UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 28, 1997
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1339
------
OREGON METALLURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0448167
---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
530 34th Avenue S.W. 97321
---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (541) 967-9000
--------------
NONE
------------------------------------------------------
(Former name or address, 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
----- -----
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class Outstanding as of November 10, 1997
----------------------------- -----------------------------------
Common stock, $1.00 par value 16,501,575
================================================================================
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- --------------------------------
September 28, September 30, September 28, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales...................................... $ 75,051 $ 64,729 $ 214,419 $ 174,798
Cost of sales.................................. 54,046 48,490 157,003 133,930
------------- ------------- ------------ ------------
GROSS PROFIT .................................. 21,005 16,239 57,416 40,868
Selling, general and administrative
expenses..................................... 5,880 5,895 16,515 15,053
Research, technical and product
development expenses......................... 740 510 2,142 1,453
------------- ------------- ------------ ------------
INCOME FROM OPERATIONS......................... 14,385 9,834 38,759 24,362
Interest income................................ 1,027 180 2,620 180
Interest expense............................... (482) (477) (878) (1,812)
Minority interests............................. (218) (273) (713) (743)
------------- ------------- ------------ -------------
INCOME BEFORE INCOME TAXES..................... 14,712 9,264 39,788 21,987
Income tax expense............................. 5,309 2,819 15,142 7,011
------------- ------------- ------------ -------------
NET INCOME..................................... $ 9,403 $ 6,445 $ 24,646 $ 14,976
============= ============= ============ =============
Net income per share........................... $ 0.57 $ 0.48 $ 1.49 $ 1.24
============= ============= ============ =============
Weighted average common shares
and equivalents outstanding ................ 16,618 13,443 16,526 12,118
============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
Unaudited
September 28, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 2,420 $ 1,460
Short-term investments available-for-sale..................................... 34,326 63,353
Accounts receivable, less allowance for doubtful
accounts of $768 and $494.................................................. 62,183 37,300
Inventories................................................................... 116,725 119,553
Other current assets.......................................................... 561 406
Deferred tax assets........................................................... 2,001 4,701
------------- ------------
Total current assets..................................................... 218,216 226,773
Property, plant and equipment, net.............................................. 52,008 34,890
Goodwill........................................................................ 17,011 732
Other assets, net............................................................... 768 650
------------- ------------
Total assets.............................................................. $ 288,003 $ 263,045
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................. $ 2,837 $ 3,785
Accounts payable ............................................................. 17,517 19,915
Accrued payroll and employee benefits......................................... 11,362 10,650
Accrued loss on long-term agreements.......................................... 418 2,710
Other liabilities............................................................. 5,946 9,231
------------ ------------
Total current liabilities................................................... 38,080 46,291
Long-term debt, less current portion............................................ 4,650 4,212
Deferred tax liabilities........................................................ 5,618 5,078
Accrued postretirement benefit.................................................. 1,693 1,621
Minority interests.............................................................. 2,701 1,990
------------ -----------
Total liabilities......................................................... 52,742 59,192
------------ -----------
Shareholders' equity:
Common stock, $1.00 par value;
80,000 shares authorized; shares issued:
1997, 16,445; 1996, 16,127.................................................. 16,445 16,127
Additional paid-in capital.................................................... 155,342 148,520
Retained earnings............................................................. 63,449 38,803
Cumulative foreign currency translation adjustment............................ 25 403
------------ -----------
Total shareholders' equity............................................... 235,261 203,853
------------ -----------
Total liabilities and shareholders' equity...................................... $ 288,003 $ 263,045
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Common Stock Paid-in Retained Translation
-------------------
Shares Amount Capital Earnings Adjustment Total
------ ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 11,018 $ 11,018 $ 38,340 $ 16,545 $ (16) $ 65,887
Common stock offering,
net of related expenses 4,600 4,600 98,638 ---- ---- 103,238
Awards for stock compensation plans 429 429 9,671 ---- ---- 10,100
Exercise of stock purchase warrants 80 80 430 ---- ---- 510
Tax effect of issuance of common
stock for employee benefits ---- ---- 1,441 ---- ---- 1,441
Currency translation adjustment ---- ---- ---- ---- 419 419
Net income ---- ---- ---- 22,258 ---- 22,258
---------- ---------- ---------- ---------- ---------- ------------
Balance, December 31, 1996 16,127 16,127 148,520 38,803 403 203,853
Awards for stock compensation
plans 318 318 7,291 ---- ---- 7,609
Tax effect of issuance of common
stock for employee benefits ---- ---- (469) ---- ---- (469)
Currency translation adjustment ---- ---- ---- ---- (378) (378)
Net Income ---- ---- ---- 24,646 ---- 24,646
---------- ---------- ---------- ---------- ---------- ------------
Balances, September 28, 1997 16,445 $ 16,445 $ 155,342 $ 63,449 $ 25 $ 235,261
========== ========== ========== ========= ========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
OREGON METALLURGICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
September 28, September 30,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................................ $ 24,646 $ 14,976
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation and amortization.................................................. 4,021 3,562
Deferred income tax expense.................................................... 3,240 889
Employee benefits paid or payable in common stock.............................. 7,595 5,463
Provision for loss on long-term agreements..................................... (2,292) (855)
Minority interests............................................................. 713 743
------------- --------------
37,923 24,778
Changes in current assets and liabilities:
Accounts receivable.......................................................... (24,929) (11,169)
Inventories.................................................................. 2,828 (27,841)
Other current assets......................................................... (308) (21)
Accounts payable............................................................. (2,408) (1,049)
Accrued payroll and employee benefits........................................ 839 3,326
Other liabilities............................................................ (4,846) 5,133
Other ......................................................................... (34) ----
------------- --------------
Net cash provided by (used in) operating activities................................. 9,065 (6,843)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments - matured.................................................. 31,573 ----
Short-term investments - purchased..................................... (2,546) (9,761)
Additions to property, plant and equipment........................................ (10,831) (2,403)
Acquisition of a business:
Fair value of assets acquired................................................. (9,958) ----
Purchase price of business in excess of net assets acquired................... (15,209) ----
Other............................................................................. 112 170
------------- --------------
Net cash used in investing activities............................................... (6,859) (11,994)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit agreement.......................................... 854 149,286
Payments on revolving credit agreement............................................ (1,840) (168,718)
Proceeds from long-term debt...................................................... ---- 177
Payments on long-term debt........................................................ (1,114) (99)
Book overdraft.................................................................... ---- 2,902
Net proceeds from stock offering.................................................. ---- 103,276
Proceeds from exercise of stock purchase warrant.................................. ---- 510
Special tax refund................................................................ 1,107 8,097
Special tax refund dividend....................................................... --- (6,557)
------------- --------------
Net cash provided by (used in) financing activities................................ (993) 88,874
-------------- --------------
Effect of exchange rates on cash and cash equivalents............................... (253) ---
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ 960 70,037
CASH AND CASH EQUIVALENTS:
Beginning of period................................................................. 1,460 572
------------- --------------
End of period....................................................................... $ 2,420 $ 70,609
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 COMPANY MERGER WITH ALLEGHENY TELEDYNE INCORPORATED
On October 31, 1997, the Company entered into a definitive merger agreement in
which Allegheny Teledyne will acquire the Company as a wholly-owned subsidiary.
Each outstanding share of the Company's common stock will be converted into
1.296 shares of Allegheny Teledyne common stock. Allegheny Teledyne is a
technology-based manufacturing company with a concentration in specialty metals.
The expected transaction provides the Company's shareholders with an approximate
11 percent ownership of the combined company, based on the closing prices of
outstanding common stock of the two companies on October 31, 1997. The merger
is expected to be tax free to the Company's shareholders, and will be accounted
for under the pooling of interests method.
NOTE 2 BASIS OF PRESENTATION
The interim consolidated financial statements have been prepared by Oregon
Metallurgical Corporation ("OREMET") and its subsidiaries (the "Company")
without audit. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the Company's results
of operations and cash flow, for the three and nine month periods ended
September 28, 1997 and September 30, 1996; and its financial position as of
September 28,1997, and December 31, 1996. The balance sheet data as of December
31, 1996, was derived from audited financial statements, but does not include
all disclosures contained in the Company's 1996 Annual Report to Shareholders.
The interim consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto appearing in the
Company's Annual Report to Shareholders.
The results of operations of interim periods are not necessarily indicative of
the operating results of a full year or future years.
NOTE 3 ORGANIZATION AND OPERATIONS
The Company is one of two U.S. integrated producers and distributors of titanium
sponge, ingot, mill products and castings for use in the aerospace, industrial,
golf and military markets.
NOTE 4 BASIS OF CONSOLIDATION
Titanium Industries, Inc. ("TI") an eighty percent (80%) owned subsidiary
operates full-line titanium metal service centers in the United States, Canada,
United Kingdom and Germany and produces small diameter bar, weld wire and fine
wire. Rome Metals, Inc. ("Rome") was acquired by the Company on July 1, 1997
(See Note 10). The consolidated financial statements of the Company include the
accounts of TI, and the Company's wholly-owned subsidiaries, Rome and OREMET
France S.a.r.l. TI's accounts reflect the activities of its wholly-owned
subsidiaries, Titanium International, LTD., Titanium Wire Corporation and
Titanium International GmbH. All material intercompany accounts and transactions
have been eliminated in consolidation.
NOTE 5 CHANGE IN FISCAL YEAR
On April 24, 1997, OREMET's Board of Directors approved a change in OREMET's
fiscal year. Effective January 1, 1997, OREMET prospectively changed its
financial reporting year from a calendar year to a fiscal year consisting of 52
or 53 weeks ending on the Sunday closest to the end of the calendar year.
Consistent with the change in its fiscal year, OREMET has modified its quarterly
financial reporting from calendar quarters to fiscal quarters ending on the
Sunday closest to the end of the calendar quarter.
NOTE 6 RECLASSIFICATIONS
Certain amounts in the December 31, 1996, balance sheet have been reclassified
to conform to current period's presentation. The reclassifications do not affect
previously reported results of operations or cash flows.
NOTE 7 SHORT-TERM INVESTMENTS AVAILABLE-FOR-SALE
At September 28, 1997, all of the Company's short-term investments had
maturities of less than one year. The fair value of investments approximates
amortized cost.
6
<PAGE>
NOTE 8 INVENTORIES
<TABLE>
<CAPTION>
September 28, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Finished goods....................................... $ 29,293 $ 33,739
Work-in-progress..................................... 37,725 34,897
Raw materials........................................ 49,707 50,917
------------ -------------
Total............................................. $ 116,725 $ 119,553
============ =============
</TABLE>
NOTE 9 CONTINGENCIES
TUNGSTEN CONTAMINATION: In the fourth quarter of 1996, the Company discovered
that certain of its finished products contained tungsten particles. The tungsten
was introduced into the Company's manufacturing process through the use of
titanium recycle which contained tungsten welds. The Company has identified
products and customers who have been affected by this matter, and believes that
substantially all of the material in question will meet required specifications
for its intended end use. Some of the material has been converted into fastener
stock and fasteners for the commercial aerospace industry. Pursuant to studies
performed by the Company and others, some commercial aerospace manufacturers and
the U.S. Federal Aviation Administration have approved the fasteners for use.
The Company established a reserve of $750 in the fourth quarter of 1996 to cover
customer claims and internal costs. Minimal costs have been incurred by the
Company as of September 28, 1997, relating to this matter. The Company continues
to believe that established reserves will be adequate to cover claims associated
with this matter.
ENVIRONMENTAL MATTERS: The Company is subject to Federal, state, and local
statutes and regulations concerning environmental matters and land use. Note 13
to the Company's 1996 Annual Report to Shareholders contains information
regarding the Company's environmental matters.
NOTE 10 ACQUISITION OF ROME METALS, INC.
On July 1, 1997, the Company acquired substantially all of the assets and
business of Rome Metals, Inc. ("Rome"), a privately owned corporation. Rome,
with operations in Western Pennsylvania, is a leading provider of finishing
services to the titanium, zirconium and specialty metals flat products
industries.
The acquisition of Rome was accounted for as a purchase, and accordingly, Rome's
results are included in the consolidated financial statements since the date of
acquisition. The purchase price, which was financed through available short-term
investments and issuance of a promissory note, has been allocated to the assets
of the Company, based upon their respective fair market values. The excess of
the purchase price over the fair value of assets acquired (goodwill) is being
amortized over fifteen years.
Pro forma consolidated results are not presented for the Rome acquisition, as it
is not material to the consolidated results of operations.
NOTE 11 NEW ACCOUNTING PRONOUNCEMENT
CHANGES IN ACCOUNTING PRINCIPLES: In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 128,
Earnings Per Share ("FAS 128"). FAS 128 specifies the computation, presentation,
and disclosure requirements for earnings per share. FAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. Earlier application of FAS 128 is not permitted. The
effect of implementing FAS 128 on the Company's earnings per share computations
is not expected to be significant.
7
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S 1996
ANNUAL REPORT ON FORM 10-K AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO OF THE COMPANY. THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE CERTAIN RISKS AND UNCERTAINTIES. ACTUAL RESULTS AND
EVENTS MAY DIFFER SIGNIFICANTLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, DEPENDENCE ON AND CYCLICALITY OF AEROSPACE INDUSTRY, UNCERTAINTY OF
EMERGING GOLF MARKET, HIGHLY COMPETITIVE INDUSTRY, SUBSTANTIAL EXCESS PRODUCTION
CAPACITY, PLANNED SIGNIFICANT INVESTMENT IN ELECTRON BEAM FURNACE, DEPENDENCE ON
ESSENTIAL MACHINERY AND EQUIPMENT, DEPENDENCE ON RAW MATERIALS AND SERVICES,
ENVIRONMENTAL REGULATION, LABOR AGREEMENTS, AND CONTINGENCIES DESCRIBED IN THE
COMPANY'S FINANCIAL STATEMENTS.
MERGER AGREEMENT
On October 31, 1997, Oregon Metallurgical Corporation ("OREMET" or "the
Company") and Allegheny Teledyne Incorporated ("Allegheny") announced that the
two companies had entered into a definitive merger agreement. The merger is
subject to the approval of OREMET's shareholders and federal regulations. The
merger plan anticipates that Allegheny will acquire OREMET as a wholly-owned
subsidary and each outstanding share of OREMET common stock will be converted
into 1.296 shares of Allegheny common stock. Allegheny is a technology-based
manufacturing company, with a concentration in specialty metals.
The merger will provide OREMET shareholders with an approximate 11% ownership
interest in the combined company.
OVERVIEW
Demand for the Company's products remained strong during the third quarter of
1997. The strength of the commercial aerospace industry was the dominant factor
behind the Company's third quarter results. The average price per pound for
ingot and mill products (the Company's two largest product lines) continued to
increase during the quarter. Gross profit margins increased to 28% for the third
quarter of 1997 compared to 27% for the second quarter.
The U.S. Geological Survey (USGS) reported that U.S. industry shipments of
titanium mill products were approximately 29 million pounds for the first half
of 1997. The USGS reported domestic mill product shipments of 57 million pounds
in 1996 and 44 million pounds in 1995. The Company expects domestic shipments of
mill products for the full year will be comparable to or slightly higher than
those in 1996. The Company further expects that increased demand from the
commercial aerospace market, coupled with increases in demand from other markets
sectors, will result in record domestic mill product shipments for the industry
in 1998.
Commercial aerospace related sales represented approximately 63% of the
Company's sales for the first nine months of 1997, compared to approximately 43%
for the same period of 1996. The commercial aerospace industry is expected to
remain the largest source of demand for titanium products for the foreseeable
future. International and export sales approximated $43 million, or 20% of
sales, for the first nine months of 1997. International and export sales are
principally to markets in Europe and Asia.
Third quarter sales to the golf club industry totaled $0.5 million, compared to
$11.3 million, or 18% of sales in the third quarter of 1996. The reduction in
sales is due to a combination of inventory accumulation by the golf clubhead
producers, their increased efficiency in recycling internal scrap and
competition from titanium producers located in the Former Soviet Union. The
Company's net sales to golf clubhead producers approximated $40 million in 1996.
The Company believes its sales to this industry will be less than $10 million in
1997. Consumer demand for titanium golf clubs remains strong.
The Company continues to offset golf club orders with orders from commercial
aerospace customers and other markets. Titanium products destined for the
commercial aerospace market typically require longer lead times than products
for non-aerospace applications. The Company estimates that the strong demand
from the commercial aerospace market, together with the corrosion protection and
military markets, will offset the decline in industry shipments to the golf
clubhead market in 1997.
8
<PAGE>
The military continues to explore using titanium for armor applications. The
Company has developed alloy plate and billet products that have excellent
ballistic characteristics, and these products have been selected for programs in
the U.S. and Europe. Market development for armor applications is a high
priority as the Company believes that titanium usage on tanks and various types
of personnel carriers will increase.
The Company's twelve-month sales order backlog was $150 million at September 28,
1997, compared to $128 million and $160 million at June 29, 1997, and September
30, 1996, respectively. The Company's backlog is based on firm purchase orders
with a scheduled delivery date. Customer orders may be subject to cancellation
by the customer upon payment of specified charges.
The Company acquired the assets of Rome Metals, Inc., on July 1, 1997. See Note
10 to the Financial Statements. The Company paid a portion of the purchase price
in cash, and financed the balance of the purchase with a five-year mortgage.
RESULTS OF OPERATIONS
The following table sets forth certain operating items of the Company's
consolidated results of operations as a percentage of net sales for each of the
years in the five-year period ended December 31, 1996, and for the three months
ended September 28, 1997 and September 30, 1996.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
----------------------
Sept. 28, Sept. 30, December 31,
--------- --------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit (loss)............ 28.0 25.1 24.4 10.8 9.3 4.9 (1.0)
Income (loss) from
operations (1).............. 19.2 15.2 14.8 (0.2) (3.5) (11.2) (10.4)
Net income (loss).............. 12.5 10.0 9.4 (1.6) (2.8) (7.4) (7.4)
<FN>
(1) A provision for a loss on long-term agreements ("LTA's") of $5.7 million
was recorded in 1995. Gross profit and income from operations, exclusive
of this provision, as a percentage of net sales would have been 13.8% and
2.8% in 1995, respectively.
</FN>
</TABLE>
QUARTERLY RESULTS OF OPERATIONS
- -------------------------------
The following table presents the Company's unaudited consolidated quarterly
financial data for fiscal year 1996, and the first, second and third quarters of
1997. Although the Company's business is not seasonal, growth rates of sales
have varied from quarter to quarter as a result of the timing of new products,
industry cyclicality and general U.S. and international economic conditions.
<TABLE>
<CAPTION>
(In millions)
1997 Quarters 1996 Quarters
--------------------------------- ---------------------------------------------
Third Second First Fourth Third Second First
----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 75.1 $ 67.3 $ 72.0 $ 62.1 $ 64.7 $ 58.8 $ 51.3
Gross profit 21.0 18.0 18.4 16.9 16.2 14.2 10.4
Income from operations 14.4 11.6 12.7 10.7 9.8 9.0 5.5
Net income 9.4 7.5 7.7 7.3 6.4 5.2 3.3
</TABLE>
9
<PAGE>
COMPARISON OF THIRD QUARTER 1997 TO THIRD QUARTER 1996
- ------------------------------------------------------
NET SALES. Net sales increased by $10.3 million, or 16% to $75.1 million in the
third quarter of 1997, compared to $64.7 million in 1996. The increase in sales
was primarily driven by increased demand and higher prices for both the
Company's manufactured and service center products. Of the $10.3 million sales
increase, $2.5 million was the result of volume increases and $7.8 million from
higher average selling prices.
TITANIUM SPONGE. During the third quarter of 1997, the Company's integrated
sponge facility operated at near capacity, primarily supplying the Company's
internal demand for titanium sponge as well as sales to RMI Titanium Company
("RMI") under a long-term titanium sponge conversion agreement. Sales of
titanium sponge and sponge conversion services of $4.0 million, remained
substantially constant between the two quarters. Sponge shipments decreased 5%
and the average sponge price per pound increased 6%. The Company expects to
continue to operate its sponge facility at near capacity with substantially all
production being utilized for internal consumption or for supply to RMI
(approximately 45% of capacity in 1996). The Company is presently supplementing
its sponge production with purchases from foreign producers, and is not
marketing its internally produced sponge.
INGOT. Sales of ingot increased 77% to $20.1 million for the third quarter of
1997 compared to $11.4 million for the third quarter of 1996. Ingot shipments
increased 24% and the average ingot price per pound increased 42%. The Company
operated its melt facilities at near capacity during the third quarter of 1997
and expects to continue to do so for the remainder of the year. The Company
produces ingot for both internal use in its mill products division and for sale
primarily to aerospace customers.
MILL PRODUCTS. The Company produces or contracts for outside production a
variety of mill products including: billet, bar, plate, sheet and engineered
parts. Mill product sales decreased 8% to $25.0 million for the third quarter of
1997 compared to $27.3 million for the third quarter of 1996. Shipments of mill
products decreased 29%, and the average price per pound increased 26%. Sales to
producers of golf clubheads decreased during the third quarter of 1997 compared
to the same period of 1996. Sales to producers of aerospace components are
responsible for a substantial portion of mill product sales.
The decrease in shipments to golf clubhead producers accounted for the majority
of the decrease in mill product sales. The Company continues to replace golf
orders with new orders from commercial aerospace customers and other markets.
DISTRIBUTION AND SERVICE. The Company's sales and service centers market a wide
variety of mill products including engineered parts that are manufactured by
various producers. Distribution and service sales for the third quarter of 1997
include the sales of Rome Metals, Inc., acquired by the Company on July 1, 1997.
During the third quarter of 1997, distribution and service sales increased 15%
to $20.7 million, compared to $18.0 million for the third quarter of 1996,
primarily due to the Rome acquisition. Sales to the industrial markets have
moderated, while the demand for commercial aerospace products has increased. Due
to high demand, the Company's service centers have had difficulty obtaining
certain commercial aerospace products from vendors.
CASTINGS. Sales of castings increased 38% to $3.6 million for the third
quarter of 1997 compared to $2.6 million for the third quarter of 1996. The
Company is expanding its casting facilities.
COST OF SALES AND GROSS PROFIT. Cost of sales for the third quarter of 1997
increased 11% to $54.0 million, compared to $48.5 million in the third quarter
of 1996. The primary reasons for the increase in cost of sales were increased
shipments, higher material costs for the distribution business, and a shift in
mix to more costly aerospace products. The Company's gross profit margin
increased to 28% for the third quarter of 1997 from 25% for the third quarter of
1996, primarily as a result of higher prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A of $5.9 million
remained substantially constant between the two quarters. As a percentage of
sales, SG&A decreased to 7.8% from 9.1% in the third quarter of 1996.
Fluctuations in the market price of the Company's common stock affect the amount
of expenses incurred under the Company's Stock Appreciation Rights ("SAR's")
Plan.
10
<PAGE>
RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES ("RT&D"). RT&D expenses
increased $.2 million during the third quarter of 1997 to $.7 million compared
to the third quarter of 1996. The increase relates to the ongoing development of
improved manufacturing processes and product development. The main focus of RT&D
is to develop enhanced production procedures, provide customers with required
technical support and develop new products and markets. RT&D works jointly on
projects with customers, research agencies and universities.
INTEREST INCOME. Net proceeds from the Offering (See Offering under Liquidity
and Capital Resources) have been invested in short-term marketable securities,
which is the primary factor giving rise to the increase in interest income.
INTEREST EXPENSE. Interest expense remained substantially unchanged between the
two quarters.
PROVISION FOR INCOME TAXES. The Company reported a provision for income taxes of
$5.3 million, or an effective tax rate of 36% (on income before income taxes and
minority interests) for the third quarter of 1997 compared to $2.8 million, or
an effective tax rate of 30% for the comparable period in 1996. The difference
between the federal and state combined statutory tax rate of 40% and the 1997
effective tax rate of 36% was due to the Company's ability to utilize tax
credits which had been subject to a valuation allowance. The difference between
the federal and state combined statutory tax rate and the effective tax rate of
30% for the third quarter of 1996 is primarily due to a change in the Company's
deferred tax asset valuation allowances.
NET INCOME. The Company reported net income of $9.4 million, $0.57 per share,
for the third quarter of 1997 compared to net income of $6.4 million, $0.48 per
share, for the comparable period in 1996.
COMPARISON OF FIRST NINE MONTHS OF 1997 TO FIRST NINE MONTHS OF 1996
- --------------------------------------------------------------------
NET SALES. Net sales increased $39.6 million, or 23% to $214.4 million in the
first nine months of 1997, compared to $174.8 million in 1996. The increase in
sales was primarily driven by higher prices and increased demand for both the
Company's manufactured and service center products. Of the $39.6 million sales
increase, $12.1 million was the result of volume increases and $27.5 million
from higher average selling prices.
TITANIUM SPONGE. During the first nine months of 1997, the Company's integrated
sponge facility operated at near capacity, primarily supplying the Company's
internal demand for titanium sponge as well as sales to RMI under a long-term
titanium sponge conversion agreement. Sales of titanium sponge and sponge
conversion services of $11.5 million remained substantially constant between the
two periods. Sponge shipments increased 9% and the average sponge price per
pound decreased 11%. The decrease in the average price per pound is related to a
decrease in sales of high purity sponge to the electronics industry. The Company
projects that it will continue to operate its sponge facility at near capacity
with substantially all production being utilized for internal consumption or for
supply to RMI.
INGOT. Sales of ingot increased 87% to $61.8 million for the first nine months
of 1997 compared to $33.1 million for the first nine months of 1996. Ingot
shipments increased 26% and the average ingot price per pound increased 48%. The
Company operated its melt facilities at near capacity during the first nine
months of 1997 and expects to continue to do so for the remainder of 1997. The
Company produces ingot for both internal use in its mill products division and
for sale primarily to aerospace customers.
MILL PRODUCTS. The Company produces or contracts for outside production a
variety of mill products including, billet, bar, plate, sheet and engineered
parts. Mill product sales increased 5% to $68.7 million for the first nine
months of 1997 compared to $65.7 million for the first nine months of 1996.
Shipments of mill products decreased 19% and the average price per pound
increased 27%. Sales to producers of golf clubheads decreased during the first
nine months of 1997 compared to the same period of 1996. Sales to producers of
aerospace components are responsible for a substantial portion of the growth in
mill product sales.
11
<PAGE>
DISTRIBUTION AND SERVICE. The Company's service centers market a wide variety of
mill products including engineered parts that are manufactured by various
producers. Distribution and service sales include the sales of Rome Metals,
Inc., which was acquired by the Company on July 1, 1997. During the first nine
months of 1997, sales of distribution and service center products increased 9%
to $57.7 million compared to $52.7 million for the first nine months of 1996.
The increase in sales was primarily due to the Rome acquisition, increased
product shipments, and favorable pricing and product mix.
CASTINGS. Sales of castings increased 26% to $9.2 million for the first nine
months of 1997 compared to $7.3 million for the first nine months of 1996. The
Company is operating at a higher production rate in 1997 and is expanding its
casting facilities.
COST OF SALES AND GROSS PROFIT. Cost of sales for the first nine months of 1997
increased 17% to $157.0 million, compared to $133.9 million in the first nine
months of 1996. The primary reasons for the increase in cost of sales were
increased shipments and higher material costs. The Company's gross profit margin
increased to 26.8% for the first nine months of 1997 from 23.4% for the first
nine months of 1996, as a result of higher prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $1.5 million, or
10%, for the first nine months of 1997 to $16.5 million from $15.1 million in
the comparable nine-month period of 1996. The increase is primarily a result of
additional employees hired to support the increase in operating activity. As a
percentage of sales, SG&A decreased to 7.7% in the first nine months of 1997
from 8.6% in the first nine months of 1996.
RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES. RT&D increased by $0.7
million for the first nine months of 1997 to $2.1 million from the comparable
nine month period of 1996. The increase relates to the development of improved
manufacturing processes and alloy development. The main focus of RT&D is to
develop enhanced production procedures, provide customers with required
technical support and develop new products and markets. RT&D works jointly on
projects with customers, research agencies and universities.
INTEREST INCOME. Net proceeds from the Offering have been invested in short-term
marketable securities, which is the primary factor giving rise to the increase
in Interest Income.
INTEREST EXPENSE. Interest expense decreased $0.9 million to $0.9 million in the
first nine months of 1997 compared to the first nine months of 1996, resulting
from a decrease in borrowings. In August 1996, the Company paid down its U.S.
revolving credit agreement with funds received from the Offering.
PROVISION FOR INCOME TAXES. The Company reported a provision for income taxes of
$15.1 million, or an effective tax rate of 37% (on income before income taxes
and minority interests) for the first nine months of 1997 compared to $7.0
million, or an effective tax rate of 31% for the comparable period in 1996. The
difference between the federal and state combined statutory tax rate of 40% and
the effective tax rate of 37% for the first nine months of 1997 is related to
favorable amendments of the Company's prior year's tax returns and utilization
of the tax credits which had been subject to a valuation allowance. The
difference between the federal and state combined statutory tax rate and the
effective tax rate of 31% for the first nine months of 1996 is primarily due to
a change in the Company's deferred tax asset valuation allowance.
NET INCOME. The Company reported net income of $24.6 million, $1.49 per share,
for the first nine months of 1997 compared to net income of $15.0 million, $1.24
per share, for the comparable period in 1996.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
- --------
Net cash provided by operating activities totaled $9.1 million for the first
nine months of 1997, compared to net cash used in operating activities of $6.8
million for the comparable period of 1996. For the first nine months of 1997,
the Company reported net income of $24.6 million, compared to $15.0 million for
the comparable period of 1996. During the first nine months of 1997 and 1996,
the Company incurred $7.6 million and $5.5 million, respectively, in non-cash
expenses relating to its Stock Compensation and Savings Plans. Increases in the
average market value of the Company's common stock and in the number of eligible
employees are the primary factors for the 1997 increase. Net cash invested in
working capital during the first nine months of 1997 was $3 million less than in
the same period of 1996.
Net cash used in investing activities totaled $6.9 million for the first nine
months of 1997 compared to net cash used in investing activities of $12.0
million for the comparable period of 1996. During the first nine months of 1997,
the Company utilized $31.6 million in short-term investments primarily to fund
working capital requirements, capital additions, and the acquisition of Rome.
The Company's additions to property, plant and equipment totaled $10.8 million
and $2.4 million in the first nine months of 1997 and 1996, respectively.
Net cash used in financing activities totaled $1.0 million for the first nine
months of 1997, compared to net cash provided by financing activities of $88.9
million for the comparable period of 1996. During the third quarter of 1996, the
Company completed the Offering with net proceeds of $103.3 million, and paid
down its U.S. revolving credit agreement.
REVIEW OF SIGNIFICANT WORKING CAPITAL ACCOUNTS.
- -----------------------------------------------
SHORT-TERM INVESTMENTS. Proceeds from the Offering have been invested in a
portfolio of highly-liquid debt securities. The Company reported $34.3 million
in short-term investments as of September 28, 1997, compared to $63.4 million as
of September 30, 1996. Short-term Investments have been utilized by the Company
to fund additions to property plant, and equipment, in addition to the purchase
of Rome.
INVENTORIES. Inventories decreased by $2.8 million, or 2% during the first nine
months of 1997, to $116.7 million; while they increased $27.8 million, or 42%,
to $93.9 million during the comparable period of 1996. During 1996, the Company
increased its level of inventories in response to a growing sales backlog and
increased production levels. While sales increased during the first nine months
of 1997, inventory levels remained relatively unchanged. The Company's
manufacturing facilities are presently operating at near capacity.
ACCOUNTS RECEIVABLE. Accounts receivable increased by $24.9 million, or 67%,
during the third quarter of 1997 to $62.2 million, while receivables increased
by $11.2 million, or 43% to $37.1 million during the comparable period of 1996.
The increase in accounts receivable is primarily the result of an increase in
sales volume.
ACCOUNTS PAYABLE. Accounts payable decreased $2.4 million, or 12%, during the
first nine months of 1997 to $17.5 million. The decrease in accounts payable
during the first nine months of 1997 reflects a decrease in the level of raw
material purchases. Accounts payable at September 30, 1996, was $15.9 million, a
decrease of $1.0 million compared to the balance at December 31, 1995.
ACCRUED PAYROLL AND EMPLOYEE BENEFITS. Accrued payroll and employee benefits
increased by $0.7 million, or 7% during the third quarter of 1997 to $11.4
million, while they increased by $3.9 million, or 58% to $10.5 million during
the comparable period of 1996. Accruals related to the Company's Stock
Compensation and Savings Plans accounted for a substantial portion of the
increase.
OFFERING
- --------
On August 26, 1996, the Company completed an Offering ("Offering") of 4.6
million shares of its common stock for a price of $23.75 per share. Proceeds
from the Offering, net of underwriting fees and expenses, totaled $103 million.
The Company has used approximately $18 million of the proceeds to pay down its
U.S. revolving credit agreement. The balance of the proceeds are being used to
construct a new electron beam furnace ("EB furnace"), expand the Company's
distribution business, and for working capital and other general corporate
purposes.
13
<PAGE>
CREDIT AGREEMENTS.
- ------------------
The Company entered into a $60 million unsecured U.S. borrowing agreement with
various lenders during the third quarter of 1997. The credit agreement provides
for interest at the lead lender's rate or LIBOR rate plus 0.5%, expires in
August 2000, and contains various restrictive covenants, including a minimum
tangible net worth, current asset coverage ratio, and interest coverage ratio.
As of September 28, 1997, there was no balance outstanding under the agreement.
Titanium International Limited, a subsidiary of TI, has a short-term credit
facility in the U.K., permitting borrowings of approximately $3.5 million. The
U.K. credit agreement is subject to renewal in May 1998. The balance outstanding
under the U.K. credit agreement as of September 28, 1997 was $1.4 million.
CAPITAL EXPENDITURES.
- ---------------------
The Company intends to use approximately $42.0 million of the net proceeds from
the Offering for the construction, start-up, and product qualification costs for
a new EB furnace and related raw material processing facilities. The
construction and production ramp-up periods are expected to take approximately
18 months. Approximately $9.0 million will be expended in 1997 (design,
procurement and construction phases), and approximately $33.0 million in 1998
(construction and testing phases).
The Company also intends to expand existing service centers and distribution
business.
The Company anticipates that capital expenditures during 1997 will approximate
$20 million, which will be provided by both presently available and internally
generated funds or credit facilities. Capital expenditures required to maintain
compliance with applicable environmental regulations are included in the
Company's capital expenditure plan to the extent that they can be determined.
Except for approximately $25 million relating to the construction of the EB
furnace, the Company has no material open commitments that obligate it to make
future capital expenditures.
INCOME TAXES.
- -------------
The Company anticipates that in 1997 it will fully utilize its federal
alternative minimum tax (AMT) credit carryforwards and its remaining State of
Oregon net operating loss carryforwards of $10.5 million. In addition to federal
and State of Oregon income taxes, the Company pays income and franchise taxes in
various foreign jurisdictions and states. The Company amended certain of its
prior years federal tax returns, reducing its second quarter 1997 provision for
income taxes by $0.4 million, and recognized $0.5 million of tax credits in the
third quarter of 1997.
ADEQUACY OF LIQUIDITY AND CAPITAL RESOURCES.
