13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14061
STEEL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0712014
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15415 Shelbyville Road, Louisville, KY 40245
(Address of principal executive offices)
Registrant's telephone number, including area code: 502-245-2110
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]
Aggregate market value of the voting stock (which consists solely of shares of
common stock) held by non-affiliates of the registrant as of December 10, 1999,
computed by reference to the closing price of the registrant's common stock, as
quoted in the Nasdaq National Market System on such date: $ 110,930,010.
Number of shares of the registrant's Common Stock outstanding at December 10,
1999: 11,093,001.
<PAGE>
Portions of the registrant's annual report to shareholders for the fiscal year
ended September 30, 1999 are incorporated by reference into Part II. Portions of
the definitive proxy statement furnished to shareholders of the registrant in
connection with the annual meeting of shareholders to be held on January 27,
2000 are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
GENERAL
Steel Technologies Inc. ("the Company") was incorporated under the laws of
the state of Kentucky in 1971 as Southern Strip Steel, Inc. In June 1985,
the name of the corporation was changed to Steel Technologies Inc.
The Company is an intermediate steel processor engaged in the business of
processing flat rolled steel to specified close tolerances in response to orders
from industrial customers who require steel of precise thickness, width, temper,
finish and shape for their manufacturing purposes. The Company purchases
commercial tolerance steel in coils up to 72 inches in width from major steel
mills, processing it to the precise thickness, width, temper, finish and shape
specified by its customers. The processed steel is distributed from facilities
located in Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio, South
Carolina in the U.S. and three facilities in Mexico. The Company has customers
in 37 states primarily in the East, Midwest and South, as well as into Mexico
and Canada. The Company's principal processed products are: hot-rolled strip and
sheet, high strength low alloy strip and sheet, hot-rolled pickle and oil and
coated strip and sheet, pickling of hot-rolled black coils, blanking and
cut-to-length processing of coil steel, cold-rolled strip and sheet, cold-rolled
one-pass strip, and high carbon and alloy strip and sheet.
Intermediate steel processors occupy a niche between the primary steel producers
and industrial customers who need processed steel for their end-product
manufacturing purposes. The primary producers have historically emphasized the
sale of commercial tolerance steel to large volume purchasers and have generally
viewed the intermediate steel processor as an integral part of this customer
base. Furthermore, end-product manufacturers have increasingly sought to
purchase steel with closer tolerances, on shorter lead times, and with more
reliable and more frequent delivery than the primary producers can efficiently
provide. Additionally, most manufacturers are not willing to commit to the
investment in technology, equipment and inventory required to further process
the steel for use in their manufacturing operations. These industry forces have
created a market in which the strength of the Company's business is based upon
its capability to process steel to more precise specifications and to service
the steel purchasing and delivery requirements of its customers more
expeditiously than the primary producers.
STEEL PROCESSING
The Company maintains a substantial inventory of coiled steel purchased from the
primary producers and mini-mills. This steel, purchased as a continuous sheet,
typically 36 to 72 inches wide, between .015 and .625 inches thick, and rolled
into a 10 to 25-ton coil--is known as "commercial tolerance" because its ranges
of thickness, width and temper are established by general industry standards
which may not be of sufficient quality for the manufacturing purposes of the
Company's customers. By purchasing various kinds of steel in large quantities
and at predetermined intervals, the Company attempts to purchase its raw
materials at the lowest competitive prices for the quality purchased.
Customer orders are entered in a computerized order entry system, and
appropriate inventory is then selected and scheduled for processing in
accordance with the customer's specified delivery date. The Company attempts to
maximize yield from its inventory by scheduling customer orders to use to the
fullest extent practicable the purchased widths of its coils. One of the first
processing functions involves the pickling of hot rolled black coil steel. This
process is a cleaning process that improves the quality of hot rolled steel by
removing the scale on the surface of the steel and prepares the hot rolled steel
for further processing. Pickling is performed on both a toll basis as well as on
hot rolled steel which is owned by the Company and will be further processed.
The next processing function typically involves slitting coils to specified
widths subject to close tolerances. After slitting, the processed product is
ready for either delivery to the customer or additional processing.
Many of the Company's orders involve an additional process known as "cold
reduction." Cold reduction reduces the thickness of the steel to a customer's
specification by passing the steel through a set of rolls under pressure. This
process significantly increases the value added by the Company to the product.
During the rolling process the edges of the steel may also be conditioned into
square, full round or partially round shapes. After cold reduction, it is
sometimes necessary to subject the rolled steel to high temperatures for long
periods of time in order to "anneal" or soften the steel. This annealing
capability is accomplished in the Company's own furnaces and is particularly
suitable for high carbon and alloy strip orders. After annealing, orders are
then ready for additional slitting and cold reduction and subsequent shipment to
the customer.
The Company has achieved high quality and productivity levels through its
commitment to modern and efficient equipment used to perform the pickling,
slitting, cold reduction, annealing and blanking processes. The Company's
pickling facility is capable of high volume pickling, leveling, coating and
slitting of hot rolled steel to greater than industry standards. The Company's
slitting lines are capable of maintaining width tolerances of +/-.002 inches.
The Company has computerized all of its rolling equipment, which has improved
its capability to deliver flat rolled steel products processed to closer than
standard tolerances. The Company's computerized rolling mills are capable of
maintaining thickness tolerances of +/-.0003 inches. Computers monitor thickness
during the cold reduction process, rapidly adjusting roll position to maintain
the proper tolerance as the steel passes through the rolling mill. The computers
also provide both visual displays and documented records of the thickness
maintained throughout the entire coil. Annealing is accomplished in high
convection bell furnaces. These furnaces feature extraordinary thermal
consistency, rapid water cooling and advanced atmosphere controls for good
surface cleanliness of the rolled steel product. The Company's blanking lines
are capable of producing blanks from coils up to 84 inches in width and maximum
gauge of .25 inches thick. Flatness of the steel is controlled by an automatic
hydraulic leveler and diagnostic equipment that continually monitors the steel
during processing to minimize scrap and provide up-to-the minute production
information.
QUALITY CONTROL
The ability to obtain high quality steel from its suppliers on a consistent
basis is critical to the Company's business. In the past five years, about 97.7%
of the raw material has conformed to the purchasing requirements. Most of the
nonconforming raw material is diverted to less critical applications. The
Company, through its technical services department, has instituted strict
quality control measures to assure that the quality of purchased raw materials
will allow the Company to meet the specifications of its customers and to reduce
the costs of production interruptions resulting from poor quality steel.
Physical, chemical, and metallographic analyses are performed on selected raw
materials to verify that their mechanical and dimensional properties,
cleanliness, surface characteristics, and chemical content are acceptable.
Similar analyses are conducted on processed steel on a selected basis before
delivery to the customer. The Company also uses statistical process control
techniques to monitor its slitting and cold reduction processes so management
can document to customers that required tolerances have been continuously
maintained throughout processing. This close attention to product quality has
enabled the Company to limit the amount of customer returns and allowances to
less than 1.15% of sales in each of the last three years ended 1999, 1998 and
1997. The Company's technical services department is located in the research and
development engineering and technology center in Louisville, Kentucky. The
Company's metallurgical laboratory is located in the Eminence, Kentucky plant.
MARKETING
The Company's marketing staff consists of sales personnel located in Alabama,
Illinois, Indiana, Iowa, Kentucky, Michigan, North Carolina, Ohio, Pennsylvania,
South Carolina, Texas, Wisconsin, and Mexico. In addition to cultivating
additional business from existing customers and developing new accounts, these
sales personnel are responsible for identifying market trends in their assigned
areas. The marketing staff consists of five regional Vice Presidents-Sales, and
by the Company's technical services department, which develops application
engineering ideas. The Company is frequently requested to recommend the type of
steel which can best serve a customer's specific needs.
CUSTOMERS AND DISTRIBUTION
The Company produces to customer order rather than for inventory. Although some
blanket orders are taken for periods of up to one year, such blanket orders
represent a projection of anticipated customer requirements and do not become
firm orders until the customer calls for delivery of specified quantities of
particular products at specified times. The Company is therefore required to
maintain a substantial inventory of raw materials to meet the short lead times
and just-in-time delivery requirements of many of its customers. Customers
typically place firm orders for delivery within two to three weeks. The
Company's backlog of firm orders at November 30, 1999 was $41,000,000,
approximately 5% higher than the $39,000,000 at November 30, 1998.
The Company processes steel for sale to a variety of industrial customers,
including those in the automotive, automotive supply, appliance, lawn and
garden, machinery and office equipment industries. In fiscal 1999, 1998, and
1997 sales to the automotive industry directly accounted for 10%, 10% and 10% of
the Company's sales, respectively; sales to the automotive supply industry
accounted for 50%, 50% and 55%, respectively. The Company believes its long-term
relationships with its major customers are a significant factor in its business.
The Company supplies processed steel to approximately 925 active accounts. These
customers are generally located within 300 miles of one of the Company's plants.
The location of Company facilities near a great number of customers permits the
efficient distribution of the Company's products by truck. Independent trucking
companies afford a convenient and expeditious means for shipping approximately
two-thirds of the Company's products to its customers. The Company also
maintains a small number of tractor-trailer trucks to provide flexible delivery
service to those customers who do not arrange for their own shipping needs.
SUPPLIERS
In 1999, the Company obtained its steel for processing from a number of primary
producers and mini-mills including Weirton Steel Corporation, Nucor Corporation,
Wheeling-Pittsburg Steel Corp, Rouge Steel Company and Mitsui & Co (USA), Inc.
The Company obtains its raw material requirements by ordering steel possessing
specified physical qualities and alloy content. By purchasing in large
quantities at predetermined intervals, the Company attempts to purchase its raw
materials at the lowest competitive prices for the quality purchased. The
Company believes that it is not dependent on any one of its suppliers for raw
materials and that its relationships with its suppliers are good.
JOINT VENTURES
In April 1987, the Company formed Mi-Tech Steel, Inc. (Mi-Tech Steel), a 50%
owned corporate joint venture with Mitsui Steel Development Co., Inc. Mi-Tech
Steel was established to own and operate high-volume steel slitting facilities
to serve Japanese and domestic automotive and appliance parts manufacturers
located in the United States. The initial processing facility was opened in
December 1987 in Murfreesboro, Tennessee. In January 1990, a second Mi-Tech
Steel processing facility opened in Greensburg, Indiana. A third processing
facility, the first for Mi-Tech Steel with pickling capabilities opened in
December 1997 in Decatur, Alabama. Steel Technologies is providing management
services for the Mi-Tech Steel operations. In October 1990, Processing
Technology, Inc., was established. The Company holds a 5% investment in the
common stock of this corporate joint venture with LTV Steel Company and Mitsui
Steel Development Co., Inc. Processing Technology operates facilities in
Perrysburg, Ohio and Burns Harbor, Indiana, which process flat rolled steel and
provide steel storage principally for LTV Steel Company. Both facilities began
operations in fiscal 1992.
COMPETITION
Steel processing is highly competitive. The Company primarily competes with a
number of other intermediate steel processors who are capable of processing
steel to closer than standard tolerance. The primary characteristics of
competition encountered by the Company are quality of product, reliability of
delivery and price.
ENVIRONMENTAL MATTERS
The Company's manufacturing facilities are subject to many existing and proposed
federal, state and foreign regulations designed to protect the environment.
Presently, the Company has no knowledge of any material pending or threatened
litigation or administrative proceeding against the Company involving
environmental matters. Management believes the Company's manufacturing
facilities are in compliance with applicable federal, state and foreign
environmental regulations, and is not presently aware of any fact or
circumstance which would require the expenditure of material amounts for
environmental compliance in the future.
EMPLOYEES
As of October 31, 1999, the Company employed 1,044 people, including 141 at the
Canton, Michigan plant, 98 at the Clinton, North Carolina plant, 47 at the
Elkton, Maryland plant, 136 at the Eminence, Kentucky plant, 29 at the Huger,
South Carolina plant, 121 at the Ghent, Kentucky plant, 177 at the Portage,
Indiana plant, 70 at the Willoughby, Ohio plant and 111 at the Monterey, Mexico
plant. There are 81 employees at its Corporate Office in Louisville, Kentucky
and 16 employees at its Engineering facility in Louisville, Kentucky. There are
17 sales personnel located in their respective market areas. The hourly
employees in the Company's Canton, Michigan facility are represented by the
United Auto Workers under a collective bargaining agreement. In October 1998,
the hourly employees decertified the United Steel Workers' Union at the Portage,
Indiana plant. The Company has never experienced a significant work stoppage and
considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company's principal processing plants are as follows:
Production Plant Date Opened/ Production
Plant Location Capacity Size Acquired Capabilities
- -------------- -------------- ------------- ------------ --------------
Eminence, Kentucky 170,000 tons 180,000 sq.ft. 1971 S,R,A,B
Portage, Indiana 210,000 tons 220,000 sq.ft. 1987 S,R,A
Elkton, Maryland 60,000 tons 60,000 sq.ft. 1989 S,R
Canton, Michigan 210,000 tons 190,000 sq.ft. 1991 S,R,A
Monterrey, Mexico 120,000 tons 80,000 sq.ft. 1994 S,R,C
Ghent, Kentucky 500,000 tons 205,000 sq.ft. 1995 S,P
Clinton, No. Carolina 130,000 tons 110,000 sq.ft. 1997 S,C
Willoughby, Ohio 160,000 tons 73,000 sq.ft. 1998 S,C,R,B
Huger, So. Carolina 140,000 tons 84,000 sq.ft. 1999 S
S=Slitting
R=Cold Reduction
A=Annealing
P=Pickling and Leveling
C=Cut to Length
B=Blanking
All of the Company's nine processing plants are owned by the Company. In 1999,
the Company purchased the real property used for processing in North Carolina
and Ohio. Prior to that, the company had lease arrangements with these
facilities subsequently purchased. During 1999, the Company sold approximately
798,000 tons of processed steel from its manufacturing plants. In addition, the
Ghent pickling facility processed approximately 283,000 tons of material owned
by customers. The remaining facilities processed an additional 106,000 tons of
material owned by customers.
The engineering division, technical services located in Louisville, Kentucky
occupies a 11,000 square foot building leased by the Company.
The Company's executive offices are located in Louisville, Kentucky in a 30,000
square foot building owned by the Company.
Mi-Tech Steel currently operates two high volume steel slitting operations and
one high volume pickling and slitting operation. The Murfreesboro, Tennessee
plant and Greensburg, Indiana Plant consist of 300,000 and 160,000 square feet
respectively. The Mi-Tech Steel Alabama facility, a wholly-owned subsidiary of
Mi-Tech Steel, Inc., in Decatur, Alabama consists of two facilities comprising a
total of 160,000 square feet.
All operating properties are in good repair and in suitable condition for the
purposes for which they are used. The Company's Elkton, Maryland processing
plant and the executive office building are subject to outstanding mortgages
covering certain long-term financing arrangements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, positions held and ages of all the
executive officers of the Company:
Name Age Title
- ---- --- -----
Merwin J. Ray 70 Chairman of the Board
Bradford T. Ray 41 Vice Chairman of the Board and Chief Executive
Officer
Michael J. Carroll 42 President and Chief Operating
Officer
Howard F. Bates, Jr. 53 Vice President-Technical Services
Joseph P. Bellino 49 Chief Financial Officer and Treasurer
Officers are elected annually by and serve at the discretion of the Board of
Directors. Messrs. Merwin J. Ray, Bradford T. Ray, Howard F. Bates, Jr. and
Michael J. Carroll are members of the Company's Board of Directors.
Mr. Merwin J. Ray has served as Chairman of the Board of the Company since
its incorporation in 1971. He previously held the positions of Chief
Executive Officer from May 1985 until November 1999 and President of the
Company from 1971 until May 1985. Mr. Merwin J. Ray is the father of
Bradford T. Ray, Vice Chairman and Chief Executive Officer of the Company.
Mr. Bradford T. Ray has served as Vice Chairman and Chief Executive Officer
since November 1999. He previously held the positions President and Chief
Operating Officer from November 1994 until November 1999, Executive Vice
President from April 1993 to November 1994 and Vice President-Manufacturing
of the Company from January 1987 to April 1993.
Mr. Michael J. Carroll has served as President and Chief Operating Officer since
November 1999. He previously held the positions of Executive Vice President from
January 1995 until November 1999, Senior Vice President-Sales from April 1993 to
January 1995 and Vice President-Sales from July 1987 to
April 1993.
Mr. Howard F. Bates, Jr. has served as Vice President-Technical Services
since November 1981. From August 1977 to November 1981, he held the position
of Manager of Technical Services.
Mr. Joseph P. Bellino has served as Chief Financial Officer and Treasurer of
the Company since October 1997. He previously held the position of President
of Beacon Capital Advisors Company from 1996 to 1997. From 1989 to 1995, Mr.
Bellino served as President of Rhawn Enterprises, Inc.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information required for Item 5 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Market Price and Dividend Information" on page 12 of the
Company's annual report to shareholders for the year ended September 30, 1999.
ITEM 6. SELECTED FINANCIAL DATA
The information required for Item 6 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Selected Financial Data" on page 11 of the Company's annual
report to shareholders for the year ended September 30, 1999.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required for Item 7 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 13 through 17 of the Company's annual report
to shareholders for the year ended September 30, 1999.
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company
is exposed to market risks related to changes in interest rates. To manage
interest rate exposures, the Company uses fixed and variable debt. The Company
does not enter into derivative financial instrument transactions for speculative
purposes.
The following table summarizes principal cash flows and related interest rates
of the Company's long-term debt at September 30, 1999 by expected maturity
dates. The weighted average interest rate of the fixed-rate debt is based on the
actual average rates at September 30, 1999. The variable-rate debt is based on
actual rates at September 30, 1999. The variable-rate debt consists primarily of
the line of credit of which $57,000,000 is outstanding at September 30, 1999.
While the line of credit matures during fiscal 2002, the company anticipates
extending this arrangement for the foreseeable future.
(In thousands except for interest rates)
<TABLE>
2000 2001 2002 2003 2004 Thereafter Total Fair value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt
(fixed) ....... $ 6,591 $ 5,991 $ 5,992 $ 5,726 $ 5,720 $ 5,680 $35,700 $36,643
Weighted avarage
interest rate . 7.86% 8.31% 8.31% 8.39% 8.52% 8.52%
Long-term debt
(variable) .... $ 100 $ 100 $57,100 $ 100 $ 100 $ 3,700 $61,200 $61,200
Weighted avarage
interest ...... 5.73% 5.73% 3.95% 3.95% 3.95% 3.95%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Steel Technologies Inc. and
Subsidiaries on pages 18 through 29, and Report of Independent Accountants on
page 30 are included in the Company's annual report to shareholders for the year
ended September 30, 1999, and the section entitled "Selected Quarterly Financial
Data" on page 12 thereof are incorporated herein by reference.
Consolidated Balance Sheets-September 30, 1999 and 1998
Consolidated Statements of Income-Years ended September 30, 1999, 1998 and
1997
Consolidated Statements of Comprehensive Income-Years ended September 30,
1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity-Years ended September 30,
1999, 1998 and 1997
Consolidated Statements of Cash Flows-Years ended September 30, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
Report of Independent Accountants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information required by Item 10 is
incorporated by reference herein from the material under the section entitled
"Election of Directors" contained on pages 3 through 6, and "Election of
Directors Section 16(a) Beneficial Ownership Reporting Compliance" on page 7 in
the Company's definitive proxy statement filed with the Securities and Exchange
Commission related to the annual meeting of shareholders of Steel Technologies
Inc. to be held on January 27, 2000. The information regarding Executive
Officers required by Item 401 of Regulation S-K is included in Part I hereof
under the section entitled "Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3), the information required by Item 11 is
incorporated by reference herein from the material under the sections entitled
"Election of Directors - Compensation of Directors" contained on page 7 and
"Executive Compensation" contained on pages 8 through 10 in the Company's
definitive proxy statement filed with the Securities and Exchange Commission
related to the Company's annual meeting of shareholders to be held on January
27, 2000.
Information appearing in the sections entitled "Compensation Committee Report on
Executive Compensation" and "Performance Graph" contained on pages 11 through 15
in the Company's definitive proxy statement filed with the Securities and
Exchange Commission related to the Company's annual meeting of shareholders to
be held on January 27, 2000 shall not be deemed to be incorporated by reference
in this report, notwithstanding any general statement contained herein
incorporating portions of such proxy statement by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3), the information required by Item 12 is
incorporated by reference herein from the material under the sections entitled
"Voting Securities" contained on pages 2 and 3 and "Election of Directors"
contained on pages 3 through 7 in the Company's definitive proxy statement filed
with the Securities and Exchange Commission related to the Company's annual
meeting of shareholders to be held on January 27, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), the information required by Item 13 is
incorporated by reference herein from the material under the sections entitled
"Certain Transactions" contained on page 10 and "Election of Directors"
contained on pages 3 through 7 in the Company's definitive proxy statement filed
with the Securities and Exchange Commission related to the Company's annual
meeting of shareholders to be held on January 27, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The response to this portion of Item 14 is submitted as a separate
section of this report-See List of Financial Statements under Item 8.
(a) (2) The Following Consolidated Financial Statement Schedule of Steel
Technologies Inc. and Subsidiaries is included in a separate section
of this report, following the index to exhibits on page E-1:
Valuation and Qualifying Accounts - Schedule II
Report of Independent Accountants
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(a) (3) Listing of Exhibits--See Index to Exhibits contained herein on page
E-1 of this report. The index to exhibits specifically identifies
each management contract or compensatory plan required to be filed as
an Exhibit to this Form 10-K.
(b) No report on Form 8-K was filed for the quarter ended September 30,
1999.
(c) Exhibits filed with this report are attached hereto.
<PAGE>
Page E-1
STEEL TECHNOLOGIES INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1999
Ref. Exhibit
# # Description
(a) 3.1 Restated Articles of Incorporation of the Registrant
(a) 3.2 First Articles of Amendment to Restated Articles of
Incorporation of the Registrant
(d) 3.3 Second Articles of Amendment to Restated Articles of
Incorporation of the Registrant
(e) 3.4 Third Articles of Amendment to Restated Articles of
Incorporation of the Registrant
(e) 3.5 Amended By-Laws of the Registrant
10.1 Second Amended and restated Loan Agreement dated as of December
31, 1998, between the Registrant and PNC Bank, Kentucky, Inc.,
National City Bank of Kentucky, NBD Bank, N.A., and SunTrust
Bank, Nashville, N.A.
(f) 10.2 Note Agreement dated as of March 1, 1995, between the
Registrant and Principal Mutual Life Insurance Company,
Lincoln National Investment Management Company,
Jefferson-Pilot Life Insurance Company and Northern Life
Insurance Company
(f) 10.2 Request for Consent to Amendment of Note Agreement (f) 10.2
Request for Consent to Second Amendment of Note Agreement (c)
10.3(a) Incentive Stock Option Plan of the Registrant * (b)
10.3(b) Amendment #1, dated April 7, 1987 to the Incentive Stock
Option Plan of the Registrant *
(f) 10.3(c) Registrant's 1995 Stock Option Plan *
(h) 10.4 Stock Purchase Agreement between Registrant and Shareholders
of Atlantic Coil Processing, Inc. effective April 1, 1997.
(d) 10.5 Revised Employee Bonus Plan of the Registrant * (b) 10.6(a)
Joint Venture Agreement dated March 30, 1987 between Mitsui &
Co., LTD., Mitsui & Co. (U.S.A.), Inc., Mitsui Steel
Development Co., Inc., and the Registrant
(d) 10.6(b) Amendment #1, dated February 28, 1989 to the Joint Venture
Agreement dated March 30, 1987 between Mitsui & Co., LTD.,
Mitsui & Co. (U.S.A.), Inc., Mitsui Steel Development Co.,
Inc., and the Registrant
(d) 10.7(a) Loan Agreement dated as of November 1, 1989 between the
County Commissioners of Cecil County, Maryland and the
Registrant relating to Economic Development Revenue Bonds
(d) 10.7(b) Reimbursement, Credit and Security Agreement dated as of
November 1, 1989 between Citizens Fidelity Bank and Trust
Company and the Registrant relating to Economic Development
Revenue Bonds
(e) 10.8 Joint Venture Agreement dated October 16, 1990 among Mitsui
Steel Development Co., Inc. and LTV Steel Company, Inc. and
the Registrant
(e) 10.9 Form of Indemnification Agreement between the Registrant and
its Directors *
(i) 10.10 Steel Technologies Inc. Restated Retirement Savings Plan
10.12 Amended and restated Nonemployee Directors Stock Plan *
(j) 10.13 Confirmation of Interest Rate Swap Transaction dated July
31, 1998 between the Registrant and SunTrust Bank, Atlanta.
(j) 10.14 Stock Purchase Agreement between Registrant and Stockholders
of Roberts Steel Company effective July 1, 1998.
13 1999 Annual Report to Shareholders, filed herewith. The annual
report shall not be deemed to be filed with the Commission
except to the extent that information is specifically
incorporated by reference herein
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27 Financial Data Schedule
Alphabetic filed exhibit reference:
(a) Incorporated herein by reference to exhibits filed with the Company's
Form S-2 Registration Statement under the Securities Act of 1933 (No.
33-24209), which became effective September 28, 1988.
(b) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1987.
(c) Incorporated herein by reference to exhibits filed with the Company's
Form S-1 Registration Statement under the Securities Act of 1933 (No.
2-98617), which became effective August 27, 1985.
(d) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1989.
(e) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1990.
(f) Incorporated herein by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q (file # 0-14061) for the quarter ended
March 31, 1995.
(g) Incorporated herein by reference to exhibits filed with the Company's
Annual Report of Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1996.
(h) Incorporated herein by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q (file # 0-14061) for the quarter ended
March 31, 1997.
(i) Incorporated herein by reference to exhibits filed with the Company's
Annual Report of Form 10K (file #0-14061) for the fiscal year ended
September 30, 1997.
(j) Incorporated herein by reference to exhibits filed with the Company's
Annual Report of Form 10K (file #0-14061) for the fiscal year ended
September 30, 1998.
* Indicates management contract or compensatory plan and arrangement
<PAGE>
STEEL TECHNOLOGIES INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Deductions Period
<S> <C> <C> <C> <C>
Year Ended September 30, 1999:
Allowance for doubtful accounts $938,837 $265,700 $157,979(A) $1,046,558
Year Ended September 30, 1998:
Allowance for doubtful accounts $928,958 $190,300 $180,421(A) $ 938,837
Year Ended September 30, 1997:
Allowance for doubtful accounts $874,772 $587,000 $532,814(A) $ 928,958
(A) Uncollectible accounts charged off, less recoveries.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Steel Technologies Inc.:
Our audit of the consolidated financial statements referred to in our report
dated November 19, 1999 appearing on page 30 of the 1999 Annual Report to
Shareholders of Steel Technologies Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the consolidated financial statement schedule listed
in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
Louisville, Kentucky
November 19, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
STEEL TECHNOLOGIES INC.
Dated: December 23, 1999 By:/S/Joseph P. Bellino
__________________________
Joseph P. Bellino
Chief Financial Officer,
and Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Date Title
/s/ Merwin J. Ray 12/23/99 Chairman of the Board of Directors
________________________ (Principal Executive Officer)
Merwin J. Ray
/s/ Bradford T. Ray 12/23/99 Director, Vice Chairman and
________________________ Chief Executive Officer
Bradford T. Ray
/s/ Michael J. Carroll 12/23/99 Director, President and Chief Operating
________________________ Officer
Michael J. Carroll
/s/ Howard F. Bates, Jr. 12/23/99 Director and Vice President-
________________________ Technical Services
Howard F. Bates, Jr.
