SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1999
Commission File Number 0-22206
NIAGARA CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 59-3182820
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
667 Madison Avenue
New York, New York 10021
---------------------------------------
(Address of principal executive offices)
(212) 317-1000
----------------------------
(Registrant's telephone
number, including area code)
N/A
-------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X . NO .
Number of shares of Common Stock outstanding at September 30, 1999
Common Stock, par value $.001 per share 9,049,746
--------------------------------------- ---------------------
(Class) (Number of Shares)
NIAGARA CORPORATION
INDEX TO SEPTEMBER 1999 FORM 10-Q
- -------------------------------------------------------------------------------
<TABLE>
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PAGE
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PART I - FINANCIAL INFORMATION
<S> <C>
FINANCIAL STATEMENTS (UNAUDITED):
NIAGARA CORPORATION
BALANCE SHEETS.................................................... 3
STATEMENTS OF OPERATIONS.......................................... 4-5
STATEMENT OF STOCKHOLDERS' EQUITY................................. 6
STATEMENTS OF CASH FLOWS.......................................... 7
NOTES TO FINANCIAL STATEMENTS..................................... 8-13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................ 14-21
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ................. 21
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES REFORM ACT OF 1995................................ 22
PART II - OTHER INFORMATION................................................... 22
SIGNATURES.................................................................... 27
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<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
BALANCE SHEETS
=========================================================================================
<S> <C> <C>
December 31, September 30,
1998 1999(a)
- -----------------------------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT:
Cash and cash equivalents $ 440,654 $ 978,044
Trade accounts receivable, net of allowance for
doubtful accounts of $789,000
and $897,000 13,360,290 53,304,077
Inventories 30,131,877 55,012,409
Deferred income taxes 494,000 640,000
Other current assets 1,446,130 5,342,388
- -----------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 45,872,951 115,276,918
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF
$13,371,116 AND $19,027,010 89,748,881 104,812,477
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF
$225,545 AND $283,694 2,099,593 2,041,444
DEFERRED FINANCING COSTS, NET OF ACCUMULATED
AMORTIZATION OF $184,480
AND $267,496 590,520 507,504
INTANGIBLE PENSION ASSET 526,000 526,000
OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION OF
$414,213 AND
$542,273 591,075 859,889
- -----------------------------------------------------------------------------------------
$ 139,429,020 $ 224,024,232
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $ 14,106,608 $ 43,600,676
Accrued expenses 6,555,103 15,417,086
Current maturities of long-term debt 4,797,209 5,522,407
- -----------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 25,458,920 64,540,169
Long-term debt, less current maturities 41,572,250 85,989,860
Accrued pension cost 4,664,337 4,209,385
Accrued post-retirement welfare benefits 5,638,639 5,728,837
Deferred income taxes 7,357,000 7,822,000
Other noncurrent liabilities 207,331 145,110
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES 84,898,477 168,435,361
- -----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value - 500,000 shares
authorized; none outstanding - -
Common stock, $.001 par value - 15,000,000 shares
authorized;
9,997,455 issued 9,998 9,998
Additional paid-in capital 50,111,675 50,111,675
Retained earnings 8,384,835 11,652,970
Accumulated other comprehensive income (1,076,000) (941,670)
- -----------------------------------------------------------------------------------------
57,430,508 60,832,973
Treasury stock, at cost, 485,880 and 947,709 shares (2,899,965) (5,244,102)
- -----------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 54,530,543 55,588,871
- -----------------------------------------------------------------------------------------
$ 139,429,020 $ 224,024,232
=========================================================================================
</TABLE>
(a) Includes the balance sheet of Niagara LaSalle (UK) Limited.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(UNAUDITED)
=========================================================================================
Three months ended September 30, 1998 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 47,813,680 $ 75,718,037
COST OF PRODUCTS SOLD 40,284,096 65,105,971
- -----------------------------------------------------------------------------------------
GROSS PROFIT 7,529,584 10,612,066
OPERATING EXPENSES:
Selling, general and administrative 4,316,712 7,385,339
- -----------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 3,212,872 3,226,727
OTHER INCOME (EXPENSE):
Interest income 8,240 7,524
Interest expense (958,442) (1,792,783)
Other income 66,360 3,040
- -----------------------------------------------------------------------------------------
INCOME BEFORE TAXES 2,329,030 1,444,508
TAXES ON INCOME 885,000 528,000
NET INCOME $ 1,444,030 $ 916,508
- -----------------------------------------------------------------------------------------
EARNINGS PER SHARE (BASIC) $ .15 $ .10
- -----------------------------------------------------------------------------------------
EARNINGS PER SHARE (DILUTED) $ .14 $ .10
- -----------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 9,890,616 9,443,660
DILUTED 10,237,091 9,443,660
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(UNAUDITED)
==========================================================================================
Nine months ended September 30, 1998 1999 (a)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 165,834,123 $ 186,716,649
COST OF PRODUCTS SOLD 140,872,652 160,874,036
- ------------------------------------------------------------------------------------------
GROSS PROFIT 24,961,471 25,842,613
OPERATING EXPENSES:
Selling, general and
administrative 12,595,861 16,885,651
- ------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 12,365,610 8,956,962
OTHER INCOME (EXPENSE):
Interest income 165,305 22,285
Interest expense (3,259,595) (3,770,622)
Other income 181,537 77,510
- ------------------------------------------------------------------------------------------
INCOME BEFORE TAXES 9,452,857 5,286,135
TAXES ON INCOME 3,685,000 2,018,000
- ------------------------------------------------------------------------------------------
NET INCOME $ 5,767,857 $ 3,268,135
- ------------------------------------------------------------------------------------------
EARNINGS PER SHARE (BASIC) $ .58 $ .35
- ------------------------------------------------------------------------------------------
EARNINGS PER SHARE (DILUTED) $ .55 $ .34
- ------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 9,961,835 9,469,472
DILUTED 10,399,182 9,521,111
==========================================================================================
</TABLE>
(a) Includes the results of Niagara LaSalle (UK) Limited from May 22,
1999.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
===================================================================================================================================
Nine Months ended September 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Accumulated other
Number of Additional Retained comprehensive Treasury stock
shares Amount paid-in capital earnings income at cost Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1999 9,997,455 $9,998 $50,111,675 $8,384,835 $(1,076,000) $(2,899,965) $54,530,543
Net income for the
period - - - 3,268,135 - - 3,268,135
Foreign Currency
Translation Adjustments
(Note 2) - - - - 134,330 - 134,330
Purchase of treasury
stock, at cost (a) - - - - - (2,344,137) (2,344,137)
===================================================================================================================================
BALANCE,
SEPTEMBER 30, 1999 9,997,455 $9,998 $50,111,675 $11,652,970 $(941,670) $(5,244,102) $55,588,871
===================================================================================================================================
(a) During the nine months ended September 30, 1999, Niagara Corporation repurchased 461,829 shares of its Common Stock at a cost
of $2,344,137. The shares repurchased are held as treasury stock.
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - INFORMATION AS OF
SEPTEMBER 30, 1999 AND FOR THE PERIODS ENDED
==========================================================================================
Nine months ended September 30, 1998 1999 (a)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,767,857 $ 3,268,135
- ------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by
(used in) operating activities:
Depreciation and amortization 4,968,615 5,912,011
Accrued post-retirement welfare benefits (3,175,793) 90,198
Provision for doubtful accounts 76,905 106,896
Deferred income taxes 1,015,526 234,000
Accrued pension costs 545,410 (454,952)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 2,462,433 (39,046,793)
Decrease (increase) in inventories 2,064,256 (2,814,500)
Decrease (increase) in other assets, net 389,290 (3,644,131)
Increase (decrease) in trade accounts
payable and accrued
expenses (3,343,933) 29,673,262
- ------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 5,002,709 (9,944,009)
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 10,770,566 (6,675,874)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment of amount to Quanex (1,371,000) -
Acquisition of U.K. steel bar businesses - (29,443,773)
Acquisition of fixed assets (5,264,011) (5,514,713)
- ------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,635,011) (34,958,486)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 44,515,887
Repayment of long-term debt (13,583,727) -
Payments to acquire treasury stock (2,020,430) (2,344,137)
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (15,604,157) 42,171,750
- ------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,468,602) 537,390
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,207,077 440,654
- ------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,738,475 $ 978,044
==========================================================================================
</TABLE>
(a) Includes the cash flows of of Niagara LaSalle (UK) Limited from May
22, 1999.
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - INFORMATION AS OF
SEPTEMBER 30, 1999 AND FOR THE PERIODS ENDED
===============================================================================
1. BASIS OF PRESENTATION The accompanying financial statements are
unaudited; however, in the opinion of
management, all adjustments necessary for a
fair statement of financial position and
results for the stated periods have been
included. These adjustments are of a normal
recurring nature. Selected information and
footnote disclosures normally included in
financial statements prepared in accordance
with generally accepted accounting
principles have been condensed or omitted.
Results for interim periods are
not necessarily indicative of the results
to be expected for an entire fiscal year.
It is suggested that these condensed
financial statements be read in conjunction
with the audited financial statements and
accompanying notes for the year ended
December 31, 1998.
2. FOREIGN CURRENCY Niagara LaSalle (UK) Limited ("Niagara UK"),
TRANSLATION AND an English company and a subsidiary of
TRANSACTIONS Niagara Corporation ("Niagara"), uses
British pounds sterling ("(pound)") as its
functional currency. Assets and liabilities
of this subsidiary are translated from
British pounds sterling to United States
dollars at the exchange rate in effect on
September 30, 1999. Statement of operations
accounts are translated at the average rate
of exchange from May 22, 1999 to September
30, 1999. Translation adjustments arising
from the use of different exchange rates
from period to period are included as
a component of stockholders' equity as
"Accumulated other comprehensive income".
Gains and losses resulting from foreign
currency transactions are included in "Other
income (expense)".
3. ACQUISITION OF On April 18, 1997, Niagara LaSalle
LASALLE Corporation (formerly Niagara
Cold Drawn Corp.) ("Niagara LaSalle"), a
subsidiary of Niagara, purchased from Quanex
Corporation ("Quanex") all of the
outstanding shares of capital stock of
LaSalle Steel Company ("LaSalle," and
together with Niagara LaSalle, "Niagara
US"), one of the largest domestic producers
of cold drawn steel bars. (Niagara, Niagara
US and Niagara UK are collectively referred
to as the "Company".) In consideration for
the sale of such shares, Niagara LaSalle
paid Quanex $65,500,000 in cash at the
closing and an additional $1,371,000, which
amount was paid on January 26, 1998, based
on changes in LaSalle's stockholder's equity
between October 31, 1996 and March 31, 1997.
Niagara LaSalle also paid Quanex an amount
based on cash activity in the intercompany
account between Quanex and LaSalle from
April 1, 1997 through April 18, 1997.
The acquisition of LaSalle was accounted for
as a purchase. The purchase price, including
acquisition costs and other estimated
liabilities as of the acquisition date, was
approximately $68,000,000. The purchase
price exceeded LaSalle's stockholder's
equity by approximately $56,000,000, and
based on an appraisal, the excess was
primarily allocated to property, plant and
equipment.
The acquisition of LaSalle and the
refinancing of existing Niagara LaSalle
indebtedness was financed (i) by borrowings
under a revolving credit and term loan
agreement with Niagara US (guaranteed by
Niagara), providing for a $50,000,000
three-year revolving credit facility and a
$40,000,000 eight-year term loan and
(ii) with proceeds from the sale of
$20,000,000 aggregate principal amount of
12.5% senior subordinated notes of Niagara
LaSalle due April 18, 2005 (the
"Subordinated Notes"). In connection with
the subordinated debt portion of this
financing, the purchasers of the
Subordinated Notes were issued 285,715
shares of Niagara Common Stock.
4. ACQUISITION OF THE On May 21, 1999, pursuant to a Sale of
STEEL BAR Business Agreement dated April 16,
BUSINESSES 1999 among Niagara, Niagara UK, Glynwed
OF GLYNWED STEELS International plc, an English company
LIMITED ("Glynwed"), and Glynwed Steels Limited,
an English company and a subsidiary of
Glynwed ("Glynwed Steels"), Niagara UK
purchased the equipment, inventory and
certain other assets of the steel bar
businesses of Glynwed Steels. In
consideration for the sale of such assets,
Niagara UK paid Glynwed Steels
(pound)21,202,000 (approximately $34
million) in cash at the closing, (pound)
3,015,500 (approximately $4.9 million) of
which was returned to Niagara UK during the
third quarter of 1999 as an adjustment to
reflect the value of the net assets
transferred. These steel bar businesses,
which are engaged in hot rolling, cold
finishing and distribution, consist of the
following unincorporated trading units:
Ductile Hot Mill, Dudley Port Rolling Mills,
GB Steel Bar, George Gadd & Company,
Longmore Brothers, Macreadys, Midland
Engineering Steels and W Wesson.
In connection with the execution of this
Sale of Business Agreement, Niagara and
Niagara UK entered into property agreements
with subsidiaries of Glynwed calling for the
lease or sublease by Niagara UK of 10
operating facilities and the assignments of
5 sales office leases. Pursuant to these
property and related agreements (i) the
initial term of the lease is 10 years for
9 of the operating facilities and 5 years
for the remaining operating facility at
aggregate rents of (pound)50,000
(approximately $80,000) for the first two
years; (pound)850,000 (approximately
$1.3 million) for years 3-6; and (pound)
1,000,000 (approximately $1.6 million) for
years 7-10, (ii) each operating facility
lease can be terminated by Niagara UK on one
year's notice and (iii) Niagara UK has the
option to purchase any or all of the 7
primary operating facilities at prices
fixed for 10 years (which prices total
(pound)9,468,000 (approximately $15.1
million)), or to renew the leases with
respect thereto for an additional term of 15
years at commercial market rates.
The purchase of the U.K. steel bar
businesses was financed by (i) borrowings
under a bank facilities agreement entered
into on May 21, 1999 by Niagara UK providing
for a (pound)10 million (approximately $16
million) seven-year term loan and a (pound)
9.8 million (approximately $15.7 million)
three-year revolving credit facility, (ii)
a (pound)3.75 million (approximately $6
million) equity investment by Niagara in
Niagara UK, (iii) a (pound)3.75 million
(approximately $6 million) subordinated loan
from Niagara to Niagara UK and (iv) a
(pound)2.5 million (approximately $4
million) short-term loan from Niagara to
Niagara UK. The equity investment and
subordinated and short-term loans were
financed by borrowings under a revolving
credit and term loan agreement dated
April 18, 1997, as amended, with Niagara US
(see Note 3).
On August 23, 1999, Niagara UK entered into
a three-year Invoice Discounting Agreement
with Lombard Natwest Discounting Limited
providing for up to (pound)20 million
(approximately $32.2 million) of advances to
Niagara UK based upon a formula tied to the
receivables purchased by such institution.
In connection with the execution of this
agreement, the revolving credit facility
under Niagara UK's bank facilities agreement
was reduced to (pound)4.9 million
(approximately $7.9 million).
Pro forma results of operations, assuming
the acquisition of the U.K. steel bar
businesses had occurred on January 1, 1998
are unaudited and detailed below. Pro forma
adjustments primarily include reductions in
depreciation and amortization based on
changes in the useful lives of the assets
acquired, additional interest expense
relating to the debt incurred in connection
with the acquisition, and changes in rent
expense based on property leases entered
into in connection with the acquisition.
<TABLE>
<CAPTION>
September 30, September 30,
Nine Months ended 1998 1999
-------------------------------------------------------------
<S> <C> <C>
Net Sales $314,705,154 $247,005,829
Net Income (Loss) $8,266,150 $ (2,610,576)
Net Income (Loss) per share $.83 $(.28)
(basic)
Net Income (Loss) per share $.79 $(.28)
(diluted)
-------------------------------------------------------------
5. INVENTORIES Inventories consisted of the following:
December 31, September 30,
1998 1999
-----------------------------------
Raw materials $ 7,824,023 $19,978,199
Work-in-process 4,588,895 7,120,790
Finished goods 17,718,959 27,913,420
-----------------------------------
$30,131,877 $55,012,409
===============================================================
</TABLE>
At September 30, 1999, inventories totaling $34,945,170
and owned by Niagara US are stated using the LIFO
method and inventories totaling $20,067,239 and owned
by Niagara UK are stated using the FIFO method.
6. COLLECTIVE On July 19, 1998, following a nine-week strike,
BARGAINING the hourly workers at the Company's Hammond, Indiana
AGREEMENT facility voted to accept a new three-year collective
bargaining agreement. Among other things, this agreement
provides for a curtailment of certain pension costs and
other post-retirement benefits. The net effect of these
curtailments for the three and nine months ended
September 30, 1998 was to increase net income by
$1,065,069 for such periods.
7. CONTINGENCIES Niagara US and Niagara UK are subject to
environmental laws and regulations concerning, among
other things, water and air emissions and waste
disposal. Under applicable laws, including the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), Niagara US
and Niagara UK may be responsible for parts of the
costs required to remove or remediate previously
disposed wastes or hazardous substances at the
locations they own or operate or at the locations which
they arranged for disposal of such materials. The costs
incurred through September 30, 1999 have been largely
covered by insurance. Management believes any
resolution of these matters will not have a material
adverse effect on the Company's financial position.
Under the Company's insurance programs, coverage
is obtained for catastrophic exposures as well as
those risks required to be insured by law or
contract. It is the policy of the Company to
retain a portion of certain expected losses
related primarily to workers' compensation,
physical loss to property, business interruption
resulting from such loss, and comprehensive
general, product, vehicle, medical and life
benefits and liability. Provisions for losses
expected under these programs are recorded based
upon the Company's estimates of the aggregate
liability, actual and estimated, for claims. Such
estimates utilize certain actuarial assumptions
followed in the insurance industry and are
included in accrued expenses.
8. SEGMENTS AND Niagara operates in two reportable segments: (i)
RELATED Niagara US which has operations in the United
INFORMATION States and (ii) Niagara UK which has operations in
the United Kingdom. Niagara operates these
segments as separate strategic business units and
measures the segment performance based on
earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Niagara UK uses British pounds
sterling as its functional currency. Assets and
liabilities are translated at the exchange rate in
effect on September 30, 1999. Statement of operations
accounts are translated at the average rate of
exchange from May 22, 1999 to September 30, 1999.
The following table sets forth certain
performance and other information by reportable
segment. Performance information for Niagara UK
reflects the results from May 22, 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------
Niagara US Niagara UK
-------------------------------------------------------------
Three months ended September 30, 1999
-------------------------------------------------------------
<S> <C> <C>
Net Sales $ 44,060,507 $ 31,657,530
Segment Profit (EBITDA) $ 3,925,215 $ 1,969,176
Nine months ended September 30, 1999
-------------------------------------------------------------
Net Sales $ 140,809,884 $ 45,906,765
Segment Profit (EBITDA) $ 14,154,886 $ 2,228,165
Segment Assets $ 147,298,070 $ 73,715,382
-------------------------------------------------------------
Prior to the acquisition of the U.K. steel bar businesses,
the Company had one segment as all of its operations were in
the United States.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Niagara was organized in April of 1993. With the acquisition of
Niagara LaSalle in August 1995, Niagara entered the cold drawn steel bar
industry. With plants in Buffalo, New York and Chattanooga, Tennessee,
Niagara LaSalle had an established position in the northeast and southeast
regions of the United States cold drawn steel bar market.
In January 1996, Niagara LaSalle acquired Southwest Steel Company,
Inc. ("Southwest"). During 1996, Southwest completed construction of a new
plant in Midlothian, Texas, relocated its Tulsa, Oklahoma operations to
this new facility and was merged into Niagara LaSalle. With this
acquisition, Niagara gained an established position in the southwest region
of the United States because Southwest was the leading cold drawn steel bar
producer servicing that area.
In April 1997, Niagara LaSalle acquired LaSalle, which had plants in
Hammond and Griffith, Indiana. This acquisition gave Niagara LaSalle a
strong market position in the midwest region of the United States and
broadened Niagara LaSalle's product range by adding thermal treated and
chrome plated bars.
With the acquisition of LaSalle, Niagara became the largest
independent producer of cold drawn steel bars in the United States. The
geographic position of Niagara's plants in the United States creates
competitive advantages because of freight savings and the ability to supply
efficiently multiple locations of steel service centers.
During the fourth quarter of 1997, nearly all of Niagara's 6,050,000
Redeemable Common Stock Purchase Warrants ("Warrants") were exercised
resulting in approximately $33.2 million in gross proceeds to Niagara. This
significantly strengthened the Company's balance sheet at December 31, 1997
by enabling it to prepay, with approximately $21.8 million of such
proceeds, the Subordinated Notes in their entirety and by increasing total
stockholders' equity to approximately $52 million at year end. During the
first quarter of 1998, the Company used another $10 million of such
proceeds to reduce the balance due under a revolving credit facility.
On May 21, 1999, Niagara UK purchased the equipment, inventory and
certain other assets of the steel bar businesses of Glynwed Steels. These
businesses (consisting of Ductile Hot Mill, Dudley Port Rolling Mills, GB
Steel Bar, George Gadd & Company, Longmore Brothers, Macreadys, Midland
Engineering Steels and W Wesson) are engaged in hot rolling, cold finishing
and distribution and represent the largest independent steel bar concern in
the United Kingdom.
RESULTS OF OPERATIONS
During the second half of 1998 and through the second quarter of
1999, the Company's U.S. and U.K. operations experienced competitive
pressures due to a marked decline in prices and weakened demand for their
products. Management believes that such developments were due to
overcapacity in the industry and the continuation of low-priced imports,
primarily from Asia and Eastern European countries. Although demand for the
Company's products in the U.S. began to strengthen modestly during the
third quarter of 1999, prices remained weak for the quarter. In addition,
Niagara UK's export business was negatively impacted as a result of the
continued high value of the British Pound.
The results of operations for the quarter and nine months ended
September 30, 1999 include the results of Niagara UK from May 22, 1999.
Three Months ended September 30, 1999 compared with September 30, 1998
Net sales for the three months ended September 30, 1999 were
$75,718,037, representing an increase of $27,904,357, or 58.4%, over the
same period in 1998. This increase was attributable to the inclusion of
$31,657,530 of Niagara UK sales, which was offset in part by a decrease in
sales from U.S. operations due to weakened demand for products and a
decline in prices.
Cost of sales for the three months ended September 30, 1999 increased
by $24,821,875 to $65,105,971, representing an increase of 61.6% over the
same period in 1998. This increase was primarily attributable to the
inclusion of $26,495,386 of Niagara UK's cost of products sold, which was
offset in part by reduced raw material costs as a result of the lower sales
volume and, to a lesser extent, reduced operating costs in the U.S.
Gross margins for the three months ended September 30, 1999 decreased
by 1.7% over the same period in 1998, due to the decline in prices which
was partially offset by a decrease in raw material prices and the Company's
greater emphasis on higher margin value-added products.
Selling, general and administrative expenses for the three months
ended September 30, 1999 increased by $3,068,627 to $7,385,339, or 9.8% of
sales, compared to 9.0% of sales for the same period in 1998. Both the
increase in dollar amount and increase as a percentage of sales were due to
the inclusion of $3,774,751 of Niagara UK's expenses for the quarter, which
was offset in part by reduced selling, general, administration expenses
from the Company's U.S. operations due to their decrease in sales.
Net interest expense for the three months ended September 30, 1999
increased by $835,057 to $1,785,259, due primarily to increased levels of
borrowing resulting from the acquisition of the U.K. steel bar businesses.
Net income for the three months ended September 30, 1999 was $916,508,
a decrease of $527,522, or 36.5%, as compared to the net income for the
three months ended September 30, 1998. This decrease resulted primarily
from the marked decline in prices and weakened demand for the Company's
products. Net income for the three months ended September 30, 1999 included
income of $390,887 at Niagara UK for the period. Net income for the quarter
ended September 30, 1998 included $1,065,069 as a result of a curtailment
of certain post retirement welfare benefits and pension costs attributable
to U.S. operations.
Nine Months ended September 30, 1999 compared with September 30, 1998
Net sales for the nine months ended September 30, 1999 were
$186,716,649, representing an increase of $20,882,526, or 12.6%, over the
same period in 1998. This increase was attributable to the inclusion of
$45,906,765 of Niagara UK sales, which was offset in part by a decrease in
sales from US operations due to weakened demand for products and a decline
in prices.
Cost of sales for the nine months ended September 30, 1999 increased
by $20,001,384 to $160,874,036, representing an increase of 14.2% over the
same period in 1998. This increase was primarily attributable to the
inclusion of $39,139,324 of Niagara UK's cost of products sold, which was
offset in part by reduced raw material costs as a result of the lower sales
volume and, to a lesser extent, reduced operating costs in the U.S.
Gross margins for the nine months ended September 30, 1999 decreased
by 1.2% over the same period in 1998, due to the decline in prices, which
was partially offset by a decrease in raw material prices and the Company's
greater emphasis on higher margin value-added products.
Selling, general and administrative expenses for the nine months
ended September 30, 1999 increased by $4,289,790 to $16,885,651, or 9.0% of
sales, compared to 7.6% of sales for the same period in 1998. Both the
increase in dollar amount and increase as a percentage of sales were due to
the inclusion of $5,278,660 of Niagara UK's expenses for the period, which
was offset in part by reduced selling, general, administration expenses
from the Company's U.S. operations due to their decrease in sales.
Net interest expense for the nine months ended September 30, 1999
increased by $654,047 to $3,748,377. This increase was due primarily to
increased levels of borrowings from the acquisition of the U.K. steel bar
businesses.
Net income for the nine months ended September 30, 1999 was
$3,268,135, a decrease of $2,499,722, or 43.3%, as compared to the net
income for the nine months ended September 30, 1998. This decrease resulted
primarily from the marked decline in prices and weakened demand for the
Company's products during the period. Net income for the nine months ended
September 30, 1999 included income of $374,160 at Niagara UK for the period
May 22 through September 30, 1999. Net income for the nine months ended
September 30, 1998 included $1,065,069 as a result of a curtailment of
certain post retirement welfare benefits and pension costs attributable to
U.S. operations.