- --------------------------------------------
The Company's access to borrowing facilities, public markets, and internally
generated cash are expected to be sufficient to support the Company's operating
needs and to finance its continued growth, acquisitions, capital expenditures
and repayment of long-term debt obligations.
NON-U.S. OPERATIONS AND MONETARY ASSETS.
- ----------------------------------------
Approximately 6% of the Company's net sales for 1997 were derived from its
service centers in the U.K., Germany, Canada and France. Changes in the value
of non-U.S. currencies relative to the U.S. dollar cause fluctuations in U.S.
dollar financial position and operating results. The impact of currency
fluctuations on the Company was not significant in the first nine months of
1997.
14
<PAGE>
PART 2: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A. Exhibits
10.1 Credit Agreement Dated as of August 26, 1997, between
Oregon Metallurgical Corporation as Borrower, certain
financial institutions, and Bank of America National
Trust and Savings Association as the Agent.
11.1 Earning Per Share Computation
27.1 Financial Data Schedule
B. Forms 8-K No reports on Form 8-K were filed by the Company during
the quarter ended September 28, 1997.
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.
OREGON METALLURGICAL CORPORATION
Registrant
Date: November 13, 1997 /s/ Dennis P. Kelly
---------------------------------
Dennis P. Kelly
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the Registrant and as
Chief Accounting Officer
15
CREDIT AGREEMENT
dated as of August 26, 1997
between
OREGON METALLURGICAL CORPORATION
as Borrower,
CERTAIN FINANCIAL INSTITUTIONS
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as the Agent
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
DEFINITIONS AND OTHER TERMS............................................................. 1
1.2. Other Definitional Provisions.................................................................. 22
1.3. Interpretation of Agreement.................................................................... 22
1.4. Accounting and Financial Determinations........................................................ 22
ARTICLE II
COMMITMENTS; LOANS; LETTERS OF CREDIT; OTHER MATTERS............................................... 23
2.1. Commitments.................................................................................... 23
2.1.1. Loan Commitment................................................................. 23
2.1.2. Letter of Credit Commitment..................................................... 23
2.2. Reduction of Commitment Amount................................................................. 23
2.3. Borrowing Procedure; Remitting Funds........................................................... 24
2.3.1. Borrowing Request............................................................... 24
2.3.2. Agent to Notify Lenders......................................................... 24
2.3.3. Remitting of Funds.............................................................. 24
2.4. Loan Options; Continuation and Conversion of Loans............................................. 25
2.4.1. Loan Options.................................................................... 25
2.4.2. Continuation and/or Conversion of Loans......................................... 25
2.5. Lender's Option in Funding of Loans............................................................ 27
2.6. Loan Accounts; Notes........................................................................... 27
2.6.1. Loan Accounts................................................................... 27
2.6.2. Notes........................................................................... 27
ARTICLE III
INTEREST AND FEES.................................................................... 28
3.1. Interest - Base Rate Loans..................................................................... 28
3.2. Interest - Eurodollar Rate Loans............................................................... 28
3.3. Interest During Event of Default............................................................... 28
3.4. Fees........................................................................................... 28
3.4.1. Closing Fee..................................................................... 28
3.4.2. Nonuse Fee...................................................................... 29
3.4.3. Letter of Credit Fees........................................................... 30
3.4.4. Agent's Fees.................................................................... 30
3.4.5. Balance Deficiency Fee.......................................................... 30
3.4.6. Method of Calculating Interest and Fees......................................... 30
ARTICLE IV
PAYMENTS; PREPAYMENTS; OFFSET............................................................. 30
4.1. Time and Place of Payment By Borrower.......................................................... 30
4.2. Loan Payments.................................................................................. 31
4.2.1. Scheduled Repayment of Loans.................................................... 31
4.2.2. Voluntary Prepayment of Loans................................................... 31
4.2.3. Mandatory Prepayment of Loans................................................... 31
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4.2.4. Other Provisions Applicable to Payments of Loans................................ 31
4.3. Agent May Assume Borrower Payment.............................................................. 32
4.4. Payments by the Lenders to the Agent and Agent to Lenders...................................... 32
4.4.1. Agent May Assume Payment By Lender.............................................. 32
4.4.2. Agent's Payments to Lenders..................................................... 33
ARTICLE V
LETTERS OF CREDIT.................................................................... 33
5.1. Requests of Issuance of Letters of Credit...................................................... 33
5.2. Letter of Credit Provisions.................................................................... 34
5.3. Issuances and Extensions....................................................................... 35
5.4. Issuing Lender's Expenses...................................................................... 35
5.5. Lenders' Purchase of Participation in Letters of Credit........................................ 35
5.6. Disbursements.................................................................................. 37
5.7. Reimbursement of Drawings Under Letters of Credit.............................................. 38
5.8. Deemed Disbursements........................................................................... 39
5.9. Increased Costs; Indemnity..................................................................... 40
5.10. Letters of Credit on Application of Subsidiaries............................................... 42
ARTICLE VI
ADDITIONAL PROVISIONS RELATING TO EURODOLLAR RATE LOANS; TAXES;
YIELD PROTECTION; INDEMNIFICATION; SHARING OF PAYMENTS.............................................. 43
6.1. Taxes.......................................................................................... 43
6.1.1. Required Payments By Borrower................................................... 43
6.1.2. Borrower to Indemnify........................................................... 43
6.1.3. Repayment by Lender............................................................. 44
6.1.4. Borrower to Furnish Receipt..................................................... 44
6.1.5. Change in Lending Office........................................................ 44
6.1.6. Withholding Tax................................................................. 44
6.2. Illegality..................................................................................... 46
6.3. Increased Costs and Reduction of Return........................................................ 47
6.4. Capital Adequacy............................................................................... 47
6.5. Funding Losses................................................................................. 47
6.6. Inability to Determine Rates................................................................... 48
6.7. Certificates of Lenders........................................................................ 48
6.8. Substitution of Lenders........................................................................ 49
6.9. Survival. .................................................................................... 49
6.10. Sharing of Payments, Etc....................................................................... 49
ARTICLE VII
REPRESENTATIONS AND WARRANTIES............................................................ 50
7.1. Organization................................................................................... 50
7.2. Authorization.................................................................................. 50
7.3. No Conflicts................................................................................... 51
7.4. Validity and Binding Effect.................................................................... 51
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7.5. No Default..................................................................................... 51
7.6. Financial Statements........................................................................... 51
7.7. Insurance...................................................................................... 52
7.8. Litigation; Contingent Liabilities............................................................. 52
7.9. Ownership of Assets; Liens..................................................................... 52
7.10. Subsidiaries................................................................................... 52
7.11. Partnerships; Joint Ventures................................................................... 53
7.12. Solvency....................................................................................... 53
7.13. Contracts; Labor Matters....................................................................... 53
7.14. Pension and Welfare Plans...................................................................... 54
7.15. Regulation U................................................................................... 54
7.16. Compliance..................................................................................... 55
7.17. Taxes.......................................................................................... 55
7.18. Investment Company Act Representation.......................................................... 55
7.19. Public Utility Holding Company Act Representation.............................................. 55
7.20. Environmental and Safety and Health Matters.................................................... 55
7.21. Accuracy of Information........................................................................ 58
ARTICLE VIII
BORROWER COVENANTS.................................................................... 59
8.1. Financial Statements and Other Reports......................................................... 59
8.1.1. Financial Reports............................................................... 59
8.1.2. Other Reports................................................................... 60
8.2. Notices........................................................................................ 60
8.3. Existence...................................................................................... 62
8.4. No Change in Line of Business.................................................................. 62
8.5. Books, Records and Access...................................................................... 62
8.6. Insurance...................................................................................... 63
8.7. Maintenance of Assets.......................................................................... 63
8.8. Taxes.......................................................................................... 63
8.9. Compliance..................................................................................... 64
8.10. Use of Proceeds................................................................................ 64
8.11. Pension Plans.................................................................................. 64
8.12. Dispositions................................................................................... 64
8.13. Consolidations, Mergers, Acquisitions.......................................................... 65
8.14. Restricted Payments............................................................................ 66
8.15. Indebtedness................................................................................... 67
8.16. Liens.......................................................................................... 69
8.17. Guaranties..................................................................................... 71
8.18. Investments.................................................................................... 72
8.19. Subsidiaries................................................................................... 73
8.20. Capital Expenditures........................................................................... 73
8.21. Financial Condition............................................................................ 74
8.21.1. Current Asset Coverage Ratio.................................................... 74
8.21.2. Interest Coverage Ratio......................................................... 74
8.21.3. Tangible Net Worth.............................................................. 74
8.22. Future Environmental Assessments............................................................... 74
8.23. Other Agreements............................................................................... 75
8.24. Unconditional Purchase Options................................................................. 75
8.25. Transactions with Related Parties.............................................................. 75
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8.26. Negative Pledges, etc.......................................................................... 75
ARTICLE IX
DEFAULT......................................................................... 76
9.1. Event of Default............................................................................... 76
9.1.1. Non-Payment of Liabilities...................................................... 76
9.1.2. Warranty........................................................................ 76
9.1.3. Non-Compliance With Other Covenants............................................. 76
9.1.4. Non-Compliance With Other Loan Documents........................................ 76
9.1.5. Non-Payment of Other Indebtedness............................................... 77
9.1.6. Default of Other Indebtedness................................................... 77
9.1.7. Other Obligations............................................................... 77
9.1.8. Insolvency...................................................................... 78
9.1.9. Pension Plans................................................................... 79
9.1.10. Litigation...................................................................... 79
9.1.11. Validity........................................................................ 79
9.1.12. Conduct of Business............................................................. 80
9.1.13. Change of Control............................................................... 80
9.2. Effect of Event of Default; Remedies........................................................... 80
9.2.1. Action if Bankruptcy............................................................ 80
9.2.2. Action if Other than Bankruptcy................................................. 80
ARTICLE X
CONDITIONS PRECEDENT,
DELIVERY OF DOCUMENTS AND OTHER MATTERS........................................................ 80
10.1. Conditions Precedent to Initial Credit Extensions.............................................. 80
10.1.1. Audit; Credit Approvals......................................................... 80
10.1.2. Solvency........................................................................ 81
10.1.3. Effect of Law................................................................... 81
10.1.4. Exhibits; Schedules............................................................. 81
10.1.5. Fees............................................................................ 81
10.1.6. Documents....................................................................... 82
10.1.7. Payment of Outstanding Indebtedness, etc........................................ 83
10.2. Continuing Conditions Precedent to all Credit
Extension; Certification....................................................................... 84
10.2.1. No Material Adverse Occurrence.................................................. 84
10.2.2. Default......................................................................... 84
10.2.3. Insurance....................................................................... 84
10.2.4. Warranties...................................................................... 84
ARTICLE XI
INDEMNITY......................................................................... 84
11.1. Environmental and Safety and Health Indemnity.................................................. 84
11.2. General Indemnity.............................................................................. 85
11.3. Indemnification for Accepting Oral Instructions................................................ 86
11.4. Survival of Borrower's Obligations............................................................. 86
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ARTICLE XII
THE AGENT........................................................................ 86
12.1. Appointment and Authorization; "Agent"......................................................... 86
12.2. Delegation of Duties........................................................................... 87
12.3. Liability of Agent............................................................................. 87
12.4. Reliance by Agent.............................................................................. 87
12.5. Notice of Default.............................................................................. 88
12.6. Credit Decision................................................................................ 88
12.7. Indemnification of Agent....................................................................... 89
12.8. Agent in Individual Capacity................................................................... 89
12.9. Successor Agent................................................................................ 90
ARTICLE XIII
MISCELLANEOUS PROVISIONS................................................................. 90
13.1. Costs and Expenses............................................................................. 90
13.2. Amendments and Waivers......................................................................... 91
13.3. Notices........................................................................................ 92
13.4. No Waiver by the Agent or Lenders.............................................................. 93
13.5. Marshalling; Payments Set Aside................................................................ 94
13.6. Successors..................................................................................... 94
13.7. Assignments, Participations, etc............................................................... 94
13.7.1. Assignments..................................................................... 94
13.7.2. Participations.................................................................. 96
13.8. Lenders May Pledge Notes....................................................................... 96
13.9. Automatic Debits of Fees....................................................................... 96
13.10. Notification of Addresses, Lending Offices, Etc................................................ 97
13.11. No Third Parties Benefited..................................................................... 97
13.12. Severability................................................................................... 97
13.13. Information.................................................................................... 97
13.14. Headings....................................................................................... 97
13.15. Execution in Counterparts, Effectiveness, etc.................................................. 97
13.16. Construction................................................................................... 98
13.17. Confidentiality................................................................................ 98
13.18. Forum Selection and Consent to Jurisdiction.................................................... 99
13.19. Waiver of Jury Trial........................................................................... 99
</TABLE>
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LIST OF EXHIBITS AND SCHEDULES
Exhibits:
A - Form of Assignment and Acceptance
B - Form of Note
C - Form of Notice of Borrowing
D - Form of Notice of Continuation/Conversion
E - Form of Guaranty
F - Form of Compliance Certificate
G - Borrower's Counsel's Opinion
Schedules:
Schedule I - Percentages
Schedule II - Disclosure Schedule
Schedule 1.1A - Pre-Existing Letters of Credit
Schedule 13.3 - Lending Offices
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is made as of this 26th day of
---------
August, 1997 by and among OREGON METALLURGICAL CORPORATION, an Oregon
corporation ("Borrower"), the various financial institutions as are or may
--------
hereafter become parties hereto (collectively, the "Lenders" and individually
-------
each, a "Lender") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
------
("BOA"), as agent for the Lenders (in such capacity, the "Agent").
--- -----
W I T N E S S E T H:
WHEREAS, Borrower may, from time to time, request loans or other
financial accommodations from the Lenders, and the parties wish to provide for
the terms and conditions upon which such loans or other financial accommodations
shall be made;
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit (including any loan or advance or grant of credit by renewal or
extension) hereafter made to Borrower by the Lenders, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND OTHER TERMS
SECTION 1.1. Definitions. As used herein, the following terms shall
-----------
have the following meanings (such meanings shall be equally applicable to the
singular and plural forms of the terms used, as the context requires):
"Acquisition" means, with respect to any Person, (i) the acquisition by
-----------
such Person of all or substantially all of the assets of any other Person (or a
division or ongoing business thereof), whether through the purchase of assets,
through merger, consolidation or otherwise or (ii) an Investment by such Person
in any other Person as a result of which such other Person becomes a Subsidiary
of such first Person. The amount of any Acquisition shall be the original
principal or capital amount thereof and shall, to the extent made by the
transfer or exchange of property other than cash, or by the assumption of
liabilities, be deemed to have been made in an original principal amount equal
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<PAGE>
to the fair market value of such property or the principal amount of the
liabilities assumed, as applicable.
"Agent" is defined in the Preamble, and includes each other Person as
-----
shall have subsequently been appointed as the successor Agent pursuant to
SECTION 12.9.
- ------------
"Agent-Related Persons" means the Agent, together with its Related
---------------------
Parties and the officers, directors, employees, agents and attorneys-in-fact of
the Agent and its Related Parties.
"Agent's Payment Office" means the address for payments set forth on
----------------------
SCHEDULE 13.3 or such other address as the Agent may from time to time specify
- -------------
to Borrower and the Lenders.
"Agreement" means this Credit Agreement as in effect on the Effective
---------
Date, and as thereafter from time to time amended, modified, supplemented or
amended and restated, and as in effect on such date.
"Applicable Margin" shall mean, as of any date of determination, 1.25%
-----------------
per annum; provided, however, that, subject to the last sentence of this
-------- -------
definition, (a) the Applicable Margin during the period from the Effective Date
to the date on which Borrower shall be required to deliver a Compliance
Certificate pursuant to SECTION 8.1.1(C) shall be 0.50% per annum, and (b) the
----------------
Applicable Margin during each subsequent period from and including the first
date on which Borrower shall have delivered a Compliance Certificate pursuant to
SECTION 8.1.1(C) demonstrating in reasonable detail (based upon financial
- ----------------
statements of Borrower for the period covered by such certificate that have been
delivered to the Agent and the Lenders pursuant to SECTION 8.1.1(A) or
----------------
8.1.1(B)), that the Interest Coverage Ratio, as of the end of the respective
- ---------
Fiscal Quarter or Fiscal Year, is within one of the ranges set forth below, to
but excluding the date of delivery of the next Compliance
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<PAGE>
Certificate, shall equal the percentage per annum set forth in the following
table:
Applicable
Interest Coverage Ratio Margin
----------------------- ----------
Less than 2.75 to 1.0 1.25%
Equal to or greater than 2.75 to 1.0
but less than 3.50 to 1.0 1.00%
Equal to or greater than 3.50 to 1.0
but less than 4.50 to 1.0 0.75%
Equal to or greater than 4.50 to 1.0 0.50%
Notwithstanding the foregoing, the "Applicable Margin" during any period when an
Unmatured Event of Default or an Event of Default in delivery of the Compliance
Certificate pursuant to SECTION 8.1.1(C) shall have occurred and be continuing,
----------------
shall be determined without reference to the foregoing table.
"Application" means an application by a Letter of Credit Applicant, in
-----------
a form and containing terms and provisions acceptable to the Issuing Lender, for
the issuance by the Issuing Lender of a Letter of Credit.
"Assignee Lender" is defined in SECTION 13.7.1.
--------------- --------------
"Assignment and Acceptance" means an Assignment and Acceptance,
-------------------------
substantially in form of EXHIBIT A hereto, or such other form as is reasonably
---------
satisfactory to the Agent, pursuant to which a Lender assigns certain of its
rights and obligations hereunder to another Person in accordance with the terms
of this Agreement.
"Assignor Lender" is defined in SECTION 13.7.1.
--------------- --------------
"Attorneys' Fees" of any Person means and includes all reasonable fees
---------------
and disbursements of any law firm or other external counsel employed by such
Person and all reasonable disbursements of internal counsel of such Person.
"Authorized Person" means (a) in the case of Borrower, those of its
-----------------
officers or employees whose signatures and (in case of officers) incumbency
shall have been certified to the Agent and the Lenders pursuant to SECTION
-------
10.1.6 and (b) in the case of a Material Subsidiary, those of its officers or
- ------
employees whose signatures and (in case of officers) incumbency shall have been
certified to the Agent and the Lenders pursuant to SECTION 5.10.
------------
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<PAGE>
"Banking Day" means any day other than (a) a Saturday, (b) a Sunday or
-----------
(c) a legal holiday on which banks are authorized or required to be closed for
the conduct of commercial banking business in Chicago, Illinois and, if the
applicable Banking Day relates to any Eurodollar Rate Loan, a day on which
dealings are carried on in the interbank eurodollar market.
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
---------
above the latest Federal Funds Rate; and (b) the Reference Rate.
"Base Rate Loan" means a Loan or portion thereof during any period in
--------------
which it bears interest at a rate based on the Base Rate.
"Borrower" -- see Preamble.
--------
"Borrowing" means a borrowing hereunder consisting of Loans of the same
---------
Type made to Borrower by all Lenders in accordance with SECTIONS 2.1, 2.3 and
------------ ---
2.4 in accordance with their respective applicable Percentages, on the same
- ---
Banking Day, and, in the case of Eurodollar Rate Loans, having the same Interest
Period.
"Capital Adequacy Regulation" means any guideline, request or directive
---------------------------
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, for any period for any Person, the sum of
--------------------
(a) the aggregate amount of all expenditures of or Indebtedness incurred by such
Person for fixed or capital assets made during such period which, in accordance
with GAAP, would be classified as capital expenditures and (b) the aggregate
amount of all Capitalized Lease Liabilities of such Person incurred during such
period.
"Capitalized Lease" means any lease which is or should be capitalized
-----------------
on the balance sheet of the lessee thereunder in accordance with GAAP.
"Capitalized Lease Liabilities" means, with respect to any Person, the
-----------------------------
aggregate monetary obligations of such Person under each Capitalized Lease, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such Capitalized Lease prior to the first
date upon which such
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<PAGE>
Capitalized Lease may be terminated by the lessee thereunder without payment of
a penalty.
"Cash Equivalent Investment" means, at any time,
--------------------------
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued, guaranteed or insured by the United
States Government or any agency thereof;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by (i) any Lender or Person
controlling such Lender or (ii) a corporation (other than Borrower or a
Related Party of Borrower) organized under the laws of any state of the
United States or of the District of Columbia and rated A-1 by Standard
& Poor's Ratings Service, Inc. or P-1 by Moody's Investors Service,
Inc.;
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by either (i) a
Lender or (ii) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profit of not less than $100,000,000;
(d) any money market account, short term asset management
account or similar investment account maintained with a Lender (or
other commercial banking institution of the stature referred to in
CLAUSE (C)(II) of this definition);
--------------
(e) any money market funds that invest primarily in Cash
Equivalent Investments of the types described in CLAUSES (A), (B) and
----------- ---
(C); or
---
(f) any repurchase agreement entered into with any Lender (or
other commercial banking institution of the stature referred to in
CLAUSE (C)(II) of this definition) which (i) is secured by a fully
--------------
perfected security interest in any obligation of the type described in
any of CLAUSES (A) through (C) of this definition, and (ii) has a
----------- ---
market value at the time such repurchase agreement is entered into of
not less than 100% of the repurchase obligation of such Lender or such
other commercial banking institution thereunder.
"Change in Control" means
-----------------
(a) the acquisition by any Person (or two or more Persons
acting in concert) other than Borrower's employee stock ownership plan
and/or savings plan, of beneficial
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<PAGE>
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 50%
or more of the outstanding shares of voting stock of Borrower; or
(b) if any Person (or two or more Persons acting in concert)
other than Borrower's employee stock ownership plan and/or savings
plan, shall have or acquired the power to elect the majority of
Borrower's Board of Directors or to direct or cause the direction of
the management and policies of Borrower.
"Closing Date" means the date on which all conditions precedent to the
------------
initial Credit Extension set forth in ARTICLE X are satisfied or waived by all
---------
Lenders.
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"Commitment" means relative to any Lender, such Lender's obligation to
----------
make Loans and to incur Letter of Credit Exposure with respect to the Letters of
Credit.
"Commitment Amount" means, on any date, $60,000,000 as such amount may
-----------------
be reduced from time to time pursuant to SECTION 2.2.
-----------
"Commitment Termination Date" means the earliest of (a) the Facility
---------------------------
Termination Date, (b) the date on which the Commitment Amount is terminated in
full or reduced to zero pursuant to SECTION 2.2 and (c) the date on which any
----------- ---
Commitment Termination Event occurs. Upon the occurrence of any event described
in CLAUSE (B) or CLAUSE (C) of this definition, the Commitments of all Lenders
---------- ----------
shall terminate automatically and without any further action.
"Commitment Termination Event" means (a) the occurrence of any Event of
----------------------------
Default described in SECTION 9.1.8; or (b) the occurrence and continuance of any
-------------
other Event of Default and either (i) the declaration of the Loans to be due and
payable pursuant to SECTION 9.2, or (ii) in the absence of such declaration, the
-----------
giving of notice by the Agent, acting at the direction of the Required Lenders,
to Borrower, that the Commitments have been terminated.
"Compliance Certificate" is defined in SECTION 8.1.1(C).
---------------------- ----------------
"Consolidated Current Assets" means, for Borrower and its consolidated
---------------------------
Subsidiaries as at any date of determination,
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<PAGE>
Borrower's consolidated current assets; provided, however, that in determining
-------- -------
the amount of Consolidated Current Assets to be taken into account for purposes
of computing the Current Asset Coverage Ratio at any date of determination, to
the extent the sum of (a) Borrower's consolidated cash, Cash Equivalent
Investments and marketable securities plus (b) the book value (net of all
reserves and allowances) of Borrower's consolidated accounts receivable, is less
than 30% of total Consolidated Current Assets, the amount of Consolidated
Current Assets taken into account in determining the Current Asset Coverage
Ratio shall be limited to the amount necessary to increase such percentage to
not less than 30%.
"Consolidated Tangible Net Worth" means, with respect to any Person at
-------------------------------
any time, the total of the shareholders' equity (including capital stock,
additional paid-in capital and retained earnings after deducting treasury stock)
of such Person and its consolidated Subsidiaries at such time calculated in
accordance with GAAP, less the sum of the total amount of all intangible assets.
Intangible assets shall include, without limitation, unamortized debt discount
and expense, unamortized deferred charges and goodwill.
"Credit Extension" means and includes (a) the advancing of Loans by the
----------------
Lenders in connection with a Borrowing and (b) any issuance or extension by the
Issuing Lender of a Letter of Credit.
"Current Asset Coverage Ratio" means, at any date of determination, the
----------------------------
ratio on such date of (a) Borrower's Consolidated Current Assets to (b) the
outstanding principal balance of the Loans.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
-------------------
SCHEDULE II, as it may be amended, supplemented or otherwise modified from time
- -----------
to time by Borrower with the written consent of the Agent and the Required
Lenders, which consent will not be unreasonably withheld.
"Disposition" means any sale, assignment, transfer or other
-----------
disposition, or grant of options, warrants or other rights with respect to, any
assets (whether now owned or hereafter acquired) by Borrower or any of its
Subsidiaries (including the sale, with or without recourse, of any accounts
receivable and the sale of capital stock of Subsidiaries) to any other Person,
excluding (a) any sale, assignment, transfer or other disposition of inventory
and other assets sold or disposed of in the ordinary course of business and on
ordinary business terms, (b) the licensing of general intangibles in the
ordinary course of business, (c) the sale of overdue accounts receivable in the
ordinary course of business, (d) the sale of worn-out or obsolete equipment and
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<PAGE>
other fixed or capital assets in the ordinary course of business in accordance
with SECTION 8.7 and (e) any Disposition in connection with a loss, or damage
-----------
to, or any condemnation or other taking of, any assets for which Borrower or any
of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation
award or other compensation.
"Dollars" and the sign "$" each mean lawful money of the United States
------- -
of America.
"EBIT" means for any Person for any period, the sum for such period of
----
(a) the aggregate of such Person's consolidated net earnings (determined in
accordance with GAAP) plus, without duplication, the interest in the net
earnings of a consolidated Subsidiary which were deducted in the calculation of
the consolidated net earnings of such Person (the "Minority Interest") due to
such Subsidiary's being less than a wholly-owned Subsidiary of such Person, plus
----
(b) the aggregate amount deducted, in determining such Person's consolidated net
earnings for such period, in respect of total interest expense (including any
interest expense in respect of Capitalized Lease Liabilities), plus
---- (c) the
aggregate amount deducted, in determining such Person's consolidated net
earnings for such period, in respect of tax expense. For purposes of this
definition, "net earnings" for any period shall not include gains during such
period on the sale of Investments or fixed assets or other extraordinary or
nonrecurring items of income, to the extent such gains or other extraordinary or
nonrecurring items of income exceed the aggregate losses during such period on
the sale of Investments or fixed assets or other extraordinary or nonrecurring
losses.
"Effective Date" means the date this Agreement becomes effective
--------------
pursuant to SECTION 13.15.
-------------
"Environmental Laws" means the Resource Conservation and Recovery Act,
------------------
42 U.S.C. section 690, et seq., the Comprehensive Environmental Response,
-- ---
Compensation and Liability Act of 1980, as amended, any so-called "Superfund" or
"Superlien" law, the Toxic Substances Control Act, and any successor statute of
similar import, together with the regulations thereunder, in each case as in
effect from time to time, and any other federal, state or local statute, law,
ordinance, code, rule, regulation, guideline, order or decree, or other
requirement (whether or not having the force of law) regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements, and emission or effluent restrictions) concerning any
Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any pollutant or contaminant or other substance, whether solid,
liquid or gas, or otherwise relating to public health and safety and/or
protection
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<PAGE>
of the environment, as now or at any time hereafter in effect. References to
sections of any such statute shall be construed to also refer to any successor
sections.
"Environmental Lien" means a Lien in favor of any federal, state or
------------------
local governmental entity or agency for (1) any liability under any
Environmental Law or (2) damages arising from or costs incurred by such
governmental entity or agency relating to a spillage, disposal, Release or
threatened Release into the environment of any Hazardous Material or other
hazardous, toxic or dangerous waste, substance or constituent, or any pollutant
or contaminant or other substance, whether solid, liquid or gas.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other trade or
---------------
business (whether or not incorporated) that is, along with Borrower, a member of
a controlled group of corporations or a controlled group of trades or
businesses, as described in sections 414(b) and 414(c), respectively, of the
Code or section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of section 414(m) of the Code.
"Eurocurrency Reserve Percentage" means, with respect to each Interest
-------------------------------
Period applicable to Eurodollar Rate Loans, a percentage (expressed as a
decimal) equal to the daily average during such Interest Period of the
percentages in effect on each day of such Interest Period, rounded upward to the
next 1/100 of 1%, as prescribed by the Federal Reserve Board (or any successor),
for determining reserve requirements applicable to "Eurocurrency liabilities"
pursuant to Regulation D or any other then applicable regulation of the Federal
Reserve Board which prescribes reserve requirements applicable to "Eurocurrency
Liabilities," as presently defined in Regulation D. For purposes of this
definition, any Eurodollar Rate Loans hereunder shall be deemed to be
"Eurocurrency Liabilities" as defined in Regulation D.
"Eurodollar Rate Loan" means, at any time, any Loan or portion thereof
--------------------
(to the extent of such portion) which bears interest at a rate determined with
reference to the Interbank Rate (Reserve Adjusted) for a particular Interest
Period.
"Event of Default" has the meaning ascribed to such term in
----------------
SECTION 9.1.
- -----------
"Facility Termination Date" means August 26, 2000.
-------------------------
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<PAGE>
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Banking Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Banking Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
---------------------
Reserve System or any successor thereto.
"Fiscal Quarter" or "FQ" means any quarter of a Fiscal Year.
-------------- --
"Fiscal Year" or "FY" means any period of 52/53 consecutive calendar
----------- --
weeks ending on the Sunday closest to the 31st day of December. References to a
Fiscal Year with a number corresponding to any calendar year (e.g. "Fiscal Year
1997" or "FY 1997") refer to the Fiscal Year ending on the Sunday closest to the
31st day of December occurring during such calendar year.
"Fronting Fee" is defined in SECTION 3.4.3.
------------ -------------
"Further Taxes" means any and all present or future taxes, levies,
-------------
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to SECTION 6.1.
-----------
"GAAP" is defined in SECTION 1.4.
---- -----------
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty" means a Guaranty executed and delivered by Borrower pursuant
--------
to SECTION 5.10, substantially in the form of EXHIBIT E hereto, with appropriate
------------ ---------
insertions, as amended, supplemented, restated or otherwise modified from time
to time.
"Guarantee Liability" of any Person means any agreement, undertaking or
-------------------
arrangement by which such Person guarantees,
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<PAGE>
endorses or otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds for payment, to
supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the Indebtedness, obligation or any other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's obligation in respect
of any Guarantee Liability shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum principal amount,
if larger) of the debt, obligation or other liability guaranteed thereby.
"Hazardous Materials" means (a) any "hazardous substance" as defined in
-------------------
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (b) any "hazardous waste" as defined in the Resource
Conservation and Recovery Act, as amended, (c) any petroleum product or (d) any
pollutant, contaminant or hazardous, dangerous or toxic chemical, material or
substance, defined or qualifying as such in (or for the purposes of) any
Environmental Law, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof which is liquid at standard
conditions of temperature or pressure (60 degrees fahrenheit and 14.7 pounds per
square inch absolute), any radioactive material, including, but not limited to,
any source, special nuclear or by-product material as defined at 42 U.S.C.
section 2011 et seq., as amended or hereafter amended, polychlorinated
-- ---
biphenyls, and asbestos in any form or condition.
"Hedging Agreement" means any agreement (including any master agreement
-----------------
and any agreement, whether or not in writing, relating any single transaction)
that is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other similar agreement, including
any option to enter into any of the foregoing, or any combination of any of the
foregoing. "Hedging Agreements" shall include all such agreements or
arrangements made or entered into at any time, or in effect at any time, whether
or not related to a Credit Extension.
"Hedging Obligations" means, with respect to any Person, all
-------------------
liabilities of such Person under any Hedging Agreements and all other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates, raw material prices or utility or energy prices
(including but not limited to obligations and liabilities arising in connection
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<PAGE>
with or as a result of early or premature termination of a Hedging Agreement or
other such agreement or arrangement, whether or not occurring as a result of a
default thereunder), absolute or contingent, now or hereafter existing or
incurred or due or to become due.
"Impermissible Qualification" means, relative to the opinion or
---------------------------
certification of any independent public accountant as to any consolidated
financial statement of Borrower, any qualification or exception to such opinion
or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause Borrower to be in default of any of its obligations
under SECTION 8.21.
------------
"including" means including without limiting the generality of any
---------
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
---------------
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication, (i) any
------------
obligation of such Person for borrowed money, including, without limitation (A)
any such obligation evidenced by bonds, debentures, notes or other similar debt
instruments, or securities providing for mandatory payments of money and (B) any
such obligation which is non-recourse to the credit of such Person, (ii) any
Reimbursement Obligation, and any other obligation, contingent or otherwise, of
such Person relative to or in connection with any letter of credit (including
the Letters of Credit), whether or not drawn, and any banker's acceptances,
(iii) any obligation of such Person on account of deposits or advances, (iv) net
liabilities of such Person under all Hedging Obligations, (v) whether or not
included as a liability in accordance with GAAP, any obligation of such Person
to pay the deferred purchase price of property or services, other than Trade
Accounts Payable, (vi) whether or not included as a liability in accordance with
GAAP, any monetary obligation (excluding prepaid interest thereon) of such
Person or of another Person secured by a Lien on any property or asset owned or
being purchased by such first Person (including any such obligation arising
under conditional sales or other title retention agreements), whether
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<PAGE>
or not such obligation shall have been assumed by such first Person or is
limited in recourse, (vii) any Capitalized Lease Liabilities of such Person,
(viii) any other item (other than Trade Accounts Payable) which, in accordance
with GAAP, would be included as a liability on the liability side of the balance
sheet of such Person as of the date at which Indebtedness is to be determined
and (ix) all Guarantee Liabilities of such Person in respect of any of the
foregoing. For all purposes of this Agreement, the Indebtedness of any Person
shall include the recourse Indebtedness of any partnership or joint venture in
which such Person is a general partner or joint venturer with unlimited
liability.
"Indebtedness to be Paid" is defined in SECTION 8.15(B).
----------------------- ---------------
"Indemnified Liabilities" is defined in SECTION 11.2.
----------------------- ------------
"Indemnified Parties" is defined in SECTION 11.1.
------------------- ------------
"Initial Funding Date" means the date the initial Credit Extension is
--------------------
made under this Agreement.
"Interbank Rate" means, for an Interest Period with respect to
--------------
Eurodollar Rate Loans comprising part of the same Borrowing, the rate per annum
at which Dollar deposits in immediately available funds are offered to banks two
(2) Banking Days prior to the beginning of such Interest Period by major banks
in the interbank eurodollar market as at or about 10:00 a.m., Chicago, Illinois
time, for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount equal to the amount of BOA's Eurodollar
Rate Loan to be outstanding during such Interest Period.