/s/ Ralph W. McIntyre 12/23/99 Director
________________________
Ralph W. McIntyre
/s/ William E. Hellmann 12/23/99 Director
________________________
William E. Hellman
/s/ Jimmy Dan Conner 12/23/99 Director
________________________
Jimmy Dan Conner
/s/ Andrew J. Payton 12/23/99 Director
________________________
Andrew J. Payton
/s/ Doug A. Bawel 12/23/99 Director
________________________
Doug A. Bawel
<PAGE>
Exhibit 10.1
SECOND AMENDED AND RESTATED LOAN AGREEMENT
dated as of December 31, 1998
by and among
STEEL TECHNOLOGIES INC.
and
PNC BANK, NATIONAL ASSOCIATION
NATIONAL CITY BANK OF KENTUCKY,
NBD BANK, N.A.,
SUNTRUST BANK, NASHVILLE, N.A., and
STAR BANK, N.A.
and
PNC BANK, NATIONAL ASSOCIATION
in its capacity as agent
<PAGE>
x
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS........................................................2
1. Definitions and Cross Reference...............................2
1.1. "Adjusted LIBOR Rate"..................................2
1.2. "Affected Bank"........................................2
1.3. "Affected Loans".......................................2
1.4. "Affiliate"............................................2
1.5. "Agent"................................................3
1.6. "And/or"...............................................3
1.7. "Applicable Letter of Credit Fee"......................3
1.8. "Applicable LIBOR Rate Margin".........................3
1.9. "Applicable Revolver Commitment Fee"...................3
1.10. "Application and Agreement For Letter of Credit".......3
1.11. "Assignment Agreement".................................3
1.12. "Authorized Officer"...................................3
1.13. "Bank" and "Banks".....................................3
1.14. "Bankruptcy Code"......................................3
1.15. "Base Rate"............................................3
1.16. "Base Rate Loans"......................................4
1.17. "Borrower".............................................4
1.18. "Business Day".........................................4
1.19. "Capital Expenditures".................................4
1.20. "Capital Lease"........................................4
1.21. "Change in Control"....................................4
1.22. "Closing Date".........................................4
1.24. "Commitment Fee Pro Rata Shares".......................5
1.25. "Compliance Certificate"...............................5
1.26. "Confidentiality Agreement"............................5
1.27. "Consolidated Current Assets"..........................5
1.28 "Consolidated Current Liabilities".....................5
1.29. "Consolidated Interest Expense"........................5
1.30. "Consolidated Long-Term Debt"..........................5
1.31. "Consolidated Net Income"..............................6
1.32. "Consolidated Rent Expense"............................6
1.33. "Consolidated Subsidiaries"............................6
1.34. "Consolidated Tangible Net Worth"......................6
1.35. "Consolidated Total Capitalization"....................6
1.36. "Consolidated Total Debt"..............................6
1.37. "Contingent Obligation"................................7
1.38. "Continuing Director"..................................7
1.39. "Covered Tax"..........................................7
1.40. "Date of Determination"................................7
1.41. "Default Rate".........................................7
1.42. "Dollars"..............................................8
1.43. "EBITDA"...............................................8
1.44. "Effective Date".......................................8
1.45. "Eligible Assignees"...................................8
1.46. "Eligible Investments".................................8
1.47. "ERISA"................................................8
1.48. "Estimated Interest Expense"...........................9
1.49. "Events of Default"....................................9
1.50. "Excluded Tax".........................................9
1.51. "Federal Funds Rate"...................................9
1.52. "Fiscal Quarter".......................................9
1.53. "Fiscal Year"..........................................9
1.54. "Funding Date"........................................10
1.55. "GAAP"................................................10
1.56. "Guarantor"...........................................10
1.57. "Guaranty Agreements".................................10
1.58. "Indebtedness"........................................10
1.59. "Interest Payment Date"...............................10
1.60. "Interest Period".....................................10
1.61. "Interest Rate Determination Date"....................11
1.62. "Internal Revenue Code"...............................11
1.63. "Joint Ventures"......................................11
1.64. "Letters of Credit"...................................11
1.65. "Letter of Credit Fee"................................11
1.66. "Letter of Credit Fee Percentage".....................11
1.67. "Letter of Credit Usage"..............................11
1.68. "Leverage Ratio"......................................11
1.69. "LIBOR Rate"..........................................11
1.70. "LIBOR Rate Loans"....................................12
1.71. "Lien"................................................12
1.72. "Loan Agreement"......................................12
1.73. "Loan Instruments"....................................12
1.74. "Margin Stock"........................................12
1.75. "Material Adverse Effect".............................12
1.76. "Note Purchase Agreement".............................12
1.77. "Note Purchasers".....................................12
1.78. "Note Purchasers Guaranty Agreements".................12
1.79. "Note Purchasers Intercreditor Agreement".............13
1.80. "Obligations".........................................13
1.82. "Offered Rate"........................................13
1.83. "Officer's Certificate"...............................13
1.84. "Permitted Securitization"............................13
1.85. "Person"..............................................13
1.86. "Potential Event of Default"..........................13
1.87. "Pricing Level".......................................13
1.88. "Pricing Level I".....................................14
1.89. "Pricing Level II"....................................14
1.90. "Pricing Level III"...................................14
1.91. "Pricing Level IV"....................................14
1.92. "Pricing Level Calculation Date"......................14
1.94. "Pricing Period"......................................14
1.95. "Prime Rate"..........................................14
1.96. "Proforma Compliant Acquisition", "Proforma
Acquisition Information", Proforma Calculation
Period", "Proforma Debt Service Coverage",
"Proforma EBITDA" and "Proforma Debt Service".......14
1.97. "Pro Rata Share"......................................14
1.98. "Purchase Money Indebtedness".........................15
1.99. "Regulation D"........................................15
1.100. "Request for Revolving Loan"..........................15
1.101. "Request for Swing Line Loan".........................15
1.102. "Requisite Banks".....................................15
1.103. "Restricted Junior Payment"...........................15
1.104. "Revolver"............................................15
1.105. "Revolving Loan Commitment" or "Revolving Loan
Commitments"..........................................16
1.106. "Revolving Loan Commitment Termination Date"..........16
1.107. "Revolving Loans".....................................16
1.108. "Revolving Note"......................................16
1.109. "Roberts".............................................16
1.110. "Senior Notes"........................................16
1.111. "ST Carolinas"........................................16
1.112. "ST Mexico"...........................................16
1.113. "ST Ohio".............................................17
1.114. "ST Wabash"...........................................17
1.115. "Subordinated Indebtedness"...........................17
1.116. "Subsidiary"..........................................17
1.117. "Swing Line Loan Commitment"..........................17
1.118. "Swing Line Loan Commitment Termination Date".........17
1.119. "Swing Line Loans"....................................17
1.120. "Swing Line Note".....................................17
1.121. "Target Person".......................................17
1.122. "Tax" or "Taxes"......................................17
1.123. "Tax Transferee"......................................18
1.124. "Total Utilization of Revolving Loan Commitments".....18
1.125. "Voting Stock"........................................18
1.126. "Year 2000 Problem"...................................18
1.127. Accounting Terms......................................18
1.128. Other Definitional Provisions.........................18
SECTION 2
REVOLVER AND SWING LINE LOANS.....................................19
2. Revolver.....................................................19
2.1. Revolving Loan Commitments; Revolving Loans...........19
2.1A. Revolving Loan Commitments............................19
2.1B. Term of Revolving Loan Commitments....................20
2.1C. Borrowing Mechanics...................................21
2.1D. Disbursement of Revolving Loans to the Borrower.......22
2.2. Interest on the Revolving Loans.......................23
2.2A. Rates of Interest.....................................23
2.2B. LIBOR Interest Periods................................24
2.2C. Interest Payments.....................................25
2.2D. Conversion or Continuation............................26
2.2E. Post-Maturity Interest................................27
2.2F. Computation of Interest...............................27
2.2G. Special Provisions Governing Federal Funds Rate.......27
2.3. Fees..................................................28
2.3A. Revolver Commitment Fee...............................28
2.3B. Other Fees............................................29
2.4. Prepayments and Payments; Reductions in Revolving
Loan..................................................29
2.4A. Prepayments...........................................29
2.4B. General Provisions Regarding Payments.................30
2.4C. Voluntary Reductions of Revolving Loan Commitments....30
2.5. Use of Proceeds.......................................31
2.5A. Revolving Loans and Letters of Credit.................31
2.5B. Margin Regulations. ..................................31
2.6. Special Provisions Governing LIBOR Rate Loans.........31
2.6A. Determination of Applicable Interest Rate. ...........31
2.6B. Inability to Determine Applicable Interest Rate.......32
2.6C. Illegality or Impracticability of LIBOR Rate Loans....32
2.6D. Compensation For Breakage or Non-Commencement
of Interest Periods...................................33
2.6E. Booking of LIBOR Rate Loans...........................33
2.6F. LIBOR Rate Loans After Default........................34
2.7. Letters of Credit.....................................34
2.7A. Letters of Credit.....................................34
2.7B. Notice of Issuance....................................35
2.7C. Delivery of Copies of Letters of Credit
and Letter of Credit Amendments.......................36
2.7D. Payment of Amounts Drawn Under Letters of Credit......36
2.7E. Payment by Banks with Respect to Letters of Credit....36
2.7F. Compensation..........................................37
2.7G. Obligations Absolute..................................38
2.7H. Computation of Interest...............................40
2.7I. Amendments............................................40
2.8. Increased Costs; Taxes; Capital Adequacy..............40
2.8A. Compensation for Increased Costs and Taxes............40
2.8B. Withholding of Taxes..................................41
2.8C. Capital Adequacy Adjustment...........................43
2.9. Banks' Obligation to Mitigate.........................44
2.10. Records...............................................45
2.11. Swing Line Loans......................................45
2.11A. Swing Line Loan Commitment............................45
2.11B. Request For Swing Line Loans..........................46
2.11C. Reimbursement to PNC for Swing Line Loans.............47
SECTION 3
CONDITIONS PRECEDENT.........................................48
3. Effective Date; Other Stipulations...........................48
3.1. Conditions to Effectiveness of Loan Agreement.........48
3.2. Conditions to All Letters of Credit. .................49
3.3. Conditions to All Revolving Loans
and Letters of Credit.................................49
SECTION 4
REPRESENTATIONS AND WARRANTIES...............................50
4. Representations and Warranties...............................50
4.1. Organization, Standing, etc...........................51
4.2. Qualification.........................................51
4.3. Use of Proceeds.......................................51
4.4. Intellectual Property.................................51
4.5. Contracts; Labor Disputes.............................51
4.7. Disclosure............................................51
4.8. Tax Returns and Payments..............................52
4.9. Indebtedness, etc.....................................52
4.10. Title to Properties; Liens............................52
4.11. Operating Leases......................................52
4.12. Litigation, etc.......................................53
4.13. Authorization; Compliance with Other
Instruments, etc......................................53
4.14. Enforceability........................................53
4.15. Governmental Consent..................................53
4.16. Investment Company Act Status.........................54
4.17. Regulation G, etc.....................................54
4.18. Holding Company Act...................................54
4.19. Employee Retirement Income Security Act of 1974.......54
4.20. Environmental Matters.................................54
4.21. Schedule of Guaranties................................55
4.22. Subsidiaries and Joint Ventures.......................55
4.23. Year 2000.............................................55
4.24. Events of Default.....................................55
SECTION 5
AFFIRMATIVE COVENANTS........................................56
5. Affirmative Covenants........................................56
5.1. Maintenance of Assets; Casualty Insurance.............56
5.2. Monetary Obligations..................................56
5.3. Financial Statements and Other Reports................57
5.4. Financial Records.....................................59
5.5. Permits, Certificates, Leases, Licenses, etc..........59
5.6. Notice................................................59
5.7. Further Assurances....................................60
5.8. Preservation of Existence, Leases, etc................60
5.9. Comprehensive General Liability Insurance.............60
5.10. Hazardous Materials...................................61
5.11. Compliance by Consolidated Subsidiaries...............61
5.12. Delivery of Guaranties................................62
SECTION 6
NEGATIVE COVENANTS...........................................62
6. Negative Covenants...........................................62
6.1. Mergers, Dissolutions, Asset Sales and Other
Extraordinary Events..................................62
6.2. Indebtedness..........................................62
6.3. Use of Assets.........................................63
6.4. Liens.................................................63
6.5. Investments, Loans, etc...............................64
6.6. Restricted Junior Payments............................67
6.7. Agreements and Licenses...............................67
6.8. Consolidated Current Ratio............................67
6.9. Consolidated Total Debt to Consolidated
Total Capitalization..................................67
6.10. Consolidated Interest Expense and
Consolidated Rent Expense Coverage Ratio..............67
6.11. Minimum Consolidated Tangible Net Worth...............67
6.12. Transactions with Affiliates..........................68
6.13. Change in Manner of Conducting Business...............68
SECTION 7
EVENTS OF DEFAULT; ACCELERATION..............................68
7. Events of Default; Acceleration..............................68
SECTION 8
REMEDIES.....................................................71
8. Remedies.....................................................71
8.1. Defaults..............................................71
8.2. Offset................................................71
8.3. Rights Cumulative.....................................71
8.4. Payment of Costs and Expenses.........................72
SECTION 9
THE AGENT....................................................72
9. The Agent....................................................72
9.1. Appointment. .........................................72
9.2. Delegation of Duties..................................72
9.3. Nature of Duties; Independent Credit Investigation....72
9.4. Actions in Discretion of the Agent; Instructions
from the Banks........................................73
9.5. Reimbursement and Indemnification of the Agent
and the Banks by the Borrower.........................73
9.6. Exculpatory Provisions................................74
9.7. Reimbursement and Indemnification of the Agent
by the Banks..........................................74
9.8. Reliance by the Agent.................................74
9.9. Notice of Default.....................................75
9.10. The Banks in Their Individual Capacities..............75
9.11. Holders of Revolving Notes............................75
9.12. Equalization of the Banks.............................75
9.13. Successor Agent.......................................76
9.14. Calculations..........................................76
9.15. Beneficiaries.........................................76
SECTION 10
ASSIGNMENTS AND PARTICIPATIONS...............................76
10. Assignments and Participations in Revolving Loans
and Revolving Notes...................................76
SECTION 11
INDEMNITY....................................................79
SECTION 12
MISCELLANEOUS................................................80
12.1. Submission to Jurisdiction, etc. .....................80
12.2. Role of the Banks.....................................81
12.3. Notices...............................................81
12.4. Ratable Sharing.......................................82
12.5. Waiver................................................83
12.6. Survival of Representations and Warranties............83
12.7. Invalidity............................................83
12.8. Assignment............................................83
12.9. Governing Law.........................................83
12.10. Section Headings......................................83
12.11. Entire Agreement......................................83
12.12. Costs and Expenses....................................84
12.13. Time of the Essence...................................84
12.14. No Oral Modifications.................................84
12.15. Counterparts..........................................84
12.16. Delivery to the Agent Only............................84
<PAGE>
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT is made and entered
into as of December 31, 1998, by and among (i) STEEL TECHNOLOGIES INC., a
Kentucky corporation having an office and place of business in Louisville,
Kentucky (the "Borrower"), (ii) (a) PNC BANK, NATIONAL ASSOCIATION, a national
banking association that is successor by merger to PNC Bank, Kentucky, Inc., a
Kentucky banking corporation, having an office and place of business in
Louisville, Kentucky ("PNC"), (b) NATIONAL CITY BANK OF KENTUCKY, a national
banking association having an office and place of business in Louisville,
Kentucky ("National City"), (c) NBD BANK, N.A., a national banking association
having an office and place of business in Indianapolis, Indiana ("NBD"), (d)
SUNTRUST BANK, NASHVILLE, N.A., a national banking association having an office
and place of business in Nashville, Tennessee ("SunTrust"), and (e) STAR BANK,
N.A., a national banking association having an office and place of business in
Louisville, Kentucky ("Star") (each of PNC, National City, NBD, SunTrust and
Star is hereinafter individually referred to as a "Bank," and all of the same
are hereinafter collectively referred to as the "Banks"), and (iii) PNC BANK,
NATIONAL ASSOCIATION, in its capacity as agent for the Banks (in such capacity,
the "Agent").
PRELIMINARY STATEMENTS
A. Borrower, the Banks and the Agent are parties to that certain Loan
Agreement dated as of October 15, 1994 (the "Original Loan Agreement"), as
amended pursuant to the following, all entered into among Borrower, Agent and
each of the Banks except Star: (i) First Amendment to Loan Agreement dated as of
January 17, 1995 (the "First Amendment"), (ii) Second Amendment to Loan
Agreement dated as of April 6, 1995 (the "Second Amendment"), (iii) Third
Amendment to Loan Agreement dated as of October 14, 1995 (the "Third
Amendment"), (iv) Fourth Amendment to Loan Agreement dated as of October 11,
1996 (the "Fourth Amendment"), (v) Amended and Restated Loan Agreement, dated as
of March 26, 1997, (vi) First Amendment to Amended and Restated Loan Agreement
dated October 10, 1997 ("First 1997 Amendment"), and (vii) Second Amendment to
Amended and Restated Loan Agreement dated October 12, 1998 ("Second 1997
Amendment"), pursuant to which the Banks established the Revolver in the current
maximum permitted principal amount of Fifty-five Million Dollars ($55,000,000)
in favor of the Borrower for the purposes set forth in Section 2.5 of the
Amended and Restated Loan Agreement, and the Line of Credit in the maximum
permitted principal amount of Twenty-Five Million Dollars ($25,000,000) for the
purposes set forth in the Amended and Restated Loan Agreement, and PNC has
established the Swing Line Loan Commitment described in the Amended and Restated
Loan Agreement.
B. The Borrower, the Banks and the Agent now desire to enter into
this Second Amended and Restated Loan Agreement (referred to hereinafter as the
"Loan Agreement") for the purpose of amending and restating the Amended and
Restated Loan Agreement as modified by the First 1997 Amendment and the Second
1997 Amendment in order to (i) increase the amount of the Revolver from
$55,000,000 to $100,000,000, and extend the Revolving Loan Commitment
<PAGE>
Termination Date until December 31, 2001, (ii) terminate the Line of Credit,
(iii) modify the Applicable LIBOR Rate Margin, (iv) revise certain of the
financial covenants, and (v) otherwise to the effect set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the mutuality, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1. Definitions and Cross Reference. The following terms used in this Loan
Agreement shall have the following meanings:
1.1. "Adjusted LIBOR Rate" means, on the particular Interest Rate
Determination Date, the rate determined by dividing (i) the per annum rate of
interest equal to the offered rates for deposits in Dollars for the applicable
Interest Period which appear on Page 3750 of the TELERATE rate reporting system
or other similar system as of approximately 13:00 A.M., Greenwich Mean Time on
the Interest Rate Determination Date, except as provided below, by (ii) an
amount equal to one minus the stated maximum rate (expressed as a decimal) of
all reserve requirements (including any marginal, emergency, supplemental,
special or other reserves) that is specified on the first day of the applicable
Interest Period by the Board of Governors of the Federal Reserve System (or any
successor agency) for determining the maximum reserve requirement with respect
to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of such System. It is
expressly understood that each Bank may or may not actually purchase any such
time deposits and obtain such funds and the Adjusted LIBOR Rate will be an
estimate and, for a variety of reasons, including changing market conditions,
the actual cost of funds to the Banks (if the Banks elect to purchase funds in
the form of time deposits on such date) might vary from the Agent's estimate of
the Adjusted LIBOR Rate. Each determination by the Agent of the Adjusted LIBOR
Rate shall be conclusive and binding on the Borrower in the absence of manifest
error on the part of the Agent.
1.2. "Affected Bank" has the meaning assigned to that term in
Sections 2.1B, 2.2G(ii), 2.6C, 2.8A, 2.8B and 2.8C hereof.
1.3. "Affected Loans" has the meaning assigned to that term in
Section 2.6C hereof.
1.4. "Affiliate" means, as applied to any Person, (i) any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person, (ii) any other Person that, directly or indirectly,
owns or controls, whether beneficially or as a trustee, guardian or other
fiduciary, 10% or more of the stock having ordinary voting power in the election
of directors of such Person, or (iii) each of such Person's directors and
officers appointed by the board of directors of such Person. For the purposes of
this definition, "control" (including with correlative meanings, the terms
"controlling," "controlled by" and
<PAGE>
"under common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise.
1.5. "Agent" has the meaning assigned to that term in the
introduction to this Loan Agreement, and includes any successor Agent under
Section 9.13 hereof.
1.6. "And/or" means one or the other or both, or any one or more or
all, of the things or persons or parties in connection with which the
conjunction is used.
1.7. "Applicable Letter of Credit Fee" means each per annum
percentage set forth in the table appearing in Section 2.7F(ii) of this Loan
Agreement.
1.8. "Applicable LIBOR Rate Margin" means each per annum percentage
set forth in the table appearing in Section 2.2A(ii) of this Loan Agreement.
1.9. "Applicable Revolver Commitment Fee" means each per annum
percentage set forth in the table appearing in Section 2.3A(i) of this Loan
Agreement.
1.10. "Application and Agreement For Letter of Credit" means the
document substantially in the form of Exhibit A annexed hereto, as the same may
be amended or modified from time to time by PNC, with appropriate insertions and
deletions, with respect to the proposed issuance or amendment of a Letter of
Credit.
1.11. "Assignment Agreement" means an Assignment Agreement between an
assigning Bank and its Eligible Assignee, substantially in the form of Exhibit B
annexed hereto.
1.12. "Authorized Officer" means the President, the Chief Financial
Officer and any other officer of the Borrower who, by the Articles of
Incorporation, Bylaws or Resolutions of the Board of Directors of the Borrower,
is authorized to execute and deliver this Loan Agreement and the other Loan
Instruments on behalf of the Borrower.
1.13. "Bank" and "Banks" have the meanings assigned to those terms in
the introduction to this Loan Agreement and shall include PNC in its individual
capacity.
1.14. "Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy" as now and hereafter in effect, or any successor statute.
1.15. "Base Rate" means, at the time of its selection, the higher of
(i) the Prime Rate, or (ii) the Federal Funds Rate plus one percent (1%);
provided, in the event that, and during the periods that, the Federal Funds Rate
cannot be determined by the Agent under the circumstances specified in Section
2.2 hereof, the Base Rate shall be the Prime Rate.
<PAGE>
1.16. "Base Rate Loans" means Revolving Loans and Swing Line Loans
made to the Borrower and bearing interest at rates determined by reference to
the Base Rate as provided in Sections 2.2A and 2.2G hereof.
1.17. "Borrower" has the meaning assigned to that term in the
introduction to this Loan Agreement.
1.18. "Business Day" means (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the jurisdiction in which each Bank maintains
its office for purposes of performing its obligations under this Loan Agreement
as set forth on the signature pages of this Loan Agreement or is a day on which
banking institutions located in such jurisdiction are authorized or required by
law or other governmental action to close, and (ii) with respect to all notices,
determinations, fundings and payments in connection with the Adjusted LIBOR
Rate, any day which is a Business Day described in clause (i) above and which is
also a day for trading by and between banks in dollar deposits in the London
interbank market.
1.19. "Capital Expenditures" means, for any period, the aggregate of
all expenditures (whether in cash or accrued as liabilities and including that
portion of Capital Leases originally incurred during such period which is
capitalized on the balance sheet of the Borrower) incurred by the Borrower
during such period that, in conformity with GAAP, are included in the balance
sheet of the Borrower.
1.20. "Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
1.21. "Change in Control" means (i) the acquisition by any Person or
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) of more than 50% of the Voting Stock of the Borrower, including any
such acquisition by merger or consolidation, or (ii) the acquisition by any
Person or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) of more than 20% of the Voting Stock of the Borrower,
including any such acquisition by merger or consolidation, and, at any time
following an acquisition described in this clause (ii), the Continuing Directors
shall not constitute a majority of the Board of Directors of the Borrower.
1.22. "Closing Date" means the date on which the conditions set forth
in Section 3.1 hereof are satisfied.
1.23. "Commitment Fee" or "Commitment Fees" has the meaning
specified in Section 2.3A hereof.
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1.24. "Commitment Fee Pro Rata Shares" means, with respect to each
Bank's share of each Commitment Fee paid by the Borrower, the percentage
determined by dividing (i) the average daily amount of the unused portion of
such Bank's Revolving Loan Commitment during the period for which the Commitment
Fee is payable, by (ii) the aggregate average daily amount of the unused
portions of all of the Banks' Revolving Loan Commitments during the period for
which the Commitment Fee is payable. For purposes of determining the Banks'
respective Commitment Fee Pro Rata Shares from time to time, the Letter of
Credit Usage shall constitute usage of each Bank's Revolving Loan Commitment in
accordance with its Pro Rata Share.
1.25. "Compliance Certificate" means a certificate substantially in
the form of Exhibit C annexed hereto delivered by the Borrower to the Agent on
behalf of the Banks pursuant to Section 5.3(c) hereof.
1.26. "Confidentiality Agreement" means a Confidentiality Agreement
between a potential Eligible Assignee and the Borrower substantially in the form
of Exhibit D annexed hereto.
1.27. "Consolidated Current Assets" means all current assets of the
Borrower and its Consolidated Subsidiaries as determined on a consolidated basis
in accordance with GAAP consistently applied.
1.28. "Consolidated Current Liabilities" means all current
liabilities of the Borrower and its Consolidated Subsidiaries as determined on a
consolidated basis in accordance with GAAP consistently applied; provided,
however, that the aggregate principal balance of all Revolving Loans outstanding
from time to time under this Loan Agreement shall not constitute a Consolidated
Current Liability notwithstanding the accounting thereof under GAAP.
1.29. "Consolidated Interest Expense" means, for any period, total
interest expense (including that attributable to Capital Leases in conformity
with GAAP) of the Borrower and its Consolidated Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Consolidated Subsidiaries on a consolidated basis, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net costs and
benefits under interest rate agreements, whether payable in cash or accrued
(including amortization of discount), all as determined on a consolidated basis
in conformity with GAAP.
1.30. "Consolidated Long-Term Debt" means, as at any date on which
the amount thereof shall be determined, the aggregate unpaid principal of all
Indebtedness for borrowed money, all outstanding Indebtedness under a Permitted
Securitization, the aggregate amount due under all Capital Leases entered into
by the Borrower or any of its Consolidated Subsidiaries over the respective
terms of such Capital Leases, and the deferred purchase price of property, in
each case which is not payable within a period of one year from the date
determination of Consolidated Long-Term Debt is being made, plus any such
Indebtedness which is payable within one year from the date determination of
Consolidated Long-Term Debt is being made but which may be renewed or extended
at the option of the particular obligor thereunder, all as determined on a
consolidated basis in accordance with GAAP.
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1.31. "Consolidated Net Income" means, for any period, the net income
(or loss) of the Borrower and its Consolidated Subsidiaries for such period
taken as a single accounting period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from Consolidated
Net Income any after-tax gains or losses attributable to the sale of assets
outside the ordinary course of business.
1.32. "Consolidated Rent Expense" means, for any period, all rent,
including, without limitation, all common area maintenance charges, pass-through
operating expenses and other out-of-pocket operating expenses of the lessor
characterized as additional rent, paid or payable by the Borrower and its
Consolidated Subsidiaries during such period under all operating leases to which
the Borrower or any of its Consolidated Subsidiaries is a party or is subject to
or otherwise bound.
1.33. "Consolidated Subsidiaries" means at any particular time, all
Subsidiaries of the Borrower whose accounts are or should be consolidated with
those of the Borrower in accordance with GAAP. The Joint Ventures shall not be
deemed to be Consolidated Subsidiaries for purposes of this Loan Agreement.
1.34. "Consolidated Tangible Net Worth" means, as at any date on
which the amount thereof shall be determined, (i) the consolidated stockholders
equity of the Borrower and its Consolidated Subsidiaries, less (ii) the sum of
the aggregate amount of all intangible assets of the Borrower and its
Consolidated Subsidiaries, including, without limitation, lease acquisition
costs, patents, patent rights, trademarks, goodwill, rights to refund and
indemnification and any other assets which would be treated as an intangible
asset under GAAP, plus the amount of any write-up in the book value of any
assets of the Borrower and its Consolidated Subsidiaries in excess of the cost
thereof to the Borrower and its Consolidated Subsidiaries, in each case as
determined by reference to the most recent consolidated balance sheet of the
Borrower, as determined on a consolidated basis in accordance with GAAP.
1.35. "Consolidated Total Capitalization" means, as at any date on
which the amount thereof shall be determined, the sum of the Consolidated Total
Debt plus the stockholders' equity of the Borrower as at such date, in each case
as determined on a consolidated basis in accordance with GAAP.
1.36. "Consolidated Total Debt" means, as at any date on which the
amount thereof shall be determined, (i) all Indebtedness for borrowed money of
the Borrower and its Consolidated Subsidiaries on a consolidated basis as at
such date, including, without limitation, all unpaid Obligations, all
outstanding Indebtedness under a Permitted Securitization, all amounts due under
all Capital Leases entered into or assumed by the Borrower or any of its
Consolidated Subsidiaries and all Contingent Obligations of the Borrower or any
of its Consolidated Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
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1.37. "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any indebtedness, lease, dividend, letter of credit or other
obligation of another if the primary purpose or intent thereof by the Person
incurring the Contingent Obligation is to provide assurance to the obligee of
such obligation of another that such obligation of another will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holder of such obligation will be protected (in whole or in part)
against loss in respect thereof, or (ii) under any letter of credit issued for
the account of or for which that Person is otherwise liable for reimbursement
thereof, or (iii) under interest rate swap agreements, interest rate collar
agreements or other similar arrangements providing interest rate protection, in
each case as marked to market. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, and (b) any liability of such Person for the obligations of another
through any agreement (contingent or otherwise) (1) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), (2) to maintain
the solvency of any balance sheet item, level of income or financial condition
of another, or (3) to make take-or-pay or similar payments if required
regardless of non-performance by any other party or parties to an agreement, if
the case of any agreement described under subclauses (1), (2) or (3) of this
sentence the primary purpose or intent thereof is as described in clause (i) of
the preceding sentence. The amount of any Contingent Obligation, as at any time
of determination, shall be equal to the amount of the obligation so guaranteed
or otherwise supported at such time of determination which amount shall be
deemed to be the amount of such obligation guarantied, as reasonably estimated
by the Borrower, if such amount cannot be specifically determined at the time of
determinations. The term "Contingent Obligations" specifically includes, with
respect to the Borrower, all obligations of the Borrower to reimburse PNC for
all drafts honored by PNC under the existing letters of credit issued by PNC for
the account of the Borrower.
1.38. "Continuing Director" means any member of the Board of
Directors of the Borrower who is a member of such Board on the Closing Date and
any Person who is a member of such Board and whose nomination as a director was
approved by a majority of the Continuing Directors then on the Board of
Directors of the Borrower.
1.39. "Covered Tax" means any Tax that is not an Excluded Tax.
1.40. "Date of Determination" means, for purposes of determining the
applicable Pricing Level on any Pricing Level Calculation Date, the forty-fifth
(45th) day following the last day of the most recent Fiscal Quarter of the
Borrower.
1.41. "Default Rate" means, upon the occurrence and during the
continuation of the Events of Default referred to in Sections 7(a) and 7(b) of
this Loan Agreement, as well as upon the
<PAGE>
acceleration of the maturity of the Obligations due to the occurrence of any
other Event of Default: (i) with respect to Revolving Loans and Swing Line
Loans, a variable rate per annum equal to the sum of (a) two percent (2%) per
annum, plus (b) the Base Rate; and (ii) with respect to Letters of Credit
outstanding on the date of the occurrence of such Event of Default or thereafter
issued by PNC during the continuation of such Event of Default (it being
understood that PNC has no obligation to issue any Letter of Credit upon the
occurrence and during the continuation of any Event of Default), a Letter of
Credit Fee equal to the sum of (a) two percent (2%) per annum, plus (b) the
Letter of Credit Fee Percentage.
1.42. "Dollars" means the lawful money of the United States of
America.
1.43."EBITDA" has the meaning set forth for it in Section 6.5 of
this Loan Agreement.
1.44. "Effective Date" means the effective date of this Loan
Agreement as defined in and subject to the conditions described in Section 3.1
hereof.
1.45. "Eligible Assignees" means (i) each Bank and each Affiliate of
each Bank, (ii) any commercial bank, insurance company, savings bank or other
financial institution to which a Bank desires to sell all or a permitted portion
of its Revolving Loans and Revolving Loan Commitment pursuant to Section 10.A.
hereof, and (iii) any commercial bank, insurance company, savings bank or other
financial institution selected by the Borrower and to which the Borrower directs
any Bank to sell its Revolving Loans and Revolving Loan Commitment pursuant to
Section 10.A hereof.
1.46. "Eligible Investments" means (i) callable direct, general
obligations of the United States of America, or any obligations unconditionally
guaranteed as to the timely payment of principal and interest by the full faith
and credit of the United States of America, (ii) bonds, notes or debentures
issued by the Federal Home Loan Banks, the Export-Import Banks of the United
States of America, the Federal National Mortgage Association, the Government
National Mortgage Association, or any agency or instrumentality of the
government of the United States of America which shall be established for the
purpose of acquiring the obligations of any of the foregoing, (iii) obligations
of a deposit-taking institution whose deposits are insured by the bank insurance
fund maintained by the Federal Deposit Insurance Corporation, provided the
principal plus interest to accrue over the term of the deposit is fully insured
by the Bank Insurance Fund, (iv) investment grade securities with a maturity of
one year or less, rated BBB or better by Standard and Poor's Corporation or Baa
or better by Moody's Investor Services, Inc., and (v) such other investments as
shall be reasonably acceptable to the Agent.
1.47. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
<PAGE>
1.48. "Estimated Interest Expense" has the meaning set forth for it
in Section 6.5 of this Loan Agreement.
1.49. "Events of Default" means the occurrence or happening of any of
the matters set forth in Section 7 hereof.
1.50. "Excluded Tax" means any of the following taxes, levies,
imposts, duties, deductions, withholdings or charges, and all liabilities with
respect thereto: (i) Taxes imposed on the net income of a Bank, the Agent or a
Tax Transferee (including without limitation branch profits taxes, minimum taxes
and taxes computed under alternative methods, at least one of which is based on
net income (collectively referred to as net income taxes") by (A) the United
States of America, (B) the jurisdiction under the laws of which such Bank, the
Agent or Tax Transferee is organized or any political subdivision thereof, or
(C) the jurisdiction of such Bank's, Tax Transferee's or the Agent's applicable
lending office or any political subdivision thereof, or (D) any jurisdiction in
which the Bank, the Agent or Tax Transferee is doing business, (ii) any Taxes to
the extent that they are in effect and would apply to a payment to such Bank or
the Agent, as applicable, as of the Closing Date, or as of the date such Person
becomes a Bank, in the case of any Eligible Assignee pursuant to Section 10
hereof, (iii) any Taxes that are in eft and would apply to a payment to a Tax
Transferee as of the date of acquisition of the Revolving Loans by such Tax
Transferee or the date of the change of lending office of such Tax Transferee,
as the case may be (provided however that a Person shall not be considered a Tax
Transferee for purposes of this clause (iii) as a result of a change of its
lending office or the taking of any other steps pursuant to Section 2.9 hereof),
(iv) any Taxes to the extent of any credit or other Tax benefit available to
such Bank, Tax Transferee or the Agent, as applicable, as a result thereof, or
(v) any Taxes that would not have been imposed but for the failure by the Agent
or such Bank or Tax Transferee, as applicable, to provide and keep current any
certification or other documentation required to qualify for an exemption from
or reduced rate of any Tax.
