.
(d) The Pension Benefit Guaranty Corporation ("PBGC")
has not instituted proceedings to terminate any pension benefit
plan as defined in Section 3(1) of ERISA that is maintained or
contributed to by the Company or any ERISA Affiliate and no
condition exists that presents a material risk that such
proceedings will be instituted.
(e) Except as and to the extent set forth on Schedule
2.16(b) of the Disclosure Schedule, no pension benefit plan as
defined in Section 3(1) of ERISA that is maintained or
contributed to by the Company or any ERISA Affiliate had an
accumulated funding deficiency as defined in Section 302 of ERISA
and Section 412 of the Code, whether or not waived, as of the
last day of the most recent fiscal year of the Plan ending on or
prior to the Closing Date. All contributions required to be made
with respect to any Plan on or prior to the Closing Date have
been timely made or will be reflected on the Closing Balance
Sheet.
(f) Neither the Company nor any entity that was at any
time during the six-year period ending on the date hereof an
ERISA Affiliate has ever maintained, had an obligation to
contribute to, contributed to, or incurred any liability with
respect to a plan that is both a multiemployer plan (as defined
in Section 3(37) of ERISA) and a pension benefit plan (as defined
in Section 3(1) of ERISA) or a plan described in Section 4063(a)
of ERISA.
(g) To the knowledge of the Seller and the Company,
neither the Company nor any other entity has engaged in a
transaction that could reasonably be expected to result in the
imposition upon the Company of a civil penalty under Section 409
or 502(i) of ERISA or a tax under Section 4975 or 4976 of the
Code with respect to any Designated Plan.
(h) Each Designated Plan has been operated and
administered in all material respects in accordance with its
terms and applicable Law, including but not limited to ERISA and
the Code.
(i) The terms of all Designated Plans that are intended
to qualify under Section 401(a) of the Code (i) have been
determined by the IRS to qualify under Section 401(a) of the Code
or (ii) of the applicable remedial amendment periods under
Section 401(b) of the Code will not have expired prior to the
Closing Date. The Seller and the Company have no knowledge of
any event or circumstance that could reasonably be expected to
cause the IRS to disqualify any Designated Plan that is intended
to qualify under Section 401(a) of the Code. To the knowledge of
the Seller and the Company, each Designated Plan that is intended
to satisfy the requirements of Section 501(c)(9) of the Code has
satisfied such requirements.
(j) Schedule 2.16(a) of the Disclosure Schedule
identifies each Designated Plan that provides medical, surgical,
hospitalization, or life insurance benefits (whether or not
insured by a third party) for employees or former employees of
the Company for periods extending beyond their retirements or
other terminations of service, other than (i) coverage mandated
by applicable Law, (ii) death benefits under any pension benefit
plan as defined in Section 3(1) of ERISA, or (iii) benefits the
full cost of which is borne by the current or former employee (or
his beneficiary).
(k) Except as and to the extent set forth on Schedule
2.16(c) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement and the Other
Documents, either alone or in conjunction with another event
(such as a termination of employment), will not (i) entitle any
current or former employee or officer of the Company, to
severance pay, or any other payment under a Designated Plan, (ii)
accelerate the time of payment or vesting of benefits under a
Designated Plan or (iii) increase the amount of compensation due
any such employee or officer.
(l) There is no litigation, action, proceeding, or claim
pending, or to the knowledge of the Seller and the Company,
threatened or contemplated relating to any Designated Plan (other
than routine claims for benefits).
(m) Except as and to the extent set forth on Schedule
2.16(d) of the Disclosure Schedule, neither the Company nor any
entity that was at any time during the six-year period ending on
the date hereof an ERISA Affiliate has incurred any liability
under Title IV of ERISA that has not been satisfied in full
(other than liability to the PBGC for the payment of premiums
pursuant to Section 4007 of ERISA). No condition exists for
which the PBGC is authorized to seek from the Company or an ERISA
Affiliate a late payment charge under Section 4007(b) of ERISA.
Except as and to the extent set forth on Schedule 2.16(e) of the
Disclosure Schedule, no condition exists that presents a risk
that the Company or an ERISA Affiliate will incur any liability
under Title IV of ERISA (other than liability to the PBGC for the
payment of premiums pursuant to Section 4007 of ERISA).
(n) During the six-year period ending on the day before
the Closing Date, no "reportable event" within the meaning of
Section 4043(c) of ERISA with respect to which the 30-day notice
requirement has not been waived by the PBGC has occurred with
respect to the LaSalle Steel Company Pension Plan for Hourly
Employees.
2.17 Personnel Information; Labor Relations
(a) Schedule 2.17(a) of the Disclosure Schedule sets
forth a complete and correct list of all directors and officers
of the Company and all other individuals employed by the Company
as of the close of business on the day prior to the date hereof,
together with such individual's title and/or job description and
date of hire, and, for each salaried individual, such
individual's salary (with last date of increase) and incentive
compensation paid in respect of the last calendar year, and
Benefit Arrangements (as defined in Section 2.16 hereof). Except
as and to the extent set forth on Schedule 2.17(a) of the
Disclosure Schedule, as of the date prior to the date hereof,
neither the Company nor the Seller has received notification that
any of the current employees of the Company presently plans to
terminate his or her employment during the 1997 calendar year,
whether by reason of the transactions contemplated by this
Agreement (and the Other Documents) or otherwise.
(b) Except as and to the extent set forth on Schedule
2.17(b) of the Disclosure Schedule: (i) there is no labor
strike, stoppage, lockout or material dispute or material
slowdown pending or, to the knowledge of those Persons identified
on Schedule 2.17(c) of the Disclosure Schedule, threatened
against the Company, and there has not been any such action
during the last three years; (ii) the Company is not a party to
or bound by any (A) collective bargaining or similar agreement
with any labor organization (complete and correct copies of which
have heretofore been delivered to the Buyer and Niagara) or (B)
written work rules or practices agreed to with any labor
organization or employee association applicable to employees of
the Company (complete and correct copies of which have hereto
been delivered to the Buyer and Niagara); (iii) no employee of
the Company is represented by any labor organization and, to the
knowledge of those Persons identified on Schedule 2.17(d) of the
Disclosure Schedule, there are no current union organizing
activities among the employees of the Company; (iv) there are no
material written personnel policies, rules or procedures
applicable to employees of the Company (complete and correct
copies of which have heretofore been delivered to the Buyer and
Niagara); (v) the Company is, and during the last three years has
been, in material compliance with all applicable Laws in respect
of employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices as
defined in the National Labor Relations Act; (vi) there is no
unfair labor practice charge or complaint against the Company
pending (for which notice has been provided to the Seller or the
Company) or, to the knowledge of those Persons identified on
Schedule 2.17(e) of the Disclosure Schedule, threatened before
the National Labor Relations Board or any similar state or
foreign agency; (vii) there have been no arbitration proceedings
or material grievance proceedings arising out of any collective
bargaining agreement during the last three years; (viii) no
charges with respect to or relating to the Company are pending
(for which notice has been provided to the Seller or the Company)
before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment
practices; (ix) neither the Company nor the Seller has received
notice of the intent of any Governmental Authority responsible
for the enforcement of labor or employment Laws to conduct an
investigation with respect to or relating to the Company and no
such investigation is in progress; and (x) there are no
complaints, lawsuits or other proceedings pending (for which
notice has been provided to the Seller or the Company) or, to the
knowledge of those Persons identified on Schedule 2.17(f) of the
Disclosure Schedule, threatened in any forum by or on behalf of
any present or former employee of the Company, any applicant for
employment or classes of the foregoing, alleging breach of any
express or implied contract of employment, any Law governing
employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship.
(c) During the last four years, the Company has not
effectuated (i) a "plant closing" (as defined in the Worker
Adjustment Retraining Notification Act of 1988 (the "WARN Act"))
affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the
Company; or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company; nor
has the Company been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to
trigger application of any similar state or local Law. Except as
and to the extent set forth on Schedule 2.17(g) of the Disclosure
Schedule, none of the Company's employees has suffered an
"employment loss" (as defined in the WARN Act) in the six-month
period preceding the date hereof.
(d) The Company is in compliance in all material
respects with all Laws relating to employment or labor,
including, without limitation, ERISA, the WARN Act and those Laws
relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity
and payment and withholding of Taxes.
2.18 Taxes Except as and to the extent set forth in
Schedule 2.18(a) of the Disclosure Schedule:
(a) The Company and any affiliated group (within the
meaning of Section 1504 of the Code) or similar group under
state, local or other applicable Law of which the Company is or
has been a member ("Affiliated Group") have filed, or caused to
be filed, or there have been filed on their behalf, in a timely
manner, all Tax Returns (as defined below) required to be filed
on or before the date hereof (taking into account any and all
extensions) by or including the Company and all such Tax Returns
are complete and correct in all material respects.
(b) All Taxes (as defined below) due and payable or
claimed to be due and payable from the Company have been timely
paid in full or are not yet delinquent. Since October 31, 1996,
the Company has not incurred any Taxes other than in the ordinary
course of business.
(c) The Company has complied in all respects with all
applicable Laws relating to the withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign
Laws), has, within the time and in the manner prescribed by such
Laws, withheld and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over
under all such applicable Laws and has, within the time and
within the manner prescribed by such Laws, filed all Tax Returns
with respect to such withholding.
(d) Except for liens for ad valorem Taxes and real and
personal property Taxes not yet delinquent, there are no
Encumbrances for Taxes upon the Company's assets.
(e) In respect of the Company's Taxes, the Company has
not requested, nor has any Person requested on its behalf, any
extension of time within which to file any Tax Return in respect
of any taxable year which has not since been filed.
(f) Except for Taxes in connection with leases of
personal property by or to the Company, the Company has no
liability for the Taxes of any other Person by Contract or as
transferor or successor.
(g) There are no outstanding waivers or extensions of
time regarding the application of the statute of limitations with
respect to any Taxes of the Company or Tax Returns required to be
filed by or including the Company.
(h) No deficiency or claim has been formally proposed,
asserted or assessed with regard to any Taxes of the Company or
Tax Returns including or required to be filed by the Company,
which has not been resolved and paid in full.
(i) No audits or other administrative proceedings or
court proceedings are presently pending, and no written
notification of such proceedings has been received by the Seller
or the Company, with regard to any Taxes of the Company or Tax
Returns required to be filed by or including the Company.
(j) Except for leases of personal property by or to the
Company, the Company is not a party to, is not bound by, and has
no obligation under, any Contract providing for the allocation or
sharing of Taxes.
(k) No power of attorney has been granted with respect
to any matter relating to Taxes of the Company which is currently
in force.