"Interbank Rate (Reserve Adjusted)" means, for an Interest Period with
---------------------------------
respect to Eurodollar Rate Loans comprising part of the same Borrowing, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined
pursuant to the following formula:
Interbank Rate Interbank Rate
= ---------------------------------
(Reserve Adjusted) 1-Eurocurrency Reserve Percentage
"Intercompany Investments" is defined in SECTION 8.18(B).
------------------------ ---------------
"Interest Coverage Ratio" means, with respect to Borrower for any
-----------------------
period of determination, the ratio of (a) the sum of Borrower's consolidated
EBIT for such period to (b) Borrower's consolidated interest expense for such
period (including any interest expense in respect of Capitalized Lease
Liabilities).
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<PAGE>
"Interest Payment Date" means (a) with respect to Base Rate Loans, each
---------------------
Quarterly Payment Date occurring after the Effective Date and (b) with respect
to Eurodollar Rate Loans, the last day of each applicable Interest Period with
respect to such Loans and, if the Interest Period is longer than three months,
on the date which is three months from the beginning of such Interest Period.
"Interest Period" means, relative to any Eurodollar Rate Loan, the
---------------
period beginning on (and including) the date on which such Eurodollar Rate Loan
is made or continued as, or converted into, a Eurodollar Rate Loan pursuant to
SECTION 2.3 or 2.4 and shall end on (but exclude) the day which numerically
- ----------- ---
corresponds to such date one, two, three or six months thereafter (or, if such
month has no numerically corresponding day, on the last Banking Day of such
month), in either case as Borrower may select in its relevant notice pursuant to
SECTION 2.3 or 2.4; provided, however, that
- ----------- --- -------- -------
(a) unless the Agent shall otherwise consent, Borrower shall
not be permitted to select Interest Periods to be in effect at any one
time which have expiration dates occurring on more than seven (7)
different dates;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Loans comprising part of the same Borrowing shall be of
the same duration;
(c) if such Interest Period would otherwise end on a day which
is not a Banking Day, such Interest Period shall end on the next
following Banking Day (unless such next following Banking Day is the
first Banking Day of a calendar month, in which case such Interest
Period shall end on the Banking Day next preceding such numerically
corresponding day); and
(d) no Interest Period may end later than the Facility
Termination Date.
"Investment" of any Person means, without duplication, (a) any
----------
investment, made in cash or by delivery of any kind of property or asset, in any
other Person, whether by acquisition of shares of stock or similar interest,
Indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, (b) any Guarantee Liability of such Person and (c)
any ownership or similar interest held by such Person in any other Person. The
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than
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cash, be deemed to have been made in an original principal or capital amount
equal to the fair market value of such property.
"Issuing Lender" means BOA.
--------------
"Lender" -- is defined in the Preamble. Unless the context otherwise
------
dictates, each reference to "Lender" herein shall include the Issuing Lender.
"Lending Office" means, as to any Lender the office or offices of such
--------------
Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Eurodollar Lending Office", as the case may be, on SCHEDULE 13.3, or such other
-------------
office or offices as the Lender may from time to time notify Borrower and the
Agent.
"Letter of Credit" means a letter of credit issued by the Issuing
----------------
Lender on or after the Effective Date on the Application of a Letter of Credit
Applicant, in such form and containing such terms as the Issuing Lender shall
require.
"Letter of Credit Applicant" means Borrower or, subject to compliance
--------------------------
with SECTION 5.10, a Material Subsidiary.
------------
"Letter of Credit Commitment" means the obligation of the Issuing
---------------------------
Lender to issue Letters of Credit and of the other Lenders to purchase
participations therein in accordance with the terms of ARTICLE V.
---------
"Letter of Credit Commitment Termination Date" means the earliest of
--------------------------------------------
(a) the Facility Termination Date; (b) the date on which the Commitment Amount
is terminated in full or reduced to zero pursuant to SECTION 2.2; and (c) the
-----------
date on which any Commitment Termination Event occurs. Upon the occurrence of
any event described in CLAUSE (B) or (C) of this definition, the Letter of
---------- ---
Credit Commitment shall terminate automatically and without any further action.
"Letter of Credit Exposure" of a Lender with respect to any Letter of
-------------------------
Credit Liabilities means such Lender's Commitment Percentage of the amount of
such Letter of Credit Liabilities. For purposes of this Agreement, a Lender
(other than the Issuing Lender) shall be deemed to incur Letter of Credit
Exposure with respect to a Letter of Credit in an amount equal to its
participation interest therein under SECTION 5.5 hereof, and the Issuing Lender
-----------
shall be deemed to have incurred Letter of Credit Exposure in an amount equal to
its retained interest therein after giving effect to the acquisition by the
Lenders other than the Issuing Lender of their respective participation
interests therein.
"Letter of Credit Facility Amount" means $30,000,000.
--------------------------------
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"Letter of Credit Liabilities" means at any time, but without
----------------------------
duplication, an amount equal to the sum of (a) the aggregate amount available to
be drawn under outstanding Letters of Credit and Pre-Existing Letters of Credit,
plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
"Liabilities" means all of the liabilities, obligations and
-----------
indebtedness of Borrower to the Agent or any Lender of any kind or nature under
or in connection with this Agreement or any other Loan Document, or under or in
connection with any Hedging Agreement, however created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing or
due or to become due, and including but not limited to Hedging Obligations of
Borrower to any Lender.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
----
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"Loan" is defined in SECTION 2.1.1.
---- -------------
"Loan Account" is defined in SECTION 2.6.1.
------------ -------------
"Loan Availability" means the Commitment Amount minus the Letter of
-----------------
Credit Liabilities.
"Loan Document" means this Agreement, any Notes, each Application, each
-------------
Letter of Credit, each Pre-Existing Letter of Credit, and any other agreement,
instrument or document (including, without limitation, notes, guarantees,
mortgages, deeds of trust, chattel mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, leases,
financing statements, subordination agreements, trust account agreements and all
other written matter) heretofore, now, or hereafter delivered to the Agent or
any Lender with respect to or in connection with or pursuant to this Agreement
or any of the Liabilities, as any thereof may be amended, modified, supplemented
or replaced from time to time.
"Margin Stock" has the meaning ascribed to such term in Regulation U of
------------
the Federal Reserve Board or any regulation substituted therefor, as in effect
from time to time.
"Material Adverse Occurrence" means any event or condition (a) having
---------------------------
or causing a material adverse change in, or a material adverse effect upon, the
operations, business, properties, condition (financial or otherwise) or
prospects of Borrower, any
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Material Subsidiary, or Borrower and its Subsidiaries taken as a whole; (b)
having or causing a material impairment of the ability of Borrower to perform
presently or in the future under any Loan Document and to avoid any Event of
Default; or (c) having a material adverse effect upon the legality, validity,
binding effect or enforceability against Borrower of any Loan Document.
"Material Subsidiary" means, at any date of determination, and without
-------------------
duplication (a) each Subsidiary of Borrower whose total revenue during either
the Fiscal Quarter or period of four consecutive Fiscal Quarters ending
coincident with or immediately preceding such date of determination, represents
ten percent (10%) or more of Borrower's consolidated total revenue during such
period, (b) each Subsidiary of Borrower whose assets, as of the last day of the
Fiscal Quarter ending coincident with or immediately preceding such date of
determination, represent ten percent (10%) or more of Borrower's consolidated
total assets and (c) each other subsidiary of Borrower identified as a Material
Subsidiary on ITEM 7.10 of the Disclosure Schedule. Determination of whether a
---------
newly formed or acquired Subsidiary is a Material Subsidiary shall be made on a
pro forma basis (i) for purposes of CLAUSE (A) of the preceding sentence, for
- --- ----- ----------
both the Fiscal Quarter and period of four Fiscal Quarters ending coincident
with or immediately preceding such date of determination and (ii) for purposes
of CLAUSE (B) of the preceding sentence, as if the date of acquisition or
----------
formation thereof was the last day of the Fiscal Quarter ending coincident with
or immediately preceding such date of determination.
"Multiemployer Plan" means a "multiemployer plan" as defined in section
------------------
4001(a)(3) of ERISA which is maintained for employees of Borrower or any ERISA
Affiliate.
"Nonuse Fee" is defined in SECTION 3.4.2.
---------- -------------
"Note" means a promissory note of Borrower payable to any Lender, in
----
the form of EXHIBIT B hereto (as such promissory note may be amended, endorsed
---------
or otherwise modified from time to time), evidencing the aggregate Indebtedness
of Borrower to such Lender resulting from outstanding Loans, and also means all
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"Notice of Borrowing" means a notice of borrowing and certificate duly
-------------------
executed by an Authorized Person of Borrower, substantially in the form of
EXHIBIT C hereto, with appropriate insertions, or such other form as shall be
- ---------
reasonably acceptable to the Agent.
"Notice of Continuation/Conversion" means a notice of continuation or
---------------------------------
conversion and certificate duly executed by an
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<PAGE>
Authorized Person of Borrower, substantially in the form of EXHIBIT D hereto,
---------
with appropriate insertions, or such other form as shall be reasonably
acceptable to the Agent.
"Occupational Safety and Health Law" means the Occupational Safety and
----------------------------------
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, in each case as in effect from time to time. References to sections of
any Occupational Safety and Health Law shall be construed to also refer to any
successor sections.
"Ongoing Indebtedness" is defined in SECTION 8.15(C).
-------------------- ---------------
"Ongoing Investment" is defined in SECTION 8.18(A).
------------------ ---------------
"Organic Document" means, relative to Borrower, its articles of
----------------
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Other Taxes" means any present or future stamp, court or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Participant" is defined in SECTION 13.7.2.
----------- --------------
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined in
------------
section 3(2) of ERISA, which is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which Borrower, or any ERISA Affiliate
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA for any time
within the preceding five years or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, its Percentage of the
----------
Commitment as set forth opposite such Lender's name on SCHEDULE I hereto, or in
----------
an Assignment and Acceptance Agreement executed and delivered by such Lender, as
such percentage may be adjusted from time to time pursuant to Assignment and
Acceptance Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to SECTION 13.7.1.
--------------
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<PAGE>
"Permitted Disposition" is defined in SECTION 8.12.
--------------------- ------------
"Permitted Liens" is defined in SECTION 7.9.
--------------- -----------
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity or government (whether national,
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"Plan" means any Welfare Plan, Pension Plan or any employee benefit
----
plan, as such term is defined in section 3(3) of ERISA, to which Borrower may
have any liability.
"Post Default Rate" means, in the case of any principal of any Loan at
-----------------
any time of determination when an Event of Default exists, the Base Rate at such
time plus 2.0%.
"Pre-Existing Letter of Credit" means a letter of credit issued on the
-----------------------------
application of Borrower or a Material Subsidiary which (a) was issued prior to
the Effective Date, (b) is outstanding on the Effective Date and (c) is
described on SCHEDULE 1.1A hereto.
-------------
"Quarterly Payment Date" means the last day of each Fiscal Quarter or,
----------------------
if any such day is not a Banking Day, the next succeeding Banking Day.
"Reference Rate" means, at any time, the rate of interest then most
--------------
recently announced by BOA at Chicago, Illinois as its "reference rate". The
reference rate is a rate set by BOA based upon various factors including BOA's
costs and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate. Any change in the reference rate announced by BOA
shall take effect at the opening of business on the day specified in the public
announcement of such change.
"Reimbursement Obligation" is defined in SECTION 5.7.
------------------------ -----------
"Related Party" means, with respect to any Person (in this definition,
-------------
the "Relevant Person") (i) any director (or other Person holding the equivalent
---------------
position) or officer (or other Person holding the equivalent position) of such
Relevant Person, and (ii) any other Person which, directly or indirectly,
controls or is controlled by or under common control with the Relevant Person
(excluding any trustee under, or any committee with
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<PAGE>
responsibility for administering, a Plan). The Relevant Person shall be deemed
to be
(a) "controlled by" any other Person if (i) such other Person
beneficially owns or holds, or directly or indirectly has the power to
vote ten percent (10%) or more (on a fully diluted basis) of the equity
interest of such Relevant Person or (ii) if such other Person has the
power to direct or cause the direction of the management and policies
of such Relevant Person (whether by contract or otherwise); or
(b) "controlled by" or "under common control with" another
Person if such other Person is a member of the immediate family of a
Person which is a Related Party of such Relevant Person or is the
executor, administrator or other personal representative of such
Relevant Person.
"Release" means a "release", as such term is defined in the
-------
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case
as in effect from time to time.
"Reportable Event" has the meaning given to such term in ERISA.
----------------
"Required Lenders" means (a) all Lenders at any time that there are
----------------
fewer than three (3) Lenders and (b) at all other times, Lenders holding at
least 67% of the sum of (1) the then aggregate outstanding principal amount of
the Loans plus Letter of Credit Exposure plus (2) unused Commitments or, if no
principal amount of the Loans and no Letter of Credit Liabilities are then
outstanding, Lenders holding at least 67% of the unused Commitments.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Subordinated Debt" means (a) the Titanium Subordinated Debt and (b)
-----------------
that portion of any other liabilities, obligations or Indebtedness of Borrower
which contains terms satisfactory to Agent and the Required Lenders and is
subordinated, in a manner satisfactory to Agent and the Required Lenders, as to
right and time of payment of principal and interest thereon, to all of the
Liabilities.
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"Subsidiary" means, as to any Person, (a) any corporation of which or
----------
in which such Person, such Person and one or more of its Subsidiaries, or one or
more Subsidiaries of such Person directly or indirectly own 50% or more of the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (b) any partnership, joint venture or similar
entity of which or in which such Person, such Person and one or more of its
Subsidiaries, or one or more Subsidiaries of such Person directly or indirectly
own 50% or more of the capital interest or profits interest or (c) any trust,
association or other unincorporated organization of which or in which such
Person, and one or more of its Subsidiaries, or one or more Subsidiaries of such
Person directly or indirectly own 50% or more of the beneficial interest.
"Taxes" means any and all present or future taxes, levies, assessments,
-----
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Lender or the Agent, as the case may be, is organized or maintains a lending
office.
"Titanium Industries" means Titanium Industries, Inc., an Oregon
-------------------
corporation (formerly known an New TI, Inc.) and an 80% owned Subsidiary of
Borrower.
"Titanium Subordinated Debt" means the Indebtedness of Titanium
--------------------------
Industries to Titanium Fabrication, Inc., a New Jersey corporation (formerly
known as Titanium Industries, Inc.) evidenced by a Subordinated Promissory Note
dated September 19, 1994 in the original principal amount of $4,500,000 due
March 19, 2000.
"Titanium Subordination Agreement" means the Subordination Agreement
--------------------------------
dated as of September 19, 1994 among BankAmerica Business Credit, Inc., a
Delaware corporation (as successor by assignment from Bank of America Illinois),
Titanium Fabrication, Inc., a New Jersey corporation (formerly known as Titanium
Industries, Inc.) and Titanium Industries, Inc.
"Trade Account Payable" of any Person means a trade account payable of
---------------------
such Person incurred in the ordinary course of such Person's business.
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"Type" means, with respect to a Loan, that it is either a Base Rate
----
Loan or a Eurodollar Rate Loan.
"Unmatured Event of Default" means any event or condition which if it
--------------------------
continues uncured would, with the lapse of time or giving of notice or both,
constitute an Event of Default.
"Welfare Plan" means an "employee welfare benefit plan" as such term is
------------
defined in section 3(1) of ERISA.
SECTION 1.2. Other Definitional Provisions. Unless otherwise defined
-----------------------------
or the context otherwise requires, all financial and accounting terms used
herein or in any certificate or other document made or delivered pursuant hereto
shall be defined in accordance with GAAP. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Loan Document, notice and other communication delivered from time to time
in connection with this Agreement or any other Loan Document.
SECTION 1.3. Interpretation of Agreement. Unless otherwise specified,
---------------------------
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references to
such clause of such Article, Section or definition. Section captions used in
this Agreement are for convenience only and shall not affect the construction of
this Agreement. The words "hereof," "herein," "hereto" and "hereunder" and words
of similar import when used in this Agreement or any other Loan Document, refer
to this Agreement or such other Loan Document, as the case may be, as a whole
and not to any particular provision of this Agreement or such other Loan
Document.
SECTION 1.4. Accounting and Financial Determinations. Compliance with
---------------------------------------
each of the financial ratios and restrictions contained in ARTICLE VIII shall,
------------
except as otherwise provided herein, be determined, and all financial statements
required to be delivered hereunder, shall be prepared in accordance with, those
generally accepted accounting principles ("GAAP") applied in the preparation of
the audited financial statements referred to in SECTION 7.6, other than the
-----------
disclosure of footnotes.
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<PAGE>
ARTICLE II
COMMITMENTS; LOANS; LETTERS OF CREDIT; OTHER MATTERS
SECTION 2.1. Commitments. On the terms and subject to the conditions of
-----------
this Agreement (including ARTICLE VI), and in reliance upon the warranties of
----------
Borrower set forth herein and in the other Loan Documents each Lender severally
and for itself alone agrees as follows:
SECTION 2.1.1. Loan Commitment. From time to time on any Banking Day
---------------
occurring prior to the Commitment Termination Date, each Lender will make loans
(relative to such Lender, its "Loans") to Borrower equal to such Lender's
-----
Commitment Percentage of the aggregate amount of the Borrowing of Loans
requested by Borrower to be made on such day; provided, however, that: (a) the
-------- -------
aggregate principal amount of all Loans which any Lender shall be committed to
have outstanding hereunder shall not at any time exceed such Lender's Commitment
Percentage of the lesser of (1) the Loan Availability and (2) the Commitment
Amount, and (b) the aggregate principal amount of all Loans which the Lenders
shall be committed to have outstanding hereunder shall not at any time exceed
the Loan Availability. On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow, prepay and reborrow Loans.
SECTION 2.1.2. Letter of Credit Commitment. From time to time on any
---------------------------
Banking Day occurring prior to the Letter of Credit Commitment Termination Date,
the Issuing Lender will issue and each Lender (other than the Issuing Lender)
will participate in, Letters of Credit, in accordance with and subject to the
provisions of ARTICLE V.
---------
SECTION 2.2. Reduction of Commitment Amount. Borrower may, at any time,
------------------------------
on at least three days' (one day if the reduction in the Commitment Amount does
not require a reduction in the outstanding balance of the Loans) prior written
notice received by the Agent (which shall promptly advise each Lender),
permanently reduce the Commitment Amount by paying to the Agent for the account
of the Lenders such amount, if any, as is necessary to reduce the outstanding
principal balance of the Loans plus Letter of Credit Liabilities to such reduced
Commitment Amount together with all accrued and unpaid interest on the amount of
the Loans being prepaid; provided, however, that all such reductions shall be
-------- -------
permanent, and any partial reduction shall be in a minimum amount of $1,000,000
and in an integral multiple of $1,000,000.
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SECTION 2.3. Borrowing Procedure; Remitting Funds.
------------------------------------
SECTION 2.3.1. Borrowing Request. Each Borrowing shall be made upon
-----------------
Borrower's irrevocable written or telephonic (promptly confirmed in writing)
notice delivered to the Agent, which written notice or confirmation, as
applicable, shall be in the form of a Notice of Borrowing and must be received
by Agent not later than 11:00 a.m. (Chicago, Illinois time) (i) two Banking Days
prior to the requested borrowing date, in the case of Eurodollar Rate Loans and
(ii) on the requested borrowing date, in the case of Base Rate Loans,
specifying:
(a) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $1,000,000 or any integral multiple of
$100,000 in excess thereof;
(b) the requested borrowing date, which shall be a Banking
Day;
(c) the Type of Loans comprising the Borrowing; and
(d) if there is to be a Borrowing of Eurodollar Rate Loans,
the duration of the Interest Period applicable to such Loans. If the
Notice of Borrowing fails to specify the duration of the Interest
Period for any Borrowing of Eurodollar Rate Loans, such Interest Period
shall be one month;
provided, however, that with respect to the Borrowing to be made on the Closing
- -------- -------
Date, if any, the Notice of Borrowing shall be delivered to the Agent not later
than 11:00 a.m. (Chicago, Illinois time) on the Closing Date and such Borrowing
will consist of Base Rate Loans only. Each telephonic notice shall be confirmed
by a Notice of Borrowing executed by an Authorized Person and delivered not
later than the next following Banking Day, it being understood, however, that
any failure to so confirm any telephonic notice or otherwise to comply with the
provisions of this SECTION 2.3.1 shall not affect the obligation of Borrower to
-------------
repay each Loan in accordance with the terms of this Agreement and any Notes.
SECTION 2.3.2. Agent to Notify Lenders. The Agent will promptly notify
-----------------------
each Lender of its receipt of any Notice of Borrowing and of the amount of such
Lender's Percentage of that Borrowing.
SECTION 2.3.3. Remitting of Funds. Each Lender will make the amount of
------------------
its relevant Percentage share of each Borrowing available to the Agent for the
account of Borrower at the Agent's Payment Office by 2:00 p.m. (Chicago,
Illinois time) on the borrowing date requested by Borrower in funds immediately
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available to the Agent. The proceeds of all such Loans will then be made
available to Borrower by the Agent, at Borrower's option, either (i) by
crediting an account maintained by Borrower on the books of BOA with the
aggregate of the amounts made available to the Agent by the Lenders and in like
funds as received by the Agent or (ii) by wire transfer in accordance with
written instructions provided to the Agent by Borrower of like funds as received
by the Agent. The failure of any Lender to make any Loan on any borrowing date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such borrowing date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any borrowing
date.
SECTION 2.4. Loan Options; Continuation and Conversion of Loans.
--------------------------------------------------
SECTION 2.4.1. Loan Options. All or any portion of a Loan may be
------------
maintained as either Type of Loan, as shall be selected by Borrower from time to
time except as otherwise provided herein.
SECTION 2.4.2. Continuation and/or Conversion of Loans.
---------------------------------------
(a) Borrower may, upon irrevocable written or telephonic
(promptly confirmed in writing) notice delivered to the Agent:
(1) elect, as of any Banking Day, in the case of Base
Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Eurodollar Rate Loans, to convert such
Loans (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $100,000 in
excess thereof) into Loans of the other Type; or
(2) elect, as of the last day of the applicable
Interest Period, to continue any Eurodollar Rate Loans having
Interest Periods expiring on such day (or any part thereof in
an amount not less than $1,000,000, or that is in an integral
multiple of $100,000 in excess thereof);
provided, that:
--------
(A) notwithstanding the foregoing, no portion of a
Loan being maintained as a Base Rate Loan shall be converted
into a Eurodollar Rate Loan, and no portion of a Loan being
maintained as a Eurodollar Rate Loan shall be continued as
such Type of Loan, less than 30 days before the Facility
Termination Date;
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(B) if at any time the aggregate amount of Eurodollar
Rate Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than
$1,000,000, such Eurodollar Rate Loans shall automatically
convert into Base Rate Loans, and on and after such date the
right of Borrower to continue such Loans as, and convert such
Loans into, Eurodollar Rate Loans shall terminate;
(C) unless the Required Lenders otherwise consent,
during the existence of an Unmatured Event of Default or Event
of Default, Borrower may not elect to have a Loan or portion
thereof converted into or continued as a Eurodollar Rate Loan;
and
(D) no Loan or portion thereof being maintained as a
Base Rate Loan shall be converted into a Eurodollar Rate Loan
and no portion of a Loan being maintained as a Eurodollar Rate
Loan shall be continued as such Type of Loan if, as a result
of such continuation or conversion, a prepayment of a
Eurodollar Rate Loan on a date other than the last day of the
current Interest Period of Loan would result from the payment
when due of any scheduled principal repayment.
(b) Each notice of continuation or conversion of a Loan shall
be received by the Agent not later than 11:00 a.m. (Chicago, Illinois
time) at least (i) two Banking Days in advance of the
conversion/continuation date if the Loans are to be converted into or
continued as Eurodollar Rate Loans or (ii) on the
conversion/continuation date if the Loans are to be converted into Base
Rate Loans, specifying:
(1) the proposed conversion/continuation date;
(2) the aggregate amount of Loans to be converted or
continued;
(3) the Type of Loans resulting from the proposed
conversion or continuation; and
(4) other than in the case of conversions into Base
Rate Loans, the duration of the requested Interest Period.
Each written notice (or confirmation of telephonic notice) shall be in
the form of a Notice of Continuation/Conversion executed by an
Authorized Person. Each confirmation of telephonic notice shall be
delivered not later than the next following Banking Day, it being
understood, however, that
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any failure to so confirm any telephonic notice or otherwise to comply
with the provisions of this SECTION 2.4.2 shall not affect the
-------------
obligation of Borrower to repay each Loan in accordance with the terms
of this Agreement and any Notes.
(c) If upon the expiration of an Interest Period applicable to
any Eurodollar Rate Loan, Borrower has failed to select timely a new
Interest Period to be applicable to such Eurodollar Rate Loan, or if
any Unmatured Event of Default or Event of Default then exists,
Borrower shall be deemed to have elected to convert such Eurodollar
Rate Loan into a Base Rate Loan effective as of the expiration date of
such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation, or, if no timely notice is
provided by Borrower, the Agent will promptly notify each Lender of the
details of any automatic conversion. All conversions and continuations
shall be pro rated among the applicable outstanding Loans of all
Lenders.
SECTION 2.5. Lender's Option in Funding of Loans. Each Lender may, if
-----------------------------------
it so elects, fulfill its obligation to make, continue or convert a Eurodollar
Rate Loan by causing one of its foreign branches or Related Parties (or an
international banking facility created by such Lender) to make or maintain such
Eurodollar Rate Loan; provided, however, that such Eurodollar Rate Loan shall
-------- -------
nonetheless be deemed to have been made and to be held by such Lender, and the
obligation of Borrower to repay such Eurodollar Rate Loan shall nevertheless be
to such Lender for the account of such foreign branch, Related Party or
international banking facility.
SECTION 2.6. Loan Accounts; Notes.
--------------------
SECTION 2.6.1. Loan Accounts. The Agent shall establish or cause to be
-------------
established on its books in Borrower's name one or more accounts (each a
"Loan Account") to evidence Loans made by the Lenders to Borrower. The Loans
------------
made by each Lender shall be evidenced by one or more loan accounts or records
maintained by such Lender in the ordinary course of business. The Loan Accounts
or records maintained by the Agent and each Lender shall be rebuttable
presumptive evidence of the amount of the Loans made by the Lenders to Borrower
and the interest and payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the obligation of
Borrower hereunder to pay any amount owing with respect to the Loans.
SECTION 2.6.2. Notes. Upon the request of any Lender made through the
-----
Agent, the Loans made by such Lender may be evidenced
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by a Note, instead of or in addition to Loan Accounts. Each such Lender shall
endorse on the schedules annexed to its Note the date, amount and maturity of
each Loan made by it and the amount of each payment of principal made by
Borrower with respect thereto. Each such Lender is irrevocably authorized by
Borrower to endorse its Note and each Lender's record shall be rebuttable
presumptive evidence of the facts stated therein; provided, however, that the
-------- -------
failure of a Lender to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of
Borrower hereunder or under any such Note to or to the order of such Lender.
ARTICLE III
INTEREST AND FEES
SECTION 3.1. Interest - Base Rate Loans. Subject to SECTION 3.3, the
-------------------------- -----------
unpaid principal of each Loan or portion thereof maintained as a Base Rate Loan
shall bear interest to maturity at a rate per annum equal to the Base Rate in
effect from time to time. Interest accrued to maturity on that portion of Loans
maintained as Base Rate Loans shall be payable on each Interest Payment Date and
at maturity.
SECTION 3.2. Interest - Eurodollar Rate Loans. Subject to SECTION 3.3,
-------------------------------- -----------
the unpaid principal of each Loan or portion thereof maintained as a Eurodollar
Rate Loan shall bear interest to maturity at a rate per annum equal to the
Interbank Rate (Reserve Adjusted) in effect for each Interest Period plus the
Applicable Margin for Eurodollar Rate Loans. Interest accrued to maturity on
that portion of Loans maintained as Eurodollar Rate Loans shall be payable on
each Interest Payment Date.
SECTION 3.3. Interest During Event of Default. Notwithstanding SECTIONS
-------------------------------- --------
3.1 and 3.2, at any time that an Event of Default exists, Borrower shall pay
- --- ---
interest on the outstanding principal of each Loan, accruing from (and
including) the date such Event of Default occurs to (but excluding) the date
such Event of Default ceases to exist, at the Post Default Rate of interest
applicable to such Loan. All interest accruing at any time that an Event of
Default exists shall be payable on demand.
SECTION 3.4. Fees.
----
SECTION 3.4.1. Closing Fee. Borrower agrees to pay, on the Effective
-----------
Date, to the Agent for the account of the Lenders that are parties to this
Agreement on the Effective Date, pro rata according to their Percentages, a
closing fee of $30,000. At Borrower's option, the amount of any closing fee due
under this
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Section may be advanced to Borrower as a part of the initial Loans.
SECTION 3.4.2. Nonuse Fee. Borrower agrees to pay, to the Agent for
----------
the account of each Lender pro rata according to its Commitment Percentage, for
the period (including any portion thereof when the Lenders' Commitments are
suspended by reason of any failure to satisfy any of the conditions precedent
set forth in ARTICLE X) from the Effective Date through the Commitment
---------
Termination Date, an aggregate fee ("Nonuse Fee") equal to 0.35% per annum on
----------
the daily average amount by which the Commitment Amount exceeds the outstanding
principal balance of the Loans plus the Letter of Credit Liabilities;
provided, however, that, subject to the penultimate sentence of this Section (a)
- -------- -------
the Nonuse Fee during the period from the Effective Date to the first date on
which Borrower shall be required to deliver a Compliance Certificate pursuant to
SECTION 8.1.1(C) shall be 0.20% per annum and (b) the Nonuse Fee during each
- ----------------
subsequent period from and including the first date on which Borrower shall have
delivered a Compliance Certificate pursuant to SECTION 8.1.1(C) demonstrating in
----------------
reasonable detail (based upon financial statements of Borrower for the period
covered by such certificate that have been delivered to the Agent and the
Lenders pursuant to SECTION 8.1.1(A) or 8.1.1(B)), that the Interest Coverage
---------------- --------
Ratio, as of the end of the respective Fiscal Quarter or Fiscal Year, is within
one of the ranges set forth below, to but excluding the date of delivery of the
next Compliance Certificate, shall equal the percentage per annum set forth in
the following table:
Ratio Nonuse Fee
----- ----------
Less than 2.75 to 1.0 0.35%
Equal to or greater than 2.75 to 1.0
but less than 3.50 to 1.0 0.30%
Equal to or greater than 3.50 to 1.0
but less than 4.50 to 1.0 0.25%
Equal to or greater than 4.50 to 1.0 0.20%
Notwithstanding the foregoing, the "Nonuse Fee" during any period when an
Unmatured Event of Default or an Event of Default in delivery of the certificate
pursuant to SECTION 8.1.1(C) shall have occurred and be continuing, shall be
----------------
determined without reference to the foregoing chart. The fee provided for in
this SECTION 3.4.2 shall be payable in arrears on each Quarterly Payment Date
-------------
for the period then ended and on the last to occur of the Commitment Termination
Date and the date all Loans are repaid in full, for the period then ended for
which no fee shall have been paid.
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SECTION 3.4.3. Letter of Credit Fees. Borrower agrees to pay to the
---------------------
Agent, for the benefit of the Issuing Lender a fee (the "Fronting Fee") equal to
------------
0.125% per annum of the daily average outstanding Letter of Credit Exposure of
the Lenders other than the Issuing Lender. Borrower further agrees to pay the
Agent, for the account of the Lenders according to their respective Commitment
Percentages, a commission equal to Applicable Margin per annum (calculated on
the basis of a year consisting of 360 days and paid for actual days elapsed) on
the aggregate daily average outstanding Letter of Credit Liabilities. The fees
payable pursuant to this Section shall be payable in arrears on each Quarterly
Payment Date.
SECTION 3.4.4. Agent's Fees. Borrower agrees to pay the Agent for its
------------
own account certain fees in the amounts and at the times separately agreed to by
Borrower and the Agent from time to time.
SECTION 3.4.5. Balance Deficiency Fee. Borrower agrees to pay,
----------------------
separately to each Lender such fees as may be separately agreed to between
Borrower and such Lender relating to Borrower's maintenance of collected
balances in demand deposit accounts with such Lender. The terms of any such
agreement(s) between Borrower and a Lender shall be set forth in a separate
document, and all payments of any fees due to a Lender under any such agreement
shall be paid directly to such Lender and not to the Agent. The Agent shall have
no responsibility to collect, remit or monitor payments of any fees due under
any agreement entered into under this SECTION 3.4.5.
-------------
SECTION 3.4.6. Method of Calculating Interest and Fees. Interest on
---------------------------------------
each Base Rate Loan and the fees provided for in SECTIONS 3.4.2 and 3.4.3 shall
-------------- -----
be computed on the basis of a year consisting of 365 (or 366, if applicable)
days and paid for actual days elapsed. Interest on each Eurodollar Rate Loan
shall be computed on the basis of a year consisting of 360 days and paid for
actual days elapsed, calculated as to each Interest Period from (and including)
the first day thereof to (but excluding) the last day thereof.
ARTICLE IV
PAYMENTS; PREPAYMENTS; OFFSET
SECTION 4.1. Time and Place of Payment By Borrower. All payments
-------------------------------------
hereunder by Borrower (including payment of Reimbursement Obligations and
payments with respect to any Notes) shall be made without withholding,
deduction, recoupment, setoff or counterclaim (except for withholdings
described in SECTION 6.1.1). Except as otherwise provided in this Agreement,
-------------
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all payments by Borrower shall be made to the Agent, for the pro rata account of
the Agent and the Lenders entitled to receive such payment, as provided for
herein, in immediately available funds (except as the Required Lenders may
otherwise consent) prior to 2:00 p.m., Chicago, Illinois time, on the date due,
at the Agent's Payment Office, or at such other place as may be designated by
the Agent to Borrower in writing. Any payments received after such time shall
be deemed received on the next Banking Day. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a date other than a
Banking Day, such payment may be made on the next succeeding Banking Day, and
such extension of time shall be included in the calculation of interest and any
fees.
SECTION 4.2. Loan Payments.
-------------
SECTION 4.2.1. Scheduled Repayment of Loans. All Loans hereunder shall
----------------------------
be repaid by Borrower on the Commitment Termination Date.
SECTION 4.2.2. Voluntary Prepayment of Loans. Subject to SECTION 4.2.4,
----------------------------- -------------
Borrower may prepay the principal of the Loans in whole or in part without
premium or penalty other than pursuant to SECTION 6.5. Any partial prepayment of
-----------
principal shall be in a minimum amount equal to the lesser of (i) the aggregate
outstanding principal balance of all Loans and (ii) $1,000,000 and an integral
multiple of $100,000.
SECTION 4.2.3. Mandatory Prepayment of Loans. In the event the
-----------------------------
aggregate outstanding principal balance of all Loans exceeds the Loan
Availability, Borrower shall, unless the Agent and the Lenders shall otherwise
consent, upon the Agent's demand immediately make such repayments of the Loans
or take such other actions as shall be necessary to eliminate such excess.
SECTION 4.2.4. Other Provisions Applicable to Payments of Loans.