1.51. "Federal Funds Rate" means the interest rate per annum equal to
the Weighted Average of the average national federal funds rate which shall be
computed on a monthly basis using the daily average national federal funds rate
as released each Business Day by the Federal Reserve Bank of New York, provided
that if the Federal Reserve Bank of New York ceases releasing such information
such rate shall be obtained by the Agent from another generally recognized
source. For the purposes of this definition, the term "Weighted Average" shall
mean the quotient of (A) the sum of the products for each day of the relevant
calendar month of (1) each Base Rate Loan multiplied by (2) the average national
federal funds rate for such day divided by (B) the aggregate amounts of all Base
Rate Loans for each day of such calendar month.
1.52. "Fiscal Quarter" means a fiscal quarter of the Borrower. The
Fiscal Quarters of the Borrower currently end on the last day of December,
March, June and September.
1.53. "Fiscal Year" means a fiscal year of the Borrower. The Fiscal
Year of the Borrower currently ends on September 30 of each calendar year.
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1.54. "Funding Date" means the date of the funding of a Revolving
Loan or a Swing Line Loan.
1.55. "GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination, as applied in accordance with the modifications contained
in Section 5.3 hereof.
1.56. "Guarantor" means each Consolidated Subsidiary (other than ST
Mexico) that is not merely a holding company, and, if applicable, each other
Person that has executed and delivered a Guaranty Agreement for the benefit of
the Banks.
1.57. "Guaranty Agreements" mean, collectively, the documents
establishing the absolute, joint and several guaranty of payment of the
Obligations by each of the Consolidated Subsidiaries, substantially in the form
of Exhibit K annexed hereto and otherwise in form and substance satisfactory in
each case to the Agent.
1.58. "Indebtedness" means, with respect to the Borrower and each of
its Consolidated Subsidiaries, (i) all indebtedness for borrowed money,
including, without limitation, all reimbursement obligations of such Person in
respect of all letters of credit issued for the account of such Person, (ii)
that portion of obligations with respect to Capital Leases which is properly
classified as a liability on a balance sheet in conformity with GAAP, (iii)
notes payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money, (iv) any obligation owed for
all or any part of the deferred purchase price of property or services which
purchase price is (y) due more than six months from the date of incurrence of
the obligation in respect thereof, or (z) evidenced by a note or similar written
instrument, but excluding trade payables incurred in the ordinary course of
business, (v) all outstanding indebtedness under a Permitted Securitization, and
(vi) all indebtedness secured by any Lien on any property or asset owned by such
Person regardless of whether the indebtedness secured thereby shall have been
assumed by such Person or is non-recourse to the credit of such Person but only
to the extent of the fair market value of any such property or assets.
1.59. "Interest Payment Date" means (i) with respect to each Base
Rate Loan, the last day of each Fiscal Quarter during which such Base Rate Loan
is outstanding in whole or in part, and (ii) with respect to each LIBOR Rate
Loan, the last day of each Interest Period applicable to such LIBOR Rate Loan;
provided that in the case of each Interest Period of six months, "Interest
Payment Date" shall also include each three month anniversary of the
commencement of that Interest Period.
1.60. "Interest Period" means any interest period applicable to a
LIBOR Rate Loan as determined pursuant to Section 2.2B hereof.
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1.61. "Interest Rate Determination Date" means each date on which the
Agent shall quote the LIBOR Rate to the Borrower for purposes of determining the
LIBOR Rate in respect of an Interest Period. The Interest Rate Determination
Date shall be the second Business Day prior to the first day of the related
Interest Period.
1.62. "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.
1.63. "Joint Ventures" means, collectively, (i) Mi-Tech Steel, Inc.,
a joint venture formed by the Borrower and Mitsui Steel Development Company
under the laws of the State of Delaware, (ii) Processing Technology, Inc., a
joint venture formed by the Borrower, LTV Corporation and Mitsui Steel
Development Company under the laws of the State of Delaware, and (iii) all other
partnerships or joint ventures to which the Borrower is now or in the future a
party and in which the Borrower has contributed capital and/or to which the
Borrower has made loan(s).
1.64. "Letters of Credit" means any letter of credit or similar
instrument issued by PNC for the account of the Borrower pursuant to this Loan
Agreement for the purpose of securing the performance, payment, deposit or
surety obligations of the Borrower pursuant to purchase orders, contracts and/or
operating leases or Capital Leases entered into or proposed to be entered into
or assumed or proposed to be assumed by the Borrower in the ordinary course of
such business. The term "Letters of Credit" as used herein specifically excludes
the outstanding letters of credit issued by PNC for the account of the Borrower
and which are described on Schedule 1.64 annexed hereto.
1.65. "Letter of Credit Fee" has the meaning assigned to that term in
Section 2.7F(ii) hereof.
1.66. "Letter of Credit Fee Percentage" means the Applicable LIBOR
Rate Margin in effect during a particular Pricing Period in which a Letter of
Credit is issued by PNC for the account of the Borrower.
1.67. "Letter of Credit Usage" means, as at any date of determination
thereof, the sum of (i) the maximum aggregate amount which is or at any time
thereafter may become available for drawing under all Letters of Credit then
outstanding, plus (ii) the aggregate unpaid amount of all drawings under all
Letters of Credit honored by PNC.
1.68. "Leverage Ratio" means, as of each Date of Determination, (a)
the Borrower's Consolidated Total Debt as of the particular Date of
Determination, divided by (b) the Borrower's Consolidated Total Capitalization
as of the particular Date of Determination, in each case determined for the
Borrower on a consolidated basis in accordance with GAAP.
1.69. "LIBOR Rate" means the Adjusted LIBOR Rate plus the Applicable
LIBOR Rate Margin in effect for the particular Interest Period.
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1.70. "LIBOR Rate Loans" means Revolving Loans made to the Borrower
bearing interest at the LIBOR Rate.
1.71. "Lien" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
1.72. "Loan Agreement" means this Second Amended and Restated Loan
Agreement dated as of December 31, 1998 as it may be amended, supplemented or
otherwise modified from time to time.
1.73. "Loan Instruments" means this Loan Agreement, the Revolving
Notes, the Swing Line Note, the Guaranty Agreement, each Application and
Agreement for Letter of Credit and all other applications, reimbursement
agreements and other documents or certificates executed in favor of PNC relating
to the Letters of Credit, each Request for Revolving Loan, each Request for
Swing Line Loan, each Compliance Certificate and all other agreements, documents
and instruments delivered by the Borrower pursuant to this Loan Agreement.
1.74. "Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
1.75. "Material Adverse Effect" means any set of circumstances or
events which (a) has or will have any material adverse effect whatsoever upon
the validity or enforceability of this Agreement or any other Loan Instruments,
(b) is or will be material and adverse to the business, properties, assets,
financial condition, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries taken as a whole or (c) impairs materially or will
impair materially the ability of the Borrower and Guarantors taken as a whole to
duly and punctually pay or perform the Obligations.
1.76. "Note Purchase Agreement" means that certain Note Agreement
dated as of March 1, 1995, between the Borrower and the Note Purchasers pursuant
to which Borrower issued and severally sold to the Note Purchasers the Senior
Notes, including any and all amendments thereto now or hereafter.
1.77. "Note Purchasers" means the institutional investors that are
parties to the Note Purchase Agreement with Borrower.
1.78. "Note Purchasers Guaranty Agreements" means guaranty agreements
by the respective Consolidated Subsidiaries parties thereto, identical in all
respects to the Guaranty Agreements except given in favor of the Note Purchasers
to guarantee the obligations of the Borrower under the Note Purchase Agreement.
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1.79. "Note Purchasers Intercreditor Agreement" means the
Intercreditor Agreement dated as of March 1, 1995 entered into among Agent, each
of the Banks and each of the Note Purchasers, including any and all amendments
thereto now or hereafter.
1.80. "Notice of Conversion/Continuation" means a notice in the form
of Exhibit E annexed hereto with respect to a proposed conversion or
continuation of a Revolving Loan.
1.81. "Obligations" means: (i) the entire unpaid principal balance of
and all interest accrued on the Revolving Notes, and (ii) all other liabilities
owing by the Borrower to the Banks arising under or pursuant to this Loan
Agreement or the other Loan Instruments of any kind or nature, present or
future, and whether or not evidenced by any note, guaranty or other instrument.
The term "Obligations" includes, without limitation, all interest, charges,
expenses, reasonable attorneys' fees and any other sums chargeable to the
Borrower under this Loan Agreement and/or any other Loan Instrument.
1.82. "Offered Rate" means the interest rate quoted from time to time
by PNC to the Borrower as applicable to Swing Line Loans. The Offered Rate shall
constitute, on each Funding Date of a Swing Line Loan, the offer quoted by an
officer of PNC to the Borrower on each such Funding Date of a Swing Line Loan.
1.83. "Officer's Certificate" means a certificate executed on behalf
of the Borrower by an Authorized Officer pursuant to this Loan Agreement.
1.84."Permitted Securitization" means a sale to a bankruptcy remote
entity of accounts receivable of Borrower in conjunction with a securitization
thereof generating net proceeds of not greater than $50 million, all in
structure, form and substance reasonably satisfactory to the Requisite Banks and
the proceeds of which at the time of such securitization are used solely to
repay the Revolving Loans, the Swing Line Loans and the Indebtedness under the
Note Purchase Agreement unless and until all of the same are paid in full, in
which case Borrower may utilize the proceeds for any other purpose permitted
under this Loan Agreement.
1.85. "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, other entity or group, institution, party or government, whether
federal, state, county, city, municipal or other, or agency or division thereof.
1.86. "Potential Event of Default" means the occurrence of any event
or condition which, with the passage of time or the giving of notice, or both,
would become an Event of Default.
1.87. "Pricing Level" means, for any Pricing Period, Pricing Level I,
Pricing Level II, Pricing Level III, Pricing Level IV or Pricing Level V, as may
be in effect for such Pricing Period; provided that the Default Rate shall be in
effect upon the occurrence and during the continuation of any Event of Default.
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1.88. "Pricing Level I" means the Pricing Level that will be in
effect for the applicable Pricing Period if, as of the relevant Date of
Determination, the Leverage Ratio of the Borrower is less than .40 to 1.0.
1.89. "Pricing Level II" means the Pricing Level that will be in
effect for the applicable Pricing Period if, as of the relevant Date of
Determination, the Leverage Ratio of the Borrower is equal to or greater than
.40 to 1.0 but is less than .45 to 1.0.
1.90. "Pricing Level III" means the Pricing Level that will be in
effect for the applicable Pricing Period if, as of the relevant Date of
Determination, the Leverage Ratio of the Borrower is equal to or greater than
.45 to 1.0 but less than 0.50 to 1.0.
1.91."Pricing Level IV" means the Pricing Level that will be in
effect for the applicable Pricing Period if, as of the relevant Date of
Determination, the Leverage Ratio of the Borrower is equal to or greater than
.50 to 1.0 but less than .55 to 1.0.
1.92."Pricing Level V" means the Pricing Level that will be in effect
for the applicable Pricing Period if, as of the relevant Date of Determination,
the Leverage Ratio of the Borrower is equal to or greater than .55 to 1.0.
1.93. "Pricing Level Calculation Date" means the date of delivery to
the Banks of the Compliance Certificate for the preceding Fiscal Quarter of the
Borrower pursuant to Section 5.3(c) of this Loan Agreement.
1.94. "Pricing Period" means, with respect to any Date of
Determination, the period commencing on such Date of Determination and ending on
the day immediately preceding the next Date of Determination.
1.95. "Prime Rate" means at any time the interest rate per annum most
recently designated or announced by PNC as its "Prime Rate" in effect at its
principal office in Pittsburgh, Pennsylvania, it being expressly understood and
agreed to by the Borrower that the "Prime Rate" is the rate of interest
designated by PNC as its "Prime Rate" and such term does not necessarily mean or
imply that it is the lowest or best rate then available from the Bank.
1.96. "Proforma Compliant Acquisition", "Proforma Acquisition
Information", Proforma Calculation Period", "Proforma Debt Service Coverage",
"Proforma EBITDA" and "Proforma Debt Service" each have the meaning set forth
for them in Section 6.5 of this Loan Agreement.
1.97. "Pro Rata Share" means, with respect to each Revolving Loan
Commitment of each Bank, the percentage set forth opposite that Bank's name on
Schedule 2.1 annexed hereto; provided that Schedule 2.1 shall be amended and
each Bank's Pro Rata Share shall be adjusted from
<PAGE>
time to time to give effect to the addition or removal of any Bank as provided
herein or by assignment pursuant to Section 10 hereof.
1.98. "Purchase Money Indebtedness" means all Indebtedness of the
Borrower which is secured by a purchase money security interest in the assets
acquired by the Borrower with the proceeds of such Indebtedness, but only to the
extent such security interest encumbers solely the assets acquired by the
Borrower with the proceeds of such Indebtedness and only secures the payment of
the Indebtedness incurred by the Borrower to acquire such assets.
1.99. "Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as in effect from time to time.
1.100. "Request for Revolving Loan" means the Request in the form of
Exhibit F annexed hereto with respect to a proposed Revolving Loan to be
delivered by the Borrower to the Agent on behalf of the Banks pursuant to
Sections 2.1C and 3.3A hereof.
1.101. "Request for Swing Line Loan" means the request in the form of
Exhibit G hereto with respect to a proposed Swing Line Loan to be delivered by
the Borrower to PNC pursuant to Section 2.11B of this Loan Agreement.
1.102. "Requisite Banks" means Banks holding at least 60% of the sum
of the Total Utilization of Revolving Loan Commitments as of the date of
determination of the Requisite Banks; provided, if there are no Revolving Loans
or Letters of Credit outstanding as of the date of determination of the
Requisite Banks, the term "Requisite Banks" shall mean Banks holding at least
60% of the sum of the Revolving Loan Commitments as of the date of determination
of the Requisite Banks. It is expressly understood that the Total Utilization of
Revolving Loan Commitments for purposes of determination of the Requisite Banks
includes each Bank's obligation to make Revolving Loans in an amount equal to
its Pro Rata Share of all drawings under Letters of Credit issued by PNC
pursuant to this Loan Agreement.
1.103. "Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of the Borrower now or hereafter outstanding, other than any dividend payable
solely in shares of capital stock or in options, warrants or other rights to
purchase capital stock, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of the Borrower, or of any warrants, options or
other rights to acquire any such shares of stock, now or hereafter outstanding,
or (iii) any payment or prepayment of principal of, premium, if any, or interest
on, redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Subordinated Indebtedness.
1.104. "Revolver" means the revolving credit facility established by
the Banks pursuant to this Loan Agreement in favor of the Borrower in the
maximum permitted aggregate principal amount at any one time outstanding of One
Hundred Million Dollars ($100,000,000.00),
<PAGE>
pursuant to which the Borrower may obtain Revolving Loans and Letters of Credit
during the term of the Revolver upon the terms and conditions set forth in this
Loan Agreement. All references to the "aggregate principal balance of the
Revolving Loans outstanding" or similar phrases in this Loan Agreement shall
mean, as at the date of determination thereof, the sum of (i) the entire
aggregate outstanding principal balance of all Revolving Loans made by the Banks
pursuant to this loan Agreement, and (ii) the then existing Letter of Credit
Usage.
1.105. "Revolving Loan Commitment" or "Revolving Loan Commitments"
means (i) the commitment of each Bank to maintain or make Revolving Loans and to
make and/or participate in Letters of Credit as set forth in Sections 2.1 and
2.7 hereof, and (ii) the commitment of PNC to issue Letters of Credit as set
forth in Section 2.7 hereof.
1.106. "Revolving Loan Commitment Termination Date" means the
Revolving Loan Commitment Termination Date then in effect, which currently shall
be December 31, 2001 subject to extension thereof pursuant to Section 2.1B
hereof, or, if sooner, (i) the date as of which the Obligations shall have
become immediately due and payable pursuant to Section 7 hereof, or (ii) the
date on which all of the Obligations are paid in full (including, without
limitation, the repayment, expiration, termination or cash collateralization of
Letters of Credit pursuant to this Loan Agreement) and all Revolving Loan
Commitments are reduced to zero.
1.107. "Revolving Loans" means the Revolving Loans which the Banks
have agreed to maintain or make pursuant to Section 2.1 hereof.
1.108. "Revolving Note" means, collectively, the Revolving Promissory
Notes, all dated as of December 31, 1998 and made by Borrower to the order of,
respectively, PNC in face principal amount of $30,000,000, NBD in face principal
amount of $22,500,000, Suntrust in face principal amount of $22,500,000,
National City in face principal amount of $15,000,000, and Star Bank in face
principal amount of $10,000,000, in the forms attached to and made a part of
this Loan Agreement as Exhibits H-1, H-2, H-3, H-4 and H-5, respectively,
together with all amendments, modifications, renewals, extensions, restatements
and replacements of each of them, respectively.
1.109. "Roberts" means Robert Steel Company, an Ohio corporation.
1.110. "Senior Notes" means Borrower's $40,000,000 8.52% Senior Notes
due March 1, 2005 that Borrower issued and severally sold to the Note Purchasers
pursuant to the Note Purchase Agreement.
1.111. "ST Carolinas" means Steel Technologies Carolinas, Inc., a
North Carolina corporation and one of the Consolidated Subsidiaries of Borrower.
1.112. "ST Mexico" means Steel Technologies De Mexico S.A. De C.V.
<PAGE>
1.113. "ST Ohio" means Steel Technologies Ohio, Inc., an Ohio
corporation that is a Consolidated Subsidiary of Borrower.
1.114. "ST Wabash" means Wabash Steel Corporation, an Indiana
corporation and one of the Consolidated Subsidiaries of Borrower.
1.115. "Subordinated Indebtedness" means any Indebtedness of the
Borrower now or hereafter owing to any Person and which has been subordinated to
the prior payment of the Obligations in a manner satisfactory to the Banks.
1.116. "Subsidiary" means, with respect to the Borrower, (i) any
corporation of which more than 50% of the outstanding voting stock is at the
time owned by the Borrower or by one or more of its Subsidiaries, and (ii) any
Person controlled by the Borrower or by one or more of its Subsidiaries, whether
by virtue of voting interest, other beneficial interest or by voting agreement,
proxy or otherwise. The Joint Ventures shall not be deemed to be Subsidiaries
for purposes of this Loan Agreement.
1.117. "Swing Line Loan Commitment" means the commitment of PNC to
maintain or make Swing Line Loans as set forth in Section 2.11A of this Loan
Agreement.
1.118. "Swing Line Loan Commitment Termination Date" means the Swing
Line Loan Commitment Termination Date then in effect, which shall originally be
November 12, 1999, subject to extension thereof pursuant to Section 2.11C of
this Loan Agreement, or if sooner (i) the date as of which the Obligations shall
have become immediately due and payable pursuant to Section 7 of this Loan
Agreement, or (ii) the date on which all of the Obligations are paid in full
(including, without limitation, the repayment, expiration, termination or cash
collateralization of Letters of Credit pursuant to this Loan Agreement) and the
Swing Line Loan Commitment is reduced to zero.
1.119. "Swing Line Loans" means the Swing Line Loans which PNC has
agreed to maintain or make pursuant to Section 2.11A of this Loan Agreement.
1.120. "Swing Line Note" means that certain Swing Line Loan
Promissory Note dated December 31, 1998, made by Borrower, payable to the order
of PNC, and in the face principal amount of $5,000,000, in the form attached to
and made a part of this Loan Agreement as Exhibit I, together with all
amendments, modifications, renewals, extensions, restatements and replacements
thereof.
1.121. "Target Person" has the meaning set forth for it in
Section 6.5 of this Loan Agreement.
1.122. "Tax" or "Taxes" means any present or future tax, levy,
impost, duty, charge, governmental fee, deduction or withholding of any nature
and whatever called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "Tax on the overall net income"
of a Person shall be construed as a reference to a tax imposed by the
jurisdiction in
<PAGE>
which that Person's principal office (and/or, in the case of a Bank, its lending
office) is located on all or part of the net income, profits or gains of that
Person (whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or otherwise).
1.123. "Tax Transferee" means any Person who acquires any interest in
the Revolving Loans (whether or not by operation of law) or in the office to
which a Bank or the Agent has transferred its Revolving Loans for purposes of
determining where the Revolving Loans are made, accounted for or booked.
1.124. "Total Utilization of Revolving Loan Commitments" means, as at
any date of determination thereof, the sum of (i) the aggregate principal amount
of all outstanding Revolving Loans, and (ii) the Letter of Credit Usage.
1.125. "Voting Stock" means the shares of capital stock or other
securities of the Borrower entitled to vote generally in the election of the
directors of the Borrower.
1.126. "Year 2000 Problem" has the meaning set forth for it in
Section 4.23 hereof.
1.127. Accounting Terms. For purposes of this Loan Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP and all financial statements and certificates
and reports as to financial matters required to be delivered to the Banks
hereunder shall (unless otherwise disclosed to the Banks in writing at the time
of delivery thereof in the manner described in Section 5.3(b) hereof) be
prepared in accordance with GAAP applied on a basis consistent with GAAP.
1.128. Other Definitional Provisions. Any reference in this Loan
Agreement (i) to a Section, a Schedule or an Exhibit is a reference to a section
hereof, a schedule hereto or an exhibit hereto, respectively; and (ii) to a
subsection or a clause is, unless otherwise stated, a reference to a subsection
or a clause of the Section or subsection in which the reference appears. In this
Loan Agreement the singular includes the plural and the plural the singular;
"hereof," "herein," "thereto," "hereunder" and the like mean and refer to this
Loan Agreement as a whole and not merely to the specific section, paragraph or
clause in which the respective word appears; words importing any gender include
the other genders; references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; references to "writing" include printing, typing, lithography and other
means of reproducing words in a tangible visible form; the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments, supplements, assignments and other
modifications thereto, but only to the extent such modifications are not
prohibited by the terms of this Loan Agreement, and references to Persons
include their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons.
<PAGE>
SECTION 2
REVOLVER AND SWING LINE LOANS
20 Revolver. Subject to the terms and conditions of this Loan Agreement,
the Banks hereby establish the Revolver in favor of the Borrower in the maximum
permitted aggregate principal amount at any one time outstanding of One Hundred
Million Dollars ($100,000,000.00). Pursuant to the Revolver, the Borrower may
obtain Revolving Loans pursuant to, and subject to the terms and conditions set
forth in, this Loan Agreement for the purposes set forth in Section 2.5 hereof.
The Revolver is subject to the following terms and conditions:
2.1. Revolving Loan Commitments; Revolving Loans.
2.1A. Revolving Loan Commitments. Each Bank severally agrees, subject
to the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to the
Borrower from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate amount not
exceeding its Pro Rata Share of the aggregate Revolving Loan Commitments. The
amount of each Bank's Revolving Loan Commitment is equal to the Pro Rata Share
Revolving Loan Commitment set forth opposite its name on Schedule 2.1 annexed
hereto applied to the maximum permitted aggregate outstanding principal amount
of the Revolving Loan Commitment in effect from time to time, and the maximum
permitted aggregate outstanding principal amount of the Revolving Loan
Commitments presently is One Hundred Million Dollars ($100,000,000); provided
that the amount of the Revolving Loan Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to Section 2.4C
hereof (it being understood that all references to the Revolving Loan
Commitments of the Banks set forth in this Loan Agreement shall mean the initial
Revolving Loan Commitments of the Banks set forth on Schedule 2.1 annexed hereto
as reduced by voluntary reductions of the Revolving Loan Commitments effected by
the Borrower pursuant to Section 2.4C hereof). Each Bank's Revolving Loan
Commitment shall expire on the Revolving Loan Commitment Termination Date and
all Revolving Loans and all other Obligations owed hereunder shall be paid in
full no later than that date. Amounts borrowed under this Section 2.1A may be
repaid and reborrowed to but excluding the Revolving Loan Commitment Termination
Date, subject to the provisions of Section 2.4C hereof.
Anything contained in this Loan Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be
subject to the following limitations (and the Borrower may be obligated to
prepay Revolving Loans outstanding by virtue of such limitations as required
under Sections 2.4A(ii) hereof):
(1) The amount otherwise available for borrowing under the Revolving Loan
Commitments as of the time of determination thereof (other than to reimburse PNC
for the
<PAGE>
amount of any drawings under any Letters of Credit honored by PNC and not
theretofore reimbursed by the Borrower) shall be reduced by an amount equal to
the Letter of Credit Usage as of such time of determination; and
(2) The Total Utilization of Revolving Loan Commitments shall not exceed
the aggregate Revolving Loan Commitments.
2.1B. Term of Revolving Loan Commitments. \The Revolving Loan
Commitments shall become effective immediately as of the Closing Date, and as of
the Closing Date, the Borrower may obtain Revolving Loans and Letters of Credit
subject to the terms and conditions contained herein. The Revolving Loan
Commitments shall continue in effect until the Revolving Loan Commitment
Termination Date, unless sooner terminated (a) by the Banks upon the occurrence
and during the continuation of an Event of Default, or (b) by the Borrower at
any time in its sole and absolute discretion. The Borrower may request, not less
than sixty (60) days prior to December 31, 2001 or any subsequent Revolving Loan
Commitment Termination Date, that the Revolving Loan Commitment Termination Date
be extended for a period selected by the Borrower and acceptable to the Banks.
The Agent shall notify the Borrower in writing, within thirty (30) days of
receipt of such request, whether the Banks have elected to so extend the
Revolving Loan Commitment Termination Date. In the event the Agent fails to give
such written notice to the Borrower within such thirty (30) day period, such
failure shall constitute an affirmative election by the Banks not to so extend
the Revolving Loan Commitment Termination Date. The Revolving Loan Commitment
Termination Date may only be extended by the unanimous written consent of all of
the Banks in their sole and absolute discretion as communicated in writing to
the Agent. If any Bank elects not to extend the Revolving Loan Commitment
Termination Date, the Agent shall notify the Borrower thereof and such Bank
shall constitute an "Affected Bank" for purposes of Section 10.E hereof. In the
event the Banks elect not to extend the Revolving Loan Commitment Termination
Date, the Revolving Loan Commitments shall terminate, and the entire unpaid
principal balance of and all accrued and unpaid interest on the Revolving Loans
and the other Obligations shall be respectively due and payable in full to the
Banks on the then Revolving Loan Commitment Termination Date, subject at all
times to the Banks' absolute right to terminate the Revolving Loan Commitments
upon the occurrence and during the continuation of an Event of Default. Upon
termination of the Revolving Loan Commitments by the Banks upon the occurrence
and during the continuation of an Event of Default, or by the Borrower at any
time in its sole and absolute discretion, the entire unpaid principal balance of
and all accrued and unpaid interest on the Revolving Loans and all other
Obligations shall be respectively due and payable in full to the Banks. The
termination of the Revolving Loan Commitments, for whatever reason, shall not in
any way release or relieve the Borrower from its obligations incurred hereunder
or in connection herewith or under the Revolving Notes or the other Loan
Instruments and the provisions hereof and of the Revolving Notes and the other
Loan Instruments shall continue in full force and effect until the Revolving
Notes and all other Obligations have been respectively paid in full to the
Banks. In the event the Borrower terminates the Revolving Loan Commitments,
which the
<PAGE>
Borrower has the right to do at any time in its sole and absolute discretion,
the Borrower shall be obligated to pay the Revolving Notes and all other
Obligations in full to the Banks, respectively.
2.1C. Borrowing Mechanics. The obtaining by the Borrower of each
Revolving Loan shall be subject to the following terms and conditions:
(a) Base Rate Loans shall be in the minimum amount of One
Million Dollars ($1,000,000.00) and integral multiples of One Hundred
Thousand Dollars ($100,000.00) in excess of that amount or, if less, the
amount available to be borrowed under the Revolver at the time the Base
Rate Loan is requested by the Borrower. Subject to there being sufficient
availability under the Revolver, LIBOR Rate Loans shall be in the minimum
amount of Five Million Dollars ($5,000,000.00) and integral multiples of
One Million Dollars ($1,000,000.00) in excess of that amount. Whenever the
Borrower desires that the Banks make a Revolving Loan to the Borrower, the
Borrower shall deliver to the Banks a Request for Revolving Loan no later
than 10:30 A.M. (Louisville, Kentucky time) at least three (3) Business
Days in advance of the proposed Funding Date in the case of a LIBOR Rate
Loan and on the day of the proposed Funding Date in the case of a Base
Rate Loan. The Request for Revolving Loan shall be in the form of Exhibit
F respectively, attached hereto and made a part of this Loan Agreement.
Revolving Loans may be continued as or converted into Base Rate Loans and
LIBOR Rate Loans in the manner provided in Section 2.2D hereof. In lieu of
delivering the above described Request for Revolving Loan, the Borrower
may give the Agent telephonic notice by the required time of the requested
Revolving Loan under this Section 2.1C; provided that such notice shall be
promptly confirmed in writing by delivery of a Request for Revolving Loan
to the Agent on or before the applicable Funding Date.
(b) Neither the Agent nor the Banks shall incur any liability to
the Borrower in acting upon any telephonic notice referred to above which
the Agent and/or the Banks believe in good faith to have been given by an
Authorized Officer or other person authorized to borrow on behalf of the
Borrower or for otherwise acting in good faith under this Section 2.1C,
and, upon funding of any Revolving Loans by the Banks in accordance with
this Loan Agreement pursuant to any telephonic notice, the Borrower shall
have effected such Revolving Loans hereunder.
(c) Except as provided in Sections 2.6B, 2.6C or 2.6F hereof, a
Request for Revolving Loan for a LIBOR Rate Loan (or telephonic notice in
lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and the Borrower shall be bound to borrow the
particular LIBOR Rate Loan in accordance therewith.
<PAGE>
(d) The Agent shall make the proceeds of each Revolving Loan
requested by the Borrower available to the Borrower on the Funding Date by
causing an amount of same day funds equal to the proceeds of such
Revolving Loan to be credited to the account of the Borrower maintained
with the Banks.
(e) The Borrower shall have no right to obtain, and the Banks
shall have no obligation to make, any Revolving Loan if a Potential Event
of Default or an Event of Default has occurred and is continuing.
(f) Each request by the Borrower for a Revolving Loan or a Swing
Line Loan shall, in and of itself, constitute a continuing representation
and warranty by the Borrower to the Banks (i) that the Borrower then is,
and at the time the Revolving Loan or Swing Line Loan is actually made
will be, entitled under this Loan Agreement to obtain the particular
Revolving Loan or Swing Line Loan, and (ii) that all of the covenants,
agreements, representations and warranties made by the Borrower herein and
in the other Loan Instruments are true and correct, and have been fully
complied with, as of such date.
(g) The Borrower shall have no right to obtain any Revolving
Loan or Swing Line Loan unless all of the terms and conditions set forth
in this Section 2.1C have been fully satisfied with regard to that
Revolving Loan or that Swing Line Loan.