(l) The Company is not a party to any Contract that
could result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section
280G of the Code.
(m) The Company has not filed a consent pursuant to
Section 341(f) of the Code (or any predecessor provision) or
agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company.
(n) No property of the Company is property that the
Company or any Party is or will be required to treat as being
owned by another Person pursuant to the provisions of Section
168(f)(8) of the Code (as in effect prior to amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(o) The Company has not agreed to make, or is not
required to make, any adjustment under Section 481(a) of the
Code.
(p) The Company has not participated in or cooperated
with an international boycott within the meaning of Section 999
of the Code.
(q) The consolidated federal income Tax Returns of the
affiliated group (within the meaning of Section 1504 of the Code)
of which the Seller is the common parent (within the meaning of
Section 1504 of the Code) and which includes the Company have
been audited by the IRS for all taxable periods through the
taxable period ended October 31, 1992, and the Company has been a
member of such affiliated group since December 30, 1981. The
Indiana Corporation Income Tax Returns which included the Company
and which have been filed on a combined basis with the Seller
have been audited for all taxable periods through the taxable
period ended October 31, 1994 and the Michigan Single Business
Tax Return filed on behalf of the Company has not been audited
for any taxable periods. The Company does not file and, to the
knowledge of those Persons identified on Schedule 2.18(b) of the
Disclosure Schedule, is not required to file, income Tax Returns
in any other jurisdiction.
(r) The Seller has provided to Niagara and the Buyer or
their representatives (i) complete and correct copies of the
relevant portions of the consolidated federal income Tax Returns
relating to the Company and filed by or including the Company for
the taxable periods ended October 31, 1993, 1994 and 1995, (ii)
complete and correct copies of the state, local and foreign
income Tax Returns, (or, in the case of consolidated or combined
state, local, and foreign income Tax Returns the relevant
portions thereof) relating to the Company and filed by or
including the Company for the taxable periods ended October 31,
1993, 1994 and 1995, and (iii) all examination reports, closing
agreements and statements of deficiencies, if any, relating to
the audit of such Tax Returns or relevant portions thereof by the
IRS or the relevant state, local or foreign taxing authorities.
(s) For purposes of this Agreement, "Taxes" shall mean
and include all taxes, charges, fees, duties, levies, penalties
or other assessments imposed by any federal, state, local or
foreign taxing authority, including, but not limited to, income,
gross receipts, excise, property, sales, gains, use, license,
capital stock, transfer, franchise, payroll, withholding, social
security or other taxes, including any interest, penalties or
additions attributable thereto; and "Tax Returns" shall mean and
include all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms, or
information returns relating to Taxes or other written
information required to be supplied to a taxing authority in
connection with Taxes (including any amended Tax Returns).
2.19 Intellectual Property
(a) The Company has the right and authority to use all
of the Intellectual Property (as defined below) that is used in
the Business as currently conducted or is the subject of an
issued patent or registration, and the Company had the right and
authority to use all of the Intellectual Property used in the
Business as heretofore conducted, and, to the knowledge of those
Persons identified on Schedule 2.19(a) of the Disclosure
Schedule, such use does not and did not conflict with, infringe
upon or violate any patent, trademark, copyright, trade secret or
other proprietary, personal or other right of any other Person
and no claim is existing or has been made in the past three years
to that effect. There are no, and, in the past three years, have
not been, any administrative, judicial, arbitration or other
adversary proceedings in any court, intellectual property
registry or other adjudicatory forum involving the Company and
third parties concerning the Intellectual Property or any third
parties' intellectual property.
(b) The Intellectual Property is not subject to any
Encumbrances, licenses or sublicenses in favor of third parties
or other Contracts, except the license agreements and other
Contracts set forth on Schedule 2.19(b) of the Disclosure
Schedule, which sets forth a complete and correct list of each
Intellectual Property license agreement and such other Contract
presently in force, to which the Company is a party or by which
it is bound (whether as the licensor or licensee), indicating, as
to each, the parties (specifying which party is the licensor and
which party is the licensee), the title of the agreement, the
date executed, and the general subject matter. The Seller does
not have, and will not retain after the Closing, any interest in
the Intellectual Property.
(c) Schedule 2.19(c) of the Disclosure Schedule sets
forth a complete and correct list of each United States and
foreign (i) patent and patent application, indicating as to each,
the country, the patent number (or application number), the U.S.
patent title, the date issued, and the expiry date; (ii)
registered trademark, servicemark, or tradename and application
therefor, indicating, as to each, the country, the mark, the
registration number (or application number); (iii) copyright
registration and copyright application indicating, as to each,
the country, the title of the work, the date issued, and the
copyright number; in each case owned in whole or in part by the
Company. Except as and to the extent set forth on Schedule
2.19(c) of the Disclosure Schedule, the Company is the current
record owner of all registrations and applications set forth on
the Disclosure Schedule, the patents, applications and
registrations set forth on Schedule 2.19(c) of the Disclosure
Schedule are subsisting and in good standing, all maintenance
fees currently due have been paid, and no challenges to title
thereto are pending before the applicable intellectual property
registry.
(d) To the knowledge of those Persons identified on
Schedule 2.19(d) of the Disclosure Schedule, the items of
Intellectual Property are valid and enforceable and there are no
infringements of the Company's rights in and to the Intellectual
Property by any third party. The Company has not entered into
any consent, indemnification, forbearance to sue or settlement
agreement with any Person relating to any item of Intellectual
Property or those of any third party. The consummation of the
transactions contemplated by this Agreement and the Other
Documents will not result in the loss or impairment of any of the
Company's rights to own or use any Intellectual Property.
(e) For purposes of this Agreement, "Intellectual
Property" shall mean and include all (i) U.S. and foreign
(registered and unregistered) patents, copyrights, trademarks,
logos, proprietary designs, phrases and other identifications,
tradenames and service marks used by the Company in the conduct
of the Business including, the name "LaSalle Steel Company" in
those countries which it is registered or currently in use and
all variations thereon and all logos, designs, phrases and other
identifications or derivations thereof used by the Company in the
conduct of the Business, together with the goodwill of the
Business symbolized thereby, the right to sue for past
infringement or misappropriation thereof, and all applications
and registrations therefor, (ii) software and computer programs,
and all user manuals, training manuals and technical
documentation relating to the Business, together with the
Company's proprietary rights therein and the right to sue for
past infringement or misappropriation thereof and (iii)
proprietary information, technology, trade secrets, know-how,
inventions, drawings and technical or marketing information
relating to the Business, together with the Company's proprietary
rights therein and the right to sue for past infringement or
misappropriation thereof and (iv) any licenses relating to the
use of any of the items contained in (i)-(iii) of this Section
2.19(e).
2.20 Compliance with Environmental Laws
(a) To the knowledge of those Persons identified on
Schedule 2.20(b) of the Disclosure Schedule, the Seller has
provided to Niagara or the Buyer all material information
necessary to put Niagara or the Buyer on notice of any and all of
the following environmental conditions affecting the Company's
facilities:
(i) any actual or alleged non-compliance with
Environmental Laws (as defined below); and
(ii) any pending or threatened Environmental Claim
(as defined below).
(b) For purposes of this Agreement, information shall be
deemed to have been provided to Niagara and the Buyer if (i) it
is set forth on Schedule 2.20(a) of the Disclosure Schedule, (ii)
it is set forth in documents made available by the Seller, the
Company or their agents for inspection by Niagara, the Buyer or
their agents, (iii) it is identified in writing to Niagara, the
Buyer or their agents or (iv) Niagara or the Buyer has knowledge
of, or is on notice of, the information from any other source.
Nothing in this Agreement shall require the Seller to disclose
communications protected from disclosure by attorney-client
privilege or any other lawful privilege, it being agreed that a
claim of privilege does not absolve the Seller of any obligation
to make disclosure of factual information if required by Section
2.20(a) hereof.
(c) Notwithstanding any other provision of this
Agreement, the representations and warranties set forth in
Section 2.20(a) are the only representations and warranties
relating to Environmental Matters made by the Seller in
connection with the transactions contemplated by this Agreement,
and the Seller shall have no responsibility with respect to any
Environmental Matter other than claims based on a breach of the
representations and warranties contained in Section 2.20(a)
hereof.
(d) For purposes of this Agreement:
(i) "Environmental Claim" shall mean and include
any notice from any Person (including any employee of the
Company) of the existence of, or potential liability
(including without limitation, potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on, or
resulting from (a) the presence or release into the
environment, of any Hazardous Material at any location,
whether or not owned by the Company or the Seller or (b) any
violation or alleged violation of any Environmental Law.
(ii) "Environmental Laws" shall mean and include
all federal, state, local and foreign Laws and regulations
relating to pollution or protection of human health or the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata), including without limitation, Laws relating to
emissions, discharges, releases or threatened releases of
Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials.
(iii) "Environmental Matters" shall mean and
include all costs, liabilities, obligations and proceedings
arising under the Environmental Laws or related to
emissions, discharges, releases or threatened releases of
Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials, and shall include without limitation all
Environmental Claims.
(iv) "Hazardous Materials" shall mean and include
all chemicals, pollutants, contaminants, wastes, toxic
substances, and any other substances regulated as hazardous
under Environmental Laws.
2.21 Insurance Schedule 2.21(a) of the Disclosure Schedule
sets forth a complete and correct list as of the Closing Date of
all primary, excess and umbrella policies, bonds and other forms
of insurance, and renewals thereof, owned or held by or on behalf
of or providing insurance coverage to or for the benefit of the
Company, copies of which have previously been provided to Niagara
and the Buyer or their representatives. All of such insurance
policies are in full force and effect, all premiums currently
payable or previously due have been paid, no notice of
cancellation or termination has been received with respect to any
such policy and no assignment of proceeds or Encumbrance exists
with respect to the proceeds of any such policy. The unpaid
claims reported by the Company (or the Seller with respect to the
Business) to the insurer under such policies are set forth on
Schedule 2.21(b) of the Disclosure Schedule.
2.22 Bank Accounts Schedule 2.22 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names
and locations of all financial institutions at which the Company
(or the Seller with respect to the Business) maintains a checking
account, deposit account, securities account, safety deposit box
or other deposit or safekeeping arrangement, (ii) the number or
other identification of all such accounts and arrangements and
(iii) the names of all Persons authorized to draw thereon or have
access thereto.