------------------------------------------------
Borrower shall give the Agent (which shall promptly advise each Lender) prior
written or telephonic notice of any intended prepayment of the Loans not later
than 11:00 a.m. (Chicago, Illinois time) (a) at least three Banking Days' prior
to the date of prepayment in the case of Eurodollar Rate Loans, and (b) on the
Banking Day of prepayment, in the case of Base Rate Loans. Borrower shall
confirm in writing, not later than the next following Banking Day, any
telephonic notice of prepayment. Once made, a notice of prepayment shall be
irrevocable. Unless the Agent shall otherwise consent, no prepayment of
Eurodollar Rate Loans may be made on a day which is not the last day of the
Interest Period for such Loans. All repayments and prepayments by Borrower with
respect to the Loans shall be made pro rata among Loans of the same Type and, if
--- ----
the
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Loans are Eurodollar Rate Loans, having the same Interest Period, of all
Lenders.
SECTION 4.3. Agent May Assume Borrower Payment. Unless the Agent
---------------------------------
receives notice from Borrower prior to the date on which any payment under this
Agreement or under any Notes is due to the Lenders that Borrower will not make
such payment in full as and when required, the Agent may assume that Borrower
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrower has not made such
payment in full to the Agent, each Lender shall repay to the Agent on demand
such amount distributed to such Lender, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
SECTION 4.4. Payments by the Lenders to the Agent and Agent to Lenders.
---------------------------------------------------------
SECTION 4.4.1. Agent May Assume Payment By Lender. Unless the Agent
----------------------------------
receives notice from a Lender on or prior to the Closing Date or, with respect
to any Borrowing after the Closing Date, at least one Banking Day prior to the
date of such Borrowing, that such Lender will not make available as and when
required hereunder to the Agent for the account of Borrower the amount of that
Lender's Percentage of the Borrowing, the Agent may assume that each Lender has
made such amount available to the Agent in immediately available funds on the
borrowing date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrower on such date a corresponding
amount. If and to the extent any Lender shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to Borrower such amount, that Lender shall on
the Banking Day following such borrowing date make such amount available to the
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Agent submitted to any Lender with respect to amounts
owing under this SECTION 4.4.1 shall be conclusive, absent manifest error. If
-------------
such amount is so made available, such payment to the Agent shall constitute
such Lender's Loan on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to the Agent on the Banking Day following
the borrowing date, the Agent will notify Borrower of such failure to fund and,
upon demand by the Agent, Borrower shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing. The failure of
any Lender to
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fund its Percentage of any Borrowing on the date due from such Lender shall not
relieve any other Lender of any obligation hereunder to fund its Percentage
share of such Borrowing on such date, but no Lender shall be responsible for the
failure of any other Lender to fund its share of any Borrowing.
SECTION 4.4.2. Agent's Payments to Lenders. The Agent will make
---------------------------
available to each Lender, not later than 3:00 p.m., Chicago, Illinois time on
the same Banking Day and in like funds as are received by the Agent, such
Lender's ratable share of any payments received by the Agent from Borrower at
the Agent's Payment Office on or prior to 12:00 noon Chicago, Illinois time
on a Banking Day. Payments received by the Agent after 12:00 noon Chicago,
Illinois time on a Banking Day will be made available to the Lender(s) entitled
to share therein not later than 12:00 noon Chicago, Illinois time on the next
succeeding Banking Day.
SETOFF 4.5. Setoff. In addition to and not in limitation of all other
------
rights and remedies (including other rights of offset or banker's lien) that any
Lender or any other holder of any Note may have under applicable law, each
Lender or such other holder shall (a) upon the occurrence and during the
continuance of any Event of Default or Unmatured Event of Default described in
SECTION 9.1.8 or (b) with the consent of the Required Lenders upon the
- -------------
occurrence and during the continuance of any other Event of Default, have the
right to appropriate and apply to the payment of the Liabilities (whether or not
then due), in such order of application as such Lender or such other holder may
elect, any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or moneys of Borrower then or thereafter
with such Lender or such other holder. The Agent shall promptly advise Borrower
of any such setoff and application upon learning thereof, but failure to do so
shall not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.
ARTICLE V
LETTERS OF CREDIT
SECTION 5.1. Requests of Issuance of Letters of Credit. By delivering
-----------------------------------------
to the Issuing Lender (with a copy to the Agent) not later than ten (10) Banking
Days prior to the Commitment Termination Date, a properly completed Application
for a Letter of Credit executed by an Authorized Person of a Letter of Credit
Applicant, together with such other documents, instruments and/or
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<PAGE>
agreements as the Issuing Lender may require, the Issuing Lender shall, unless
directed otherwise by the Agent, issue Letters of Credit on such terms as are
satisfactory to the Issuing Lender, and each Lender (other than the Issuing
Lender) shall participate in each such Letter of Credit upon the terms contained
in this Agreement and incur Letter of Credit Exposure in an amount equal to its
Commitment Percentage of such Letter of Credit. Upon receipt of a copy of an
Application, the Agent shall promptly notify the Lenders thereof.
Notwithstanding the foregoing, the Issuing Lender shall not be required to
issue, and no Lender shall be required to incur Letter of Credit Exposure with
respect to, any Letter of Credit if, before or after giving effect to the
issuance of such Letter of Credit:
(a) either (i) the aggregate Letter of Credit Liabilities
exceeds or would exceed the Letter of Credit Facility Amount or (ii)
such Lender's Letter of Credit Exposure, together with the aggregate
outstanding principal amount of all Loans of such Lender, exceeds or
would exceed such Lender's Percentage of the Commitment Amount; or
(b) the aggregate Letter of Credit Liabilities plus Loans
hereunder outstanding exceeds any limit imposed on the Issuing Lender
or any other Lender under or pursuant to, or if the issuance of such
Letter of Credit would otherwise cause a violation of, any Requirement
of Law.
SECTION 5.2. Letter of Credit Provisions. Each Letter of Credit shall,
---------------------------
by its terms:
(a) be stated to expire on a date (its "Expiry Date") which is
-----------
not later than the earlier of (1) one year from its date of issuance
and (2) the Banking Day prior to the Facility Termination Date; and
(b) on or prior to its Expiry Date: (1) terminate immediately
upon notice to the Agent or Issuing Lender from the beneficiary
thereunder that all obligations covered thereby have been terminated,
paid, or otherwise satisfied in full; and (2) reduce in part
immediately and to the extent the beneficiary thereunder has notified
the Agent or Issuing Lender that the obligations covered thereby have
been paid or otherwise satisfied in part.
As long as no Unmatured Event of Default or Event of Default exists, by
delivery to the Issuing Lender and the Agent of a written request therefor at
least thirty (30) Banking Days prior to the Expiry Date of any Letter of Credit,
the Borrower may request the Issuing Lender to extend the Expiry Date of such
Letter of Credit for an additional period not to exceed the
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earlier of one year from its date of extension and the day immediately preceding
the Facility Termination Date.
SECTION 5.3. Issuances and Extensions. On the terms and subject to the
------------------------
conditions of this Agreement (including ARTICLE X), the Issuing Lender shall
---------
issue Letters of Credit, and extend the Expiry Dates of outstanding Letters of
Credit, in accordance with Borrower's requests made therefor. The Issuing Lender
will make available the original of each Letter of Credit which it issues to the
beneficiary thereof (and will promptly provide each of the Lenders with a copy
of such Letter of Credit) and will notify the beneficiary under any Letter of
Credit of any extension of the Expiry Date thereof.
SECTION 5.4. Issuing Lender's Expenses. Borrower agrees to pay to the
-------------------------
Issuing Lender all administrative expenses of the Issuing Lender in connection
with the issuance, amendment, maintenance, modification (if any) and
administration of each Letter of Credit, in accordance with the Issuing Lender's
published fees as in effect from time to time, upon demand from time to time.
SECTION 5.5. Lenders' Purchase of Participation in Letters of Credit.
-------------------------------------------------------
(a) Each Letter of Credit issued (or, pursuant to SECTION 5.5(B),
--------------
deemed to have been issued) pursuant to this ARTICLE V shall, effective upon its
---------
issuance and without further action, be issued on behalf of all Lenders
(including the Issuing Lender) pro rata according to their respective Commitment
--- ----
Percentages. Simultaneously with the issuance (or, pursuant to SECTION 5.5(B),
--------------
deemed issuance) by the Issuing Lender of any Letter of Credit, each Lender
(other than the Issuing Lender) shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Lender, without recourse
or warranty, an undivided interest and participation in such Letter of Credit,
including, without limitation, all obligations of the Letter of Credit Applicant
with respect thereto and any security therefor or guarantees pertaining thereto
(including any Guaranty), in an amount equal to such Lender's Commitment
Percentage of the amount of such Letter of Credit, and shall be responsible to
reimburse the Issuing Lender promptly for any Reimbursement Obligations which
have not been reimbursed in accordance with SECTION 5.7, or which have been
-----------
reimbursed but must be returned, restored or disgorged by the Issuing Lender for
any reason. In the event that the Issuing Lender shall not be reimbursed, or if
for any reason Loans shall not be made to fund any Reimbursement Obligation, all
as provided in SECTION 5.7, and in an amount equal to the amount of any drawing
-----------
honored by the Issuing Lender under a Letter of Credit, or in the event the
Issuing Lender must for any reason return or disgorge such
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reimbursement, the Issuing Lender shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Agent, for the
account of the Issuing Lender, whether or not any Unmatured Event of Default or
Event of Default shall have occurred and be continuing, an amount equal to its
respective Commitment Percentage of such Reimbursement Obligation in same day or
immediately available funds at the office of the Agent not later than 12:00
o'clock noon, Chicago, Illinois time, on the Banking Day after the date notified
by the Agent or the Issuing Lender. The obligation of each Lender (other than
the Issuing Lender) to provide the Agent with such Lender's Commitment
Percentage of the amount of any payment or disbursement made by the Issuing
Lender under any outstanding Letter of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which such Lender may have or have had
against a beneficiary of any Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the Agent,
the Issuing Lender, any other Lender or any other Person, whether in connection
with this Agreement, the Application, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions, including, without
limitation, (1) any defense based on the failure of the demand for payment under
such Letter of Credit to conform to the terms of such Letter of Credit, (2) any
draft, certificate or any other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, (3) the legality,
validity, regularity or enforceability of this Agreement or such Letter of
Credit, (4) the identity of the transferee of such Letter of Credit or the
sufficiency of any transfer if such Letter of Credit is transferable, (5) any
failure of the Agent or the Issuing Lender to provide timely notice to the
Lender of any drawing under any Letter of Credit or (6) the occurrence or
continuance of any Event of Default or Unmatured Event of Default. In the event
that any Lender fails to make available to the Issuing Lender the amount of such
Lender's Commitment Percentage of such Reimbursement Obligation as provided
herein, the Issuing Lender shall be entitled to recover such amount from such
Lender on demand together with interest at the daily average Federal Funds Rate
for three Banking Days (together with such other compensatory amounts as may be
required to be paid by such Lender to the Agent pursuant to the Rules for
Interbank Compensation of the Council on International Banking or the
Clearinghouse Compensation Committee, as the case may be, as in effect from time
to time) and thereafter at the rate of interest from time to time applicable to
Base Rate Loans. Notwithstanding the foregoing, nothing in this Section shall be
deemed to prejudice the right of any Lender to recover from the Issuing Lender
any
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amounts made available by such Lender to the Issuing Lender pursuant to this
Section in the event of a final determination by a court of competent
jurisdiction that the payment with respect to a Letter of Credit by the Issuing
Lender in respect of which payment was made by such Lender constituted gross
negligence or wilful misconduct on the part of the Issuing Lender. The Issuing
Lender shall distribute to each other Lender which has paid all amounts payable
by it under this Section with respect to any Letter of Credit, such other
Lender's Commitment Percentage of all payments received by the Issuing Lender in
reimbursement of drawings honored by the Issuing Lender under such Letter of
Credit when such payments are received. If any Lender shall fail to pay the
amount of its participation in a Letter of Credit drawing on the date such
amount is due in accordance with this Section, the Issuing Lender shall be
deemed to have advanced funds in such amount on behalf of such other Lender.
Each such advance shall be secured by such other Lender's participation interest
herein, and the Issuing Lender shall be subrogated to such other Lender's rights
hereunder in respect thereof. At the option of the Issuing Lender, such advance
may be repaid by the Agent's turning over to the Issuing Lender, for application
by the Issuing Lender to amounts owed to the Issuing Lender by such other
Lender, of any payment received by the Agent or the Issuing Lender which such
other Lender is otherwise entitled to receive under this Agreement. Any amount
not paid by such other Lender to the Issuing Lender hereunder shall bear
interest for each day from the day such payment was due until such payment shall
be paid in full at a rate per annum equal to the rate of interest then
applicable to Base Rate Loans. The obligations of each Lender under this Section
shall continue until the last to occur of (a) the Letter of Credit Commitment
Termination Date and (b) the date the Letter of Credit Liabilities have been
reduced to zero.
(b) On the Effective Date, and after satisfaction of the conditions
precedent set forth in SECTION 10.1, each Pre-Existing Letter of Credit shall be
------------
deemed to be a Letter of Credit issued by the Issuing Lender hereunder. Each
Pre-Existing Letter of Credit shall be deemed to be a Letter of Credit issued by
the Issuing Lender and outstanding hereunder, and each Lender shall incur Letter
of Credit Exposure with respect to each such PreExisting Letter of Credit in
accordance with PARAGRAPH (A) of this SECTION 5.5 in an amount equal to such
------------- -----------
Lender's Commitment Percentage of the Letter of Credit Liabilities with respect
to each such Pre-Existing Letter of Credit.
SECTION 5.6. Disbursements. The Issuing Lender will notify Borrower and
-------------
the Agent promptly of the presentment for payment of any Letter of Credit,
together with notice of the date (a "Disbursement Date") such payment shall be
-----------------
made. Subject to the terms and provisions of such Letter of Credit, the Issuing
Lender
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shall make such payment to the beneficiary (or its designee) of such Letter of
Credit.
SECTION 5.7. Reimbursement of Drawings Under Letters of Credit. (a)
-------------------------------------------------
Borrower irrevocably agrees to, or cause the Material Subsidiary that is the
Letter of Credit Applicant to, reimburse the Issuing Lender prior to 12:00 noon,
Chicago, Illinois time, on the Disbursement Date with respect to each Letter of
Credit, such reimbursement to be without setoff, protest, defense or
counterclaim of any kind, for each payment made by the Issuing Lender under or
pursuant to each such Letter of Credit. Borrower's obligation (its
"Reimbursement Obligation") to reimburse or cause the reimbursement of the
------------------------
Issuing Lender for payments and disbursements made by the Issuing Lender under
any Letter of Credit shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which Borrower or any of its Subsidiaries may have or have had against the
Issuing Lender or any other Person, including, without limitation, any defense
based on the failure of the demand for payment under such Letter of Credit to
conform to the terms of such Letter of Credit, any draft, demand or certificate
or other document presented under a Letter of Credit proving to be forged,
fraudulent, invalid or insufficient, the failure of any disbursement to conform
to the terms of the applicable Letter of Credit (if, in the Issuing Lender's
good faith opinion, such disbursement is determined to be appropriate), the
legality, validity, regularity or enforceability of such Letter of Credit, or
the identity of the transferee of such Letter of Credit or the sufficiency of
any transfer if such Letter of Credit is transferable. Borrower, for itself and
each other Letter of Credit Applicant, assumes all risks of the acts or
omissions of the user of any Letters of Credit and all risks of the misuse of a
Letter of Credit. Neither the Issuing Lender nor any of its correspondents, nor
the Agent or any other Lender, shall be responsible: (1) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document specified in
an Application even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent, or forged; (2) for the validity
or sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or any of the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (3) for failure of any draft to bear any
reference or adequate reference to any Letter of Credit, or failure of anyone to
note the amount of any disbursement on the reverse of any Letter of Credit or to
surrender or to take up any Letter of Credit or to send forward any such
document apart from drafts as required by the terms of any Letter of Credit,
each of which provisions, if contained in the Letter of Credit itself, it is
agreed, may be waived by the
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Issuing Lender; (4) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (5) for any error, neglect,
default, suspension or insolvency of any correspondents of the Issuing Lender;
(6) for errors in translation or for errors in interpretation of technical
terms; (7) for any loss or delay, in the transmission or otherwise, of any such
document or draft or of proceeds thereof; (8) for the misapplication by the
beneficiary of a Letter of Credit or of the proceeds of any drawing under such
Letter of Credit; (9) for any consequences arising from causes beyond the
control of the Agent, the Issuing Lender and the other Lenders, including,
without limitation, any act or omission, rightful or wrongful, of any present or
future de jure or de facto government or governmental authority; or (10) for any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit, except only that Borrower or other applicable Letter of Credit
Applicant shall have a claim against the Issuing Lender, and the Issuing Lender
shall be liable to Borrower or such other Letter of Credit Applicant, as the
case may be, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by Borrower or such other Letter of Credit
Applicant which Borrower or such other Letter of Credit Applicant proves were
caused by the Issuing Lender's wilful misconduct or gross negligence. None of
the above shall affect, impair or prevent the vesting of any of the rights or
powers of the Issuing Lender, the Agent or any of the other Lenders. The Issuing
Lender shall have the right to transmit the terms of any Letter of Credit
without translating them.
(b) To the extent the Issuing Lender is not reimbursed in full
in accordance with next sentence of this SECTION 5.7(B), Borrower's
--------------
Reimbursement Obligation shall accrue interest at the Post Default Rate
applicable to Base Rate Loans, payable on demand. In the event the Issuing
Lender is not reimbursed by Borrower or other applicable Letter of Credit
Applicant on the Disbursement Date, or if the Issuing Lender must for any reason
return or disgorge such reimbursement, the Lenders (including Issuing Lender)
shall, on the terms and subject to the conditions of this Agreement, fund the
Reimbursement Obligation therefor by making, on the next Banking Day, Loans
which are Base Rate Loans as provided in SECTION 2.1.1 (Borrower being deemed to
-------------
have given a timely request therefor for such amount); provided, however, for
-------- -------
the purpose of determining the availability of the Commitments to make Loans
immediately prior to giving effect to the application of the proceeds of such
Loans, such Reimbursement Obligation shall be deemed not to be outstanding at
such time.
SECTION 5.8. Deemed Disbursements. Upon the occurrence and during the
--------------------
continuation of any Event of Default or the occurrence
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of the Commitment Termination Date, an amount equal to that portion of Letter of
Credit Liabilities attributable to outstanding and undrawn Letters of Credit
shall, at the election of the Issuing Lender, and without demand upon or notice
to Borrower, be deemed to have been paid or disbursed by the Issuing Lender
under such Letters of Credit (notwithstanding that such amount may not in fact
have been so paid or disbursed), and, upon notification by the Issuing Lender to
the Agent and Borrower of its obligations under this Section, Borrower shall be
immediately obligated to reimburse the Issuing Lender the amount deemed to have
been so paid or disbursed by such Issuer. Any amounts so received by the Issuing
Lender from Borrower pursuant to this Section shall be delivered by the Issuing
Lender to the Agent and held as collateral security (a) first, for the repayment
of Borrower's obligations in connection with the Letters of Credit and (b)
second, for all other Liabilities of Borrower. At any time when such Letters of
Credit shall terminate and all obligations of the Issuing Lender in respect of
Letters of Credit are either terminated or paid or reimbursed in full, the
Liabilities of Borrower under this Section shall be reduced accordingly
(subject, however, to reinstatement in the event any payment in respect of such
Letters of Credit is recovered in any manner from the Issuing Lender). Provided
no Unmatured Event of Default or Event of Default then exists, the Issuing
Lender or the Agent, as the case may be, will return to Borrower the excess, if
any, of (a) the aggregate amount deposited by Borrower with the Issuing Lender
and/or the Agent and not theretofore applied by the Issuing Lender to any
Reimbursement Obligation over (b) the aggregate amount of all Reimbursement
----
Obligations to the Issuing Lender pursuant to this Section, as so adjusted. At
such time when all Unmatured Events of Default and Events of Default shall have
been cured or waived, the Issuing Lender shall return to Borrower all amounts
then on deposit with the Issuing Lender pursuant to this Section.
SECTION 5.9. Increased Costs; Indemnity. If by reason of
--------------------------
(a) any change in any applicable Requirement of Law, any
change in the interpretation or application thereof by any judicial or
Governmental Authority, or
(b) compliance by any Lender (including the Issuing Lender)
with any direction, request or requirement (whether or not having the
force of law) of any governmental or monetary authority, including
Regulation D of the Federal Reserve Board:
(1) any Lender (including the Issuing Lender) shall
be subject to any tax (other than taxes on net income and
franchises), levy, charge or withholding of any nature or to
any variation thereof or to any
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penalty with respect to the maintenance or fulfillment of its
obligations under this ARTICLE V, whether directly or by such
---------
being imposed on or suffered by such Lender;
(2) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any
Letters of Credit issued by the Issuing Lender or
participations therein purchased by any Lender; or
(3) there shall be imposed on the Issuing Lender or
any Lender any other condition regarding this ARTICLE V, any
---------
Letter of Credit or any participation therein;
and the result of the foregoing is directly or indirectly to increase the cost
to the Issuing Lender or such Lender of issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation therein, or
to reduce any amount receivable in respect thereof by the Issuing Lender or such
Lender, then and in any such case the Issuing Lender or such Lender may, at any
time after the additional cost is incurred or the amount received is reduced,
notify Borrower thereof, and Borrower shall pay on demand such amounts as the
Issuing Lender or Lender may specify to be necessary to compensate the Issuing
Lender or such Lender for such additional cost or reduced receipt, together with
interest on such amount from the date demanded until payment in full thereof at
a rate equal at all times to the rate of interest applicable to Base Rate Loans.
The determination by the Issuing Lender or Lender, as the case may be, of any
amount due pursuant to this Section, as set forth in a statement setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto. In
addition to amounts payable as elsewhere provided in this ARTICLE V, Borrower
---------
hereby agrees to protect, indemnify, pay and save the Issuing Lender harmless
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable Attorney's Fees) which the
Issuing Lender may incur or be subject to as a consequence, direct or indirect,
of
(c) the issuance of the Letters of Credit, other than as a
result of the gross negligence or wilful misconduct of the Issuing
Lender as determined by a court of competent jurisdiction, or
(d) the failure of the Issuing Lender to honor a drawing under
any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or
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future de jure or de facto government or governmental authority.
The obligations of Borrower under this SECTION 5.9 shall survive
-----------
termination of this Agreement and payment of all other Liabilities.
SECTION 5.10. Letters of Credit on Application of Subsidiaries.
------------------------------------------------
Notwithstanding any other provision of this Agreement, the Issuing Lender shall
have no obligation to issue a Letter of Credit on the Application of a
Subsidiary unless prior to such issuance the Agent shall have received all of
the following, in sufficient number of counterpart originals for the Agent and
each Lender:
(a) the Guaranty duly executed by Borrower;
(b) a copy, duly certified by the secretary or an assistant
secretary of such Subsidiary of (1) resolutions of the Board of
Directors of such Subsidiary or a duly empowered committee of the Board
of Directors authorizing (A) the incurrence by such Subsidiary of
Indebtedness owing to the Issuing Lender in connection with Letters of
Credit issued on the Applications of such Subsidiary and (B) the
execution, delivery and performance by such Subsidiary of Applications
for Letters of Credit, (2) all documents, if any, evidencing any other
necessary corporate action with respect to Applications executed and
delivered by such Subsidiary, and (3) all approvals or consents, if
any, with respect to Applications executed and delivered by such
Subsidiary;
(c) A certificate of the secretary or an assistant secretary
of such Subsidiary certifying the names of the officers of such
Subsidiary authorized to sign Applications and all other documents and
certificates to be delivered by such Subsidiary in connection
therewith, together with the true signatures of such officers, upon
which certificate the Agent and the Issuing Lender may conclusively
rely until it shall have received a further certificate of the
secretary or an assistant secretary of such Subsidiary canceling or
amending such prior certificate; and
(d) In the case of a Subsidiary which is not a Subsidiary
Obligor (as such term is defined in the Guaranty) on the date of
Borrower's execution and delivery of the Guaranty, but which thereafter
executes and delivers an Application, a written statement from Borrower
in form and substance reasonably acceptable to the Agent reaffirming
the Guaranty and acknowledging that such Subsidiary is a Subsidiary
Obligor thereunder.
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ARTICLE VI
ADDITIONAL PROVISIONS RELATING TO EURODOLLAR RATE LOANS; TAXES;
YIELD PROTECTION; INDEMNIFICATION; SHARING OF PAYMENTS
SECTION 6.1. Taxes. Any and all payments by Borrower to each Lender or
-----
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In addition,
Borrower shall pay all Other Taxes.
SECTION 6.1.1. Required Payments By Borrower. If Borrower shall be
-----------------------------
required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes
from or in respect of any sum payable hereunder to any Lender or the Agent,
then:
(a) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Lender or the Agent, as the case may be, receives
and retains an amount equal to the sum it would have received and
retained had no such deductions or withholdings been made;
(b) Borrower shall make such deductions and withholdings;
(c) Borrower shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law; and
(d) Borrower shall also pay to each Lender or the Agent for
the account of such Lender, at the time interest is paid, Further Taxes
in the amount that the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed.
SECTION 6.1.2. Borrower to Indemnify. Borrower agrees to indemnify and
---------------------
hold harmless each Lender and the Agent for the full amount of (a) Taxes, (b)
Other Taxes, and (c) Further Taxes in the amount that the respective Lender
specifies as necessary to preserve the after-tax yield the Lender would have
received if such Taxes, Other Taxes or Further Taxes had not been imposed, and
any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes, Other
Taxes or Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the
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Lender or the Agent makes written demand therefor. Notwithstanding any other
provision of this Agreement, Borrower shall have no obligation to indemnify any
Lender or the Agent for any taxes imposed on or measured by its net income by
the jurisdiction (or any political subdivision thereof) under the laws of which
such Lender or the Agent, as applicable, is organized or maintains a lending
office.
SECTION 6.1.3. Repayment by Lender. If any Lender receives a refund in
-------------------
respect of any Taxes, Other Taxes or Further Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower (or any Person acting
on behalf of Borrower) has paid additional amounts pursuant to SECTION 6.1, it
-----------
shall promptly repay such refund (but only to the extent of the indemnity
payments made, or additional amounts paid, by or on behalf of Borrower under
SECTION 6.1 with respect to Taxes, Other Taxes and Future Taxes giving rise to
- -----------
such refund).
SECTION 6.1.4. Borrower to Furnish Receipt. Within 30 days after the
---------------------------
date of any payment by Borrower of Taxes, Other Taxes or Further Taxes, Borrower
shall furnish to each Lender or the Agent the original or a certified copy of a
receipt evidencing payment thereof, or other evidence of payment satisfactory to
such Lender or the Agent.
SECTION 6.1.5. Change in Lending Office. If Borrower is required to pay
------------------------
any amount to any Lender or the Agent pursuant to SECTION 6.1.1, SECTION 6.1.2
------------- -------------
or SECTION 6.2, then such Lender shall use reasonable efforts (consistent with
-----------
legal and regulatory restrictions) to change the jurisdiction of its Lending
Office so as to eliminate any such additional payment by Borrower which may
thereafter accrue, if such change in the sole judgment of such Lender is not
otherwise disadvantageous to such Lender.
SECTION 6.1.6. Withholding Tax.
---------------
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Lender claims exemption
from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to
deliver to the Agent and Borrower:
(1) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS Form
1001 before the payment of any interest in the first calendar
year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid
under this Agreement;
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(2) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade
or business of such Lender, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and
in each succeeding taxable year of such Lender during which
interest may be paid under this Agreement; and
(3) such other form or forms as may be required under
the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding
tax.
Such Lender agrees to promptly notify the Agent and Borrower
of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Liabilities of Borrower to such
Lender, such Lender agrees to notify the Agent and Borrower of the
percentage amount in which it is no longer the beneficial owner of
Liabilities of Borrower to such Lender. To the extent of such
percentage amount, the Agent and Borrower will treat such Lender's IRS
Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent and Borrower
sells, assigns, grants a participation in, or otherwise transfers all
or part of the Liabilities of Borrower to such Lender, such Lender
agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent and Borrower may withhold from any interest
payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. However, if
the forms or other documentation required by subsection (a) of this
Section are not delivered to the Agent and Borrower, then the Agent and
Borrower may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the
Code, without reduction, notwithstanding the first sentence of SECTION
-------
4.1.
---
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(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent or
Borrower did not properly withhold tax from amounts paid to or for the
account of any Lender (because the appropriate form was not delivered
or was not properly executed, or because such Lender failed to notify
the Agent and Borrower of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for
any other reason) such Lender shall indemnify the Agent and Borrower
fully for all amounts paid, directly or indirectly, by the Agent or
Borrower as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable
to the Agent or Borrower under this Section, together with all costs
and expenses (including reasonable Attorney's Fees). The obligation of
the Lenders under this subsection shall survive termination of this
Agreement, the payment of all other Liabilities and the resignation or
replacement of the Agent.
SECTION 6.2. Illegality.
----------
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable Lending
Office to make Eurodollar Rate Loans, then, on notice thereof by the
Lender to Borrower through the Agent, any obligation of the Lenders to
make Eurodollar Rate Loans shall be suspended until the Lender notifies
the Agent and Borrower that the circumstances giving rise to such
determination no longer exist, and all Loans which would otherwise be
made as Eurodollar Rate Loans shall be made as Base Rate Loans.
(b) If a Lender determines that it is unlawful to maintain any
Eurodollar Rate Loan, Borrower shall, upon its receipt of notice of
such fact and demand from such Lender (with a copy to the Agent),
prepay in full such Eurodollar Rate Loan of that Lender then
outstanding, together with interest accrued thereon and amounts
required under SECTION 6.5, either on the last day of the Interest
-----------
Period thereof, if the Lender may lawfully continue to maintain such
Eurodollar Rate Loan to such day, or immediately, if the Lender may not
lawfully continue to maintain such Eurodollar Rate Loan. If Borrower is
required to so prepay any Eurodollar Rate Loan, then concurrently with
such prepayment, Borrower shall borrow from the affected Lender, in the
amount of such repayment, a Base Rate Loan.
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SECTION 6.3. Increased Costs and Reduction of Return. If any Lender
---------------------------------------
determines that, due to either (i) the introduction of or any change (other than
any change by way of imposition of or increase in reserve requirements included
in the calculation of the Interbank Rate) in or in the interpretation of any law
or regulation or (ii) the compliance by that Lender with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans,
then Borrower shall be liable for, and shall from time to time, within fifteen
(15) days following receipt of written demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
SECTION 6.4. Capital Adequacy. If any Lender shall have determined that
----------------
(a) the introduction of any Capital Adequacy Regulation, (b) any change in any
Capital Adequacy Regulation, (c) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (d) compliance by the Lender (or its Lending Office) or any
corporation controlling the Lender with any Capital Adequacy Regulation, affects
or would affect the amount of capital required or expected to be maintained by
the Lender or any corporation controlling Lender and (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy
and such Lender's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment(s), Credit Extension or
obligations under this Agreement, then, within fifteen (15) days following
receipt of written demand from such Lender to Borrower through the Agent,
Borrower shall pay to the Lender, from time to time as specified by the Lender,
additional amounts sufficient to compensate the Lender for such increase.
SECTION 6.5. Funding Losses. Borrower shall reimburse each Lender and
--------------
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of:
(a) the failure of Borrower to make on a timely basis any
payment of principal of any Eurodollar Rate Loan;
(b) the failure of Borrower to borrow, continue or convert a
Loan after Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the failure of Borrower to make any prepayment in
accordance with any notice delivered under SECTION 4.4;
-----------
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(d) the prepayment (including pursuant to SECTIONS 4.2.2 or
--------------
4.2.3) or other payment (including after acceleration thereof) of any
-----
Eurodollar Rate Loan on a day that is not the last day of the relevant
Interest Period; or
(e) the automatic conversion under SECTION 2.4.2 of any
-------------
Eurodollar Rate Loan to a Base Rate Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Eurodollar Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by Borrower to the Lenders under this
Section and under SECTION 6.3, each Eurodollar Rate Loan made by a Lender (and
-----------
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the Interbank Rate used in
determining the Interbank Rate for such Eurodollar Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Eurodollar Rate Loan is
in fact so funded.
SECTION 6.6. Inability to Determine Rates. If the Agent determines that
----------------------------
for any reason adequate and reasonable means do not exist for determining the
Interbank Rate for any requested Interest Period with respect to a proposed
Eurodollar Rate Loan, or that the Interbank Rate applicable for any requested
Interest Period with respect to a proposed Eurodollar Rate Loan does not
adequately and fairly reflect the cost to the Lenders of funding such Loan, the
Agent will promptly so notify Borrower and each Lender. Thereafter, the
obligation of the Lenders to make or maintain Eurodollar Rate Loans hereunder
shall be suspended until the Agent upon the instruction of the Required Lenders
revokes such notice in writing. Upon receipt of such notice, Borrower may revoke
any Notice of Borrowing or Notice of Conversion/Continuation then submitted by
it. If Borrower does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by Borrower, in the amount specified in the
applicable notice submitted by Borrower, but such Loans shall be made, converted
or continued as Base Rate Loans instead of Eurodollar Rate Loans.
SECTION 6.7. Certificates of Lenders. Any Lender claiming reimbursement
-----------------------
or compensation under this ARTICLE VI shall deliver to Borrower (with a copy to
----------
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
Borrower in the absence of manifest error.
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SECTION 6.8. Substitution of Lenders. Upon the receipt by Borrower from
-----------------------
any Lender (an "Affected Lender") of a claim for compensation under SECTIONS
--------------- --------
5.9, 6.1.1(D), 6.2, 6.3 or 6.4, Borrower may: (i) request the Affected Lender to
- --- -------- --- --- ---
use reasonable efforts to obtain a replacement bank or financial institution
satisfactory to Borrower and to Agent (a "Replacement Lender") to acquire and
------------------
assume all or a ratable part of all of such Affected Lender's Credit Extensions
and Commitments, (ii) request one more of the other Lenders to acquire and
assume all or part of such Affected Lender's Credit Extensions and Commitments,
provided that no such other Lender shall have any obligation whatsoever, under
any circumstances, to do so; or (iii) designate a Replacement Lender. Any such
designation of a Replacement Lender under CLAUSE (I) or (III) of this Section
---------- -----
shall be subject to the prior written consent of the Agent (which consent shall
not be unreasonably withheld).
SECTION 6.9. Survival. The agreements and obligations of Borrower in
--------
this ARTICLE VI shall survive termination of this Agreement and the payment of
----------
all other Liabilities.
SECTION 6.10. Sharing of Payments, Etc. If, other than as expressly
------------------------
provided elsewhere herein, any Lender shall obtain on account of the Credit
Extensions made by it or Liabilities owed to it, any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated hereunder), such Lender
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Lender such participations in the Credit Extension made by them as shall
be necessary to cause such purchasing Lender to share the excess payment pro
rata with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from the purchasing Lender, such purchase
shall to that extent be rescinded and each other Lender shall repay to the
purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender's ratable share (according to the proportion of (i)
the amount of such paying Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
Borrower agrees that any Lender so purchasing a participation from another
Lender may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lender following any such purchases or
repayments. If under any applicable bankruptcy, insolvency or other similar law,
any Lender receives
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a secured claim in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the other Lenders entitled under
this Section to share in the benefits of any recovery on such secured claim.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce each of the Lenders and the Agent, for the account of the
Lenders, to make Credit Extension to Borrower under this Agreement, Borrower
makes the following representations and warranties, all of which shall be true
and correct as of the Initial Funding Date and shall survive the execution of
this Agreement and the Initial Funding Date:
SECTION 7.1. Organization. Borrower and all of its corporate
------------
Subsidiaries are corporations duly organized and validly existing and, if
applicable, in "good standing" under the laws of the jurisdictions of their
respective incorporation or formation. All of Borrower's other Subsidiaries, if
any, are entities duly organized, validly existing and in good standing under
the laws of the jurisdictions of their respective organization or formation.