2.1D. Disbursement of Revolving Loans to the Borrower. All Revolving
Loans made to the Borrower under this Loan Agreement shall be made by the Banks
simultaneously and proportionately in accordance with their respective Pro Rata
Shares of the Revolving Loan Commitments, it being understood that no Bank shall
be responsible for any default by any other Bank of that other Bank's obligation
to fund its Pro Rata Share of a Revolving Loan requested hereunder by the
Borrower, nor shall the Revolving Loan Commitment of any Bank be increased or
decreased as a result of the default by any other Bank of that other Bank's
obligation to fund its Pro Rata Share of a Revolving Loan requested hereunder by
the Borrower. Promptly after receipt by the Agent of a Request For Revolving
Loan pursuant to Section 2.1C hereof (or telephonic notice in lieu thereof), the
Agent shall notify each Bank of the Revolving Loan requested by the Borrower
pursuant thereto. Each Bank shall make its Pro Rata Share of each Revolving Loan
to be made to the Borrower available to the Agent, in same day funds, at the
office of the Agent located at 500 West Jefferson Street, Louisville, Kentucky
not later than 1:00 P.M. (Louisville, Kentucky time) on the Funding Date. Except
with respect to the reimbursement to PNC for a drawing under a Letter of Credit
issued by PNC as provided in Section 2.7 hereof, upon satisfaction or waiver of
the conditions precedent specified in Section 3.l in the case of the initial
Revolving Loan on the initial Funding Date and Section 3.3 in the case of a
Revolving Loan on any subsequent Funding Date, the Agent shall make the proceeds
of each Revolving Loan requested by the Borrower available to the Borrower on
the Funding Date by causing an amount of same day funds equal to the proceeds of
the Banks' respective Pro Rata Shares of such Revolving Loan received by the
Agent at its office located at the address set forth
<PAGE>
in the preceding sentence to be credited to the account of the Borrower at such
office of the Agent or wired to an account designated by the Borrower. All
Revolving Loans shall be paid in full to the Agent on the Revolving Loan
Commitment Termination Date.
Unless the Agent shall have been notified by any Bank prior to a
Funding Date that such Bank does not intend to make available to the Agent such
Bank's Pro Rata Share of the Revolving Loan requested on such Funding Date to be
made to the Borrower, the Agent may assume that such Bank has made such amount
available to the Agent on such Funding Date and the Agent may, in its sole
discretion, but shall not be obligated to, make available to the Borrower a
corresponding amount on such Funding Date. If such corresponding amount is not
in fact made available to the Agent by such Bank, the Agent shall be entitled to
recover such corresponding amount on demand from such Bank together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to the Agent, at the customary rate set by the Agent for the correction
of errors among banks for three (3) Business Days and thereafter at the Federal
Funds Rate. If such Bank does not pay such corresponding amount forthwith upon
the Agent's demand therefor, the Agent shall promptly notify the Borrower
thereof and the Borrower shall immediately pay such corresponding amount to the
Agent together with interest thereon, for each day from such Funding Date until
the date such amount is paid to the Agent, at the interest rate borne by the
particular Revolving Loan. Nothing in this Section 2.1D shall be deemed to
relieve any Bank from its obligation to fulfill its Revolving Loan Commitment
hereunder or to prejudice any rights that the Borrower may have against any Bank
as a result of any default by such Bank hereunder. In the event any Bank gives
notice to the Agent that such Bank does not intend to fund its Pro Rata Share of
any Revolving Loan to be made to the Borrower or in the event any Bank otherwise
fails to fund its Pro Rata Share of any Revolving Loan to be made to the
Borrower, the Agent shall promptly notify the other Banks and the Borrower of
the occurrence of any such event.
2.2. Interest on the Revolving Loans.
2.2A. Rates of Interest. Subject to the provisions of Sections 2.2G
and 2.6 hereof, each Revolving Loan made to the Borrower shall bear interest on
the unpaid principal amount thereof from the date made through maturity (whether
by acceleration or otherwise) at either the Base Rate or the LIBOR Rate as
provided below, as the case may be. The applicable basis for determining the
rate of interest with respect to Revolving Loans made to the Borrower shall be
selected by the Borrower initially at the time a Request for Revolving Loan is
delivered to the Agent pursuant to Section 2.1A hereof. The basis for
determining the interest rate with respect to any Revolving Loan made to the
Borrower may be changed from time to time pursuant to Section 2.2D hereof. If on
any day a Revolving Loan is outstanding to the Borrower with respect to which
notice has not been delivered to the Banks in accordance with the terms of this
Loan Agreement specifying the applicable basis for determining the rate of
interest to apply to such Revolving Loan then, for that day, that Revolving Loan
shall be deemed a Base Rate Loan and shall bear interest at the Base Rate.
<PAGE>
Subject to the provisions of Sections 2.6B and 2.6C hereof,
Revolving Loans shall bear interest through maturity as follows:
(i) If a Base Rate Loan, then at a rate per annum equal to
the Base Rate;
(ii) If a LIBOR Rate Loan, then at a rate per annum equal
to the LIBOR Rate; provided that, on each Date of Determination,
commencing with the first such date to occur after the Effective Date
the Applicable LIBOR Rate Margin in effect for the Pricing Period
commencing on such Date of Determination and continuing for the term
of the Pricing Period that begins on such Date of Determination shall
be the Applicable LIBOR Rate Margin corresponding to the Pricing
Level in effect for such Pricing Period, as applicable:
Applicable
Pricing Level LIBOR Rate Margin
Pricing Level I .575%
Pricing Level II .625%
Pricing Level III .675%
Pricing Level IV .725%
Pricing Level V .825%
Notwithstanding anything in the foregoing to the contrary, if
any Compliance Certificate delivered by the Borrower demonstrating the
appropriate Pricing Level shall prove to be incorrect (as determined by
reference to the Borrower's financial statements or otherwise), such
Compliance Certificate shall no longer be in effect, and the Banks shall
notify the Borrower of such incorrectness and shall calculate the
difference between the amount of interest actually paid by the Borrower on
the basis of such incorrect Compliance Certificate and the amount of
interest which would have been due had such incorrect Compliance
Certificate not been delivered. The Agent shall notify the Borrower of the
amount of such difference, if any, in a statement setting forth the method
of calculation of such amount (which calculation, in the absence of
demonstrable error, shall be deemed correct) and the Borrower shall pay
such amount to the Agent, for the benefit of the Banks, within three (3)
Business Days of such notice.
2.2B. LIBOR Interest Periods. In connection with each LIBOR Rate Loan
made to the Borrower, the Borrower may, pursuant to the Request for Revolving
Loan or Notice of Conversion/Continuation, as the case may be, select an
interest period (each an "Interest Period") to be applicable to such LIBOR Rate
Loan, which Interest Period shall be at the Borrower's option either a one, two,
three or six month period, provided that:
<PAGE>
(i) the initial Interest Period for any LIBOR Rate Loan
made to the Borrower shall commence on the Funding Date of such LIBOR
Rate Loan, in the case of a Revolving Loan initially made as a LIBOR
Rate Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Base Rate Loan converted to
a LIBOR Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a LIBOR Rate Loan made to the Borrower continued as
such pursuant to a Notice of Conversion/ Continuation, each
successive Interest Period shall commence on the day on which the
next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (iii) of this Section
2.2B, end on the last Business Day of a calendar month;
(v) there shall be no more than seven (7) Interest Periods
relating to the LIBOR Rate Loans made to the Borrower outstanding at
any time, unless there are Base Rate Loans outstanding, in which
event there shall be no more than six (6) Interest Periods relating
to LIBOR Rate Loans outstanding at such time;
(vi) in the event the Borrower fails to specify an Interest
Period in the particular Request for Revolving Loan and/or Notice of
Conversion/Continuation, the Borrower shall be deemed to have
selected an Interest Period of one month; and
(vii) no Interest Period shall extend beyond the then
stated maturity date of the Revolver.
2.2C. Interest Payments. Subject to the provisions of Section 2.2E
hereof, interest shall be payable on the Revolving Loans made to the Borrower as
follows:
(i) interest on each Base Rate Loan shall be payable in
arrears on the last day of each Fiscal Quarter, upon any prepayment
or repayment of any such Revolving Loan (to the extent accrued on the
amount being prepaid or
<PAGE>
repaid) and at maturity (including final maturity); all the interest
on the Base Rate Loans shall be computed based upon the actual number
of days elapsed over an assumed year of three hundred sixty-five
-(365) or three hundred sixty-six (366) days; and
(ii) interest on each LIBOR Rate Loan shall be payable in
arrears on the last day of an Interest Period, if the Interest Period
is one, two or three months, or shall be payable in arrears on the
three month anniversary of each Interest Period and on the last day
of the Interest Period if the Interest Period is six months, upon the
date of any prepayment or repayment of such LIBOR Rate Loan (to the
extent accrued on the amount being prepaid or repaid) and at maturity
(including final maturity); all the interest on the LIBOR Rate Loans
shall be computed based upon the actual number of days elapsed over
an assumed year of three hundred sixty (360) days.
2.2D.Conversion or Continuation. Subject to the provisions of Section
2.6 hereof, the Borrower shall have the option (i) to convert at any time all or
any part of outstanding Revolving Loans made to the Borrower from Revolving
Loans bearing interest at a rate determined by reference to one basis to
Revolving Loans bearing interest at a rate determined by reference to an
alternative basis, or (ii) upon the expiration of any Interest Period applicable
to a LIBOR Rate Loan made to the Borrower, to continue all or any portion of
such LIBOR Rate Loan as a LIBOR Rate Loan, and the succeeding Interest Period of
such continued LIBOR Rate Loan shall commence on the last day of the current
Interest Period with respect thereto; provided however that a LIBOR Rate Loan
may only be converted into a Base Rate Loan on the expiration date of the
Interest Period applicable thereto.
The Borrower shall deliver a Notice of Conversion/Continuation
to the Agent no later than 10:30 A.M. (Louisville, Kentucky time) on the
same Business Day in advance of the proposed conversion/continuation date
(in the case of a conversion to a Base Rate Loan) and at least three (3)
Business Days in advance of the proposed conversion/continuation date (in
the case of a conversion to, or a continuation of, a LIBOR Rate Loan). A
Notice of Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the
amount of the Revolving Loan to be converted/continued, (iii) the nature
of the proposed conversion/continuation, (iv) in the case of a conversion
to, or continuation of, a LIBOR Rate Loan, the requested Interest Period,
and (v) in the case of a conversion to, or a continuation of, a LIBOR Rate
Loan, that no Event of Default has occurred and is continuing. In lieu of
delivering the above-described Notice of Conversion/Continuation, the
Borrower may give the Banks telephonic notice by the required time of any
proposed conversion/continuation under this Section 2.2D; provided that
such notice shall be promptly confirmed in writing by delivery of a Notice
of Conversion/Continuation to the Agent on or before the proposed
conversion/continuation date.
<PAGE>
Neither the Agent nor the Bank shall incur any liability to the
Borrower in acting upon any telephonic notice referred to above that the
Agent believes in good faith to have been given by an Authorized Officer
of the Borrower or for otherwise acting in good faith under this Section
2.2D, and upon conversion or continuation of the applicable basis for
determining the interest rate with respect to any Revolving Loans made to
the Borrower in accordance with this Loan Agreement pursuant to any such
telephonic notice, the Borrower shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in Sections 2.6B, 2.6C and 2.6F
hereof, a Notice of Conversion/Continuation for conversion to, or
continuation of, a LIBOR Rate Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination
Date and the Borrower shall be bound to effect the conversion or
continuation in accordance therewith.
2.2E. Post-Maturity Interest. All installments of accrued interest on
and all unpaid principal of the Revolving Notes not paid to the Banks when due
or within fifteen (15) days thereafter shall bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable Bankruptcy laws) at the Default Rate until such overdue installments
of accrued interest and unpaid principal have been paid in full to the Banks.
Payment or acceptance of the increased rates of interest provided for in this
Section 2.2E is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of the Agent or any Bank.
2.2F. Computation of Interest. In computing interest on any Revolving
Loan made to the Borrower, the date of the making of such Revolving Loan or the
first day of an Interest Period applicable to such Revolving Loan or, with
respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of
conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case may be,
shall be included, and the date of payment of such Revolving Loan or the
expiration date of an Interest Period applicable to such Revolving Loan or, with
respect to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of
conversion of such Base Rate Loan to such LIBOR Rate Loan shall be excluded;
provided that if a Revolving Loan is repaid on the same day on which it is made,
one day's interest shall be paid on that Revolving Loan.
2.2G. Special Provisions Governing Federal Funds Rate.
(i) Federal Funds Rate Unascertainable. In the event that, on
any date on which a Federal Funds Rate would otherwise be set, the Agent
shall have determined (which determination shall be final and conclusive)
that, by reason of circumstances affecting the reporting of the average
national federal funds rate by the Federal Reserve Bank of New York or
such other agency then reporting such rate, reasonable means do not exist
for ascertaining the Federal Funds Rate, the Agent shall give prompt
notice of
<PAGE>
such determination to the Borrower and to the Banks and, until the Agent
notifies the Borrower and the Banks that the circumstances giving rise to
such determination no longer exist, all Base Rate Loans then or thereafter
outstanding shall bear interest at the Prime Rate.
(ii) Impracticability of Offering Federal Funds Rate by Any
Bank. In the event that any Bank shall determine, in good faith, that
it is impracticable or impossible for such Bank to offer funds to the
Borrower at the Federal Funds Rate because changes in market
conditions and/or in such Bank's cost of funds occurring after the
Closing Date have made it not feasible for such Bank to realize the
anticipated and bargained-for-yield hereunder, then such Bank shall
be an "Affected Bank" hereunder and shall promptly notify the Agent
of such impracticability. The Agent upon receipt of such notice shall
notify the Borrower that all Base Rate Loans from the Affected Bank
shall thereafter bear interest at the Prime Rate. Nothing in this
Section 2.2G(ii) shall affect the obligation of any Bank other than
an Affected Bank to make or maintain Revolving Loans as, or to
convert Revolving Loans to, Base Rate Loans in accordance with the
other terms of this Loan Agreement.
2.3. Fees.
2.3A. Revolver Commitment Fee. The Borrower agrees to pay the Agent,
for the benefit of the Banks in proportion to their respective
Commitment Fee Pro Rata Shares, commitment fees (the "Commitment
Fees") for the period from and including the Effective Date to and
excluding the Revolving Loan Commitment Termination Date, equal to
the average of the daily excess of the Revolving Loan Commitments (as
reduced pursuant to Section 2.4C hereof) over the aggregate principal
amount of Revolving Loans plus the Letter of Credit Usage multiplied
by the Applicable Revolver Commitment Fee per annum. The Commitment
Fees shall be calculated on the basis of a 360-day year and the
actual number of days elapsed and shall be payable quarterly in
arrears on the last day of each Fiscal Quarter, commencing on the
first such day to occur after the Effective Date, and on the
Revolving Loan Commitment Termination Date. The Borrower shall have
no liability to any Banks for any Commitment Fees paid to the Agent
which the Agent does not properly remit to such Banks, and any such
Bank's sole remedy in respect thereof shall be against the Agent. The
Applicable Revolver Commitment Fee in effect for the Pricing Period
commencing on the first day of each Fiscal Quarter and continuing for
the term of the Fiscal Quarter that begins on such first day of the
Fiscal Quarter shall be the Applicable Revolver Commitment Fee
corresponding to the Pricing Level in effect for such period, as
applicable
<PAGE>
Applicable Revolver
Pricing Levels Commitment Fee
Pricing Level I .150%
Pricing Level II .175%
Pricing Level III .200%
Pricing Level IV .225%
Pricing Level V .250%
Provided that, on each Date of Determination, commencing with the
first such date to occur after the Effective Date the Applicable Revolver
Commitment Fee in effect for the Pricing Period commencing on such Date of
Determination and continuing for the term of the Pricing Period that begins on
such Date of Determination shall be the Applicable Revolver Commitment Fee
corresponding to the Pricing Level in effect for such Pricing Period, as
applicable.
2.3B. Other Fees. The Borrower agrees to pay to the Agent such fees
for serving as the Agent hereunder in the amounts and at the times agreed to in
writing between the Borrower and the Agent.
2.4. Prepayments and Payments; Reductions in Revolving Loan.
2.4A. Prepayments.
(i) Voluntary Prepayments of Revolving Loans Made to the Borrower. The
Borrower may at any time prepay Revolving Loans by giving to the Agent, in the
case of Base Rate Loans, notice of intent to prepay such Base Rate Loans by
11:00 A.M. Louisville, Kentucky time on the date the Borrower elects to prepay
such Base Rate Loans and, in the case of LIBOR Rate Loans, notice of intent to
prepay by 11:00 A.M., Louisville, Kentucky time one (1) Business Day prior to
the date the Borrower elects to prepay such LIBOR Rate Loans (which notice the
Agent will promptly transmit by telecopy, telex or telephone to each Bank),
provided that each such prepayment shall be in a minimum amount of Two Hundred
Fifty Thousand Dollars ($250,000.00) and integral multiples of Fifty Thousand
Dollars ($50,000.00) in excess of that amount; provided further that in the
event that the Borrower prepays a LIBOR Rate Loan pursuant to this Section 2.4A
or pays a LIBOR Rate Loan pursuant to any other Section of this Loan Agreement
on a date that is other than the expiration date of the Interest Period
applicable thereto, the Borrower shall compensate the Banks receiving such
prepayments in accordance with the provisions of Section 2.6D hereof. If the
Borrower has given notice of prepayment as aforesaid, the principal amount of
the Revolving Loans specified in such notice shall become due and payable on the
prepayment date specified therein.
(ii) Mandatory Prepayments. The Borrower shall from time to time prepay
the Revolving Loans to the extent necessary to give effect to the limitations
set forth in Section 2.1A hereof.
<PAGE>
All prepayments of the Revolving Loans made to the Borrower shall be
applied to the outstanding Revolving Loans in the manner directed by the
Borrower and, if no direction is given by the Borrower to the Agent, first to
Base Rate Loans to the full extent thereof and then to LIBOR Rate Loans.
2.4B. General Provisions Regarding Payments.
(i) Manner and Time of Payment. Except as provided in Section 2.7 hereof,
all payments by the Borrower of principal, interest and fees hereunder and under
the Revolving Notes shall be made without defense, setoff and counterclaim and
in same day funds and delivered to the Agent not later than 12:00 Noon
(Louisville, Kentucky time) on the date due at its office located at 500 West
Jefferson Street, Louisville, Kentucky, for the account of the Banks. Funds
received by the Agent after that time shall be deemed to have been paid by the
Borrower on the next succeeding Business Day. The Borrower hereby authorizes the
Agent to charge its accounts with the Agent in order to cause timely payment to
be made to the Agent of all principal, interest and fees due hereunder (subject
to sufficient funds being available in its account for that purpose).
(ii) Apportionment of Payments. The Agent shall apportion all principal
and interest payments made by the Borrower to the payment in full of all
outstanding Revolving Loans, in each case proportionately to the Banks'
respective Pro Rata Shares. Subject to the penultimate sentence of Section 2.7E
hereof, the Agent (or, in the case of payments received by PNC from the Borrower
after payments have been made to PNC by the Banks pursuant to Section 2.7E
hereof, PNC) shall promptly distribute to each Bank at its primary address set
forth below its name on the appropriate signature page hereof or such other
address as any Bank may request, its share of all such payments received by the
Agent (or PNC in respect of Letters of Credit, including all Letter of Credit
Fees) and the Commitment Fees of such Bank when received by the Agent pursuant
to Section 2.3A hereof. Notwithstanding the foregoing provisions of this Section
2.4B(ii), if, pursuant to the provisions of Section 2.6C hereof, any Notice of
Conversion/Continuation is withdrawn as to any Affected Bank or if any Affected
Bank makes Base Rate Loans to the Borrower in lieu of its Pro Rata Share of any
LIBOR Rate Loans, the Agent shall give effect thereto in apportioning payments
received thereafter. The Borrower shall have no liability to any Bank for any
payments made to the Agent which the Agent does not properly remit to such Bank,
and any such Bank's sole remedy in respect thereof shall be against the Agent.
(iii) Payments on Business Days. Whenever any payment to be made hereunder
or under the Revolving Notes shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Revolving Notes or of the Commitment Fees
hereunder, as the case may be.
2.4C. Voluntary Reductions of Revolving Loan Commitments. The
Borrower shall have the right, at any time and from time to time, to
terminate in whole or permanently reduce in part, without premium or penalty,
the Revolving Loan Commitments in an amount up
<PAGE>
to the amount by which the Revolving Loan Commitments exceed the Total
Utilization of Revolving Loan Commitments. The Borrower shall give not less than
five (5) Business Days' prior written notice to the Agent designating the date
(which shall be a Business Day) of such termination or reduction and the amount
of any partial reduction of the Revolving Loan Commitments. Within one (1)
Business Day after receipt of a notice of such termination or partial reduction,
the Agent shall notify each Bank of the proposed termination or reduction. Such
termination or partial reduction of the Revolving Loan Commitments shall be
effective on the date specified in the Borrower's notice and shall reduce the
Revolving Loan Commitment of each Bank in proportion to its Pro Rata Share. Any
such partial reduction of the Revolving Loan Commitments shall be in an
aggregate minimum amount of Five Million Dollars ($5,000,000.00), and integral
multiples of One Million Dollars ($1,000,000.00) in excess of that amount.
2.5. Use of Proceeds.
2.5A. Revolving Loans and Letters of Credit. The proceeds of the
Revolving Loans shall be used by the Borrower for its working capital and other
general corporate purposes, including but not limited to, at the option of
Borrower, Permitted Acquisitions and repayments and prepayments of the Senior
Notes. The Letters of Credit shall be used for general corporate purposes,
including, without limitation, to secure the Borrower's legal obligations under
bonds, permits, licenses and contracts to which the Borrower is a party or
otherwise subject.
2.5B. Margin Regulations. No portion of the proceeds of any Revolving
Loans shall be used by the Borrower in any manner which might cause the making
of the Revolving Loans or the application of the proceeds thereof to violate
Regulation G, Regulation U, Regulation T, or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Securities and Exchange Act of 1934, in each case as in effect on
the date or dates of the making of any such Revolving Loan and such use of the
proceeds thereof. If requested by any Bank, the Borrower shall execute and
deliver to such Bank a completed Federal Reserve Form U-1.
2.6. Special Provisions Governing LIBOR Rate Loans. Notwithstanding
any other provision of this Loan Agreement to the contrary, the following
provisions shall govern with respect to LIBOR Rate Loans as to the matters
covered:
2.6A. Determination of Applicable Interest Rate. As soon as
practicable after 10:00 A.M. Louisville, Kentucky time on each Interest Rate
Determination Date, the Agent shall furnish to the Borrower a best efforts quote
of the Adjusted LIBOR Rate to apply to the particular LIBOR Rate Loan. The Agent
will in addition confirm to the Borrower and each Bank in writing the actual
Adjusted LIBOR Rate on the Funding Date of the particular LIBOR Rate Loan, and
the determination of each Adjusted LIBOR Rate by the Agent, provided that the
Agent shall have determined the Adjusted LIBOR Rate in good faith, shall be
final, conclusive
<PAGE>
and binding upon all parties in the absence of manifest or demonstrable error
and shall apply to the particular LIBOR Rate Loan for the applicable Interest
Period.
2.6B. Inability to Determine Applicable Interest Rate. In the event
that the Agent shall have determined in good faith (which determination shall be
final and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date or Funding Date with respect to any LIBOR Rate Loans, that by
reason of circumstances occurring after the date of this Loan Agreement
affecting the London interbank market, adequate and fair means do not exist for
ascertaining the interest rate applicable to such LIBOR Rate Loans on the basis
provided for in the definition of Adjusted LIBOR Rate, the Agent shall on such
date give notice (by telecopy or by telephone confirmed in writing) to the
Borrower and each Bank of such determination, whereupon (i) no Revolving Loans
may be made as, or converted to, LIBOR Rate Loans until such time as the Agent
notifies the Borrower and the Banks that the circumstances giving rise to such
notice no longer exist; (ii) any Notice of Conversion/Continuation given by the
Borrower with respect to the Revolving Loans in respect of which such
determination was made shall be deemed to be rescinded by the Borrower, and
(iii) any Request For Revolving Loan given by the Borrower with respect to the
Revolving Loans in respect of which such determination was made shall be deemed
to be a request to make Base Rate Loans.
2.6C. Illegality or Impracticability of LIBOR Rate Loans.In the event
that on any date any Bank shall have determined in good faith (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with the Borrower and the Agent) that
the making, maintaining or continuation of its LIBOR Rate Loans (i) has become
unlawful as a result of compliance by such Bank in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable, or would cause such Bank material
hardship, as a result of contingencies occurring after the date of this Loan
Agreement which materially and adversely affect the London interbank market or
the position of such Bank in that market, then, and in any such event, such Bank
shall be an "Affected Bank" and it shall as soon as practicable but in no event
later than the next Business Day give notice (by telecopy or by telephone
confirmed in writing) to the Borrower and the Agent of such determination (which
notice the Agent shall promptly transmit to each other Bank). Thereafter, (a)
the obligation of the Affected Bank to make Revolving Loans as, or to convert
Revolving Loans to, LIBOR Rate Loans shall be suspended until such notice shall
be withdrawn by the Affected Bank, (b) to the extent such determination by the
Affected Bank relates to a LIBOR Rate Loan then being requested by the Borrower
pursuant to a Request For Revolving Loan or a Notice of Conversion/Continuation,
the Affected Bank shall make such LIBOR Rate Loan as (or convert such LIBOR Rate
Loan to, as the case may be) a Base Rate Loan, and (c) the Affected Bank's
obligation to maintain its outstanding LIBOR Rate Loans, as the case may be (the
"Affected Loans"), shall be terminated at the earlier to occur of the expiration
of the Interest Period then in effect with respect to the Affected Loans or when
required by law, and the Affected Loans shall automatically convert into Base
Rate Loans on the
<PAGE>
date of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Bank as described above relates to a LIBOR Rate
Loan then being requested by the Borrower pursuant to a Request For Revolving
Loan or a Notice of Conversion/Continuation, the Borrower shall have the option
to rescind such Request For Revolving Loan or Notice of Conversion/Continuation
as to all the Banks by giving notice (by telecopy or by telephone confirmed in
writing) to the Agent of such rescission on the date on which the Affected Bank
gives notice of its determination as described above (which notice of rescission
the Agent shall promptly transmit to each other Bank). Except as provided in the
immediately preceding sentence, nothing in this Section 2.6C shall affect the
obligation of any Bank other than an Affected Bank to make or maintain Revolving
Loans as, or to convert Revolving Loans to, LIBOR Rate Loans in accordance with
the terms of this Loan Agreement.
2.6D. Compensation For Breakage or Non-Commencement of Interest
Periods. The Borrower shall compensate each Bank, within fifteen (15) days after
written request by that Bank (which request shall set forth the basis for
requesting such amounts), for all reasonable losses, expenses and liabilities
(including, without limitation, any interest paid by that Bank to lenders of
funds borrowed by it to make or carry its LIBOR Rate Loans and any reasonable
loss, expense or liability sustained by that Bank in connection with the
liquidation or re-employment of such funds) which that Bank may sustain: (i) if
for any reason (other than a default by that Bank or the conversion of such
Bank's Request For Revolving Loan from a request to make LIBOR Rate Loans into a
request to make Base Rate Loans pursuant to Section 2.6B or 2.6C hereof) a
borrowing of any LIBOR Rate Loan does not occur on a date specified therefor in
a Request For Revolving Loan or a telephonic request for borrowing, or a
conversion to or continuation of any LIBOR Rate Loan does not occur on a date
specified therefor in a Notice of Conversion/Continuation or a telephonic
request for conversion or continuation, (ii) if any prepayment or conversion of
any of its LIBOR Rate Loans occurs on a date that is not the last day of an
Interest Period applicable to that LIBOR Rate Loan, even if the Borrower gave
written notice of the intended prepayment to the Agent in accordance with the
provisions of Section 2.1A hereof, (iii) if any prepayment of any of its LIBOR
Rate Loans is not made on any date specified in a notice of prepayment given by
the Borrower, or (iv) as a consequence of any other default by the Borrower to
repay its LIBOR Rate Loans when required by the terms of this Loan Agreement.
Each Bank seeking compensation from the Borrower pursuant to this Section 2.6D
shall deliver to the Borrower a certificate setting forth the calculation of the
compensation claimed to be due to such Bank within thirty (30) days after the
occurrence of the event giving rise to such claim for compensation, which
calculations shall be binding upon the Borrower in the absence of manifest or
demonstrable error
2.6E. Booking of LIBOR Rate Loans. Any Bank may make, carry or
transfer LIBOR Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Bank; provided however that if any
transfer of LIBOR Rate Loans from the office where such LIBOR Rate Loans
originated shall materially and unreasonably increase the cost to the Borrower
of such LIBOR Rate Loans, such transfer may occur only if required (x) by the
introduction of or any change (including, without limitation, any change by way
of
<PAGE>
imposition or increase of reserve requirements) in or in the interpretation of
any law or regulation, or (y) to comply with any guideline or request from any
central bank or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally (whether or
not such guideline or request shall have the force of law).
2.6F. LIBOR Rate Loans After Default. After the occurrence and during
the continuation of an Event of Default, (i) the Borrower may not elect to have
a Revolving Loan be made or maintained as, or converted to, a LIBOR Rate Loan
after the expiration of any Interest Period then in effect for that Revolving
Loan, (ii) subject to the provisions of Section 2.6D hereof, any Request For
Revolving Loan or Notice of Conversion/Continuation given by the Borrower with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by the Borrower, and (iii) all LIBOR
Rate Loans and Base Rate Loans shall thereupon bear interest at the Default Rate
until the Event of Default is cured or the Revolving Loans are paid in full to
the Banks and the Revolving Loan Commitments have expired or have been
terminated by the Borrower or the Banks.
2.7. Letters of Credit.
2.7A. Letters of Credit. Subject to the terms and conditions of this
Loan Agreement and in reliance upon the representations and warranties of the
Borrower set forth herein, the Borrower may request, in accordance with the
provisions of this Section 2.7A, that on and after the Closing Date, PNC issue
Letters of Credit for the account of the Borrower denominated in Dollars.
Issuances of Letters of Credit shall be subject to the following limitations:
(i) The Borrower may not request that PNC issue any Letter of
Credit if, after giving effect to such issuance, (y) the total Letter
of Credit Usage would exceed Ten Million Dollars ($10,000,000), or
(z) the Total Utilization of Revolving Loan Commitments would exceed
the Revolving Loan Commitments as the amount available under such
Revolving Loan Commitments may be limited from time to time pursuant
to the second paragraph of Section 2.1A hereof or shall be reduced
from time to time pursuant to Section 2.4C hereof.
(ii) In no event shall PNC issue, reissue, amend or permit the
extension of: (y) any Letter of Credit having an expiration date
later than the Revolving Loan Commitment Termination Date in effect
at the time of issuance, reissuance, amendment or extension
(automatic or otherwise) thereof; or (z) subject to the foregoing
clause (y), any Letter of Credit having an expiration date more than
one year after its date of issuance; provided that subject to the
foregoing clause (y), this clause (z) shall not prevent PNC from
agreeing that a Letter of Credit will automatically be extended
annually for one or more periods each not to exceed
<PAGE>
one year if PNC does not cancel such extension, subject to the Banks
extending the Revolving Loan Commitment Termination Date.