2.23 Customers and Suppliers There have been no material
adverse changes in the relationships between the Company and its
customers and suppliers since October 31, 1996. Except as and to
the extent set forth on Schedule 2.23(a) of the Disclosure
Schedule, the Company and, with respect to the Business, the
Seller, have not been provided with any notice that any
significant supplier, manufacturer or customer intends to cease
doing business with the Company. To the knowledge of those
Persons identified on Schedule 2.23(b) of the Disclosure
Schedule, there are no facts or circumstances (including, without
limitation, the transactions contemplated by this Agreement and
the Other Documents) that could reasonably be expected to have a
material adverse affect on the Company's relationships with its
customers, suppliers and manufacturers.
2.24 Affiliate Transactions Schedule 2.24 of the
Disclosure Schedule sets forth a correct and complete list of all
arrangements or transactions since October 31, 1993 between the
Company, on the one hand, and the Seller or any affiliate or
associate of the Company or the Seller, or any business or entity
in which the Seller, the Company, or any affiliate or associate
thereof, has or had any direct or indirect interest
(collectively, the "Seller's Affiliates"), on the other hand
(other than (i) dividends and distributions of profits as
reflected on the Audited Financial Statements and (ii)
transactions entered into in the ordinary course of business
consistent with past practice), that involves an obligation or
commitment on the part of or for the benefit of the Company or
such Seller's Affiliate of more than $10,000 in any fiscal year.
The Company and the Seller have terminated each of the Quanex
Management Agreement and the Intercompany Interest Bearing Open
Account Agreement, each dated February 24, 1993, by and between
the Company and the Seller, and such agreements are of no further
force or effect.
2.25 Brokers Neither the Buyer nor the Company has or will
have any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee or expenses in
connection with this Agreement or the Other Documents, or the
transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of the Seller or, with respect to
actions taken on or before the Closing Date, the Company.
2.26 Disclosure The Seller has not knowingly failed to
disclose to the Buyer any facts material to the Company's
business, results of operations, assets, liabilities or financial
condition. No representation or warranty by the Seller in this
Agreement and no statement by the Seller or the Company in any
Other Document (including the Schedules of the Disclosure
Schedule), contains any untrue statement of a material fact or
omits to state any material fact necessary, in order to make the
statements made herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NIAGARA AND THE BUYER
Each of Niagara and the Buyer severally represents and
warrants to the Seller with respect to such Party as follows:
3.1 Organization and Standing Such Party is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and such Party has all requisite
corporate power and authority to own, lease and operate its
properties and assets and to carry on its business and operations
as it is now being conducted.
3.2 Authorization; Binding Obligation Such Party has all
requisite corporate power and authority to execute and deliver
this Agreement and the Other Documents executed and delivered by
such Party pursuant hereto or in connection herewith and to
consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder. The
execution and delivery by such Party of this Agreement and the
Other Documents executed and delivered by such Party pursuant
hereto or in connection herewith and the consummation of the
transactions contemplated hereby and thereby by such Party have
been duly and validly authorized by the Board of Directors of
such Party and no other corporate proceedings on the part of such
Party are necessary to authorize this Agreement or the Other
Documents executed and delivered by such Party pursuant hereto or
in connection herewith or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Other
Documents executed and delivered by such Party pursuant hereto or
in connection herewith have been validly executed and delivered
by such Party and, assuming the due authorization, execution and
delivery by the Seller, the Company and any other party thereto,
constitute legal, valid and binding obligations of such Party,
enforceable against such Party in accordance with their
respective terms.
3.3 Consents and Approvals; No Violation Except for (i)
filings or recordings in public offices necessary in connection
with the financing arrangements of the Buyer and its affiliates
and (ii) post-Closing securities law filings, neither the
execution and delivery of this Agreement and the Other Documents
executed and delivered by such Party pursuant hereto or in
connection herewith, nor the consummation by such Party of the
transactions contemplated hereby or thereby, nor compliance by
such Party with any of the provisions hereof or thereof (a)
conflicts with any provision of the Certificate of Incorporation
or By-laws of such Party, (b) requires any Consent of, filing
with or notification to, or any other action by, any Governmental
Authority by such Party, (c) violates any Law of any Governmental
Authority applicable to such Party, or by which any of its
businesses, property or assets is bound or affected or (d)
violates, breaches, or conflicts with, or constitutes (with or
without due notice or lapse of time or both) a default (or gives
rise to any right of termination, cancellation or acceleration or
any obligation to pay or result in the imposition of any
Encumbrance upon any of the property) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
Encumbrance, Contract, Permit, Order, or other instrument or
obligation to which such Party is a party or by which any of its
businesses, property or assets is bound or affected.
3.4 Brokers The Seller does not have, nor will the Seller
have, any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee or expenses in
connection with this Agreement or the Other Documents, or the
transactions contemplated hereby or thereby, by any action taken
by or on behalf of such Party.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Benefit Matters
(a) Salaried Pension Plan.
(i) As soon as practicable following the
determination of the Permitted Transfer Amount (as defined
below) in accordance with Section 4.1(a)(ii) hereof, the
Seller shall direct the trustee of the Quanex Corporation
Salaried Employees' Pension Plan to transfer, in cash, from
the trust maintained under the Quanex Corporation Salaried
Employees' Pension Plan to the trust maintained under the
LaSalle Steel Company Salaried Employees' Pension Plan (the
"Buyer Salaried Pension Plan"), an amount equal to the
amount required to be transferred pursuant to Section 414(1)
of the Code (determined as of the Closing Date) with respect
to current and former employees of the Company set forth on
Schedule 4.1(a) of the Disclosure Schedule (the "Salaried
Participants") and their beneficiaries calculated utilizing
such actuarial assumptions as are agreed upon by the
enrolled actuaries for the Quanex Corporation Salaried
Employees' Pension Plan and the Buyer Salaried Pension Plan,
which agreement shall not be withheld unreasonably (the
"Permitted Transfer Amount"), provided, however, that to the
extent permitted by Section 414(1) of the Code, the
Permitted Transfer Amount shall be equal to $6,709,000
adjusted for (i) contributions reflected on the Closing
Balance Sheet and benefit distributions made to the Salaried
Participants and their beneficiaries during the period (the
"Adjustment Period") commencing on October 31, 1996 and
ending on the date on which the transfer occurs (the
"Transfer Date") and (ii) a pro rata share of the Quanex
Corporation Salaried Employees' Pension Plan actual
investment earnings or losses occurring during the
Adjustment Period and Plan administrative expenses actually
paid from the Quanex Corporation Salaried Employees' Pension
Plan during the Adjustment Period (the "Fixed Transfer
Amount"); provided, further, that (i) if the Permitted
Transfer Amount is less than the Fixed Transfer Amount, then
the Permitted Transfer Amount shall be transferred from
trust to trust, and the Seller shall pay to the Buyer, in
cash on the Transfer Date, the excess of the Fixed Transfer
Amount over the Permitted Transfer Amount and (ii) if the
Permitted Transfer Amount exceeds the Fixed Transfer Amount,
then the Permitted Transfer Amount shall be transferred
trust to trust, and the Buyer shall pay to the Seller, in
cash on the Transfer Date, the excess of the Permitted
Transfer Amount over the Fixed Transfer Amount.
(ii) The Seller shall deliver to Niagara and the
Buyer (in accordance with the provisions of Section 7.9
hereof) as soon as reasonably practicable, and in any event
within 60 days of the Closing Date, a statement setting
forth the proposed Fixed Transfer Amount and Permitted
Transfer Amount (collectively, the "Transfer Amounts") as
certified by the Seller's actuaries (the "Seller's Transfer
Amount Statement"). The costs and expenses incurred in
connection with the preparation and delivery of the Seller's
Transfer Amount Statement shall be borne by the Seller.
Niagara and the Buyer shall have 45 days following the
delivery of the Seller's Transfer Amount Statement during
which to submit to the Seller, in accordance with the
provisions of Section 7.9 hereof, a written statement
setting forth any dispute therewith (a "Buyer's Transfer
Amount Statement"). The costs and expenses incurred in
connection with the preparation of a Buyer's Transfer Amount
Statement shall be borne by the Buyer. If Niagara and the
Buyer fail to submit a Buyer's Transfer Amount Statement
within such 45-day period, then the proposed Transfer
Amounts set forth on the Seller's Transfer Amount Statement,
as further adjusted in accordance with Section 4.1(a)
hereof, shall be deemed the Transfer Amounts. In the event
Niagara and the Buyer deliver a Buyer's Transfer Amount
Statement, the Parties shall consult and attempt to resolve,
as soon as practicable, all disputes set forth therein. In
the event the Parties are unable to resolve any such dispute
within 30 days of the delivery of the Buyer's Transfer
Amount Statement, such dispute shall be resolved by a
nationally recognized independent actuarial firm mutually
acceptable to the Parties (the "Independent Actuarial
Firm"). The Independent Actuarial Firm shall be instructed
to make its determination as promptly as practicable and
such determination shall be final and binding upon the
Parties enforceable by appropriate judicial proceedings.
The fees and expenses of the Independent Actuarial Firm
shall be shared equally by the Buyer and the Seller. The
proposed Transfer Amounts set forth in the Seller's Transfer
Amount Statement, as modified to reflect the resolution of
disputes by the Parties or by the Independent Actuarial Firm
in accordance with this Section 4.1, shall be the "Transfer
Amounts".
(iii) From time to time during the Adjustment
Period, Niagara and the Buyer on the one hand, and the
Seller on the other hand, shall give the other, and any of
its or their independent actuaries and authorized
representatives, reasonable access during normal business
hours to the properties, books, records and personnel of the
Seller and the Company, and shall use all reasonable efforts
to cause their independent actuaries to make available to
each such other Party and its or their authorized
representatives their work papers generated in connection
with the preparation of the Seller's Transfer Amount
Statement and any Buyer's Transfer Amount Statement for
purposes of resolving any disputes concerning the Transfer
Amounts.
(iv) As soon as reasonably practicable, the
Parties shall cooperate with each other in making any
required filings, including Forms 5310-A (with all
attachments), reflecting the transfer of assets and
assumption of liabilities pursuant to this Section 4.1(a).
In connection and concurrent with such transfer, the
liabilities under the Quanex Corporation Salaried Employees'
Pension Plan in respect of the Salaried Participants shall
be transferred to the Buyer Salaried Pension Plan.
(b) Savings Plans. As soon as reasonably practicable,
and in any event within 90 days of the Closing Date, each
participant in the Quanex Corporation Employee Savings Plan or
the Quanex Corporation Hourly Bargaining Unit Employee Savings
Plan (collectively, the "Seller Savings Plans") who is an
employee or former employee of the Company shall have the right
to elect to receive a distribution of all or a portion of such
employee's account balance in the applicable Seller Savings Plan
(subject to, and in accordance with, the provisions of the
respective plan and applicable Law). The Buyer shall take any
and all necessary action to cause the trustee of the Niagara Cold
Drawn 401(k) Retirement Plan (the "Buyer Savings Plan"), if
requested to do so by a distributee, to accept the "roll over" of
all or a portion of any such distribution from the applicable
Seller Savings Plan.