Except as set forth on ITEM 7.1 of the Disclosure Schedule, Borrower and all of
--------
its Subsidiaries are in good standing and are duly qualified to do business in
each jurisdiction where, because of the nature of their respective activities or
properties, such qualification is required, except for those jurisdictions where
the failure to be so qualified does not constitute and could not reasonably be
expected to constitute a Material Adverse Occurrence. Except as listed on ITEM
----
7.1 of the Disclosure Schedule, on the date of this Agreement, Borrower and each
- ---
of its Subsidiaries conducts business in its own name exclusively. ITEM 7.1 of
--------
the Disclosure Schedule sets forth a complete and accurate list, as of the date
of this Agreement, of (a) the state or other jurisdiction of formation of
Borrower, (b) each state in which Borrower is qualified to do business and (c)
all of Borrower's trade names, trade styles or doing business forms.
SECTION 7.2. Authorization. Borrower is duly authorized, has full power
-------------
and authority, and holds all requisite governmental licenses, permits and other
approvals, to execute and deliver this Agreement, any Notes, and any other Loan
Documents contemplated by this Agreement to be executed and/or delivered by it,
and is and will continue to be duly authorized, have full power and authority
and hold all requisite governmental licenses, permits and other approvals to
borrow monies hereunder
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<PAGE>
and to perform its obligations under this Agreement, any Notes and any such
other Loan Documents. The execution, delivery and performance by Borrower of
this Agreement, any Notes, and any other Loan Documents contemplated by this
Agreement to be executed and/or delivered by it, and the borrowings hereunder,
do not and will not require any consent or approval of any Governmental
Authority except any that have been obtained and are in full force and effect.
SECTION 7.3. No Conflicts. The execution, delivery and performance by
------------
Borrower of this Agreement, any Notes, and any other Loan Documents executed
and/or delivered or to be executed and/or delivered by it do not and will not
conflict with (i) any provision of law applicable to Borrower, (ii) Borrower's
Organic Documents, (iii) any agreement binding upon Borrower or (iv) any court
or administrative order or decree applicable to Borrower, and do not and will
not require, or result in, the creation or imposition of any Lien on any asset
of Borrower or any of its Subsidiaries except as provided herein.
SECTION 7.4. Validity and Binding Effect. This Agreement, any Notes,
---------------------------
and any other Loan Documents contemplated by this Agreement, when duly executed
and delivered, will be legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditors' rights or by
general principles of equity limiting the availability of equitable remedies.
SECTION 7.5. No Default. Neither Borrower nor any of its Subsidiaries
----------
is in default under any agreement or instrument to which Borrower or any of its
Subsidiaries is a party or by which any of their respective properties or assets
is bound or affected, which default constitutes or could reasonably be expected
to constitute a Material Adverse Occurrence. No Event of Default or Unmatured
Event of Default has occurred and is continuing.
SECTION 7.6. Financial Statements. Borrower's audited consolidated
--------------------
financial statement as at December 31, 1996 and unaudited consolidated financial
statements as at June 30, 1997, copies of which have been furnished to the Agent
and each of the Lenders, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding Fiscal Year and present fairly the financial condition of Borrower and
its Subsidiaries as at such date and the results of their operations for the
periods then ended (subject, in the case of interim financial statements, to
notes and year-end adjustments). Since December 31, 1996, there has been no
material adverse change in the financial condition of
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<PAGE>
Borrower, any of its Material Subsidiaries, or Borrower and its Subsidiaries
taken as a whole.
SECTION 7.7. Insurance. ITEM 7.7 of the Disclosure Schedule is a
--------- --------
complete and accurate summary of the property and casualty insurance program
carried by Borrower and its Material Subsidiaries on the date hereof. This
summary also includes any self-insurance program that is in effect.
SECTION 7.8. Litigation; Contingent Liabilities.
----------------------------------
(a) Except for those referred to in ITEM 7.8 of the Disclosure
--------
Schedule, no claims, litigation, arbitration proceedings or
governmental proceedings are pending or, to the knowledge of Borrower,
overtly threatened against or are affecting Borrower or any of its
Subsidiaries, or any of their respective properties, assets or
revenues, the results of which constitutes or could reasonably be
expected to constitute a Material Adverse Occurrence.
(b) Other than any liability incident to the claims,
litigation or proceedings disclosed in ITEM 7.8 or ITEM 7.14 of the
-------- ---------
Disclosure Schedule, or provided for or disclosed in the financial
statements referred to in SECTION 7.6, neither Borrower nor any of its
-----------
Subsidiaries has any contingent liabilities which are material to
Borrower, any of its Material Subsidiaries or Borrower and its
Subsidiaries taken as a whole.
SECTION 7.9. Ownership of Assets; Liens. Subject only to immaterial
--------------------------
defects, Borrower and each of its Subsidiaries owns good and marketable title to
all of its properties and assets, real and personal, tangible and intangible.
None of the property, revenues or assets of Borrower or any of its Material
Subsidiaries is subject to any Lien (including but not limited to Liens pursuant
to Capitalized Leases under which Borrower or any of its Subsidiaries is a
lessee) except: (a) Liens disclosed in the financial statements referred to in
SECTION 7.6; (b) Liens existing on or arising after the date of this Agreement
- -----------
which are permitted under SECTION 8.16; and (c) Liens in existence on the date
------------
of this Agreement and listed on ITEM 7.9 of the Disclosure Schedule (all of the
--------
foregoing being collectively referred to as "Permitted Liens").
---------------
SECTION 7.10. Subsidiaries. Borrower has no Subsidiaries except as
------------
listed on ITEM 7.10 of the Disclosure Schedule. ITEM 7.10 contains a complete
--------- ---------
listing of those Subsidiaries which are Material Subsidiaries as of the
Effective Date. ITEM 7.10 of the Disclosure Schedule sets forth, for each
---------
Subsidiary of Borrower, a complete and accurate statement as of the date of this
Agreement of (a) Borrower's and each such Subsidiary's
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<PAGE>
percentage ownership of each of their respective Subsidiaries, (b) the state or
other jurisdiction of formation or incorporation of each such Subsidiary, (c)
each state in which each such Subsidiary is qualified to do business on the date
of this Agreement and (d) all of each such Subsidiary's trade names, trade
styles or doing business forms.
SECTION 7.11. Partnerships; Joint Ventures. Neither Borrower nor any
----------------------------
of its Subsidiaries is a partner or joint venturer in any partnership or joint
venture other than (i) its Subsidiaries listed on ITEM 7.10 of the Disclosure
---------
Schedule and (ii) the partnerships and joint ventures listed on ITEM 7.11 of the
---------
Disclosure Schedule. ITEM 7.11 of the Disclosure Schedule sets forth, for each
---------
partnership or joint venture that is not a Subsidiary of Borrower, a complete
and accurate statement as of the date of this Agreement of (a) Borrower's and
each such Subsidiary's percentage ownership of each such partnership or joint
venture, (b) the state or other jurisdiction of formation or incorporation, as
appropriate, of each such partnership or joint venture, (c) each state in which
each such partnership or joint venture is qualified to do business on the date
of this Agreement and (d) all of each such partnership's or joint venture's
trade names, trade styles or doing business forms.
SECTION 7.12. Solvency. Borrower and each of its Material Subsidiaries
--------
(i) has assets (excluding goodwill and other intangible assets not capable of
valuation) having a value, both at present fair saleable value and at fair
valuation, greater than the amount of its liabilities (including Trade
Payables), (ii) has capital sufficient to carry on its respective business and
transactions and all business and transactions in which it is about to engage,
(iii) has not engaged in and is not about to engage in a business or transaction
for which its remaining assets are unreasonably small in relation to the
business or the transaction, (iv) is able to pay its respective debts as they
mature and does not intend to incur, or believe that it is incurring, debts
beyond its ability to pay as they mature and (v) has no actual intent to hinder,
delay or defraud either present or future creditors.
SECTION 7.13. Contracts; Labor Matters. Except as disclosed on ITEM
------------------------ ----
7.13 of the Disclosure Schedule, there exists no default by Borrower, any of its
- ----
Subsidiaries or any other Person under any contract or agreement which is
material to the business, financial condition, operations, property or prospects
of Borrower or any of its Material Subsidiaries, which default constitutes or
could reasonably be expected to constitute or result in a Material Adverse
Occurrence. Except as disclosed on ITEM 7.13 of the Disclosure Schedule: (a)
---------
neither Borrower nor any of its Subsidiaries is subject to any charge, corporate
restriction, judgment, decree or order which constitutes or could
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<PAGE>
reasonably be expected to constitute or result in a Material Adverse Occurrence;
(b) no labor contract to which Borrower or any of its Subsidiaries is a party or
is otherwise subject is scheduled to expire prior to the initial Facility
Termination Date; (c) neither Borrower nor any of its Subsidiaries has, within
the two-year period preceding the date of this Agreement, taken any action which
would have constituted or resulted in a "plant closing" or "mass layoff" within
the meaning of the Federal Worker Adjustment and Retraining Notification Act of
1988 or any similar applicable federal, state or local law, and Borrower has no
reasonable expectation that any such action is or will be required at any time
prior to the initial Facility Termination Date; and (d) on the date of this
Agreement and except for any which do not constitute and could not reasonably be
expected to constitute or result in a Material Adverse Occurrence (i) neither
Borrower nor any of its Subsidiaries is a party to any labor dispute and (ii)
there are no pending or threatened strikes or walkouts relating to any labor
contracts to which Borrower or any of its Subsidiaries is a party or is
otherwise subject.
SECTION 7.14. Pension and Welfare Plans. Each Pension Plan complies in
-------------------------
all material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither Borrower nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted to terminate any Pension Plan; no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which could result in the
incurrence by Borrower or any ERISA Affiliate of any liability, fine or penalty
which constitutes or could reasonably be expected to constitute a Material
Adverse Occurrence; and neither Borrower nor any ERISA Affiliate is a
"contributing sponsor" as defined in section 4001(a)(13) of ERISA of a
"single-employer plan" as defined in section 4001(a)(15) of ERISA which has two
or more contributing sponsors at least two of whom are not under common control.
Except as listed in ITEM 7.14 of the Disclosure Schedule, neither Borrower nor
---------
any of its Subsidiaries has any contingent liability with respect to any
post-retirement benefit under any Welfare Plan which covers retired or
terminated employees and their beneficiaries, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 7.15. Regulation U. Neither Borrower nor any of its
------------
Subsidiaries is engaged in the business of purchasing or selling Margin Stock or
extending credit to others for the purpose of
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<PAGE>
purchasing or carrying Margin Stock, and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any Margin Stock or for
any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
SECTION 7.16. Compliance. Except as described on ITEM 7.14 or ITEM 7.20
---------- --------- ---------
of the Disclosure Schedule, Borrower and all of its Subsidiaries are in
compliance with all statutes, judicial or administrative orders, licenses,
permits and governmental rules and regulations applicable to them, except where
the failure to comply does not constitute and could not reasonably be expected
to constitute or result in a Material Adverse Occurrence.
SECTION 7.17. Taxes. Borrower and each of its Subsidiaries have filed
-----
all federal tax returns and reports which are required to have been filed by it
and have paid all of its federal Taxes which are due and payable, except such
Taxes, if any, as are being diligently contested in good faith and by
appropriate proceedings and as to which appropriate reserves or other
appropriate provisions as may be required by GAAP have been set aside on its
books. Except for any being diligently contested in good faith and by
appropriate proceedings and as to which appropriate reserves or other
appropriate provisions as may be required by GAAP have been set aside on its
books, or where the failure to file or pay does not constitute and could not
reasonably be expected to constitute or result in a Material Adverse Occurrence,
Borrower and each of its Subsidiaries has filed all other tax returns and
reports which are required to have been filed by it and has paid all of its
other Taxes which are due and payable. Borrower is not aware of any proposed
assessment against Borrower or any of its Subsidiaries for additional Taxes (or
any basis for any such assessment) which could reasonably be expected to
constitute or result in a Material Adverse Occurrence.
SECTION 7.18. Investment Company Act Representation. Neither Borrower
-------------------------------------
nor any of its Subsidiaries is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 7.19. Public Utility Holding Company Act Representation.
-------------------------------------------------
Neither Borrower nor any of its Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 7.20. Environmental and Safety and Health Matters. Except as
-------------------------------------------
disclosed on ITEM 7.20 of the Disclosure Schedule:
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(a) Borrower and each of its Subsidiaries, and each property
(including underlying groundwater), operation and facility that
Borrower or any of its Subsidiaries owns, operates or controls, have
been, and continue to be, owned, operated or controlled in compliance
in all respects with (1) all applicable Environmental Laws and (2) all
applicable Occupational Safety and Health Laws, except where
noncompliance would not constitute and could not reasonably be expected
to constitute or result in a Material Adverse Occurrence, and Borrower
and each of its Subsidiaries, as applicable, has been issued and it and
its properties, operations and facilities are in compliance with all
permits, certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary or desirable for its
businesses, except where noncompliance would not constitute and could
not reasonably be expected to constitute or result in a Material
Adverse Occurrence;
(b) neither Borrower nor any of its Subsidiaries, and no
property (including underlying groundwater), operation or facility that
Borrower or any of its Subsidiaries now owns, operates or controls, or
previously owned, operated or controlled, is subject to any judicial or
administrative proceeding alleging the violation of any Environmental
Law or Occupational Safety and Health Law, except for any such alleged
violation which, if adversely determined, could not reasonably be
expected to constitute or result in a Material Adverse Occurrence;
(c) neither Borrower nor any of its Subsidiaries has received
any notice (1) that it may be in violation of any Environmental Law or
Occupational Safety and Health Law, or (2) threatening the commencement
of any proceeding relating to allegedly unlawful, unsafe or unhealthy
conditions or (3) alleging that it is or may be responsible for any
response, cleanup, or corrective action, including but not limited to
any remedial investigation/feasibility studies, under any Environmental
Law or Occupational Safety and Health Law which, in any case,
constitutes or could reasonably be expected to constitute or result in
a Material Adverse Occurrence;
(d) neither Borrower nor any of its Subsidiaries, and no
property (including underlying groundwater), operation or facility that
Borrower or any of its Subsidiaries now owns, operates or controls, or
previously owned, operated or controlled, is the subject of federal or
state investigation evaluating whether any investigation, remedial
action or other response is needed to respond to (1) a spillage,
disposal or Release or threatened Release into the
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environment of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance or (2)
any allegedly unsafe or unhealthful condition, which in either case
constitutes or could reasonably be expected to constitute or result in
a Material Adverse Occurrence;
(e) neither Borrower nor any of its Subsidiaries has filed any
notice under or relating to any Environmental Law or Occupational
Safety and Health Law indicating or reporting, with respect to any
property (including underlying groundwater), operation and facility
that it now owns, operates or controls or previously owned, operated or
controlled (1) any past or present spillage, disposal or Release into
the environment (other than legally permitted disposals and Releases)
of, or treatment, storage or disposal of, any Hazardous Material or
other hazardous, toxic or dangerous waste, substance or constituent, or
other substance or (2) any potentially unsafe or unhealthful condition,
and there exists no basis for any such notice irrespective of whether
or not such notice was actually filed;
(f) there has been no Release of Hazardous Materials at, on or
under any property, operation or facility that Borrower or any of its
Subsidiaries now owns, operates or controls (other than legally
permitted Releases) or previously owned, operated or controlled, the
occurrence of which, or any fine or liability arising therefrom,
constitutes or could reasonably be expected to constitute or result in
a Material Adverse Occurrence;
(g) no property, operation or facility that Borrower or any of
its Subsidiaries now owns, operates or controls (other than legally
permitted Releases) or previously owned, operated or controlled is
listed or proposed for listing (with respect to owned property only) on
the National Priorities List maintained pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, on the Comprehensive Environmental Response Compensation
Liability Information System List or on any similar state list of sites
requiring investigation or clean-up;
(h) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property,
operation or facility that Borrower or any of its Subsidiaries now
owns, operates or controls (other than legally permitted Releases) or
previously owned, operated or controlled, the presence or required
removal of which
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<PAGE>
constitutes or could reasonably be expected to constitute or result in
a Material Adverse Occurrence;
(i) neither Borrower nor any of its Subsidiaries has directly
transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List maintained pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, on the Comprehensive Environmental Response
Compensation Liability Information System List or on any similar state
list of sites, or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to a claim
against Borrower or any of its Subsidiaries for any remedial work,
damage to natural resources or personal injury, including claims under
any Environmental Law, except where such claim does not constitute and
could not reasonably be expected to constitute or result in a Material
Adverse Occurrence;
(j) there are no polychlorinated biphenyls or friable asbestos
present at any property, operation or facility that Borrower or any of
its Subsidiaries now owns, operates or controls, or previously owned,
operated or controlled, the presence or required removal of which
constitutes or could reasonably be expected to constitute or result in
a Material Adverse Occurrence;
(k) no conditions exist at, on or under any property now or
previously owned, operated or controlled by Borrower or any of its
Subsidiaries which, with the passage of time, or the giving of notice
or both, would give rise to liability under any Environmental Law,
excepting any which do not constitute and could not reasonably be
expected to constitute or result in a Material Adverse Occurrence; and
(l) neither Borrower nor any of its Subsidiaries has any
contingent liability in connection with (1) any actual, threatened, or
potential spillage, disposal or Release into the environment of, or
otherwise with respect to, any Hazardous Material or other hazardous,
toxic or dangerous waste, substance or constituent, or other substance,
whether on any premises now or previously owned or occupied by Borrower
or any such Subsidiary or on any other premises or (2) any unsafe or
unhealthful condition, excepting any which do not constitute or could
reasonably be expected to constitute or result in a Material Adverse
Occurrence.
SECTION 7.21. Accuracy of Information. All factual information
-----------------------
heretofore or contemporaneously furnished by or on behalf of Borrower in writing
to the Agent or any Lender for
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<PAGE>
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby is, and all other such factual
information hereafter furnished by or on behalf of Borrower to the Agent or any
Lender will be, true and accurate in every material respect on the date as of
which such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Agent or such Lender, as applicable, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
ARTICLE VIII
BORROWER COVENANTS
From the date of this Agreement and thereafter until the Commitments
are terminated and all Liabilities are indefeasibly paid in full in cash, and
performed in full, Borrower agrees that, unless the Required Lenders, or the
Agent acting with the consent and on behalf of the Required Lenders, shall
otherwise consent in writing, it will comply with and perform its obligations
under the provisions of this ARTICLE VIII.
------------
SECTION 8.1. Financial Statements and Other Reports. Borrower will
--------------------------------------
furnish, or cause to be furnished to each Lender:
SECTION 8.1.1. Financial Reports:
-----------------
(a) Annual Audit Report; Annual Plan. Within ninety (90) days
--------------------------------
after each Fiscal Year (i) a copy of the annual audit report of
Borrower and its Subsidiaries prepared on a consolidated basis and in
conformity with GAAP and audited (without any Impermissible
Qualification) by an independent certified public accountant of
recognized national standing and (ii) the annual plan for the current
Fiscal Year;
(b) Quarterly Financial Statement. Within forty-five (45) days
-----------------------------
after the end of each Fiscal Quarter (except the fourth Fiscal Quarter
of each Fiscal Year), a copy of the unaudited financial statement of
Borrower and its Subsidiaries prepared in the same manner as the audit
report referred to in the preceding SUBSECTION (A) except for exclusion
--------------
of footnotes, signed by Borrower's chief financial Authorized Person
and consisting of at least a balance sheet as at the close of such
Fiscal Quarter and statements of earnings and cash flows for such
Fiscal Quarter and for the period from the beginning of the applicable
Fiscal Year to the close of such Fiscal Quarter showing a comparison
with the data for the comparable periods in the prior Fiscal Year; and
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(c) Officer's Certificate. Within (i) forty-five (45) days
---------------------
after the end of each of the first three Fiscal Quarters and (ii) sixty
(60) days after the end of the fourth Fiscal Quarter, a certificate of
Borrower's chief financial Authorized Person in substantially the form
of EXHIBIT F hereto (each, a "Compliance Certificate"), dated the last
--------- ----------------------
day of such Fiscal Quarter, containing a statement that no Event of
Default or Unmatured Event of Default has occurred and is continuing,
or, if there is any such event, describing it and the steps, if any,
being taken to cure it, and containing a computation of, and showing
compliance with, each of the financial ratios and restrictions
contained in this ARTICLE VIII.
------------
SECTION 8.1.2. Other Reports:
-------------
(a) SEC and Other Reports. Copies of each filing and report
---------------------
made by Borrower or any of its Subsidiaries with or to any securities
exchange or the Securities and Exchange Commission and of each written
communication from Borrower to shareholders generally,
contemporaneously with the filing or making thereof;
(b) Report of Changes in Disclosure Schedule Information.
----------------------------------------------------
Promptly from time to time, a written report of any change in the
information set forth in ITEM 7.1, ITEM 7.10 or ITEM 7.11 concerning
-------- --------- ---------
Borrower or any of its Subsidiaries;
(c) Other Reports. Any information required to be provided
-------------
pursuant to other provisions of this Agreement or any other Loan
Document, and promptly from time to time, such other reports or
information as the Agent or any Lender, acting through the Agent, may
reasonably request.
SECTION 8.2. Notices. Borrower will notify or cause to be notified, the
-------
Agent (which will promptly notify each Lender) in writing of any of the
following immediately upon learning of the occurrence thereof (or, in the case
of CLAUSES (E), (F) and (G) of this SECTION 8.2, at least 30 days prior to the
----------- --- --- -----------
occurrence thereof to the extent applicable to Borrower or any of its
Subsidiaries), and provide the Agent with copies of all relevant documentation
relating thereto, describing the same and, if applicable, the steps being taken
by the Person(s) affected with respect thereto:
(a) Default. The occurrence of an Event of Default or
Unmatured Event of Default;
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(b) Litigation, etc. The institution of any litigation, action
---------------
or proceeding affecting Borrower or any of Borrower's Subsidiaries,
whether or not considered to be covered by insurance, where the amount
claimed or at issue is $5,000,000 or more; the commencement of any
material labor controversy or dispute; or the occurrence of any
material adverse development with respect to any litigation, action,
proceeding, labor controversy or dispute, or contract or agreement
described in ITEM 7.8 or ITEM 7.13 of the Disclosure Schedule, or
-------- ---------
previously reported pursuant to this PARAGRAPH (B);
-------------
(c) Judgments, etc. The entry of any judgment or decree in any
--------------
litigation, action or proceeding involving Borrower or any Subsidiary
of Borrower if the amount for which any such Person will be liable or
responsible as a result thereof, individually or in the aggregate,
exceeds $5,000,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
-------------------------------
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower or any ERISA
Affiliate; the institution of proceedings to terminate a Pension Plan
by the PBGC or any other Person; the withdrawal in a "complete
withdrawal" or a "partial withdrawal" as defined in sections 4203 and
4205, respectively, of ERISA by Borrower or any ERISA Affiliate from
any Multiemployer Plan; the failure of Borrower or any ERISA Affiliate
to make a required contribution to any Pension Plan, including but not
limited to any failure to pay an amount sufficient to give rise to a
Lien under section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan which could result in the requirement that
Borrower or any ERISA Affiliate furnish a bond or other security to the
PBGC or such Pension Plan; the occurrence of any other event with
respect to any Pension Plan which could result in the incurrence by
Borrower or any ERISA Affiliate of any material liability, fine or
penalty; or the incurrence of any material increase in the contingent
liability of Borrower, or any of its Subsidiaries with respect to any
Welfare Plan which covers retired or terminated employees and their
beneficiaries;
(e) Insurance Information. Any material change in the
---------------------
information set forth in ITEM 7.7 of the Disclosure Schedule.
--------
(f) Environmental and Safety and Health Matters. The
-------------------------------------------
occurrence of any event or the acquisition of any information which, if
it had occurred or been acquired on or before the date of this
Agreement, would have been required
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to have been disclosed and included on ITEM 7.20 of the Disclosure
---------
Schedule, including but not limited to the existence of any
Environmental Lien and the receipt of any notice from any entity or
federal, state or local government or agency of or with respect to any
actual or alleged violation of, or potential liability under, any
Environmental Law or any Occupational Safety and Health Law;
(g) Material Adverse Occurrence. The occurrence of any event
---------------------------
or condition, or the existence of any facts or circumstances,
constituting a Material Adverse Occurrence;
(h) Change in Management. Any substantial change in the
--------------------
senior management of Borrower; and
(i) Other Notices. Any notices required to be provided
-------------
pursuant to any other Loan Document or the other provisions of this
Agreement, and notice of the occurrence of such other events as the
Agent or any Lender, acting through the Agent, may reasonably from time
to time specify.
SECTION 8.3. Existence. Except for any merger, consolidation or similar
---------
transaction permitted under SECTION 8.13, Borrower will maintain and preserve,
------------
and cause each of its Material Subsidiaries to maintain and preserve, its
respective existence as a corporation or other form of business organization, as
the case may be, and all rights, privileges, licenses, patents, patent rights,
copyrights, trademarks, trade names, trade styles, franchises and other
authority to the extent material and necessary for the conduct of its respective
business in the ordinary course as conducted from time to time.
SECTION 8.4. No Change in Line of Business. Borrower will engage, and
-----------------------------
cause each of its Material Subsidiaries to engage, in substantially the same
types and fields of business as it is engaged in on the Effective Date, and such
other activities as may be incidental or related thereto, and no other.
SECTION 8.5. Books, Records and Access. Borrower will maintain, and
-------------------------
cause each of its Subsidiaries to maintain, proper and accurate books and
records, in which full and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its respective business and
activities. Borrower will permit, and cause each of its Subsidiaries to permit,
access by the Agent or any Lender (accompanying the Agent) and its agents or
employees to Borrower's and its Subsidiaries' books and records and its
respective place or places of business at reasonable intervals to be determined
by the Agent and without hindrance or delay and (b) permit, and cause each of
its Subsidiaries to permit, the Agent or any Lender or its agents and employees
to inspect,
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audit, check and make copies and/or extracts from any books, records, computer
data and records, computer programs, journals, orders, receipts, correspondence
and other data relating to its business, assets or any transactions between the
parties hereto and (c) permit, and cause each of its Subsidiaries to permit, the
Agent or any Lender to discuss Borrower's or such Subsidiary's financial matters
with its officers and independent public accountant (and Borrower, for itself
and each of its Subsidiaries, at any time that an Event of Default or Unmatured
Event of Default exists, hereby authorizes such independent public accountant to
discuss such financial matters with the Agent or any Lender or its
representatives whether or not any representative of Borrower or such Subsidiary
is present). As long as no Event of Default or Unmatured Event of Default has
occurred and is continuing, the Agent shall give advance notice of any intent to
visit a premises, and all such visits shall be during normal business hours and
made in such a way as to interfere as little as possible with the conduct of
Borrower's or its Subsidiaries' businesses.
SECTION 8.6. Insurance. Borrower will maintain, and cause each of its
---------
Subsidiaries to maintain, insurance to such extent and against such hazards and
liabilities as is commonly maintained by companies similarly situated or as the
Agent may reasonably and in good faith request from time to time and which is
adequate to insure Borrower and its Subsidiaries against risks which could
reasonably be expected to be encountered by it in the conduct of its business.
Borrower will keep, and will cause each of its Subsidiaries to keep, its
property properly housed and insured for its full insurable value against loss
or damage and such other risks as are customarily insured against by persons
engaged in business similar to that of Borrower or such Subsidiary, with
financially sound and reputable insurers.
SECTION 8.7. Maintenance of Assets. Except for Permitted Dispositions,
---------------------
Borrower will maintain, preserve and keep, and cause each of its Material
Subsidiaries to maintain, preserve and keep, its properties in operating
condition and repair, ordinary wear and tear excepted, and from time to time
make, and cause each of its Material Subsidiaries to make, all necessary and
proper repairs, renewals, replacements, additions, betterments and improvements
thereto so that at all times the efficiency thereof shall be fully preserved and
maintained unless Borrower determines in good faith that the continued
maintenance thereof is no longer economically desirable.
SECTION 8.8. Taxes. Borrower will pay, and will cause each of its
-----
Subsidiaries to pay, when due, all of its federal Taxes unless and only to the
extent that Borrower or such Subsidiary is diligently contesting such Taxes in
good faith and by appropriate proceedings and Borrower or such Subsidiary has
set aside on its
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books appropriate reserves or other appropriate provisions therefor as may be
required by GAAP. Borrower will pay, and will cause each of its Subsidiaries to
pay, when due, all of its other Taxes unless and only to the extent that (a)
Borrower or such Subsidiary is diligently contesting such Taxes in good faith
and by appropriate proceedings and Borrower or such Subsidiary has set aside on
its books appropriate reserves or other appropriate provisions therefor as may
be required by GAAP or (b) the failure to pay does not constitute and could not
reasonably be expected to constitute or result in a Material Adverse Occurrence.
SECTION 8.9. Compliance. Borrower will comply, and cause each of its
----------
Subsidiaries to comply, with all statutes, judicial or administrative orders,
licenses, permits, and governmental rules and regulations applicable to it,
except where the failure to comply does not constitute and could not reasonably
be expected to constitute or result in a Material Adverse Occurrence.
SECTION 8.10. Use of Proceeds. Borrower will use the proceeds of the
---------------
initial Loans to repay in full any Indebtedness to be Paid, and use the proceeds
of all other Loans to finance working capital, general corporate purposes,
acquisitions and capital expenditure requirements of Borrower and its
Subsidiaries. Borrower will not use or permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock, and will
furnish to the Agent and each Lender upon request, a statement in conformity
with the requirements of Federal Reserve Form U-l referred to in Regulation U of
the Federal Reserve Board.
SECTION 8.11. Pension Plans. Borrower will not, and will not permit any
-------------
of its Subsidiaries to, permit any condition to exist in connection with any
Pension Plan which could constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan. Borrower will not fail, and will not permit any of
its Subsidiaries to fail, to make a required contribution to any Pension Plan if
such failure is sufficient to give rise to a Lien under section 302(f) of ERISA.
Borrower will not engage in, or permit to exist or occur, or permit any of its
Subsidiaries to engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any Pension Plan which could result in the
incurrence by Borrower or any of its Subsidiaries of any liability, fine or
penalty in an amount which constitutes or could reasonably be expected to
constitute or result in a Material Adverse Occurrence.
SECTION 8.12. Dispositions. Except for Permitted Dispositions,
------------
Borrower will not, and will not permit any of its
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<PAGE>
Subsidiaries to, engage in or permit to occur any Disposition. As used herein
the term "Permitted Disposition" means, without duplication:
---------------------
(a) a sale of assets or stock in connection with a transaction
permitted under SECTION 8.13;
------------
(b) a Disposition of fixed or capital assets which, together
with all other similar Dispositions during the period of twelve months
ending on such date, have an aggregate book value not in excess of
$5,000,000; or
(c) a Disposition of fixed or capital assets in connection
with a transaction permitted under CLAUSE (E) of SECTION 8.16; and
---------- ------------
(d) the transaction(s) described in ITEM 8.12 of the
---------
Disclosure Schedule.
Notwithstanding the foregoing, no transaction otherwise permitted by this
Section shall be permitted if, immediately before or after giving effect
thereto, any Unmatured Event of Default or Event of Default shall have occurred
and be continuing or would result therefrom.
SECTION 8.13. Consolidations, Mergers, Acquisitions. Except for the
-------------------------------------
transaction described in ITEM 8.13 of the Disclosure Schedule, Borrower will
---------
not, and will not permit any of its Subsidiaries to be a party to any merger,
liquidation, dissolution, consolidation, or Acquisition, except that
(a) any Subsidiary of Borrower may liquidate, or dissolve
voluntarily into, or may merge with and into, Borrower or any other
wholly-owned Subsidiary of Borrower;
(b) the assets or stock of any Subsidiary of Borrower may be
purchased or otherwise acquired by Borrower or any wholly-owned
Subsidiary of Borrower;
(c) Borrower may merge with any other Person, and any other
Person may liquidate or dissolve voluntarily into Borrower, as long as
Borrower is the surviving Person;
(d) Borrower or any of its Subsidiaries may engage in an
Acquisition if:
(i) after giving effect thereto Borrower or such
Subsidiary would be in compliance with SECTION 8.4,
-----------
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<PAGE>
(ii) the Acquisition is consented to and approved by the
board of directors of the Person that is the subject of such
Acquisition,
(iii) the amount of any single Acquisition or series of
related Acquisitions does not exceed $25,000,000 in the
aggregate, and
(iv) giving effect to the Acquisition, Borrower's forecast
of the Interest Coverage Ratio calculated on a pro forma basis
--- -----
for the Fiscal Quarter ending coincident with or next
following the effective date thereof is not less than 3.0 to
1.0.;
provided, however, that no transaction otherwise permitted by this Section shall
- -------- -------
be permitted if immediately before or after giving effect thereto any Unmatured
Event of Default or Event of Default shall have occurred and be continuing or
would result therefrom.
SECTION 8.14. Restricted Payments.
-------------------
(a) Except for dividends permitted under this SECTION 8.14,
------------
Borrower will not declare, pay or make any dividend or distribution (in
cash, property or obligations) on any shares of any class of capital
stock (now or hereafter outstanding) of Borrower or on any warrants,
options or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of Borrower (other than
dividends or distributions payable in its common stock or warrants to
purchase its common stock or split-ups or reclassifications of its
stock into additional or other shares of its common stock) or apply, or
permit any of its Subsidiaries to apply, any of its funds, property or
assets to the purchase, redemption, sinking fund or other retirement
of, or agree or permit any of its Subsidiaries to purchase or redeem,
any shares of any class of capital stock (now or hereafter outstanding)
of Borrower, or warrants, options or other rights with respect to any
shares of any class of capital stock (now or hereafter outstanding) of
Borrower.
(b) Except to the extent permitted in this SECTION 8.14,
------------
Borrower will not, and will not permit any of its Subsidiaries to
(1) make any payment or prepayment of principal of,
or make any payment of interest on, any Subordinated Debt on
any day other than the stated, scheduled date for any
mandatory payment or prepayment set forth in the documents and
instruments
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<PAGE>
memorializing such Subordinated Debt, or which would violate
the subordination provisions of such Subordinated Debt; or
(2) redeem, purchase or defease, any Subordinated
Debt.
(c) Except for the transaction described in PART A of ITEM
------ ----
8.14 of the Disclosure Schedule, Borrower will not take any action, or
----
permit any of its Subsidiaries to take any action, which will result in
a decrease in Borrower's or any of its Subsidiaries' ownership interest
in any of Borrower's Material Subsidiaries.
(d) Borrower will not, and will not permit any of its
Subsidiaries to, make any deposit for any of the foregoing purposes.