On a pro forma basis, and as disclosed in Note 4 to the financial
statements, net loss for the nine months ended September 30, 1999 would
have been $2,610,576 compared to net income of $8,266,150 for the same
period in 1998. This decrease is attributable to reduced sales of
approximately $67,700,000 and an inventory adjustment of approximately
$5,700,000 to estimated net realizable value at the U.K. steel bar
businesses during the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term liquidity requirement for day-to-day
operating expenses has been, and is expected to continue to be, funded by
operations, borrowings under its revolving credit facilities and advances
under its invoice discounting agreement. The Company's principal long-term
liquidity requirement has been, and is expected to continue to be, the
funding of capital expenditures to modernize, improve and expand its
facilities, machinery and equipment. Capital expenditures for the nine
months ended September 30, 1999 totaled $5,514,712 as compared to
$5,264,011 for the same period in 1998. This increase in expenditures was
largely due to the purchase of production equipment and certain leasehold
improvements.
Cash flows used in operations were $6,675,874 for the nine months
ended September 30, 1999, a decrease of $17,446,440 as compared to cash
flows provided by operations of $10,770,566 for the same period in 1998.
This decrease is attributable primarily to a decrease in net income of
$2,499,722 and an increase in accounts receivable of $39,046,793
($35,111,922 attributable to Niagara UK), which was offset in part by an
increase in accounts payable and accrued expenses of $29,961,525
($25,352,240 attributable to Niagara UK), largely resulting from the
acquisition of the U.K. steel bar businesses. At September 30, 1999, the
Company had $978,044 in cash and cash equivalents. Such funds are used for
working capital and other corporate purposes.
On April 18, 1997 and in connection with the acquisition of LaSalle,
Niagara US entered into a revolving credit and term loan agreement (the
"Credit Agreement") with Manufacturers and Traders Trust Company ("M&T"),
CIBC Inc., National City Bank, National Bank of Canada and the Prudential
Insurance Company of America, and Niagara LaSalle terminated its previously
existing credit agreements with M&T. The Credit Agreement provides for a
$50,000,000 three-year revolving credit facility and a $40,000,000
eight-year term loan. The obligations of Niagara US under the Credit
Agreement are guaranteed by Niagara and Niagara UK and secured by
substantially all of the assets and a pledge of all outstanding capital
stock of Niagara US.
Principal of the term loan under the Credit Agreement amortizes in
monthly installments that commenced on November 1, 1997 and end on April 1,
2004. The principal repayment installments on the term loan escalate
throughout its term. Interest on the term loan is payable in monthly
installments either at the LIBOR rate (for a period specified by Niagara US
from time to time) plus 210 basis points, or M&T's prime rate plus 50 basis
points. Revolving credit loans made pursuant to the Credit Agreement are
based on a percentage of eligible accounts receivable and inventory and
will mature on April 17, 2000. Interest on such loans is payable in monthly
installments and is either 175 basis points above the LIBOR rate (for a
period specified by Niagara LaSalle from time to time) or M&T's prime rate
plus 25 basis points.
The Credit Agreement carries restrictions on, among other things,
indebtedness, liens, capital expenditures, dividends, asset dispositions
and changes in control of Niagara US, and requires minimum levels of net
worth through maturity. Also included in this agreement 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. Niagara US was in
compliance with all of these requirements as of September 30, 1999.
On October 31, 1997, Niagara exercised its right to redeem all of its
then outstanding and unexercised Warrants. Each outstanding Warrant
entitled the holder to purchase from Niagara, prior to the exercise
deadline, one share of Niagara Common Stock at an exercise price of $5.50.
Of the 6,050,000 Warrants outstanding prior to the call for redemption,
6,042,990 were exercised resulting in $33,236,445 in gross proceeds to
Niagara and the issuance of 6,042,990 shares of Niagara Common Stock.
During the fourth quarter of 1997, the Company used approximately $21.8
million of such proceeds to prepay in their entirety, at 107% plus accrued
interest, the Subordinated Notes. During the first quarter of 1998, the
Company used another $10 million of such proceeds to reduce the balance due
under a revolving credit facility.
On March 20, 1998, Niagara's Board of Directors authorized the
repurchase, from time to time, of up to one million shares of Niagara
Common Stock in open market and privately negotiated transactions. On
October 6, 1999, Niagara's Board authorized the repurchase of an additional
one million Niagara shares. Such repurchases are subject to market and
other conditions and financed with internally generated funds, borrowings
under the Company's revolving credit facilities or advances under the
Company's invoice discounting agreement. Shares of Niagara Common Stock
repurchased are held as treasury stock and are available for use in the
Company's benefit plans and for general corporate purposes. As of September
30, 1999, Niagara had repurchased 947,709 shares of its Common Stock at a
cost of $5,244,102, of which 461,829 shares were repurchased at a cost of
$2,344,137 during the nine months ended September 30, 1999.
On May 21, 1999 and in connection with the acquisition of the steel
bar businesses from Glynwed Steels, Niagara UK entered into a bank
facilities agreement (the "Facilities Agreement") with National
Westminister Bank Plc ("National Westminister") providing for a (pound)10
million (approximately $16 million) seven-year term loan and a (pound)9.8
million (approximately $15.7 million) three-year revolving credit facility.
The obligations of Niagara UK under the Facilities Agreement are secured by
standby letters of credit issued by M&T to National Westminster
(respectively, the "Term Letter of Credit" and the "Revolving Letter of
Credit," and, together, the "Letters of Credit") and substantially all of
the assets of Niagara UK (for the benefit of M&T). Niagara UK's agreement
to reimburse M&T for drawdowns under the Letters of Credit is guaranteed by
Niagara and Niagara US, which guarantees are secured by substantially all
of the assets of Niagara US on a second priority basis. As consideration
for the issuance of the Letters of Credit, Niagara UK paid M&T a total of
(pound)178,400 (approximately $285,440) at the time of issuance and agreed
to pay further annual fees (in monthly installments) of 3% and 2.75% in
respect of the Revolving and Term Letters of Credit, respectively.
Principal of the term loan under the Facilities Agreement amortizes
in monthly installments commencing on May 31, 2000 and ending on April 30,
2006. The principal repayment installments on the term loan escalate
throughout its term. Revolving credit loans made pursuant to the Facilities
Agreement are based upon a percentage of eligible inventory and will mature
on May 21, 2002. Interest of the term and revolving credit loans under the
Facilities Agreement accrue at the LIBOR rate (for periods specified by
Niagara UK from time to time) plus 15 basis points and is payable at the
conclusion of such interest periods.
On August 23, 1999, Niagara UK entered into a three-year Invoice
Discounting Agreement (the "Discount Agreement") with Lombard Natwest
Discounting Limited ("Lombard") providing for up to (pound)20 million
(approximately $32.2 million) of advances to Niagara UK based upon a
formula tied to the receivables purchased by Lombard. Interest on such
advances accrues at the National Westminister base rate plus 2.25%. The
obligations of Niagara UK under the Discount Agreement are guaranteed by
Niagara and secured by substantially all of the assets of Niagara UK. In
connection with the execution of the Discount Agreement, the Revolving
Letter of Credit and the revolving credit facility under the Facilities
Agreement were reduced to (pound)4.9 million (approximately $7.9 million).
The Facilities and Discount Agreements carry restrictions on, among
other things, security interests, borrowed money, asset dispositions,
dividends, transactions with affiliates, capital expenditures, changes in
control and mergers and acquisitions. Also included in these agreements are
requirements regarding tangible net worth, the ratio of profit before
interest and taxes to interest and the ratio of current assets to current
liabilities. Niagara UK was in compliance with all of these requirements as
of September 30, 1999.
The purchase of the U.K. steel bar businesses was also financed
pursuant to (i) a (pound)3.75 million (approximately $6 million) equity
investment (the "Equity Investment") by Niagara in Niagara UK, (ii) a
(pound)3.75 million (approximately $6 million ) subordinated loan from
Niagara to Niagara UK which accrues interest at 7.5% per annum (the
"Subordinated Loan") and (iii) a (pound)2.5 million (approximately $4
million) non-interest bearing short-term loan from Niagara to Niagara UK
(the "Short-Term Loan"). The Equity Investment, the Subordinated Loan and
the Short-Term Loan were financed by borrowings under the Credit Agreement.
The Short-Term Loan was repaid during the third quarter of 1999.
In connection with the execution of the Facilities and Discount
Agreements, Niagara and Niagara UK entered into intercreditor agreements
which, among other things (i) restricts the payment of dividends in respect
of the Niagara UK shares, (ii) prohibits the repayment of the Subordinated
Loan until after the discharge of all of Niagara UK's liabilities under the
Facilities and Discount Agreements and (iii) permits the repayment of the
Short-Term Loan upon demand unless payments of principal or interest under
the Facilities and Discount Agreements are owing, certain financial
covenants in these agreements have not been met or an event of default
thereunder has occurred and is continuing.
At September 30, 1999, the Company had borrowed or been advanced
$41,552,910 under its revolving credit facilities and the Discount
Agreement and had approximately $22,500,000 in available credit thereunder,
and the outstanding balance of its term loans was $49,151,262. Working
capital of the Company at September 30, 1999 was $50,736,749 as compared to
$20,414,031 on December 31, 1998.
YEAR 2000 READINESS DISCLOSURE
The Company could be adversely affected if the computer and other
systems, machinery, equipment and applications which it or its suppliers,
customers or service providers use does not properly accommodate the "Year
2000" dating changes necessary to permit the recording of year dates for
2000 and later years. Management does not anticipate any material
disruption in the Company's operations as a result of this issue. However,
because of the reliance on and involvement of a great many third parties in
this regard, disruptions in the Company's operations could occur which may
have a material effect on the Company's results of operations.
The Company has inquired into the Year 2000 readiness status of its
suppliers, customers and essential service providers and, based on their
responses, contingency plans have been or are being formulated to prepare
for any Year 2000 related issues they identify.
Based on current assessments, management does not expect that total
costs associated with the Company's Year 2000 program will be material to
the Company's results of operations. The Company has budgeted an additional
$50,000 on Year 2000 remediation through 1999.
Information Technology
In 1998, the Company upgraded its internal computer systems in four
of its five plants in the U.S. at a cost of approximately $1,000,000. This
upgrade allowed Niagara US to centralize all of its internal business
functions. Based on assurances from the manufacturers of the upgraded
system's hardware and software and independent tests performed by the
Company's personnel, management does not expect that this system will
suffer any interruption or performance degradation as a result of the Year
2000.
The Company's U.K. operations have undertaken an assessment of their
internal computer systems. Replacements and upgrades required as a result
of the Year 2000 have been substantially completed. Based on suppliers'
warranties and standardized confirmation testing in the U.K., management
does not anticipate any significant Year 2000 compliance failures or
performance degradations.
Operating Equipment and Systems
The Company's personnel, together with outside engineering firms,
have assessed the machinery, equipment, and other non-information
technology systems of its U.S. operations for Year 2000 readiness.
Management is taking all appropriate steps to correct the problems
identified by this assessment or to minimize the impact of any
interruptions or performance degradations caused by the Year 2000.
The Company's U.K. operations have reviewed their non-information
technology systems for Year 2000 compliance. Businesses and health and
safety concerns have been identified and testing has been conducted.
Required replacements and upgrades have been substantially completed.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risks include fluctuations in interest
rates, variability in interest rate spreads (i.e., prime to LIBOR spreads)
and exchange rate variability. The Company does not trade in derivative
financial instruments. Substantially all of the Company's non-trade
indebtedness relates to loans made pursuant to the Credit and Facilities
Agreements and advances under the Discount Agreement. Interest on the term
loan under the Credit Agreement accrues at either the LIBOR rate (for a
period specified by Niagara US from time to time) plus 210 basis points, or
M&T's prime rate plus 50 basis points. Interest on revolving credit loans
made pursuant to such agreement accrues at either 175 basis points above
the LIBOR rate (for a period specified by Niagara US from time to time) or
M&T's prime rate plus 25 basis points. Interest on the term and revolving
credit loans under the Facilities Agreement accrues at the LIBOR rate (for
a period specified by Niagara UK from time to time) plus 15 basis points.
Interest on advances under the Discount Agreement accrues at National
Westminster's base rate plus 2.25%. Management attempts to reduce market
risks associated with the fluctuations in interest rates through the
selection of LIBOR periods under the Credit and Facilities Agreements and
advance amounts under the Discount Agreement.
The Company sells its products primarily to customers in North America
and Europe. Niagara UK's revenues are generally collected in the local
currency of its customers. To reduce the Company's exposure to fluctuations
in exchange rates, Niagara UK purchases foreign exchange contracts in
amounts and with expiration dates in line with customer orders. Revenues
from sales by Niagara US are collected exclusively in U.S. dollars.
CAUTIONARY STATEMENT FOR PURPOSES OF THE" SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES REFORM ACT OF 1995
The Private Securities Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. The factors discussed under
"CAUTIONARY STATEMENTS FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995" in Niagara's Report on
Form 10-K for the fiscal year ended December 31, 1998, among others, could
cause actual results to differ materially from those contained in
forward-looking statements made in this Form 10-Q, including, without
limitation, in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS," in future filings by Niagara with the
Securities and Exchange Commission, in the Company's press releases and in
oral statements made by authorized officers of the Company. The words
"may," "will," "should," "could," "expects," "plans," "anticipates,"
"intends," "believes," "estimates," "predicts," "projects," "potential," or
"continue" and other similar expressions are intended to identify such
forward-looking statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Under applicable laws, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
Niagara US and Niagara UK may be responsible for costs required to remove
or remediate previously disposed wastes or hazardous substances at
locations owned or operated by them or at locations owned or operated by
third parties where they, or a company from which they acquired assets,
arranged for the disposal of such materials. Claims for such costs have
been made against LaSalle with respect to five such third-party sites.
Management believes that, in four cases, the volumes of the waste allegedly
attributable to LaSalle and the share of costs for which it may be liable
are de minimis. At three of these sites, LaSalle has entered into de
minimis settlement agreements resolving the pending claims of liability,
one of which awaits administrative and judicial approval. In the fifth
case, LaSalle has entered into an agreement with a group of other companies
alleged to be responsible for remediation of the site in an effort to share
proportionately the cost of remediation. LaSalle and this group of
companies have also signed an Administrative Order on Consent with the
United States Environmental Protection Agency and agreed to perform a
limited remediation at the site. LaSalle has received an insurance
settlement in an amount that largely covers the financial contributions it
has been required to make for these sites through September 30, 1999.
Because liability under CERCLA and analogous state laws is generally joint
and several, and because further remediation work may be required at these
sites, LaSalle may be required to contribute additional funds. However,
based on its volumetric share of wastes disposed and the participation of
other potentially liable parties, management does not believe that
LaSalle's share of the additional costs will have a material adverse effect
on the Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
+3.1 Registrant's Restated Certificate of Incorporation, as amended on
May 16, 1996.
*3.2 Registrant's By-laws.
*4.1 Form of Common Stock Certificate.
!!!!!4.2 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 (the "Credit Agreement").
+++4.3 First Amendment to the Credit Agreement, dated as of September 4,
1997.
+++4.4 Second Amendment to the Credit Agreement, effective as of December
31, 1997.
!!!4.5 Third Amendment to the Credit Agreement, effective May 15, 1998.
**4.6 Fourth Amendment to the Credit Agreement, effective as of December
1, 1998.
****4.7 Fifth Amendment to the Credit Agreement, effective as of May 21,
1999.
!!!!!4.8 Stockholders Agreement, dated as of April 18, 1997, among the
Registrant, 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.
**4.9 Amended and Restated Promissory Note, dated December 15, 1998,
made by Gilbert D. Scharf in favor of Niagara Corporation.
****4.10 Bank Facilities Agreement, dated May 21, 1999 between National
Westminster Bank Plc and Niagara LaSalle (UK) Limited.
****4.11 Intercreditor Agreement, dated May 21, 1999, between National
Westminster Bank Plc, Niagara Corporation and Niagara LaSalle (UK)
Limited.
4.12 Invoice Discounting Agreement, dated August 23, 1999, between
Niagara LaSalle (UK) Limited and Lombard Natwest Discounting
Limited.
4.13 Intercreditor Agreement, dated August 23, 1999, between Lombard
Natwest Discounting Limited, Niagara Corporation and Niagara
LaSalle (UK) Limited.
4.14 Deed of Priority, dated August 23, 1999, between Lombard
Natwest Discounting Limited, National Westminster Bank Plc,
Manufacturers and Traders Trust Company, Niagara LaSalle (UK)
Limited and Niagara Corporation.
***10.1 Employment Agreement, dated as of January 1, 1999, by and
among Niagara Corporation, Niagara LaSalle Corporation and Michael
Scharf.
** 10.2 Employment Agreement, dated August 16, 1995, between International
Metals Acquisition Corporation, Niagara Cold Drawn Corp. and
Frank Archer.
** 10.3 Employment Agreement, dated August 16, 1995, between International
Metals Acquisition Corporation, Niagara Cold Drawn Corp. and
Raymond Rozanski.
!10.4 Amended and Restated Promissory Note made by Southwest Steel
Company, Inc. in favor of the Cohen Family Revocable
Trust, u/t/a dated June 15, 1988, in the principal amount of
$898,000, dated January 31, 1996.
!10.5 Guaranty, made by the Registrant in favor of the Cohen Family
Revocable Trust, u/t/a dated June 15, 1988, dated January
31, 1996.
!!10.6 International Metals Acquisition Corporation 1995 Stock Option
Plan.
!!!!10.7 First Amendment to the International Metals Acquisition Corporation
1995 Stock Option Plan, dated October 5, 1996.
++10.8 Second Amendment to the Niagara Corporation 1995 Stock Option Plan,
dated June 8, 1998.
++10.9 Niagara Corporation Employee Stock Purchase Plan.
** 10.10 First Amendment to Lease, dated May 4, 1998, between Niagara
LaSalle Corporation and North American Royalties, Inc.
*****10.11 Sale of Business Agreement, dated April 16, 1999, between Glynwed
Steels Limited, Glynwed International plc, Niagara LaSalle (UK)
Limited and Niagara Corporation
*****10.12 Property Agreement, dated April 16, 1999, between Glynwed Property
Management Limited, Glynwed Properties Limited, Niagara LaSalle
(UK) Limited, Niagara Corporation and Glynwed International plc.
*****10.13 Agreement For Lease of Unit 6-8 Eagle Industrial Estate, dated
April 16, 1999, between Glynwed Property Management Limited,
Glynwed Properties Limited, Niagara LaSalle (UK) Limited and
Niagara Corporation.
27 Financial Data Schedule.
- --------------------------
+ Incorporated by reference to exhibit 3.1 filed with the
Registrant's Report on Form 10-Q for the quarter ended June 30,
1996.
++ Incorporated by reference to Annexes to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders held on July 7,
1998.
+++ Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1997.
* Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-64682.
** Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1998.
*** Incorporated by reference to exhibit 10.1 filed with the
Registrant's Report on Form 10-K/A for the fiscal year ended
December 31, 1998.
**** Incorporated by reference to exhibits filed with the Registrant's
Report on Form 8-K, dated June 4, 1999.
***** Incorporated by reference to exhibits filed with the Registrant's
Report on Form 8-K, dated April 27, 1999.
! Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the year ended December 31, 1995.
!! Incorporated by reference to Annex A to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders held on May 16,
1996.
!!! Incorporated by reference to exhibit 4.8 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1998.
!!!! Incorporated by reference to exhibit 10.10 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1996.
!!!!! Incorporated by reference to exhibits filed with the Registrant's
Report on Form 8-K, dated May 2, 1997.
(b) Reports on Form 8-K.
On August 4, 1999, the Registrant filed an amendment to its
Report on Form 8-K, dated June 4, 1999, reporting under Item 7 the
financial statements and pro forma financial information required in
connection with the acquisition of the steel bar businesses of Glynwed
Steels.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1999 NIAGARA CORPORATION
-------------------
(Registrant)
/s/ Michael Scharf
----------------------------------------------
Michael Scharf, President
Date: November 12, 1999 /s/ Raymond Rozanski
----------------------------------------------
Raymond Rozanski, Vice President and Treasurer
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
4.12 Invoice Discounting Agreement, dated August
23, 1999, between Niagara LaSalle (UK) Limited and
Lombard Natwest Discounting Limited.
4.13 Intercreditor Agreement, dated August 23, 1999,
between Lombard Natwest Discounting Limited,
Niagara Corporation and Niagara LaSalle (UK) Limited.
4.14 Deed of Priority, dated August 23, 1999, between
Lombard Natwest Discounting Limited, National
Westminster Bank Plc, Manufacturers and Traders
Trust Company, Niagara LaSalle (UK) Limited and
Niagara Corporation.
27 Financial Data Schedule
</TABLE>
EXHIBIT 4.12
DATED 23 AUGUST 1999
NIAGARA LASALLE (UK) LIMITED (1)
- and -
LOMBARD NATWEST DISCOUNTING LIMITED (2)
------------------------------
INVOICE DISCOUNTING AGREEMENT
relating to
a committed invoice discounting facility of (pound)20,000,000
------------------------------
Ref : PAJ/RHH
Eversheds
115 Colmore Row
Birmingham B3 3AL
DOC ID: BIRCORP 177826.9
TABLE OF CONTENTS
ClauseHEADING Page Number
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
1.2 Headings
1.3 Interpretation
2. INVOICE DISCOUNTING FACILITY
2.1 Invoice Discounting Facility
2.2 Additional Clients
3. PURPOSE
3.1 Purpose of the Invoice Discounting Facility
3.2 Undertaking by the Clients
3.3 No liability
4. CONDITIONS PRECEDENT
4.1 Conditions precedent
4.2 Confirmation of satisfaction
5. AVAILABILITY OF INVOICE DISCOUNTING FACILITY
5.1 Clients' offer to sell
5.2 Purchase
5.3 Conditions to Payment
5.4 Facility Limit
5.5 Calculation of Available Amount
5.6 Variation of Global Deduction Percentage
5.7 Determination of Substantial Debt Deduction
5.8 Assignment of Purchased Receivables
5.9 Goods
5.10 Collection
6. REMUNERATION
6.1 Determination of the Funding Amount
6.2 Discounting Charge
6.3 Calculation and Payment of Remuneration
6.4 Margin ratchet
6.5 Default Interest
6.6 Expenses
6.7 Records
6.8 LND's Determination
7. TERMINATION, REPURCHASE AND CANCELLATION
7.1 Repurchase
7.2 Voluntary repurchase of Receivables
7.3 Cancellation of Invoice Discounting Facility
7.4 Repurchase Fees
8. CHANGES IN CIRCUMSTANCES
8.1 Illegality
8.2 Certificates
9 PAYMENTS
9.1 Place and time
9.2 Funds
9.3 Business Days
9.4 Currency
9.5 Accounts as evidence
9.6 Partial payments
9.7 Set-off and counterclaim
9.8 Grossing-up
10. SECURITY
10.1 Security Documents
11. REPRESENTATIONS AND WARRANTIES
11.1 Representations and warranties
11.2 Repetition
11.3 LND warranty
12. UNDERTAKINGS
12.1 Information undertakings
12.2 Positive undertakings
12.3 Negative undertakings
12.4 Financial undertakings
13. DEFAULT
13.1 Default
13.2 Acceleration, etc.
14. SET-OFF
15. FEES AND EXPENSES
15.1 Expenses
15.2 Administration fees
15.3 Non Utilisation Fee
15.4 Documentary Taxes indemnity
15.5 VAT
15.6 Indemnity payments
15.7 Debiting authority
16. WAIVERS: REMEDIES CUMULATIVE
17. MISCELLANEOUS
17.1 Severance
17.2 Counterparts
18. NOTICES
18.1 Method
18.2 Delivery
18.3 Deemed receipt
19. ASSIGNMENTS AND TRANSFERS
19.1 Benefit of Agreement
19.2 Assignments and transfers by Clients
19.3 Assignments by LND
19.4 Transfers by LND
19.5 Disclosure of information
20. INDEMNITIES
20.1 Currency indemnity
20.2 General
21. LAW AND JURISDICTION
21.1 Law
21.2 Jurisdiction
21.3 Agent for service
22. EUROPEAN AND MONETARY UNION
22.1 Monetary Union
22.2 Necessary Amendments
23. ANNOUNCEMENTS
SCHEDULE 1 CONDITIONS PRECEDENT
SCHEDULE 2 FORM OF ACCESSION AGREEMENT
SCHEDULE 3 OFFER OF RECEIVABLES
SCHEDULE 4 SPECIFIC CONDITIONS
SCHEDULE 5 COMPLIANCE CERTIFICATE
SCHEDULE 6 SITES
SCHEDULE 7 LOCKBOX LETTER
THIS AGREEMENT is made on 23 August 1999
BY
(1) NIAGARA LASALLE (UK) LIMITED, a company incorporated in England and
Wales with registered number 3725308 and whose registered office is situate
at Victoria Steel Works, Bull Lane, Moxley, Wednesbury, West Midlands, WS10
8RS (the "INITIAL Client"); and
(2) LOMBARD NATWEST DISCOUNTING LIMITED a company incorporated in England
and Wales with registered number 943038 and whose registered office is at
Smith House, Elmwood Avenue, Feltham, Middlesex TW13 7WD ("LND").