(c) Group Benefits Plan. The Buyer hereby assumes all
liabilities under the Quanex Corporation Group Benefits Plan for
all participants who are employees or former employees of the
Company, as set forth on Schedule 4.1(b) of the Disclosure
Schedule, and their dependents, as of the Closing Date (the
"LaSalle Group Benefit Plan Participants") subject to the terms
and conditions of such plan. Effective as of the Closing, the
Seller shall (i) cause the Company to terminate its participation
as an adopting employer with respect to the Quanex Corporation
Group Benefits Plan and (ii) cause that portion of the Quanex
Corporation Group Benefit Plan covering the LaSalle Group
Benefits Plan Participants to be spun-off into a new welfare
benefit plan entitled the "LaSalle Steel Company Group Benefits
Plan" which shall be sponsored by the Company and which, as of
the Closing, shall otherwise be substantially identical to the
Quanex Corporation Group Benefits Plan.
(d) Deferred Compensation Plan. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Deferred Compensation Plan maintained for the benefit
of current and former key salaried employees of the Seller and
its subsidiaries and their beneficiaries. None of the Company,
the Buyer or Niagara shall assume any liability with respect to
the Quanex Corporation Deferred Compensation Plan.
(e) Executive Incentive Compensation Plan. Effective as
of the Closing, the Seller shall cause the Company to terminate
its participation as an adopting employer with respect to the
Quanex Corporation Executive Incentive Compensation Plan
maintained for the benefit of current and former key salaried
employees of the Seller and its subsidiaries and their
beneficiaries. None of the Company, the Buyer or Niagara shall
assume any liability with respect to the Quanex Corporation
Executive Incentive Compensation Plan.
(f) Management Incentive Program. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Management Incentive Program maintained for the
benefit of current and former employees of the Seller and its
subsidiaries and their beneficiaries. Effective as of the
Closing, the Seller shall cause that portion of the Quanex
Corporation Management Incentive Program covering current and
former salaried employees of the Company and their beneficiaries
to be spun-off into a new deferred compensation plan entitled the
"LaSalle Steel Company Management Incentive Program" which shall
be solely a contractual obligation of the Company and which, as
of the Closing, shall otherwise be substantially identical to the
Quanex Corporation Management Incentive Program.
(g) Supplemental Salaried Employees' Pension Plan.
Effective as of the Closing, the Seller shall cause the Company
to terminate its participation as an adopting employer with
respect to the Quanex Corporation Supplemental Salaried
Employees' Pension Plan maintained for the benefit of current and
former key salaried employees of the Seller and its subsidiaries
and their beneficiaries. Except as and to the extent reflected
as a liability on the Closing Balance Sheet, none of the Company,
the Buyer or Niagara shall assume any liability with respect to
the Quanex Corporation Supplemental Salaried Employees' Pension
Plan.
(h) Severance Allowance Policy. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Severance Allowance Policy maintained for the benefit
of current employees of the Seller and its subsidiaries. None of
the Company, the Buyer or Niagara shall assume any liability with
respect to the Quanex Corporation Severance Allowance Policy.
4.2 Further Assurances; Cooperation
(a) Each of the Parties shall from time to time after
the Closing, upon the request of any other Party and without
further consideration, execute, acknowledge and deliver in proper
form such further instruments, and take such further actions, as
such other Party may reasonably require, to carry out effectively
the intent of this Agreement and the Other Documents.
(b) The Seller shall, from time to time after the
Closing, upon the request of Niagara, the Buyer or their
designee, and without further consideration, execute, acknowledge
and deliver in proper form such further instruments and take such
further actions as Niagara or the Buyer may reasonably require,
to record the Company or its designee as the record owner of any
and all Intellectual Property owned by the Company which may
currently be standing, as of record, in the name of the Company's
predecessor in interest.
(c) The Parties shall cooperate with each other in
connection with any claim, action, suit, proceeding, inquiry or
investigation by any other Person which relates to the execution
and delivery of this Agreement or the Other Documents, or the
consummation of the transactions contemplated hereunder and
thereunder.
(d) For a period of seven years following the Closing
Date, each of the Parties will retain any records or files within
its control after the Closing relating to the operations of the
Company prior to the Closing (including those relating to the
Taxes of the Company). During such seven-year period, each Party
shall afford any other Party, and such Party's counsel,
accountants and other representatives, reasonable access to such
records during normal business hours for any proper purpose.
4.3 Notification of Certain Matters Niagara and the Buyer
on the one hand, and the Seller on the other hand, shall promptly
notify the other, in the manner provided in Section 7.9 hereof,
of (i) any claim, action, suit, proceeding, inquiry or
investigation pending or, to such Party's knowledge, threatened
which relates to the execution and delivery of this Agreement or
the Other Documents, or the consummation of the transactions
contemplated hereunder or thereunder, (ii) any circumstance or
development which could adversely impair or affect its ability to
perform its obligations under this Agreement or the Other
Documents, (iii) any notice or other communication from any
Person alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement or the Other Documents or (iv) any notice or other
communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement or the Other
Documents.
4.4 Confidentiality/Non-Competition
(a) The Seller acknowledges that Niagara and the Buyer
would be irreparably damaged if Company Information (as defined
below) were to be disclosed to or utilized on behalf of any
Person, firm, corporation or other business organization that
competes in any respect with the Business. As used herein,
"Company Information" shall include, without limitation, any and
all proprietary or confidential information pertaining to the
Company or its business or activities of any nature, including,
without limitation, any information relating to (i) the Company's
operation or management, finances or financial affairs, profits,
profit margins, capital requirements, business methods,
organization, procedures or Contracts, (ii) the Company's
customers (including customer lists), suppliers or sources of
supply, marketing strategies or data, products, product plans,
service lines or pricing, (iii) the Company's personnel
(including medical and salary information) and (iv) the
Intellectual Property. The Seller covenants and agrees that it
will not, and will cause its agents, affiliates, advisors,
directors, officers and employees (collectively,
"Representatives") not to, at any time, without the prior written
consent of Niagara, use or disclose any Company Information,
except to employees and other authorized Representatives of
Niagara or the Buyer; provided, however, that Company Information
shall not include any information which (i) was or becomes
generally available to or known by the public (other than as a
result of a disclosure directly or indirectly by the Seller or
its Representatives) or (ii) is available to the Seller on a non-
confidential basis from a source other than Niagara, the Buyer or
their Representatives; provided, further, however, that the
Seller may use or disclose Company Information to the extent (i)
required by Law and (ii) necessary in connection with its Tax
filing obligations. In the event that the Seller or any of its
Representatives are legally compelled (by deposition,
interrogatory, request for documents, subpoena, civil
investigative demand or otherwise) to disclose any Company
Information, such Person shall provide Niagara and the Buyer with
prompt prior written notice of such demand so that Niagara or the
Buyer may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Section 4.4(a). If
a protective order or other remedy is not obtained and Niagara
has not waived compliance with these provisions, the Seller or
its Representatives, as the case may be, shall furnish only that
portion of such Company Information which it is advised by its
legal counsel is legally required to be disclosed.
(b) The Seller agrees that for a period of two years
following the Closing Date, it shall not directly or indirectly
manufacture or invest in any entity which manufactures cold drawn
or chrome-plated steel bars.
(c) The Seller agrees that for a period of one year
following the Closing Date, it shall neither solicit, persuade or
induce any person employed by the Company to terminate his or her
employment with the Company, nor, except for Persons whose
employment has been terminated by the Company, employ any person
employed by the Company as of the Closing Date or in the three-
month period prior thereto without the consent of Niagara.
(d) The Seller acknowledges and agrees that the
provisions of this Section 4.4 are reasonable and necessary for
the protection of Niagara, the Buyer and the Company. It is
understood and agreed that money damages would not be a
sufficient remedy for any breach of this Section 4.4 by the
Seller or its Representatives, and that Niagara and the Buyer
shall be entitled to specific performance as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive
remedy for any breach of this Section 4.4 but shall be in
addition to all other remedies available pursuant to the terms of
this Agreement.
4.5 Expenses Except as otherwise specifically provided
for herein or in Paragraph 7 of the Letter of Intent (as defined
in Section 7.3 hereof), each Party shall be solely responsible
for all expenses incurred by it or on its behalf in connection
with the preparation and execution of this Agreement and the
Other Documents and the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the fees and expenses of its counsel, consultants, accountants,
brokers, finders, investment bankers, financial advisors and
other representatives and advisors.
ARTICLE V
TAX MATTERS
5.1 Section 338(h)(10) Election
(a) The Parties shall jointly make a timely election
pursuant to Section 338(h)(10) of the Code and Section
1.338(h)(10)-1 of the United States Treasury Regulations (the
"Regulations") and any comparable election under applicable state
or local Law (collectively, the "Section 338(h)(10) Election")
with respect to the purchase by the Buyer of the Shares pursuant
hereto. Subject to subsection (b) of this Section 5.1, as soon
as practicable after the Closing, with respect to such federal
Section 338(h)(10) Election, the Parties shall prepare a Form
8023-A (with all attachments), Niagara and the Seller shall
execute such Form 8023-A, and Niagara shall promptly file or
cause to be filed such executed Form 8023-A and provide written
evidence of such filing to the Seller. In addition, the Seller,
the Company, Niagara and the Buyer shall, as promptly as
practicable following the Closing, cooperate with each other to
take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other
documents as may be required by applicable state or local Law) to
effect and preserve a timely Section 338(h)(10) Election in
accordance with any comparable provision of applicable state or
local Law, and the Parties responsible for filing any such
Section 338(h)(10) Election under applicable state or local Law
shall promptly file or cause to be filed such Section 338(h)(10)
Election with the appropriate taxing authority and provide
written evidence of such filing to the other Parties. The
Parties shall report the purchase by the Buyer of the Shares
consistent with the Section 338(h)(10) Election, and no Party
shall take any position to the contrary thereto in any Tax
Return, any proceeding before any taxing authority or otherwise,
except in connection with the resolution of a Tax Dispute (as
defined in Section 5.7 hereof) in accordance with the provisions
of Section 5.7 hereof. In the event that any Section 338(h)(10)
Election is disputed by any taxing authority, the Party receiving
notice of such dispute shall promptly notify and consult with the
other Parties concerning such dispute.