Notwithstanding the foregoing Borrower may (i) prepay or cause a Subsidiary to
prepay, the Titanium Subordinated Debt, (ii) pay cash dividends on its capital
stock, (iii) increase its percentage of ownership of the issued and outstanding
stock of Titanium Industries and (iv) repurchase or redeem for cash issued and
outstanding shares of its capital stock or warrants (including, in accordance
with any applicable shareholder agreements or other agreements identified in
PART B of ITEM 8.14 of the Disclosure Schedule, outstanding stock or warrants of
- ------ ---------
Borrower held by Borrower's employees) as long as immediately before and after
giving effect to any such payment, redemption or repurchase:
(x) no Unmatured Event of Default or Event of Default exists
which is continuing or would result therefrom; and
(y) the aggregate amount expended or committed to be expended
by Borrower does not exceed $10,000,000 during any period of twelve
(12) consecutive months.
SECTION 8.15. Indebtedness. Borrower will not, and will not permit any
------------
of its Subsidiaries to, create, incur, assume or permit to exist, or otherwise
become or be liable in respect of, any Indebtedness (including but not limited
to Indebtedness as lessee under Capitalized Leases and Indebtedness in the
nature of Guarantee Liabilities under guarantees), other than, without
duplication, the following:
(a) Indebtedness under the terms of this Agreement;
(b) until the Initial Funding Date, Indebtedness identified in
PART A of ITEM 8.15 ("Indebtedness to be Paid") of the Disclosure
------ --------- -----------------------
Schedule;
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(c) other Indebtedness outstanding on the date hereof and
identified in PART B of ITEM 8.15 ("Ongoing Indebtedness") of the
------ --------- --------------------
Disclosure Schedule;
(d) Indebtedness in an aggregate principal amount not to
exceed $5,000,000 incurred by Borrower or any of its Subsidiaries to
finance the acquisition by Borrower or one of its Subsidiaries of
assets permitted to be acquired pursuant to SECTION 8.20, if the
------------
Indebtedness secured thereby does not exceed 100% of the fair market
value of the assets being acquired at the time of the acquisition
thereof;
(e) Indebtedness assumed by Borrower or any of its
Subsidiaries in connection with (1) the acquisition by Borrower or one
of its Subsidiaries of assets permitted to be acquired pursuant to
SECTION 8.16(D) or SECTION 8.20, or (2) an Acquisition permitted under
--------------- ------------
SECTION 8.13 of a business entity owning assets permitted to be
------------
acquired pursuant to SECTION 8.20, as long as (x) in either case such
------------
Liens were in existence prior to Borrower's or its Subsidiary's
acquisition of such assets or such business entity and such Liens were
not created or granted by Borrower or any of its Subsidiaries or
incurred, created, extended or renewed in contemplation of such
acquisition by Borrower or one of its Subsidiaries and (y) the
aggregate principal amount of such assumed Indebtedness does not exceed
$5,000,000 at any time outstanding;
(f) Indebtedness of Borrower or any of its Subsidiaries in
respect of Capitalized Lease Liabilities to the extent permitted by
SECTION 8.20 and SECTION 8.16(E);
------------ ---------------
(g) unsecured Indebtedness for borrowed money incurred by
Borrower or any of its Subsidiaries which does not at any time exceed
$20,000,000 in the aggregate at any time outstanding;
(h) Indebtedness of Borrower or any of its Subsidiaries
incurred after the Effective Date in connection with a transaction
permitted under CLAUSE (E) of SECTION 8.16;
---------- ------------
(i) Indebtedness existing on the date of this Agreement of a
Subsidiary of Borrower or of one of Borrower's Subsidiaries owing to
Borrower or to such other Subsidiary, and additional Indebtedness of
such type incurred after the date of this Agreement;
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(j) Indebtedness in the nature of Guarantee Liabilities
arising under guarantees issued by Borrower or any of its Subsidiaries
permitted under SECTION 8.17;
------------
(k) unsecured Hedging Obligations of Borrower and its
Subsidiaries, and secured Hedging Obligations of Borrower and its
Subsidiaries to the extent permitted under SECTION 8.16(J); and
---------------
(l) other Indebtedness incurred after the date of this
Agreement and described in PART C of ITEM 8.15 of the Disclosure
------ ---------
Schedule;
provided, however, that no Indebtedness otherwise permitted by CLAUSES (D)
- -------- ------- -----------
through (K) shall be permitted if, immediately after giving effect to the
---
incurrence thereof, any Unmatured Event of Default or Event of Default shall
have occurred and be continuing.
SECTION 8.16. Liens. Borrower will not, and will not permit any of its
-----
Subsidiaries to, create or permit to exist any Lien with respect to any of its
property, revenue or assets, whether now owned or hereafter acquired, except,
without duplication:
(a) Liens securing payment of the Liabilities;
(b) Liens referred to in the financial statements described in
SECTION 7.6 or described on ITEM 7.9 of the Disclosure Schedule
----------- --------
existing on date of this Agreement to secure payment of Ongoing
Indebtedness;
(c) Liens granted after the date of this Agreement to secure
payment of Indebtedness of the type permitted and described in CLAUSES
-------
(D) or (F) of SECTION 8.15 and covering only those assets acquired with
--- --- ------------
the proceeds of such Indebtedness;
(d) Liens on fixed or capital assets acquired by Borrower or
one of its Subsidiaries or owned by a business entity which is acquired
by Borrower or one of its Subsidiaries, as long as (1) such Liens were
in existence prior to Borrower's or its Subsidiary's acquisition of
such assets or such business entity, (2) such Liens were not created or
granted by Borrower or any of its Subsidiaries or incurred, created,
extended or renewed in contemplation of such acquisition by Borrower or
one of its Subsidiaries, (3) immediately before and after giving effect
to such acquisition by Borrower or one of its Subsidiaries no Unmatured
Event of Default or Event of Default exists which is continuing, (4)
the Liens attach solely to such fixed or capital assets and (5) at the
time of Borrower's or its
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<PAGE>
Subsidiary's acquisition of such assets or such business entity, the
aggregate unpaid Indebtedness secured by such Liens (whether or not
such Indebtedness is assumed by Borrower or one of its Subsidiaries),
shall not exceed the lesser of (A) the total purchase price of such
assets or (B) the fair market value thereof at the time of acquisition
by Borrower or one of its Subsidiaries of such assets or of the
business entity then owning such assets, as applicable;
(e) Liens granted after the Effective Date in connection with
sale/leaseback or other similar financings of fixed or capital assets
of Borrower or any of its Subsidiaries, as long as (i) such Liens cover
only the assets subject to the sale/leaseback or other similar
financing, (ii) at the time of the granting of any such Lien and after
giving effect thereto, the aggregate appraised value of assets subject
to Liens granted in connection with such transactions does not at any
time exceed $5,000,000, and (iii) the terms of such sale/leaseback or
other similar transactions are acceptable to the Agent and the Required
Lenders, which acceptance will not be unreasonably withheld or delayed;
(f) Liens for current taxes not delinquent or taxes being
diligently contested in good faith and by appropriate proceedings and
as to which such reserves or other appropriate provisions as may be
required by GAAP or as otherwise required by the Agent are being
maintained on its books;
(g) Liens incurred or arising in the ordinary course of
business (1) in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or benefits, (2) of
carrier's, warehousemen, mechanics, materialmen, repairmen, landlords
artisans or other similar statutory Liens, or (3) securing performance
of bids, trade contracts (other than contracts constituting
Indebtedness), leases, statutory obligations, contingent obligations on
surety and appeal bonds and other obligations of a like nature;
provided the obligation secured is not overdue or is being diligently
contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by
GAAP or as otherwise reasonably required by the Agent are being
maintained on its books; and provided, further, that such Liens,
individually or in the aggregate with all other Liens permitted under
this SECTION 8.17, would not (even if enforced), constitute or result
------------
in a Material Adverse Occurrence;
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(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct by Borrower and its Material
Subsidiaries of their respective businesses, provided, that all such
--------
Liens individually or in the aggregate with all other Liens permitted
under this SECTION 8.17, would not (even if enforced), constitute or
------------
result in a Material Adverse Occurrence;
(i) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution; provided that (1) such deposit
account is not a dedicated cash collateral account and is not subject
to restrictions against access by Borrower in excess of those set forth
by regulations promulgated by the Federal Reserve Bank, and (2) such
deposit account is not intended by Borrower or any Subsidiary to
provide collateral to the depository institution;
(j) Liens consisting of pledges of cash collateral or
government securities to secure on a mark-to-market basis Hedging
Obligations only, provided that (1) the counterparty to any such
contract relating to such Hedging Obligation is under a similar
requirement to deliver similar collateral from time to time to Borrower
or its Subsidiary party thereto on a mark-to-market basis; and (2) the
aggregate value of such collateral so pledged by Borrower and its
Subsidiaries together in favor of any counterparty does not at any time
exceed $6,000,000; and
(k) judgment Liens (1) for immaterial amounts; or (2) in
existence less than 21 days after the entry thereof as long as all such
Liens individually or in the aggregate with all other Liens permitted
under this SECTION 8.17, would not (even if enforced), constitute or
------------
result in a Material Adverse Occurrence; or (3) with respect to which
execution has been stayed; or (4) the payment of which is covered in
full (subject to a customary deductible) by insurance maintained with
responsible insurance companies.
SECTION 8.17. Guaranties. Borrower will not, and will not permit any of
----------
its Subsidiaries to, become or be a guarantor or surety of, or otherwise become
or be responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services, or otherwise) with respect to, any undertaking
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of any other Person, except for (a) the endorsement, in the ordinary course of
collection, of instruments payable to it or its order and (b) guarantees
outstanding on the date of this Agreement and listed on PART B of ITEM 8.15 of
------ ---------
the Disclosure Schedule and (c) guarantees by Borrower and its Subsidiaries of
obligations of Borrower's Subsidiaries entered into after the date of this
Agreement to the extent such obligations of Borrower's Subsidiaries are required
under this Agreement or permitted under this Agreement to be incurred.
SECTION 8.18. Investments. Borrower will not, and will not permit any
-----------
of its Subsidiaries to, make or permit to exist any Investment in any Person,
except for, without duplication:
(a) Investments existing on the date of this Agreement and
identified in PART A of ITEM 8.18 of the Disclosure Schedule, other
------ ---------
than Investments in Borrower's Subsidiaries ("Ongoing Investments");
-------------------
(b) the following Investments by Borrower or any of its
Subsidiaries in any of Borrower's Subsidiaries
("Intercompany Investments"):
------------------------
(1) Investments in existence on the date of this
Agreement not in the nature of loans or advances constituting
---
Indebtedness listed on PART B of Item 8.18 of the Disclosure
------ ---------
Schedule; and
(2) Investments in existence on the date of this
Agreement in the nature of loans and advances and constituting
Indebtedness listed on PART C of Item 8.18 of the Disclosure
------ ---------
Schedule;
(3) Investments after the date of this Agreement in
the ordinary course of business in the nature of either (i)
capital contributions or (ii) loans and advances constituting
Indebtedness permitted under SECTION 8.15(H);
---------------
(c) Cash Equivalent Investments;
(d) without duplication, Investments in the nature of
Indebtedness permitted under SECTION 8.15;
------------
(e) advances to its employees or employees of any of its
Subsidiaries for travel or other ordinary business expenses in amounts
which are both reasonable and consistent with Borrower's and its
Subsidiaries' past practice;
(f) advances to subcontractors and suppliers in maximum
aggregate amounts which are both reasonable and
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consistent with Borrower's and its Subsidiaries' past practice;
(g) extensions of credit in the nature of Accounts Receivable
or notes receivable arising from the sale of goods and services in the
ordinary course of business;
(h) shares of stock, obligations or other securities received
in settlement of claims arising in the ordinary course of business;
(i) Investments permitted under SECTION 8.13; and
------------
(j) other Investments made after the Effective Date and
described in PART D of ITEM 8.18 of the Disclosure Schedule;
------ ---------
provided, however, that:
- -------- -------
(x) no Investment otherwise permitted by CLAUSE (B)(3), CLAUSE
------------- ------
(D), CLAUSE (I) or CLAUSE (J) shall be permitted to be made if,
--- ---------- ----------
immediately before or after giving effect thereto any Unmatured Event
of Default or Event of Default shall have occurred and be continuing or
would result therefrom; and
(y) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held notwithstanding that such Investment, if made
thereafter, would not so comply.
SECTION 8.19. Subsidiaries. Except to the extent permitted under
------------
SECTION 8.13 or 8.18, Borrower will not, and will not permit any Subsidiary to
- ------------ ----
(a) acquire any stock or similar interest in any Person or (b) create,
establish, acquire or permit to exist any Material Subsidiaries other than those
existing on the date of this Agreement.
SECTION 8.20. Capital Expenditures. Except as otherwise permitted in
--------------------
this Section, and except in connection with an Acquisition permitted under
SECTION 8.13, Borrower will not, and will not permit any Subsidiary to, make or
- ------------
commit to make any Capital Expenditures in any Fiscal Year if, after giving
effect thereto, the aggregate thereof in any one Fiscal Year would exceed
$20,000,000. Capital Expenditures relating to the electron beam furnace and
enhanced scrap handling facilities, which are projected to be approximately
$40,000,000, shall not be taken into consideration for purposes of the preceding
sentence.
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SECTION 8.21. Financial Condition.
-------------------
SECTION 8.21.1. Current Asset Coverage Ratio. Borrower will not permit
----------------------------
its Current Asset Coverage Ratio, determined as of the last day of each Fiscal
Quarter, to be less than 1.50 to 1.0.
SECTION 8.21.2. Interest Coverage Ratio. Borrower will not permit its
-----------------------
Interest Coverage Ratio, determined as of the last day of each Fiscal Quarter
for the Fiscal Quarter then ending, to be less than 2.75 to 1.0.
SECTION 8.21.3. Tangible Net Worth. Borrower will not permit Borrower's
------------------
Consolidated Tangible Net Worth determined as at the last day of each Fiscal
Quarter, to be less than the sum of (a) $180,000,000 plus (b) fifty percent
(50%) of Borrower's consolidated positive net income for the period commencing
January 1, 1997 and ending on such date of determination. A consolidated net
loss in any Fiscal Quarter after January 1, 1997 will be included in the
calculation of consolidated positive net income only to the extent that the sum
of the consolidated net income and consolidated net loss amounts for the Fiscal
Quarters comprising a Fiscal Year or portion thereof for which Consolidated
Tangible Net Worth is being calculated, is not less than zero.
SECTION 8.22. Future Environmental Assessments. Borrower will provide,
--------------------------------
and will cause each of its Subsidiaries to provide, such information and
certifications as the Agent may reasonably request from time to time pertaining
to the environmental aspects of Borrower and its Subsidiaries and any property
owned, operated or controlled by Borrower or any of its Subsidiaries. To
investigate environmental aspects of Borrower and its Subsidiaries and their
properties, facilities and operations, the Agent or any Lender or their
respective agents shall have the right, but no obligation at any time, to enter
upon the property of Borrower or any of its Subsidiaries, take samples, review
the books, records or other documents of Borrower and its Subsidiaries,
interview officers and employees and independent contractors of Borrower or its
Subsidiaries, and conduct such other activities as the Agent or such Lender, in
its sole discretion, deems appropriate; provided, however, that as long as no
--------
Event of Default or Unmatured Event of Default exists the Agent shall exercise
such rights, if at all, so as to minimize any interference with the conduct of
Borrower's or its Subsidiary's business on the property which is the subject of
such investigation. Borrower shall, and shall cause its Subsidiaries to,
cooperate fully in the conduct of any such assessment. If the Agent decides to
cause such an assessment to be conducted because of (a) the Required Lenders'
considering directing the Agent to take possession of or title to the property
after the occurrence of an Event of Default or (b) a
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material change in the use of the property which, in the Agent's or the Required
Lenders' reasonable opinion, materially increases the risk of non-compliance
with Environmental Laws or increases the risk of material costs or material
liabilities thereunder, then Borrower shall pay upon demand all costs and
expenses (including Attorneys' Fees) connected with such assessment. Nothing in
this SECTION 8.22, and no actions taken by the Agent or any Lender pursuant
------------
hereto, shall be construed as affecting, directing, influencing, or controlling,
or giving to the Agent or any Lender the right, capacity or obligation to direct
or control, the conduct or action or inaction of Borrower or any of its
Subsidiaries with respect to any environmental matters, including but not
limited to those pertaining to compliance with any Environmental Law and
Hazardous Material disposal.
SECTION 8.23. Other Agreements. Borrower will not, and not permit any
----------------
of its Subsidiaries to, enter any agreement containing any provision which would
be violated or breached by the performance by Borrower or such Subsidiary of its
obligations hereunder or under any other Loan Document or any instrument or
document delivered or to be delivered by Borrower or such Subsidiary in
connection herewith.
SECTION 8.24. Unconditional Purchase Options. Except for the agreements
------------------------------
identified in ITEM 8.24 of the Disclosure Schedule, Borrower will not, and will
---------
not permit any of its Subsidiaries to, enter into or be a party to any contract
for the purchase of materials, supplies or other property or services, if such
contract requires that payment be made by it regardless of whether or not
delivery is ever made of such materials, supplies or other property or services.
SECTION 8.25. Transactions with Related Parties. Borrower will not,
---------------------------------
and will not permit any of its Subsidiaries to, enter into or be a party to any
transaction or arrangement, including, without limitation, the purchase, sale,
lease or exchange of property or the rendering of any service, with any Related
Party of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to Borrower or such Subsidiary than
would be obtained in a comparable arm's-length transaction with a Person not a
Related Party of Borrower.
SECTION 8.26. Negative Pledges, etc. Borrower will not, and not permit
---------------------
any of its Material Subsidiaries to, enter into any agreement (excluding this
Agreement, any other Loan Document and, with respect to CLAUSE (A) of this
----------
Section, any agreement governing any Indebtedness permitted by CLAUSE (D) of
----------
SECTION 8.15 as to the assets financed with the proceeds of such Indebtedness)
- ------------
prohibiting (a) the creation or assumption of any
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Lien upon its properties, revenues or assets, whether now owned or hereafter
acquired; (b) the ability of Borrower to amend or otherwise modify this
Agreement or any other Loan Document; or (c) except for the agreement described
and identified in ITEM 8.26 of the Disclosure Schedule, the ability of any of
---------
Borrower's Subsidiaries to make any payments, directly or indirectly, to
Borrower by way of dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany charges, expenses and
accruals or other returns on investments, or any other agreement or arrangement
which restricts the ability of any such Subsidiary to make any payment, directly
or indirectly, to Borrower.
ARTICLE IX
DEFAULT
SECTION 9.1. Event of Default. Each of the following shall constitute
----------------
an "Event of Default" under this Agreement:
SECTION 9.1.1. Non-Payment of Liabilities. Default in the payment or
--------------------------
prepayment when due of any principal of any Loan or any Reimbursement
Obligation, or default (and continuance thereof for a period of three days) in
the payment when due of any interest, fee or other Liability.
SECTION 9.1.2. Warranty. Any warranty made by Borrower herein or in any
--------
other Loan Document at any time executed by Borrower is untrue or misleading in
any material respect when made or deemed made; or any schedule, statement,
report, notice, certificate or other writing furnished by Borrower to the Agent
or any Lender is untrue or misleading in any material respect on the date as of
which the facts set forth therein are stated or certified; or any certification
made or deemed made by Borrower to the Agent or any Lender is untrue or
misleading in any material respect on or as of the date made or deemed made.
SECTION 9.1.3. Non-Compliance With Other Covenants. Default in the
-----------------------------------
performance or observance of any of Borrower's agreements set forth in this
Agreement (and not constituting an Event of Default under any of the other
subsections of SECTION 9.1), and continuance of such default for 30 days after
-----------
notice thereof to Borrower from the Agent or any Lender.
SECTION 9.1.4. Non-Compliance With Other Loan Documents. Default in the
----------------------------------------
performance by Borrower of any of its agreements set forth in any other Loan
Document (and not constituting an Event of Default under any of the other
subsections of SECTION 9.1), and continuance of such default after notice from
-----------
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the Agent and the expiration of the grace period (if any) set forth therein.
SECTION 9.1.5. Non-Payment of Other Indebtedness. Default in the
---------------------------------
payment when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness having a principal amount,
individually or in the aggregate, in excess of $1,000,000, of or guaranteed by,
Borrower or any of Borrower's Subsidiaries (other than (i) any Indebtedness
under this Agreement and any Note or (ii) any Indebtedness of any of Borrower's
Subsidiaries to Borrower or to any other such Subsidiary). Notwithstanding the
foregoing neither (a) default in the payment by Borrower or any of its
Subsidiaries of any amount due to Kamyr, Inc. in connection with the acquisition
of Titanium Industries, Inc. nor (b) default in the payment by Borrower or any
of its Subsidiaries of any amount due to the Person identified in ITEM 9.1.5 of
----------
the Disclosure Schedule in connection with the circumstances described therein
shall be an Event of Default under this SECTION 9.1.5 if the existence of such
-------------
default is being contested in good faith and by appropriate proceedings and
Borrower shall have set aside on its books a reserve of not less than 100% of
the amount of such Indebtedness.
SECTION 9.1.6. Default of Other Indebtedness. Any event or condition
-----------------------------
shall occur which results in the acceleration of the maturity of any
Indebtedness having a principal amount, individually or in the aggregate, in
excess of $1,000,000 of, or guaranteed by, Borrower, or any of Borrower's
Subsidiaries (other than (i) any Indebtedness of any of Borrower's Subsidiaries
to Borrower or to any other such Subsidiary and (ii) the Indebtedness under this
Agreement and any Note) or enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any required notice of
default having been given and any applicable grace period having expired) to
accelerate the maturity of such other Indebtedness. Notwithstanding the
foregoing neither (a) default in the payment by Borrower or any of its
Subsidiaries of any amount due to Kamyr, Inc. in connection with the acquisition
of Titanium Industries, Inc. nor (b) default in the payment by Borrower or any
of its Subsidiaries of any amount due to the Person identified in ITEM 9.1.5 of
----------
the Disclosure Schedule in connection with the circumstances described therein
shall be an Event of Default under this SECTION 9.1.5 if the existence of such
-------------
default is being contested in good faith and by appropriate proceedings and
Borrower shall have set aside on its books a reserve of not less than 100% of
the amount of such Indebtedness.
SECTION 9.1.7. Other Obligations. Default in the payment when due,
-----------------
whether by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period
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or waiver of such default) of (i) any material obligation or agreement of
Borrower or any of Borrower's Subsidiaries to or with any Lender (other than any
obligation or agreement of Borrower under this Agreement or any other Loan
Document) or (ii) any material obligation or agreement of any such Person to or
with any other Person (other than (x) any such material obligation or agreement
constituting or related to Indebtedness, (y) Trade Accounts Payable and (z) any
material obligation or agreement of any of Borrower's Subsidiaries to Borrower
or to any other such Subsidiary), except only to the extent that the existence
of any such default under CLAUSE (I) or (II) is being contested by such Person
---------- ----
in good faith and by appropriate proceedings and such Person shall have set
aside on its books appropriate reserves or other appropriate provisions therefor
(including but not limited to any as may be required by GAAP).
SECTION 9.1.8. Insolvency. Borrower or any of Borrower's Material
----------
Subsidiaries shall:
(a) become insolvent, or generally fail to pay, or admit in
writing its inability to pay, its debts as they mature;
(b) apply for, consent to, or acquiesce in the appointment of
a trustee, receiver, sequestrator or other custodian for such Person or
for any of the property of such Person or any other such Person, or
makes a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
any such Person or for a substantial part of the property of any such
Person and is not discharged or dismissed within 60 days; provided that
each such Person hereby expressly authorizes the Agent to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend its rights and the rights of the Lenders
under this Agreement and any other Loan Document;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of any such Person
and, if any such case or proceeding is not commenced by any such
Person, such case or proceeding shall be consented to or acquiesced in
by any such Person or shall result in the entry of an order for relief
or shall remain for 60 days undismissed, provided that each such Person
hereby expressly authorizes the Agent to appear in any court conducting
any relevant proceeding
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during such 60-day period to preserve, protect and defend its rights
and the rights of the Lenders under this Agreement and any other Loan
Document;
(e) permit any warrant of attachment or similar legal process
against any substantial part of the property of any such Person to be
issued and remain for 5 days undismissed or undischarged unless a bond
has been posted with respect thereto and all enforcement action has
been stayed, provided that each such Person hereby expressly authorizes
the Agent to appear in any court conducting any relevant proceeding to
preserve, protect and defend its rights and the rights of the Lenders
under this Agreement and any other Loan Document; or
(f) take any corporate or other action authorizing, or in
furtherance of, any of the foregoing.
SECTION 9.1.9. Pension Plans. The institution by Borrower or any ERISA
-------------
Affiliate of steps to terminate any Pension Plan if, in order to effectuate such
termination, Borrower or any ERISA Affiliate would be required to make a
contribution to such Pension Plan, or would incur a liability or obligation to
such Pension Plan in excess of $5,000,000; the institution by the PBGC of steps
to terminate any Pension Plan and the continuation of either such condition
after notice thereof from Lender; the occurrence of a contribution failure with
respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA.
SECTION 9.1.10. Litigation. There shall be entered against any one of
----------
Borrower or any of Borrower's Subsidiaries one or more judgments or decrees in
excess of $5,000,000 in the aggregate at any one time outstanding (excluding any
judgments or decrees for and to the extent which such Person is insured and with
respect to which the insurer has assumed responsibility in writing or for and to
the extent which such Person is otherwise indemnified if the terms of such
indemnification are satisfactory to the Agent), and either (1) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (2) there shall be any period of 21 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
SECTION 9.1.11. Validity. This Agreement or any other Loan Document
--------
shall (except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and enforceable
obligation of any party thereto except to the extent caused by an action or
omission of the Agent or any Lender; Borrower or any other Person shall,
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directly or indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability.
SECTION 9.1.12. Conduct of Business. Borrower or any of Borrower's
-------------------
Material Subsidiaries is enjoined, restrained or in any way prevented by court
order, which has not been dissolved or stayed within five Banking Days, from
conducting all or any material part of its business affairs.
SECTION 9.1.13. Change of Control. Any Change of Control shall occur.
-----------------
SECTION 9.2. Effect of Event of Default; Remedies.
------------------------------------
SECTION 9.2.1. Action if Bankruptcy. In the event that one or more
--------------------
Events of Default described in SECTION 9.1.8 shall occur, then each Lender's
-------------
Commitments (if not theretofore terminated) shall automatically terminate and
all Liabilities shall be immediately due and payable without demand, notice or
declaration of any kind whatsoever.
SECTION 9.2.2. Action if Other than Bankruptcy. In the event an Event
-------------------------------
of Default other than one described in SECTION 9.1.8 shall for any reason,
-------------
whether voluntary or involuntary, occur and be continuing, the Agent, upon the
direction of the Required Lenders, shall declare all or any portion of the
Liabilities immediately due and payable and/or the Commitments (if not
theretofore terminated) to be terminated, without demand or notice of any kind
whatsoever, whereupon the full unpaid amount of such Liabilities which shall be
so declared due and payable shall be and become immediately due and payable,
without demand, notice or presentment of any kind, and/or, as the case may be,
the Commitments extended under this Agreement shall terminate. The Agent shall
promptly advise Borrower of any such declaration, but failure to do so shall not
impair the effect of such declaration.
ARTICLE X
CONDITIONS PRECEDENT,
DELIVERY OF DOCUMENTS AND OTHER MATTERS
SECTION 10.1. Conditions Precedent to Initial Credit Extensions. The
-------------------------------------------------
obligation of each Lender to make its initial Credit Extension is subject to
satisfaction of the following conditions precedent (in addition to those
provided in SECTION 10.2):
------------
SECTION 10.1.1. Audit; Credit Approvals. Each Lender shall have (a)
-----------------------
obtained all required internal credit approvals and
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(b) completed its due diligence audit of the business, operations and assets of
Borrower and its Subsidiaries, the results of which shall provide such Lender
with results and information which, in its sole determination, are satisfactory
to permit such Lender to enter into the financing transaction described in this
Agreement and the other Loan Documents.
SECTION 10.1.2. Solvency. After giving effect to the initial Loans,
--------
Borrower and each of its Subsidiaries (a) shall have assets (excluding goodwill
and other intangible assets not capable of valuation) having a value, both at
present fair saleable value and at fair valuation, greater than the amount of
its liabilities (including its Trade Accounts Payable), (b) shall have capital
sufficient to carry on its respective business and transactions and all business
and transactions in which it is about to engage, (c) shall not have engaged in
or be about to engage in a business or transaction for which its remaining
assets are unreasonably small in relation to the business or the transaction,
(d) shall believe that it is able to pay its respective debts as they mature and
shall not believe that it is incurring, debts beyond its ability to pay as they
mature and (e) shall have no actual intent to hinder, delay or defraud either
present or future creditors.
SECTION 10.1.3. Effect of Law. No law or regulation affecting the
-------------
Agent's or any Lender's entering into the financing transaction contemplated by
this Agreement shall impose upon the Agent or any Lender any material
obligation, fee, liability, loss, cost, expense or damage.
SECTION 10.1.4. Exhibits; Schedules. All Exhibits and Schedules to this
-------------------
Agreement and each other Loan Document shall have been completed and submitted
to each Lender and shall be in form and substance satisfactory to each Lender,
and none of the foregoing shall contain any fact or information which any
Lender, in its sole judgment, determines to be unacceptable.
SECTION 10.1.5. Fees. If not funded with the proceeds of the initial
----
Loans, the Agent shall have received the closing fee referred to in SECTION
-------
3.4.1 and any other fees due and payable by Borrower or any other Person on the
- -----
Initial Funding Date and any expenses arising pursuant to SECTION 13.1, to the
------------
extent then invoiced. Borrower agrees that, pursuant to SECTION 13.1 of this
------------
Agreement, to the extent not previously paid or provided for, the estimated
Attorneys' Fees, expenses and charges of the Agent's attorneys related to the
negotiation, documentation and closing of this Agreement, the other Loan
Documents and the initial Credit Extension shall be paid from the proceeds of
the initial Loans.
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SECTION 10.1.6. Documents. The Agent shall have received all of the
---------
following, each duly executed where appropriate and in form and substance
satisfactory to the Agent, and each in sufficient number of counterparts to
provide one to each Lender:
(a) Borrower Resolutions. A copy, duly certified by the
--------------------
secretary or an assistant secretary of Borrower as of the Initial
Funding Date, of (1) resolutions of the Board of Directors of Borrower
or a duly empowered committee of the Board of Directors authorizing (A)
the borrowings by Borrower hereunder and (B) the execution, delivery
and performance by Borrower of this Agreement and each other Loan
Document to be executed and/or delivered by Borrower and (2) all
documents evidencing any other necessary corporate action with respect
to this Agreement and the other Loan Documents, and (3) all approvals
or consents, if any, with respect to this Agreement and the other Loan
Documents;
(b) Borrower Incumbency Certificate. A certificate of the
-------------------------------
secretary or an assistant secretary of Borrower dated the Initial
Funding Date and certifying the names of the officers of Borrower
authorized to sign this Agreement, and each other Loan Document to be
executed by Borrower, and all other documents and certificates to be
delivered by Borrower hereunder, together with the true signatures of
such officers, upon which certificate the Agent and each Lender may
conclusively rely until it shall have received a further certificate of
the secretary or an assistant secretary of Borrower canceling or
amending such prior certificate;
(c) Borrower's Closing Certificate. A certificate of the
------------------------------
President, Chairman of the Board or Vice President Finance of Borrower
dated the Initial Funding Date and certifying to the fulfillment by
Borrower of all conditions precedent to closing and funding the
financing transaction contemplated by this Agreement to be fulfilled by
it, and to the truth and accuracy, as of such date, of the
representations and warranties of Borrower contained in this Agreement
and each other Loan Document to which Borrower is a party or by which
it is bound;
(d) Borrower's Organic Documents. A copy, duly certified as of
----------------------------
the date of this Agreement by the secretary or an assistant secretary
of Borrower, of Borrower's articles of incorporation and by-laws,
including all amendments thereto;
(e) Borrower's Registration; Good Standing. A copy, duly
--------------------------------------
certified as of a date reasonably near to the date of this Agreement by
the applicable Secretary of State of (i) a
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certificate of existence issued by the Secretary of the State of Oregon
and a certificate of "good standing" issued by the Secretary of State
of each other state where Borrower is qualified to do business, and
(ii) in any state in which Borrower is doing business under an assumed
name, a certificate or other document dated as of a date reasonably
near to the date of this Agreement issued by the Secretary of State of
each such state evidencing Borrower's authority to use such name;
(f) Legal Opinion. A legal opinion from counsel for Borrower
-------------
and its Subsidiaries, addressed to the Agent and the Lenders,
substantially in the form of EXHIBIT G;
---------
(g) Insurance. Evidence satisfactory to the Agent of the
---------
existence of insurance on the business of Borrower and its
Subsidiaries, in amounts and with insurers acceptable to the Agent;
(h) Notice of Borrowing. A duly executed Notice of Borrowing
-------------------
containing instructions from Borrower for disbursement of the proceeds
of the initial Loans;
(i) Note(s). To the extent the Loans are evidenced by Notes, a
-------
duly executed Note payable to the applicable Lender in the amount of
such Lender's Percentage of the Commitment Amount;
(j) Other Documents. Such other documents as the Agent or any
---------------
Lender shall determine to be necessary or desirable.
The Agent and each Lender agrees that the making of the initial Credit
Extension shall be deemed to constitute the Agent's and each such Lender's
agreement that all of the foregoing conditions precedent have been satisfied or
waived.
SECTION 10.1.7. Payment of Outstanding Indebtedness, etc. All
----------------------------------------
Indebtedness to be Paid, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been paid in full
(including, to the extent necessary, from proceeds of the initial Loans); and
all Liens on any property of Borrower and all of Borrower's Subsidiaries
securing payment of any such Indebtedness to be Paid have been released and the
Agent shall have received all Uniform Commercial Code Form UCC-3 termination
statements or other instruments or documents evidencing the termination of such
Liens and the payment of such Indebtedness to be Paid as may be suitable or
appropriate in connection therewith, reasonably requested by the Agent or
determined by the Agent to be necessary to release all such Liens.
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SECTION 10.2. Continuing Conditions Precedent to all Credit Extension;
--------------------------------------------------------
Certification. The obligation of each Lender to make its initial Credit
- -------------
Extension and each subsequent Credit Extension, is subject to satisfaction of
the following conditions precedent in addition to those provided in SECTION
-------
10.1:
- ----
SECTION 10.2.1. No Material Adverse Occurrence. No event shall have
------------------------------
occurred or condition exist which, in the reasonable credit judgment of the
Required Lenders, constitutes a Material Adverse Occurrence;
SECTION 10.2.2. Default. Before and after giving effect to such Credit
-------
Extension, no Event of Default or Unmatured Event of Default shall have occurred
and be continuing;
SECTION 10.2.3. Insurance. There shall have been no material change, or
---------
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent or scope of the insurance policies listed on
ITEM 7.7 of the Disclosure Schedule which change could constitute a Material
- --------
Adverse Occurrence; and
SECTION 10.2.4. Warranties. Before and after giving effect to such
----------
Credit Extension the warranties in ARTICLE VII and in each other Loan Document
-----------
shall be true and correct in all material respects with the same effect as if
then made (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date), except for such changes as are specifically permitted hereunder.