It shall be a condition precedent to the issuance of any Letter of
Credit in accordance with the provisions of this Section 2.7 that each condition
set forth in Sections 3.2 and 3.3 of this Loan Agreement shall have been
satisfied.
Immediately upon the issuance of each Letter of Credit, each Bank
shall be deemed to, and hereby agrees to, have irrevocably purchased from PNC a
participation in such Letter of Credit and drawings thereunder in an amount
equal to such Bank's Pro Rata Share of the maximum amount which is or at any
time may become available to be drawn thereunder.
Each Letter of Credit shall provide that it shall be subject to the
Uniform Customs and Practice of Documentary Credits (1993 Revision),
International Chamber of Commerce Brochure No. 500, or any successor thereto.
Each Letter of Credit may provide that PNC may (but shall not be required to)
pay the beneficiary thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the Revolving Loans or, if payment is not then
due to the beneficiary, provide for the deposit of funds in an account to secure
payment to the beneficiary and that any funds so deposited shall be paid to the
beneficiary of the Letter of Credit if conditions to such payment are satisfied
or returned to PNC for distribution to the Banks (or, if all Obligations shall
have been indefeasibly paid in full, to the Borrower) if no payment to the
beneficiary has been made and thirty (30) days after the final date available
for drawings under the Letter of Credit has passed. Each payment or deposit of
funds by PNC as provided in this paragraph shall be treated for all purposes of
this Loan Agreement as a drawing duly honored by PNC under the related Letter of
Credit.
2.7B. Notice of Issuance. Whenever the Borrower desires the issuance
of a Letter of Credit, the Borrower shall deliver to PNC an Application and
Agreement for Letter of Credit in the form of Exhibit C annexed hereto no later
than 10:00 A.M. (Louisville, Kentucky time) at least ten (10) Business Days, or
in each case such shorter period as may be agreed to by PNC in any particular
instance, in advance of the proposed date of issuance. The Application and
Agreement for Letter of Credit shall specify (i) the proposed date of issuance
(which shall be a Business Day under the laws of the Commonwealth of Kentucky),
(ii) the face amount of the Letter of Credit, (iii) the expiration date of the
Letter of Credit, (iv) the name and address of the beneficiary, and (v) a
summary of the purpose and contemplated terms of such Letter of Credit. Prior to
the date of issuance of any Letter of Credit, the Borrower shall specify a
precise description of the documents and the proposed text of any certificate to
be presented by the beneficiary under such Letter of Credit which, if presented
by the beneficiary prior to the expiration date of the Letter of Credit, would
require PNC to make payment under the Letter of Credit; provided that PNC, in
its sole reasonable judgment, may require changes in any such documents and
certificates; provided further that no Letter of Credit shall require payment
against a conforming draft to be made thereunder on the same Business Day (under
the laws of the Commonwealth of Kentucky) that such draft is presented if such
presentation is made after
<PAGE>
11:00 A.M. (Louisville, Kentucky time) on such Business Day. In determining
whether to pay under any Letter of Credit, PNC shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on their face
with the requirements of that Letter of Credit; provided, further, nothing
contained in this Section 2.7B shall be deemed to prejudice the right of the
Borrower to recover from PNC in respect of any amounts paid by PNC under any
Letter of Credit in the event that it is determined by a court of competent
jurisdiction that the payment with respect to such Letter of Credit by PNC
constituted gross negligence or willful misconduct on the part of PNC.
2.7C. Delivery of Copies of Letters of Credit and Letter of Credit
Amendments. PNC shall, promptly after the issuance of each Letter of Credit, or
any amendment or cancellation thereto, furnish each other Bank with a copy of
such Letter of Credit or of such amendment or cancellation, as the case may be,
together with, in the case of the issuance of any Letter of Credit, the amount
of their risk participation therein, which shall be each Bank's Pro Rata Share
of the stated amount of such Letter of Credit.
2.7D. Payment of Amounts Drawn Under Letters of Credit. In the event
of any drawing under any Letter of Credit by the beneficiary thereof, PNC shall
promptly notify the Borrower of such drawing, and the Borrower shall reimburse
PNC on the date on which such drawing is honored in an amount in same day funds
equal to the amount of such drawing. The Borrower shall have the right to obtain
a Revolving Loan (subject to the limitations set forth in Section 2.1A hereof)
in an amount sufficient to repay in full any such drawing honored by PNC under a
Letter of Credit.
2.7E. Payment by Banks with Respect to Letters of Credit.In the event
that the Borrower shall fail to reimburse PNC as provided in Section 2.7D hereof
in an amount equal to the amount of any drawing honored by PNC under a Letter of
Credit issued by PNC, PNC shall promptly notify each Bank of the unreimbursed
amount of such drawing and of such Bank's respective participation therein,
which participation shall be equal to such Bank's Pro Rata Share of the
unreimbursed amount of such drawing. Each Bank shall make available to PNC an
amount equal to its respective participation in same day funds, at the offices
of PNC located at 500 West Jefferson Street, Louisville, Kentucky, not later
than 1:00 P.M. (Louisville, Kentucky time) on the Business Day (under the laws
of the Commonwealth of Kentucky) after the date notified by PNC, and each such
amount so made available by each Bank will be deemed a Revolving Loan made by
such Bank to the Borrower under this Loan Agreement as of the date such amount
is so made available to PNC. In the event that any Bank fails to make available
to PNC the amount of such Bank's participation in such Letter of Credit as
provided in this Section 2.7E, PNC shall be entitled to recover such amount on
demand from such Bank together with interest at the customary rate set by PNC
for the correction of errors among banks for three Business Days and thereafter
at the Federal Funds Rate. Nothing in this Section 2.7 shall be deemed to
prejudice the right of any Bank to recover from PNC any amounts made available
by such Bank to PNC pursuant to this Section 2.7E in the event that it is
determined by a court of competent jurisdiction that the payment made by PNC
with respect to a Letter of Credit in
<PAGE>
respect of which reimbursement was made by such Bank constituted gross
negligence or willful misconduct on the part of PNC. PNC shall distribute to
each other Bank which has paid all amounts payable by it under this Section 2.7E
with respect to any Letter of Credit issued by PNC such other Banks Pro Rata
Share of all payments received by PNC from the Borrower in reimbursement of
drawings honored by PNC under such Letter of Credit, as the case may be, when
such payments are received. Notwithstanding anything to the contrary herein,
each Bank which has paid all amounts payable by it under this Section 2.7E shall
have a direct right to reimbursement of such amounts from the Borrower, subject
to the procedures for reimbursing Banks set forth in this Section 2.7.
2.7F. Compensation. The Borrower agrees to pay, without duplication,
the following amounts to PNC with respect to each such Letter of Credit issued
by PNC for the account of the Borrower:
(i) With respect to each Letter of Credit a letter of credit
issuance fee payable to PNC equal to 1/8th of 1% per annum of the maximum
amount available from time to time to be drawn under such Letter of
Credit, calculated on the basis of a 360-day year and the actual number of
days elapsed and payable in immediately available funds quarterly in
advance to PNC until the expiration of such Letter of Credit;
(ii) With respect to each Letter of Credit a letter of credit
fee (the "Letter of Credit Fee") payable to PNC for the account of the
Banks (and to be shared by the Banks as provided in Section 2.7E hereof)
equal to the per annum Applicable Letter of Credit Fee multiplied by the
maximum amount available from the time to time to be drawn under such
Letter of Credit, calculated on the basis of a 360-day year and the actual
number of days elapsed and payable in immediately available funds
quarterly in arrears on the first Business Day immediately succeeding the
last day of each Fiscal Quarter and upon expiration of such Letter of
Credit; provided, however, upon the occurrence and during the continuation
of any Event of Default, the Letter of Credit Fee shall equal two percent
(2%)per annum plus the Applicable Letter of Credit Fee in effect on the
date of the occurrence of such Event of Default;
On each Date of Determination, commencing with the first such date to
occur after December 31, 1998, the Applicable Letter of Credit Fee in effect for
the Pricing Period commencing on such Date of Determination and continuing for
the term of the Pricing Period that begins on such Date of Determination shall
be the Applicable Letter of Credit Fee corresponding to the Pricing Level in
effect for such Pricing Period, as follows:
<PAGE>
Applicable
Pricing Level Letter of Credit Fee
Pricing Level I .575%
Pricing Level II .625%
Pricing Level III .675%
Pricing Level IV .725%
Pricing Level V .825%
(iii) With respect to drawings made under any Letter of Credit,
interest, payable in immediately available funds to PNC on demand, on the
amount paid by PNC in respect of each drawing from the date of the drawing
through the date such amount is reimbursed by the Borrower at a variable
rate equal to the Base Rate then in effect for Base Rate Loans made or
available to be made to the Borrower;
(iv) With respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder, documentary and
processing charges payable to PNC in accordance with PNC's standard
schedule for such charges in effect at the time of such issuance,
amendment, transfer or drawing, as the case may be; and
(v) Promptly upon receipt by PNC of the amount described in
subsections (ii) and (iii) of this Section 2.7F, PNC shall distribute to
each Bank its pro rata share of such amount.
2.7G. Obligations Absolute. Subject to the right of the Borrower and
the Banks to seek damages in the event that a court of competent jurisdiction
determines that PNC acted in bad faith and/or committed gross negligence or
willful misconduct in honoring any draft presented under any Letter of Credit
issued by PNC, the obligation of the Borrower to reimburse PNC for drawings made
under such Letter of Credit and the obligation of the Banks under Section 2.7E
hereof to reimburse PNC in accordance with their Pro Rata Shares for drawings
made under such Letter of Credit shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Loan Agreement under
all circumstances including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of such Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which the
Borrower may have at any time against a beneficiary or any transferee of such
Letter of Credit (or any Persons for whom any such transferee may be acting),
the Agent, any Bank or any other Person, whether in connection with this Loan
Agreement, the transactions contemplated herein or any unrelated transaction
(including any underlying transaction between the Borrower and the beneficiary
for which such Letter of Credit was procured);
<PAGE>
(iii) any draft, demand, certificate or any other document presented under
such 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;
(iv) payment by PNC under such Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit;
(v) any other circumstance or happening whatsoever, which is similar to
any of the foregoing; or
(vi) the fact that an Event of Default or a Potential Event of Default
under this Loan Agreement shall have occurred and be continuing.
As between the Borrower and PNC, the Borrower assumes all risks of
the acts and omissions of, or misuse of the Letters of Credit issued by PNC for
the account of the Borrower by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, PNC shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for and issuance of such Letters of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) for errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document required in order
to make a drawing under any such Letter of Credit or of the proceeds thereof;
(vii) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; and (viii) for any
consequences arising from causes beyond the control of PNC, including, without
limitation, any act or omission, whether rightful or wrongful, of any present or
future government agency or authority. None of the above shall affect, impair,
or prevent the vesting of any of PNC's rights or powers hereunder; provided
however, that PNC shall be responsible for any payment PNC makes under any
Letter of Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit in the
event such payment constitutes bad faith, gross negligence or willful misconduct
of PNC as determined by a court of competent jurisdiction.
In furtherance and extension and not in limitation of the specific
provisions herein above set forth, any action taken or omitted by PNC under or
in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith and without bad
<PAGE>
faith, gross negligence or willful misconduct, shall not put PNC under any
resulting liability to the Borrower or the Banks.
Notwithstanding anything to the contrary contained in this Section
2.7, the Borrower shall have no obligation to indemnify PNC in respect of any
liability incurred by PNC arising out of the bad faith, gross negligence or
willful misconduct of PNC, as determined by a court of competent jurisdiction,
or out of the wrongful dishonor by PNC of proper demand for payment made under
the Letters of Credit issued by it.
2.7H. Computation of Interest. Interest payable pursuant to this
Section 2.7 shall be computed on the basis of a 360-day year and the actual
number of days elapsed in the period during which it accrues.
2.7I. Amendments. The Borrower may request that PNC enter into one or
more amendments of any Letter of Credit issued by PNC for the account of the
Borrower by delivering to PNC an Application and Agreement For Letter of Credit
specifying (i) the proposed date of the amendment, and (ii) the requested
amendment. PNC shall be entitled to enter into amendments with respect to the
Letters of Credit issued by it; provided however that any such amendment
extending the expiry date, changing the letter of Credit Fee Percentage, or
increasing the stated amount of any Letter of Credit shall only be permitted if
PNC would be permitted to issue a new Letter of Credit having such an expiry
date, different Letter of Credit Fee Percentage, or stated amount under this
Section 2.7 on the date of the amendment.
2.8. Increased Costs; Taxes; Capital Adequacy.
2.8A. Compensation for Increased Costs and Taxes. In the event that
any Bank shall determine in good faith (which determination shall, absent
manifest or demonstrable error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by such
Bank with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental
authority, and which has the force of law and first becomes effective after the
Closing Date:
(i) subjects such Bank (or its applicable lending office) to any
additional Covered Tax with respect to this Loan Agreement or any of the
Revolving Loans or any of its obligations hereunder, or changes the basis of
taxation of payments to such Bank (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder (but not changes
in Excluded Taxes);
<PAGE>
(ii) imposes, modifies or holds applicable any additional reserve
(including without limitation any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit extended by, or any
other acquisition of funds by, the Bank (or its applicable lending office)
(other than any such reserve or other requirements with respect to LIBOR Rate
Loans that are reflected in the definition of Adjusted LIBOR Rate, as the case
may be); or
(iii) imposes any other condition on or affecting such Bank (or its
applicable lending office) or its obligations hereunder or the London interbank
market, other than with respect to Taxes; and the result of any of the foregoing
is to increase the cost to such Bank of agreeing to make, making or maintaining
Revolving Loans hereunder or to reduce any amount received or receivable by such
Bank (or its applicable lending office) with respect thereto, then, in any such
case, the Borrower shall promptly pay to such Bank, upon demand, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest as such Bank in its reasonable discretion shall determine)
as may be necessary to compensate such Bank on an after-tax basis for any such
increased cost or reduction in amounts received or receivable hereunder;
provided that any increased cost arising as a result of any of the foregoing
other than in respect of Taxes shall apply only to LIBOR Rate loans; provided
further, such Bank shall have the right to seek such additional compensation
from the Borrower only if such Bank has given the Borrower not less than ninety
(90) days prior written notice of such Bank's intent to seek such additional
compensation from the Borrower and only if such Bank is generally seeking to
recover the additional costs of the type referred to in this Section 2.8A from
its other borrowers similarly situated; provided even further, each Bank that
seeks additional compensation from the Borrower pursuant to this Section 2.8A
shall be an Affected Bank and such Bank shall be entitled to such additional
compensation from the Borrower only if the Borrower has not replaced such Bank
pursuant to Section 10 hereof within the ninety (90) day notice period provided
above. Such Bank shall deliver to the Borrower a written statement, setting
forth in reasonable detail the basis for calculating the additional amounts owed
to such Bank under this Section 2.8A, which statement shall be conclusive and
binding upon all parties hereto absent manifest or demonstrable error.
2.8B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by the Borrower under
this Loan Agreement and the other Loan Instruments to or for the benefit of any
Bank or the Agent or any Person who acquires any interest in the Revolving Loans
pursuant to the provisions hereof shall be paid free and clear of and (except to
the extent required by law) without any deduction or withholding on account of
any Covered Tax imposed, levied, collected, withheld or assessed by or within
the United States of America or any political subdivision in or of the United
States of America or any other jurisdiction from or to which a payment is made
by or on behalf of the Borrower or by any federation or organization of which
the United States of America or any such jurisdiction is a member at the time of
payment.
<PAGE>
(ii) Grossing-up of Payments. If the Borrower or any other Person is
required by law to make any deduction or withholding on account of any Covered
Tax from any sum paid or payable by the Borrower to the Agent or any Bank under
any of the Loan Instruments;
(1) The Borrower shall notify the Agent of any such requirement or any
change in any such requirement as soon as the Borrower becomes aware of it;
(2) The Borrower shall pay any such Tax before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is imposed on
the Borrower) for its own account or (if that liability is imposed on the Agent
or such Bank, as the case may be) on behalf of and in the name of the Agent or
such Bank;
(3) The sum payable by the Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to the extent
necessary to ensure that, after the making of that deduction, withholding or
payment, the Agent or such Bank, as the case may be, receives on the due date
and retains (free from any liability in respect of any such deduction,
withholding or payment) a net sum equal to what it would have received and so
retained had no such deduction, withholding or payment in respect of Covered
Taxes been required or made; and
(4) Within thirty (30) days after paying any sum from which it is required
by law to make any deduction or withholding, and within thirty (30) days after
the due date of payment of any Tax which it is required to pay by clause (b)
above, the Borrower shall deliver to the Agent evidence satisfactory to the
other affected parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any Bank
under clause (3) above except to the extent that any change after the date
hereof in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such deduction,
withholding or payment from that in effect at the date of this Loan Agreement in
respect of payments to such Bank; provided, further, such Bank shall have the
right to seek such additional amounts under this Section 2.8B from the Borrower
only if such Bank has given the Borrower not less than ninety (90) days prior
written notice of such Bank's intent to seek such additional amounts from the
Borrower and only if such Bank is generally seeking to recover the additional
amounts of the type referred to in this Section 2.8B from its other borrowers
similarly situated; provided even further, each Bank that seeks additional
amounts from the Borrower-pursuant to this Section 2.8B shall be an Affected
Bank and such Bank shall be entitled to such additional amounts from the
Borrower only if the Borrower has not replaced such Bank pursuant to Section 10
hereof within the ninety (90) day notice period provided above.
(iii) Tax Refund. If the Borrower determines in good faith that a
reasonable basis exists for contesting a Covered Tax, the relevant Bank or Tax
Transferee or the Agent, as applicable,
<PAGE>
shall cooperate with the Borrower in challenging such Tax at the Borrower's
expense if requested by the Borrower (it being understood and agreed that
neither the Agent nor any Bank shall have any obligation to contest, or any
responsibility for contesting, any Tax). If any Tax Transferee, any Bank or the
Agent, as applicable, receives a refund (whether by way of a direct payment or
by offset of any Covered Tax for which a payment has been made pursuant to this
Section 2.8) the amount of such refund (together with any interest received
thereon) shall be paid to the Borrower to the extent payment has been made in
full pursuant to this Section 2.8.
(iv) U.S. Tax Certificates. Each Bank that is organized under the laws of
any jurisdiction other than the United States or any state or other political
subdivision thereof shall deliver to the Agent for transmission to the Borrower,
on or prior to the Closing Date (in the case of each Bank listed on the
signature pages hereof) or on the date (and as a condition to effectiveness) of
the Assignment Agreement pursuant to which it becomes a Bank (in the case of
each other Bank), and at such other times as may be necessary in the
determination of the Borrower or the Agent (each in the reasonable exercise of
its discretion), such certificates, documents or other evidence, properly
completed and duly executed by such Bank (including, without limitation,
Internal Revenue Service Form 1001 or Form 4224 or any other certificate or
statement of exemption required by Treasury Regulations Section 1.1441-4(a) or
Section 1.1441-6(c) or any successor thereto) to establish that such Bank is not
subject to deduction or withholding of United States federal income tax under
Section 1441 or 1442 of the Internal Revenue Code or otherwise (or under any
comparable provisions of any successor statute) with respect to any payments to
such Bank of principal, interest, fees or other amounts payable under any of the
Loan Instruments. The Borrower shall be required to pay any additional amount to
any such Bank under clause (3) of Section 2.8B(ii) hereof if such Bank shall
have failed to satisfy the requirements of the immediately preceding sentence;
provided that if such Bank shall have satisfied such requirements on the Closing
Date (in the case of each Bank listed on the signature pages hereof) or on the
date of the Assignment Agreement pursuant to which it became a Bank (in the case
of each other Bank), nothing in this Section 2.8B(iv) shall relieve the Borrower
of its obligation to pay any additional amounts pursuant to clause (3) of
Section 2.8B(ii) hereof in the event that, as a result of any change in
applicable law, such Bank is no longer properly entitled to deliver
certificates, documents or other evidence at a subsequent date establishing the
fact that such Bank is not subject to withholding as described in the
immediately preceding sentence.
2.8C. Capital Adequacy Adjustment. If any Bank shall have determined
in good faith that the adoption, effectiveness, phase-in or applicability of any
law, rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
applicable lending office) with any guideline, request or directive regarding
capital adequacy of any such governmental authority, central bank or comparable
agency, and which has the force of law and first becomes effective after the
Closing Date, has or will have the effect of reducing the rate of return on the
capital of such Bank or any corporation controlling such Bank as a consequence
of, or with reference to, such Bank's Revolving Loans or Revolving Loan
<PAGE>
Commitment or other Obligations hereunder to a level below that which such Bank
or such controlling corporation would have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Bank or such controlling corporation with
regard to capital adequacy), then from time to time, within ten (10) Business
Days after demand by such Bank (with a copy of such demand to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank or such controlling corporation on an after-tax basis for
such reduction as and when incurred; provided, such Bank shall have the right to
seek such additional compensation from the Borrower only if such Bank has given
the Borrower not less than ninety (90) days prior written notice of such Bank's
intent to seek such additional compensation from the Borrower and only if such
Bank is generally seeking to recover such additional compensation of the type
contemplated in this Section 2.8C from its other borrowers similarly situated
provided further, each Bank that seeks additional compensation from the Borrower
pursuant to this Section 2.8C shall be an Affected Bank and such Bank shall be
entitled to such additional compensation from the Borrower only if the Borrower
has not replaced such Bank pursuant to Section 10 hereof within the ninety (90)
day notice period provided above. Each Bank, upon determining in good faith that
any additional amounts will be payable pursuant to this Section 2.8C, will give
prompt written notice thereof to the Borrower, which notice shall set forth the
basis of the calculation of such additional amounts, although the failure to
give any such notice shall not release or diminish any of the Borrower's
obligations to pay additional amounts under this Section 2.8C.
2.9. Banks' Obligation to Mitigate. Each Bank agrees that, as
promptly as practicable after the officer of such Bank responsible for
administering the Revolving Loans under this Loan Agreement becomes aware of the
occurrence of an event or the existence of a condition that would cause such
Bank to become an Affected Bank or that would entitle such Bank to receive
payments under Section 2.6 or 2.8 hereof, it will, to the extent not
inconsistent with such Bank's internal policies, use reasonable efforts (i) to
make, fund or maintain the Revolving Loan Commitment of such Bank or the
Affected Loans of such Bank through another lending office of such Bank, or (ii)
take such other reasonable measures if as a result thereof the circumstances
which would cause such Bank to be an Affected Bank would cease to exist or the
additional amounts which would otherwise be required to be paid to such Bank
pursuant to Section 2.6 or 2.8 hereof would be materially reduced and if, as
determined by such Bank in its sole discretion, the making, funding or
maintaining of such Revolving Loan Commitment or Revolving Loans through such
other lending office or in accordance with such other measures, as the case may
be, would not otherwise materially adversely affect such Revolving Loan
Commitments or Revolving Loans or the interests of such Bank; provided that such
Bank will not be obligated to utilize such other lending office pursuant to this
Section 2.9 unless the Borrower agree to pay all expenses incurred by such Bank
in utilizing such other lending office. A certificate as to the amount of any
such expenses payable by the Borrower pursuant to this Section 2.9 (setting
forth in reasonable detail the basis for requesting such amount) submitted by
such Bank to the Borrower shall be conclusive absent manifest or demonstrable
error.
<PAGE>
2.10. Records.
2.10A. The Agent shall record the names and addresses of the Banks
and the Revolving Loan Commitments and the Revolving Loans (or
participations therein) of each Bank from time to time in the electronic
records of the Agent. The Borrower, the Agent and the Banks may treat each
Person whose name is so recorded in the electronic records of the Agent as
a Bank hereunder for all purposes of this Loan Agreement. Printouts of the
Agent's electronic records shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice to the Agent.
2.10B. The Agent shall record the Revolving Loan Commitment and the
Revolving Loans from time to time of each Bank made to the Borrower and each
repayment or prepayment in respect of the principal amount of the Revolving
Loans of each Bank made to the Borrower in the Agent's electronic records. Any
such recordation in accordance with the terms of this Loan Agreement shall be
conclusive and binding on the Borrower absent manifest error; provided, that
failure to make any such recordation, or any error in such recordation, shall
not affect the Borrower's obligation to repay all Revolving Loans to the Banks
in accordance with this Loan Agreement and the Revolving Notes.
2.10C. Each Bank shall record on its internal records its Pro Rata
Share of each Revolving Loan made by it to the Borrower and each payment in
respect thereof. Any such recordation in accordance with the terms of this Loan
Agreement shall be conclusive and binding on the Borrower absent manifest error;
provided, that failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligation to repay all Revolving
Loans to the Banks in accordance with this Loan Agreement; provided further,
that in the event of any inconsistency between the Agent's electronic records
and any Bank's records, the Agent's electronic records shall govern in the
absence of manifest or demonstrable error.
2.11. Swing Line Loans.
2.11A. Swing Line Loan Commitment. Subject to the terms and
conditions of this Loan Agreement and in reliance upon the representations and
warranties of the Borrower set forth herein, PNC hereby agrees, subject to the
limitations set forth below with respect to the maximum amount of Swing Line
Loans permitted to be outstanding from time to time, to make a portion of its
Revolving Loan Commitment available to the Borrower from time to time during the
period up to but not including the Revolving Loan Commitment Termination Date in
an aggregate principal amount of up to Five Million Dollars ($5,000,000.00), by
making Swing Line Loans to the Borrower, notwithstanding the fact that such
Swing Line Loans, when aggregated with PNC's outstanding Revolving Loans, may
exceed PNC's Revolving Loan Commitment. PNC's commitment to make Swing Line
Loans to the Borrower pursuant to this Section 2.11 is herein called its "Swing
Line Loan Commitment." In no event shall (a) the aggregate principal amount of
Swing Line Loans outstanding at any time exceed the Swing Line Loan Commitment,
or (b) the aggregate principal amount of Revolving Loans and Swing Line Loans
outstanding at any time exceed the sum of the aggregate Revolving Loan
Commitments reduced by the aggregate Letter of Credit Usage at such time. Any
reduction of the Revolving
<PAGE>
Loan Commitments made pursuant to Section 2.4 hereof which reduces the Revolving
Loan Commitments below the then current amount of the Swing Line Loan Commitment
shall result in an automatic corresponding reduction of the Swing Line Loan
Commitment to the amount of the Revolving Loan Commitments as so reduced,
without any further action on the part of PNC.
PNC's Swing Line Loan Commitment shall constitute a 364-day facility
and shall be renewable from time to time at the sole option of PNC upon not less
than thirty (30) days' prior written notice to the Borrower; Provided, that all
outstanding Swing Line Loans on the date of cancellation of the Swing Line Loan
Commitment, if such date is earlier than the Revolving Loan Commitment
Termination Date shall be paid in full to PNC with Revolving Loans made by the
Banks in accordance with their respective Pro Rata Shares in the manner set
forth in Section 2.1D herein; provided further, the Swing Line Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all Swing
Line Loans shall be paid in full to PNC no later than such date.
All Swing Line Loans shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration or
otherwise) at a rate per annum equal to the Offered Rate, shall be payable
monthly in arrears and shall not be entitled to be converted into LIBOR Rate
Loans unless and until such Swing Line Loans are converted to Revolving Loans in
accordance with Section 2.11C hereof. Swing Line Loans made on any Funding Date
may be in any amount up to Five Million Dollars ($5,000,000.00), or, if less,
the positive difference between Five Million Dollars ($5,000,000.00) and the
aggregate principal amount of all Swing Line Loans then outstanding. All Swing
Line Loans together with accrued interest thereon shall be evidenced by the
Swing Line Note. All Swing Line Loans shall be paid in full to PNC on the Swing
Line Loan Commitment Termination Date.
2.11B. Request For Swing Line Loans. Whenever the Borrower desires to
obtain a Swing Line Loan pursuant to Section 2.11A hereof, it shall deliver to
PNC a Request For Swing Line Loan no later than 1:00 P.M. (Louisville, Kentucky
time) on the proposed Funding Date. The Request For Swing Line Loan shall
specify (i) the proposed Funding Date (which shall be a Business Day), and (ii)
the amount of the proposed Swing Line Loan. In lieu of delivering the
above-described Request For Swing Line Loan, the Borrower may give PNC
telephonic notice by the required time of any proposed borrowing under this
Section 2.11B; provided that such notice shall be promptly confirmed in writing
by delivery of a Request For Swing Line Loan to PNC prior to or promptly after
the Funding Date of the requested Swing Line Loan.
Neither the Agent nor any Bank shall incur any liability to the
Borrower in acting upon any telephonic notice referred to above which PNC
believes in good faith to have been given by a duly Authorized Officer or other
Person authorized to borrow on behalf of the Borrower or for otherwise acting in
good faith under this Section 2.11B and, upon funding of Swing Line Loans by PNC
in accordance with this Loan Agreement pursuant to any telephonic notice, the
Borrower shall have effected such Swing Line Loans hereunder.
<PAGE>
2.11C. Reimbursement to PNC for Swing Line Loans. PNC shall notify
each Bank on Tuesday of each week of any Swing Line Loans that are outstanding,
and, within one (1) Business Day after receipt of such notice, each Bank,
including PNC, shall make a Revolving Loan (which shall initially be funded as a
Base Rate Loan), in each case as directed by PNC, in an amount equal to such
Bank's Pro Rata Share of the amount of the Swing Line Loans outstanding on the
date notice is given to the Banks to fund their Pro Rata Shares of the Swing
Line Loans; provided, however, the obligation of each Bank to make any such
Revolving Loan is subject to the condition that (i) PNC believed in good faith
that all conditions under Section 2.1C(f) hereof to the making of such Swing
Line Loan were satisfied at the time such Swing Line Loan was made, or (ii) the
satisfaction of any such condition not satisfied had been waived by the
Requisite Banks prior to or at the time such Swing Line Loan was made. In the
case of Revolving Loans made by Banks other than PNC under the immediately
preceding sentence, each such Bank shall make the amount of its Revolving Loan
available to the Agent, in same day funds, at the office of the Agent located at
500 West Jefferson Street, Louisville, Kentucky 40202, not later than 1:00 P.M.
(Louisville, Kentucky time) on the required Business Day. The proceeds of such
Revolving Loans shall be immediately delivered to PNC (and not to the Borrower)
and applied to repay the outstanding Swing Line Loans. On the day such Revolving
Loans are made, PNC's Pro Rata Share of the outstanding Swing Line Loans shall
be deemed to be paid with the proceeds of a Revolving Loan made by PNC and such
portion of the Swing Line Loans deemed to be so paid shall no longer be
outstanding as Swing Line Loans, shall no longer be due under the Swing Line
Note and shall be due under the Revolving Note issued by the Borrower to PNC.
The Borrower authorizes the Agent to charge the Borrower's accounts with the
Agent (up to the amount available in each such account) in order to immediately
pay PNC the amount of such outstanding Swing Line Loans to the extent amounts
received from the Banks, including amounts deemed to be received from PNC, are
not sufficient to repay in full such outstanding Swing Line Loans. If any
portion of any such amount paid (or deemed to be paid) to PNC should be
recovered by or on behalf of the Borrower from PNC in bankruptcy, by assignment
for the benefit of creditors or otherwise, the loss of the amount so recovered
shall be ratably shared among all of the Banks that have made Revolving Loans
pursuant to this Section 2.11C in the manner contemplated by Section 10 hereof.