(b) In connection with the Section 338(h)(10) Election,
the Parties shall determine, as promptly as reasonably
practicable following the Closing, the allocation of the Purchase
Price and the liabilities of the Company (and the liabilities to
which the Company's assets are subject) as of the beginning of
the day after the Closing Financial Statement Date (other than
liabilities that were neither liabilities of the Company nor
liabilities to which the Company's assets were subject before
the day after the Closing Financial Statement Date) among the
assets of the Company. The Parties shall prepare and file all
Tax Returns to be filed with any taxing authority in a manner
consistent with such allocation and shall take no position
inconsistent with such allocation in any Tax Return, any
proceeding before any taxing authority or otherwise, except in
connection with the resolution of a Tax Dispute in accordance
with the provisions of Section 5.7 hereof. In the event that
such allocation is disputed by any taxing authority, the Party
receiving notice of such dispute shall promptly notify and
consult with the other Parties concerning such dispute.
5.2 Tax Indemnity by the Seller
(a) Without duplication, and subject to the provisions
of this Article V, the Seller shall indemnify, defend and hold
harmless each Buyer Indemnified Party (as defined in Section 6.2
hereof), from and against any and all Losses (as defined in
Section 6.2 hereof) asserted against, resulting to, imposed upon,
or incurred by such Buyer Indemnified Party, directly or
indirectly, by reason of or resulting from:
(i) any and all Taxes imposed with respect to (A)
any consolidated federal income Tax Return of any
"affiliated group" (as such term is defined in Section 1504
of the Code) which includes or included the Company for all
periods or portions thereof ending on or before the Closing
Financial Statement Date, and (B) any state, local or
foreign consolidated, combined, affiliated or unitary income
Tax Return of an applicable group of corporations that
includes or included the Company for all periods or portions
thereof ending on or before the Closing Financial Statement
Date, such Tax Returns described in clauses (A) and (B) of
this Section 5.2(a)(i) including, but not being limited to,
the Tax Returns described in Section 5.6(a);
(ii) any and all Taxes (other than Taxes described
in Section 5.2(a)(i)) imposed upon the Company with respect
to any taxable period ending on or before the Closing
Financial Statement Date ("Pre-Closing Periods");
(iii) any and all Taxes (other than Taxes described
in Section 5.2(a)(i)) imposed upon the Company with respect
to any taxable period beginning before and ending after the
Closing Financial Statement Date ("Straddle Periods") with
respect to the portion of such Straddle Period ending on the
Closing Financial Statement Date (the "Pre-Closing" portion
of such Straddle Period);
(iv) the breach of or any inaccuracy in any of the
representations and warranties of the Seller contained in or
made pursuant to Section 2.18 (Taxes) hereof;
(v) the breach or nonperformance of any covenant or
agreement of the Seller contained in or made pursuant to
this Article V;
(vi) any and all Taxes imposed upon the Company
pursuant to Treasury Regulations Section 1.1502-6 (or any
comparable provision under state, local, or foreign Tax Law
imposing several liability upon members of a consolidated,
combined, affiliated or unitary group (a "Group")) by virtue
of the Company having been a member of a Group that includes
the Seller; and
(vii) any and all Taxes imposed upon the Company as
a result of the Section 338(h)(10) Election.
(b) The indemnifications in favor of the Buyer
Indemnified Parties contained in subsections (ii), (iii), (iv)
and (v) of Section 5.2(a) hereof shall not be effective until the
aggregate amount of all Losses in respect thereof exceeds the Tax
Accrual (as defined herein), and then only to the extent such
Losses exceed the Tax Accrual. For purposes of this Agreement,
"Tax Accrual" shall mean and include the aggregate amount of
accruals, reserves and provisions for Taxes on the Closing
Balance Sheet and the worksheets thereto, it being understood
that the Tax Accrual shall not include amounts on the Closing
Balance Sheet for "Deferred Income Taxes."
(c) Except as provided in Sections 5.2(a)(vi) and (vii)
hereof, nothing contained in this Section 5.2 shall require the
Seller to indemnify any Buyer Indemnified Party for any Losses
with respect to any Taxes with respect to any taxable period
beginning after the Closing Financial Statement Date (a "Post-
Closing Period") or any portion beginning after the Closing
Financial Statement Date of any Straddle Period (a "Post-Closing"
portion of such Straddle Period).
5.3 Tax Indemnity by Niagara and the Buyer
(a) Without duplication, and subject to the provisions
of this Article V, Niagara and the Buyer shall, jointly and
severally, indemnify, defend and hold harmless each Seller
Indemnified Party (as defined in Section 6.3 hereof) from and
against any and all Losses asserted against, resulting to,
imposed upon or incurred by such Seller Indemnified Party,
directly or indirectly, by reason of or resulting from:
(i) to the extent provided in Section 5.3(b), any
and all Taxes imposed upon the Company with respect to any
Pre-Closing Period and for the Pre-Closing portion of any
Straddle Period other than Taxes described in Sections
5.2(a)(i), (vi) and (vii) hereof;
(ii) any and all Taxes imposed upon the Company
with respect to any Post-Closing Period and the Post-Closing
portion of any Straddle Period, other than Taxes described
in Sections 5.2(a)(vi) and (vii) hereof;
(iii) the breach or nonperformance of any covenant
or agreement of Niagara or the Buyer contained in or made
pursuant to this Article V.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in subsection (i) of Section 5.3(a)
hereof shall not exceed, in the aggregate, the amount of the Tax
Accrual.
5.4 Transfer Taxes Notwithstanding anything contained in
this Agreement to the contrary, any and all sales, use, transfer,
stamp, documentary, gains and other similar Taxes, and any
transfer, recording or similar fees and charges, imposed in
connection with the consummation of the transactions contemplated
by this Agreement (collectively, "Transfer Taxes") shall be borne
one-half by the Buyer and one-half by the Seller. The Parties
agree to use their commercially reasonable efforts to minimize
the Transfer Taxes. Each of the Buyer and the Seller shall cause
to be prepared and timely filed all Tax Returns relating to
Transfer Taxes ("Transfer Tax Returns") which such Party has
primary responsibility for filing under applicable Law and shall
cause all such Transfer Taxes to be duly and timely paid in full.
The Party that has prepared any such Transfer Tax Return shall
cause each such Transfer Tax Return, together with all relevant
work papers and other information, to be delivered to the other
Parties for their review and approval no later than 30 days prior
to the due date for the filing of such Transfer Tax Return
(giving effect to any and all extensions thereof). As between
the Buyer and the Seller, the Party not required to file such
Transfer Tax Return under this Section 5.4 shall pay to the other
such Party's share of the Transfer Taxes due and payable not
later than seven days prior to the due date for payment of such
Transfer Taxes (giving effect to any and all extensions thereof).
5.5 Allocation of Certain Taxes In the case of any Tax
that relates to any Straddle Period, the portion of such Tax
attributable to the Pre-Closing and Post-Closing portions of such
Straddle Period shall be determined as follows (provided,
however, that this Section 5.5 shall not apply with respect to
any and all Taxes described in Sections 5.2(a)(vi) or (vii)
hereof):
(a) In the case of any franchise Tax based on capital
and any ad valorem Tax, the portion attributable to the Pre-
Closing portion of such Straddle Period shall be the amount of
such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days (including the
Closing Financial Statement Date) in the Pre-Closing portion of
such Straddle Period and the denominator of which is the number
of days in the entire taxable period. The amount of such Tax
remaining after subtracting the portion attributable to the Pre-
Closing portion of such Straddle Period (as determined in
accordance with the preceding sentence) shall be the amount of
such Tax attributable to the Post-Closing portion of such
Straddle Period.
(b) In the case of any such Tax not described in
Section 5.5(a) above, the portion attributable to the Pre-Closing
portion of such Straddle Period shall be determined on the basis
of an interim closing of the books as of and including the
Closing Financial Statement Date, provided, however, that for
purposes of this Section 5.5(b), no amount attributable to the
Section 338(h)(10) Election shall be taken into account.
5.6 Return Filings, Refunds and Credits
(a) The Seller shall (i) cause the Company to be
included in the consolidated federal income Tax Returns of the
affiliated group (within the meaning of Section 1504 of the Code)
of which the Seller is the common parent (within the meaning of
Section 1504 of the Code) and the Indiana Corporation Income Tax
Returns (filed on a combined basis) that include the Seller and
the Company for (A) the taxable year of the Seller ended October
31, 1996 and (B) the taxable year of the Seller that will end on
October 31, 1997 (the "1997 Consolidated Returns"), which 1997
Consolidated Returns will include the tax items of the Company
for the portion of such taxable year ending on the Closing
Financial Statement Date, (ii) timely file such Tax Returns and
(iii) timely pay any Taxes shown as due on such Tax Returns.
(b) With respect to each Tax Return (other than the Tax
Returns described in Section 5.6(a) hereof) of the Company for
Pre-Closing Periods which have not been filed on or before the
Closing Date,
(i) the Seller shall prepare or cause to be
prepared each such income Tax Return and franchise Tax
Return; and
(ii) the Buyer shall prepare or cause the Company
to prepare all Tax Returns not described in Section
5.6(b)(i) hereof (to the extent not prepared before the
Closing Date).
Subject to Sections 5.2, 5.3, 5.6(d) and 5.6(e) hereof, the Buyer
shall timely file or cause the Company to timely file the Tax
Returns described in this Section 5.6(b) and shall timely pay or
cause to be timely paid all Taxes shown as due thereon. Subject
to Sections 5.6(d) and 5.6(e) hereof, seven days prior to the due
date for the filing of each Tax Return referred to in this
Section 5.6(b), the Seller shall pay to the Company the excess,
if any, of (i) the aggregate amount which will have been paid
(when the amount of Taxes shown as due on such Tax Return has
been paid) by Niagara, the Buyer or the Company (to any Seller
Indemnified Party or to any taxing authority, as applicable)
pursuant to Section 5.3(a)(i) (including, but not limited to,
payments made under this Section 5.6) over (ii) the sum of (x)
the Tax Accrual and (y) the total aggregate amount previously
paid to any Buyer Indemnified Party pursuant to this Section 5.6.