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 DEFINITIONS
-----------
In this Agreement:
"Accession Agreement" means an agreement substantially
in the form set out in Schedule 2;
"Accounts" means:
(a) in relation to the Initial
Client, its audited consolidated
accounts (including all additional
information included in, and notes
to, the accounts) together with the
relevant directors' report and
auditors' report; and
(b) in relation to any other
Group Company from time to
time, its audited accounts
(including all additional
information included in, and
notes to, the accounts) together
with the relevant directors' report
and auditors' report;
"Acquisition" means the acquisition by the
Initial Client of certain business
and assets of Glynwed Steels
Limited pursuant to the terms of the
Acquisition Agreement;
"Acquisition Agreement" means the sale and purchase
agreement (together with its
schedules) dated 16 April 1999
relating to the sale and
purchase of the Target Assets and
made between (1) Glynwed Steels
Limited, (2) Glynwed International
Plc, (3) the Initial Client and (4)
the Holding Company;
"Acquisition Documents" means the Acquisition Agreement
together with the related
documents in respect of the
Existing Properties but, for
the avoidance of doubt, shall not
include the Disclosure Letter;
"Act" means the Companies Act 1985
(as amended or substituted by
the Companies Act 1989);
"Adjusted Tangible Net Worth" means (on a consolidated basis) the
aggregate amount of the share capital
of the Client paid up or credited as
paid up (including, but not limited
to, amounts standing to the credit
of any share premium account or
capital redemption reserve plus or
minus the aggregate amount standing
in the Client's capital and revenue
reserves (on a consolidated basis)):-
(a) adjusted to take account of any
variation in the amount of such paid
up share capital, share premium
account or capital redemption reserve
since the date to which such accounts
have been made up;
(b) excluding any capital accounts
or reserves derived from any writing
up of the book value of any assets of
the Client above historic costs less
accumulated depreciation at any time
after the date of Completion;
(c) excluding any provisions for
deferred Taxation or deferred
charges;
(d) making such adjustments as may
in the opinion of the Auditors be
appropriate to reflect any variations
which have occurred since the date
of the Accounts and to reflect any
changes in GAAP since such date;
(e) excluding exchange gains and
losses arising on consolidation
accounted for through reserves in
accordance with SSAP20;
(f) deducting any amounts
attributable to any intangible asset
(including but not limited to
goodwill arising out of the
Acquisition, trade marks or similar
property) included as an asset in
the Client's consolidated balance
sheet;
(g) excluding any profit or loss
arising on the disposal of fixed
assets;
(h) excluding any minority interests
arising on consolidation;
(i) excluding Extraordinary Items
since the date of Completion; and
(j) adding back the amount of the
Subordinated Loan and any accrued but
unpaid interest arising thereon
to the extent that such interest has
been charged to the profit and loss
account of the Client;
(k) excluding adequate provision for
pension contributions made by the
Client in respect of Mr A Bagshawe's
pension and in each case the relevant
calculations, addition, deduction,
exclusion or adjustment shall be
made by reference to the then
latest Accounts;
"Advice Transmission" means in relation to a
Purchased Receivable, a modem
transmission from the Client to LND
in a form acceptable to LND;
"Affiliate" means, in relation to any person,
all associated companies,
directors and relatives and companies
in which such persons are
interested;
"Approved Currencies" means each of:
(a) Sterling; and
(b) any other freely tradeable
and convertible currency
approved in writing by LND;
"Auditors" means, in relation to the
Client and each Group Company, BDO
Stoy Hayward or any other firm of
chartered accountants of
internationally recognised standing
that has been appointed as auditors
of such Group Company;
"Available Amount" means the maximum aggregate
amount available to be drawn
down by the Clients under
Clause 5.5 and for the time being
undrawn;
"Available Headroom" means the aggregate amount, at
any time, of:-
(i) the Available Amount; and
(ii) the Revolving Facility
Available Amount (as such
term is defined in the NWB
Agreement); and
(iii) any cash deposits held
by the Client at LND; and
(iv) the loans to be made by
the Holding Company to the Initial
Client as referred to in
Clause 12.2.20;
"Base Rate" means NWB's base rate from
time to time;
"Borrowed Money" means, in relation to the
Initial Client (or the Holding
Company or any of its Subsidiaries,
as the context may require), any
obligation for the payment
or repayment of money (whether as
principal or as surety and whether
present or future, actual or
contingent) incurred in respect of
the following (but without double
counting):
(a) the principal amount of money
borrowed or raised,
(b) any bond, note, loan stock,
debenture or similar instrument,
(c) acceptance credit, documentary
credit, bill discounting, factoring
or note or purchase facilities,
(d) deferred payments for assets
or services acquired (other than on
normal trade credit terms) where
payment is due more than 4 months
after the date of the acquisition of
the goods or services in question,
(e) rental payments under leases
(whether in respect of land,
machinery, equipment or otherwise)
which are defined as Finance Leases
but excluding rental payments
under a lease of property which would
not be treated as a Finance Lease;
(f) counter indemnity obligations in
respect of guarantees, bonds, standby
letters of credit, or other
instruments issued in connection
with the performance of contracts by
banks or other financial
institutions,
(g) payments under any hire, hire
purchase, conditional, sale or
instalment sale and purchase
agreements but, for the avoidance of
doubt, excluding any obligations
lease;
(h) guarantees or other assurances
against financial loss in respect of
indebtedness of any person falling
within any of (a) to (g) above;
(i) any interest swap or currency
swap agreement or any other hedging
or derivatives instrument or
agreement; and
(j) any other transaction having
substantially the same commercial
effect as any of the above;
"Business Day" means a day (other than a Saturday
or Sunday) on which banks and foreign
exchange markets are open for
business in: (a) London; and (b)
in relation to a transaction
involving an Approved Currency, in
the principal financial centre of
that Approved Currency;
"Capital Expenditure" means expenditure incurred (or as
the case may be) to be incurred by
the Client in the acquisition of
buildings, plant, machinery or other
fixed assets, businesses, shares in
new subsidiaries and/or associated
companies and any other investment or
expenditure treated as capital
expenditure in accordance with GAAP;
"Certified Copy" means, in relation to a document, a
copy of that document bearing the
endorsement "Certified a true,
complete and accurate copy of the
original, which has not been amended
otherwise than by a document, a
Certified Copy of which is attached
hereto" which has been signed and
dated by a duly authorised officer of
the relevant company and which
complies with that endorsement;
"Charging Group Companies" means the Initial Client and
each of its Subsidiaries which has
granted, or is by the terms
of this Agreement to grant, a
Guarantee and Debenture and "Charging
Group Company" shall be construed
accordingly;
"Clients" means the Initial Client and any
other Charging Group Company
that becomes a party to this
Agreement pursuant to Clause
2.2; and "Client" shall be
construed accordingly;
<TABLE>
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"Commencement Date" means the date upon which LND notified the Initial
Client that all of the conditions set out in Schedule
1 have been satisfied or waived;
"Commission Charge" means the commission charge to be paid by the Initial
Client under Clause 15.3;
"Completion" means the completion of the sale and purchase of the
Target Assets pursuant to the Acquisition Agreement;
"Compliance Certificate" has the meaning given to that term
in Clause 12.1.6;
"Cost of Funds" means the cost to LND of obtaining Approved Currencies
(other than Sterling) from such sources as it may select;
"Current Assets" means the aggregate value of the Client's assets which are
treated as current assets in accordance with GAAP;
"Current Liabilities" means the aggregate value of the Client's liabilities which are
treated as current liabilities in accordance with GAAP;
"Customer" means the debtor in relation to a Purchased Receivable;
"Debenture" means a debenture in the agreed form executed or to be
executed by the Initial Client or any Group
Company in favour of LND;
"Deed of Priority" means the deed of priority dated 23 August 1999 made between
(1) LND, (2) National Westminster Bank Plc (as security
agent for MTT), (3) MTT, (4) National Westminster Bank Plc
(as lender under the NWB Agreement) (5) the Initial Client
and (6) the Holding Company relating to the regulation of
security granted by the Initial Client to both LND and NWB
(as security agent for MTT);
"Default" means any event specified as such in Clause 13.1;
"Default Notice" has the meaning given to that term in Clause 13.2;
"Delivered means, in relation to Goods, their removal from the Client's
premises and proof of shipment or delivery, as the case may be,
having been received by the Client and, in relation to Services,
fully performed "Deliver" and "Delivery" are to be similarly
construed;
"Disclosure Letter" has the meaning given to that term in the Acquisition Agreement;
"Discounting Charge" means the discount charge to be paid by the Initial Client
under Clause 6.2;
"Discounting Documents" means this Agreement and the Security Documents or any of
them;
"Discounting Rate" means the aggregate of:
(a) the Base Rate (or, if applicable, the Cost of
Funds); and
(b) the Margin;
"Disposal" means a sale, transfer or other disposal (including by way of
lease or loan) by a person of all or part of its assets, whether
by one transaction or a series of transactions and whether at
the same time or over a period of time;
"Dormant Subsidiary" means, on any given date, a Group Company, (a) which has been
dormant within the meaning of section 250(3) of the Act for
a period of 12 months ending on that date and (b) the value of
whose assets does not exceed in aggregate(pound)5,000;
"Electronic Transmission" means telegraphic transfers and any method pursuant to which
payments can be made through the inter bank payments system;
"Environmental Law" means all or any statutes, directives, regulations,
codes of practice or conduct, circulars and guidance notes
and rules of law relating to or concerning:-
(a) pollution or protection of the environment or the health
of humans, animals or plants; or
(b) workers' health and safety; or
(c) the manufacture, processing, distribution, use, treatment,
storage, disposal, emission, release or discharge into the
environment of any hazardous substance;
"Exceptional Items" has the meaning given to that term in FRS3, but excluding those
items listed in paragraph 20 of FRS3;
"Existing Properties" means the properties the subject of Leases;
"Extraordinary Items" has the meaning given to that term in FRS3, but including those
items listed in paragraph 20 of FRS3 and, for the avoidance of
doubt, shall include the reorganisation costs charged to profit
relating to the closure of Ductile Hot Mill and the partial
closure of Dudley Port Rolling Mill, limited to a maximum amount
of(pound)1,500,000 (one million five hundred thousand pounds
Sterling);
"Facility Limit" means (pound)20,000,000 (twenty million pounds Sterling);
"Finance Lease" means any lease, hire agreement, credit sale agreement, hire
purchase agreement, conditional sale agreement or
instalment sale and purchase agreement which should be
treated in accordance with SSAP 21 (or any successor to
SSAP 21) as a finance lease or in the same way as a
finance lease;
"Financial Year" in relation to a company, has the meaning given to that
expression in section 223 of the Act;
"FRS" together with a number means the financial reporting standard
issued by the Accounting Standards Board for application in England and
Wales and identified by reference to that number;
"Funding Amount" means the amount calculated under Clause 6.1;
"GAAP" means, in relation to a company, accounting principles,
concepts, bases and policies generally adopted and accepted in the
jurisdiction of its incorporation;
"Global Deduction Percentage" means 25% (twenty five per cent) in relation
to Receivables purchased by LND (or such other percentage calculated in
accordance with Clause 5.6);
"Goods" means goods provided by a Client in relation to which a
Purchased Receivable is created;
"Group" means the Initial Client and each of its Subsidiaries and "Group
Company" means any one of them;
"Guarantee" means a guarantee in the agreed form executed or to be
executed by the Holding Company in favour of LND;
"Holding Company" means Niagara Corporation, a Delaware corporation having
its principal office at 667 Madison Avenue, New York, New York 10021,
United States of America;
"Intercreditor Agreement" means the intercreditor agreement to be made between (1) LND,
(2) the Holding Company and (3) the Initial Client relating to the
Subordinated Loan made available by the Holding Company to the
Initial Client;
"Interest" means in respect of the Client in relation to a period of time,
the aggregate of:-
(a) interest from time to time charged by NWB under and in respect of
the NWB Agreement and the Discounting Charge charged by LND from time
to time under this Agreement or any other facility made available by
LND or NWB from time to time to the Client;
(b) interest, commissions, periodic fees and other financing
charges on any other indebtedness payable (on an accrued basis)
by the Client during that period including the interest element
of hire purchase and Finance Leases but excluding any amounts
amortised on finance costs arising from completion of the
Acquisition;
(c) the consideration given by the Client during that period
whether by way of discount or otherwise in connection with
finance for the Holding Company or any of its Subsidiaries (other
than the Client) by way of acceptance credit bill discounting
debt factoring or other like arrangement;
(d) excluding any interest received or receivable;
(e) less any sums receivable or plus any sum paid or due, owing
or incurred by the Client under any interest rate protection
agreement of whatever description during such period; and
(f) less any interest accrued (to the extent not paid) in respect
of the Subordinated Loan; (but so that there will be no double
counting of any of the above items);
"Invoice Discounting means the invoice discounting facility of (pound)20,000,000
Facility" (twenty million pounds Sterling) referred to in Clause 2.1;
"Leases" means the various leasehold interests acquired by the
Initial Client pursuant to :
(a) a property agreement dated 16 April 1999 and made between (1)
Glynwed Property Management Limited, (2) Glynwed Properties
Limited, (3) the Initial Client, (4) the Holding Company and (5)
Glynwed International plc; and
(b) an agreement for lease dated 16 April 1999 and made between
(1) Glynwed Property Management Limited, (2) Glynwed Properties
Limited, (3) the Initial Client and (4) the Holding Company;
"Listing" means the listing of any shares in the share capital of the
Initial Client or any Group Company on any recognised investment
exchange (as defined by section 207 of the Financial
Services Act 1986);
"Management Accounts" has the meaning given to that term in Clause 12.1.2;
"Margin" means 2.25% (two hundred and twenty five basis points) per
annum;
"Material Adverse Change" means any change which is, in the reasonable opinion of LND,
likely to be adverse to the ability of any Client to perform its
material obligations under this Agreement or under any of the
other Discounting Documents as and when such obligations fall
due;
"Material Company" means the Initial Client and each of its Subsidiaries:
(i) whose profits are equal to or greater than 5 per cent of the
aggregate profits of the Group; or
(ii) whose turnover is equal to or greater than 5 per cent of the
aggregate turnover of the Group; or (iii) whose assets have a
value equal to or greater than 5 per cent of the aggregate value
of all assets owed by the Group; For the purposes of paragraphs
(i) and (ii) above, profits and turnover shall be measured over a
period of at least 6 months duration ending on a Quarter Date;
"Memorandum Discounting means the accounts in the name of the Clients held at LND in
Statements" order to calculate the Discounting Charge or any of them, as the
context may require;
"MTT" means Manufacturers & Traders Trust Company, a New York
banking corporation whose principal place of business is at One
Fountain Plaza, Buffalo, New York 14203-1495;
"NWB" means National Westminster Bank plc and its successors in
title, assignees and transferees;
"NWB Agreement" means the term and revolving loan facility agreement dated 21
May 1999 between (1) NWB and (2) the Initial Client;
"NWB Facility" means the term and revolving loan facility of up to a maximum
principal amount of (pound)19,800,000 (nineteen million eight
hundred thousand pounds Sterling) provided by NWB to the Initial
Client as reduced by repayments, prepayments or cancellations
under the terms of the NWB Agreement;
"NWB Lending Documents" has the meaning given to the term "Lending Documents" in the NWB
Agreement;
"OECD" means the Organisation for Economic Co-operation & Development or
any body replacing the same;
"Offer" means a written offer, in the form set out in Schedule 3 by the
Initial Client to LND to sell each of its Receivables to LND with
full title guarantee;
"Party" means a party to this Agreement;
"PBIT" means, in relation to the Client and period for which the
calculation is made, profit on ordinary trading activities
(including but not limited to Exceptional Items and credit
interest receivable in respect of positive cash balances) before
Tax and Interest excluding:
(a) amounts written off the value of investments;
(b) profit attributable to minority interests;
(c) amounts written off the value attributed to goodwill arising
out of the Acquisition;
(d) any Extraordinary Items;
(e) any profit or loss arising on the disposal of fixed assets;
(f) income from participating interests in associated
undertakings and income from any other fixed asset investments;
(g) acquisition expenses required to be capitalised in accordance
with paragraph 85 of FRS7;
(h) any realised or unrealised exchange gains and losses;
any costs associated with the Acquisition
PROVIDED ALWAYS THAT no item should be counted more than once and
Interest shall be excluded;
"Permitted Borrowed Money" means:
(a) Borrowed Money under any of the NWB Lending Documents;
(b) Borrowed Money under any of the Discounting Documents;
(c) Borrowed Money specifically approved by LND in the budgets
approved by LND;
(d) Borrowed Money incurred with the prior written consent of
LND;
(e) Borrowed Money under any Finance Lease where the aggregate
amount of such obligations does not exceed (pound)400,000 in any
one Financial Year;
(f) Borrowed Money under the Subordinated Loan;
(g) Borrowed Money of (i) the Initial Client to a Subsidiary of
the Initial Client or (ii) of a Subsidiary of the Initial Client
to the Initial Client or (iii) of a Subsidiary of the Initial
Client to another Subsidiary of the Initial Client, provided that
in all cases LND has received security from such Subsidiaries
pursuant to Clause 12.2.24;
(h) Borrowed Money in respect of non-interest bearing loans
(which are, subject to the terms of the Intercreditor Agreement,
repayable on demand) made on an unsecured basis by the Holding
Company to the Initial Client provided that:-
(i) such loans shall not exceed, at any time, a principal
amount in excess of (pound)5,000,000 in aggregate;
(ii) the Initial Client shall be entitled to repay any
amounts outstanding under such loans unless at such time (i)
any payment of any amount payable under this Agreement has
not be paid on its due date; or (ii) the financial covenants
contained in Clause 12.4 have not been met or (iii) a
Default or Potential Default has occurred and is continuing
or (iv) the effect of such repayment would mean that the
amount of the Available Headroom would reduce below
(pound)2,500,000 (two million five hundred thousand pounds
sterling);
(i) the UK Guarantee and the Reimbursement Agreement (as
such terms are defined in the NWB Agreement);
"Permitted Disposal" means any sale, transfer, lease, loan or disposal of any Asset
(excluding any Current Assets) of the Clients or any of their
Subsidiaries on terms whereby:-
(i) the proceeds of such sale, transfer, lease loan or disposal are
re-invested in the business of the Clients (or the relevant
Subsidiary) within 3 months of the date of such transaction; or
(ii) the proceeds of such sale, transfer, lease, loan or disposal are
used to repurchase the Purchased Receivables on the next Remuneration
Payment Date following such transactions; or
(iii) the proceeds of such sale, transfer, loan or disposal do not
exceed(pound)100,000 in aggregate in any one Financial Year; or the
sale or disposal of stock-in- trade or inventory sold or disposed of
in the ordinary course of trading;
"Permitted Security means:
Interest" (a) any Security Interest created under the NWB Lending
Documents; and
(b) any Security Interest created under any of the Discounting
Documents;
"Potential Default" means an event or omission which, with the giving of any notice,
the lapse of time (or any combination thereof) would, in the
reasonable opinion of LND, constitute a Default;
"Purchased Receivable" means each Receivable other than any Unpurchased Receivable;
"Quarter Days" means 31st March, 30th June, 30th September and 31st December;
"Receivable" means any present, future or contingent obligation of a
Customer to make payment under a contract for the sale of Goods
or performance of Services (together with all rights that the
Client may have in relation thereto) (or where the context allows
a part of such obligation or its related rights), including:-
(i) the future right to recover sums due following the
determination, assessment or agreement of the amount of the
obligation; and
(ii) VAT; and
(iii) all duties and charges;
"Receivables Purchased means the accounts in the name of the Clients held at LND which
Accounts" record the prospective purchase price of the Purchased Receivables
or any of them, as the context may require;
"Remittances" means cash, cheques, bills of exchange, negotiable and non-
negotiable instruments, letters of credit, orders, drafts,
promissory notes, electronic payments and any other instruments,
methods or forms of payment or engagement received by LND or the
Initial Client or any agent of the Initial Client towards a
Receivable;
"Remuneration Payment Date" means in relation to each calendar month the last Business Day of
such period;
"Security Documents" means:
(a) the Guarantee and any further guarantee executed by a Group
Company pursuant to clause 12.2.24;
(b) the Debenture executed by the Initial Client and any further
debenture executed by a Group Company pursuant to clause 12.2.24;
(c) the Intercreditor Agreement and the Deed of Priority; and (d)
any guarantee and any document creating security executed and
delivered after the date of this Agreement as security for any of
the obligations and liabilities of any Client and the other Group
Companies under any Discounting Document;
"Security Interest" means any mortgage, charge (whether fixed or floating), pledge,
hypothecation, lien (other than liens arising in the ordinary
course of business by operation of law), encumbrance, trust
arrangement, preferential creditor's right (other than such a
right arising under the general law for the protection of certain
classes of creditors) or other agreement or arrangement, the
effect of any of which is the creation of security or any other
security interest, however created or arising;
"Security Period" means the period starting on the date of this Agreement and
ending on the date on which all of the obligations and
liabilities of the Initial Client under each Discounting Document
are discharged in full and LND has no continuing obligations in
relation to this Agreement;
"Services" means services provided by the Clients in relation to which a
Purchased Receivable is created;
"Sites" means the premises listed in Schedule 6 and "Site" shall be
construed accordingly;
"Specific Conditions" means conditions specific to individual Sites as set out in
Schedule 4 hereto;
"SSAP" together with a number means the statement of standard accounting
practice issued by the Institute of Chartered Accountants for
application in England and Wales and identified by reference to
that number;
"Sterling" and "(pound)" mean the lawful currency for the time being of the United
Kingdom;
"Sterling Funding Amount" means, in respect of any day on which the Funding Amount is
calculated from time to time, the aggregate of all Funding
Amounts, where Funding Amounts which are not in Sterling are
calculated at their equivalent in Sterling using NWB's relevant
spot rate of exchange on that date;
"Subordinated Loan" means the principal sum of (pound)3,750,000 (three million
seven hundred and fifty thousand pounds sterling) lent by the
Holding Company to the Initial Client pursuant to the terms of
the Intra Group Loan Agreement (as defined in the NWB Agreement);
"Subsidiary " means a subsidiary or subsidiary undertaking within the
meaning of sections 736, 258 and 742(1) of the Act;
"Substantial Debt means, in relation to any Customer, the amount as determined under
Deduction" Clause 5.7;
"Substantial Receivable" means the aggregate of the Purchased Receivables from an
individual Customer that exceeds 25 per cent of the aggregate of
the Purchased Receivables from all Customers from time to time;
"Target Assets" means the business and assets acquired by the Initial Client
pursuant to the Acquisition Agreement;
"Taxes" includes all present and future governmental taxes, charges,
imposts, duties, levies, deductions, withholdings or fees of any
kind whatsoever, or any amount payable on account of or as
security for any of the foregoing, by whomsoever on whomsoever
and wherever imposed, levied, collected, withheld or assessed,
together with any penalties, additions, fines, surcharges or
interest relating thereto; and "Tax" and "Taxation" shall be
construed accordingly;
"Term Loan" has the meaning given to that term in the NWB Agreement;
"Termination Date" means the third anniversary of Commencement Date or such
later date as is agreed in writing between the Initial Client (on
behalf of the Clients) and LND under Clause 7.1;
"Transaction Documents" means, in relation to a Group Company, each of the following
documents to which it is a party: the NWB Lending Documents, the
Discounting Documents, the Acquisition Documents;
"Unpurchased Receivable" means:
(a) any Receivable not denominated in an Approved Currency;
(b) any Receivable where the debtor is an Affiliate of any Client
or the Holding Company or any of its Subsidiaries;
(c) any Receivable arising from the conduct of trading activities
of a Client other than those undertaken at the date of this
Agreement or which LND has approved in writing;
(d) any Receivable where British Steel Plc or any Subsidiary of
British Steel Plc is the Customer;
(e) any Receivable the subject of payment in cash or where payment
is made by the Customer in advance of an invoice being issued by the Client;
(f) Receivables where the debtor is resident or domiciled in a country
which is not a member of the OECD;
(g) Receivables where the payment obligation of a Customer is secured
by a letter of credit payable upon sight;
"US Lockbox Account" means the account held by the Initial Client at MTT and
numbered 8700343711;
"VAT" means value added tax as provided for in the Value Added Tax Act
1994 and legislation (or purported legislation and whether
delegated or otherwise) supplemental to that Act or in any
primary or secondary legislation promulgated by the European
Community or any official body or agency of the European
Community, and any tax similar or equivalent to value added tax
imposed by any country other than the United Kingdom and any
similar or turnover Tax replacing or introduced in addition to
any of the same;
"Year 2000 Compliant" means complying with the Year 2000 conformity requirements
promulgated by the British Standard Institution whose definition
is as follows:-
Year 2000 conformity shall mean that neither performance nor
functionality is affected by dates prior to, during and after
Year 2000, and in particular:-
Rule 1 no value for current data will cause any interruption in
operation;
Rule 2 data-based functionality must behave consistently for
dates before, during and after Year 2000;
Rule 3 in all interfaces and data storage, the century in any
date is specified either explicitly or by unambiguous algorithm
or interfacing rules; and
Rule 4 Year 2000 must be recognised as a leap year.
</TABLE>
1.2 Headings
--------
The headings in this Agreement are for convenience only and shall be
ignored in construing this Agreement.
1.3 Interpretation
--------------
In this Agreement (unless otherwise provided):
1.3.1 words importing the singular shall include the plural and
vice versa;
1.3.2 references to Clauses and Schedules are to be construed
as references to the clauses of, and schedules to, this
Agreement;
1.3.3 references to any Discounting Document or any other
document shall be construed as references to that
Discounting Document or that other document, as amended,
varied, novated or supplemented, as the case may be;
1.3.4 references to any statute or statutory provision include
any statute or statutory provision which amends, extends,
consolidates or replaces the same, or which has been
amended, extended, consolidated or replaced by the same,
and shall include any orders, regulations, instruments or
other subordinate legislation made under the relevant
statute;
1.3.5 references to a document being "in the agreed form" means
that document the form and content of which has been
approved by LND and which has endorsed on it the words "in
the agreed form" and which is initialled by or on behalf of
LND and the Initial Client;
1.3.6 references to "assets" shall include revenues and the
right to revenues and property and rights of every kind,
present, future and contingent and whether tangible or
intangible (including uncalled share capital);
1.3.7 the words "including" and "in particular" shall be
construed as being by way of illustration or emphasis
only and shall not be construed as, nor shall they take
effect as, limiting the generality of any foregoing
words;
1.3.8 the words "other" and "otherwise" shall not be construed
ejusdem generis with any foregoing words where a wider
construction is possible;
1.3.9 references to a "person" shall be construed so as to
include that person's assigns, transferees or successors
in title and shall be construed as including references
to an individual, firm, partnership, joint venture,
company, corporation, unincorporated body of persons or
any state or any agency of a state;
1.3.10 where there is a reference in this Agreement to any
amount, limit or threshold specified in Sterling, in
ascertaining whether or not that amount, limit or
threshold has been attained, broken or achieved, as the
case may be, a non-Sterling amount shall be counted on
the basis of the equivalent in Sterling of that amount
using NWB's relevant spot rate of exchange;
1.3.11 accounting terms shall be construed so as to be consistent
with GAAP;
1.3.12 references to time are to London time; and
1.3.13 the obligations and liabilities of the Clients in this
Agreement are joint and several obligations and
liabilities of the Clients.