Subject to the proviso contained in the first sentence of this paragraph, each
Bank's obligation to make the Revolving Loans referred to in this Section 2.11C
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Bank may have against PNC, the
Borrower or anyone else for any reason whatsoever; (ii) the occurrence or
continuance of an Event of Default or a Potential Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
the acceleration or maturity of any Revolving Loans or the termination of the
Revolving Loan Commitments after the making of any Swing Line Loan; (v) any
breach of this Loan Agreement by the Borrower or any other Bank; or (vi) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing. All Swing Line Loans outstanding on the Revolving Loan
Commitment Termination Date shall be paid in full to PNC on such date.
<PAGE>
In the event that the Borrower has filed for protection under the
Bankruptcy Code or any other bankruptcy laws, each Bank shall upon request by
PNC acquire without recourse or warranty an undivided participation interest
equal to such Bank's Pro Rata Share of any Swing Line Loan otherwise required to
be repaid by such Bank pursuant to the preceding paragraph by paying to PNC on
the date on which such Bank would otherwise have been required to make a
Revolving Loan in respect of such Swing Line Loan pursuant to the preceding
paragraph, in immediately available funds, an amount equal to such Bank's Pro
Rata Share of such Swing Line Loan, and no Revolving Loans shall be made by such
Bank pursuant to the preceding paragraph. If such amount is not in fact made
available to PNC by that Bank on the date when Revolving Loans would otherwise
be required to be made pursuant to the preceding paragraph, PNC shall be
entitled to recover such amount on demand from that Bank together with interest
accrued from such date at the customary rate set by PNC for the correction of
errors among banks for three Business Days and thereafter at the Base Rate. From
and after the date on which any Bank purchases an undivided participation
interest in a Swing Line Loan pursuant to this paragraph, PNC shall promptly
distribute to such Bank such Bank's Pro Rata Share of all payments of principal
and interest in respect of such Swing Line Loan.
A copy of each notice given by PNC to the Banks pursuant to the
second preceding paragraph shall be promptly delivered by PNC to the Borrower.
Upon the making of a Revolving Loan by a Bank pursuant to this Section 2.11C,
the amount so funded shall become due under the Revolving Note issued by the
Borrower to such Bank and shall no longer be owed under the Swing Line Note.
Notwithstanding anything herein to the contrary, PNC shall not be
obligated to make any Swing Line Loans if it has elected after the occurrence of
a Potential Event of Default or Event of Default not to make Swing Line Loans
and has notified the Borrower in writing or by telephone of such election. PNC
shall promptly give notice to the Banks of such election not to make Swing Line
Loans.
SECTION 3
CONDITIONS PRECEDENT
3. Effective Date; Other Stipulations.
3.1. Conditions to Effectiveness of Loan Agreement. This Loan
Agreement shall be effective on that date (the "Effective Date") on which each
of the following documents (collectively, the "Amendment Documents") has been
executed by each of the parties to them and delivered to the Agent, on behalf of
the Banks, and each other condition set forth below has been fulfilled to the
satisfaction of the Agent:
<PAGE>
[i] this Loan Agreement, duly executed by the Borrower; and
[ii] Guaranty Agreements duly executed and delivered by ST
Carolinas, ST Ohio, ST Wabash and Roberts; and
[iii]Evidence of such consents, if any, from the Note Purchasers
as may be required under the Note Purchase Agreement to execution and
delivery of a Guaranty Agreement on or before the Effective Date by the
Guarantors; and
[iv] Certified Resolutions of the Board of Directors of the
Borrower and each of the Guarantors, authorizing the execution and
delivery by Borrower of this Loan Agreement and by Guarantors of their
respective Guaranty Agreements; and
[v] Certificates of existence for Borrower and each Guarantor,
dated within thirty days of the Effective Date; and
[vi] a copy of each promissory note evidencing Indebtedness that
is owed on the Effective Date by any subsidiary of Borrower to Borrower;
and
[vii] supplemental written opinions of counsel to the Borrower
and Guarantors, substantially in the form of Exhibit J hereto.
If each of the Amendment Documents has not been fully executed and
delivered to the Agent and each other condition set forth above not fulfilled to
the satisfaction of Agent on or before December 31, 1998 this Loan Agreement
shall be voidable at any time thereafter upon notice given by Borrower to the
Banks or by notice given by the Agent, acting at the direction of the Requisite
Banks, to the Borrower.
3.1A. Upon the Effective Date, this Loan Agreement shall supersede
and replace the Amended and Restated Loan Agreement dated March 26, 1997 a
modified by the First 1997 Amendment, and the Second 1997 Amendment, and from
and after the Effective Date each reference to the "Loan Agreement" or words of
like import shall mean and be deemed a reference to this Loan Agreement.
3.1B.Upon the Effective Date, Agent and Banks shall be deemed to have
consented to the acquisition by Borrower or one of its Consolidated Subsidiaries
of Roberts.
3.2. Conditions to All Letters of Credit. [intentionally omitted].
3.3. Conditions to All Revolving Loans and Letters of Credit. The
obligation of the Banks to make Revolving Loans to the Borrower and the
obligation of PNC to issue or extend the stated expiration date of each Letter
of Credit is subject to the following further conditions precedent:
<PAGE>
3.3A. The Agent shall have received with respect to each Revolving
Loan, in accordance with the provisions of Section 2.1C of this Loan Agreement,
an originally executed Request For Revolving Loan, in each case signed by an
Authorized Officer of the Borrower.
3.3B. PNC shall have received with respect to each Letter of Credit,
in accordance with the provisions of Section 2.7B of this Loan Agreement, an
originally executed Application and Agreement For Letter of Credit relating to
such Letter of Credit, in each case signed by an Authorized Officer of the
Borrower.
3.3C. As of the Funding Date of the Revolving Loan or the date of
issuance or extension of the stated expiration date of the Letter of Credit:
(i) The representations and warranties contained herein, as originally
stated or as updated in writing from time to time by the Borrower, shall be true
and correct in all material respects on and as of that date to the same extent
as though made on and as of that date;
(ii) No event shall have occurred and be continuing or would result from
the funding of the Revolving Loan or the issuance or extension of the stated
expiration date of such Letter of Credit which would constitute an Event of
Default;
(iii) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Bank from making
that Revolving Loan or PNC from issuing or extending the stated expiration date
of that Letter of Credit; and
(iv) No injunction or other restraining order shall have been issued and
no hearing to cause an injunction or other restraining order to be issued shall
be pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of this Loan Agreement or the
making of the Revolving Loans hereunder or the issuance or extension of the
respective stated expiration dates of the Letters of Credit hereunder.
3.3D. As of the date of any expected or requested future advances of any
of the Revolving Loans, the Year 2000 Problem (as defined below) shall not have
resulted in any Material Adverse Effect.
SECTION 4
REPRESENTATIONS AND WARRANTIES
4. Representations and Warranties. The Borrower represents and warrants to
the Banks as follows, which representations and warranties shall be deemed
restated as of each Funding Date and the date of the issuance of or the
extension of the expiration date of each Letter of Credit, and shall survive the
execution and delivery of this Loan Agreement:
<PAGE>
4.1. Organization, Standing, etc. The Borrower is a corporation duly
organized and validly existing under the laws of the Commonwealth of Kentucky.
The Borrower has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, to execute and deliver this Loan Agreement and the other Loan
Instruments to which it is a party, and to carry out the terms hereof and
thereof. The Borrower has delivered to the Agent a true and complete copy of its
Articles of Incorporation and Bylaws as in effect on the date hereof.
4.2. Qualification. The Borrower is duly qualified to transact
business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction in respect of which the failure to be so
qualified would have a Material Adverse Effect.
4.3. Use of Proceeds. The Borrower's uses of the Revolving Loans made
to the Borrower (a) will at all times be legal and proper corporate uses of the
Borrower, and such uses are consistent with all applicable laws and statutes as
in effect as of the date hereof, and (b) will not violate or result in a
violation of Regulations G, U, T or X of the Board of Governors of the Federal
Reserve System.
4.4. Intellectual Property. The Borrower owns or possesses such
assets, licenses, patents, patent applications, copyrights, trademarks,
trademark applications, trade names, franchises, consents, authorizations and
service marks and rights with respect to the foregoing which are necessary to be
owned or possessed by the Borrower to prevent a Material Adverse Effect.
4.5. Contracts; Labor Disputes. The Borrower is not a party to any
contract or agreement, or subject to any charge, corporate restriction,
judgment, decree or order, which has or could be reasonably foreseen to have a
Material Adverse Effect. There are no strikes or walkouts relating to any labor
contracts binding upon the Borrower.
4.6. Accuracy of Financial Reports. The audited financial statements
of the Borrower for its Fiscal Year 1997 and the interim unaudited financial
statements of the Borrower as at and for the period ending June 30, 1998, in
each case which have been delivered to the Banks, have been prepared in
accordance with GAAP and fairly and accurately present the financial condition
of the Borrower on a consolidated basis as of the dates and for the periods
ended reflected in such financial statements; provided, such interim financial
statements shall be without footnotes and shall be subject to normal year-end
adjustments. There have been no material adverse changes in the financial
condition of the Borrower on a consolidated basis subsequent to the periods
ended reflected in such financial statements.
4.7. Disclosure. Neither this Loan Agreement nor any other Loan
Instrument furnished to the Agent on behalf of the Banks by or on behalf of the
Borrower in connection with the transactions contemplated hereby taken as a
whole contains any statement of any material fact which is untrue or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact known to the Borrower (other than
<PAGE>
which is hereafter disclosed in any document filed by the Borrower with the
Securities and Exchange Commission or is otherwise disclosed by the Borrower in
writing to the Agent) which materially adversely affects the financial condition
of the Borrower on a consolidated basis which has not been set forth in this
Loan Agreement or in the other Loan Instruments furnished to the Banks by or on
behalf of the Borrower in connection with the transactions contemplated hereby.
The Borrower is currently solvent, and neither the issuance and delivery of the
Revolving Notes to the Banks, nor the performance of the transactions
contemplated hereunder, will render the Borrower insolvent, inadequately
capitalized to undertake the transactions contemplated hereunder or to undertake
the business in which it is presently engaged or about to engage or render the
Borrower unable to pay its debts as they become due. The Borrower is not
currently contemplating either the filing of a petition by it or the
commencement of a case by it under the Bankruptcy Code or any other insolvency
laws or the liquidation of all or a major portion of its property, and the
Borrower does not have any knowledge of any Person contemplating the filing of
any such petition or commencement of any such case against the Borrower.
4.8. Tax Returns and Payments. The Borrower has filed all tax returns
required by law to be filed by it and has paid all taxes, assessments and other
governmental charges levied upon its properties, assets, income and franchises,
other than those not yet delinquent and those taxes, assessments and other
governmental charges the non-payment of which would not have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Borrower in
respect of its taxes are adequate in the opinion of the Borrower. The Borrower
does not know of any unpaid assessment for additional taxes.
4.9. Indebtedness, etc. As of the date of this Loan Agreement, and
without regard to the transactions contemplated hereunder, the Borrower does not
have any outstanding Indebtedness other than the Indebtedness identified on
Schedule 4.10 annexed hereto and other Indebtedness the principal amount of
which does not exceed One Million Dollars ($1,000,000.00) in the aggregate.
4.10. Title to Properties; Liens. The Borrower has good and
marketable title to all of its properties and assets and none of such properties
or assets is or will be, as of the Closing Date, subject to any Lien except (i)
the Liens identified on Schedule 4.10 annexed hereto and other liens which
secure Indebtedness the principal amount of which does not exceed One Million
Dollars ($1,000,000.00) in the aggregate, and (ii) other non-consensual Liens
which in the aggregate are not substantial in amount, do not secure any
Indebtedness, do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Borrower and
would either singularly or in the aggregate have a Material Adverse Effect.
4.11. Operating Leases. The Borrower enjoys quiet possession under
all operating leases to which it is a party as lessee, and all of such operating
leases are to the best knowledge of the Borrower, after due inquiry, validly
existing and in full force and effect, and, to the best knowledge of the
Borrower, after due inquiry, neither the lessor nor the Borrower as
<PAGE>
lessee is in default under any of such operating leases to an extent which has
or could be reasonably foreseen to have a Material Adverse Effect. None of such
operating leases contains any provision restricting the incurrence of
Indebtedness by the lessee or any unusual or burdensome provision which has or
could be reasonably foreseen to have a Material Adverse Effect.
4.12. Litigation, etc. Except as described on Schedule 4.12 annexed
hereto (as the same may be updated in writing from time to time by the
Borrower), there is no action, proceeding or investigation pending or, to the
best knowledge of the Borrower, threatened (or any basis therefor known to the
Borrower) which questions the validity of this Loan Agreement, the Revolving
Notes or the other Loan Instruments or any action taken or to be taken pursuant
hereto or thereto or which if determined adversely to the Borrower would in the
Borrower's reasonable judgment result, either in any case or in the aggregate,
in any Material Adverse Effect.
4.13. Authorization; Compliance with Other Instruments, etc. The
execution, delivery and performance of this Loan Agreement, the Revolving Notes
and the other Loan Instruments to which the Borrower is a party have been duly
authorized by all necessary corporate action on the part of the Borrower, will
not result in any violation of or be in conflict with or constitute a default
under the Articles of Incorporation or By-Laws of the Borrower or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to the Borrower, or result in the creation of any Lien upon any of
the properties or assets of the Borrower. The Borrower is not in material
violation of its Articles of Incorporation or By-Laws or any agreement or
instrument to which it is a party, or, to the Borrower's best knowledge, any
judgment, decree, order, statute, rule or governmental regulation applicable to
the Borrower. Without limiting the generality of the foregoing, to the best
knowledge of the Borrower, the Borrower is in compliance with all federal and
state laws and all rules, regulations and administrative orders of all state and
local commissions or authorities which are applicable to the Borrower or to the
operation of its business the non-compliance of which could result in a Material
Adverse Effect.
4.14. Enforceability. This Loan Agreement, the Revolving Notes and
the other Loan Instruments to which the Borrower is a party constitute the valid
and binding obligations of the Borrower, legally enforceable against the
Borrower in accordance with their respective terms, except to the extent the
enforceability of the Loan Agreement, the Revolving Notes and the other Loan
Instruments is subject to the effect of applicable laws affecting the rights of
creditors generally and equitable principles.
4.15. Governmental Consent. To the best knowledge of the Borrower,
the Borrower is not currently required to obtain any order, consent, approval or
authorization of, and is not currently required to make any declaration or
filing with, any governmental authority in connection with the execution and
delivery of this Loan Agreement or the negotiation, offer, issue, sale and
delivery of the Revolving Notes, or in connection with the execution, delivery
and
<PAGE>
performance of the other Loan Instruments, and the failure to so obtain any such
order, consent, approval or authorization or to make any such declaration or
filing would result in a Material Adverse Effect.
4.16. Investment Company Act Status. The Borrower is not an
"investment company", as such term is defined in the Investment Company Act
of 1940, as amended.
4.17. Regulation G, etc. None of the Revolving Loans will be used,
directly or indirectly, by the Borrower for the purpose of reducing or retiring
any Indebtedness which was originally incurred to purchase or carry any Margin
Stock or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit" within the meaning of Regulation G or
Regulation U of the Board of Governors of the Federal Reserve System, or cause
this Loan Agreement to violate Regulation G, Regulation U, Regulation T,
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or the Securities Exchange Act of 1934.
4.18. Holding Company Act. The Borrower is not a "Holding Company" or
a "Subsidiary Company" of a "Holding Company", or an "Affiliate" of a "Holding
Company" or of a "Subsidiary Company" of a "Holding Company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
4.19. Employee Retirement Income Security Act of 1974. The Borrower
(a) has not incurred any material accumulated funding deficiency within the
meaning of ERISA, (b) has not incurred any material liability to the Pension
Benefit Guaranty Corporation established under ERISA (or any successor thereto
under ERISA) in connection with any employee benefit plan established or
maintained by the Borrower, nor has the Borrower had any tax assessed against it
by the Internal Revenue Service for any alleged violation under Section 4975 of
the Internal Revenue Code, and (c) has not and does not participate in any
Multi-Employer Pension Plan within the meaning of Section 3(37) of ERISA except
as approved by the Banks and set forth on Schedule 4.19 attached hereto.
Further, to the Borrower's knowledge, each employee benefit plan established or
maintained by the Borrower is in compliance in all material respects with ERISA
and all other applicable laws, and no prohibited transaction within the meaning
of Section 4975 of the Internal Revenue Code has occurred with respect to any
such employee benefit plan established or maintained by the Borrower.
4.20. Environmental Matters.
4.20A. As used herein, the term "Environmental Law(s)" means any
federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to, or imposing liability or standards of conduct
concerning any Hazardous Substance, as now or at any time hereafter in effect.
As used herein, the term "Hazardous Substance(s)" shall have the meaning
ascribed in any Environmental Law to any hazardous, toxic or dangerous waste,
substance, pollutant or material.
<PAGE>
4.20B. The Borrower represents and warrants, to its knowledge, and
except as otherwise disclosed in writing to the Agent on behalf of the Banks
prior to the date of this Loan Agreement, that neither the Borrower nor any
other Person within the Borrower's knowledge or control, including any lessee of
the Borrower's property, has ever caused or permitted any Hazardous Substance to
be released, spilled or disposed of on, under or at the Borrower's property nor
any part thereof which has resulted in or could reasonably be foreseen to result
in a Material Adverse Effect. Further, to the Borrower's knowledge, no portion
of the Borrower's property has ever been used by the Borrower or any other
person as a dump site or storage site, whether permanent or temporary, for any
Hazardous Substance, except in substantial compliance with all Environmental
Laws or except as otherwise disclosed in writing to the Banks prior to the date
of this Loan Agreement.
4.20C. The Borrower shall, except as otherwise separately
disclosed in writing to the Agent on behalf of the Banks prior to the date of
this Loan Agreement, give the Banks prompt written notice of any litigation or
administrative proceeding involving a claim against the Borrower which (i)
asserts or alleges that (a) the Borrower has violated any Environmental Law, (b)
the Borrower is required to clean up or take other response action due to the
release or threatened release or transportation of any Hazardous Substance, or
(c) the Borrower is required to pay all or a portion of the cost of any past,
present or future cleanup or other response action which arises out of or is
related to the release or threatened release or transportation of any Hazardous
Substance, and (ii) if true, would have a Material Adverse Effect.
4.21. Schedule of Guaranties. Annexed hereto as Schedule 4.21 is a
list of all guaranty agreements or similar instruments to which the Borrower is
currently a party or which is otherwise binding upon the Borrower.
4.22. Subsidiaries and Joint Ventures. Annexed hereto as Schedule
4.22 is a list of all existing Consolidated Subsidiaries and Joint Ventures of
the Borrower.
4.23. Year 2000. The Borrower and its Subsidiaries have reviewed the
areas within their business and operations which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
risk that certain computer applications used by the Borrower or its Subsidiaries
(or any of their respective material suppliers, customers or vendors) may be
unable to recognize and perform properly date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). Except as
disclosed to the Agent in writing by the Borrower, the Borrower has no reason to
believe that the Year 2000 Problem will result in any Material Adverse Effect.
4.24. Events of Default. There are no Potential Events of Default
or Events of Default existing as of the Closing Date.
<PAGE>
SECTION 5
AFFIRMATIVE COVENANTS
5. Affirmative Covenants. The Borrower hereby covenants and agrees that
until the Revolving Notes have been respectively paid in full to the Banks, the
Borrower will perform and observe all of the following provisions unless waived
in writing by the Requisite Banks:
5.1. Maintenance of Assets; Casualty Insurance. The Borrower will,
insofar as it is not prevented by causes beyond its control, maintain or cause
to be maintained in good repair, working order and condition its assets used or
useful in its business in a manner and to the extent necessary to prevent a
Material Adverse Effect. The Borrower will in addition, insofar as it is not
prevented by causes beyond its control, make or cause to be made all appropriate
repairs, renewals and replacements to its assets to the extent necessary to
prevent a Material Adverse Effect. The Borrower will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its assets and business against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or a similar business and similarly situated, in such types and amounts
as are customarily carried under similar circumstances by such other
corporations.
5.2. Monetary Obligations.
(a) The Borrower will pay and discharge promptly as they become due
and payable all taxes, assessments and other governmental charges levied upon it
or its income or upon any of its properties or assets or in respect of its
franchises, business, income or profits, or upon any part thereof, as well as
all lawful claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a lien or a charge upon its
property before any of the same become delinquent; provided, however, the
Borrower shall not be obligated to pay any such tax, assessment or charge (i) if
the non-payment thereof would not have a Material Adverse Effect, or (ii) if the
non-payment thereof would have a Material Adverse Effect but the Borrower is
contesting the amount or validity of, or its liability for, any such taxes,
assessments or charges in good faith and by appropriate proceedings promptly
initiated and diligently conducted by the Borrower and the Borrower has
established such reserve or other appropriate provision, if any, as shall be
required by GAAP in respect thereof. The Borrower will satisfy or cause to be
satisfied the minimum annual funding standard within the meaning of ERISA for
any employee benefit plan established or maintained by the Borrower which is
subject to such minimum funding standards under ERISA, and the Borrower will not
permit any tax or penalty to be incurred by it as a result of any failure to
satisfy any such minimum funding requirement or as a result of any violation of
the provisions of Section 4975 of the Internal Revenue Code or of any regulation
issued thereunder.
<PAGE>
(b) The Borrower will pay in full all its other debts, obligations and
liabilities allowed hereunder before the same become delinquent, unless (i) the
non-payment thereof would not have a Material Adverse Effect, or (ii) the
non-payment thereof would have a Material Adverse Effect but the same are being
contested in good faith by the Borrower, the Borrower has established adequate
reserves for the payment of the same in accordance with GAAP, and the contesting
thereof does not involve the risk of forfeiture or loss of any of the Borrower's
assets.
5.3. Financial Statements and Other Reports. The Borrower will
furnish to the Agent on behalf of the Banks:
(a) As soon as reasonably possible, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, the audited balance sheet
of the Borrower as at the end of such Fiscal Year, and the related audited
statements of income and cash flows of the Borrower for such Fiscal Year, on a
consolidated basis, together with statements in comparative form for the
previous Fiscal Year, all in reasonable detail and accompanied by the opinion
thereon of independent public accountants selected by the Borrower and
reasonably acceptable to the Banks (the Banks acknowledge and agree that Coopers
& Lybrand or any other "Big 6" accounting firm hereafter selected by the
Borrower shall be acceptable to the Banks), which opinion shall be in a form
generally recognized as unqualified and shall state that such financial
statements have been prepared in accordance with GAAP applied on a basis
consistent with that of the preceding Fiscal Year (except for such changes, if
any, as shall be specified and approved by such accountants in such opinion) and
that the audit by such accountants in connection with such financial statements
has been made in accordance with GAAP relating to auditing;
(b) As soon as reasonably possible, and in any event within forty-five
(45) days after the end of each Fiscal Quarter in each Fiscal Year, an unaudited
balance sheet of the Borrower as at the end of such Fiscal Quarter, and related
unaudited statements of income and cash flows of the Borrower for such Fiscal
Quarter, on a consolidated basis, all in reasonable detail, prepared in
accordance with GAAP consistently applied and certified to be true, accurate and
complete by the Chief Financial Officer of the Borrower; provided, such interim
financial statements shall be without footnotes and shall be subject to normal
year-end adjustments;
(c) Together with each delivery of financial statements pursuant to
subdivisions (a) and (b) above, (i) a Certificate of the President or Chief
Financial Officer of the Borrower setting forth the maximum amount of all
guaranty agreements and similar instruments issued by the Borrower for the
account of each Joint Venture and each Subsidiary, and (ii) a Compliance
Certificate (A) stating that the Chief Financial Officer of the Borrower has
reviewed the relevant terms of this Loan Agreement and has no knowledge of any
event or condition which constitutes a Potential Event of Default or an Event of
Default hereunder, or, if any such Potential Event of Default or Event of
Default existed or exists, specifying the nature and period of existence thereof
and what action the Borrower has taken or is taking or proposes to take with
respect thereto, and (B) demonstrating in reasonable detail compliance at the
end of such accounting period with Section 6.2, relating to Indebtedness,
Section 6.4, relating to Liens, Section 6.5, relating to investments and loans,
and Sections 6.8 through 6.11, relating to financial covenants;
<PAGE>
(d) Forthwith upon any principal officer of the Borrower obtaining
knowledge of, or receiving notice of any claim of or action taken with respect
to, any condition or event which constitutes a Potential Event of Default or an
Event of Default (including, without limitation, knowledge that any claim by any
creditor has been made that there exists, or that any action has been taken by
any creditor with respect to, any default as set forth in Section 7(h) hereof),
an Officers' Certificate specifying the nature and period of existence thereof
and what action the Borrower has taken or is taking or propose to take with
respect thereto;
(e) Promptly upon receipt thereof, a copy of any final management letter
submitted to the Borrower by its independent certified public accountants in
connection with the examination of the financial statements of the Borrower made
by such accountants;
(f) Promptly upon the filing thereof with the Securities and Exchange
Commission, copies of all reports hereafter filed by the Borrower with the
Securities and Exchange Commission;
(g) Copies of all annual and, upon written request by the Requisite Banks,
interim, financial statements, including balance sheets and statements of income
and cash flows, prepared in respect of the Joint Ventures, promptly upon receipt
thereof by the Borrower; provided, the Borrower shall be obligated to deliver
any such financial statements to the Agent on behalf of the Banks only if the
delivery thereof to the Agent on behalf of the Banks does not violate the joint
venture agreement under which any such Joint Venture was formed or any other
agreement or any applicable law to which the Borrower is subject;
(h) With reasonable promptness, such other information and data with
respect to the Borrower as from time to time may be reasonably requested by the
Requisite Banks; provided, the Borrower shall be obligated to deliver any
financial statements pertaining to the Joint Ventures only if the delivery
thereof to the Agent on behalf of the Banks does not violate the joint venture
agreement under which any such Joint Venture was formed or any other agreement
or any applicable law to which the Borrower is subject;
(i) Promptly upon receipt thereof, copies of such notices, reports or
other documents received by the Borrower which discloses facts which, if true,
could reasonably be expected to have a Material Adverse Effect on the Borrower;
and
(j) On or before thirty (30) days prior to the closing of any Permitted
Securitization, notice of the pendency thereof containing a description in
reasonable detail of the material elements thereof, and thereafter promptly upon
request such additional information with respect thereto as reasonably may be
requested by the Agent or the Requisite Banks.
The Borrower shall deliver to the Agent on behalf of the Banks at the
same time as the delivery of any annual or quarterly financial statement under
this Section 5.3, (i) a description in reasonable detail of any variation
between the application of accounting principles
<PAGE>
employed in the preparation of such statement and the application of accounting
principles employed in the preparation of the next preceding annual or quarterly
financial statements (which variation materially affects the presentation of the
financial position or results of operations of the Borrower) and (ii) reasonable
estimates of the difference between such statements arising as a consequence
thereof.
The Banks shall keep confidential all of the financial statements and
other information furnished to the Banks pursuant to this Loan Agreement other
than any such information which has otherwise been publicly disclosed or is in
the public domain, and each Bank shall cooperate with the Borrower in
establishing a joint privilege with respect to all such non-public information
furnished to such Bank; provided, subject to the foregoing, each Bank shall have
the right to furnish copies of such financial statements and other information
furnished to each Bank (A) to any proposed Eligible Assignee of such Bank
pursuant to Section 10 hereof, subject to such proposed Eligible Assignee
executing a Confidentiality Agreement as required under Section 10 hereof, (B)
to governmental agencies having jurisdiction over such Bank and which request
copies of such financial statements and/or other information, (C) if required to
under applicable rules of civil procedure to any appropriate Person in any
litigation involving or affecting such Bank, provided such Bank shall give
notice to the Borrower of such Bank's receipt of the subpoena or other request
to furnish such information and the Borrower shall have the right at its expense
to seek an appropriate protective order in such litigation preserving the
confidentiality of any non-public information furnished to such Bank, and (D) to
any appropriate Person in connection with the enforcement by such Bank of its
rights under this Loan Agreement and the Revolving Note issued to it.
5.4. Financial Records. The Borrower will maintain a system of
accounting established and administered in accordance with GAAP consistently
applied, and will set aside on its books all such proper reserves as shall be
required by GAAP. Borrower shall cause all Indebtedness owed to Borrower by any
Subsidiary of Borrower, including but not limited to any subsidiary created or
acquired pursuant to a Proforma Compliant Acquisition, to be evidenced by
promissory note(s), and from and after the date of this Agreement shall deliver
to Agent a copy of each such promissory note on or before ten (10) days after
the date the Indebtedness evidenced thereby is created or incurred.
5.5. Permits, Certificates, Leases, Licenses, etc. The Borrower will
obtain, maintain and comply at all times with all permits, certificates,
licenses, approvals, authorizations, leases and other instruments necessary or
appropriate for the conduct of its business as presently conducted or as
contemplated to be conducted in the future; provided, the Borrower shall not be
in violation of this Section 5.5 if the failure to obtain any such permit,
certificate, license, approval, authorization, lease or other instrument would
not have a Material Adverse Effect.
5.6. Notice. The Borrower will notify the Agent on behalf of the
Banks in writing, within no more than ten (10) Business Days (and without the
benefit of any grace period afforded in any provision of this Loan Agreement or
any other Loan Instrument) after the Borrower learns of any of the following:
(i) the existence or occurrence of any Potential Event of Default under this
Loan Agreement and/or any of the other Loan Instruments, (ii) that any
<PAGE>
representation or warranty made herein or in the other Loan Instruments shall,
for any reason, not be or shall cease in any material respect to be true and
complete and not misleading, or (iii) the institution of, or adverse
determination in, any litigation involving a claim against the Borrower in
excess of the sum of One Million Dollars ($1,000,000.00) which is not fully
covered by insurance (other than any deductible), describing the nature thereof,
what happened with respect thereto, and what steps are being taken by the
Borrower with respect thereto.
5.7. Further Assurances. The Borrower will from time to time
hereafter execute and deliver, or will cause to be executed and delivered, such
additional instruments, certificates or documents and will take all such further
actions, as the Banks may reasonably request for the purposes of implementing or
effectuating the provisions of this Loan Agreement and/or the other Loan
Instruments; provided, the Borrower shall not be required to grant or create any
consensual or voluntary lien on or security interest in any of its assets
pursuant to this Section 5.7. Upon the exercise by the Agent of any power,
right, privilege or remedy pursuant to the Loan Instruments which requires any
consent, approval, registration, qualification or authorization of any Person,
the Borrower will execute and deliver, or will cause the execution and delivery
of, all applications, certificates, instruments and other documents and papers
that the Agent requires in order to obtain any such consent, approval,
registration, qualification or authorization.
5.8. Preservation of Existence, Leases, etc. The Borrower will at all
times preserve and keep in full force and effect, to the extent necessary to
prevent a Material Adverse Effect, its corporate existence, rights, patents,
trademarks, service marks, trade names, copyrights, licenses, consents and
authorizations and operating leases and Capital Leases to which the Borrower is
a party, other than any changes to any of the same effected by the Borrower in
the ordinary course of business, and the Borrower shall comply with all
applicable laws and regulations.