Each request for a Credit Extension hereunder made or deemed to have been made
by Borrower shall be deemed to be a certificate of Borrower as to the matters
set out in the foregoing provisions of SECTION 10.2.
------------
ARTICLE XI
INDEMNITY
SECTION 11.1. Environmental and Safety and Health Indemnity. Borrower
---------------------------------------------
hereby indemnifies, exonerates and holds the Agent, each Lender and each other
holder of a Note, and each of its officers, directors, employees and agents
(collectively, the "Indemnified Parties") free and harmless from and against any
-------------------
and all actions, causes of action, suits, costs, liabilities, losses, damages,
injuries, expenses and claims of any and every kind whatsoever (including,
without limitation, court costs and Attorneys' Fees) (a) relating to or arising
under any Environmental Law or Occupational Safety and Health Law; or (b) which
otherwise
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may be paid, incurred or suffered by or asserted against such Indemnified Party
for, with respect to, or as a direct or indirect result of the violation by
Borrower, any of Borrower's Subsidiaries or any other Related Party of Borrower,
or any immediate or remote predecessor of any of them, of any Environmental Law
or Occupational Safety and Health Law; or (c) with respect to, or as a direct or
indirect result of, (1) the presence of any Hazardous Material on or under, or
the escape, seepage, leakage, spillage, disposal, discharge, emission, threat of
Release, or Release of any Hazardous Material from, any property allegedly
owned, operated or controlled by Borrower, any of Borrower's Subsidiaries or any
other Related Party of Borrower (or any immediate or remote predecessors of any
of them), or any property at which Hazardous Material allegedly generated by any
such Person, or any immediate or remote predecessors of any of them, may have
come to be located, or (2) the existence of any unsafe or unhealthful condition
on or at any premises operated or controlled by any such Person or any immediate
or remote predecessor of any of them.
SECTION 11.2. General Indemnity. In addition to and without limitation
-----------------
of the indemnity set forth in SECTION 11.1 and in addition to the payment of
------------
expenses pursuant to SECTION 13.1, whether or not the transactions contemplated
------------
hereby shall be consummated, Borrower hereby indemnifies, exonerates and holds
each Indemnified Party free and harmless from and against any and all actions,
causes of action, suits, costs, liabilities, losses, damages, injuries, expenses
and claims of any and every kind whatsoever (including, without limitation,
court costs and Attorneys' Fees and disbursements of counsel for any Indemnified
Party in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not any of such Indemnified
Parties shall be designated a party thereto) that may be imposed on, incurred
by, or asserted against any Indemnified Party, in any manner relating to or
arising out of (a) this Agreement, any other Loan Document or any other
agreements executed and delivered by Borrower, any Subsidiary of Borrower in
connection herewith, the statements contained in any commitment letter delivered
by any Lender, any Lender's agreement to make Credit Extensions hereunder, the
use or intended use of any Letters of Credit, or the use or intended use of the
proceeds of any of the Loans, (b) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of any Loan or
Letter of Credit, (c) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of Borrower, any Subsidiary of Borrower as the result of
any determination by a Lender pursuant to ARTICLE X not to fund any Credit
---------
Extension) or (d) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by Borrower, or any of Borrower's
Subsidiaries of all
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or any portion of the stock or assets of any Person, whether or not any Lender
is party thereto (collectively, the "Indemnified Liabilities"); provided that
-----------------------
Borrower shall have no obligation to an Indemnified Party hereunder with respect
to Indemnified Liabilities arising from the gross negligence or wilful
misconduct of such Indemnified Party. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnified Parties or any of them.
SECTION 11.3. Indemnification for Accepting Oral Instructions. Except
-----------------------------------------------
for any loss or expense proximately caused by a Lender's or the Agent's gross
negligence or wilful misconduct, Borrower agrees to indemnify and hold the Agent
and each Lender harmless from any loss or expense suffered by the Agent or such
Lender which may arise or be created by the Agent's acceptance of telephonic or
other instructions for making, converting and/or disbursing the proceeds of
Loans or the issuance of Letters of Credit.
SECTION 11.4. Survival of Borrower's Obligations. Borrower's
----------------------------------
obligations under this ARTICLE XI shall survive any termination of this
----------
Agreement and the payment of all other Liabilities.
ARTICLE XII
THE AGENT
SECTION 12.1. Appointment and Authorization; "Agent". Each Lender
--------------------------------------
hereby irrevocably (subject to SECTION 12.9) appoints, designates and authorizes
------------
the Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this Agreement or
any other Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to
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connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 12.2. Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
SECTION 12.3. Liability of Agent. None of the Agent-Related Persons
------------------
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Borrower or any
Subsidiary or Related Party of Borrower, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
for the value of or title to any collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrower any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of Borrower or any of the Company's Subsidiaries or Related
Parties.
SECTION 12.4. Reliance by Agent.
-----------------
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to Borrower) independent accountants and
other experts selected by the Agent. The Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any
other Loan
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Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and, if it so requests, it
shall first be indemnified to its satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request
or consent of the Required Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of
the Lenders.
(b) For purposes of determining compliance with the conditions
specified in SECTION 10.1, each Lender that has executed this Agreement
------------
shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Agent
to such Lender for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender.
SECTION 12.5. Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of the
Lenders, unless the Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Unmatured Event of Default
or Event of Default and stating that such notice is a "notice of default". The
Agent will notify the Lenders of its receipt of any such notice. The Agent shall
take such action with respect to such Unmatured Event of Default or Event of
Default as may be requested by the Required Lenders in accordance with ARTICLE
-------
IX; provided, however, that unless and until the Agent has received any such
- -- -------- -------
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Unmatured Event of Default
or Event of Default as it shall deem advisable or in the best interest of the
Lenders.
SECTION 12.6. Credit Decision. Each Lender acknowledges that none of
---------------
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the affairs
of Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
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business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and its Subsidiaries, the value of and title to any
collateral, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower and its Subsidiaries hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of Borrower which may come into the possession of any of the
Agent-Related Persons.
SECTION 12.7. Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Lender
-------- -------
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including Attorney Fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of Borrower. The undertaking in
this Section shall survive termination of this Agreement and the payment of all
other Liabilities hereunder and the resignation or replacement of the Agent.
SECTION 12.8. Agent in Individual Capacity. BOA and its Related Parties
----------------------------
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial
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advisory, underwriting or other business with Borrower and its Subsidiaries and
Related Parties as though BOA were not the Agent hereunder and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BOA or its Related Parties may receive information regarding
Borrower or its Related Parties (including information that may be subject to
confidentiality obligations in favor of Borrower or such Related Party) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BOA shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not the Agent, and the terms "Lender" and "Lenders" include BOA
in its individual capacity.
SECTION 12.9. Successor Agent. The Agent may, and at the request of the
---------------
Required Lenders shall, resign as Agent upon 30 days' notice to the Lenders and
Borrower. If the Agent resigns under this Agreement, the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders. If no
successor agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders and
Borrower, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this ARTICLE XII and SECTIONS 11.2 and
----------- -------------
13.1 shall inure to its benefit as to any actions taken or omitted to be taken
- ----
by it while it was Agent under this Agreement. If no successor agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Costs and Expenses. Borrower shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BOA (including in its capacity as Agent)
within five Banking Days after demand (subject to SECTION 10.1.5) all
--------------
costs and expenses incurred by BOA (including in its capacity as Agent)
in connection with the development, preparation, delivery,
administration
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and execution of, and any amendment, supplement, waiver or modification
to (in each case, whether or not consummated), this Agreement, any Loan
Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby
and thereby, including reasonable Attorney Fees incurred by BOA in its
capacity as Agent with respect thereto; and
(b) pay or reimburse the Agent, and each Lender within five
Banking Days after demand (subject to SECTION 10.1.5) for all costs and
--------------
expenses (including Attorney Fees) incurred by them in connection with
the enforcement, attempted enforcement, or preservation of any rights
or remedies under this Agreement or any other Loan Document during the
existence of an Unmatured Event of Default or Event of Default or after
acceleration of the Liabilities (including in connection with any
"workout" or restructuring, and including in any insolvency proceeding
or appellate proceeding); and
(c) pay or reimburse BOA (including in its capacity as Agent)
within five Banking Days after demand (subject to SECTION 10.1.5) for
--------------
all appraisal (including the allocated reasonable cost of internal
appraisal services), audit, environmental inspection and review
(including the allocated reasonable cost of such internal services),
search and filing costs, fees and expenses, incurred or sustained by
BOA (including in its capacity as Agent) in connection with the matters
referred to under SUBSECTIONS (A) and (B) of this Section;
--------------- ---
provided, that Borrower's obligation to BOA in connection with the development,
- --------
preparation, delivery and execution of this Agreement and the Loan Documents and
the closing of the transactions contemplated hereby, shall be limited to not
more than $25,000 for professional fees of BOA's external counsel, plus all
reasonable costs, expenses and other charges of such external counsel
customarily charged by it to its clients.
SECTION 13.2. Amendments and Waivers. No amendment or waiver of any
----------------------
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrower or any applicable Subsidiary therefrom,
shall be effective unless the same shall be in writing and signed by the
Required Lenders (or by the Agent at the written request of the Required
Lenders) and Borrower and acknowledged by the Agent, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
-------- -------
consent
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shall, unless in writing and signed by all the Lenders and Borrower, and
acknowledged by the Agent, do any of the following:
(a) increase or extend any Commitment of any Lender (or
reinstate any Commitment terminated pursuant to SECTION 9.2);
-----------
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or
other amounts due to the Lenders (or any of them) or the Issuing Lender
hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to CLAUSE (III) below) any fees or
------------
other amounts payable hereunder or under any other Loan Document;
(d) change the percentages of the Commitments or of the
aggregate unpaid principal amount of the Loans and/or Letter of Credit
Exposure which is required for the Lenders or any of them to take any
action hereunder; or
(e) amend this Section, SECTION 6.10, the definition of
------------
"Required Lenders" or any provision herein providing for consent or
other action by all Lenders;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Agent, be effective to amend ARTICLE XII or in any way
-----------
affect the rights or duties of the Agent under this Agreement or any other Loan
Document, (ii) no amendment, waiver or consent shall, unless in writing and
signed by the Issuing Lender, be effective to amend ARTICLE V or in any way
---------
affect the rights or duties of the Issuing Lender under this Agreement or any
other Loan Document, (iii) any separate fee letters between Borrower and any
Lender may be amended, or rights or privileges thereunder waived, in a writing
executed by the parties thereto.
SECTION 13.3. Notices.
-------
(a) Except as otherwise permitted under SECTION 2.3, all
-----------
notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that
any matter transmitted by Borrower by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at the
number specified on SCHEDULE 13.3, and (ii) shall be followed promptly
-------------
by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified
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for notices on SCHEDULE 13.3; or, as directed to Borrower or the Agent,
-------------
to such other address as shall be designated by such party in a written
notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written
notice to Borrower and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible
form by facsimile machine, respectively, or if mailed, upon the third
Banking Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices to the Agent under
ARTICLES II, V or XII shall not be effective until actually received by
----------- - ---
the Agent.
(c) Any agreement of the Agent and the Lender herein to
receive certain notices by telephone or facsimile is solely for the
convenience and at the request of Borrower. The Agent and the Lenders
shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by Borrower to give such notice and the Agent
and the Lenders shall not have any liability to Borrower or any other
Person on account of any action taken or not taken by the Agent or a
Lender in reliance upon such telephonic or facsimile notice. The
obligation of Borrower to repay the Loans and to fulfill its other
Liabilities shall not be affected in any way or to any extent by any
failure by the Agent or any Lender to receive written confirmation of
any telephonic or facsimile notice or the receipt by the Agent or any
Lender of a confirmation which is at variance with the terms understood
by the Agent and the Lenders to be contained in the telephonic or
facsimile notice.
SECTION 13.4. No Waiver by the Agent or Lenders. No failure or delay on
---------------------------------
the part of the Agent or any Lender in the exercise of any power or right, and
no course of dealing between Borrower or any of its Subsidiaries on the one
hand, and the Agent or any Lender on the other hand, shall operate as a waiver
of such power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise of any other
power or right. The remedies provided for herein are cumulative and not
exclusive of any remedies which may be available to the Agent or any Lender at
law or in equity. No notice to or demand on Borrower not required hereunder
shall in any event entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of the Agent
or any Lender to any other or further action in any circumstances without notice
or demand.
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SECTION 13.5. Marshalling; Payments Set Aside. Neither the Agent nor
-------------------------------
the Lenders shall be under any obligation to marshall any assets in favor of
Borrower or any other Person or against or in payment of any or all of the
Liabilities. To the extent that Borrower makes a payment to the Agent or a
Lender, or the Agent or a Lender exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Agent or such Lender
in its discretion) to be repaid to a trustee, receiver or any other party, in
connection with any bankruptcy or insolvency proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Lender severally agrees to pay to the Agent upon demand its pro rata share
of any amount so recovered from or repaid by the Agent.
SECTION 13.6. Successors. This Agreement shall be binding upon
----------
Borrower, the Agent and the Lenders and their respective successors and assigns,
and shall inure to the benefit of Borrower, the Agent and the Lenders and the
successors and assigns of the Agent and the Lenders. Borrower shall not assign
its rights or duties hereunder without the consent of the Agent and the Lenders.
SECTION 13.7. Assignments, Participations, etc.
---------------------------------
SECTION 13.7.1. Assignments.
-----------
(a) Any Lender (an "Assignor Lender") may, with the written
---------------
consent of Borrower at all times other than during the existence of an
Unmatured Event of Default or an Event of Default and the Agent, which
consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written
consent of Borrower or the Agent shall be required in connection with
any assignment and delegation by an Assignor Lender to an Eligible
Assignee that is a Related Party of such Lender) (each an
"Assignee Lender") all, or any ratable part of all, of the Credit
---------------
Extensions, the Commitments and the other rights and obligations of
such Assignor Lender hereunder. Any such assignment shall (a) not cause
the Assignor Lender's total Commitments, after giving effect to such
assignment, to be less than $10,000,000 unless it is an assignment of
such Lender's total Commitments, (b) unless made to another Lender, be
in a minimum amount of $5,000,000 or, if less, the Assignor Lender's
total Commitments, and (c) shall be of a constant, and not a varying,
percentage of all of the Assignor Lender's Loans, other Credit
Extensions
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and Commitments; provided, however, that (i) Borrower and the Agent may
-------- -------
continue to deal solely and directly with such Assignor Lender in
connection with the interest so assigned to an Assignee Lender until
(A) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the
Assignee Lender, shall have been given to Borrower and the Agent by
such Assignor Lender and the Assignee Lender; (B) such Assignor Lender
and Assignee Lender shall have delivered to Borrower and the Agent an
Assignment and Acceptance together with any Note or Notes subject to
such assignment and (C) the Assignor Lender or Assignee Lender has paid
to the Agent a processing fee in the amount of $2,500.
(b) From and after the date that the Agent notifies the
Assignor Lender that it has received (and, if applicable, provided its
consent with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee Lender
shall be a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the
Loan Documents, and (ii) the Assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under the
Loan Documents.
(c) Within five Banking Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, (and provided that, if applicable,
it consents to such assignment), Borrower shall execute and deliver to
the Agent, new Notes evidencing such Assignee Lender's assigned Loans
and Commitment(s) and, if the Assignor Lender has retained a portion of
its Credit Extensions and its Commitments, replacement Notes in the
principal amount of the Loans retained by the Assignor Lender (such
Notes to be in exchange for, but not in payment of, the Notes held by
such Assignor Lender). Immediately upon each Assignee Lender's making
its processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee Lender and
the resulting adjustment of the Percentages and the Commitments arising
therefrom. The Commitment(s) allocated to each Assignee Lender shall
reduce such Commitment(s) of the Assignor Lender pro tanto.
--- -----
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SECTION 13.7.2. Participations. Any Lender may at any time sell to one
--------------
or more commercial banks or other Persons not Related Parties or competitors of
the Company (a "Participant") participating interests in any Credit Extensions,
-----------
Loans, or Commitments of that Lender and the other interests of that Lender (the
"originating Lender ") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Lender's obligations under this
- -------- -------
Agreement shall remain unchanged, (ii) the originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrower, each
other Lender and the Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Lenders
as described in the first proviso to SECTION 13.2. In the case of any such
----- ------- ------------
participation, the Participant shall be entitled to the benefit of SECTIONS 6.1,
------------
6.3 and ARTICLE XI as though it were also a Lender hereunder, and, if amounts
- --- ----------
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
SECTION 13.8. Lenders May Pledge Notes. Notwithstanding any other
------------------------
provision in this Agreement, any Lender may at any time create a security
interest in, or pledge, all or any portion of its rights under and interest in
this Agreement and any Notes held by it in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
SECTION 13.9. Automatic Debits of Fees. With respect to any commitment
------------------------
fee, or other fee, or any other cost or expense (including Attorneys' Fees) due
and payable to a Lender (including BOA in its capacity as Agent) under the Loan
Documents, at any time an Event of Default exists Borrower hereby irrevocably
authorizes each Lender to debit any deposit account of Borrower with such Lender
in an amount such that the aggregate amount debited from all such deposit
accounts does not exceed such fee or other cost or expense. If there are
insufficient funds in such deposit accounts to cover the amount of the fee or
other cost or expense then due, such debits will be reversed (in
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<PAGE>
whole or in part, in such Lender's reasonable discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.
SECTION 13.10. Notification of Addresses, Lending Offices, Etc. Each
------------------------------------------------
Lender shall notify the Agent in writing of any changes in the address to which
notices to such Lender should be directed, of addresses of any Lending Office,
of payment instructions in respect of all payments to be made to it hereunder
and of such other administrative information as the Agent shall reasonably
request.
SECTION 13.11. No Third Parties Benefited. This Agreement is made and
--------------------------
entered into for the sole protection and legal benefit of Borrower, the Lenders,
the Agent and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
SECTION 13.12. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 13.13. Information. Each Lender may furnish any information
-----------
concerning Borrower and its Subsidiaries in the possession of such Lender from
time to time to any potential or actual Participants, and may furnish
information in response to credit inquiries consistent with general banking
practice.
SECTION 13.14. Headings. The various headings of this Agreement and of
--------
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 13.15. Execution in Counterparts, Effectiveness, etc. This
----------------------------------------------
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. On the date counterparts executed by
all of the parties shall have been lodged with the Agent (or, in the case of any
Lender as to which an executed counterpart shall not have been so lodged, the
Agent shall have received telegraphic, telex or other written confirmation from
such Lender of the execution of a counterpart hereof by such Lender), this
Agreement
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<PAGE>
shall become effective as of the date hereof, and at such time the Agent shall
notify Borrower and each Lender of the effectiveness of this Agreement.
SECTION 13.16. Construction. Borrower acknowledges that this Agreement
------------
shall be deemed to have been negotiated and entered into in the STATE OF
ILLINOIS, and SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF SUCH
STATE without regard to choice of law rules as to interpretation, enforcement,
validity, construction, effect, choice of law, and in all other respects,
including, but not limited to, the legality of the interest rate and other
charges, but excluding perfection of security interests and liens which shall be
governed and controlled by the laws of the relevant jurisdiction. This
Agreement, any Note and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matters
hereof and thereof and supersede any prior agreements, written or oral, with
respect thereto.
SECTION 13.17. Confidentiality. Agent and each Lender agrees to take
---------------
and to cause its Related Parties to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by Borrower or any of its Subsidiaries, or by the
Agent on Borrower's or such Subsidiary's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Related Parties shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with Borrower or any of its Subsidiaries;
except to the extent such information (a) was or becomes generally available to
the public other than as a result of disclosure by the Agent or a Lender, or (b)
was or becomes available on a non-confidential basis from a source other than
Borrower (provided that such source is not bound by a confidentiality agreement
with Borrower known to the Agent or any Lender); PROVIDED, HOWEVER, that a
Lender may disclose such information (A) at the request or pursuant to any
requirement of any Governmental Authority to which such Lender is subject or in
connection with an examination of such Lender by any such authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which any Agent-Related Person, any Lender or their respective Related Parties
may be party; (E) to the extent reasonably required in connection with the
exercise of any remedy thereunder or under any other Loan Document; (F) to such
Lender's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the
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<PAGE>
same extent required of the Lenders thereunder; (H) as to any Lender or its
Related Parties, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which Borrower or any of its Subsidiaries
is party or is deemed a party with such Lender or such Related Party; and (I) to
its Related Parties.
SECTION 13.18. Forum Selection and Consent to Jurisdiction. To induce
-------------------------------------------
the Agent and each Lender to accept this Agreement, Borrower irrevocably agrees
that, subject to the Agent's sole and absolute election, ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, ANY LENDER OR BORROWER
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 13.19. Waiver of Jury Trial. EACH OF BORROWER, THE AGENT AND
--------------------
EACH LENDER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT
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BEFORE A JURY. BORROWER, THE AGENT AND EACH LENDER ACKNOWLEDGE AND AGREE THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND EACH SUCH LENDER
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
OREGON METALLURGICAL CORPORATION,
AN OREGON CORPORATION
By: /s/ Dennis P. Kelly
-------------------------------------------
Title: VP Finance-Treasurer
----------------------------------------
Address: 530 34th Avenue, S.W.
Albany, OR 97321
Attention: Dennis P. Kelly
V.P. - Finance
Facsimile number: 541-917-0656
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS AGENT
By: /s/ David A. Johanson
------------------------------------------
Title: Vice President
----------------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Agency Management Services
Facsimile number: (312) 974-9102
-----------------------------
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<PAGE>
LENDERS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ George Lyman
------------------------------------------
Title: Vice President
---------------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: George Lyman
Facsimile number: 312-828-1974
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Scott J. Bell
------------------------------------------
Title: Vice President
---------------------------------------
Address: 555 S.W. Oak Street
Suite 400
Portland, OR 97204
Attention: National Corporate
Banking Division
Facsimile number:503-275-4809
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
- --------
A - Form of Assignment and Acceptance
B - Form of Note
C - Form of Notice of Borrowing
D - Form of Notice of Continuation/Conversion
E - Form of Guaranty
F - Form of Compliance Certificate
G - Borrower's Counsel's Opinion
Schedules:
- ---------
Schedule I - Percentages
Schedule II - Disclosure Schedule
Schedule 1.1A - Pre-Existing Letters of Credit
Schedule 13.3 - Lending Offices
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EXHIBIT A
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (the "Assignment and Acceptance") is
-------------------------
made and entered into as of ______________by and between _______________ (the
"Assignor") and ______________ (the "Assignee").
--------
W I T N E S S E T H
WHEREAS, a Credit Agreement dated as of August 26, 1997 (as amended,
supplemented or modified from time to time, the "Credit Agreement") has been
----------------
entered into among OREGON METALLURGICAL CORPORATION, an Oregon corporation (the
"Borrower"), the financial institutions from time to time party thereto
--------
including the Assignor (individually a "Lender" and collectively, the
------
"Lenders"), and Bank of America National Trust and Savings Association ("BOA")
------- ---
as agent for the Lenders (the "Agent"). Unless otherwise defined herein, terms
-----
defined in the Credit Agreement are used herein with the same meanings; and
WHEREAS, pursuant to the Credit Agreement, on the date hereof, and
without giving effect to any other assignments to become effective on the
Assignment Effective Date (hereafter defined) or any other assignments thereof
which have not yet become effective (a) the Assignor's Commitment is the amount
specified in Item 1 of Schedule 1 hereto, (b) the aggregate principal amount of
------ ----------
outstanding Loans made by the Assignor to the Borrower pursuant to the
Assignor's Commitment, and the Assignor's Letter of Credit Exposure, is
specified in Item 2 of Schedule 1 hereto and (c) the Assignor's Percentage is
------ ----------
the percentage set forth in Item 3 of Schedule 1 hereto; and
------ ----------
WHEREAS, the Assignor wishes to sell to the Assignee, and the Assignee
wishes to purchase and assume from the Assignor (a) the portion of the
Assignor's Commitment specified in Item 4 of Schedule 1 hereto (the "Assigned
------ ----------
Commitment") and (b) the portion of the Assignor's outstanding Loans (the
- ----------
"Assigned Loans") and Letter of Credit Exposure (the "Assigned Letter of
-------------- ------------------
Credit Exposure") specified in Item 5 of Schedule 1 hereto.
- --------------- ------ ----------
NOW, THEREFORE, the parties hereto agree as follows:
1. Subject to the terms and conditions set forth herein, the Assignor
hereby sells and assigns to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, WITHOUT RECOURSE, as of the Assignment Effective Date
and without giving effect to other assignments to become effective on the
Assignment Effective Date or any other assignments thereof which have not yet
become effective (a) all right, title and interest of the
<PAGE>
Assignor to the Assigned Loans and (b) all obligations of the Assignor under the
Credit Agreement with respect to the Assigned Commitment and the Assigned Letter
of Credit Exposure including, without limitation, the Note held by the Assignor
(if any), any interest, fees and commissions which accrue after the Assignment
Effective Date; provided, however, that Assignee does not purchase or assume any
-------- -------
liability resulting from acts or omissions of Assignor occurring prior to the
Assignment Effective Date. After giving effect to the transactions contemplated
by this Assignment and Acceptance, (i) the amount of the Assigned Loans and
Assigned Letter of Credit Exposure shall be the amounts set forth in Item 5 of
------
Schedule 1 and (ii) Assignor's and Assignee's respective Percentages and
- ----------
Commitments shall be set forth in Item 6 of Schedule 1 hereto.
------ ----------
2. The Assignor (i) represents and warrants that the information set forth
in Items 1, 2 and 3 is true and correct as of the date hereof; (ii) represents
------- - -
and warrants that (a) it is the legal and beneficial owner of the Loans and
Commitments being assigned by it hereunder, (b) it has the full power and legal
right to execute and deliver this Assignment and Acceptance and to perform its
obligations hereunder, (c) the execution, delivery and performance by it of its
obligations hereunder have been duly authorized by all necessary corporate or
other action and do not violate any provisions of its charter or by-laws or any
contractual obligation or requirement of law binding upon it and (d) the
Assigned Loans, Assigned Commitment and Assigned Letter of Credit Exposure are
free and clear of any adverse claim; (iii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made by Borrower or any other Obligor in or in connection with
the Credit Agreement or any of the other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any of the other Loan Documents; (iv) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or any other Obligor or the performance or
observance by Borrower or any other Obligor of any of its obligations under the
Credit Agreement or any of the other Loan Documents; and (v) represents and
warrants that except as previously disclosed to Assignee, during the period from
the Effective Date to the Assignment Effective Date, to its knowledge the Agent
has not notified the Borrower of the existence of any Unmatured Event of Default
or Event of Default.
3. The Assignee (i) represents and warrants that (a) it has the full power
and legal right to execute and deliver this Assignment and Acceptance and to
perform its obligations hereunder and, to the extent of its interest therein,
under the Credit Agreement and the other Loan Documents and (b) the execution,
delivery and performance by it of its obligations
-2-
<PAGE>
hereunder and, to the extent of its interest therein, under the Credit Agreement
and the other Loan Documents, have been duly authorized by all necessary
corporate or other action and do not violate any provisions of its charter or
by-laws or any contractual obligation or requirement of law binding upon it;
(ii) confirms that it has received a copy of the Credit Agreement and the other
Loan Documents, together with copies of the financial statements referred to in
the Credit Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (iii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iv) appoints and authorizes the Agent to take such actions on its
behalf and to exercise such powers under the Credit Agreement and the other Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will become a
party to and a Lender under the Credit Agreement on the Assignment Effective
Date and perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement are required to be performed by it as a
Lender; (vi) specifies as its address for notices the office set forth in Item 7
------
of Schedule 1 hereto; and (vii) agrees that no fee is payable by Borrower to
----------
Assignee in connection with the execution and delivery of this Assignment and
Acceptance.
4. The Assignor agrees that the Assignor shall pay to the Agent, for the
account of the Agent, any processing fee required by the Agent to be paid to it
pursuant to the Credit Agreement. The Assignor further agrees that, within one
Banking Day following receipt of new Notes, if any, duly executed by the
Borrower reflecting the amount of the Assigned Commitment and the Assigned
Loans, it will return its superseded Note, if any, to the Agent for the account
of the Borrower.
[5. The Assignor agrees that upon the execution of this Assignment and
Acceptance by the Assignor and the Assignee and the acceptance hereof by the
Borrower, the Assignor shall pay to the Assignee a fee in the amount of
$_________.]
6. The obligations of the Assignee and the Assignor hereunder shall be
subject to the requirement that the Assignor (a) shall have received good funds
representing payment in full of all amounts due from the Assignee for purchase
of the Commitments being purchased by and assigned to the Assignee and (b)
complied with all other provisions of this Assignment and Acceptance and all
applicable provisions of the Credit Agreement. The effective date of this
Assignment and Acceptance (the
-3-
<PAGE>
"Assignment Effective Date") shall be ______________ or, if later, the first
-------------------------
Banking Day on which the requirements of the preceding sentence of this
Section 6 have been satisfied. Following the execution of this Assignment and
- ---------
Acceptance by the Assignor and the Assignee and the acknowledgment of the same
by the Borrower, it will be delivered to the Agent for acceptance and recording
by the Agent.
7. Upon such acceptance and recording, as of the Assignment Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and under other Loan Documents and (ii) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Credit Agreement and the other Loan
Documents.
8. Upon such acceptance and recording, from and after the Assignment
Effective Date, the Agent shall make all payments received by it under the
Credit Agreement and the other Loan Documents in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and commitment fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Assignment Effective Date directly between
themselves.
9. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the internal laws and decisions (as opposed to conflicts of law
provisions) of the State of Illinois.
10. This Assignment and Acceptance shall inure to the benefit of and be
binding upon successors and assigns of the Assignor and the Assignee.
11. This Assignment and Acceptance shall supersede any prior agreement or
understanding between the parties (other than the Credit Agreement and the other
Loan Documents) as to the subject matter hereof. This Assignment and Acceptance
shall be deemed to be a Loan Document for all purposes under the Credit
Agreement.
12. This Assignment and Acceptance may be executed by Assignor and Assignee
in any number of counterparts and on the same or separate counterparts, each of
which, when executed and delivered, shall be an original but all of which taken
together, shall be but a single Assignment and Acceptance.
-4-
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Assignment and Acceptance as of this ____ day of _____________, 19___.
_____________________, Assignor
By: ______________________________
Title: Vice President
_____________________, Assignee
By: ______________________________
Title: ___________________________
Pursuant to the Credit Agreement, the Borrower hereby agrees, accepts
and consents to the foregoing Assignment and Acceptance. The Borrower further
agrees that, within five Banking Days from Assignment Effective Date, it will
execute and deliver to the Agent a new Note to the Assignee and the Assignor,
reflecting the amount of the Assignor's Commitment assigned to the Assignee
pursuant to this Assignment and Acceptance, and the Assignor's Commitment less
the Assigned Commitment respectively.
OREGON METALLURGICAL CORPORATION,
an Oregon corporation
By: _____________________________
Title: __________________________
Date: ____________________________
Pursuant to the Credit Agreement the undersigned, as Agent for the Lenders
(i) accepts the foregoing Assignment and Acceptance and (ii) agrees that the
execution and delivery of the Assignment and Acceptance shall not alter the
rights and obligations of the undersigned as Agent.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
for the Lenders
By: ______________________________
Title: Vice President
Date: ____________________________
-5-
<PAGE>
SCHEDULE 1
to
Assignment and Acceptance Agreement
dated as of ________________, 19___ between
___________________, Assignor and __________________, Assignee
Item 1. Assignor's Commitment $_____________
- ------
Item 2. Assignor's Loans Outstanding
- ------
and Outstanding Letter of
Credit Exposure $_____________
Item 3. Assignor's Percentage __________%
- ------
Item 4. Amount of Assigned
- ------
Commitment $_____________
Item 5. Amount of Assigned Loans $_____________
- ------
Item 6. Commitment and Percentage After Assignment
- ------
Commitment
a. Assignor $_____________
b. Assignee $_____________
Percentages
a. Assignor __________%
b. Assignee __________%
Item 7. Notice Address of Assignee
- -------
__________________________
__________________________
__________________________
Attention: _______________
Telephone: _______________
Facsimile: _______________
<PAGE>
Notes to Schedule 1
-------------------
1. Insert the dollar amount of the Assignor's Commitment prior
to the assignment.
2. Insert the total amount of outstanding Loans, and the Assignor's
potential exposure with respect to outstanding Letters of Credit, under
the Assignor's Commitment prior to the assignment. The descriptions of
the Loan types should conform to the Credit Agreement.
3. Insert the Assignor's Percentage prior to the assignment.
4. Insert the dollar amount of the Assignor's Commitment being assigned.
5. Insert the amount of the outstanding Loans, and the amount of the
contingent obligations in respect of outstanding Letters of Credit,
being assigned. Description of Loan types should be consistent with
Item 2.
6. Insert Commitments and Percentages of Assignor and Assignee after
giving effect to the assignment.
7. Insert address and notice information for the Assignee.
-7-
<PAGE>
EXHIBIT B
NOTE
$___________ ____________, 19___
FOR VALUE RECEIVED, the undersigned, OREGON METALLURGICAL CORPORATION,
an Oregon corporation (the "Borrower"), promises to pay to the order of
--------
_________________________________ (the "Lender") on August 26, 2000 the
------
principal sum of __________________ DOLLARS ($___________) or, if less, the
aggregate unpaid principal amount of all Loans shown on the schedule attached
hereto (and any continuation thereof) made by the Lender pursuant to that
certain Credit Agreement, dated as of August 26, 1997 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "Credit Agreement"), among the Borrower, BANK OF AMERICA NATIONAL
----------------
TRUST AND SAVINGS ASSOCIATION, as Agent, and the various financial institutions
(including the Lender) as are, or may from time to time become, parties thereto.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Agent pursuant to the Credit Agreement.
This Note is one of the Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a statement of the terms and conditions on which the Borrower is permitted
and required to make prepayments and repayments of principal of the Indebtedness
evidenced by this Note and on which such Indebtedness may be declared to be
immediately due and payable. Unless otherwise defined, terms used herein have
the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF).
OREGON METALLURGICAL CORPORATION,
an Oregon corporation
By: ____________________________________
Name:
Title:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PRINCIPAL PAYMENTS
- --------------------------------------------------------------------------------
Amount of Unpaid
Amount of Principal Principal
Loan Made Repaid Balance
---------------- Interest ---------------- -----------------
Base Eurodollar Period (if Base Eurodollar Base Eurodollar Notation
Date Rate Rate applicable) Rate Rate Rate Rate Total Made By
- ---- ---- ---------- ----------- ---- ---------- ---- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
</TABLE>
- 3 -
<PAGE>
EXHIBIT C
NOTICE OF BORROWING
Bank of America National Trust
and Savings Association, as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Agency Services
OREGON METALLURGICAL CORPORATION
--------------------------------
Gentlemen and Ladies:
This Notice of Borrowing is delivered to you pursuant to Section 2.3.1
-------------
of the Credit Agreement, dated as of August 26, 1997 (together with all
amendments, if any, from time to time made thereto, the "Credit Agreement"),
----------------
among Oregon Metallurgical Corporation, an Oregon corporation (the "Borrower"),
--------
Bank of America National Trust and Savings Association, as Agent (the "Agent")
-----
and various financial institutions as are or may from time to time become
parties thereto. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that Loans be made in the aggregate
principal amount of $__________ on __________, 19___ as [Eurodollar Rate Loans
having an Interest Period of ____ months] [Base Rate Loans].