2. INVOICE DISCOUNTING FACILITY
----------------------------
2.1 Invoice Discounting Facility
----------------------------
Subject to the terms of this Agreement LND agrees to make
available to the Client an invoice discounting facility of a
maximum amount of (pound)20,000,000 (twenty million Pounds
Sterling).
2.2 Additional Clients
------------------
2.2.1 The Initial Client may, on giving written notice to LND,
nominate a Charging Group Company incorporated in England
and Wales as an additional Client.
2.2.2 A Charging Group Company wishing to become an additional
Client shall execute and deliver an Accession Agreement
to LND together with all the documents referred to in the
schedule to that Accession Agreement, each in form and
substance satisfactory to LND.
2.2.3 A Charging Group Company shall accede to this Agreement
as a Client on LND counter-signing the relevant Accession
Agreement.
3. PURPOSE
-------
3.1 Purpose of the Invoice Discounting Facility
The proceeds of the Invoice Discounting Facility shall only be
used:
3.1.1 as to a maximum principal amount of (pound)9,800,000 (or
such lesser amount as shall be agreed between the Initial
Client and LND) to repay or prepay any amounts
outstanding under the Revolving Facility (as defined in
the NWB Agreement); and
3.1.2 as to the balance, for general working capital and
corporate purposes of any Client.
3.2 Undertaking by the Clients
--------------------------
Each Client undertakes that it will only utilise the Invoice
Discounting Facility as permitted by this Clause 3.
3.3 No liability
------------
LND shall not be concerned as to the use or application of
amounts made available under the Invoice Discounting Facility.
4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions precedent
--------------------
Notwithstanding any other term of this Agreement, LND shall not
be under any obligation to make the Invoice Discounting
Facility available to the Clients and the Clients will be under
no obligation to make any payment under this Agreement unless
LND has notified the Initial Client that all the conditions set
out in Schedule 1 have been satisfied on or before 31 August
1999 (or such later date as LND and the Initial Client shall
agree).
4.2 Confirmation of satisfaction
----------------------------
At the request of the Initial Client, LND shall certify whether
or not any one or more of the conditions set out in Schedule 1
have been satisfied or, as the case may be, waived.
5. AVAILABILITY OF INVOICE DISCOUNTING FACILITY
--------------------------------------------
5.1 Clients' offer to sell
----------------------
On or before the Commencement Date the Initial Client (on
behalf of each of the Clients) shall deliver an Offer to LND.
If LND wishes to accept such an Offer, it shall do so by
crediting the face value of the invoice for the relevant
Receivable to the Receivables Purchased Account when title to
each such Receivable shall pass to LND.
5.2 Purchase
--------
5.2.1 After operation of Clause 5.1, the Clients will, during
the period of this Agreement, deliver offers to LND by
notifying LND of Receivables available for purchase on an
ongoing basis by way of Advice Transmissions. LND shall
purchase (and the relevant Client will sell with full
title guarantee) each Purchased Receivable immediately
upon the Purchased Receivable coming into existence free
from all Security Interests upon the terms of this
Agreement by crediting the face value of the invoice to
the relevant Receivables Purchased Account. Any such sale
and purchase shall be an absolute sale and purchase and
the rights to the relative Purchased Receivable shall
vest in LND. The balance standing to the credit of the
Receivables Purchased Account shall be LND's record of
the prospective purchase price of the Purchased
Receivables before any of the deductions used under
Clause 5.2.2 to calculate the purchase price.
5.2.2 The price payable for each Purchased Receivable covered
by this Agreement is to be the amount received by LND
towards the discharge of the Purchased Receivable but less:-
5.2.2.1 any Customers prompt settlement discount later
claimed (if any) relating to such Receivable; and
5.2.2.2 any other later claimed Customer deductions,
abatement or set-off relating to such Receivable;
and
5.2.2.3 the Discounting Charge and Commission Charges
relating to such Receivable; and
5.2.2.4 all other sums due to LND under this Agreement
to the extent not otherwise satisfied.
5.2.3 For the avoidance of doubt, the Invoice Discounting
Facility is made available on a recourse basis only (so
that the Clients shall indemnify and keep indemnified LND
against any non-payment by the Customer in respect of any
Purchased Receivables) and LND shall not be obliged to
purchase at any time any Receivable falling within the
definition of "Unpurchased Receivable".
5.3 Conditions to Payment
---------------------
5.3.1 LND shall establish a Receivables Purchased Account and
Memorandum Discounting Statement for each Approved
Currency and in respect of each Site.
5.3.2 LND shall pay by Electronic Transmission, all (or such
part of the Available Amount as is required by the
relevant Client) of the relative Approved Currency to a
Client, on written demand by that Client, on or before
10.30 a.m. (London time) on any Business Day if:
5.3.2.1 all of the Conditions Precedent have been
satisfied or otherwise waived in writing by LND;
5.3.2.2 the matters represented and warranted, or
deemed to be represented and warranted under
Clause 11.1 inclusive, are true and accurate
at the relevant time;
5.3.2.3 the Invoice Discounting Facility has not
expired nor has demand been made on the Clients
under Clause 13.2;
5.3.2.4 no Default or Potential Default is outstanding;
5.3.2.5 the Sterling Funding Amount does not, and
will not by such payment, equal or exceed the
Facility Limit; and
5.3.2.6 the Client has provided to LND an Advice
Transmission in relation to the relative
Receivable.
5.3.3 The Available Amount in relation to each Approved
Currency shall only be available in the relative Approved
Currency.
5.3.4 To the extent that any Memorandum Discounting Statement
has a credit balance on:-
(a) the Termination Date; or
(b) the date of the termination of the Facility under
Clause 7.2;
LND shall promptly account for such credit balance to the
Clients arising after the exercise of the rights of
set-off available to LND under Clause 14.
5.3.5 Payments made under this Clause 5.3 shall, unless
otherwise instructed in writing by the relevant Client
acting by any director, be made to NWB at 103 Colmore
Row, Birmingham B3 3NR (Sort Code : 60-00-04) for the
accounts specified in respect of the relevant Site, in
Column B below in relation to the Approved Currency
specified opposite in Column A below:
COLUMN A Column B
-------- --------
Deutschemark Account No : 08047618 (Ductile
Hot Mill), Account No : 08047561
(Gadd Dudley Port), Account No :
08047502 (GB Longmores), Account
No 08047421 (W. Wesson);
Euro Account No : 08047634 (Ductile
Hot Mill), Account No : 08047553 (GB
Longmores) Account No : 08047642
(Midland Engineers), Account No:
08047499 (W. Wesson);
Swedish Krona Account No : 08047537 (GB
Longmores), Account No :
08047464 (W. Wesson);
US Dollar Account No : 08047065 (Ductile
Hot Mill), Account No : 08047057
(Gadd Dudley Port), Account No :
08047081 (GB Longmores), Account
No : 08047073 (Midland
Engineering), Account No :
08047049 (W. Wesson);
Danish Krona Account No : 08047448 (W.
Wesson);
French Franc Account No : 08047596 (Gadd
Dudley Port), Account No :
08047510 (GB Longmores), Account
No : 08047413 (W. Wesson);
Italian Lira Account No : 08047626 (Ductile
Hot Mill), Account No : 08047588
(Gadd Dudley Port), Account No :
08047529 (GB Longmores), Account
No : 08047456 (W. Wesson);
Dutch Guilder Account No : 08047545 (GB
Longmores), Account No :
0804748 ( W. Wesson);
Norwegian Krona Account No : 08047472 (W.
Wesson);
and in respect of any other Approved Currency to such
account at NWB notified in writing by the Initial Client
to LND from time to time and, in relation to any other
Client to the bank and account specified in relation to
the Approved Currency in its Accession Agreement.
5.3.6 Payments made under this Clause 5.3 shall be debited to
the relevant Receivables Purchased Account and to the
relevant Memorandum Discounting Statement. All other sums
due, owing or incurred by the Clients to LND may also be
debited to the relevant Receivables Purchased Account and
the relevant Memorandum Discounting Statement. The value
of any Remittance received by LND will be credited to the
relevant Memorandum Discounting Statement with an
effective date for the purposes of calculating the
Discounting Charge as follows :-
5.3.6.1 if in cleared funds, by Electronic
Transmission, to LND's bank account as
notified to the Client, the same Business Day
that LND receives the Remittance;
5.3.6.2 for any other Remittances, three calendar
days after the date of lodgement by the
Client of such Remittance.
The balance on the relevant Memorandum Discounting
Statement will reflect any payments taken by the Clients
under Clause 5.3.2, any sums owed by the Clients to LND
and any Remittances received by LND. LND will provide the
Clients with statements of each Receivables Purchased
Account and each Memorandum Discounting Statement which
shall, save for any manifest error, be valid and
binding upon the Clients in all respects.
5.4 Facility Limit
--------------
If, at any time, the Sterling Funding Amount exceeds the
Facility Limit the Clients shall forthwith pay the difference
between such amounts to LND.
5.5 Calculation of Available Amount
-------------------------------
The Available Amount in relation to an Approved Currency shall
be an amount, without double counting, equal to the aggregate
of:
5.5.1 the face amount of all Purchased Receivables including
any VAT as has been previously notified on an Advice
Transmission to LND and standing to the credit of all
Receivables Purchased Accounts for that Approved
Currency;
5.5.2 any monies received by LND from the Clients under this
Agreement; and
5.5.3 any monies received by LND under Clause 5.9;
LESS:
5.5.4 first, without double counting, the aggregate of:-
5.5.4.1 all payments made to the Clients by LND under
this Agreement;
5.5.4.2 the amount of any Purchased Receivable in
excess of 120 days from date of original
invoice in relation to the relative Goods or
Services as determined by the latest aged
debts listing received by LND;
5.5.4.3 the amount of any Purchased Receivable
subject to any dispute by the Customer or in
relation to which legal proceedings for their
recovery have been threatened or instigated
by the Clients;
5.5.4.4 the amount of any accumulated retrospective
discount afforded by the Clients to any Customer;
5.5.4.5 the amount of any Purchased Receivable that
relates to Goods which are situated on
premises owned or occupied by the Clients;
5.5.4.6 the amount of any Purchased Receivable that
relates to goods or services which are not
assets of the relevant Client but which add
value to such of the Customers' Goods which are
in the custody of the Clients for the purpose of
providing such Goods or Services;
5.5.4.7 the amount of any Purchased Receivable in
relation to which the Clients do not have
available proof of Delivery, satisfactory to
LND, of the relative Goods or Services;
5.5.4.8 the amount of any Purchased Receivable in
relation to Goods supplied on a 'sale or return'
basis;
5.5.4.9 any Purchased Receivable in relation to which
the Customer has not obtained all the authorities
necessary under the regulations in force in the
country to which the Goods or Services are
provided or from which payment is to be made in
order to pay such Receivable in accordance with
the relative contract or invoice;
5.5.4.10 any Purchased Receivable which is not a bona
fide obligation of the Customer arising out
of the sale of Goods or the provision of
Services by the Clients in the ordinary
course of its trading;
5.5.4.11 in respect of a Substantial Receivable the
amount of any excess above the twenty five
per cent level required to categorise a
Receivable as a Substantial Receivable ;
5.5.4.12 the amount of any Purchased Receivable from
any Customer who is a supplier of Goods or
Services to the Clients;
5.5.4.13 the amount of all payments due and payable by
any Client under this Agreement (including
any payments under Clause 6.1);
5.5.4.14 the amount of the full value of all credit
notes issued by, or due from, any Client;
5.5.4.15 the amount of any Purchased Receivable which
LND gives notice to a Client to repurchase
under Clause 8.1;
5.5.4.16 the amount of any payment, costs, damage or
liability made or sustained by LND arising
directly or indirectly in consequence of any
breach of representation, warranty or undertaking
by the Clients or steps taken by LND to mitigate
such payment, cost or damage or liability;
5.5.4.17 the amount of any Substantial Debt Deduction;
5.5.4.18 the amount of any Purchased Receivable from
either a Customer incorporated outside any
country which is a member of the OECD or which
arose in relation to the provision of Goods or
Services outside of any country which is a member
of the OECD;
5.5.4.19 the amount of any Purchased Receivable in
relation to which there is a restriction on
the relative Client's ability to assign the
benefit of such Purchased Receivable;
5.5.4.20 the amount of any Purchased Receivable which
later becomes a Receivable falling within the
categories of Receivable defined in this
Agreement as "Unpurchased Receivables"; and
5.5.4.21 in respect of Purchased Receivables which are
not insured with a credit insurer reasonably
acceptable to LND, the amount of any excess above
the amount by which such Purchased Receivables
exceed 10% of the aggregate amount of Purchased
Receivables at any time
in the case of all such lettered and numbered items, which are
denominated in that Approved Currency; and
5.5.5 Secondly, from the balance thereof, an amount equal to
the Global Deduction Percentage of such balance.
5.6 Variation of Global Deduction Percentage
----------------------------------------
5.6.1 The Global Deduction Percentage shall be varied to the
extent determined by LND if LND having complied with
Clauses 5.6.3 and 5.6.4, determines that:
5.6.1.1 the quality of covenant of the Customer base
taken as a whole has deteriorated or is likely
to do so;
5.6.1.2 the quality of covenant of any Client has
deteriorated or is likely to do so; and
5.6.1.3 the quality of the Purchased Receivables taken
as a whole has deteriorated or is likely to do
so.
5.6.2 The amount of any variation of the Global Deduction
Percentage under this Clause shall reflect the extent of
the deteriorations referred to in Clause 5.6.1 above.
5.6.3 LND shall give the Initial Client a minimum of one
months' written notice of the possibility of a variation
of the Global Deduction Percentage specifying the reason
for such possible variation.
5.6.4 If the Initial Client, within 5 Business Days of receipt
of the notice from LND in Clause 5.6.3, gives written
notice to LND that it disagrees with the reasons
specified by LND in its notice, then LND and the Initial
Client shall consult with each other in good faith for a
period of not more than 10 days to determine whether, and
to the extent that, the Global Deduction Percentage shall
be varied. Any agreement in respect of such variation
between LND and the Initial Client shall be binding on
all the Clients. In the absence of agreement within such
10 day period the determination of LND under Clause 5.6.1
shall be binding on all the Clients and the Global
Deduction Percentage varied accordingly.
5.6.5 If the Global Deduction Percentage is varied by
LND under this Clause 5.6 and the Initial Client
disagrees with the proposed variation (and
agreement cannot be reached pursuant to Clause
5.6.4 above) the Initial Client shall (on behalf
of the Clients) be entitled to repurchase all, but
not part, of the Purchased Receivables by giving
LND not less than 90 days prior written notice
(which shall be irrevocable). The Initial Clients
obligations under such notice will be to
repurchase the Purchased Receivables by payment to
LND of amounts in each Approved Currency equal to
the Funding Amounts on the date of payment for
each Approved Currency provided always that no
prepayment fee shall be payable to LND in such
circumstances. Any such payment will be subject to
Clause 20.1. On such repurchase the Invoice
Discounting Facility shall automatically be
cancelled and reduced to zero.
5.7 Determination of Substantial Debt Deduction
-------------------------------------------
5.7.1 The Substantial Debt Deduction (if any) of the relative
Substantial Receivable shall be determined by LND in its
sole discretion if LND determines that:
5.7.1.1 the quality of covenant of the relative
Customer has deteriorated or is likely to do so;
or
5.7.1.2 the quality of the relative Substantial
Receivable has deteriorated or is likely to do
so.
5.7.2 The determination of any Substantial Debt Deduction shall
be made and reviewed promptly after the end of each
calendar month.
5.7.3 LND shall promptly notify the Initial Client in writing
of its determination under Clause 5.7.1 and shall (to the
extent permitted by law and not restricted by any
confidentiality obligation of LND to any third party)
give the reasons for its determination. If the Initial
Client disagrees with such reasons LND and the Initial
Client shall consult with each other in good faith for a
period of not less than 1 week. Any agreement in respect
of the determination of a Substantial Debt Deduction
between LND and the Initial Client shall be binding on
all the Clients. In the absence of agreement the
determination of the relative Substantial Debt Deduction
by LND shall be binding on all the Clients.
5.7.4 The Substantial Debt Deduction shall come into effect 1
week after the Initial Client has received notification
of the determination thereof.
5.7.5 The Substantial Debt Deduction may not be applied in
relation to any Substantial Receivable in relation to
which a Client has obtained credit insurance for the full
value thereof from a credit insurer reasonably acceptable
to LND in form and substance satisfactory to LND and
which are assigned (by way of security) to LND.
5.8 Assignment of Purchased Receivables
-----------------------------------
5.8.1 Each Client shall at its own expense and if so requested
by LND execute a separate assignment in writing to LND of
any Purchased Receivable sold to LND in accordance with
this Agreement and of any rights which that Client may
have in relation thereto. LND shall be entitled to serve
notice of such assignment at any time in its absolute
discretion.
5.8.2 If in relation to any Purchased Receivable it is not
possible for LND to take a separate assignment the
relevant Client will hold such Purchased Receivable in
trust for LND and any payments received in respect
thereof will be immediately paid to LND.
5.9 Goods
-----
5.9.1 On purchase by LND of any Purchased Receivable any title,
property, right or interest of the relevant Client in the
Goods to which such Purchased Receivables relates
(including all such Goods that may be rejected or
returned by the Customers) all the relevant Client's
rights as unpaid vendor and all other rights of the
relevant Client under the contract or contracts pursuant
to which the Purchased Receivable comes into existence
(whether such rights be created by contract, statute or
other rule of law) shall be deemed to be assigned and
transferred to LND absolutely whether or not the Goods
shall have been Delivered by the relevant Client at the
time of the said purchase.
5.9.2 On purchase by LND of any Purchased Receivable there
shall vest in LND the benefit of all guarantees,
indemnities, insurances and securities given to or held
by the relevant Client in respect of such Purchased
Receivables or of the relative Goods or Services.
5.9.3 Any Goods relating to any Purchased Receivable recovered
by or on behalf of a Client shall be set aside marked
with LND's name and held for LND's account as owner.
Subject to the occurrence of a Default or Potential
Default which is continuing LND shall (in addition to and
without prejudice to any other rights it may have) have
the right to take possession of and to sell or cause to
be sold without notice any such returned or recovered
Goods at such prices to such purchasers and upon such
terms and conditions as it may in its absolute discretion
determine. Upon any such sale the relevant Client shall
pay to LND on demand (and without asserting any right of
set-off or counterclaim deduction or withholding):
5.9.3.1 the difference between the amount of the
Purchased Receivable relating to such Goods
and the amount received by LND on any such
sales; and
5.9.3.2 any costs and expenses (including legal fees)
incurred by LND in relation to any such
repossession and sale.
5.9.4 Each Client (as trustee for LND) will hold and keep
separate from any other monies of that Client all
Remittances received by it in payment of any Purchased
Receivable which has been sold to LND. Each Client will
immediately pay all such Remittances endorsed where
required:-
5.9.4.1 direct to the account of LND at the bankers of
LND; or
5.9.4.2 into a trust account in the name of LND.
5.10 Collection
----------
5.10.1 Prior to LND making a direction under Clause 12.2.12 the
Initial Client will be responsible (at its own expense)
for collection of all Receivables and for the management
of all Customers accounts on LND's behalf as an
undisclosed agent. During this period, LND may
communicate in the Initial Client's name with Customers
for the purposes of verifying the existence and amount of
Receivables. The Initial Client undertakes to
LND that it will act promptly and efficiently when
carrying out its duties as LND's agent.
5.10.2 Upon the making of a direction by LND under Clause
12.2.12, LND shall have the sole right of collecting and
enforcing payment of the Purchased Receivables (other
than those re-assigned after payment of the repurchase
price) in whatever manner it may in its absolute
discretion decide, whether or not the relevant Client has
been debited with the amount of the Purchased Receivables
and each Client shall co-operate to procure such
collection and enforcement.
5.10.3 Upon LND giving notice to the Initial Client, the conduct
of any proceedings shall be with LND who may (where
necessary in the name of any Client) institute,
compromise, settle, abandon or in any manner whatsoever
conduct such proceedings upon such terms as LND in its
sole discretion shall decide and each Client shall be
bound by all acts of LND under this Clause 5.10. The
Client shall be responsible for and shall forthwith on
demand pay all reasonable costs, charges and expenses of
whatsoever nature incurred by LND under this Clause 5.10.
5.10.4 Each Client irrevocably:
-----------------------
5.10.4.1 authorises LND to endorse the name of that
Client on any and all cheques or other forms of
Remittance received where such endorsement is
required to effect collection or to perfect LND's
title as a holder in due course of the Purchased
Receivables; and
5.10.4.2 following a Default or Potential Default
which is continuing appoints LND the attorney
of that Client to execute in the name and on
behalf of that Client any assignment
requested under Clause 5.8.1
The power of attorney granted by this Clause 5.10.4 is granted
irrevocably and for value as part of LND's rights under this
Agreement to secure proprietary interests in and the
performance of the Client's obligations owed to LND within the
meaning of the Powers of Attorney Act 1971.
6. REMUNERATION
------------
6.1 Determination of the Funding Amount
-----------------------------------
The Funding Amount, in relation to an Approved Currency, shall
be an amount equal to the aggregate of (without double
counting):-
6.1.1 all amounts paid to the Clients by LND under this Agreement;
6.1.2 the aggregate of all of the amounts due and payable by the
Clients to LND under this Agreement; and
6.1.3 the aggregate of all of the amounts paid by LND directly
or indirectly in consequence of any breach of this
Agreement by the Clients;
LESS (without double counting):
6.1.4 any amount received by LND under this Agreement;
6.1.5 any amount received by LND directly from a Customer in
relation to any Purchased Receivable; and
6.1.6 any amount paid by the Clients to LND,
in each case, where amounts paid or received are amounts
denominated in that Approved Currency.
6.2 Discounting Charge
------------------
The Initial Client shall be obliged to pay a Discounting Charge
calculated in accordance with Clause 6.3 below on the Funding
Amount from time to time at the rate determined by LND to be
the Discounting Rate.
6.3 Calculation and Payment of Remuneration
---------------------------------------
6.3.1 As soon as is practicable following each Remuneration
Payment Date, LND will notify the Client of the relative
rate and amount of the Discounting Charge or other amount
payable by the Client for the relative month.
6.3.2 Any Discounting Charge and default interest due from the
Client to LND under any of the Discounting Documents
shall:-
6.3.2.1 accrue from day to day on the relative
amount, be calculated on the basis of the
actual number of days elapsed and a 365 day
year (or 360 days if the Funding Amount is
denominated in United States Dollars or
Euros);
6.3.2.2 be paid in the currency of the relative
Funding Amount by the Client to LND in
arrears on each Remuneration Payment Date;
and
6.3.2.3 be payable after as well as before judgement.
6.4 Margin Ratchet
--------------
6.4.1 In respect of each Financial Year of the Initial Client
beginning after 1/1/2000, the Margin shall reduce or
increase in accordance with the other provisions of this
Clause 6.4, provided that the Margin shall at no time be
greater than 2.25% per annum or less than 2% per annum.
6.4.2 In this Clause 6.4 "Relevant Financial Year" means in
relation to a Financial Year of the Initial Client, the
immediately preceding Financial Year of the Initial
Client.
6.4.3 Subject to the other provisions of this Clause 6.4 in
respect of a Financial Year of the Initial Client, the
margin shall be 2% per annum if the amount of PBIT for
the Relevant Financial Year is at least equal to or more
than (pound)5,000,000.
6.4.4 In relation to a Financial Year of the Initial Client,
for the purpose of this Clause 6.4, any reduction or
increase in the Margin shall be determined on the day
immediately following receipt by the LND of the Accounts
for the Relevant Financial Year. Any reduction or
increase shall, subject to Clause 6.4.5, take effect
following receipt by LND of those Accounts as if it had
applied since the end of the Relevant Financial Year and
LND or the Client (as the case may be) will account to
the other accordingly. If the Initial Client does not
deliver the relevant Accounts to LND in accordance with
the terms of Clause 12.1.1, the Margin shall (if
necessary), as from the date immediately following the
last date on which such Accounts have been so delivered
to LND pursuant to Clause 12.1.1 until the date once such
Accounts have been so delivered, be reinstated to 2.25%
per annum.
6.4.5 Where in respect of a Financial Year of the Initial
Client, the Margin has been adjusted on the basis of the
Accounts for the Relevant Financial Year and any
subsequent Accounts show that such adjustment should not
have been made, the said adjustment shall be cancelled on
the next Remuneration Payment Date to occur after
delivery of those subsequent Accounts to the LND and the
Client and LND shall promptly make such payments as may
be necessary to put themselves in the position they would
have been had no such adjustment been made.
6.4.6 Notwithstanding any other term of this Clause 6.4, if, at
the time a decrease in the Margin is to take effect, a
Default or Potential Default is continuing, such decrease
shall not take effect unless and until such Default or
Potential Default ceases to be continuing or is waived.
6.4.7 For the avoidance of doubt, if in respect of a Financial
Year of the Initial Client, the condition set out in
Clause 6.4.3 is not satisfied in relation to the Relevant
Financial Year, the Margin for that Financial Year shall
be 2.25% per annum.
6.5 Default Interest
----------------
If any Client fails to pay any amount due and payable to LND
under any of the Discounting Documents on the due date, the
Clients shall pay default interest on such amount to LND from
the due date of actual payment at the rate per annum being the
aggregate of:
(a) 3% per annum; and
(b) the Discounting Rate.
6.6 Expenses
--------
Each Client shall pay to LND all costs incurred (including VAT)
in relation to the transmission of funds by LND to the clients.
6.7 Records
-------
6.7.1 Upon a Client's request and subject to its compatibility
with LND's software LND shall provide to that Client
detailed records of the Available Amount, the Funding
Amounts and the Sterling Funding Amounts by means of a
modem communications link.
6.7.2 At the end of each calendar month upon the request and at
the cost of the Clients LND shall provide hard copies of
any information specified under Clause 6.7.1.