5.9. Comprehensive General Liability Insurance. The Borrower will, in
addition to obtaining and maintaining all insurance required under Section 5.1
hereof, obtain and maintain comprehensive general liability insurance with an
insurance company licensed to do business in all jurisdictions wherein the
Borrower transacts business in such amounts and upon such terms and conditions
as are reasonably satisfactory to the Agent; the Agent acknowledges that the
insurance currently maintained by the Borrower as described in the Certificate
of Insurance delivered to the Agent satisfies the provisions of this Section 5.9
as of the Closing Date.
<PAGE>
5.10. Hazardous Materials.
5.10A. The Borrower covenants that (i) the Borrower will not violate
any Environmental Law, as such term is defined in Section 4.20 hereof, in
connection with the use, ownership, lease, maintenance or operation of all real
property owned or leased by it and the conduct of business thereon if such
violation would result in or could reasonably be foreseen as resulting in a
Material Adverse Effect, and (ii) the Borrower, its agents, employees, lessees
and independent contractors, will operate the Borrower's real property and will
receive, handle, use, store, treat, transport and dispose of all Hazardous
Substances, as such term is defined in Section 4.20 hereof, in compliance in all
material respects with all Environmental Laws; provided, in the event the
Borrower receives notice from any appropriate governmental agency to the effect
that the Borrower is in violation of any Environmental Law, the same shall not
constitute a default hereunder to the extent the Borrower seeks to correct any
such violation in good faith and with due diligence.
5.10B. If the Borrower receives any written notice from any
governmental agency or "potentially responsible party" within the meaning of the
Environmental Laws regarding (i) the happening of any event involving any
Hazardous Substance, or (ii) any noncompliance with regard to any environmental
matter, and as a result thereof the Borrower would suffer a Material Adverse
Effect, the Borrower shall immediately notify the Banks orally and in writing
thereof and shall provide the Banks with copies of any written notice or
information.
5.10C. The Borrower agrees to indemnify each Bank and hold each Bank
harmless from and against any and all losses, liabilities, including strict
liability, damages, injuries, expenses, including reasonable attorneys' fees,
claims for damage to the environment, claims for fines or civil penalties, costs
of any settlement or judgment and claims of any and every kind whatsoever paid,
incurred or suffered by or asserted against the Bank by any Person for, with
respect to or as a direct or indirect result of the presence on or under the
Borrower's property of, or the release or threatened release or transportation
of, any Hazardous Substance or arising under any Environmental Law; provided
that the incurrence by any such Bank of any such losses, liabilities, damages,
injuries, expenses, claims for damage to the environment, claims for fines or
civil penalties, costs of any settlement or judgment and other claims is not the
result of any gross negligence or willful misconduct committed by that Bank. The
Borrower's indemnification obligations hereunder include, without limitation,
costs incurred by any Bank in connection with any investigation of site
conditions or any clean up, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because of Hazardous
Substances present in or about the Borrower's property. The indemnification
obligations of the Borrower shall survive the payment of the Obligations to the
Banks and the termination of this Loan Agreement.
5.11. Compliance by Consolidated Subsidiaries. The Borrower covenants
and agrees to cause each of its Consolidated Subsidiaries, whether now existing
or hereafter created or acquired, to comply with all of the covenants set forth
in Section 5 and Sections 6.1 through 6.7 and Section 6.12 hereof. The covenants
set forth in Sections 6.8 through 6.11 hereof are
<PAGE>
calculated on a consolidated basis and shall be determined solely by reference
to the consolidated financial statements of the Borrower and its Consolidated
Subsidiaries.
5.12. Delivery of Guaranties. Borrower shall cause each Consolidated
Subsidiary of Borrower formed or acquired hereafter to execute and deliver to
the Agent, contemporaneously with such entity becoming a Consolidated
Subsidiary, a certificate of existence for such Guarantor dated within thirty
(30) days of delivery of the Guaranty Agreement, a copy of resolutions of the
Board of Directors of Guarantor authorizing the execution and delivery of the
Guaranty Agreement, and an opinion of counsel to the Guarantor addressed to
Agent and Banks confirming the due execution and delivery of the Guaranty
Agreement and such other matters as Agent reasonably requests.
SECTION 6
NEGATIVE COVENANTS
6. Negative Covenants. The Borrower hereby covenants and agrees that until
the Revolving Notes have been paid in full to the Banks, the Borrower will
perform and observe all of the following provisions:
6.1. Mergers, Dissolutions, Asset Sales and Other Extraordinary
Events. The Borrower will not, without the prior written consent of the
Requisite Banks, which consent shall not be unreasonably withheld:
(a) Be or become a party to any consolidation, reorganization (including,
without limitation, the types referred to in Section 368 of the Code) merger or
recapitalization, other than (i) any merger of a Consolidated Subsidiary into
the Borrower, (ii) any merger of a Consolidated Subsidiary into another
Consolidated Subsidiary, or (iii) any merger pursuant to which the Borrower or
any Consolidated Subsidiary of the Borrower is the surviving corporation; or
(b) Sell, lease, assign, transfer or dispose of all or a material portion
of its assets other than in the ordinary course of the Borrower's business as
historically conducted and as necessary to conclude a Permitted Securitization.
6.2. Indebtedness. The Borrower will not, without the prior written
consent of the Requisite Banks, directly or indirectly, create, incur, assume,
guarantee, agree to purchase or repurchase or provide funds in respect of, or
otherwise become liable with respect to any Indebtedness or Contingent
Obligation other than
(a) the Revolving Notes;
(b) current liabilities of the Borrower (other than for borrowed money)
incurred in the ordinary course of its business and in accordance with customary
trade practices;
<PAGE>
(c) Indebtedness not to exceed Fifteen Million Dollars ($15,000,000) in
the aggregate principal amount at any one time outstanding constituted by any of
the following: [i] Purchase Money Indebtedness incurred by the Borrower to
finance Capital Expenditures, subject to the limitation that any Purchase Money
Indebtedness may only be secured by those assets acquired by the Borrower with
the proceeds of such Purchase Money Indebtedness; plus [ii] any unsecured
Indebtedness incurred to the owners of the stock and/or sellers of the assets of
an acquired Target Person in conjunction with the closing of and as part of the
consideration for the acquisition of the stock or assets of that Target Person;
(d) Indebtedness the proceeds of which are used to permanently reduce the
Revolving Loan Commitments pursuant to Section 2.4A(i) hereof;
(e) the Indebtedness and Contingent Obligations identified on Schedule
4.10 annexed hereto;
(f) Contingent Obligations or other Indebtedness associated with a
Permitted Securitization;
(g) the Swing Line Note;
(h) the Senior Notes; and
(i) the Note Purchasers Guaranty Agreements, provided neither of the same
is modified or amended without the prior written consent of the Banks.
6.3. Use of Assets. The Borrower will not use, or cause or permit the
use of, any of its assets in any manner which could result in a Material Adverse
Effect.
6.4. Liens. The Borrower will not, without the prior written consent
of the Requisite Banks, directly or indirectly create, incur, assume or permit
to continue in existence (other than existing Liens permitted under this Loan
Agreement), any Lien on, or pledge or deposit of, or conditional sale or other
title retention agreement (including any Capital Lease which in accordance with
GAAP would constitute Indebtedness) with respect to, any property or asset now
owned or hereafter acquired by the Borrower, provided that the restrictions in
this Section 6.4 shall not prohibit:
(a) Liens securing all Purchase Money Indebtedness permitted under Section
6.2(c) hereof, provided that (i) each such Lien shall at all times be confined
solely to the item of property acquired with the proceeds of such Purchase Money
Indebtedness, and (ii) no such Lien shall be permitted unless at the time of the
creation of such Lien the incurrence of such Purchase Money Indebtedness would
be permitted by Section 6.2 hereof;
<PAGE>
(b) liens for taxes, assessments or other governmental charges the payment
of which is not at the time required for the reasons set forth by the proviso to
the first sentence of Section 5.2(a);
(c) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, contractors and materialmen incurred in the ordinary course of
business for sums not yet due or being contested by the Borrower in good faith
and by appropriate proceedings promptly initiated and diligently conducted, if
the Borrower shall have made such reserve or other appropriate provision, if
any, as shall be required by GAAP in connection therewith;
(d) Liens incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other types of
social security or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money) for sums not yet due or being contested by the Borrower in good faith and
by appropriate proceedings promptly initiated and diligently conducted, if the
Borrower shall have made such reserve or other appropriate provision, if any, as
shall be required by GAAP in connection therewith;
(e) easements, rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business which do not in the
aggregate materially detract from the value of the property of the Borrower or
materially impair the use thereof in the operation of its business and which do
not interfere with the ordinary conduct of the business of the Borrower;
(f) Liens, charges, encumbrances and priority claims which (i) are
incidental to the conduct of the business of the Borrower and the ownership of
its properties and assets, (ii) were not incurred in connection with the
borrowing of money or the obtaining of advances of credit, and (iii) do not in
the aggregate materially detract from the value of the property of the Borrower
or materially impair the use thereof in the operation of its business;
(g) security interests created under Capital Leases expressly permitted to
be entered into by the Borrower pursuant to Section 6.2 hereof;
(h) the Liens identified on Schedule 4.10 annexed hereto;
(i) common law liens encumbering goods acquired by the Borrower the
acquisition of which has been financed through a "trade" or "commercial" letter
of credit issued for the account of the Borrower; and
6.5. Investments, Loans, etc. The Borrower will not, without the
prior written consent of the Requisite Banks, directly or indirectly, purchase
or otherwise acquire the stock or other securities or the properties or assets
of any other Person, or make any investment in or any loan, advance or capital
contribution to any other Person, provided that
<PAGE>
(i) the Borrower may purchase or otherwise acquire and own Eligible
Investments;
(ii) the Borrower may purchase or otherwise acquire goods and services in
the ordinary course of business and in accordance with customary trade
practices;
(iii) the Borrower may make Capital Expenditures subject to the limitation
on the incurrence of Purchase Money Indebtedness set forth in Sections 6.2(c)
and 6.4(a) hereof;
(iv) so long as no Event of Default or Potential Event of Default has
occurred and is continuing or would result therefrom, the Borrower during the
term of the Loan Agreement may contribute capital and/or make loans to and/or
may increase its existing investment in (a) ST Mexico in an amount not to exceed
$10 million during the term of the Loan Agreement, and (b) Consolidated
Subsidiaries that also are Guarantors;
(v) so long as no Event of Default or Potential Event of Default has
occurred and is continuing or would result therefrom the Borrower during the
term of the Loan Agreement may contribute capital and/or make loans to Mi-Tech
Steel, Inc., in an aggregate amount not to exceed Twelve Million Dollars
($12,000,000.00) and may extend, renew and/or reissue from time to time any
guaranties of payment up to an aggregate amount of Ten Million Dollars
($10,000,000) of the unpaid principal of and/or unpaid interest on each and
every promissory note now or hereafter issued by Mi-Tech Steel, Inc.;
(vi) So long as no Event of Default or Potential Event of Default has
occurred and is continuing or would result therefrom, the Borrower may acquire
the assets or stock of a Person pursuant to a "Proforma Compliant Acquisition."
For purposes of the foregoing Section 6.5(vii), the following terms
have the following meanings:
"Target Person" means a Person engaged in the same line of
business as Borrower, the assets or stock of which Borrower or a
Consolidated Subsidiary of Borrower desires to acquire pursuant to a
Proforma Compliant Acquisition.
"Proforma Compliant Acquisition" means the acquisition, with the
consent of the Target Person (i.e., a "friendly" acquisition), by Borrower
or a Consolidated Subsidiary of Borrower of the capital stock or material
assets of a Target Person in connection with which Borrower has certified
to the Agent, as confirmed by written notice given by the Agent to the
Borrower on or before three (3) Business Days prior to the closing of the
Proforma Compliant Acquisition, and pursuant to delivery to the Agent on
or before ten (10) Business Days prior to the proposed acquisition of the
Proforma Acquisition Information and Acquisition Compliance Certificate in
the form of Exhibit L hereto, that the Proforma Debt Service Coverage will
not be less than 1.25 to 1.0, and that none of the financial covenants
contained in Sections 6.8, 6.9, 6.10, 6.11 or otherwise in this Agreement
will be violated after giving effect thereto.
<PAGE>
"Proforma Acquisition Information" means the actual financial
statements for the Target Person solely (a) audited in accordance with
GAAP for the most recent fiscal year then ended, and (b) unaudited but in
accordance with GAAP for the Proforma Calculation Period, together with
proforma consolidated financial statements of Borrower and the Target
Person for the Proforma Calculation Period, which shall include the effect
of any Indebtedness to be incurred or acquired by Borrower in conjunction
with the acquisition as well as the results of the operations of the
Target Person, assuming the Target Person had been made Consolidated
Subsidiary of Borrower at the inception of the Proforma Calculation
Period, containing such other assumptions as are in accordance with GAAP,
together with such other information concerning the proposed acquisition
as the Agent shall request.
"Proforma Calculation Period" means the four complete Fiscal
Quarters of Borrower and Target Person most recently preceding the date of
a Proforma Compliant Acquisition.
"Proforma Debt Service Coverage" means the quotient of
Proforma EBIDTA divided by Proforma Debt Service.
"EBITDA" means the sum of the Consolidated Net Income of
Borrower, plus Consolidated Interest Expense of Borrower, plus
consolidated income tax expense, depreciation expense and amortization
expense of Borrower.
"Proforma EBITDA" means EBITDA for the Proforma Calculation
Period as adjusted pursuant to the Proforma Acquisition Information for
the purpose of including the proforma financial results of the Target
Person plus the Permitted Synergies to determine whether the intended
acquisition is a Proforma Compliant Acquisition.
"Permitted Synergies" means those readily identifiable expenses,
satisfactory to the Agent and the Requisite Banks, of the Target Person
that will be either eliminated or reduced as a result of the Proforma
Compliant Acquisition.
"Proforma Debt Service" means the sum of (a) 14.3% of Proforma
Indebtedness, plus (b) Estimated Interest Expense for the four complete
Fiscal Quarters next succeeding the date of the Proforma Compliant
Acquisition.
"Proforma Indebtedness" means the Consolidated Total Debt
existing as of the date of the Proforma Compliant Acquisition plus any
Indebtedness to be incurred or assumed as a result of the acquisition, all
as established pursuant to the Proforma Acquisition Information.
"Estimated Interest Expense" means the product of the interest
rate actually applicable to the Revolving Loans at the time the Proforma
Acquisition Information is tendered by Borrower to the Agent multiplied by
Proforma Indebtedness.
<PAGE>
Anything contained in the foregoing provisions of this Section
(6.5(vi) notwithstanding, the prior written consent of the Requisite Banks
shall be required as to any acquisition (i) that would not be a Proforma
Compliant Acquisition but for the Permitted Synergies, or (ii) for which
the financial statements of the Target Person are not available or are not
audited.
6.6. Restricted Junior Payments. The Borrower will not make any
Restricted Junior Payments after the occurrence and during the continuation
of any Event of Default.
6.7. Agreements and Licenses. The Borrower will not transfer,
terminate, cancel, modify or amend, encumber, or commit a default under, any
operating lease or Capital Lease to which the Borrower is a party, or any
license, permit, consent, approval or authorization necessary or appropriate for
the conduct of the Borrower's business, if the same would result in a Material
Adverse Effect.
6.8. Consolidated Current Ratio. The Borrower will not permit the
ratio of its Consolidated Current Assets to its Consolidated Current Liabilities
to be less than 1.5 to 1.0 as at any Fiscal Quarter end.
6.9. Consolidated Total Debt to Consolidated Total Capitalization.
The Borrower will not permit the ratio of its Consolidated Total Debt to its
Consolidated Total Capitalization to exceed .60 to 1.0 as at any Fiscal Quarter
end.
6.10. Consolidated Interest Expense and Consolidated Rent Expense
Coverage Ratio. The Borrower will not permit, as of each Fiscal Quarter end, the
ratio of (a) its Consolidated Net Income plus Consolidated Interest Expense,
provisions for all taxes and Consolidated Rent Expense for the four-Fiscal
Quarter period ended on such Fiscal Quarter end, to (b) the sum of its
Consolidated Interest Expense and Consolidated Rent Expense for the four-Fiscal
Quarter period ended on such Fiscal Quarter end, to be less than 2.0 to 1.0 as
at any Fiscal Quarter end.
6.11. Minimum Consolidated Tangible Net Worth. The Borrower will
not permit its Consolidated Tangible Net Worth:
(i) As of September 30, 1998 to be less than Ninety Million Dollars
($90,000,000); and
(ii) As of each subsequent Fiscal Quarter end of the Borrower after
September 30, 1998, to be less than the sum of the Minimum Consolidated Tangible
Net Worth required of the Borrower as of the immediately preceding Fiscal
Quarter end plus fifty percent (50%) of the Borrower's Consolidated Net Income
for its Fiscal Quarter then ended plus one hundred percent (100%) of the net
proceeds from any equity offering completed after December 31, 1998.
<PAGE>
For purposes of this Section 6.11, any net losses hereafter incurred
by the Borrower will not reduce the amount of the Minimum Consolidated Tangible
Net Worth required to be maintained by the Borrower pursuant to this Section
6.11.
6.12. Transactions with Affiliates. The Borrower will not directly or
indirectly enter into any operating lease or Capital Lease or other transaction
with any Affiliate of the Borrower which would have a Material Adverse Effect.
6.13. Change in Manner of Conducting Business. Neither the Borrower
nor any Consolidated Subsidiary will engage in any business if, as a result, the
general nature of the business, taken on a consolidated basis, which would then
be engaged in by the Borrower and its Consolidated Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Borrower and its Consolidated Subsidiaries as of September 30, 1998.
SECTION 7
EVENTS OF DEFAULT; ACCELERATION
7. Events of Default; Acceleration. If any of the following events
("Events of Default") shall occur:
(a) If the Borrower shall default in the payment of any interest on any of
the Revolving Notes, or the Swing Line Note when the same becomes due and
payable and any such default continues for ten (10) Business Days; or
(b) If the Borrower shall default in the payment of any principal of any
of the Revolving Notes or the Swing Line Note when the same becomes due and
payable and any such default continues for ten (10) Business Days; or
(c) If the Borrower shall breach or default in the performance or
observance of any of the provisions of Sections 6.1, 6.6, 6.7, 6.8, 6.9, 6.10 or
6.11 and such breach or default is not cured within thirty (30) days after the
Agent has given written notice of such breach or default to the Borrower; or
(d) If the Borrower shall default in the performance of or compliance with
any covenant, obligation or provision contained in this Loan Agreement (other
than those referred to above in this Section 7), and any such default shall not
have been remedied (i) within thirty (30) days after the date written notice of
such default shall have been delivered to the Borrower, or (ii) if such default
cannot be cured within such thirty (30) day period, within such longer period of
time as may be necessary to effect such cure, but in any event within sixty (60)
days after written notice of such default shall have been delivered to the
Borrower, provided that the Borrower
<PAGE>
commences to cure the particular default within such thirty (30) day period and
prosecutes the cure to completion with due diligence within sixty (60) days
after written notice of such default shall have been delivered to the Borrower;
or
(e) If any material representation or warranty made in writing by or on
behalf of the Borrower herein or pursuant hereto or otherwise in connection with
the transactions contemplated hereby shall have been materially false or
misleading or incorrect when made and the Borrower shall have known or should
have known of the falsity, misleading nature of or incorrectness of such
representation or warranty when it was made, and the Borrower fails to cause
such representation or warranty to cease to be materially false, misleading or
incorrect within thirty (30) days after written notice of such materially false,
misleading or incorrect representation or warranty shall have been delivered to
the Borrower; or
(f) If the Borrower shall default (as principal or guarantor or other
surety or otherwise) in the payment of any principal of or premium, if any, or
interest on any other Indebtedness in respect of borrowed money or any Capital
Lease or in the deferred purchase price of property which, at the time of the
Borrower's default in the payment thereof, has an unpaid balance in excess of
One Million Dollars ($1,000,000.00), or if the Borrower defaults in the
performance of or compliance with any term of any documents evidencing
Indebtedness of the Borrower or of any agreement relating thereto, and (i) such
default shall continue for more than the period of grace, if any, specified
therein and shall not have been waived pursuant thereto, (ii) the Borrower shall
not be contesting the amount or validity of, or its liability for, any such
Indebtedness or Capital Lease or deferred purchase price of property in good
faith and by appropriate proceedings promptly initiated and diligently conducted
by the Borrower and in which all actions against the property of the Borrower
have been stayed, and (iii) the holder of such Indebtedness has an immediate
right under applicable law to accelerate the maturity of such Indebtedness by
virtue of such default and expiration of the applicable grace period; or
(g) If the Borrower shall discontinue its business or shall make an
assignment for the benefit of its creditors, or shall fail generally to pay its
debts as such debts become due, or shall apply for or consent to the appointment
of or taking possession by a trustee, receiver or liquidator (or other similar
official) of any substantial part of its property, or if the Borrower shall take
any action in furtherance of its dissolution or liquidation; or
(h) If the Borrower shall commence a case or have an order for relief
entered against it under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable bankruptcy, insolvency or other similar
law, or if, within thirty (30) days after the commencement against the Borrower
of a case under the Bankruptcy Code, as now or hereafter constituted, or any
other applicable bankruptcy, insolvency or other similar law, such case shall
have been consented to or shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the Borrower
shall not have been stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if within sixty (60) days after the entry of a
decree appointing a trustee, receiver or liquidator (or other similar official)
of any substantial part of the property of the Borrower, such appointment shall
not have been vacated; or
<PAGE>
(i) If a final uninsured judgment which, with other outstanding final
judgments against the Borrower exceeds an aggregate of One Million Dollars
($1,000,000.00), shall be rendered against the Borrower and (i) if, prior to the
availability of any execution thereon, such judgment shall not have been
discharged or execution thereof shall not have been stayed pending appeal, or
if, after the expiration of any such stay, such judgment shall not have been
discharged, or (ii) the Borrower shall not have established adequate reserves on
its books in respect of such final uninsurable judgment or judgments; or
(j) If the Borrower experiences a Change in Control without the prior
written consent of the Banks;
then (i) upon the occurrence of any Event of Default described in clause (h) of
this Section 7 with respect to the Borrower, the Revolving Loan Commitment of
each Bank shall terminate and the respective unpaid principal balances of the
Revolving Notes together with all accrued interest thereon and all other
Obligations of the Borrower to the Banks shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by the Borrower, or (ii) upon
the occurrence of any other Event of Default referred to in this Section 7, the
Agent, with the written consent of the Requisite Banks at any time at their
option, shall by written notice to the Borrower, terminate the Banks' respective
Revolving Loan Commitments and declare the respective unpaid principal balances
of the Revolving Notes together with all accrued interest thereon and all other
Obligations of the Borrower to the Banks to be due and payable in full to the
Banks, without presentment, demand, protest or other requirements of any kind,
all of which are hereby waived by the Borrower. Upon the occurrence of any Event
of Default, the Banks shall have no obligation to make additional Revolving
Loans to the Borrower, PNC shall have no obligation to issue or extend the
expiration date of any Letters of Credit, and the Borrower shall immediately
deposit with the Agent an amount in "good and collected" funds equal to the
then-existing Letter of Credit Usage to secure all Obligations of the Borrower
in respect of all outstanding Letters of Credit.
Any amendment or modification of this Loan Agreement shall, except as
otherwise expressly provided herein, require the affirmative written consent of
the Requisite Banks; provided, notwithstanding anything herein to the contrary,
the following shall require the affirmative written consent of all of the Banks:
(i) the termination, cancellation or release of any Loan Instrument, (ii) the
decrease in the interest rate(s) borne by the Revolving Loans, other than
decreases in the interest rate(s) borne by the Revolving Loans by virtue of any
decreases in the Federal Funds Rate or the Adjusted LIBOR Rate, in each case as
expressly contemplated herein, (iii) the decrease in the Letter of Credit Fee
Percentage, (iv) any extension of the stated maturity date of the Revolving Loan
Commitments pursuant to Section 2.1B hereof, (v) any extension of the due dates
of any installments of accrued interest on the Revolving Loans, (vi) any
reduction in the Pro Rata Share of any Bank except as expressly contemplated or
permitted in this Loan Agreement, (vii) any change in the provision that Banks
holding more than 60% of the Total Utilization of Revolving Loan Commitments
constitute the Requisite Banks, (viii) any
<PAGE>
amendment, modification or termination of any Guaranty Agreement and/or any
release of any Guarantor from any of its obligations thereunder, or (ix) any
amendment of the provisions of this paragraph.
SECTION 8
REMEDIES
8. Remedies.
8.1. Defaults. Upon the occurrence and during the continuation of any
Event of Default, the Agent, at the direction of the Requisite Banks, shall
proceed to protect and enforce the rights of the Banks by an action at law, suit
in equity or other appropriate proceeding, whether for the specific performance
of any agreement contained herein, in the Revolving Notes or in the other Loan
Instruments, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any power granted hereby or thereby or
by law. In case of a default in the payment of any principal of or premium, if
any, or interest on the Revolving Notes or upon acceleration thereof, the
Borrower will pay to the Banks such further amount as shall be sufficient to
cover the costs and expenses of collection thereof, including (to the extent
permitted by law), without limitation, reasonable attorneys' fees, expenses and
disbursements (including allocable costs of in-house counsel of the Agent or any
Bank).
8.2. Offset. If any Event of Default shall occur and be continuing
and regardless of whether or not the Banks have accelerated the maturity date of
the Revolving Notes or any of the other Obligations, each Bank shall have the
right then, or at any time thereafter, to setoff against any and all deposit
balances and other sums and Indebtedness and other property then held or owed by
that Bank to or for the credit or account of the Borrower, all without notice to
or demand upon the Borrower or any other Person, all such notices and demands
being hereby expressly waived by the Borrower, and in and on all of which the
Borrower hereby grants each Bank a Lien to secure the payment of the
Obligations. All amounts received by a Bank pursuant to the exercise of its
right of setoff against any deposit balances or other sums and Indebtedness and
other property then held or owed by such Bank to or for the credit or account of
the Borrower shall be shared pro rata with the other Banks and applied to the
payment of the Obligations in the manner set forth in Section 12.4 hereof.
8.3. Rights Cumulative. All of the rights and remedies of the Banks
and/or the Agent, in its capacity as agent for the Banks, as applicable, upon
the occurrence of an Event of Default shall be cumulative to the greatest extent
permitted by law, and shall be in addition to all those rights and remedies
afforded the Banks at law or in equity or under the other Loan Instruments.
<PAGE>
8.4. Payment of Costs and Expenses. All of the costs, expenses,
damages and liabilities, including, without limitation, all reasonable
attorneys' fees, incurred by and imposed upon the Banks with respect to, in
connection with or as a result of any action taken or omitted to be taken
pursuant to this Loan Agreement and the other Loan Instruments shall be paid by,
and shall be the sole and joint and several responsibility of, the Borrower.
SECTION 9
THE AGENT
9. The Agent.
9.1. Appointment. Each Bank hereby irrevocably designates, appoints
and authorizes PNC to act as Agent for such Bank under this Loan Agreement and
to execute and deliver or accept on behalf of each of the Banks the other Loan
Instruments. Each Bank hereby irrevocably authorizes, and each holder of any
Revolving Note by the acceptance of such Revolving Note shall be deemed
irrevocably to authorize, the Agent to take such action on behalf of such Bank
and such holder under the provisions of this Loan Agreement and the other Loan
Instruments and any other instruments and agreements referred to herein, and to
exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC agrees to act as the Agent on
behalf of the Banks to the extent provided in this Loan Agreement.
9.2. Delegation of Duties. The Agent may perform any of its duties
hereunder by or through agents or employees (provided such delegation is
exercised with reasonable care and does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 9.5, 9.6 and 9.7 hereof, shall be
entitled to engage and pay for the advice or services of any attorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained, provided reasonable care is
used in the selection of the foregoing experts.
9.3. Nature of Duties; Independent Credit Investigation. The Agent
shall have no duties or responsibilities except those expressly set forth in
this Loan Agreement and the other Loan Instruments and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Loan Agreement or shall otherwise exist. The duties of the Agent shall
be mechanical and administrative in nature and shall include the duty to provide
to each Bank an executed original of such Bank's Revolving Note and an executed
original of this Loan Agreement and a copy of the other Loan Instruments; the
Agent shall not have by reason of this Loan Agreement a fiduciary or trust
relationship in respect of any Bank; and nothing in this Loan Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Loan Agreement except as expressly
set forth herein. Each Bank expressly acknowledges (i) that the Agent has not
made any representations or warranties to it and that no act which the Agent
hereafter takes, including any review of the affairs of
<PAGE>
the Borrower, shall be deemed to constitute any representation or warranty by
the Agent to any Bank; (ii) that it has made and will continue to make, without
reliance upon the Agent, its own independent investigation of the financial
condition and affairs and its own appraisal of the creditworthiness of the
Borrower in connection with this Loan Agreement and the making and continuance
of the Revolving Loans hereunder; and (iii) except as expressly provided herein,
that the Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect thereto, whether coming into its possession before the making of any
Revolving Loan or at any time or times thereafter
9.4. Actions in Discretion of the Agent; Instructions from the Banks.
The Agent agrees, upon the written request of the Requisite Banks, to take or
refrain from taking any action of the type specified as being within the Agent's
rights, powers or discretion herein; provided that the Agent shall not be
required to take any action which exposes the Agent to legal liability or which
is contrary to this Loan Agreement or any other Loan Instrument or applicable
law. In the absence of a request by the Requisite Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Loan Agreement specifically requires the consent of the Requisite
Banks or all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to the
provisions of Section 9.6 hereof. Subject to the provisions of Section 9.6
hereof, no Bank shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the instructions of the Requisite Banks or the Banks, as applicable, or in
the absence of such instructions, in the absolute discretion of the Agent.
9.5. Reimbursement and Indemnification of the Agent and the Banks by
the Borrower. The Borrower unconditionally agrees to pay or reimburse the Agent
and each Bank and save the Agent and each Bank harmless against (i) liability
for the payment of all reasonable and necessary out-of-pocket costs, expenses
and disbursements for which reimbursement is customarily obtained, including
fees and expenses of counsel and consultants (including allocable costs of
in-house counsel of the Agent and each Bank), incurred by the Agent and/or any
Bank (a) in connection with the preparation, negotiation, printing, execution,
administration, interpretation and performance of this Loan Agreement and the
other Loan Instruments, (b) relating to any requested amendments, waivers or
consents pursuant to the provisions hereof, (c) in connection with the
enforcement of this Loan Agreement or any other Loan Instrument or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Loan Agreement or any other Loan Instrument, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Instrument or in connection with any foreclosure, collection or
bankruptcy proceedings, and (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent and/or any Bank, in its capacity as such, in any way relating
to or arising out of this Loan Agreement or any other Loan Instrument or any
action taken or omitted by the Agent and/or any Bank hereunder or
<PAGE>
thereunder; provided that the Borrower shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (A) if the same results from the gross
negligence or willful misconduct of the Agent or any Bank, or (B) if the
Borrower were not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense, or (C) if the same results
from a compromise or settlement agreement entered into without the consent of
the Borrower which consent shall not be unreasonably withheld.