The Borrower hereby acknowledges that, pursuant to Section 10.2 of the
------------
Credit Agreement, each of the delivery of this Notice of Borrowing and the
acceptance by the Borrower of the proceeds of the Loans requested hereby
constitutes a representation and warranty by the Borrower that, on the date of
such Loans, and before and after giving effect thereto and to the application of
the proceeds therefrom, all statements set forth in each of the subsections of
Section 10.2 are true and correct in all material respects.
- ------------
The Borrower agrees that if prior to the time of the Borrowing
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the Borrowing requested
hereby the Agent shall receive written notice to the contrary from the Borrower,
each matter certified to herein shall be deemed once again to be certified as
true and correct at the date of such Borrowing as if then made.
<PAGE>
Please disburse the proceeds of the Borrowing in accordance with the
instructions set forth on Exhibit A hereto.
---------
The Borrower has caused this Notice of Borrowing to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officer this ___ day of ___________, 19___.
OREGON METALLURGICAL CORPORATION,
an Oregon corporation
By: __________________________________
Name:
Title:
- 2 -
<PAGE>
EXHIBIT A
Please disburse the proceeds of the Loans requested in the attached Notice of
Borrowing as follows:
- 3 -
<PAGE>
EXHIBIT D
NOTICE OF CONTINUATION/CONVERSION
Bank of America National Trust
and Savings Association, as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Agency Services
OREGON METALLURGICAL CORPORATION
--------------------------------
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to
Section 2.4 of the Credit Agreement, dated as of August 26, 1997 (together with
- -----------
all amendments, if any, from time to time made thereto, the "Credit Agreement"),
----------------
among Oregon Metallurgical Corporation, an Oregon corporation (the "Borrower"),
--------
Bank of America National Trust and Savings Association, as Agent (the "Agent")
-----
and various financial institutions as are or may from time to time become
parties thereto. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that on ____________, 19___,
(1) $___________ of the presently outstanding principal amount
of the Loans originally made on __________, 19___,
(2) and all presently being maintained as [Base Rate Loans]
[Eurodollar Rate Loans],
(3) be [converted into] [continued as],
(4) [Eurodollar Rate Loans having an Interest Period of
____________ months [Base Rate Loans].
The Borrower hereby:
(a) certifies and warrants that no Unmatured Event of Default
or Event of Default has occurred and is continuing; and
(b) agrees that if prior to the time of such continuation or
conversion any matter certified to herein by
<PAGE>
the Borrower will not be true and correct at such time as if then made,
the Borrower will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the
continuation or conversion requested hereby the Agent shall receive written
notice to the contrary from the Borrower, each matter certified to herein shall
be deemed to be certified at the date of such continuation or conversion as if
then made.
The Borrower has caused this Notice of Continuation/ Conversion to be
executed and delivered, and the certification and warranties contained herein to
be made, by its Authorized Officer this ___ day of _________, 19___.
OREGON METALLURGICAL CORPORATION,
an Oregon corporation
By: _____________________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT E
---------
GUARANTY
--------
THIS GUARANTY (this "Guaranty"), dated as of August 26, 1997, made by
--------
OREGON METALLURGICAL CORPORATION, an Oregon corporation (the "Guarantor"), in
---------
favor of each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of August 26, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among the Guarantor, the
----------------
various financial institutions (individually a "Lender" and collectively the
------
"Lenders") as are, or may from time to time become, parties thereto and Bank of
-------
America National Trust and Savings Association, as agent (together with any
successor(s) thereto in such capacity, the "Agent") for the Lenders, the Lenders
-----
have agreed that the Issuing Lender under the Credit Agreement will issue
Letters of Credit on the Application of certain Subsidiaries of the Guarantor;
and
WHEREAS, as a condition precedent to the issuance of a Letter of Credit on
the Application of a Subsidiary of the Guarantor, the Guarantor is required to
execute and deliver this Guaranty; and
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the issuance of Letters of Credit on the Applications of its
Subsidiaries;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the Guarantor agrees, for the benefit of each
Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
-------------
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following
<PAGE>
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"Credit Agreement" is defined in the first recital
---------------- -------------.
"Guarantor" is defined in the preamble
--------- --------.
"Guaranty" is defined in the preamble
-------- --------.
"Lender Party" means, as the context may require, any Lender (including the
------------
Issuing Lender) or the Agent and each of its respective successors, transferees
and assigns.
"Obligations" means, with respect to each Subsidiary Obligor, all
-----------
liabilities and obligations of such Subsidiary Obligor under or pursuant to, or
in connection with, each Subsidiary Letter of Credit of such Subsidiary Obligor,
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or due or to become due.
"Subsidiary Letter of Credit" means a Letter of Credit issued on the
---------------------------
Application of a Subsidiary of the Guarantor.
"Subsidiary Obligor" means each Subsidiary of the Guarantor on the
------------------
Application of which a Letter of Credit is issued. On the date of this Guaranty
the Subsidiary Obligors are Titanium Industries, Inc., an Oregon corporation,
Rome Metals, Inc., an Oregon corporation and E.B. Furnace Company, LLC, an
Oregon limited liability company.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
----------------------------
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
--------
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Subsidiary Obligor, whether for
principal, interest, fees, expenses or otherwise (including all such
amounts which would become due but for the operation of the automatic stay
under Section 362(a) of the
-2-
<PAGE>
United States Bankruptcy Code, 11 U.S.C. <SUBSECTION SIGN>362(a), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code,
11 U.S.C. <SUBSECTION SIGN>502(b) and <SUBSECTION SIGN>506(b)), and
(b) indemnifies and holds harmless each Lender Party for any and
all reasonable costs and expenses (including reasonable Attorneys' Fees)
incurred by such Lender Party, as the case may be, in enforcing any rights
under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be necessary
or required that any Lender Party exercise any right, assert any claim or demand
or enforce any remedy whatsoever against any Subsidiary Obligor (or any other
Person) before or as a condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
------------------------
event of the dissolution or insolvency of the Guarantor or a Subsidiary Obligor,
or the inability or failure of the Guarantor or such Subsidiary Obligor to pay
debts as they become due, or an assignment by the Guarantor or such Subsidiary
Obligor for the benefit of creditors, or the commencement of any case or
proceeding in respect of the Guarantor or such Subsidiary Obligor under any
bankruptcy, insolvency or similar laws, and if such event shall occur at a time
when any of the Obligations of such Subsidiary Obligor are not then due and
payable, the Guarantor will pay to the Agent for the account of the Issuing
Lender forthwith the full amount which would be payable hereunder by the
Guarantor if all such Liabilities were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
----------------------
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Letter of Credit Liabilities
relating to Subsidiary Letters of Credit have been indefeasibly paid in full or
otherwise satisfied, all obligations of the Guarantor hereunder shall have been
indefeasibly paid in full and the obligation of the Issuing Lender to issue
Letters of Credit on the Application of a Subsidiary of the Guarantor shall have
terminated. The Guarantor guarantees that the Obligations will be paid strictly
in accordance with the terms of the applicable Applications and each other Loan
Document under which they arise, regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Lender Party with respect thereto. The liability of the Guarantor
under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
-3-
<PAGE>
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Lender Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Subsidiary Obligor or any other Person (including any
other guarantor) under the provisions of the Credit Agreement, any
Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other extension,
compromise or renewal of any Obligations;
(d) any reduction, limitation, impairment or termination of any
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Guarantor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or nonperfection of any
collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Lender Party or
any holder of any Note securing any of the Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Subsidiary Obligor,
any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
------------------
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in
-4-
<PAGE>
whole or in part) of any of the Obligations is rescinded or must otherwise be
restored by any Lender Party or any holder of any Note, upon the insolvency,
bankruptcy or reorganization of the Guarantor, any Subsidiary Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
-----------
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Agent, any other
Lender Party or any holder of any Note protect, secure, perfect or insure any
security interest or Lien, on any property subject thereto, or exhaust any right
or take any action against the Guarantor or any Subsidiary Obligor or any other
Person (including any other guarantor) or entity or any collateral securing the
Obligations, as the case may be.
SECTION 2.6. Subrogation, etc. The Guarantor will not exercise any rights
----------------
which it may acquire by reason of any payment made hereunder, whether by way of
rights of subrogation, reimbursement or otherwise, until the prior indefeasible
payment, in full and in cash, of all Obligations. Any amount paid to the
Guarantor on account of any payment made hereunder prior to the indefeasible
payment in full of all Obligations shall be held in trust for the benefit of the
Lender Parties and each holder of a Note and shall immediately be paid to the
Agent and credited and applied against the Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Agreement;
provided, however, that if
- -------- -------
(a) the Guarantor has made payment to the Lender Parties and each
holder of a Note of all or any part of the Obligations, and
(b) all Obligations have been indefeasibly paid in full and the
obligation of the Issuing Lender to issue Letters of Credit on the
Application of a Subsidiary of the Guarantor has been permanently
terminated,
each Lender Party and each holder of a Note agrees that, at the Guarantor's
request, the Agent, on behalf of the Lender Parties and the holders of the
Notes, will execute and deliver to the Guarantor appropriate documents (without
recourse and without representation or warranty) necessary to evidence the
transfer by subrogation to the Guarantor of an interest in the Obligations
resulting from such payment by the Guarantor. In furtherance of the foregoing,
for so long as any Obligations or Commitments remain outstanding, the Guarantor
shall refrain from taking any action or commencing any proceeding against any
Subsidiary Obligor (or its successors or assigns, whether in connection with a
bankruptcy proceeding or otherwise) to recover any amounts in
-5-
<PAGE>
respect of payments made under this Guaranty to any Lender Party or any holder
of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
------------------------------------------------------------
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Agent and each
other Lender Party.
Without limiting the generality of the foregoing clause (b), any Lender may
----------
assign or otherwise transfer (in whole or in part) any Note or Loan held by it
to any other Person or entity, and such other Person or entity shall thereupon
become vested with all rights and benefits in respect thereof granted to such
Lender under any Loan Document (including this Guaranty) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Section 13.7 and Article XII of the Credit Agreement.
-----------
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1. Loan Document. This Guaranty is a Loan Document executed
-------------
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
SECTION 3.2. Binding on Successors, Transferees and Assigns; Assignment
----------------------------------------------------------.
In addition to, and not in limitation of, Section 2.7, this Guaranty shall be
-----------
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Lender Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
----------- -------- -------
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 3.3. Amendments, etc. No amendment to or waiver of any provision of
---------------
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent and the Guarantor, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
-6-
<PAGE>
SECTION 3.4. Notices. All notices, requests, consents, approvals, waivers
-------
and other communications hereunder shall be made in accordance with the
provisions of Credit Agreement.
SECTION 3.5. No Waiver; Remedies. In addition to, and not in limitation of,
-------------------
Section 2.3 and Section 2.5, no failure on the part of any Lender Party or any
- ----------- -----------
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.6. Section Captions. Section captions used in this Guaranty are
----------------
for convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 3.7. Setoff. In addition to, and not in limitation of, any rights
------
of any Lender Party or any holder of a Note under applicable law, each Lender
Party and each such holder shall, upon the occurrence of any Unmatured Event of
Default described in Section 9.1.8 of the Credit Agreement, or any Event of
-------------
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not then due, any
and all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Lender Party or such holder.
SECTION 3.8. Severability. Wherever possible each provision of this
------------
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 3.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
------------------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS
(WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF). THIS GUARANTY AND
THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
OREGON METALLURGICAL CORPORATION,
an Oregon corporation
By: _______________________________________
Name:
Title:
-8-
<PAGE>
EXHIBIT F
COMPLIANCE CERTIFICATE
Bank of America National Trust
and Savings Association, as Agent
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Agency Services
OREGON METALLURGICAL CORPORATION
--------------------------------
Re: Credit Agreement, dated as of August 26, 1997
(together with all amendments, if any, from time to time made
thereto, the "Credit Agreement"), among Oregon Metallurgical
----------------
Corporation, an Oregon corporation (the "Borrower"), Bank of
--------
America National Trust and Savings Association, as Agent (the
"Agent") and various financial institutions as are or may from
-----
time to time become parties thereto
As used herein, the term "Computation Date" shall mean the
last day of the Fiscal Quarter ending immediately prior to the
date of this Certificate. Capitalized terms not otherwise
defined herein shall be as defined in the Credit Agreement.
Ladies and Gentlemen:
Following are computations and information showing compliance with
certain sections of the Credit Agreement:
Section 8.12(b) - Dispositions. During the period of twelve months
--------------- ------------
ending on the Computation Date, the Borrower and its Subsidiaries disposed of
fixed or capital assets having an aggregate book value of approximately (and in
any event not more than) $__________.
Section 8.14 - Restricted Payments. During the period of twelve months
------------ -------------------
ending on the Computation Date, the aggregate amount paid or committed to be
paid by the Borrower (a) in connection with the prepayment of the Titanium
Subordinated Debt, and/or (b) for the payment of cash dividends on its capital
stock, and/or (c) to increase its percentage ownership of Titanium Industries
and/or (d) in connection with the repurchase or redemption its outstanding stock
or warrants was approximately (and in any event not more than) $______________.
<PAGE>
Section 8.15(d) - Indebtedness. As of the Computation Date the
--------------- ------------
aggregate outstanding Indebtedness of the Borrower and its Subsidiaries which is
permitted to be outstanding under SECTION 8.15(D) of the Credit Agreement was
---------------
approximately (and in any event not greater than) $_______________.
Section 8.15(e) - Indebtedness. As of the Computation Date the
--------------- ------------
aggregate outstanding Indebtedness of the Borrower and its Subsidiaries which is
permitted to be outstanding under SECTION 8.15(E) of the Credit Agreement was
---------------
approximately (and in any event not greater than) $_______________.
Section 8.15(g) - Indebtedness. As of the Computation Date the
--------------- ------------
aggregate outstanding Indebtedness of the Borrower and its Subsidiaries which is
permitted to be outstanding under SECTION 8.15(G) of the Credit Agreement was
---------------
approximately (and in any event not greater than) $_______________.
Section 8.16(e) - Liens. As of the Computation Date the aggregate
--------------- -----
appraised value of assets subject to Liens granted in connection with
sale/leaseback or other similar transactions engaged in by the Borrower and its
Subsidiaries was approximately (and in any event not greater than)
$_______________.
Section 8.16(j) - Liens. As of the Computation Date the aggregate value
--------------- -----
of assets permitted to be pledged as collateral under SECTION 8.16(J) of the
---------------
Credit Agreement was approximately (and in any event not greater than)
$_______________.
Section 8.20 - Capital Expenditures. During the period from the
------------ --------------------
beginning of the current Fiscal Year to the Computation Date, the aggregate
amount of Capital Expenditures of the Borrower and its Subsidiaries was
approximately (and in any event not greater than) $_________________.
Section 8.21.1 - Current Asset Coverage Ratio. The Borrower's Current
-------------- ----------------------------
Asset Coverage Ratio, determined as of the Computation Date, was approximately
(and in any event not less than) _____ to 1.0, as computed on ATTACHMENT 1
------------
hereto.
Section 8.21.2 - Interest Coverage Ratio. The Borrower's Interest
-------------- -----------------------
Coverage Ratio, determined as of the Computation Date for the Fiscal Quarter
then ending, was approximately (and in any event not less than) _____ to 1.0, as
computed on ATTACHMENT 2 hereto.
------------
Section 8.21.3 - Consolidated Tangible Net Worth. The Borrower's
-------------- -------------------------------
Consolidated Tangible Net Worth as of the Computation Date was approximately
(and in any event not less than) $________, as computed on ATTACHMENT 3 hereto.
------------
-2-
<PAGE>
Certification. The Borrower hereby certifies and warrants to the Agent
-------------
and each Lender that:
1. all of the information set forth in this
Certificate (and in the Attachments hereto) is true
and correct in all material respects;
2. the financial statements as of the Computation
Date furnished by the Borrower have been prepared in
conformity with GAAP (without footnotes in the case of interim
statements);
3. except as stated on ATTACHMENT 4 hereto, no event
------------
or condition exists or has occurred (which has not been
previously disclosed) which constitutes or could reasonably be
expected to constitute or result in a Material Adverse
Occurrence; and
4. except as stated on ATTACHMENT 4 hereto, no Event
------------
of Default or Unmatured Event of Default had occurred and was
continuing at the Computation Date.
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be
executed and delivered by an Authorized Person this ______ day of _____________,
19__.
OREGON METALLURGICAL CORPORATION,
an Oregon Corporation
By: __________________________
Name:_________________________
Title: _______________________
-3-
<PAGE>
ATTACHMENT 1
(to __/__/__ Compliance
Certificate)
CURRENT ASSET COVERAGE RATIO ON
______________, 19__ COMPUTATION DATE
1. Borrower's Consolidated Current Assets.......................... $___________
2. Borrower's consolidated cash.................................... $___________
3. Borrower's consolidated Cash Equivalent Investments ............ $___________
4. Market value of Borrower's consolidated marketable securities... $___________
5. Book value (net of all reserves and allowances)
of Borrower's consolidated accounts receivable.................. $___________
6. Sum of Item 2, plus Item 3 plus Item 4 plus Item 5...............$___________
------ ------ ------ ------
7. Maximum amount of Consolidated Current Assets to be taken into account
for purposes of determining the Current Asset Coverage Ratio
(Item 6 divided by 0.30).........................................$___________
------
8. Lesser of Item 1 and Item 7......................................$___________
------ ------
9. CURRENT ASSET COVERAGE RATIO (RATIO OF ITEM 8
------
TO OUTSTANDING PRINCIPAL BALANCE OF THE LOANS................... _____ to 1.0
-4-
<PAGE>
ATTACHMENT 2
(to __/__/__ Compliance
Certificate)
INTEREST COVERAGE RATIO ON
______________, 19__ COMPUTATION DATE
1. Borrower's consolidated net earnings (determined in accordance with GAAP)
for the Fiscal Quarter ending on Computation Date, excluding gains from the
sale of Investments or fixed assets and other extraordinary or nonrecurring
items of income to the extent such gains or other extraordinary or
nonrecurring items of income exceed the aggregate of losses during such
period on the sale of Investments or fixed assets and other extraordinary
or nonrecurring losses........................................... $________
2. To the extent not included in Item 1, Borrower's interest in the net
------
earnings of a consolidated Subsidiary which were deducted in the
calculation of the Borrower's consolidated net earnings due to such
Subsidiary's being less than an wholly-owned Subsidiary of Borrower,
excluding from the determination of such Subsidiary's net earnings gains
from the sale of Investments or fixed assets and other extraordinary or
nonrecurring items of income to the extent such gains or other
extraordinary or nonrecurring items of income exceed the aggregate of
losses sustained by such Subsidiary during such period on the sale of
Investments or fixed assets and other extraordinary or nonrecurring
losses.......................................................... $_________
3. Borrower's consolidated interest expense (including interest expense in
respect of Capitalized Lease Liabilities) for the period described in
Item 1 taken into account in determining the Borrower's consolidated
------
net earnings for such period .................................. $__________
4. Borrower's consolidated tax expense for the period described in Item 1
------
taken into account in determining the Borrower's consolidated net earnings
for such period ............................................... $__________
5. Borrower's EBIT for the Fiscal Quarter ending on the Computation Date (sum
of Item 1 plus Item 2 plus Item 3 plus Item 4)................. $__________
------ ------ ------ ------
6. BORROWER'S INTEREST COVERAGE RATIO FOR THE FISCAL QUARTER ENDING ON THE
COMPUTATION DATE (RATIO OF ITEM 5 TO ITEM 3...................._____ TO 1.0
------ ------
-5-
<PAGE>
ATTACHMENT 3
(to __/__/__ Compliance
Certificate)
CONSOLIDATED TANGIBLE NET WORTH ON
______________, 19__ COMPUTATION DATE
1. Borrower's consolidated shareholders' equity.................... $_________
2. Borrower's consolidated intangible assets....................... $_________
3. BORROWER'S CONSOLIDATED TANGIBLE NET WORTH
(ITEM 1 MINUS ITEM 2)........................................... $_________
------ ------
-6-
<PAGE>
ATTACHMENT 4
(to __/__/__ Compliance
Certificate)
Notice by Borrower of the occurrence of (a) any event or condition which
constitutes or could reasonably be expected to constitute or result in a
Material Adverse Occurrence and/or (b) an Event of Default or Unmatured Event of
Default
[IF NONE, SO INDICATE]
-7-
<PAGE>
EXHIBIT G
Borrower's Counsel's Opinion
[Letterhead of SCHWABE WILLIAMSON & WYATT]
August 26, 1997
To each of the Lenders to the Credit Agreement
referred to below and Bank of America National
Trust and Savings Association as Agent
Re: Oregon Metallurgical Corporation
Dear Ladies and Gentlemen:
We have acted as Oregon special counsel to Borrower in connection with
the establishment by the Lenders of a credit facility pursuant to that certain
Credit Agreement dated as of August 26, 1997 (the "Credit Agreement") among the
Borrower, the Lenders and Bank of America National Trust and Savings Association
as the Agent ("Credit Transaction"). This Opinion is provided to you at the
request of the Borrower pursuant to Section 10.1.6(f) of the Credit Agreement.
Except as otherwise defined in this Opinion Letter, the capitalized terms used
in this Opinion Letter are defined as set forth in the Credit Agreement or the
Accord (as defined below).
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The Law covered by the opinions
rendered in this Opinion Letter is expressly limited to the Law of the State of
Oregon and to the Federal law of the United States. For purposes of this Opinion
Letter, we have assumed that the laws of the State of Illinois are identical in
all respects to the laws of the State of Oregon.
In rendering this opinion, we have reviewed the following documents:
1. The Credit Agreement;
2. The Notes;
3. The Guaranty;
<PAGE>
August 26, 1997
Page 2
4. The documents furnished by the Borrower pursuant to Sections
10.1.6(a) through (c) of the Credit Agreement;
5. The Constituent Documents for the Borrower;
6. The Certificate of Carlos E. Aguirre and Dennis P. Kelly dated as
of the date of this letter;
7. Certified copies of action taken by the Board of Directors of the
Borrower relating to and/or approving the Credit Agreement and Credit
Transaction ("Resolutions"); and
8. The certificates of public officials as follows: (a) certificates
of existence dated July 2, 1997 and May 16, 1997, respectively, confirming the
corporate existence of the Borrower and Titanium Industries, Inc. in the State
of Oregon; (b) certificate of status of foreign corporation dated May 9, 1997
confirming the corporate existence of Titanium Industries, Inc. in the State of
California; (c) certificate dated May 20, 1997 confirming the authority to
transact business of Titanium Industries, Inc. in the State of Florida; (d)
certificate dated May 19, 1997 confirming the authority to transact business of
Titanium Industries, Inc. in the State of Illinois; (e) certificates of short
form standing dated July 11, 1997 and May 20, 1997, respectively, confirming the
active business of Borrower (alternative name OREMET Titanium) and Titanium
Industries, Inc. in the State of New Jersey; (f) certificate dated July 3, 1997
confirming the qualification to do business of Borrower in the Commonwealth of
Pennsylvania; (g) certificate of account status dated May 19, 1997 confirming
good standing (having no franchise tax reports or payments due) of Titanium
Industries, Inc. in the State of Texas and certificate of the Secretary of State
of Texas dated May 29, 1997 confirming that Titanium Industries, Inc. was issued
a certificate of authority and that no certificate of withdrawal has been
issued; (h) certificate of the Secretary of the Commonwealth for the
Commonwealth of Pennsylvania dated July 1, 1997 confirming that Rome Metals,
Inc. is duly qualified as a corporation in the Commonwealth of Pennsylvania; (i)
certificate dated August 1, 1997 confirming the authority to transact business
of Titanium Industries, Inc. in the State of Washington; (j) certificate of
existence dated June 17, 1997 confirming the corporate existence of Rome Metals,
Inc. in the State of Oregon; (k) certificate dated August 5, 1997 confirming the
authority to transact business of Titanium Industries, Inc. in the State of
Connecticut; (l) certificate dated July 15, 1997 confirming the authority to
transact business of EB Furnace Company, LLC in the State of Oregon; (m)
certificate of registrations dated July 16, 1997 for EB Furnace Company, LLC in
the State of Washington; and (n) certificate dated August 4, 1997 confirming the
authority of Titanium Wire Corporation to transact business in the Commonwealth
of Pennsylvania.
Those documents identified as documents 1 through 3 above are referred
to as the "Credit Documents"; those documents identified as documents 4 through
7 are referred to as the "Certificates"; and those documents identified as
document 8 are referred to as the "Public Authority Documents." With respect to
the Certificates and Public Authority Documents, we have assumed, without
inquiry or investigation, that, since their respective dates, no intervening
<PAGE>
August 26, 1997
Page 3
event or circumstance has occurred which would in any way change or affect the
substance of the affirmations or statements so certified.
Based upon and subject to the foregoing and to the limitations,
disclaimers and qualifications set forth in this Opinion Letter and in the
Accord, we are of the opinion that:
1. Borrower and all of its domestic corporate Subsidiaries are
corporations duly incorporated and validly existing and, if applicable, in "good
standing" under the laws of those domestic jurisdictions of their incorporation.
EB Furnace Company, LLC is an Oregon limited liability company which is validly
existing under the laws of the State of Oregon. Borrower and all of its domestic
corporate Subsidiaries are, if applicable, in "good standing" and are duly
qualified to do business in each domestic jurisdiction where, because of the
nature of their respective activities or properties, such qualification is
required, except for those jurisdictions where the failure to be so qualified
does not constitute and could not reasonably be expected to constitute a
Material Adverse Occurrence.
2. Borrower is duly authorized, and has full corporate power and
authority, and, to our knowledge, holds all requisite governmental licenses,
permits and other approvals, to execute and deliver the Credit Agreement, and
any other Loan Document expressly contemplated thereby to be executed and/or
delivered by Borrower. The execution, delivery and performance by Borrower of
the Credit Agreement and any other Loan Document expressly contemplated thereby
to be executed, delivered and performed by it, and the requests for issuance of
Credit Extensions, do not require any consent or approval of any Governmental
Authority which a lawyer in the State of Oregon exercising customary
professional diligence would reasonably recognize as being directly applicable
to Borrower in connection with the Credit Transaction, except any that have been
obtained and are in full force and effect.
3. The execution, delivery and performance by Borrower of the Credit
Agreement and any other Loan Document executed and delivered (or to be executed
and delivered and expressly contemplated by the Credit Agreement) by it (A) do
not conflict with (i) any provision of law applicable to Borrower which a lawyer
in the State of Oregon exercising customary professional diligence would
reasonably recognize as being directly applicable to Borrower in connection with
the Credit Transaction, (ii) Borrower's Constituent Documents, (iii) any
agreement known to us and binding upon Borrower and which conflict would breach,
result in or constitute or could reasonably be expected to constitute or result
in a Material Adverse Occurrence; or (iv) any court or administrative order or
decree known to us and applicable to Borrower, and (B) to our knowledge, do not
require or result in the creation or imposition of any lien on any asset of
Borrower or any of its Subsidiaries, except as provided in the Credit Documents.
For purposes of this Opinion, we assume that all rights and obligations of
BankAmerica Business Credit, Inc. under the Borrower's Loan and Security
Agreement dated as of September 19, 1994, as amended, have been assigned and
assumed by Bank of America National Trust and Savings Association.
<PAGE>
August 26, 1997
Page 4
4. The Credit Documents, when duly executed and delivered, will be,
legal, valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms.
5. With respect to Opinion 4, we invoke the Private Ordering
provisions of Section 21 of the Accord in opining that, an Oregon court or a
federal court applying the choice of laws principles prevailing under the laws
of the State of Oregon to which the question is presented will generally give
effect to the provisions in the Credit Documents selecting the laws of the State
of Illinois as the governing law, and will apply such laws, to the construction
and application thereof; provided, Illinois law has a reasonable relationship to
the transaction or the parties and it is not contrary to the public policy of
Oregon.
Without otherwise affecting those matters addressed above which may
deviate from the Accord, we invoke the Private Ordering provisions of Section 21
of the Accord with respect to the following matters:
1. In rendering our Opinion Letter, we have limited the scope of our
factual inquiry to a review only of the Credit Agreement, Loan Documents, the
Constituent Documents, the Certificates, the Other Agreements, the Public
Authority Documents and the Resolutions. We have made no other investigation or
inquiry.
2. The General Qualifications apply to all opinions set forth in
this Opinion Letter.
3. The phrase "Primary Lawyer Group," as used in the Accord, is
modified, and, for purposes of applying the Accord to this Opinion Letter, the
Primary Lawyer Group means and is limited to Carmen M. Calzacorta, Mark A. Long,
Wayne E. Harris, David F. Bartz, Jr., Gregory W. Mallory, David Kopilak, R.
Cammon Turner and William E. Love.
4. We have assumed, without inquiry or investigation, that, as to
factual matters, the warranties and representations of the Borrower as set forth
in the Credit Agreement and the Loan Documents, are in all respects true,
accurate and complete, and in rendering this Opinion Letter, we have relied, as
to factual matters, on the truthfulness, accuracy, and completeness of all such
warranties and representations.
5. We have assumed that the knowledge and awareness of those
individuals delivering the Certificates is full and complete as to all matters
addressed therein.
6. We have assumed, without independent inquiry or investigation
that, (i) legal consideration both exists and is adequate to support the
enforceability of the Guaranty; (ii) the Guaranty was made and entered into in
good faith and is necessary and convenient to carry out the business and affairs
of the Guarantor; and (iii) the making of the Guaranty is incident to the
transaction of the ordinary affairs of the Guarantor and for its own benefit,
and will promote or protect the Guarantor's own rights or property interests,
and will accomplish some legitimate object of financial benefit to it.
<PAGE>
August 26, 1997
Page 5
7. In addition to, and not in limitation of, the other
qualifications to which this Opinion Letter is subject, we express no opinion on
the enforceability of the following provisions or with respect to the following
matters, some or all of which may also fall within the General Qualifications or
otherwise be dealt with under the Accord:
(a) Any reservation of the right to pursue inconsistent or cumulative
remedies;
(b) Procedural prerequisites to realizing upon remedies, not otherwise
reflected in the Loan Documents, which may restrict rights and remedies
otherwise stated to be available;
(c) Provisions purporting to establish evidentiary standards;
(d) Provisions relating to the waiver of rights, remedies and defenses,
including without limitation, any provisions purporting to affect rights to
notice or to waive statutes of limitations, jury trials or other benefits
conferred by statute or by law;
(e) Provisions which permit a party to collect a late charge, increased
interest after default or maturity or prepayment fees, insofar as such
provisions may be interpreted by a court to be unenforceable as a penalty which
has no relation to the actual damages suffered;
(f) Provisions for the payment or reimbursement of costs and expenses
or indemnification for claims, losses or liabilities (including without
limitation Attorneys' Fees) in excess of statutory limits or a reasonable
amount, and any provisions for Attorneys' Fees other than to the prevailing
party;
(g) Provisions permitting modification of a document only if it is in
writing;
(h) Provisions purporting to lengthen or shorten time periods otherwise
established by law or statute;
(i) The right of a party to declare a default based upon, or otherwise
to pursue any rights or remedies on account of, a breach of warranties or
representations in circumstances where such party knew, should have known, or
had reason to know, the inaccuracy or incompleteness of the warranty or
representation at the time it was or was deemed to be given;
(j) Limitations on consent to jurisdiction;
(k) The unenforceability under certain circumstances of provisions to
the effect that failure to exercise or a delay in exercising rights or remedies
will not operate as a waiver of the right or remedy;
(l) Rights of setoff or self-help;
(m) Limitations on the liability of any Lender or Agent or for their
indemnification for their own negligence, misconduct or unlawful conduct;
<PAGE>
August 26, 1997
Page 6
(n) The effect or enforceability of the severability clause;
(o) Any provisions which attempt to recharacterize, re-apply or
re-allocate payments made in the event the applicable rate of interest is
determined to be usurious;
(p) The negotiability of the Notes;
(q) The enforceability of obligations that may arise or be varied by
the Lender's or Agent's exercise of discretion other than in a commercially
reasonable manner;
(r) The effect of non-compliance by any Lender or Agent with any state,
federal or foreign laws or regulations applicable to the transactions
contemplated by the Credit Documents because of the nature of their business;
and
(t) The effect on enforceability of the Guaranty of modifications or
amendments of the Obligations without the consent of the Guarantor.
This Opinion Letter may be relied upon by you only in connection with
the Loans, and may not be used or relied upon by you or any other person for any
purpose whatsoever, except to the extent authorized in the Accord, without in
each instance our prior written consent. Any such consent given at any time in
the future shall in no way be construed as a restatement of this Opinion Letter
as of the date such request is made or consent is given, Section 9 of the Accord
being expressly reaffirmed.
Very truly yours,
/s/ Schwabe, Williamson & Wyatt, P.C.
SCHWABE, WILLIAMSON & WYATT, P.C.
cc: Oregon Metallurgical Corporation
Richard M. Newman, Esq.
OREGON METALLURGICAL CORPORATION
EXHIBIT 11.1
Earnings per share computation
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------ ---------------------------------
September 28, September 30, September 28, September 30,
1997 1996 1997 1996
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 9,403 $ 6,445 $ 24,646 $ 14,976
=========== =========== ========== ===========
Weighted average shares outstanding 16,402 13,247 16,284 11,879
Weighted average share equivalents
assumed issued from Excess Benefit Plan 17 42 42 75
Weighted average share equivalents
assumed issued from exercise of warrants
and stock options 89 93 88 107
Weighted average share equivalents
assumed issued as part of Employee
Compensation Plans 110 61 112 57
----------- ----------- ---------- -----------
Weighted average share and share
equivalents outstanding 16,618 13,443 16,526 12,118
=========== =========== ========== ===========
Net income per share $ 0.57 $ 0.48 $ 1.49 $ 1.24
=========== =========== ========== ===========
</TABLE>
Earnings per share computed on both the primary and fully diluted bases are the
same.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's report on Form 10-Q for the period ended September 28, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000074856
<NAME> Oregon Metallurgical Corporation
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<EXCHANGE-RATE> 1
<CASH> 2,420
<SECURITIES> 34,326
<RECEIVABLES> 62,951
<ALLOWANCES> (768)
<INVENTORY> 116,725
<CURRENT-ASSETS> 218,216
<PP&E> 125,694
<DEPRECIATION> (73,686)
<TOTAL-ASSETS> 288,003
<CURRENT-LIABILITIES> 38,080
<BONDS> 4,650
0
0
<COMMON> 16,445
<OTHER-SE> 218,816
<TOTAL-LIABILITY-AND-EQUITY> 288,003
<SALES> 75,051
<TOTAL-REVENUES> 75,051
<CGS> 54,046
<TOTAL-COSTS> 54,046
<OTHER-EXPENSES> 6,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 482
<INCOME-PRETAX> 14,712
<INCOME-TAX> 5,309
<INCOME-CONTINUING> 9,403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,403
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