6.8 LND's Determination
-------------------
LND's determination of the amount of any of the Discounting
Charge and default interest payable under any Clause 6 shall be
conclusive and binding on the Clients
except for any manifest error.
7. TERMINATION, REPURCHASE AND CANCELLATION
----------------------------------------
7.1 Repurchase
----------
The Clients shall repurchase the Purchased Receivables by payment
to LND on the Termination Date (or such later date as is agreed
in writing between the Initial Client (on behalf of the Clients)
and LND) of amounts in each Approved Currency equal to the
Funding Amounts on that date for each Approved Currency.
7.2 Voluntary repurchase of Receivables
-----------------------------------
7.2.1 The Clients may, by giving LND not less than 12 months
prior written notice, repurchase all the Purchased
Receivables on a Remuneration Payment Date by payment to
LND on that date of amounts in each Approved Currency
equal to the Funding Amounts on that date for each
Approved Currency. Such 12 months notice shall not be
required in the case of a repurchase of Receivables under
Clause 5.6.5 (Variation of Global Reduction Percentage),
Clause 7.4 (Repurchased Fees), Clause 8.1.2.2
(Illegality) or Clause 9.8.5 (Grossing Up) or Clauses
19.3.3 (Assignments) or 19.4.3 (Transfers) where the time
periods set out in such clauses shall apply or where
there is a general refinancing as defined in Clause 7.4
below where 90 days prior written notice (which shall be
irrevocable) of such refinancing by the Client shall be
required.
7.2.2 Any notice of repurchase shall be irrevocable, shall
specify the date on which the repurchase or the
prepayment is to be made and shall oblige the Clients to
make that repurchase.
7.3 Cancellation of Invoice Discounting Facility
--------------------------------------------
7.3.1 The Initial Client (on behalf of the Clients) may by no
less than 5 Business Days' prior irrevocable written
notice to LND, cancel any undrawn part of the Invoice
Discounting Facility (in minimum amounts of
(pound)1,000,000 and subsequent multiples of
(pound)1,000,000). The Facility Limit will be reduced
accordingly.
7.3.2 The Client may not cancel all or part of the Invoice
Discounting Facility if such cancellation would result in
the Sterling Funding Amount exceeding the Facility Limit.
7.4 Repurchase Fees
---------------
If on or before the expiry of the 24 month period from the
Commencement Date the Funding Amount (or any part thereof) are
repaid from the proceeds of a refinancing with persons other
than LND or the Facility Limit is cancelled as a consequence of
a refinancing with persons other than LND the Initial Client
shall at the same time pay to LND a prepayment fee equal to 1.5
per cent of the aggregate amount of the Funding Amount prepaid
or the Facility Limit cancelled provided always that no
prepayment fee shall be payable to LND if (a) such refinancing
forms part of a general refinancing (a "general refinancing")
of the debt obligations of the group of companies of which the
Holding Company is parent (but only as long as such
refinancing does not involve directly or indirectly the
Invoice Discounting Facility being refinanced or provided by
another invoice discounter or specialist debt purchase
financer based in the United Kingdom), (b) repayment is made
as a result of the provisions of Clause 8 (Illegality),
Clause 9.8 (Grossing Up), Clause 5.6.5 (Variation of Global
Deduction Percentage) or Clauses 19.3.3 (Assignment) or
19.4.3 (Transfers).
8. CHANGES IN CIRCUMSTANCES
------------------------
8.1 Illegality
----------
If after the date of this Agreement it is or becomes illegal
for LND to maintain or to continue to make available or fund
all or any part of the Facility
then:-
8.1.1 LND shall notify the Initial Client; and
8.1.1.1 the obligations of LND under this Agreement
shall be cancelled immediately; and
8.1.1.2 the Clients shall repurchase the Purchased
Receivables by payment of amounts equal to the
Funding Amount for each Approved Currency
(together with all other amounts owing
to LND under this Agreement) within 5 Business
Days of demand by LND (or, if permitted by the
relevant law, on the next Remuneration Payment
Date).
8.2 Certificates
------------
The certificate or notification of LND as to any of the matters
referred to in Clause 8.1 shall be conclusive and binding on
the Clients except for any manifest error.
9. PAYMENTS
--------
9.1 Place and Time
--------------
All payments to be made by a Client in relation to this
Agreement shall be made to LND at its office at Feltham or such
other office at such time as LND may notify the Clients for
this purpose.
9.2 Funds
-----
All payments to LND under this Agreement shall be made for
value on the due date in freely transferable and readily
available funds.
9.3 Business Days
-------------
If a payment under this Agreement is due on a day which is not
a Business Day, the due date for that payment shall instead be
the next Business Day in the same calendar month (if there is
one) or the preceding Business Day (if there is not).
9.4 Currency
--------
All payments by a Client is respect of a Funding Amount shall
be made in the relative Approved Currency. All payments
relating to costs, losses, expenses or Taxes shall, be made in
the currency in which the relative costs, losses, expenses or
Taxes were incurred. Any other amount payable under this
Agreement shall, except as otherwise provided, be made in
Sterling.
9.5 Accounts as evidence
--------------------
LND shall maintain in accordance with its usual practice the
Receivables Purchased Account and the Memorandum Discounting
Statement which shall, as between the Clients and LND, be prima
facie evidence of the amounts from time to time paid by, owing
to, and paid to, LND under this Agreement.
9.6 Partial Payments
----------------
9.6.1 If LND receives a payment insufficient to discharge all
the amounts due and payable by a Client under this
Agreement, LND shall apply that payment towards the
obligations of that Client in the following order:
9.6.1.1 first, in or towards payment of any unpaid
costs and expenses of LND under this Agreement;
9.6.1.2 second, in or towards payment pro rata of any
accrued Discounting Charge due by that Client
but unpaid under this Agreement;
9.6.1.3 third, in or towards payment pro rata of any
other sum due by that Client but unpaid under
the Discounting Documents.
9.6.2 LND may vary the order set out in Clause 9.6.1.1 to
9.6.1.3 and shall give notice to the Initial Client of
any such variation.
9.6.3 Clause 9.6.1 shall override any appropriation made by any
Client.
9.7 Set-Off and Counterclaim
------------------------
All payments by any Client under this Agreement shall be made
without set-off, deduction or counterclaim.
9.8 Grossing-Up
-----------
9.8.1 Subject to Clause 9.8.2, all sums payable to LND pursuant
to or in connection with any Discounting Document shall
be paid in full free and clear or all deductions or
withholdings whatsoever except only as may be required by
law.
9.8.2 If any deduction or withholding is required by law in
respect of any payment due from a Client or a Customer to
LND pursuant to or in connection with any Discounting
Document each Client shall:
9.8.2.1 ensure or procure that the deduction or
withholding is made and that it does not
exceed the minimum legal requirement
therefor;
9.8.2.2 pay, or procure the payment of, the full
amount deducted or withheld to the relevant
Taxation or other authority in accordance
with the applicable law;
9.8.2.3 increase the payment in respect of which the
deduction or withholding is required so that the
net amount received by LND after the deduction or
withholding (and after taking account of any
further deduction which is required to be made as
a consequence of the increase) shall be equal to
the amount which LND would have been entitled to
receive in the absence of any requirement to make
any deduction or withholding; and
9.8.2.4 promptly deliver or procure the delivery to
LND of receipts evidencing each deduction or
withholding which has been made.
9.8.3 If LND determines, in its absolute discretion, that it
has received, realised, utilised and retained a Tax
benefit by reason of any deduction or withholding in
respect of which a Client has made an increased payment
under this Clause 9.8 LND shall, provided that it has
received all amounts which are then due and payable under
any Discounting Document, pay to that Client (to the
extent that LND can do so without prejudicing the amount
of the benefit or repayment and the right of LND to
obtain any other benefit, relief or allowance which may
be available to it) such amount, if any, as LND, in its
absolute discretion shall determine, will leave LND in no
worse position than it would have been if the deduction
or withholding had not been required, provided that:
9.8.3.1 LND shall have an absolute discretion as to
time at which and the order and manner in
which it realises or utilises any Tax benefit
and shall not be obliged to arrange its
business or its Tax affairs in any particular
way in order to be eligible for any credit or
refund or similar benefit;
9.8.3.2 LND shall not be obliged to disclose any
information regarding its business, Tax affairs
or its Tax computations; and
9.8.3.3 if LND had made a payment to a Client pursuant
to this Clause 9.8.3 on account of any Tax
benefit and it subsequently transpires
that LND did not receive that Tax benefit, or
received a lesser Tax benefit, that Client shall
on demand pay to LND such sum as LND may
determine as being necessary to restore its
after-tax position to that which it would have
been had no adjustment under this Clause 9.8.3
been made; and
9.8.3.4 any sums payable by a Client to LND under
this Clause 9.8.3 shall be subject to Clause
15.6.
9.8.4 LND shall not be obliged to make any payment under Clause
9.8.3 if, by doing so, it would contravene the terms of
any applicable law or any notice, direction or
requirement of any governmental or regulatory authority
(whether or not having the force of law).
9.8.5 If a Client is required to make an increased payment for
the account of LND under Clause 9.8.2, then, without
prejudice to that obligation and so long as such
requirement exists and subject to the Initial Client (on
behalf of the Clients) giving LND not less than 10 days'
prior written notice (which shall be irrevocable), the
Clients may repurchase all, but not part, of the
Purchased Receivables by payment to LND of amounts in
each Approved Currency equal to the Funding Amounts on
the date of payment for each Approved Currency and
without payment of any prepayment fee. Any such payment
shall be subject to Clause 20.1. On any such repurchase
the Invoice Discounting Facility shall be automatically
cancelled.
10. SECURITY
--------
10.1 Security Documents
------------------
The obligations and liabilities of the Clients to LND under the
Discounting Documents shall be secured by the interests and
rights granted in favour of LND
under the Security Documents.
11. REPRESENTATIONS AND WARRANTIES
------------------------------
11.1 Representations and warranties
The Initial Client represents and warrants to LND that:
11.1.1 STATUS: each Client is a limited company duly incorporated
under the laws of England and Wales and it possesses the
capacity to sue and be sued in its own name and has the
power to carry on its business and to own its property and
other assets;
11.1.2 POWER AND AUTHORITY: each Group Company has (or had,
as the case may be) power to execute, deliver and
perform its obligations under the Transaction Documents
and to carry out the transactions contemplated by those
documents and all necessary corporate, shareholder and
other action has been or will be taken to authorise the
execution, delivery and performance of the same. In
particular no Client has any express limitation on its
power or capability to sell Receivables to any third
party or any utilisation of the Invoice Discounting
Facility;
11.1.3 BINDING OBLIGATIONS: the obligations of each Group
Company under the Transaction Documents constitute its
legal, valid, binding and enforceable obligations;
11.1.4 CONTRAVENTIONS: the execution, delivery and
performance by each Group Company of the Transaction
Documents does not:
11.1.4.1 contravene any applicable law or regulation
or any order of any governmental or other
official authority, body or agency or any
judgment, order or decree of any court having
jurisdiction over it;
11.1.4.2 conflict with, or result in any breach of any
of the terms of, or constitute a default under,
any agreement or other material instrument to
which it is a party or any licence or other
authorisation to which it is subject or by which
it or any of its property is bound; or
11.1.4.3 contravene or conflict with the provisions of
its memorandum and articles of association;
11.1.5 INSOLVENCY: no Group Company has taken any action nor
have any steps been taken or legal proceedings been
started or threatened against it for winding-up,
dissolution or re-organisation, the enforcement of any
Security Interest over its assets or for the appointment
of a receiver, administrative receiver, or administrator,
trustee or similar officer of it or of any of its assets;
11.1.6 NO DEFAULT: no Group Company is (nor would be with any of
the giving of notice, the lapse of time, the
determination of materiality, or the satisfaction of any
other condition) in breach of or in default under any
material agreement to which it is a party or which is
binding on it or any of its assets;
11.1.7 LITIGATION: no action, litigation, arbitration or
administrative proceeding has been commenced, or is
pending or threatened, against any Group Company which,
if decided adversely, could be expected to have a
material adverse effect on the relevant company's
business assets or financial condition or its ability to
comply with any obligation under the Discounting
Documents nor is there subsisting any unsatisfied
judgment or award given against any of them by any court,
arbitrator or other body;
11.1.8 ACCOUNTS: each of the latest Accounts of each Material
Company required to be delivered under Clause 12.1.1 is
prepared in accordance with GAAP and gives a true and
fair view of the financial position of the relevant
company as at the date to which they were prepared and
for the Financial Year of that company then ended and
that as at such date, such Material Company did not have
any significant liabilities (contingent or otherwise)
which are required to be disclosed or reserved in
accordance with GAAP and are not disclosed by or reserved
against in, such financial statements (or the notes
thereto) and such Material Company did not have any
unrealised or anticipated losses which should, in
accordance with GAAP be included in such Accounts by way
of note or provision;
11.1.9 MANAGEMENT ACCOUNTS, any Management Accounts required to
be delivered under Clause 12.1.2 have been properly
prepared in accordance with good accounting practice on a
basis consistent with that adopted in the Accounts, that
such Management Accounts are not considered misleading in
any material respects, that the profit and loss accounts
contained in the Management Accounts give a fair view of
the results of the Client for the trading period to which
they relate and the statement of net trading assets
contained in the Management Accounts gives a fair view of
the financial position of the business of the Client on
that date;
11.1.10 SECURITY INTEREST: no Security Interest (other than a
Permitted Security Interest) exists over all or any part of
the assets of any Group Company;
11.1.11 NO SECURITY INTEREST CREATED: the execution of the
Discounting Documents by the Group Companies (and the
Holding Company, as the case may be) and the exercise
of each of their respective rights and the performance
of each of their respective obligations under the
Discounting Documents will not result in the creation
of, or any obligation to create, any Security Interest over
or in respect of any of their assets except a Permitted
Security Interest;
11.1.12 AUTHORISATIONS: all authorisations, approvals,
licences, consents, filings, registrations, payment of
duties or taxes and notarisations required:
11.1.12.1 for the conduct of the business, trade and
ordinary activities of each Group Company;
11.1.12.2 for the performance and discharge of the
obligations of each Group Company and the
Holding Company under the Discounting
Documents to which it is a party; and
11.1.12.3 in connection with the execution, delivery,
validity, enforceability or admissibility in
evidence of the Discounting Documents
are in full force and effect;
11.1.13 TAXES: no claims are being or are likely to be
asserted against the Initial Client with respect
to Taxes which are likely to be determined
adversely to the Initial Client and which, if so
adversely determined, would cause a Material
Adverse Change, and that it is not overdue in the
filing of any Tax returns;
11.1.14 CORPORATE STRUCTURE: immediately prior to
Completion, the Client has and has had no
Subsidiaries;
11.1.15 ENVIRONMENTAL: save as fully and fairly
disclosed to NWB in writing and contained in the
Fifth Schedule of the NWB Agreement the Initial
Client:-
11.1.15.1 complies and has at all times complied in all
material respects with all Environmental Laws and
Environmental Consents which may cause a Material
Adverse Change except where any breach is a
matter the subject of indemnification in favour
of the Initial Client under the Acquisition
Agreement and the Initial Client has taken all
steps to enforce such rights of indemnification;
11.1.15.2 has obtained and maintained in full force and
effect all material Environmental Consents and,
there are no conditions, facts or circumstances
entitling any such material Environmental
Consents to be revoked, suspended, amended,
varied, withdrawn or not renewed or which would
prevent compliance with any Environmental
Consents;
11.1.15.3 is not required by any Environmental Consent
or any Environmental Law or as a result of any
claim in respect of a breach of any Environmental
Law or Consent to make any investment or to incur
any expenditure or to take or desist from taking
any action which is likely to have a material
adverse effect on its financial condition;
11.1.16 ENVIRONMENTAL BREACHES: no claim in respect of
a breach of any Environmental Law or Consent is
pending or has been made or threatened against the
Initial Client or any occupier of any property
owned or leased by the Clients;
11.1.17 DELIVERY AND SERVICE: in relation to each
Purchased Receivable, the Goods have been duly
Delivered or the Services duly provided;
11.1.18 BONA FIDE OBLIGATIONS: each Purchased Receivable is
an existing and bona fide obligation of the
Customer arising out of the sale of Goods or the
provision of Services by a Client in the ordinary
course of its trading;
11.1.19 ENFORCEABILITY: no Client is in breach of any
of its obligations to any Customer and the
Customer will accept the Goods or the Services and
the invoices therefor (or if the Customer is
bankrupt or in liquidation the Customer's trustee
in bankruptcy or liquidation will accept as proof
of debt for the unpaid balance of the invoiced
price) without any dispute or claim whatsoever
(whether justifiable or not) including disputes as
to price, terms, quantity, or quality, set-offs or
counter-claim or claims of release from liability
or inability to pay because of any act of God or
public enemy of war or because of the requirement
of law (whether in the United Kingdom or
elsewhere) or of rules, orders or regulations
having the force of law where any of the foregoing
would involve or result in a liability owing by
any Client in excess of(pound)100,000 at any time;
11.1.20 CUSTOMERS AUTHORITIES: to the best of the
knowledge, information and belief of the Initial
Client each Customer has obtained all the
authorities necessary under the regulation in
force in the country to which the Goods or
Services are provided or from which payment is to
be made, in order to pay the Receivables in
accordance with the contract or invoice;
11.1.21 CUSTOMER CONTRACTS: the standard terms of
trading with Customers provide that they are
governed by English law and specifies the nature
and quantity of the Goods or Services and every
invoice relating to such contracts contains the
terms and currency of payment and the benefit of
material contracts entered into between the
Clients and any of their Customers in respect of
Purchased Receivables is capable of formal
assignment in favour of LND and "material" for the
purposes of this Clause 11.2.21 shall mean
contracts with an aggregate rate in excess of 5%
of turnover of the relevant Client;
11.1.22 NO MATERIAL ADVERSE CHANGE: no Material Adverse
Change has occurred;
11.1.23 US LOCKBOX ACCOUNT: no Security Interest (other
than a Permitted Security Interest) or rights of
set off or combination of accounts exists in
favour of any person in respect of the Initial
Client's interest in the US Lockbox Account and
any monies standing to the credit of such account;
and
11.1.24 RETENTION OF TITLE: none of the contracts or
trading terms between any of the Clients and its
suppliers create any retention of title provisions
whereby the relevant suppliers are entitled
validly to the proceeds of sale of any Goods
supplied (or any products in which the Goods have
been mixed).
11.2 Repetition
----------
The representations and warranties set out in Clause 11.1 shall
survive the execution of this Agreement and shall be deemed to
be repeated on the Commencement Date and each of the said
representations and warranties shall be repeated on each
Quarter Date, in each case, as if made with reference to the
facts existing at the time of repetition.
11.3 LND Warranty
------------
LND warrants that the date of this Agreement it is authorised
to purchase Receivables under the terms of this Agreement.
12. UNDERTAKINGS
------------
12.1 Information undertakings
------------------------
The Initial Client undertakes that during the Security Period
it shall, unless LND otherwise agrees:
12.1.1 ACCOUNTS: as soon as the same become available (and in
any event within 120 days after the end of its Financial
Years), deliver to LND a copy of the Accounts for each
such Financial Year of each Material Company together
with:
12.1.1.1 the notes thereto and directors report thereon;
12.1.1.2 a copy of the management letter (if any)
addressed by the Auditors to the directors of
each such company in connection with its auditing
of the relevant Accounts as soon as practicable
after receipt of the letter by such company; and
12.1.1.3 a copy of Form 10-Q and 10-K (with all
attachments) filed by the Holding Company
with the Securities and Exchange Commission
in the United States of America;
12.1.2 MANAGEMENT ACCOUNTS: as soon as the same become available
(and in any event within 30 days after the end of each
successive accounting period (none of which shall be more
than 5 weeks in duration) (each an "Accounting Period")
during each of its Financial Years, deliver to LND a copy
of the management accounts (the "Management Accounts") of
the Client (in which case such management accounts shall
be consolidated management accounts relating to the
Group) and of each other Material Company for each such
Accounting Period and in such a form as to disclose the
financial position of the Client or, as the case may be,
the relevant Material Company and which shall include the
following information in respect of each such Accounting
Period:
12.1.2.1 a statement of profit and loss;
12.1.2.2 a balance sheet; and
12.1.2.3 a cashflow statement;
12.1.3 BUDGETS: no later than 30 days prior to the beginning of
each Financial Year a budget for such Financial Year in a
form previously approved by LND (without prejudice to any
other provision of this Clause 12 and including
specifically, but without limitation, profit and loss and
cashflow forecasts and balance sheet for such Financial
Year) and a certificate signed by a director of the
Initial Client (without personal liability on his part,
except in the case of fraudulent misrepresentation) to
the effect that implementation of such budget would not
give rise to:-
12.1.3.1 a Default; or
12.1.3.2 a Potential Default,
at any time during or following such Financial Year;
12.1.4 INFORMATION ON REQUEST: subject to LND complying with any
specific confidentiality provisions given in favour of
Customers will provide to LND such financial and other
information (other than customer trade secrets) in its
possession concerning the Clients or any of their
Customers as LND may from time to time reasonably
require;
12.1.5 CASHFLOW FORECASTS: provide to LND within 30 days of each
Quarter Date cashflow forecasts in respect of each
Material Company relating to the 6 month period
commencing on each such Quarter Date;
12.1.6 COMPLIANCE CERTIFICATES : at the time of the delivery
of the Accounts for each Financial Year, and at the
time of delivery of the Management Accounts on each
Quarter Date, a certificate in the form of Schedule 5
signed by a director of the Initial Client (without
personal liability on his part, except in the case of
fraudulent misrepresentation), stating :-
12.1.6.1 the respective amounts of PBIT, Interest,
Adjusted Tangible Net Worth, Current Assets,
Current Liabilities and Capital Expenditure
(such certificate to be prepared in each case in
respect of or, as the case may be, as at the end
of the Financial Year or at the Quarter Date to
which such Accounts or Management Accounts
respectively relate and to indicate the manner
in which such amounts have been calculated);
12.1.6.2 the application of such amounts to the ratios
and limits specified in Clause 12.4 and
confirming that, as at the date at or to which
the relevant Accounts or, as the case may be,
Management Accounts are made up, the Initial
Client was in compliance with the covenants and
undertakings set out in Clause 12.4 (or, if it
was not in such compliance, indicating the extent
of the breach and the steps intended to be taken
to remedy the same) and that, as at a date not
more than 7 days prior to the delivery of the
certificate:-
12.1.6.2.1 no Default has occurred and is continuing
(or, if such is not the case, specifying
the same); and
12.1.6.2.2 the Initial Client is not aware that any
PotentialDefault has occurred and is
continuing;
12.1.6.3 that there has been no Material Adverse Change
in the business, assets or financial conditions
of the Clients since the date as at, or to which,
such Accounts or, as the case may be, Management
Accounts are made up (or, if such is not the
case, specifying the same);
12.1.6.4 that the representations and warranties
contained in Clause 11.1 were true (other than
previously advised in writing to LND) as at the
date of or to which such Accounts or, as the case
may be, Management Accounts are made up as if
made with reference to the facts and
circumstances existing at such dates;
12.1.7 GAAP: ensure that all Accounts and other financial
information (to the extent practicable) submitted to LND
have been prepared in accordance with GAAP;
12.1.8 DEFAULT, LITIGATION, ETC.: promptly, upon becoming aware of
the same, notify LND of:
12.1.8.1 any Default or Potential Default;
12.1.8.2 will, upon the same being threatened or
pending and in any case immediately after the
commencement thereof, give to LND notice in
writing of any litigation, arbitration or
administrative proceedings or any dispute
affecting the Initial Client or any of its
Subsidiaries or any of their respective assets,
rights or revenues in an amount in excess
of(pound)100,000 which if determined against such
company could be expected to have an adverse
effect on the ability of any Group Company duly
to perform and observe their respective
obligations under this Agreement or any of the
other Discounting Documents;
12.1.8.3 Any such notice under this Clause 12.1.8 shall
be accompanied by a statement of a duly
authorised officer of the Initial Client (without
personal liability on his part, except in the
case of fraudulent misrepresentation) providing
such notice, setting forth details of the
occurrence referred to and stating what action
the Initial Client proposes to take with respect
thereto.
12.1.8.4 any Security Interest (other than a Permitted
Security Interest) attaching to any of the
assets of any Group Company;
12.1.8.5 any occurrence relating to any Group Company
(including any third party claim or
liability) which could be expected to have a
Material Adverse Change;
12.1.9 RECEIVABLES: within 15 days after the end of each
Accounting Period and in relation to each Approved Currency
provide to LND:
12.1.9.1 an aged analysis of the Receivables sold to
LND which remain outstanding at that date from
invoice date separately identifying the
outstanding amounts by each Customer showing
Customer balances as follows: total, up to 30
days past its invoice date, 31-60 days past its
invoice date, 61-90 days past its invoice date,
91-120 days past its invoice date and more than
120 days past its invoice date plus a summary
giving the totals of each of these categories and
identifying those accounts which are either
disputed or in solicitors' hands;
12.1.9.2 a copy of the sales ledger account relating
to the Receivables purchased by LND in the
form provided by LND for such purpose under
this Agreement;
12.1.9.3 a copy of each Customers' month end statement
with LND or such other open item breakdown of
the Purchased Receivables from a Customer,
and in each case in a form acceptable to LND;
12.1.9.4 a copy of each Client's purchase ledger at the
end of the Accounting Period; and
12.1.10 ADVICE TRANSMISSION: in relation to each Purchased
Receivable (or any Unpurchased Receivable if instructed
to do so by LND) promptly send to LND an Advice
Transmission (together with such other documents as LND
may require (including proof of Delivery of all Goods
notified on any Advice Transmission)) after
Delivery of the relative Goods or the provision of
the relative Services. An Advice Transmission may
contain the aggregate amount of various Receivables
but Unpurchased Receivables are not to be included
in an Advice Transmission unless the Initial Client
is instructed to do so by LND.