(c) Subject to Sections 5.2, 5.3 and 5.6(d) and 5.6(e)
hereof, the Buyer shall prepare or cause to be prepared each Tax
Return (other than the Tax Returns described in Section 5.6(a)
hereof) with respect to the Company for Straddle Periods, shall
timely file or cause the Company to timely file all such Tax
Returns, and shall timely pay or cause to be timely paid all
Taxes shown as due thereon. Subject to Section 5.6(d) and 5.6(e)
hereof, seven days prior to the due date for the filing of each
Tax Return referred to in this Section 5.6(c), the Seller shall
pay to the Company the excess, if any, of (i) the aggregate
amount which will have been paid (when the amount of Taxes shown
as due on such Tax Return has been paid) by the Buyer or the
Company (to a Seller Indemnified Party or to any taxing
authority, as applicable) pursuant to Section 5.3(a)(i)
(including, but not limited to, payments made under this Section
5.6) over (ii) the sum of (x) the Tax Accrual and (y) the total
aggregate amount previously paid to any Buyer Indemnified Party
pursuant to this Section 5.6.
(d) The Tax Returns referred to in Sections 5.6(b) and
5.6(c) hereof shall be prepared in a manner consistent with past
practice (including, without limitation, as to accounting methods
and methods of measuring sales, income, property values or other
relevant items), unless a contrary treatment is required by an
intervening change in applicable Law. The Seller shall cause any
Tax Return that is described in Section 5.6(b)(i) hereof,
together with all relevant work papers and any other information,
to be delivered to Niagara and the Buyer (in accordance with the
provisions of Section 7.9 hereof) for their review and approval
at least 30 calendar days prior to the due date (giving effect to
any and all extensions thereof) for filing such Tax Return. The
Buyer shall cause any Tax Return that is described in Section
5.6(b)(ii) or 5.6(c) hereof, together with all relevant work
papers and other information, to be delivered to the Seller (in
accordance with the provisions of Section 7.9 hereof) for its
review and approval at least 30 calendar days prior to the due
date (giving effect to any and all extensions thereof) for filing
such Tax Return. With respect to any Tax Return described in
Section 5.6(c) hereof which is delivered to the Seller pursuant
to the previous sentence, the Buyer shall simultaneously deliver
to the Seller (in accordance with the provisions of Section 7.9
hereof) a statement (the "Buyer's Tax Statement") calculating the
portion of the Taxes shown as due on such Tax Return that is
attributable to the Pre-Closing portion of the Straddle Period
under Section 5.5 hereof. The costs and expenses incurred in
connection with the preparation and delivery of the Tax Returns
referred to in Section 5.6(a) and (b)(i) hereof shall be borne by
the Seller. The costs and expenses incurred in connection with
the preparation and delivery of the Tax Returns referred to in
Section 5.6(b)(ii) and (c) hereof and the Buyer's Tax Statement
shall be borne by the Buyer.
(e) The amount of Taxes shown to be due on any Tax
Return described in Section 5.6(b) or 5.6(c) hereof and on any
Buyer's Tax Statement related thereto described in Section 5.6(d)
hereof shall be final and binding upon the Parties, unless
whichever of the Parties did not prepare or cause the preparation
of such Tax Return or the Buyer's Tax Statement, as the case may
be (the "Other Party"), shall have delivered to the Party that
prepared or caused the preparation of such Tax Return (within 10
calendar days after the date of the Other Party's receipt of such
Tax Return and, if applicable, the Buyer's Tax Statement related
thereto) a written report containing all changes that the Other
Party proposes to make to such Tax Return and, if applicable, to
the Buyer's Tax Statement related thereto, which report shall set
forth in reasonable detail the basis for such changes. The
Parties shall undertake to resolve any issues raised in any such
report described in the first sentence of this paragraph prior to
the due date (including any extension thereof) for filing such
Tax Return and to mutually consent to the filing of such Tax
Return and, if applicable, to agree on the determination to be
set forth in the Buyer's Tax Statement related thereto, in which
case the information and total amount of Taxes shown to be due on
such agreed Tax Return or, if applicable, shown on such Buyer's
Tax Statement (as agreed to) shall be final and binding on the
Parties. In the event the Parties are unable to resolve any
dispute by the date that is 15 calendar days prior to the due
date for filing of the Tax Return in question (including any
extension thereof), the Parties shall jointly engage the
Independent Accounting Firm to make its independent determination
with respect to the item or items in dispute and the amount or
amounts related thereto. The Buyer and the Seller shall each
bear and pay one-half of the fees and other costs charged by the
Independent Accounting Firm to perform such function. If the
Independent Accounting Firm is so engaged, the Parties agree to
provide the Independent Accounting Firm with all books, records
and other information relevant to the determination of the
disputed items and the Independent Accounting Firm shall be
instructed to make its determination as soon as possible. The
Independent Accounting Firm's determination with respect to the
Tax treatment of any disputed item shall be made on the basis of
the Tax treatment for which the Independent Accounting Firm
determines there is substantial authority (or, if there is
substantial authority for two or more Tax treatments of such
disputed item, the Tax treatment for which the weight of the
authorities supporting such Tax treatment is most substantial in
relation to the weight of authorities supporting the other Tax
treatment or treatments). The determination of the Independent
Accounting Firm shall be final and binding on the Parties
enforceable by appropriate judicial proceedings. In any case
where a disputed item has not been resolved (either by mutual
agreement of the Parties or by a determination of the Independent
Accounting Firm) 10 calendar days prior to the due date
(including any extension thereof) for filing such Tax Return,
then the Party required to file such Tax Return under Section
5.6(b) or 5.6(c) hereof, as the case may be, shall cause such Tax
Return to be filed on the due date (including any extension
thereof) for filing such Tax Return without the Parties' mutual
agreement or the Independent Accounting Firm's determination with
respect thereto and (i) the Independent Accounting Firm shall
make a determination with respect to any such disputed item and
(ii) the amount of Taxes determined to be due with respect to
such Tax Return or, if applicable, determined to be properly set
forth on the Buyer's Tax Statement related to such Tax Return,
shall be the amount of Taxes that would have been due on such Tax
Return or, if applicable, be the amount of Taxes that would be
properly set forth on the Buyer's Tax Statement related to such
Tax Return, after giving effect to the Independent Accounting
Firm's determination. Any overpayments or underpayments as
between the Parties shall be equitably adjusted to take into
account the determination of the Independent Accounting Firm,
with interest on any such payments to be paid, from the date of
payment, at the rate charged by the IRS for underpayments under
Section 6621 of the Code.
(f) Any refunds or credits of Taxes of the Company for
any Pre-Closing Period or any Pre-Closing portion of any Straddle
Period together with any after-tax interest received or credited
thereon shall be for the account of the Seller and shall be paid
by Niagara, the Buyer or the Company to the Seller within 10 days
after such Person receives or utilizes such refund or credit (or
interest thereon). Any refunds or credits of Taxes of the
Company for any Post-Closing Period or any Post-Closing portion
of any Straddle Period together with any after-tax interest
received or credited thereon shall be for the account of the
Buyer and shall be paid by the Seller to the Buyer within ten
days after the Seller receives or utilizes such refund or credit
(or interest thereon). In applying the provisions of the first
two sentences of this Section 5.6(f), any refunds or credits of
Taxes of the Company for any Straddle Period together with any
after-tax interest received or credited thereon shall be
allocated between the Seller and the Buyer in a manner consistent
with Section 5.5 hereof.
5.7 Tax Contests
(a) If any taxing authority proposes any adjustment or
questions the treatment of any item, which adjustment or question
could, if pursued successfully, result in or give rise to solely
a claim for indemnification against the Seller by any Buyer
Indemnified Party under Section 5.2 hereof (a "Seller Tax
Claim"), solely a claim for indemnification against Niagara or
the Buyer by any Seller Indemnified Party under Section 5.3
hereof (a "Buyer Tax Claim"), or both a Seller Tax Claim and a
Buyer Tax Claim (a "Joint Tax Claim"), then the Party first
receiving notice of such adjustment or question (a "Tax Dispute")
shall promptly notify the other Parties in writing of such Tax
Dispute.
(b) In the case of a Buyer Tax Claim, the Buyer shall
have the right, at its sole cost and expense, to control the
defense, prosecution, settlement or compromise of the Tax Dispute
underlying such Buyer Tax Claim.
(c) In the case of a Seller Tax Claim, the Seller shall
have the right, at its sole cost and expense, to control the
defense, prosecution, settlement or compromise of the Tax Dispute
underlying such Seller Tax Claim.
(d) In the case of a Joint Tax Claim, the Buyer
Indemnified Party and the Seller Indemnified Party shall first
attempt to separate such Joint Tax Claim into two, one involving
the Buyer Tax Claim portion thereof (which shall be subject to
the provisions of Section 5.7(b) hereof) and the other involving
the Seller Tax Claim portion thereof (which shall be subject to
the provisions of Section 5.7(c) hereof). If the Buyer
Indemnified Party and the Seller Indemnified Party are not
successful in accomplishing such separation, the Buyer
Indemnified Party and the Seller Indemnified Party shall, and
shall cause their respective affiliates to, consult and cooperate
with each other in controlling such audit, examination,
investigation, or administrative, court, or other proceeding,
shall not compromise or settle such Joint Tax Claim without the
other's prior written consent (which consent shall not be
unreasonably withheld or delayed), and shall share the costs and
expenses associated with such Joint Tax Claim on such equitable
basis as the Parties shall mutually agree. If the Buyer
Indemnified Party and the Seller Indemnified Party cannot agree
with respect to any matter involving any such Joint Tax Claim,
the Buyer Indemnified Party and the Seller Indemnified Party
shall jointly engage independent tax counsel that is mutually
acceptable to the Buyer Indemnified Party and the Seller
Indemnified Party to make its decision with respect to such
matter, which decision shall be final and binding on the Parties,
the Buyer Indemnified Party and the Seller Indemnified Party.
The Buyer and the Seller shall each bear and pay one-half of the
fees and other costs charged by such counsel.
(e) The Party that controls a Tax Dispute under the
provisions of this Section 5.7 shall keep the other Parties
informed of all significant events and developments relating to
such Tax Dispute and the other Parties, or their authorized
representatives, shall be entitled, at their own expense, to
attend (but not control) all conferences, meetings and
proceedings with the relevant taxing authority relating to such
Tax Dispute.