12.2 Positive Undertakings
---------------------
The Initial Client undertakes that during the Security Period
it shall, and it shall procure that each Group Company shall,
unless LND otherwise agrees:
12.2.1 PAY TAXES : will cause to be paid and discharged all
Borrowed Money when due (except to the extent that they
are the subject of a bona fide dispute as determined in
the reasonable opinion of LND and that the relevant
Client is taking all steps available to it to contest
such claim) and all Taxes imposed upon any Client, and
will file or cause to be filed all tax returns required
to be filed in all jurisdictions in which it is situated
or carries on business or is otherwise subject to
Taxation and pay all Taxes agreed with the Inland Revenue
or relevant authority shown to be due and payable on such
returns or any assessments made against it;
12.2.2 INSURANCE:
12.2.2.1 maintain and keep in force at all times such
insurance policies as have been disclosed in
writing to LND prior to the date hereof;
12.2.2.2 duly and punctually pay all premiums and
other moneys due and payable under all such
insurances as aforesaid and promptly upon
request by LND produce to the LND premium
receipts or other evidence of the payment
thereof;
12.2.3 AUTHORISATION: obtain, maintain and comply with the terms
of any authorisation, approval, licence, consent,
exemption, clearance, filing or registration required:
12.2.3.1 for the conduct of its business, trade and
ordinary activities; and
12.2.3.2 to enable it to perform its obligations under,
or the validity, enforceability or admissibility
in evidence of, any Discounting Document;
12.2.4 ACCESS: immediately upon request being given to the Initial
Client by LND, permit LND and any person (being an
accountant, auditor, solicitor, valuer or other
professional adviser of LND) authorised by LND to have,
at any time during business hours access to the property,
premises and accounting books and records of any Group
Company and to the officers of any Group Company;
12.2.5 FURTHER DOCUMENTS: at the request of LND, do or procure
the doing of all such things and execute or procure the
execution of all such documents as are, in the reasonable
opinion of LND, necessary or desirable to ensure that LND
obtains all its rights and benefits under the Discounting
Documents but so that the requirement of reasonableness
in this Clause 12.2.5 shall not apply to any assignment
over the Purchased Receivables required by LND, whose
requirements in this respect shall not be fettered in any
way;
12.2.6 DELIVERY OF DECLARATIONS, ETC.: within any relevant
period paid down in any statute, law or regulation make
all necessary declarations and deliver all necessary
forms and documents required to be delivered to, filed
with or registered with any United Kingdom governmental,
statutory or other body or agency by it in connection
with the Transaction Documents and any of the
transactions contemplated under the Transaction
Documents;
12.2.7 COMPLIANCE WITH ENVIRONMENTAL LAW: will procure that its
business is carried on in accordance in all material
respects with all applicable Environmental Law and that
all requisite Environmental Consents are maintained in
full force and effect at all times (other than in each
case where any breach is the subject of indemnification
in favour of the Initial Client under the Acquisition
Agreement provided that the Initial Client has taken all
steps to promptly enforce such rights);
12.2.8 AUDITORS CONFIRMATION: use all reasonable endeavours to
procure that, within 5 Business Days of the date of
appointment as auditors of any Group Company, the
relevant accountants deliver to LND a letter from such
newly appointed auditors confirming that they are aware
of the provisions of Clause 12.4.1 of this Agreement;
12.2.9 TRANSMISSION BANKING BUSINESS: ensure that all Customers
paying Receivables by way of Electronic Transmission are
given written instructions of the details of LND's bank
account;
12.2.10 PROTECTION OF RIGHTS UNDER THE ACQUISITION DOCUMENTS:
take all reasonable steps to preserve and enforce its
material rights arising under any Acquisition Document;
12.2.11 PERFORMANCE: promptly performs all its further or
continuing obligations of whatsoever nature to the
Customer arising out of the sale of Goods or the
provision of Services;
12.2.12 NOTICE: give notice to such of the Customers as LND
shall direct at any time that the right to the
Receivables specified in such notice (which may
include Receivables which have not yet come into
existence) has been assigned to (or purchased by)
LND, such notice to be in such form as LND shall
require;
12.2.13 BOOKS OR RECORDS: procure that all entries relating
to the sale of any Receivable by each Client to LND
are duly and promptly recorded in the books of that
Client and to ensure that all accounts maintained in
the books or records of the Clients in the names of
its Customers bear a conspicuous notation that they
have been assigned to LND;
12.2.14 PAYMENT TIMING: procure that any Purchased
Receivable becomes due and payable within 120 days of
the delivery of the relevant invoice;
12.2.15 DELIVERY AND SERVICES: procure that in relation to
each Purchased Receivable, the Goods have been duly
Delivered or the Services duly provided;
12.2.16 BONA FIDE OBLIGATION: procure that each Purchased
Receivable is an existing and bona fide obligation of
the Customer arising out of the sale of Goods or the
provision of Services by a Client in the ordinary
course of its trading;
12.2.17 CUSTOMER CONTRACTS: procure that each standard terms
of trading by each Client with Customers are governed
by English law and specify the nature and quantity of
the Goods or Services and that each invoice relating
to such contract contains the terms and currency of
payment and that, to the extent that any contract
between a Customer and a Client in respect of a
Purchased Receivable is not capable of assignment in
favour of LND, such Client will seek consent from the
Customer if required by LND (acting reasonably);
12.2.18 ENFORCEABILITY: use its best endeavours to procure
that no Client is in breach of any of its obligations
to any Customer and the Customer will accept the Goods
or Services and the invoices thereof (or if the
Customer is bankrupt or in liquidation the Customer's
trustee in bankruptcy or liquidation will accept a
proof of debt for the unpaid balance of the invoiced
price) without any dispute or claim whatsoever
(whether justifiable or not) including disputes as to
price, terms, quantity or quality, set-offs or
counter-claims or claims or release from liability
or inability to pay because of any act of God or
public enemy of war or because of the requirement of
law (whether in the United Kingdom or elsewhere) or of
rules, orders or regulations having the force of law
where any of the foregoing would involve or result in
a liability owing by any Client in excess of
(pound)100,000 at any time;
12.2.19 RECORDS: it has debt record insurance in a form
satisfactory to LND from a reputable insurer in the UK
or will (if required by LND) confirm in writing to LND
that the sales ledger records are backed up daily and
copy disks stored off site at all times and that
separate sales ledgers will be maintained by the
Client at each Site for each Receivable in each
Approved Currency;
12.2.20 AVAILABLE HEADROOM: it will ensure that, at all
times during the Invoice Discounting Facility, the
Available Headroom is a minimum amount
of(pound)2,500,000 (two million five hundred thousand
pounds Sterling) and to the extent that the Available
Headroom falls below such amount and to the extent
that loans ("Intra Group Loans") to the Initial Client
(but excluding for this purpose the Subordinated Loan
which shall not be counted towards calculation of the
Available Headroom) are less than (pound)2,500,000,
will procure that the Holding Company will lend to the
Initial Client such sums (on an interest free and
unsecured basis so as to increase the amount of the
Intra Group Loans up to a maximum amount
of(pound)2,500,000) as will result in the Available
Headroom being restored to the amount referred to
above
If in the opinion of LND, (after the increase of such
Intra Group Loans) the Available Headroom is still less
than (pound)2,500,000 it will take all steps open to it
to create the circumstances to permit that the Holding
Company will lend to the Initial Client such additional
sums (on an interest free and unsecured basis) up to an
additional maximum amount of (pound)2,500,000 (Two
million five hundred thousand Pounds Sterling) subject to
the Holding Company obtaining all required approvals from
MTT (as agent) and NWB
PROVIDED THAT the Holding Company's obligations to inject
such funds by way of loan under this Clause 12.2.20 can
never exceed the principal amount of (pound)5,000,000
(Five million Pounds Sterling);
12.2.21 SPECIFIC CONDITIONS: will comply at all times with
the Specific Conditions;
12.2.22 DORMANT COMPANIES: procure that no Dormant Subsidiary
will acquire any assets or assume any liabilities;
12.2.23 YEAR 2000 COMPLIANT: use best endeavours to procure
that all computer hardware, software, embedded
chips and related systems are, or will be by 30
September 1999, Year 2000 Compliant;
12.2.24 SUBSIDIARY ACCESSION: to the extent that it is
lawful to do so (and if and to the extent it is
unlawful to do so, will, and will procure that any
Subsidiary will comply, with all applicable
legislation in ensuring that it is lawful to do so)
will procure, that a deed or other documentation, in
form and substance satisfactory to LND incorporating
provisions substantially the same as those in the
guarantees and debentures (comprised in the
Discounting Documents) and/or such other Discounting
Documents as LND may require shall be executed and
delivered to LND by any Subsidiary of the Initial
Client, promptly upon its becoming such a Subsidiary,
unless otherwise agreed by LND;
12.2.25 US LOCKBOX ACCOUNT: will require all of its
Customers based in the United States of America or
paying Remittances in United States Dollars to make
such payments into the US Lockbox Account; and
12.2.26 INVOICES: will ensure that all invoices issued by
each Client in respect of Purchased Receivables
will contain a written direction by such Client
that all Remittances in respect of such invoice
shall be paid to LND's bank account at NWB.
12.3 Negative undertakings
---------------------
The Initial Client undertakes that during the Security Period
it shall not, and it shall procure that none of the Group
Companies shall, unless LND otherwise agrees:
12.3.1 NEGATIVE PLEDGE: create or permit to subsist any Security
Interest over any of its assets (including, but without
limitations, its interest in the US Lockbox Account or
any monies standing to the credit of such account) other
than Permitted Security Interests;
12.3.2 CHANGE OF BUSINESS: make any substantial change to the
general nature or scope of the business of the Group as a
whole from that carried on at the date of this Agreement;
12.3.3 MERGERS: enter into any amalgamation, demerger, merger or
reconstruction or any joint venture or partnership
agreement;
12.3.4 BORROWED MONEY: incur or permit to subsist any Borrowed
Money other than Permitted Borrowed Money;
12.3.5 ACQUISITIONS: acquire any business of or shares or
securities of any company (other than a Charging Group
Company);
12.3.6 DIVIDENDS AND THE SUBORDINATED LOAN: in respect of the
Initial Client only other than as permitted by the NWB
Agreement, make, pay or declare any dividend or other
distribution in relation to any shares forming part of
its issued share capital or repay or prepay the
Subordinated Loan or pay any interest in respect of the
Subordinated Loan; nor
12.3.7 DEALINGS WITH RECEIVABLES: other than in favour of LND,
sell, factor discount or otherwise dispose of or enter
into any agreement under which it may be or become
obliged to sell, factor, discount or dispose of any
Receivable; nor
12.3.8 DEALINGS WITH AFFILIATES: other than inter company
trading carried out between Clients and the Holding
Company and any of its other Subsidiaries on an arm's
length basis and on terms where the transfer of assets or
liabilities are settled on a cash transfer basis
immediately on transfer of the relevant assets and
liabilities, provide Goods or Services to an Affiliate.
12.3.9 DISPOSALS: make any Disposals other than Permitted
Disposals.;
12.3.10 MEMORANDUM AND ARTICLES OF ASSOCIATION: it will not
alter or vary any provision of its Memorandum and
Articles of association or convene any meeting with a
view either to the alteration of any provision of its
Memorandum of Association or Articles of Association or
to the passing of a resolution that it be wound up
(except for the purpose of a reconstruction or
amalgamation whilst solvent on terms previously
approved in writing by LND (such approval not to be
unreasonably withheld or delayed)); and
12.3.11 REDEMPTION OF SHARES: without the prior written
consent of LND, make any redemption of any of its
shares, purchase any of its shares or otherwise reduce
its issued share capital.
12.4 Financial Undertakings
----------------------
12.4.1 The Initial Client undertakes to ensure that during the
Security Period unless LND otherwise agrees:
12.4.1.1 PBIT TO INTEREST
----------------
the ratio of PBIT to Interest for each period
referred to in Column A below shall not be
less than the ratio set out in Column B below
opposite that period:-
COLUMN A COLUMN B
Commencement Date to 30/9/99 1.5:1
Commencement Date to 31/12/99 1.75:1
Commencement Date to 31/3/00 2:1
1/7/99 to 30/6/00 2.25:1
1/10/00 to 30/9/00 2.5:1
1/1/00 to 31/12/00 and thereafter 2.75:1
12.4.1.2 MINIMUM ADJUSTED TANGIBLE NET WORTH
The Adjusted Tangible Net Worth shall not be
less than (pound)6,250,000 on Commencement
Date and at any time in relation to each
period from the date set out in Column A
below to the date set out in Column B below
opposite such first mentioned date shall not
be less than the amount set out in Column C
below opposite both such dates:
COLUMN A Column B Column C
Commencement Date 30/12/99 (pound)6,250,000
31/12/99 30/3/00 (pound)7,250,000
31/3/00 29/6/00 (pound)7,450,000
30/6/00 29/9/00 (pound)7,950,000
30/9/00 30/12/00 (pound)8,650,000
31/12/00 30/12/01 (pound)9,350,000
31/12/01 and thereafter (pound)10,000,000
12.4.1.3 CAPITAL EXPENDITURE
the Capital Expenditure incurred by the
Initial Client in any period set out in
Column A below shall not exceed the amount
set out opposite such period in Column B
below:
COLUMN A Column B
Commencement Date to (pound)1,600,000
31/12/99
1/1/00 to 31/12/00 and (pound)2,100,000
thereafter
Provided that, for the avoidance of doubt:-
(i) the amount of Capital Expenditure in
Column B for the period from Commencement
Date to 31/12/00 shall exclude the costs
associated with the closure of Ductile Hot
Mill or the partial closure of Dudley Port
Steel Mill, Longmores or GB Steel Bar (which
costs shall be limited to a maximum of
(pound)1,500,000); and
(ii) the amounts set out in Column B shall
exclude any amounts re-invested by the Client
in the Business (as defined in the NWB
Agreement);
12.4.1.4 LIQUIDITY
the ratio of Current Assets to Current
Liabilities shall at all times not be less than
1.5:1
12.4.1.5 If the directors of any Group Company
determine at any time during the Security Period
that the accounting reference date of that Group
Company has or should be changed or any of the
accounting principles applied in the preparation
of any of the Accounts and the Management
Accounts shall be different from the accounting
principles previously used, or if as a result of
the introduction or implementation of any SSAP or
FRS or any change in any of them or in any
applicable law such accounting principles are
required to be changed the Initial Client shall
promptly give notice to LND of that change,
determination or requirement.
12.4.1.6 If LND believes that the financial
undertakings set out in this Clause 12.4 need to
be amended as a result of any such change,
determination or requirement, the Initial Client
shall negotiate with LND in good faith to amend
the existing financial undertakings so as to
provide LND with the same protections as the
financial undertakings set out in this Clause
12.4.
12.4.1.7 If the Initial Client and LND cannot agree
such amended financial undertakings within 30
days of the notice contained in Clause 12.4.2.1,
the Initial Client and LND shall jointly nominate
a firm of chartered accountants to settle the
amended financial undertakings, or in default of
such nomination, LND shall request the President
for the time being of the Institute of Chartered
Accountants in England and Wales to nominate
a firm of chartered accountants for that
purpose. Such accountants shall act as
experts and not arbitrators and their
decision shall be final and binding on the
Parties. The costs of such accountants shall
be paid by the Initial Client.
12.4.2 The calculation of ratios and other amounts under this
Clause 12.4 shall be made by LND by reference to the
latest Accounts, Management Accounts and other financial
information of the Group Companies for the Financial Year
of the Initial Client, or other period in relation to
which the calculation falls to be made. Each
determination of LND under this Clause 12.4 shall be
conclusive and binding on the Clients except for any
manifest error.
13. DEFAULT
-------
13.1 Each of the following shall be a Default:
13.1.1 Non-Payment: a Client does not pay on the due date any
-----------
amount payable by it under this Agreement at the place at
and in the currency and funds in which it is expressed to
be payable unless the failure to pay such amount is due
solely to administrative or technical delays in the
transmission of funds which are not the fault of that
client and such amount is paid within 2 Business Days
after its due date for payment; or
13.1.2 Other Defaults: any Group Company breaches any of its
--------------
obligations under any Discounting Document (other than
the obligations referred to in Clause 13.1.1) and if that
breach is capable of remedy, it is not remedied within 5
Business Days after written notice of that breach has
been given by LND to the Initial Client; or
13.1.3 Breach of representation or warranty: any representation
------------------------------------
warranty or statement made or deemed to be repeated by
any Group Company under any Discounting Document or in
any document delivered by or on behalf of any Client
under or in connection with any Discounting Document is
materially incorrect when made or deemed to have been
repeated unless the underlying circumstances (if in LND's
opinion, capable of remedy) are remedied within 3
Business Days after LND shall have given notice to the
Initial Client of such incorrect representation, warranty
or statement and of the action required by LND to remedy
the same; or
13.1.4 Unlawfulness or repudiation: it is unlawful for any Group
---------------------------
Company to perform or comply with, or any Group Company
repudiates, any of itsobligations under any Discounting
Document ; or
13.1.5 Cross-default:
-------------
13.1.5.1 any Borrowed Money of the Holding Company or
any of its Subsidiaries at any time becomes
prematurely due and payable or any creditor of
the Holding Company or any of its Subsidiaries
becomes entitled to declare any such Borrowed
Money due and payable prior to the date when they
would otherwise have become due or any guarantee
or indemnity given by the Holding Company or any
of its Subsidiaries in respect of any such
indebtedness is not honoured when due and called
upon provided that such sums exceed(pound)100,000
(or its equivalent at NWB's spot rate of exchange
in any other currency); or
13.1.5.2 any Borrowed Money of the Holding Company or
any of its Subsidiaries is not paid as and
when the same is or becomes due and payable;
or
13.1.5.3 any Security Interest over any assets of the
Holding Company or any of its Subsidiaries
securing Borrowed Money or any guarantee or
indemnity given by the Holding Company or any of
its Subsidiaries in respect of such Borrowed
Money becomes enforceable and steps are taken to
enforce the same;
13.1.6 Attachment or distress: a creditor or encumbrancer
----------------------
attaches or takes possession of or a distress, execution
sequestration or other process is levied or enforced upon
against any of the assets of any Group Company and such
process is not being discharged within 7 days; or
13.1.7 Insolvency:
----------
13.1.7.1 a Group Company is deemed unable to pay its
debts in accordance with section 123(1) or (2) of
the Insolvency Act 1986 (as that section may be
amended by order under section 416 of the
Insolvency Act 1986 or otherwise); or
13.1.7.2 a Group Company becomes, or admits to being,
unable to pay its debts as they fall due; or
13.1.7.3 a Group Company otherwise becomes insolvent
or stops or suspends making payments (whether
of principal or interest) with respect to all
or any class of its debts or announces an
intention to do so; or
13.1.8 Adjudication or appointment: any adjudication order or
appointment is made under or in relation to any of the
proceedings referred to in Clause 13.1.7 or 13.1.9 or
13.1.9 Administration:
--------------
13.1.9.1 any meeting of any Group Company is convened
for the purpose of considering any resolution
to present an application for an
administration order; or
13.1.9.2 a petition for an administration order in
relation to any Group Company is presented to
the court; or
13.1.9.3 any Group Company passes a resolution to
present an application for an administration
order; or
13.1.9.4 an administration order is made in relation to
any Group Company ; or
13.1.10 Compositions etc.: any steps are taken or
-----------------
negotiations commenced, by any Group Company or by the
creditors generally of any Group Company (or any class
of them) with a view to proposing (under any enactment
or otherwise) any kind of composition, scheme of
arrangement, compromise or arrangement, in each case
involving any Group Company and any of its creditors
generally (or any class of them); or
13.1.11 Appointment of receivers and managers:
-------------------------------------
13.1.11.1 any administrative or other receiver or any
manager is appointed of any Group Company or
any part of its assets and/or undertaking; or
13.1.11.2 the directors of any Group Company request
any person to appoint such a receiver or
manager; or
13.1.11.3 any other steps are taken to enforce any
Security Interest over all or any part of the
assets and/or undertaking of the Initial
Client or any of its Subsidiaries; or
13.1.12 Winding up:
----------
13.1.12.1 any meeting of any Group Company or any of
its Subsidiaries is convened for the purpose
of considering any resolution for (or to
petition for) its winding up; or
13.1.12.2 any Group Company passes such a resolution; or
13.1.12.3 any person presents any petition for the
winding up of any Group Company which is not
withdrawn or discharged within 6 Business
Days of service; or
13.1.12.4 an order for the winding up of any Group
Company is made not being a winding-up or
dissolution of such company involving an
amalgamation or reorganisation on a solvent basis
to which LND has given its prior written consent
(such consent not to be unreasonably withheld or
delayed); or
13.1.13 Striking Off: any corporate, legal or
------------
administrative proceedings are commenced with a
view to the striking off of any Group Company not
being a striking off involving an amalgamation or
reorganisation on a solvent basis to which LND has
given its prior written consent (such consent not
to be unreasonably withheld or delayed); or
13.1.14 Analogous Proceedings: there occurs, in
---------------------
relation to any Group Company in any country or
territory in which any of them carries on business
or to the jurisdiction of whose courts any part of
their assets is subject, any event which, in the
opinion of LND, appears in that country or
territory to correspond with, or have an effect
equivalent or similar to, any of those mentioned
in Clauses 13.1.6 to 13.1.13 (inclusive) or any
Group Company otherwise becomes subject, in any
such country or territory, to the operation of any
law relating to insolvency, bankruptcy or
liquidation; or
13.1.15 Cessation of business: any Group Company (other
---------------------
than a Dormant Subsidiary) suspends, ceases or
threatens to suspend or cease to carry on the whole
or a substantial part of its business; or
13.1.16 Change of control: any person or persons (not
-----------------
being a member of the Initial Client at the date
of this Agreement) acquires or agrees to acquire
or has an option to acquire any interest in the
equity share capital (as defined by section 744 of
the Companies Act 1985) of the Initial Client; or
13.1.17 Material adverse change: there occurs a Material
-----------------------
Adverse Change; or
13.1.18 Change of management: if any two of Michael
--------------------
Scharf, Ray Rozanski or Tony Bagshawe cease to be
employed by the Holding Company or any of its
Subsidiaries or if Tony Bagshawe ceases to be
employed by the Initial Client and a replacement
(satisfactory to LND) is not appointed to assume
his role and duties within 3 months of his ceasing
to be employed by the Initial Client; or
13.1.19 Listing: there is a Listing; or
-------
13.1.20 Guarantee: the Guarantee is determined or
---------
repudiated or any surety provided pursuant to this
Agreement by the Holding Company or any of its
Subsidiaries is determined.
13.2 Acceleration etc.
-----------------
If a Default occurs LND may, by notice (a "Default Notice") to
the Initial Client:
13.2.1 cancel the Invoice Discounting Facility and require the
Clients immediately to repurchase the Purchased
Receivables by payment to LND of amounts (in each
Approved Currency) equal to the Funding Amounts (for each
Approved Currency) and to pay all other sums payable
under this Agreement, whereupon they shall become
immediately due and payable. Upon the service of any
Default Notice LND's obligations under this Agreement
shall be terminated and the Invoice Discounting Facility
shall be cancelled and reduced to zero; or
13.2.2 place all or any part of the Invoice Discounting Facility
repayable on demand, so that the Initial Client shall be
obliged to immediately repurchase the Purchased
Receivables purchased by LND for an amount equal to the
Funding Amount together with interest accrued thereon
which shall be due and payable on LND's demand.
14. SET-OFF
-------
LND may set off any obligation owed by a Client under any Discounting
Document against any obligation owed by LND to that Client,
regardless of the place of payment, booking branch or currency of
either obligation. If the obligations are in different currencies,
LND may convert either obligation at the relevant spot rate of
exchange of NWB for the purpose of the set-off and such calculation
shall, in the absence of manifest error, be binding upon the Client
in all respects.
For the avoidance of doubt, there shall be excluded from the effect
of this clause any credit balances arising in favour of any Client
solely as a consequence of it paying money to LND when it is not
obliged to do so under this Agreement, including any payments made in
error.
15. FEES AND EXPENSES
-----------------
15.1 Expenses
--------
The Initial Client shall on demand pay all reasonable expenses
incurred (including legal, valuation and accounting fees) and
any VAT on those expenses:
15.1.1 by LND in connection with the negotiation, preparation
and execution of the Discounting Documents and the other
documents contemplated by the Discounting Documents;
15.1.2 by LND in connection with the granting of any release,
waiver or consent or in connection with any amendment or
variation of any Discounting Document; and
15.1.3 by LND in enforcing, perfecting, protecting or preserving
(or attempting so to do) any of its rights, or in suing
for or recovering any sum due from a Client or any other
person under any Discounting Document or in investigating
any possible Default.
15.2 Administration Fees
-------------------
The Initial Client shall pay to LND an annual administration
fee of (pound)10,000 plus VAT per Site (with a minimum of
(pound)50,000 payable each year). This fee will be reviewed
once the proposed consolidation of the Sites has taken place
and is payable each year in advance with the first such payment
being payable upon the date of this Agreement.
15.3 Non Utilisation Fee
-------------------
15.3.1 The Initial Client shall pay non-utilisation fees to LND
at the rate of 0.75 per cent per annum above Base Rate
from time to time on the difference between the average
Sterling Funding Amount during the relative period and
the Available Amount;
15.3.2 The non-utilisation fee shall accrue from day to day
throughout the applicable period on the basis of a 365
days' year and shall be paid in arrears on each
succeeding Quarter Day and the Termination Date.
15.4 Documentary Taxes Indemnity
---------------------------
Although it is not believed by the Parties that any Taxes or
stamp duty are payable as a consequence of the execution of
this Agreement or the transactions contemplated by it, if that
belief is found to be erroneous or if, after the date hereof,
the law in such respect is changed, all stamp, documentary,
registration or other like duties or Taxes, including any
penalties, additional, fines, surcharges or interest relating
to those duties and Taxes, which are imposed or chargeable on
or in connection with any Discounting Document shall be paid by
the Clients. LND shall be entitled but not obliged to pay any
such duties or Taxes (whether or not they are its primary
responsibility). If LND does so the Client shall on demand
indemnify LND against those duties and Taxes and against any
reasonable costs and expenses incurred by LND in discharging
them.
15.5 VAT
---
15.5.1 All payments made by a Client under the Discounting
Documents are calculated without regard to VAT. If any
such payment constitutes the whole or any part of the
consideration for a taxable or deemed taxable supply
(whether that supply is taxable pursuant to the exercise
of an option or otherwise) by LND, the amount of that
payment shall be increased by an amount equal to the
amount of VAT which is chargeable in respect of the
taxable supply in question.
15.5.2 No payment or other consideration to be made or furnished
to a Client by LND pursuant to or in connection with any
Discounting Document or any transaction or document
contemplated in any Discounting Document may be increased
or added to by reference to (or as a result of any
increase in the rate of) any VAT which shall be or may
become chargeable in respect of any taxable supply.
15.6 Indemnity payments
------------------
15.6.1 Where in any Discounting Document a Client has an
obligation to indemnify or reimburse LND in respect of
any loss or payment, the calculation of the amount
payable by way of indemnity or reimbursement shall take
account of the likely Tax treatment in the hands of LND
(as determined by LND's auditors) of the amount payable
by way of indemnity or reimbursement and of the loss or
payment in respect of which that amount is payable.
This Clause 15.6.1 does not apply to any corporation Tax
incurred by LND on its overall net income.
15.6.2 If (as a consequence of this Clause 15.6) LND obtains a
refund of tax, or credit against tax on its overall net
income, by reason of a Client paying an
additional amount under this Clause 15.6 (a "Tax
Credit"), and LND is able to identify the Tax Credit as
being attributable, wholly or partly to such additional
amount, then LND shall reimburse to the Clients such
amounts as it shall reasonably determine to be the
proportion of the Tax Credit as will leave LND (after
that reimbursement) in no better or worse position that
it would have been in if the additional payment had not
been required. LND shall not be obliged to disclose any
confidential information regarding its business, tax
affairs or computations to a Client.
15.7 Debiting authority
------------------
The Clients authorise LND to debit the amount of any fees
payable by any of them under this Agreement from any account
held by it with LND.
16. WAIVERS: REMEDIES CUMULATIVE
----------------------------
The rights of LND under the Discounting Documents:
16.1 may be exercised as often as necessary;
16.2 are cumulative and not exclusive of its rights under the general
law; and
16.3 may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver of
that right.
17. MISCELLANEOUS
-------------
17.1 Severance
---------
If any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, that shall not
effect:
17.1.1 the legality, validity or enforceability in that
jurisdiction of any other provision of this Agreement; or
17.1.2 the legality, validity or enforceability in any other
jurisdiction of that or any other provision of this
Agreement.
17.2 Counterparts
------------
This Agreement may be executed in any number of counterparts
and this shall have the same effect as if the signatures on the
counterparts were on a single copy of this Agreement.
18. NOTICES
-------
18.1 Method
------
Each notice or other communication to be given under this
Agreement shall be given in writing in English and, unless
otherwise provided, shall be made by telex, fax or letter.
18.2 Delivery
--------
18.2.1 Any notice, proceedings or other documents to be served on
the Initial Client pursuant to this Agreement shall be
addressed to it at Victoria Steel Works, Bull Lane, Moxley,
Wednesbury, West Midlands, WS10 8RS (Marked for the
attention of Tony Bagshawe) with a copy to be sent to the
Holding Company simultaneously at 667 Madison Avenue, New
York, New York 10021, United States of America (Attention
Michael Scharf) or such address as the Initial Client or
the Holding Company (as the case may be) may hereafter
advise LND in writing or sent to it by facsimile at the
latest number notified to LND by the Initial Client.
Notices sent by facsimile shall be deemed to be given on
the date telephone confirmation of receipt is received and
notices sent by post first class pre-paid shall be deemed
to be served 3 Business Days after despatch provided that
if such date of despatch is not a Business Day in the
country of the addressee or if the time of despatch of
a facsimile is after the close of business for the
relevant date in the country of the addressee this
shall be deemed to have been received at the opening of
business on the next Business Day.
18.2.2 Any notice or other communication to be given by any
Party to LND under this Agreement shall (unless LND has
by 15 days' notice specified another address) be given to
LND at the address given below:-
Smith House
Elmwood Avenue
Feltham
Middlesex
TW13 7WD
Attention: the Company Secretary
Fax: 0181 895 7568
with copies to:
Lombard Nat West Commercial Services Limited
Alexandra House
Lawnswood Park
Redvers Close
Leeds
LS16 6QY
Attention: Ian Conway
Fax: 0113 230 6690
18.3 Deemed receipt
--------------
Any notice or other communication given by either Party to the
other shall be deemed to have been received:
18.3.1 if sent by fax, with a confirmed receipt of transmission
from the receiving machine, on the day on which
transmitted;
18.3.2 in the case of a written notice given by hand, on the day
of actual delivery; and
18.3.3 if posted, on the third Business Day or, in the case of
airmail, the fifth Business Day following the day on
which it was despatched by first class mail postage
prepaid or, as the case may be, airmail postage prepaid;
provided that a notice given in accordance with the above
but received on a day which is not a Business Day or
after normal business hours in the place of receipt shall
only be deemed to have been received on the next Business
Day.
19. ASSIGNMENTS AND TRANSFERS
-------------------------
19.1 Benefit of Agreement
--------------------
This Agreement shall be binding upon and enure to the benefit of
each Party and its successors and assigns.
19.2 Assignments and transfers by Clients
No Client shall be entitled to assign or transfer any of its
rights or obligations under this Agreement.
19.3 Assignments by LND
19.3.1 Subject to Clause 19.3.2, LND may assign any of its
rights and benefits under the Discounting Documents to
another bank or other financial institution.
19.3.2 LND shall notify the Initial Client of such assignment no
less than 30 days before such assignment.
19.3.3 If the assignee is not:-
19.3.3.1 National Westminster Bank plc; or
19.3.3.2 a company controlled by National Westminster
Bank plc
(together a "NatWest Group Company"),
the Initial Client (on behalf of the Clients) shall be
entitled to repurchase all, but not part of, the
Purchased Receivables by giving LND notice (which shall
be irrevocable) no more than 90 days after receiving
notice of the assignment. The Initial Client's
obligations under such notice will be to repurchase the
Purchased Receivables by payment to LND of amounts in
each Approved Currency equal to the Funding Amounts on
the date of payment for each Approved Currency provided
always that no repayment fee shall be payable to LND. Any
such payment will be subject to Clause 20.1. On such
repurchase the Invoice Discounting Facility shall
automatically be cancelled and reduced to zero.
19.4 Transfers by LND
----------------
19.4.1 Subject to Clause 19.4.2, LND may transfer any of its
rights and obligations under the Discounting Documents to
another bank or other financial institution. The Initial
Client shall enter into such documents as LND may
reasonably stipulate in order to effect any such
transfer.
19.4.2 LND shall notify the Initial Client of such transfer no
less than 30 days before such transfer if the transferee
is a NatWest Group Company.
19.4.3 If the transferee is not a NatWest Group Company, the
Initial Client (on behalf of the Clients) shall be
entitled to repurchase all, but not part of, the
Purchased Receivables by giving LND notice (which shall
be irrevocable) no more than 90 days after receiving
notice of the transfer The Initial Client's obligations
under such notice will be to repurchased the Purchased
Receivables by payment to LND of amounts in each
Approved Currency provided always that no repayment fee
shall be payable to LND. Any such payment will be
subject to Clause 20.1. On such repurchase the Invoice
Discounting Facility shall automatically be cancelled
and reduced to zero.
19.5 Disclosure of information
LND may disclose (on a confidential basis) to its professional
advisers and to any actual or potential assignee, transferee or
sub-participant any information which LND has acquired under or
in connection with any Discounting Document.
20. INDEMNITIES
-----------
20.1 Currency indemnity
------------------
20.1.1 Any payment made to or for the account of or received by
LND in respect of any moneys or liabilities due, arising
or incurred by a Client to LND in a currency (the
"CURRENCY OF PAYMENT") other than the currency in which
the payment should have made under this Agreement (the
"CURRENCY OF OBLIGATION") in whatever circumstances
(including as a result of a judgment against a Client)
and for whatever reason shall constitute a discharge to
that Client only to the extent of the Currency of
Obligation amount which LND is able on the date of
receipt of such payment (or if such date of receipt if
not a Business Day, on the next succeeding Business Day)
to purchase with the Currency of Payment amount at its
spot rate of exchange (as conclusively determined by LND)
in the London foreign exchange market.
20.1.2 If the amount of the Currency of Obligation which LND is
so able to purchase falls short of the amount originally
due to LND under this Agreement, then the relevant Client
shall immediately on demand indemnify LND against any
loss or damage arising as a result of that shortfall by
paying to LND that amount in the Currency of Obligation
certified by LND as necessary so to indemnify it.
20.2 General
-------
20.2.1 The indemnities in Clause 20.1 shall constitute a
separate and independent obligation from the other
obligations contained in this Agreement, shall give rise
to a separate and independent causes of action, shall
apply irrespective of any indulgence granted from time to
time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated
sum or sums in respect of amounts due under this
Agreement or under any such judgment or order.
20.2.2 The Client will accept a certificate signed by the
Company Secretary or a director of LND as to all or any
of the following on the date referred to in
the certificate:
20.2.2.1 the balance on any Receivables Purchased
Account and any Memorandum Discounting Statement;
20.2.2.2 any loss or damage suffered by LND;
20.2.2.3 any other amount payable to LND under the
Discounting Documents.
In any proceedings such certificate shall be conclusive
evidence as to the balance, loss, damage or amount on the
date so certified.
21. LAW & JURISDICTION
------------------
21.1 Law
---
This Agreement is governed by and shall be construed in
accordance with English law.
21.2 Jurisdiction
------------
21.2.1 The Parties agree that the courts of England shall
have exclusive jurisdiction to settle any disputes
which may arise in connection with any Discounting
Document and that any judgment or order of an English
court in connection with any Discounting Document is
conclusive and binding on them and may be enforced
against them in the courts of any other jurisdiction.
This Clause 21.2.1 is for the benefit of LND only and
shall not limit the right of LND to bring proceedings
against the Holding Company or any Client in connection
with any Discounting Document in any other court of
competent jurisdiction (in the country in which the
Holding Company or such Client is incorporated or
domiciled or in any other country where, in the opinion
of LND, assets belonging to such entities are available
to satisfy such proceedings) or concurrently in more
than one jurisdiction.
21.2.2 Each Client:
21.2.2.1 waives any objections which it may have to
the English courts on the grounds of venue or
forum non conveniens or similar grounds as
regards proceedings in connection with any
Discounting Document; and
21.2.2.2 consents to service of process by mail or in
any other manner permitted by the relevant
law.
21.2.3 Agent for service
-----------------
Each Client which is not a "company" or an "overseas
company" within the meaning of the Act (an "OVERSEAS
CLIENT") shall at all times maintain an agent for service
of process in England satisfactory to LND. Any writ,
summons, judgment or other notice of legal process shall
be sufficiently served on each Overseas Client if
delivered to that agent at its address for the time
being. No Overseas Client shall revoke the authority of
that agent. If for any reason that agent no longer serves
as agent of each Overseas Client to receive service of
process, each Overseas Client shall promptly appoint
another such agent and immediately advise LND of that
appointment.
22. EUROPEAN ECONOMIC AND MONETARY UNION
------------------------------------
22.1 MONETARY UNION
--------------
If, as a result of the implementation of European economic and
monetary union ("MONETARY UNION"):-
22.1.1 the currency in which a Funding Amount (or any other
obligation under this Agreement or the Discounting
Documents) is denominated ceases to be the lawful
currency of the country of that currency and is replaced
by a European single currency; or
22.1.2 that currency and a European single currency are at the
same time recognised by the central bank of the country
of that currency as the lawful currency of that country;
and LND so requires, then each amount which would otherwise
have been payable by the Client under this Agreement or the
Discounting Documents in that currency shall be paid by the
Client in the European single currency and the amount so
payable shall be such amount of the European single currency as
equals the amount of that currency translated at the rate of
exchange recognised by the European Central Bank for the
conversion of the relevant currency into the European single
currency for the purposes of implementation of monetary union.
22.2 NECESSARY AMENDMENTS
--------------------
If, following the implementation of monetary union, LND so
requires, this Agreement will be amended to the extent LND
specifies to be necessary to reflect the implementation of
monetary union and the redenomination of the Invoice
Discounting Facility (or part thereof) and to put the Parties
to this Agreement in the same position, so far as possible,
that they would have been in had monetary union not occurred
and the Client agrees to pay the costs of LND incurred in
respect thereof.
23. ANNOUNCEMENTS
-------------
No announcement concerning the subject matter of this Agreement (or
any document ancillary to it) shall be made by either Party without
the prior written approval of the other (such approval not to be
unreasonably withheld or delayed) except as required by law or by a
relevant regulatory authority.
IN WITNESS whereof the Parties have caused this Agreement to be duly
executed on the date set out above.
Acknowledged and agreed to as of this 23rd day of August 1999
By: /s/ Robert J. Kush
Name: Robert J. Kush
Title:Vice President
For and on behalf of
MANUFACTURERS AND TRADERS TRUST COMPANY
THE INITIAL CLIENT
SIGNED by ) /s/ RAYMOND ROZANSKI
)
for and on behalf of )
NIAGARA LASALLE (UK) LIMITED )
in the presence of:- ) /s/ A.J. BAYSHAWE
LND
SIGNED by )
)
for and on behalf of )
LOMBARD NATWEST ) /s/ IAN CONWAY
DISCOUNTING LIMITED )
in the presence of:- )
/s/ RUPERT HAGUE-HOLMES
115 Colmore Row
Birmingham
B3 3AL
EXHIBIT 4.13
DATED 23 AUGUST 1999
--------------------
(1) LOMBARD NATWEST DISCOUNTING LIMITED
(2) NIAGARA CORPORATION
(3) NIAGARA LASALLE (UK) LIMITED
INTERCREDITOR AGREEMENT
Ref: RHH/PAJ/Bircorp186053
Eversheds
115 Colmore Row
Birmingham
B3 3AL
THIS AGREEMENT is made on the 23rd August 1999
- --------------
BETWEEN:-
- ---------
(1) Lombard NatWest Discounting Limited (registered number 943038), whose
registered office is at Smith House, PO Box 50, Elmwood Avenue,
Feltham, Middlesex, TW13 7WD ("LND") as financier under an invoice
discounting agreement dated 23 August 1999 made between LND (1) and
the Borrower (2) (the "Invoice Discounting Agreement"), which
expression shall be deemed to include any amendments, supplements,
accessions, variations or additions made in accordance with the terms
of the Invoice Discounting Agreement;
(2) Niagara Corporation, a Delaware Corporation whose principal place of
business is at 667 Madison Avenue, New York, New York 10021, United
States of America ("Niagara"); and
(3) Niagara LaSalle (UK) Limited (registered number 3725308), whose
registered office is at Victoria Steel Works, Bull Lane, Moxley,
Wednesbury, WS10 8RS (the "Borrower") (together the "Parties")
NOW IT IS HEREBY AGREED AS FOLLOWS:
- ----------------------------------
1. Except where expressly stated to the contrary, or where the context
otherwise requires, terms defined in the Invoice Discounting Agreement
shall have the same meanings when used in this Agreement. In this
Agreement, the following terms have the following meanings:
"Discharge Date" means the date on which LND's
Liabilities under the Invoice
Discounting Agreement have been
irrevocably paid or discharged in full;
"LND's Liabilities" means all moneys and liabilities,
whatsoever and wherever, actual or
contingent, and whether as principal or
surety, presently or in the future due,
owing or incurred by the Borrower to LND
under the Invoice Discounting
Agreement and the other Discounting
Documents;
"Shares" means any share capital in the Borrower
whether issued now or in the future;
"Subordinated Liabilities" means all moneys and liabilities,
whatsoever and wherever, actual or
contingent, and whether as principal or
surety, presently or in the future due,
owing or incurred by the Borrower to
Niagara under the Intra Group Loan
Agreement including, without limitation,
all interest, fees and related costs.
2. In consideration of LND entering into the Invoice Discounting
Agreement and making available the Invoice Discounting Facility to the
Borrower, until the Discharge Date, Niagara and the Borrower jointly
and severally agree and undertake with LND in the terms set out in
this Agreement.
3. The Borrower shall ensure that, until the Discharge Date and other
than as permitted by the terms of the Invoice Discounting Agreement,
it shall not pay (or make) any dividend (or other distribution) in
respect of the Shares without the prior written consent of LND, or
make any repayments or prepayments of principal (or interest) to
Niagara in respect of the Subordinated Liabilities, but the parties
acknowledge that the provision of this clause 3 and clauses 6.3, 6.5
and 6.9 of this Agreement will not restrict the repayment of loans
made to the Borrower by Niagara pursuant to clause 12.3.4 or 12.2.20
of the Invoice Discounting Agreement unless at that time (i) any
payment of monies due owing or incurred under the Invoice Discounting
Agreement remains unpaid or (ii) the financial covenants contained in
clause 12.4 of the Invoice Discounting Agreement have not been met or
(iii) a Default or Potential Default has occurred and is continuing.
4. Any moneys received by Niagara from the Borrower in breach of the
undertaking in clause 3 shall be deemed never to have been paid by the
Borrower to Niagara.
5. Niagara acknowledges and undertakes to LND that any repayments,
prepayments, dividends or distributions received by it from the
Borrower in breach of clause 3 are deemed to be held on trust by
Niagara for and on behalf of LND and shall be paid to LND, together
with interest accrued at 2 per cent above the base rate of National
Westminster Bank Plc from time to time starting from the date of
receipt by Niagara, within 3 Business Days of receipt.
6. Until the Discharge Date:-
6.1 Niagara undertakes to LND that Niagara shall not transfer any
part of the Subordinated Liabilities or the benefit of the
Intra Group Loan Agreement nor transfer any Shares held by
Niagara (or its interest and entitlement thereto) to any
person, and the Borrower undertakes that it shall not register
any transfer of any Shares;
6.2 other than the Shares already issued to Niagara and referred to
in Clause 2.3 of paragraph 2 of Schedule 1 to the Invoice
Discounting Agreement, the Borrower undertakes to LND that it shall
not issue any further Shares in the Borrower to any other person;
6.3 the rights of Niagara in respect of the Subordinated
Liabilities (and the obligations of the Borrower in respect of
the Subordinated Liabilities) are subordinated (and postponed
in all respects) to the rights of LND (and the obligations of
the Borrower) under the Invoice Discounting Agreement and the
other Discounting Documents and accordingly repayments of any
amount (whether of principal or interest) under the
Subordinated Liabilities shall only be made to Niagara after
the Discharge Date;
6.4 if the Subordinated Liabilities or any part thereof are
converted into Shares, the Borrower undertakes not to declare
any dividends in respect of such Shares, or make any
distributions, without the prior written consent of LND;
6.5 Niagara and the Borrower undertake that the Subordinated
Liabilities shall not be paid by the Borrower until after the
point in time that LND has received repayment of the Invoice
Discounting Facility or any other monies or liabilities due,
owing or incurred under the Invoice Discounting Agreement;
6.6 Niagara undertakes not to demand, claim, sue or prove for or
receive payment of any of the Subordinated Liabilities or
continue with any demand, claim, proof or suit in respect
thereof which it may previously have made or commenced;
6.7 the Borrower undertakes not to create any kind of Security
Interest under which the Subordinated Liabilities or any part
or parts thereof are to be secured in favour of Niagara;
6.8 Niagara and the Borrower undertake not to vary, alter or amend
in any way the Intra Group Loan Agreement or the terms upon
which the Subordinated Liabilities have been made available
without obtaining LND's prior written consent;
6.9 LND's Liabilities shall always rank above and in priority to
the Subordinated Liabilities in all respects; and
6.10 Available Headroom: it will ensure that, at all times during
the Invoice Discounting Facility, the Available Headroom is a
minimum amount of (pound)2,500,000 (two million five hundred
thousand pounds Sterling) and to the extent that the Available
Headroom falls below such amount and to the extent that loans
("Intra Group Loans") to the Initial Client (but excluding for
this purpose the Subordinated Loan which shall not be counted
towards calculation of the Available Headroom) are less than
(pound)2,500,000, will procure that the Holding Company will
lend to the Initial Client such sums (on an interest free and
unsecured basis so as to increase the amount of the Intra Group
Loans up to a maximum amount of (pound)2,500,000) as will
result in the Available Headroom being restored to the
amount referred to above.
If the opinion of LND, (after the increase of such Intra Group
Loans) the Available Headroom is still less than
(pound)2,500,000 it will take all steps open to it to create
the circumstances to permit that the Holding Company will lend
to the Initial Client such additional sums (on an interest free
and unsecured basis) up to an additional maximum amount of
(pound)2,500,000 (Two million five hundred thousand Pounds
Sterling) subject to the Holding Company obtaining all required
approvals from MTT (as agent) and NWB
PROVIDED THAT the Holding Company's obligations to inject such
funds by way of loan under this Clause 12.2.20 can never exceed
the principal amount of (pound)5,000,000 (Five million Pounds
Sterling)
7. Other than under LND's rights to assign or transfer the benefit of the
Invoice Discounting Agreement in the circumstances envisaged by
Clauses 19.3 and 19.4 of the Invoice Discounting Agreement, the rights
and obligations under this Agreement may not be assigned or
transferred by any Party to any other person, without the prior
written consent of each of the others.
8. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be an original, but all of
which when taken together shall constitute a single instrument.
9. Every notice made under this Agreement shall be given in writing and
shall be sent:
9.1 in the case of the Borrower, to its address at:
Victoria Steel Works,
Bull Lane,
Moxley,
Wednesbury
West Midlands WS10 8RS
Facsimile : 0121 556 7623
Attention : Tony Bagshawe;
with a copy to Niagara at the address and to the addressee set
out below
9.2 in the case of LND, to its address at:
Smith House
PO Box 50
Elmwood Avenue,
Feltham
Middlesex TW13 7WD
Facsimile : 0181 895 7568
Attention : The Company Secretary; and
with a copy to :
Lombard Nat West Commercial Services Limited
Alexandra House
Lawnswood Park
Redvers Close
Leeds
LS16 6QY
Facsimile : 0113 230 6690
Attention : Ian Conway
9.3 in the case of Niagara, to its address at:
667 Madison Avenue,
New York 10021
United States of America
Facsimile : 001 212 317 1001
Attention : Michael Scharf; or
9.4 to such other address or facsimile number as any of the above
Parties may from time to time notify to each of the other
Parties in writing.
10. Every notice sent pursuant to this Agreement:
10.1 personally, shall be deemed to have been received on delivery;
10.2 by facsimile shall be confirmed by posting first class post,
and shall be deemed to have been received three Business Days
after posting and not, for the avoidance of doubt, on
transmission of the facsimile; and
10.3 by first class post, shall be deemed to have been received
three Business Days after posting.
11. This Agreement shall be governed by, and construed in accordance with,
English law and the Parties hereto submit to the exclusive
jurisdiction of the English Courts in respect of any dispute arising
out of it.
EXECUTED as a Deed
by LOMBARD NATWEST DISCOUNTING LIMITED /s/ IAN CONWAY
acting by its authorised signatory in the presence of:-
R.D. Hague-Holmes
115 Colmore Row
Birmingham
B3 3AL
EXECUTED as a Deed
by NIAGARA CORPORATION
acting by its duly authorised officers:-
/s/ MICHAEL SCHARF
PRESIDENT
/s/ RAYMOND ROZANSKI
VICE PRESIDENT
EXECUTED as a Deed
by NIAGARA LASALLE (UK) LIMITED
acting by its duly authorised officers:-
/s/ TONY BAGSHAWE
/s/ RAYMOND ROZANSKI
EXHIBIT 4.14
DATED 23 AUGUST 1999
(1) LOMBARD NATWEST DISCOUNTING LIMITED
(as financier)
(2) NATIONAL WESTMINSTER BANK PLC
(as security agent)
(3) MANUFACTURERS AND TRADERS TRUST COMPANY
(as beneficiary)
(4) NATIONAL WESTMINSTER BANK PLC
(as lender)
(5) NIAGARA LASALLE (UK) LIMITED
(as borrower)
(6) NIAGARA CORPORATION
--------------------
DEED OF PRIORITY
--------------------
Ref : PAJ/RHH - 077506.010001
Eversheds
115 Colmore Row
Birmingham
B3 3AL
Bircorp 187756-4
THIS DEED is made the 23rd day of August 1999
BETWEEN
(1) LOMBARD NATWEST DISCOUNTING LIMITED (Company Number 943038) whose
registered office is at Smith House, P O Box 50, Elmwood Avenue,
Feltham, Middlesex, TW13 7QD (the "Financier")
(2) NATIONAL WESTMINSTER BANK PLC (Company Number 929027) acting through
its Agency Group at 5th Floor, Juno Court, 24 Prescott Street, London
E1 8BB as security agent for the Beneficiary (the "Agent")
(3) MANUFACTURERS AND TRADERS TRUST COMPANY a New York banking
corporation whose principal place of business is at One Fountain
Plaza, Buffalo, New York 14203-1495, United States of America (the
"Beneficiary")
(4) NATIONAL WESTMINSTER BANK PLC (Company Number 929027) acting through
its branch at P O Box 4641, 103 Colmore Row, Birmingham, B3 3NR (the
"Lender")
(5) NIAGARA LASALLE (UK) LIMITED (Company Number 3725308) whose
registered office is at Victoria Street Works, Bull Lane, Moxley,
Wednesbury, West Midlands WS10 8RS (the "Company")
(6) NIAGARA CORPORATION a Delaware corporation whose principal place of
business is at 667 Madison Avenue, New York, New York 10021, United
States of America ("Niagara")
AND WITNESSES as follows:-
1. Definitions and Interpretation
------------------------------
1.1 Words and phrases defined or referred to in the Financier's
Security (as defined below) shall have the same meanings,
unless the context otherwise requires, where used in this deed.