5.8 Cooperation The Parties shall, and Niagara and the
Buyer shall cause the Company to, cooperate, and shall cause
their respective directors, officers, employees, agents,
accountants and representatives to cooperate, in preparing and
filing all Tax Returns (including amended Tax Returns and claims
for refund), in handling audits, examinations, investigations,
and administrative, court or other proceedings relating to Taxes
covered by this Agreement, in resolving all disputes, audits and
refund claims with respect to such Tax Returns and Taxes, and any
earlier Tax Returns and Taxes of the Company, and in all other
Tax matters to which this Agreement relates, in each case
including making employees available to assist the requesting
Party, timely providing information reasonably requested,
maintaining and making available to each other all records
necessary in connection therewith, and the execution and delivery
of IRS Form 2848 (or a successor form or forms) and comparable
forms for foreign, state and local Tax purposes, as appropriate,
when the requesting party reasonably requires such forms in
connection with any Tax Dispute and claims for refund. Any
information obtained by a Party or its affiliates from another
Party or its affiliates in connection with any Tax matters to
which this Agreement relates shall be kept confidential, except
(i) as may be otherwise necessary in connection with the filing
of Tax Returns or claims for refund or in conducting an audit or
other proceeding relating to Taxes or as may be otherwise
reasonably required by applicable Law, (ii) for any external
disclosure in audited financial statements or regulatory filings
which a Party reasonably believes is required by applicable law
or stock exchange rules or (iii) for any disclosure which a Party
or its affiliates, as the case may be, reasonably believes is
required by an entity which has made financing available to such
Party or affiliate or to which such Party or affiliate has
applied for financing in connection with this Agreement or with
any other agreement (a "Lender"), provided that such Lender shall
have agreed to keep all such information confidential.
5.9 Termination of Tax Sharing Agreements Except as
provided in this Agreement, any and all Tax allocation
agreements, Tax sharing agreements, intercompany agreements,
intercompany Indebtedness, or other agreements or arrangements
between the Company and the Seller or any of the Seller's
Affiliates and relating to any Tax matters shall be terminated
with respect to the Company as of the Closing Financial Statement
Date, and from and after such time will have no further force or
effect for any taxable period (whether past, current, or future
taxable periods).
5.10 Purchase Price Unless otherwise required by
applicable Law, the Parties shall treat any payments of Taxes
made pursuant to this Article V as an adjustment to the Purchase
Price for federal, state and local Tax purposes.
5.11 Payments Except as otherwise provided in this Article
V, any amount to which a Party is entitled under this Article V
shall be promptly paid in immediately available funds to such
Party by the Party or Parties obligated to make such payment
within five business days after written notice to the Party so
obligated stating that the Taxes to which such amount relates are
due or have been paid and providing details supporting the
calculation of such amount, but in no event shall such payment be
required to be made earlier than seven calendar days before the
due date (giving effect to any and all valid extensions) for
payment of such Taxes.
5.12 Survival All representations and warranties contained
in Section 2.18 hereof, and all covenants and agreements
contained in or made pursuant to this Article V, shall survive
until 90 calendar days following expiration of the applicable
statute of limitations (including any and all valid extensions
thereof), provided, however, that a claim for indemnification
made within the applicable survival period in respect of any such
representation, warranty, covenant or agreement may continue to
be asserted beyond such period.
5.13 Exclusivity of Article V Notwithstanding anything in
this Agreement to the contrary, this Article V shall be the
exclusive agreement among the Parties with respect to
indemnification for any Losses in respect of Taxes.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
6.1 Survival of Representations and Warranties All
representations and warranties of the Parties contained herein
shall survive the Closing and any investigation at any time made
by or on behalf of any Party for a period of two years after the
Closing Date; provided, however, that the representations and
warranties contained in Section 2.18 (Taxes) hereof shall
survive in accordance with the provisions of Section 5.12 hereof.
Provided that a claim with respect to a breach of representation
or warranty is made within the applicable period, it may continue
to be asserted beyond such period with respect to the
representation or warranty to which such claim relates.
6.2 Indemnification by the Seller Subject to the
provisions of this Article VI, and in addition to the obligations
of the Seller pursuant to Section 5.2 hereof, the Seller shall
indemnify, defend and hold harmless Niagara, the Buyer, any
parent, subsidiary or affiliate of, and any director, officer,
employee, agent or advisor of, any of them, or any of their
respective heirs, successors or assigns (a "Buyer Indemnified
Party"), from and against any and all demands, claims, actions,
causes of action, assessments, losses, damages, liabilities,
judgments, settlements, fines, penalties, sanctions, costs,
deficiencies and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, interest and
penalties, and all other reasonable costs of investigating and
defending third party claims as incurred) (collectively,
"Losses") asserted against, resulting to, imposed upon or
incurred by any Buyer Indemnified Party, directly or indirectly,
by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of the Seller contained in or
made pursuant to this Agreement;
(ii) the breach or nonperformance of any covenant
or agreement of the Seller contained in or made pursuant to
this Agreement; and
(iii) any guarantee by the Company, made prior to
the Closing, of Indebtedness of the Seller or any Seller's
Affiliate.
6.3 Indemnification by Niagara and the Buyer Subject to
the provisions of this Article VI, and in addition to the
obligations of Niagara and the Buyer under Section 5.3 hereof,
Niagara and the Buyer shall, jointly and severally, indemnify,
defend and hold harmless the Seller, any parent, subsidiary or
affiliate of the Seller, and any director, officer, employee,
agent or advisor of any of them or any of their respective heirs,
successors or assigns (a "Seller Indemnified Party"), from and
against any and all Losses asserted against, resulting to,
imposed upon or incurred by any Seller Indemnified Party,
directly or indirectly, by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of Niagara or the Buyer
contained in or, made pursuant to this Agreement;
(ii) the breach or non-performance of any covenant
or agreement of Niagara or the Buyer contained in or made
pursuant to this Agreement; and
(iii) any actions or omissions by a Buyer
Indemnified Party or the Company following the Closing with
respect to any Designated Plan that is sponsored by the
Company immediately prior to the Closing; and
(iv) any matter relating to the Buyer Salaried
Pension Plan (as defined in Section 4.1(a) hereof), the
Buyer's Savings Plan (as defined in Section 4.1(b) hereof),
the LaSalle Steel Company Group Benefit Plan, and the
LaSalle Steel Company Management Incentive Program.
6.4 Limitations on Indemnification (a) The
indemnifications in favor of the Buyer Indemnified Parties
contained in Section 6.2(i) hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against
under such Section exceeds $250,000 (the "Seller's Threshold
Amount"), and then only to the extent such aggregate amount
exceeds the Seller's Threshold Amount. The indemnifications in
favor of the Buyer Indemnified Parties contained in Section
6.2(i) hereof shall terminate once the dollar amount of all
Losses indemnified against under such Section aggregates
$35,000,000.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in Section 6.3(i) hereof shall not
be effective until the aggregate dollar amount of all Losses
indemnified against under such Section exceeds $250,000 (the
"Buyer's Threshold Amount"), and then only to the extent such
aggregate amount exceeds the Buyer's Threshold Amount. The
indemnifications in favor of the Seller Indemnified Persons
contained in Section 6.3(i) hereof shall terminate once the
dollar amount of all Losses indemnified against under such
Section aggregates $35,000,000.
6.5 Indemnification Procedures
(a) Notice. If any legal proceeding shall be threatened
or instituted or any claim or demand shall be asserted by any
Buyer Indemnified Party or Seller Indemnified Party in respect of
which indemnification may be sought under the provisions of this
Agreement, the Party seeking indemnification (the "Claiming
Party") shall promptly cause written notice of the assertion of
any such claim, demand or proceeding of which it has knowledge to
be forwarded to the Party from whom it is claiming
indemnification (the "Indemnitor"). Such notice shall contain a
reference to the provisions hereof or of such other agreement,
instrument or certificate delivered pursuant hereto, in respect
of which such claim is being made, and shall specify, in
reasonable detail, the amount of such Loss if determinable at
such time. The Claiming Party's failure to give the Indemnitor
prompt notice shall not preclude the Claiming Party from seeking
indemnification from the Indemnitor unless the Claiming Party's
failure has materially prejudiced the Indemnitor's ability to
defend the claim, demand or proceeding.
(b) Third Party Claims. If the Claiming Party seeks
indemnification from the Indemnitor as a result of a claim or
demand being made by a third party (a "Third Party Claim"), the
Indemnitor shall have the right to promptly assume the control of
the defense of such Third Party Claim, including, at its own
expense, employment by it of counsel reasonably satisfactory to
the Claiming Party. The Claiming Party may, in its sole
discretion and at its own expense, employ counsel to represent it
in the defense of the Third Party Claim, and in such event
counsel for the Indemnitor shall cooperate with counsel for the
Claiming Party in such defense, provided that the Indemnitor
shall direct and control the defense of such Third Party Claim or
proceeding. The Indemnitor shall not consent to the entry of any
judgment, except with the written consent of the Claiming Party,
and shall not enter into any settlement of such Third Party Claim
without the written consent of the Claiming Party which (i) does
not include as an unconditional term thereof the release of the
Claiming Party from all liability in respect of such Third Party
Claim or (ii) results in the imposition on the Claiming Party of
any remedy other than money damages. If the Indemnitor elects
not to exercise its rights to assume the defense of the Third
Party Claim, or if injunctive relief is sought which would have
an adverse effect on the Claiming Party (or the Company if a
Buyer Indemnified Party is the Claiming Party), the Claiming
Party may, but shall have no obligation to, defend against such
Third Party Claim or legal proceeding in such manner as it may
deem appropriate, and the Claiming Party may compromise or settle
such Third Party Claim and proceeding without the Indemnitor's
consent.
(c) Payment. After any final judgment or award shall
have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the time in
which to appeal therefrom shall have expired, or a settlement
shall have been consummated, or the Claiming Party and the
Indemnitor shall arrive at a mutually binding agreement with
respect to each separate matter alleged to be indemnified by the
Indemnitor hereunder, the Claiming Party shall forward to the
Indemnitor notice of any sums due and owing by it with respect to
such matter (in accordance with Section 7.9 hereof) and the
Indemnitor shall pay all of the sums so owing to the Claiming
Party by wire transfer, certified or bank cashier's check within
10 days after the date of such notice.
6.6 Application to Taxes. Notwithstanding anything in this
Agreement to the contrary, Article V shall be the exclusive
agreement among the Parties with respect to indemnification for
any Losses in respect of Taxes.
6.7 Remedies Except for Losses resulting from fraud, the
rights and remedies specifically provided for in this Agreement
shall be the exclusive rights and remedies of the Parties.
Without limiting the foregoing, each of Niagara and the Buyer
waives any rights and remedies it may have against the Seller
under any Environmental Law, including without limitation the
Comprehensive Environmental Response, Compensation and Liability
Act, the Indiana Responsible Property Transfer Law and the
Indiana Hazardous Substances Response Trust Fund Law. For
purposes of this Agreement, any statement made by the Company in
a notice delivered or filed pursuant to the Indiana Responsible
Property Transfer Law in connection with the financing
arrangements of the Buyer and its affiliates shall not be deemed
to be a representation, warranty, agreement or covenant pursuant
to this Agreement and the Parties acknowledge that the Seller
shall not have any responsibility concerning the preparation,
delivery or filing of such notice.