1.2 In this deed, except where the context otherwise requires, the
following expressions have the meanings set out against each of
them:-
"Agent's Security" the debenture dated 21 May 1999
given by the Company to the Agent (as
security agent for the Beneficiary);
"Agreement" the invoice discounting agreement
dated 23 August 1999 for the purchase
of Receivables between the Financier
and the Company and any extension or,
amendments to such agreement;
"Beneficiary Discharge the date upon which all the
Date" liabilities outstanding to the
Beneficiary (as agent) under
the US Financing Agreements have been
irrevocably and unconditionally
satisfied in full by the borrowers
thereunder;
"Discounting Documents" has the same meaning as in the
Agreement;
"Financier Discharge Date" the date upon which all the
liabilities outstanding to the
Financier under the Agreement and/or
the Financier's Security have been
irrevocably and unconditionally
discharged or satisfied in full by the
Company;
"Financier's Security" the debenture dated 23 August 1999
given by the Company to the Financier;
"Inter Bank Agreement" the agreement dated 21 May 1999
made between (1) the Lender, (2) the
Beneficiary and (3) the Company
relating to the Lender's lending
relationship with the Company and
certain letters of credit issued by the
Beneficiary to the Lender to secure
such lending;
"Non-Vesting Receivables" all or any Receivables or their
related rights purchased or purported
to be purchased by the Financier
pursuant to the Agreement which fail to
vest absolutely and effectively in the
Financier for any reason;
"NWB Lending Documents" has the same meaning as in the
Agreement but subject to the variations
expressly set out in this Deed;
"Receivables" has the same meaning as in the
Agreement;
"Receiver" includes a receiver or a manager
or a receiver and manager or an
administrative receiver as defined in
Section 29(2) of the Insolvency Act
1986 or a receiver of part only of the
property of the Company or a receiver
only of the income arising from
any part of the Company's property;
"Securities" the Agent's Security and the
Financier's Security and "Security"
means either of them;
"Security Holders" the Agent (as security agent for
the Beneficiary) and the Financier and
"Security Holder" means either of them;
"US Financing Agreements" has the same meaning as in the
Inter Bank Agreement; and
"US Lockbox Account" has the same meaning as in the
Agreement.
1.3 In this deed, unless the context otherwise requires:-
(a) references to any of the parties shall be construed so as
to include their respective successors and permitted
assignees;
(b) references to a "business day" shall be construed as a
reference to a day (other than a Saturday or Sunday) on
which banks are generally open in London for the
transaction of business in the lawful currency of the
United Kingdom;
(c) references to a "clause" or to a "schedule" are
references to a clause of or a schedule to this deed;
(d) references to this deed shall be to this deed as amended,
varied, supplemented or novated from time to time;
(e) references to any statute, law, decree or regulations
shall be treated as references to such statute, law,
decree or regulations as re-enacted, amended, extended or
replaced from time to time; and
(f) headings are inserted for ease of reference only and
shall be ignored in the construction of this deed.
1.4 If there shall be any conflict or inconsistency between any
provision of this deed and any provision contained within a
Security, the provisions of this deed shall prevail.
2. Consents
--------
2.1 Each of the Security Holders consents to the creation and
continuation of each Security. The Agent and the Beneficiary
each consent to the Agreement, the Financier's Security and the
sale and assignment by the Company to the Financier of the
Purchased Receivables (as such term is defined in the
Agreement). The Financier consents to the existence of the NWB
Lending Documents.
2.2 The Agent and the Beneficiary hereby irrevocably and
unconditionally agree to release the Purchased Receivables (as
such term is defined in the Agreement) and the US Lockbox
Account (and any monies standing to the credit thereof) from
the terms of the Agent's Security. In consequence of the
foregoing the Agent and the Beneficiary each undertake to the
Financier that it does not have the benefit of (and will not in
the future take or demand that the Company will create in its
favour) any Security Interest (as such term is defined in the
Agreement) or liens or rights of set-off, combination in
respect of, or over the US Lockbox Account to secure any
indebtedness owed to it by the Company or Niagara and will not
exercise any lien, rights of set off or combination in respect
of any monies standing to the credit of the US Lockbox Account
in respect of any indebtedness (actual or contingent) owed to
the Beneficiary by the Company or Niagara or any Subsidiary of
Niagara.
2.3 Insofar as any consent or waiver is required from the Lender,
the Agent and/or the Beneficiary under the terms of the NWB
Lending Documents to the terms of the Discounting Documents,
the Lender, the Agent and/or the Beneficiary consents to such
matters and the transactions contemplated thereby. The Company
and the Lender acknowledge that the variations to the NWB
Lending Documents, set out in the Schedule to this deed, shall
take effect from the point in time that the Financier first
provides funds to the Company under the terms of the Agreement.
2.4 Insofar as any consent or waiver is required from the Financier
under the terms of the Discounting Documents to the terms of
the NWB Lending Documents, the Financier consents to such
matters and the transactions contemplated thereby.
2.5 To the extent that the Company disposes or purports to dispose
of assets with "full title guarantee" or grants or purports to
grant first ranking security over any assets under the
provisions of any of the NWB Lending Documents (as at the date
of this deed) or under the Discounting Documents (as at the
date of this deed), the Agent, the Beneficiary, the Lender and
the Financier each acknowledge that such provisions will
operate subject to the provisions of this deed (and in
particular Clause 3.1).
2.6 The Agent and the Beneficiary acknowledge and consent to the
Financier's prior right to serve notice of assignment of the
Purchased Receivables or any Non-Vesting Receivables or Other
Receivables on the relevant debtors. The Agent and the
Beneficiary undertake that they will not serve notice of
assignment on any debtors of the Company under the terms of the
Agent's Security without first notifying the Financier of their
intention to do so and giving the Financier 10 Business Days to
serve formal notices of assignment on such debtors under the
Discounting Documents.
3. Priorities
----------
3.1 As between themselves the charges created by the Securities
shall rank in the following order of priority, namely:
3.1.1 as to any Receivables (including Non Vesting Receivables)
of the Company other than Purchased Receivables, the
Financier's Security shall rank in priority to the
Agent's Security without limit; and
3.1.2 subject to clause 3.1.1 above the Agent's Security shall
rank in priority to the Financier's Security without
limit.
3.2 The proceeds of any insurance claim charged under the
Securities after the Enforcement Date shall (to the extent not
already applied towards making good the loss or damage in
respect of which such moneys were received) be applied in the
order of priority set out in clause 3.1 above, depending upon
the category of asset of the Company the subject of the claim.
3.3 The amount of any Receiver's remuneration and all outgoings,
costs, charges, expenses, liabilities and payments ranking by
statute for payment in priority to the amount secured by the
Securities shall be deducted from all receipts and recoveries
under the relevant Security prior to their application towards
the discharge or satisfaction of the amounts secured by the
Securities.
3.4 Any amount owing, or which shall become due by the Financier to
the Company pursuant to the Agreement shall be and remain
subject to any security in the Agent's favour over the book
debts of the Company. However any such security shall always be
subject to all or any rights of set-off or combination of
accounts that the Financier may have against the Company,
whether arising before or after the Financier's receipt of
notice of any security in the Agent's favour.
3.5 Niagara hereby undertakes to each of the Lender, the Agent, the
Beneficiary, the Financier and the Company that any monies paid
to Niagara by the Company in breach of clauses 3, 4, 5, 6.3,
6.4, 6.5, 6.6, 6.7 and 6.9 contained in the Intercreditor
Agreement dated 21 May 1999 made between (1) the Lender, (2)
Niagara and (3) the Company and the Intercreditor Agreement
dated 23 August 1999 made between (1) the Financier, (2)
Niagara and (3) the Company, shall be repaid to the Company
forthwith upon receipt and pending such repayment, will be
held on trust for the Company.
4. Continuing Security
-------------------
The Securities shall be continuing securities for repayment to the
Beneficiary and the Financier of the money and liabilities thereby
secured and the priority arrangements herein contained shall not be
affected by any fluctuations in the amount from time to time due
owing or incurred by the Company on any account to either of the
Beneficiary or the Financier or by the existence at any time of a
credit or nil balance on any such account of the Company with the
Beneficiary or the Financier.
5. Subordination and Enforcement of Security
-----------------------------------------
5.1 The Beneficiary undertakes to the Financier that, until the
Financier Discharge Date, it will not make demand for payment
or take any steps to enforce the terms of any guarantee given
by the Company to the Beneficiary to guarantee the indebtedness
of any Subsidiaries (as such term is defined in the Agreement)
of Niagara under the US Financing Agreements. Prior to the
Financier Discharge Date, the Beneficiary also undertakes to
the Financier that it will not take the benefit of any Security
Interest to secure the obligations of the Company under any
guarantee referred to in this clause 5.1.
5.2 The Financier undertakes to the Beneficiary that, until the
Beneficiary Discharge Date , it will not make demand for
payment or take any steps to enforce the terms of any guarantee
given by Niagara to the Financier to guarantee the indebtedness
of the Company under the Discounting Documents (as such term is
defined in the Agreement). Prior to the Beneficiary Discharge
Date, the Financier also undertakes to the Beneficiary that it
will not take the benefit of any Security Interest to secure
the obligations of Niagara under any guarantee referred to in
this clause 5.2.
5.3 The Security Holders shall consult and co-operate with each
other to the intent (but without any requirement) that:
5.3.1 the Securities shall so far as practicable be enforced by
the same method and at the same time;
5.3.2 in the case of an appointment of a Receiver or Receivers
by a Security Holder under its Security the same
person(s) shall be appointed Receiver(s) by the other
Security Holder (if that other Security Holder shall also
make such an appointment).
5.4 The provisions of clause 5.3 shall not prevent any Security
Holder from appointing a Receiver under its Security or from
the exercise or enforcement of its Security without any
consultation if it considers it expedient to do so.
5.5 If any Security Holder shall appoint a Receiver under its
Security or shall otherwise enforce or exercise its Security it
shall promptly give written notice thereof to the other
Security Holder.
6. Information
-----------
6.1 Whilst this deed subsists each Security Holder, the Lender and
the Beneficiary shall be at liberty from time to time to
disclose to the other information concerning the Company,
Niagara or any Subsidiary of either of them and their affairs
in such manner and to such extent as the disclosing Security
Holder or the Lender or Beneficiary (as the case may be) may
decide.
6.2 The Security Holders, the Lender and the Beneficiary each
acknowledge the right of the others to the production and
delivery of copies of the documents comprising or referred to
in the Securities.
7. Compliance with Covenants
-------------------------
7.1 The Company shall observe and perform all the covenants in the
Financier's Security in respect of the Non-Vesting Receivables
and other Receivables and the proceeds, if any, of the same.
Such observance and performance shall be treated as compliance
with the covenants in the Agent's Security in respect of the
Non-Vesting Receivables and other Receivables and their
proceeds.
7.2 Insofar as the Company has complied with the obligations
contained in the Agent's Security as regards the deposit,
custody or control of any documentation relating to assets
which are the subject of security under the Agent's Security
(or such obligations have been waived by the Agent), the
Company shall be deemed to have complied with all similar
obligations contained in the Financier's Security.
8. Termination
-----------
The provisions of this deed relating to the creation and priority of
the Securities (specifically including the provisions of clause 3),
the release of Purchased Receivables from the Agent's Security
(clause 2.2), the treatment of inconsistencies concerning the
Company's obligations thereunder (specifically including the
provisions of clauses 2.5, 7.1 and 7.2) and all such other provisions
of this deed specifically relating or incidental to the parties'
undertakings with respect to the Securities, shall cease to have
further effect on the date one or more of the Securities shall have
been fully discharged (the "Securities Discharge Date"). The
provisions of this deed relating to the Financier's and the
Beneficiary's subordination of the guarantees under the Discounting
Documents and the US Financing Agreements provided by Niagara
(specifically including clauses 5.1, 5.2, 9.3 and 9.4), and all such
other provisions of this deed specifically relating or incidental to
the parties' undertakings with respect to the guarantees described in
clauses 5.1 and 5.2, shall cease to have further effect on the date
one or more of such guarantees shall have been terminated in
accordance with its (or their) terms or released by the Financier or
the Beneficiary (as the case may be) (the "Guarantees Discharge
Date"). This deed shall terminate and shall cease to have further
effect on the later of the Securities Discharge Date or the
Guarantees Discharge Date.
9. The Company's and Niagara's Acknowledgement
-------------------------------------------
9.1 The Company and Niagara each acknowledge the priorities
recorded in this deed and consent to the rest of the terms of
this deed.
9.2 The Company and Niagara jointly and severally agree and undertake
with each Security Holder, the Lender and the Beneficiary that
each of them will not do or omit to do anything that would lead
to a breach of any of the provisions of this Deed.
9.3 Until the Financier Discharge Date, the Company undertakes with
the Financier that its obligations to pay the Beneficiary any
monies under the guarantee referred to in clause 5.1 above
shall be subordinate to, and shall be conditional upon, the
repayment and payment in full to the Financier of all amounts
outstanding due or owing to the Financier pursuant to, under or
in connection with the Agreement. Until the Financier Discharge
Date, the Company undertakes to the Financier that it will not
grant any Security Interest in favour of the Beneficiary to
secure its obligations under the guarantee referred to in
clause 5.1 above.
9.4 Until the Beneficiary Discharge Date, Niagara undertakes with the
Beneficiary that its obligations to pay the Financier any monies
under the guarantee referred to in clause 5.2 above shall be
subordinated to, and shall be conditional upon, the repayment and
payment in full to the Beneficiary of all amounts outstanding due
or owing to the Beneficiary pursuant to, or in connection with,
the US Financing Agreements. Until the Beneficiary Discharge
Date, Niagara undertakes to the Beneficiary that it will not
grant any Security Interest in favour of the Financier to secure
its obligations under the guarantee referred to in clause 5.2
above.
9.5 In addition to their obligations under clauses 9.1 and 9.2, it
is recorded that each of the Company and Niagara are entering
into this deed for the purpose of giving the agreements and
undertakings contained in clauses 9.3 and 9.4 hereof, but
provided that, other than the right to enforce the provisions
of clauses 2.1, 2.2, 2.3, 2.4, 2.5, 7.1, 7.2 and/or 21 against
the Agent, the Beneficiary, the Lender and/or the Financier, as
applicable, neither the Company nor Niagara shall obtain any
rights against any of the Lender, the Agent, the Beneficiary or
the Financier by virtue of it being a party to this Agreement.
10. The Entire Agreement
--------------------
This deed forms the entire agreement between the parties relating to
the priority of their respective Securities and the application of
the proceeds thereof and supersedes all earlier meetings,
discussions, negotiations, correspondence, faxes, telexes, letters,
transactions, communications, understandings and arrangements of any
kind so relating.
11. Release of Assets
-----------------
Any release of any assets the subject of the Securities granted by
the Security Holder having priority under clause 3.1 above in respect
of such asset (or class of assets) of the Company will be deemed to
have been given by the other Security Holder on the same terms and
conditions.
12. Forbearance, Failures and Waivers
---------------------------------
12.1 No forbearance or failure by any party to exercise or assert or
claim any rights or entitlement hereunder shall be construed
(in the absence of a written agreement to a waiver or a written
confirmation of a past waiver) as a waiver of that right or
entitlement.
12.2 No waiver of any breach of any term of this deed shall (unless
expressly agreed in writing by the waiving party) be construed
as a waiver of a future breach of the same term or as
authorising a continuation of a particular breach.
13. Variations
----------
Save as otherwise provided herein, any variation of this deed shall
be binding only if it is recorded in a document signed by or on
behalf of each party to this deed.
14. Severability
------------
The provisions of this deed shall be severable and distinct from each
other. If at any time any one or more of such provisions is or
becomes invalid, illegal or unenforceable, the validity, legality and
enforceability of each of the remaining provisions of this deed shall
not in any way be affected, prejudiced or impaired thereby.
15. Facilities
----------
Nothing contained in this deed shall bind the Lender, the Agent, the
Beneficiary or the Financier to make any advance or prepayment or to
grant any credit or other facilities to the Company or restrict the
Lender or the Financier from varying the terms of their respective
facilities (including but without limitation, the amounts owed to
them) without reference to the other.
16. Time and Indulgence
-------------------
The Agent and the Financier shall each be entitled to grant time or
indulgence or to release or compound with the Company or otherwise
deal with its Security without reference to each other except to the
extent regulated by this deed.
17. Counterparts
------------
This deed may be executed in any number of documents or counterparts
each in the like form, all of which when taken together shall
constitute one and the same document.
18. Continuing Effect
-----------------
The priorities set forth above shall apply even though a liquidator
or Receiver or an administrator shall be appointed under the
Insolvency Act 1986 in relation to the Company.
19. Inter Bank Agreement
--------------------
Save as set out expressly in the Schedule to this this deed nothing
in this deed shall vary or affect in any way any of the terms of the
Inter Bank Agreement which shall, as between the parties to that
agreement, continue in full force and effect.
20. Notices
-------
20.1 Every notice made under this deed shall be given in writing and
shall be sent:
20.1.1 in the case of LND, to its address at:
Smith House
P O Box 50
Elmwood Avenue
Feltham
Middlesex
TW13 7QD
Facsimile : 0181 895 7568
Attention : Company Secretary
with a copy to:
Lombard Nat West Commercial Services Limited
Alexandra House
Lawnswood Park
Redvers Close
Leeds
LS16 6QY
Facsimile : 0113 230 6690
Attention : Ian Conway;
20.1.2 in the case of the Agent, to its address at:
National Westminster Bank Plc
Agency Group
5th Floor
Juno Court
24 Prescott Street
London
E1 8BB
Facsimile : 0171 714 6167
Attention : Head of Agency Group;
20.1.3 in the case of MTT, to its address at:
One Fountain Plaza
Buffalo
NY 14203-1495
New York
United States of America
Facsimile : 001 716 848 7316
Attention : Mr R J Kush;
20.1.4 in the case of the Lender, to its address at:
P O Box No. 4641
103 Colmore Row
Birmingham
B3 3NR
Facsimile : 0121 234 2504
Attention : The Corporate Director; and
20.1.5 in the case of the Company, to its address at:
Victoria Steel Works
Bull Lane
Moxley
Wednesbury
West Midlands
WS10 8RS
Facsimile : 0121 556 9011
Attention : Tony Bagshawe
with a copy to the Holding Company at:
667 Madison Avenue
New York
New York 10021
United States of America
Facsimile : 001 212 317 1001
Attention : Michael Scharf;
20.1.6 in the case of Niagara, to its address at:
667 Madison Avenue
New York
New York 10021
United States of America
Facsimile : 001 212 317 1001
Attention : Michael Scharf; or
20.1.7 to such other address or facsimile number as any of the
above parties may from time to time notify to each of the
other parties in writing.
20.2 Every notice sent pursuant to this deed:
20.2.1 personally, shall be deemed to have been received on
delivery;
20.2.2 by facsimile shall be confirmed by posting first class
post, and shall be deemed to have been received three
Business Days after posting and not, for the avoidance of
doubt, on transmission of the facsimile; and
20.2.3 by first class post, shall be deemed to have been
received three Business Days' after posting.
21. Assignment
----------
The Lender, the Agent, the Beneficiary and and the Financier agree
that if they shall assign their rights under the NWB Lending
Documents or the Discounting Documents (as the case may be) to any
assignee (the "Assignee") they shall use all reasonable endeavours to
procure that the Assignee shall enter into a deed of adherence
agreeing to be bound by and to observe the terms of this deed as if
the Assignee were the Lender, the Agent, the Beneficiary or the
Financier, as the case may be.
22. Law and Jurisdiction
--------------------
22.1 This deed is governed by and shall be construed in accordance
with English law.
22.2 The parties to this deed irrevocably submit to the
non-exclusive jurisdiction of the English courts to settle any
disputes which may arise out of or in connection with this
deed.
IN WITNESS whereof the parties hereto have an executed this deed and have
delivered it on the day and year first above written.
SCHEDULE
FACILITIES AGREEMENT
--------------------
CONTENTS: Schedule 3 - delete 'Eligible Receivables and'
DEFINITIONS: delete 'Account Debtors' and its definition
delete 'Eligible Receivables' and its definition
delete 'Eligible Receivables Limit' and its definition
in 'Eligible Receivables and Eligible Stock Certificate', delete 'Eligible
Receivables and' and where mentioned within the definition
delete 'Receivables' and its definition
2.2: delete 'or the amount of the Eligible Receivables Limit and/'
4.1.13: delete 'in respect of its Receivables and'
5.3 (i) : delete 'the Eligible Receivables Limit and'
5.4: delete 'Eligible Receivables Limit and the', 'Eligible Receivables and'
5.5: delete 'and the Eligible Receivables Limit', 'Eligible Receivables and'
5.6: delete 'Eligible Receivables Limit and' (twice)
9.1.6 (c) : delete 'Eligible Receivables and', 'containing a list of
Receivables detailing the amount of each Receivable, the Account Debtor and
date of the invoice (set out on an aged basis) and'
9.1.6 (e) (A) : delete 'and Eligible Receivables'
9.1.12: delete 'and Receivables'
9.2.3 (b) : delete 'Receivables or'
delete subclause 9.2.15(d), and renumber 9.2.15 (e) and (f) as (d) and (e)
respectively
9.5: delete 'and Eligible Receivables'
18.3: delete second paragraph
2ND SCHEDULE: (a): delete 'Eligible Receivables for the Accounting Quarter is
[AMOUNT]'
3RD SCHEDULE: HEADING: delete 'Eligible Receivables and'
delete RECEIVABLES to (Dx85%) (pound)_____
reletter (F) as (A), (G) as (B), (H) as (C), (I) as (D), (J) as (E)
in new line (D): replace (G - H = I) with (B - C = D)
in new line (E), replace (I x 60%) with (D x 60%)
delete line (K)
reletter (L) as (F), (N) as (G), (O) as (H)
Final paragraph: replace (O) with (H)
INTERBANK AGREEMENT
-------------------
4.6: delete 'the Eligible Receivables and' (line 3)
delete 'the Eligible Receivables and' (line 4-5)
delete 'Eligible Receivables and' (lines 8 and 10)
delete 'Eligible Receivables Limit and' (penultimate line)
5.5: delete 'the Eligible Receivables Limit or', 'Eligible Receivables and/'
5.6: delete 'Eligible Receivables and', 'the Eligible Receivables Limit and'
FINANCIER
Signed and delivered as a deed )
on behalf of LOMBARD NATWEST )
DISCOUNTING LIMITED )
by
)
/s/ Ian Conway ) /s/ Ian Conway
- ------------------------------------ ----------------------------
duly appointed Attorney in the Attorney for Lombard NatWest
presence of this Witness: Discounting Limited
Witness' Signature: /s/ R.D. Hague-Holmes
Witness' Full Names: Rupert Hague-Holmes
Witness' Address: 115 Colmore Row
Birmingham, B3 3AL
Witness' Occupation: Solicitor
AGENT
Signed and delivered as a deed )
on behalf of NATIONAL )
WESTMINSTER BANK PLC )
(in its capacity as security agent )
for the Beneficiary only) by)
/s/ Gary P. Smith ) /s/ Gary P. Smith
- ---------------------------------- ---------------------------------------
duly appointed Attorney in the Attorney for National
presence of this Witness: Westminster Bank Plc (as security agent
for the Beneficiary)
Witness' Signature: /s/ Robert Ottowil
Witness' Full Names: Robert Ottowil
Witness' Address: .............................................
London
Witness' Occupation: Banker
BENEFICIARY
- -----------
Signed and delivered as a deed)
on behalf of MANUFACTURERS )
AND TRADERS TRUST )
COMPANY )
by )
/s/ Robert J. Kush ) /s/ Robert J. Kush, Vice President
- ------------------- -----------------------------------
duly appointed Attorney in the Officer for Manufacturers and
presence of this Witness: Traders Trust Company
Witness' Signature: /s/ Terence A. Greiner
Witness' Full Names: Terence A. Greiner
Witness' Address: E. Almherst, NY 14051
Witness' Occupation: Attorney
LENDER
Signed and delivered as a deed)
on behalf of NATIONAL )
WESTMINSTER BANK PLC )
by )
/s/ Alun Lewis ) /s/ Alun Lewis
- ------------------------------------ -----------------------------
its duly authorised signatory in the Duly authorised signatory for
presence of this Witness: National Westminster Bank Plc
Witness' Signature: /s/ R.D. Hague-Holmes
Witness' Full Names: Rupert Hague-Holmes
Witness' Address: 115 Colmore Row
Birmingham B3 3AL
Witness' Occupation: Solicitor
COMPANY
Signed and delivered as a deed )
on behalf of NIAGARA LASALLE )
(UK) LIMITED )
by )
Anthony John Bagshawe ) /s/ Anthony John Bagshawe
- ------------------------------------ ---------------------------------
Director Signature of Director
and
Raymond Rozanski ) /s/ Raymond Rozanski
- ------------------------------------ ---------------------------------
**Director/Company Secretary Signature of **Director/
Company Secretary
NIAGARA
Signed and delivered as deed )
on behalf of NIAGARA )
CORPORATION by )
President ) /s/ Michael Scharf
- ------------------------------ -------------------------------
Title Signature of Officer
and
Vice President ) /s/ Raymond Rozanski
- ------------------------------ -------------------------------
Title Signature of Officer
** Delete as applicable
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED QUARTERLY FINANCIAL
STATEMENTS OF NIAGARA CORPORATION AND SUBSIDIARIES FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-12-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-09-1999
<CASH> 978,044
<SECURITIES> 0
<RECEIVABLES> 54,201,077
<ALLOWANCES> 897,000
<INVENTORY> 55,012,409
<CURRENT-ASSETS> 115,276,918
<PP&E> 123,839,487
<DEPRECIATION> 19,027,010
<TOTAL-ASSETS> 224,024,232
<CURRENT-LIABILITIES> 64,540,169
<BONDS> 85,989,860
<COMMON> 9,998
0
0
<OTHER-SE> 55,578,873
<TOTAL-LIABILITY-AND-EQUITY> 224,024,232
<SALES> 186,716,649
<TOTAL-REVENUES> 186,716,649
<CGS> 160,874,036
<TOTAL-COSTS> 160,874,036
<OTHER-EXPENSES> 16,885,651
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,770,622
<INCOME-PRETAX> 5,286,135
<INCOME-TAX> 2,018,000
<INCOME-CONTINUING> 3,268,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,268,135
<EPS-BASIC> .35
<EPS-DILUTED> .34
</TABLE>