ARTICLE VII
MISCELLANEOUS
7.1 Parties in Interest; No Third Party Beneficiaries (a)
This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the Parties and their respective
successors and permitted assigns. This Agreement and the rights
and obligations of the Parties hereunder may not be assigned by
any of the Parties without the prior written consent of the other
Parties.
(b) This Agreement is not intended, nor shall it be
construed, to confer upon any Person, except the Parties and
their respective successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
7.2 Exhibits and Disclosure Schedule All Exhibits annexed
hereto and the Disclosure Schedule referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth
in full herein.
7.3 Entire Agreement This Agreement (including the
Exhibits hereto and the Disclosure Schedule) and the other
documents, certificates and instruments referred to herein,
together with the letter agreement dated the date hereof by and
among the Parties, embody the entire agreement and understanding
of the Parties in respect of the transactions contemplated by
this Agreement, and, except as provided in Section 4.5 hereof,
supersedes all prior agreements, arrangements and understandings
of the Parties with respect to such transactions, including (i)
the Confidentiality Agreement, dated December 19, 1995, by and
between the Seller and Niagara and (ii) the Letter of Intent,
dated January 23, 1997, by and among Niagara, the Seller and the
Company, as amended.
7.4 Waiver of Compliance No amendment, modification,
alteration, supplement or waiver of compliance with any
obligation, covenant, agreement or provision hereof or consent
pursuant to this Agreement shall be effective unless evidenced by
an instrument in writing executed by both of the Parties or in
the case of a waiver, the Party against whom enforcement of any
waiver, is sought. Any waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or
provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
7.5 Validity The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
7.6 Counterparts This Agreement may be executed in
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
7.7 Headings The table of contents, article and section
headings contained in this Agreement or any Exhibit hereto or the
Disclosure Schedule are for convenience only and shall not
control or affect in any way the meaning or interpretation of
this Agreement.
7.8 Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law of
such jurisdiction.
7.9 Notices All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally (which is
confirmed) or sent by registered or certified mail (postage
prepaid, return receipt requested) and, in the case of the
Intercompany Statement, by overnight delivery (Federal Express),
to the Parties at the following addresses:
(a) If to Niagara:
Mr. Michael Scharf
President
Niagara Corporation
667 Madison Avenue
New York, New York 10021
Telephone: (212) 317-1000
Telecopy: (212) 317-1001
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Milton G. Strom, Esq.
(b) If to the Buyer to:
Mr. Frank Archer
President
Niagara Cold Drawn Corp.
110 Hopkins Street
P.O. Box 399
Buffalo, New York 14240
Telephone: (716) 827-7010
Telecopy: (716) 827-8855
Copies to:
Mr. Michael Scharf
President
Niagara Corporation
667 Madison Avenue
New York, New York 10021
Telephone: (212) 317-1000
Telecopy: (212) 317-1001
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Milton G. Strom, Esq.
(c) If to the Seller:
Mr. Wayne M. Rose
Vice President
Quanex Corporation
1900 West Loop South
Suite 1500
Houston, Texas 77027
Telephone: (713) 877-5307
Telecopy: (713) 877-5333
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney Street
Houston, Texas 77010-3095
Telephone: (713) 651-5100
Telecopy: (713) 651-5246
Attention: Harva R. Dockery, Esq.
or to such other address as the Person to whom notice is to be
given may have previously furnished to the other in writing in
the manner set forth above, provided that notice of a change of
address shall be deemed given only upon receipt.
IN WITNESS WHEREOF, the Parties have executed this
Agreement, on the day and year first above written.
QUANEX CORPORATION
By: /s/Wayne M. Rose
_________________________
Name: Wayne M. Rose
Title: Vice President
NIAGARA CORPORATION
By: /s/Michael Scharf
________________________
Name: Michael Scharf
Title: President
NIAGARA COLD DRAWN CORP.
By: /s/Frank Archer
_________________________
Name: Frank Archer
Title: President
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . 1
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . 1
1.3 The Closing . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Actions Taken Prior to the Closing . . . . . . . . . . . 2
1.5 Deliveries by the Seller . . . . . . . . . . . . . . . . 2
1.6 Deliveries by Niagara and the Buyer . . . . . . . . . . 2
1.7 Post-Closing Adjustment . . . . . . . . . . . . . . . . 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . 5
2.1 Organization and Standing . . . . . . . . . . . . . . . 5
2.2 Organizational Documents and Corporate Records . . . . . 6
2.3 Equity Investments . . . . . . . . . . . . . . . . . . . 6
2.4 Authorization; Binding Obligation . . . . . . . . . . . 6
2.5 Capitalization; Title to the Shares . . . . . . . . . . 6
2.6 Consents and Approvals; No Violation . . . . . . . . . . 7
2.7 Financial Statements . . . . . . . . . . . . . . . . . . 7
2.8 Absence of Undisclosed Liabilities . . . . . . . . . . . 7
2.9 Accounts Receivable . . . . . . . . . . . . . . . . . . 8
2.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Absence of Certain Changes or Events . . . . . . . . . 8
2.12 Properties and Assets . . . . . . . . . . . . . . . . 10
2.13 Certain Contracts . . . . . . . . . . . . . . . . . . . 11
2.14 Compliance with Laws and Permits . . . . . . . . . . . 11
2.15 Litigation and Arbitration . . . . . . . . . . . . . . 11
2.16 Employee Benefit Plans . . . . . . . . . . . . . . . . 12
2.17 Personnel Information; Labor Relations . . . . . . . . 14
2.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.19 Intellectual Property . . . . . . . . . . . . . . . . . 17
2.20 Compliance with Environmental Laws . . . . . . . . . . 18
2.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . 19
2.22 Bank Accounts . . . . . . . . . . . . . . . . . . . . . 19
2.23 Customers and Suppliers . . . . . . . . . . . . . . . . 19
2.24 Affiliate Transactions . . . . . . . . . . . . . . . . 19
2.25 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 19
2.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NIAGARA AND THE BUYER . . . 20
3.1 Organization and Standing . . . . . . . . . . . . . . . 20
3.2 Authorization; Binding Obligation . . . . . . . . . . . 20
3.3 Consents and Approvals; No Violation . . . . . . . . . . 20
3.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . 21
4.1 Benefit Matters . . . . . . . . . . . . . . . . . . . . 21
4.2 Further Assurances; Cooperation . . . . . . . . . . . . 23
4.3 Notification of Certain Matters . . . . . . . . . . . . 23
4.4 Confidentiality/Non-Competition . . . . . . . . . . . . 23
4.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Section 338(h)(10) Election . . . . . . . . . . . . . . 24
5.2 Tax Indemnity by the Seller . . . . . . . . . . . . . . 25
5.3 Tax Indemnity by Niagara and the Buyer . . . . . . . . . 26
5.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 26
5.5 Allocation of Certain Taxes . . . . . . . . . . . . . . 27
5.6 Return Filings, Refunds and Credits . . . . . . . . . . 27
5.7 Tax Contests . . . . . . . . . . . . . . . . . . . . . . 29
5.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . 29
5.9 Termination of Tax Sharing Agreements . . . . . . . . . 30
5.10 Purchase Price . . . . . . . . . . . . . . . . . . . . 30
5.11 Payments . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Survival . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Exclusivity of Article V . . . . . . . . . . . . . . . 30
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . 30
6.1 Survival of Representations and Warranties . . . . . . . 30
6.2 Indemnification by the Seller . . . . . . . . . . . . . 31
6.3 Indemnification by Niagara and the Buyer . . . . . . . . 31
6.4 Limitations on Indemnification . . . . . . . . . . . . . 31
6.5 Indemnification Procedures . . . . . . . . . . . . . . . 32
6.6 Application to Taxes. . . . . . . . . . . . . . . . . . 32
6.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Parties in Interest; No Third Party Beneficiaries . . . 33
7.2 Exhibits and Disclosure Schedule . . . . . . . . . . . . 33
7.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . 33
7.4 Waiver of Compliance . . . . . . . . . . . . . . . . . . 33
7.5 Validity . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . 33
7.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . 33
7.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . 33
Exhibit A - Termination Agreement
Exhibit B - Certificate of Non-Foreign Status
FOR IMMEDIATE RELEASE
NIAGARA CORPORATION COMPLETES ACQUISITION
OF LASALLE STEEL COMPANY
COMBINATION CREATES LARGEST
U.S. COLD FINISHED STEEL BAR PRODUCER
New York, New York - April 18, 1997 - Niagara Corporation
(NIAG:NASDAQ) announced today that it completed the
acquisition of LaSalle Steel Company from Quanex
Corporation. The purchase price was $65.5 million in
cash plus closing adjustments.
The acquisition of LaSalle, when combined with Niagara's
wholly-owned subsidiary Niagara Cold Drawn Corp., creates
the largest producer of cold finished steel bar products
in the United States with annual production in excess of
300,000 tons.
LaSalle's sales and net income for its fiscal year ended
October 31, 1996 were $158.6 million and $5.6 million
respectively. Niagara's sales and net income for the
year ended December 31, 1996 were $76.8 million and $1.1
million.
Financing for the acquisition and the refinancing of
Niagara's existing indebtedness consisted of $90 million
of senior secured debt provided by M&T Bank, CIBC, Inc.
and National City Bank and $20 million of 12-1/2% 8-year
senior subordinated notes sold to Prudential Life
Insurance Company, Equitable Life Assurance Society and
United States Fidelity and Guaranty Company. In
connection with the senior subordinated notes, the
purchasers were issued 285,715 shares of common stock of
Niagara Corporation, thereby increasing Niagara's common
shares outstanding to 3,954,465.
In commenting on the acquisition, Michael Scharf,
Chairman of Niagara, stated, "The acquisition of LaSalle
by Niagara is a true milestone in our Company's history.
It vaults us into first place in the production of cold
finished steel bars and gives us the broadest product
range and geographic coverage of any company in the
industry. LaSalle's wide range of specialty products -
including STRESSPROOF, Fatigue-Proof, e.t.d 150, Super
1200, UltraBar and IHCP and CPO chrome plated bars -
combined with Niagara's reputation for outstanding
customer service creates a winning combination for our
customers."
Mr. Scharf also announced that Frank Archer, the
President of Niagara Cold Drawn Corp., would also become
President of LaSalle.
LaSalle has facilities in Hammond and Griffith, Indiana,
and Niagara has production facilities in Buffalo, New
York, Chattanooga, Tennessee, and Midlothian Texas.
Contact: Michael Scharf, Chairman and CEO, Niagara Corporation
667 Madison Avenue, New York, New York, 10021,
(212) 317-1000.