9.6. Exculpatory Provisions. Neither the Agent nor any of its
directors, officers, employees, agents or affiliates shall (i) be liable to any
Bank for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith including pursuant to any other Loan Instruments, unless
caused by its or their own gross negligence or willful misconduct, (ii) be
responsible in any manner to any of the Banks for the effectiveness,
enforceability, genuineness, validity or the due execution of this Loan
Agreement or any other Loan Instrument or for any recital, representation,
warranty, document, certificate, report or statement herein or made or furnished
under or in connection with this Loan Agreement or any other Loan Instrument, or
(iii) be under any obligation to any of the Banks to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions
hereof or thereof on the part of the Borrower, or the financial condition of the
Borrower, or the existence or possible existence of any Event of Default or
Potential Event of Default under the Loan Instruments. Neither the Agent nor any
Bank nor any of their respective directors, officers, employees, agents,
attorneys or affiliates shall be liable to the Borrower or any other Person for
consequential damages resulting from any breach of contract, tort or other wrong
in connection with the negotiation, documentation or administration of the Loan
Instruments or the collection of the Revolving Loans.
9.7. Reimbursement and Indemnification of the Agent by the Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so) in proportion to its Pro Rata Share from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Loan Agreement or any other Loan
Instrument or any action taken or omitted by the Agent hereunder or thereunder,
provided that no such reimbursement shall be required with respect to expenses
incurred by the Agent during the time period through the Closing Date and no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(i) if the same relates to or arises out of the Agent's gross negligence or
willful misconduct, or (ii) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense,
or (iii) if the same results from a compromise and settlement agreement entered
into without the consent of the Requisite Banks, which consent shall not be
unreasonably withheld.
9.8. Reliance by the Agent. The Agent shall be entitled to rely
upon any writing, telegram, telex or teletype message, facsimile, resolution,
notice, consent, certificate, letter,
<PAGE>
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
9.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Event of Default or Event
of Default unless the Agent has received written notice from a Bank or the
Borrower referring to this Loan Agreement, specifically describing such
Potential Event of Default or Event of Default and stating that such notice is a
"notice of default."
9.10. The Banks in Their Individual Capacities. With respect to its
Revolving Loan Commitment and the Revolving Loans made by it, the Agent shall
have the same rights and powers hereunder as any other Bank and may exercise the
same as though it were not the Agent, and the term "Banks" shall, unless the
context otherwise indicates, include the Agent in its individual capacity. PNC
and its Affiliates and each of the Banks and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Borrower and
its Affiliates, in the case of the Agent, as though it were not acting as Agent
hereunder and in the case of each Bank, as though such Bank were not a Bank
hereunder.
9.11. Holders of Revolving Notes. The Agent may deem and treat any
payee of any Revolving Note as the owner thereof for all purposes hereof unless
and until written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who at the
time of making such request or giving such authority or consent is the holder of
any Revolving Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Revolving Note or of any Revolving Note or
Revolving Notes issued in exchange therefor.
9.12. Equalization of the Banks. The Banks and the holders of any
participations in any Revolving Notes agree among themselves that, with respect
to all amounts received by any Bank or any such holder for application on any
Obligation hereunder or under any Revolving Note or other Loan Instrument or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Revolving Notes. The
Banks or any such holder receiving any such amount shall purchase for cash from
each of the other Banks an interest in such Bank's Revolving Loans in such
amount as shall result in a ratable participation by the Banks and each holder
in the
<PAGE>
aggregate unpaid amount under the Revolving Notes, provided that if all or any
portion of such excess amount is thereafter recovered from the Bank or the
holder making such purchase, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, together with interest or other
amounts, if any, required by law (including court order) to be paid by the Bank
or the holder making such purchase.
9.13. Successor Agent. The Agent may resign as Agent with the consent
of the Borrower, such consent not to be unreasonably withheld, upon not less
than thirty (30) days prior written notice given to the Borrower and the Banks.
If the Agent shall resign under this Loan Agreement, then either (i) the
Requisite Banks shall appoint from among the Banks a successor agent for the
Banks, subject to the consent to such successor agent by the Borrower, such
consent not to be unreasonably withheld, or (ii) if a successor agent shall not
be so appointed and approved within the thirty (30) day period following the
Agent's notice to the Banks of its resignation, then the Agent shall appoint,
with the consent of the Borrower, such consent not to be unreasonably withheld,
a successor agent who shall serve as Agent until such time as the Requisite
Banks appoint, and the Borrower consents, which consent shall not be
unreasonably withheld, to the appointment of, a successor agent. Upon its
appointment pursuant to either clause (i) or (ii) above, such successor agent
shall succeed to the rights, powers and duties of the Agent and the term "Agent"
shall mean such successor agent, effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated without any other
or further act or deed on the part of such former Agent or any of the other
parties to this Loan Agreement. After the resignation of any Agent hereunder,
the provisions of this Section 9.13 shall not by reason of such resignation be
deemed to release the Agent from liability for any actions taken or not taken by
it while it was the Agent under this Loan Agreement.
9.14. Calculations. In the absence of gross negligence or willful
misconduct, the Agent shall not be liable for any error in computing the amount
payable to any Bank whether in respect of the Revolving Loans or the fees or
other amounts due to the Banks under this Loan Agreement. In the event an error
in computing any amount payable to any Bank is made, the Agent, the Borrower and
each affected Bank shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any compensation
therefor will be calculated at the Federal Funds Rate.
9.15. Beneficiaries. Except as set forth in Sections 9.5 and 9.13
hereof, the provisions of this Section 9 are solely for the benefit of the Agent
and the Banks, and the Borrower shall not have any right to rely on or enforce
any of the provisions hereof. In performing its functions and duties under this
Loan Agreement, the Agent shall act solely as agent of the Banks and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for the Borrower or any other Person.
SECTION 10
ASSIGNMENTS AND PARTICIPATIONS
10. Assignments and Participations in Revolving Loans and Revolving Notes.
<PAGE>
10A. Each Bank shall have the right at any time, upon prior written
notice to, and with the prior written consent of, the Borrower and the Agent,
which consent shall not be unreasonably withheld, to sell, assign, transfer or
negotiate all or a permitted portion of such Bank's Revolving Loans and
Revolving Loan Commitment to one or more Eligible Assignees. Each Bank shall,
following a demand by the Borrower after a demand by such Bank pursuant to
Section 2.2G(ii), 2.6C, 2.8A, 2.8B or 2.8C hereof, or upon the failure by a Bank
to extend the Revolving Loan Commitment Termination Date pursuant to Section
2.1B hereof, sell, assign, transfer or negotiate all or any part of its
Revolving Loans and Revolving Loan Commitment to one or more Eligible Assignees
selected or approved by the Borrower; provided that prior to receiving any
confidential or other material information regarding the Borrower or the
transactions contemplated by this Loan Agreement, any Eligible Assignee shall
have entered into a Confidentiality Agreement; provided further that any such
assignment shall become effective five (5) Business Days after the Agent's
receipt of (x) a written notice of such assignment from the assigning Bank, (y)
processing and recordation fees of Three Thousand Five Hundred Dollars ($3,500)
from the assigning Bank in connection with the Agent's recording of such sale,
assignment, transfer or negotiation, as provided in Section 10F. hereof, and (z)
an Assignment Agreement executed by the assignee and assignor; provided still
further that no Bank shall make any assignment to any Eligible Assignee in a
principal amount of less than Five Million Dollars ($5,000,000) unless, after
giving effect to such assignment, the assigning Bank will have no Revolving
Loans or Revolving Loan Commitment hereunder; provided still further, each such
assignment made as a result of a demand by the Borrower pursuant to this Section
10.A shall be arranged by the Borrower at its expense (including without
limitation, the processing and recordation fee referred to in (y) above) after
consultation with the Agent, shall be to an Eligible Assignee(s) acceptable to
the Agent as confirmed in a written notice to the Borrower, and shall be either
an assignment of all of the rights and obligations of the assigning Bank under
this Loan Agreement or an assignment of a portion of such rights and obligations
made concurrently with another assignment or other such assignments which
together constitute all of the rights and obligations of the assigning Bank
under this Loan Agreement. In the case of any sale, assignment, transfer or
negotiation of all or part of the Revolving Loans and the Revolving Loan
Commitments authorized under this Section 10.A, the assignee, transferee or
recipient shall have, to the extent of such sale, assignment, transfer or
negotiation, the same rights, benefits and obligations as it would if it were a
Bank hereunder, including, without limitation (x) the right to approve or
disapprove actions which, in accordance with the terms hereof, require the
approval of the Requisite Banks or the Banks, as applicable, and (y) the
obligation to fund Revolving Loans directly to the Agent pursuant to Section 2
hereof. Upon its receipt of any Assignment Agreement delivered by an assigning
Bank pursuant to this Section 10.A, the Agent shall record the information
contained therein in the records of the Agent.
10B. Notwithstanding Section 10.A hereof, each Bank may grant
participations in all or any part of its Revolving Loans and Revolving Loan
Commitment to one or more of its Affiliates; provided that (i) any such
disposition shall not, without the consent of the Borrower, require the Borrower
to file a registration statement with the Securities and Exchange Commission or
apply to qualify the Revolving Loans or the Revolving Notes or any other Loan
<PAGE>
Instrument under the blue sky law of any state; (ii) the holder of any such
participation shall not be entitled to require such Bank to take or omit to take
any action hereunder except action directly extending the final maturity of any
portion of the principal amount of or interest on a Revolving Loan allocated to
such participation or a reduction of the principal amount of or the rate of
interest payable on the Revolving Loans, or payments due in repayment of draws
under Letters of Credit allocable to such participation; and (iii) neither the
Agent nor the Borrower shall have any duty or obligation to deal directly with
the holder of any such participation but instead shall be entitled to continue
to deal directly with the Bank that granted such participation.
10C. No Bank shall, as between the Borrower and that Bank, be
relieved of any of its obligations hereunder as a result of any granting of
participations in all or any part of the Revolving Loans or Revolving Loan
Commitment or other Obligations owed to such Bank to any Affiliate of such Bank.
Each Bank shall, as between the Borrower and that Bank, be relieved of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of all or any part of the Revolving Loans or Revolving Loan
Commitment of that Bank or other Obligations owed to such Bank made in
accordance with Section 10.A hereof.
10D. Notwithstanding the provisions of Section 10.A. hereof, no Bank
shall be entitled to assign all or any portion of its Revolving Loans or
Revolving Loan Commitment under this Loan Agreement pursuant to Section 10.A.
hereof unless (x) such assigning Bank shall have given the other Banks a first
right to acquire or purchase the portion of the Bank's Revolving Loans and
Revolving Loan Commitment being assigned. The assigning or selling Bank shall
notify the Agent of the amount of its Revolving Loans and Revolving Loan
Commitment it intends to transfer and the Agent shall give each other Bank
notice thereof and shall determine within forty-five (45) days the amount, if
any, that the other Banks elect to acquire, such amount to be allocated pro rata
among such Banks in accordance with their respective Revolving Loan Commitments
unless such Banks otherwise agree to the contrary. The provisions of this
Section 10.D. shall not apply to the sale by any Bank of participations in its
Revolving Loans and Revolving Loan Commitment to any Affiliate of such Bank.
10E. In the event any Bank becomes an Affected Bank pursuant to
Section 2.1B, 2.2G, 2.6C, 2.8A, 2.8B or 2.8C hereof and the Borrower elects, at
its sole option, to replace the Affected Bank with an Eligible Assignee(s)
selected by the Borrower and approved of in writing by the Agent, which approval
shall not be unreasonably withheld, the Borrower shall, prior to selecting any
replacement Eligible Assignee for the Affected Bank, offer to the other Banks
for a period of sixty (60) days the right to increase their respective Revolving
Loan Commitments by an aggregate amount equal to the Revolving Loan Commitment
of the Affected Bank, such Revolving Loan Commitment of the Affected Bank to be
allocated pro rata among the other Banks in accordance with their respective
Revolving Loan Commitments unless such other Banks otherwise agree to the
contrary. In the event the Banks (other than the Affected Bank) elect not to
increase their respective Revolving Loan Commitments or fail to respond to the
Borrower within the sixty (60) day period referenced above, the Borrower shall
have the right to replace the Affected Bank with an Eligible Assignee(s). Each
Bank agrees that, in the event it becomes an Affected Bank, such Bank will sell
its Revolving Loan and Revolving Loan
<PAGE>
Commitment to the other Banks and/or an Eligible Assignee(s), as the case may
be, if directed by the Borrower, in accordance with the provisions of this
Section 10.E. The Affected Bank and the Eligible Assignee(s) shall be obligated
to execute and deliver an Assignment Agreement in favor of the Agent.
10F. Notwithstanding the provisions of Section 10A, no consent of the
Borrower shall be required as a condition to any sale, assignment, transfer or
negotiation pursuant to Section 10A if such sale, assignment, transfer or
negotiation occurs following a Potential Event of Default that has not either
been cured in a manner permitted under this Loan Agreement and the other Loan
Instruments or expressly waived in writing by all of the Banks or by the Agent
with the consent of all of the Banks. Without limitation of the foregoing or of
Section 10A, Borrower shall not unreasonably withhold its consent to any sale,
assignment, transfer or negotiation requested by a Bank pursuant to Section 10A
if such request is made with regard to a prospective assignee contacted by the
Agent for the purpose of facilitating the syndication of the funding for all or
part of the Obligations. Each sale, assignment, transfer or negotiation by a
Bank pursuant to Section 10A, other than a sale, assignment, transfer or
negotiation to an Affiliate of such Bank, shall, at the sole and exclusive
option of the Agent, be conditioned upon the payment to the Agent by the
assigning Bank of a service fee in the amount of $3,500 as a condition precedent
to such sale, assignment, transfer or negotiation.
SECTION 11
INDEMNITY
The Borrower shall indemnify and hold harmless the Banks, their
respective successors, assigns, agents and employees, from and against any and
all claims, actions, suits, proceedings, costs, expenses, damages, fines,
penalties and liabilities, including, without limitation, reasonable attorneys'
fees and costs, arising out of and/or connected with the transactions
contemplated hereunder. Provided, the Borrower shall have no obligation to
indemnify the Banks for any loss caused by the Banks' gross negligence or
willful misconduct. At each Bank's request, the Borrower shall, at its own cost
and expense, defend or cause to be defended any and all such actions or suits
that may be brought against the applicable Bank and, in any event, shall
satisfy, pay and discharge any and all judgments, awards, penalties, costs and
fines that may be recovered against the applicable Bank in any such action, plus
all attorneys' fees and costs related thereto to the extent permitted by
applicable law; provided, however, that each Bank shall give the Borrower, to
the extent the applicable Bank seeks indemnification from the Borrower under
this Section 11, written notice of any such claim, demand or suit as soon as
practicable after the applicable Bank has received written notice thereof, and
the applicable Bank shall not settle any such claim, demand or suit, if the
applicable Bank seeks indemnification therefor from the Borrower, without first
giving notice to Borrower of the applicable Bank's desire to settle and
obtaining the consent of Borrower to the same, which consent Borrower hereby
agrees not to unreasonably withhold.
<PAGE>
SECTION 12
MISCELLANEOUS
12.1. Submission to Jurisdiction, etc. The Borrower hereby
irrevocably agrees that any legal action, suit or proceeding against the
Borrower with respect to the obligations and liabilities of the Borrower
hereunder or any other matter under or arising out of or in connection with this
loan Agreement or for recognition or enforcement of any judgment rendered in any
such action, suit or proceeding may be brought in the United States District
Court of the Western District of Kentucky or in the courts of the Commonwealth
of Kentucky, as the Requisite Banks may elect, and, by execution and delivery of
this Loan Agreement, the Borrower hereby irrevocably accepts and submits to the
non-exclusive jurisdiction of each of the aforesaid courts in personam generally
and unconditionally with respect to any such action, suit or proceeding
involving the Borrower and in respect of the Borrower's property. The Borrower
further agrees that final judgment against the Borrower in any action, suit or
proceeding referred to herein shall be conclusive after all appeals have been
exhausted or waived by the Borrower, and may thereafter be enforced in any other
jurisdiction, within or outside the United States of America, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and of the amount of the Borrower's obligations and liabilities. The
Borrower further irrevocably consents and agrees to the service of any and all
legal process, summons, notices and documents out of any of the aforesaid courts
in any such action, suit or proceeding by mailing copies thereof by registered
or certified air mail, postage prepaid, to the Borrower at the address set forth
in Section 12.3 below or by serving copies thereof upon any statutory agent for
service of process of the Borrower. The Borrower agrees that service upon the
Borrower as provided for herein shall constitute valid and effective personal
service upon the Borrower and that the failure of any statutory agent to give
any notice of such service to the Borrower shall not impair or affect in any way
the validity of such service or any judgment rendered in any action or
proceeding based thereon. Nothing herein shall, or shall be construed so as to,
limit the right of the Banks to bring actions, suits or proceedings with respect
to the obligations and liabilities of the Borrower under, or any other matter
arising out of or in connection with, this Loan Agreement and/or the other Loan
Instruments, or for recognition or enforcement of any judgment rendered in any
such action, suit or proceeding, in the courts of whatever jurisdiction in which
property of the Borrower may be found or as otherwise shall to the Requisite
Banks seem appropriate, or to affect the rights to service of process in any
jurisdiction in any manner permitted by law. In addition, the Borrower hereby
irrevocably and unconditionally waives any objection which the Borrower may now
or hereafter have to the laying of venue of any of the aforesaid actions, suits
or proceedings arising out of or in connection with this Loan Agreement and/or
the other Loan Instruments brought in the Circuit Court of Jefferson County,
Kentucky or in the United States District Court for the Western District of
Kentucky, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim that any such action, suit or proceeding brought in either
such court has been brought in an inconvenient forum.
12.2. Role of the Banks. Notwithstanding any of the terms or
conditions hereof or of the other Loan Instruments to the contrary, the Banks
shall not have, and by their execution
<PAGE>
and acceptance of this Loan Agreement hereby expressly disclaim, any obligation
or responsibility for the management, conduct or operation of the business and
affairs of the Borrower. Any term or condition hereof, or of any of the other
Loan Instruments, permitting the Banks to take or refrain from taking any action
with respect to the Borrower shall be deemed solely to permit the Banks to audit
and review the management, operation and conduct of the business and affairs of
the Borrower, and may not be relied upon by any other Person. Further, the Banks
shall not have, have not assumed, and by their execution and acceptance of this
Loan Agreement hereby expressly disclaim, any liability or responsibility for
the payment or performance of any indebtedness or obligation of the Borrower,
and no term or condition hereof, or of any of the other Loan Instruments, shall
be construed otherwise.
12.3. Notices. All notices required or permitted to be given
hereunder shall be given in writing and shall be personally delivered or sent by
telecopier, by express courier service or by registered or certified United
States mail, return receipt requested, postage prepaid, addressed as follows (or
to such other address as to which any party hereto shall have given the other
written notice):
If to the Borrower: Steel Technologies Inc.
15415 Shelbyville Road
Louisville, KY 40245
Attn: Mr. Joseph P. Bellino
Chief Financial Officer
Telephone: (502) 245-2110
Telecopy: (502) 245-3821
cc:Steel Technologies Inc.
15415 Shelbyville Road
Louisville, Kentucky 40245
Attn: John M. Baumann, Esq.
Secretary/Corporate Counsel
Telephone: (502) 245-0322
Telecopy: (502) 245-0542
If to the Banks: At the telecopy number or address specified below the
signature of the applicable Bank
cc: Ms. Arlene M. Ohler
Vice President Manager
PNC Capital Markets Agency Services
Multi-Bank Loan Administration
One PNC Plaza
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
<PAGE>
Telephone: (412) 762-3627
Telecopy: (412) 762-8672
cc: Arthur A. Rouse, Esq.
Wyatt, Tarrant & Combs
2700 Citizens Plaza
Louisville, KY 40202
Telephone: (502) 562-7508
Telecopy: (502) 589-0309
All notices hereunder shall be deemed given upon the earliest of (a)
actual delivery in person or by telecopier, (b) one (1) Business Day after
delivery to an express courier service, or (c) three (3) Business Days after
having been deposited in the United States mails, in accordance with the
foregoing.
12.4. Ratable Sharing. Each Bank agrees with each other Bank that (i)
with respect to all amounts received by them which are applicable to the payment
of principal of or interest on the Revolving Loans and amounts payable in
respect of the Letters of Credit or Commitment Fees, including, without
limitation, all amounts received by such Bank pursuant to the exercise of the
right of setoff pursuant to Section 8.2 hereof, equitable adjustment will be
made so that, in effect, all such amounts will be shared among the Banks
proportionately in accordance with their respective Pro Rata Shares whether
received by voluntary payment, by the exercise of the right of set-off or
banker's lien, by counterclaim or cross action or by the enforcement of any or
all of the Obligations, and (ii) if any of them shall exercise any right of
counterclaim, setoff, banker's lien or similar right with respect to amounts
owed by the Borrower hereunder or in respect of the Letters of Credit, that Bank
shall apportion the amount recovered as a result of the exercise of such right
pro rata in accordance with (a) all amounts outstanding at such time owed by the
Borrower to it hereunder, and (b) all amounts otherwise owed by the Borrower to
it, and (iii) if any of them shall thereby through the exercise of any right of
counterclaim, set-off, banker's lien or otherwise, or as adequate protection of
a deposit treated as cash collateral under the Bankruptcy Code, receive payment
or reduction of a proportion of the aggregate amount of principal and interest
due with respect to the Revolving Loans made by that Bank or amounts payable in
respect of any Letter of Credit or any participation therein, or any other
amount payable hereunder (collectively, the "Aggregate Amount Due" to such
Bank), which is greater than the proportion received by any other Bank in
respect of the Aggregate Amount Due to such other Bank, then the Bank receiving
such proportionately greater payment shall (y) notify each other Bank and the
Agent of such receipt and (z) purchase participations (which it shall be deemed
to have done simultaneously upon the receipt of such payment) in the Aggregate
Amounts Due to the other Banks so that all recoveries of Aggregate Amounts Due
shall be shared by the Banks in proportion to their respective Pro Rata Shares;
provided that if all of part of such proportionately greater payment received by
such purchasing Bank is thereafter recovered from such Bank, those purchases
shall be rescinded and the purchase prices paid for such participations shall be
returned to that Bank to the extent of such recovery, but without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
participant in respect of any Revolving Loan may exercise any and all rights of
banker's lien,
<PAGE>
set-off or counterclaim with respect to any and all rights of banker's lien,
set-off or counterclaim with respect to any and all monies owing by the Borrower
to that participant as fully as if that participant were a Bank in the amount of
such participation held by that participant.
12.5. Waiver. No course of dealing in respect of, nor any omission or
delay in the exercise of, any right, power, remedy or privilege by the Banks
shall operate as a waiver thereof, nor shall any right, power, remedy or
privilege of the Banks be exclusive of any other right, power, remedy or
privilege referred to herein or in any related document or now or hereafter
available at law, in equity, in bankruptcy, by statute or otherwise. Each such
right, power, remedy or privilege may be exercised by the Banks, either
independently or concurrently with others, and as often and in such order as the
Banks may deem expedient. No waiver or consent granted by the Banks in respect
of this Loan Agreement, the Revolving Notes or the other Loan Instruments shall
be binding upon the Banks unless specifically granted in writing by a duly
authorized officer of each Bank, which writing shall be strictly construed.
12.6. Survival of Representations and Warranties. All
representations, warranties and covenants of the Borrower contained herein or in
the other Loan Instruments or made pursuant hereto shall survive the execution
and delivery of the Loan Instruments. Further, the indemnities set forth in
Sections 5.11 and 11 hereof shall survive the payment of the Revolving Notes and
the other Obligations.
12.7. Invalidity. If any part of this Loan Agreement shall be
adjudged invalid or unenforceable, whether in general or in any particular
circumstance, then such partial invalidity or enforceability shall not cause the
remainder of this Loan Agreement to be or to become invalid or unenforceable,
and if a provision hereof is held invalid or unenforceable in one or more of its
applications, the parties hereto agree that said provision shall remain in
effect in all valid applications that are severable from the invalid or
unenforceable application or applications.
12.8. Assignment. This Loan Agreement may not be assigned by the
Borrower without the prior written consent of the Banks. All rights of the Banks
hereunder shall inure to the benefit of their respective permitted successors
and assigns, and all obligations, covenants and agreements of the Borrower shall
bind its successors and assigns, if any.
12.9. Governing Law. This Loan Agreement and the rights and
obligations of the parties hereunder shall, in all respects, be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky.
12.10. Section Headings. The section headings of this Loan Agreement
are inserted herein solely for convenience of reference and shall not affect the
construction or interpretation of the provisions hereof.
12.11. Entire Agreement. This Loan Agreement, the Revolving Notes and
the other Loan Instruments constitute the entire agreement among the Banks and
the Borrower with respect to the subject matter hereof.
<PAGE>
12.12. Costs and Expenses. The Borrower agrees to reimburse PNC for
all charges, expenses, out-of-pocket costs and fees incurred by PNC in the
preparation, negotiation, documentation, amendment, execution and administration
(other than the ordinary and customary expenses of administration) of this Loan
Agreement and all other Loan Instruments, including without limitation: the
reasonable fees of PNC's counsel and agreed loan or commitment fees. All
obligations of the Borrower under this Section 12.12 shall survive the
termination or cancellation of this Loan Agreement for any reason whatsoever.
12.13. Time of the Essence. Time shall be of the essence in the
payment and performance of all of the Borrower's obligations under this Loan
Agreement, the Revolving Notes and the other Loan Instruments.
12.14. No Oral Modifications. This Loan Agreement may be modified
only in writing executed by the Requisite Banks (or all of the Banks to the
extent applicable) and the Borrower.
12.15. Counterparts. This Loan Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
12.16. Delivery to the Agent Only. Notwithstanding any provision or
inference to the contrary set forth herein, all notices, financial statements,
certificates, documents, instruments and other items or information required to
be given, provided, furnished or delivered by the Borrower under this Loan
Agreement shall be delivered solely to the Agent and not to all of the Banks,
unless the Borrower at its sole option otherwise elects to deliver any such
notices, financial statements, certificates, documents, instruments and other
items or information to all of the Banks.
[Signatures Commence on Next Page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above written.
(the "Borrower")
STEEL TECHNOLOGIES INC.
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
("PNC")
PNC BANK, NATIONAL ASSOCIATION
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
Address: PNC Bank, National Association
Energy, Metals and Mining
249 Fifth Avenue
P1-POPP-03-3
Pittsburgh, PA 15222-2707
Attn: David W. Mengel
Senior Vice President
Telephone: (412) 762-2524
Telecopy: (412) 705-3232
<PAGE>
("National City")
NATIONAL CITY BANK OF KENTUCKY
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
Address: 101 South Fifth Street
Louisville, KY 40202
Attn: Deroy Scott
Vice President
Telephone: (502) 581-7821
Telecopy: (502) 581-4424
("NBD")
NBD BANK, N.A.
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
Address: One Indiana Square
Suite 7028
Indianapolis, IN 46266
Attn: Randall K. Stephens
Telephone: (317) 266-6704
Telecopy: (317) 266-6042
<PAGE>
("SunTrust")
SUNTRUST BANK, NASHVILLE, N.A.
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
Address: 201 Fourth Avenue North
Nashville, TN 37219
Attn: Jeffrey L. Howard
Group Vice President
Telephone: (615) 748-5579
Telecopy: (615) 259-4119
("Star")
STAR BANK, N.A.
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
Address: One Financial Square
Louisville, KY 40202-3322
Attn: Mr. Phillip L. Marshall
Telephone: (502) 562-6486
Telecopy: (502) 560-8111
(collectively, the "Banks")
(the "Agent")
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, in its capacity
as Agent
By:________________________________
(signature)
Name:______________________________
(type or print)
Title:_____________________________
(type or print)
<PAGE>
Exhibit 10.12
AMENDED AND RESTATED
STEEL TECHNOLOGIES INC.
NONEMPLOYEE DIRECTORS STOCK PLAN
1. Purpose. The Amended and Restated Steel Technologies Inc. Nonemployee
Directors Stock Plan (the "Restated Plan") is intended to increase the
proprietary interest of nonemployee members of the Board of Directors (the
"Board") of Steel Technologies Inc. (the "Company") by providing further
opportunity for ownership of the Company's common stock (the "Stock"), and to
increase their incentive to contribute to the success of the Company's business.
2. Shares of Stock.
(a) Shares Reserved for Issuance. Shares of Stock which may be issued
under the Restated Plan may either be authorized but unissued shares or issued
shares which have been reacquired by the Company, provided that the total number
of shares of Stock which shall be reserved and available for issuance under the
Restated Plan shall not exceed 25,000 shares, subject to adjustment pursuant to
paragraph (b) below.
(b) Capital Adjustments. In the event of a change in the number or class
of shares of Stock as a result of any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation or other
similar change in capitalization, the maximum number or class of shares
available for issuance under the Restated Plan, and the number or class of Stock
to be delivered hereunder shall be proportionately adjusted to reflect any such
change.
3. Stock in Lieu of Directors Fees.
(a) Mandatory Portion. For each calendar year commencing with the calendar
year beginning January 1, 1999, each member of the Board who is not an employee
of the Company or any of its subsidiaries (an "Eligible Director") and has not
attained, as of the first day of any such year, the age of 60, shall receive a
whole number of shares of Stock equal in value to 50% of the annual retainer fee
(the "Fee") to be earned by the Eligible Director during each such calendar
year. Such shares of Stock shall be received in lieu of the payment of cash in
respect of 50% of such Fee. Such shares shall be issued to each Eligible
Director, in substantially equal installments, on the scheduled date of the
Regular Meetings of the Board of Directors (the "Normal Stock Payment Date").
The number of shares of Stock which each Eligible Director shall be
entitled to receive pursuant to this paragraph (a) shall be equal to 50% of the
amount of the Fee which otherwise would have been payable to such Eligible
Director (during the calendar quarter) divided by the Fair Market Value (as
hereinafter defined) on the first trading day of the week which includes the
Normal Stock Payment Date. "Fair Market Value" shall mean, as of any specified
date, the
<PAGE>
average of the high and low trading price of a share of Stock as reported on the
National Association of Securities Dealers Automated Quotation System or, if the
Stock is admitted to trade on a national securities exchange, on such exchange.
The value of fractional shares shall be paid to the Eligible Director in cash.
(b) Elective Portion. In addition to the shares of Stock received pursuant
to Section 3 (a) hereof, for each calendar year commencing with the calendar
year beginning January 1, 1999: (i) each Eligible Director subject to Section 3
(a) hereof may elect to receive a whole number of shares of Stock equal in value
(determined in accordance with paragraph (a) above) to either 0% or 100% of the
remaining 50% of his or her Fee to be earned by the Eligible Director during
each such calendar year, and (ii) each Eligible Director not subject to Section
3 (a) hereof may elect to receive a whole number of shares of Stock equal in
value (determined in accordance with paragraph (a) above) to either 0%, 50%, or
100% of his or her Fee to be earned by the Eligible Director during each such
calendar year. Such shares of Stock shall be received in lieu of the payment of
cash in respect of the specified percentage of such Fee. Such shares shall be
issued to each such Eligible Director, in substantially equal installments, on
the Normal Stock Payment Dates. The value of fractional shares shall be paid to
the Eligible Director in cash.
4. Timing and Form of Elections. Any election described in Section 3 (b)
hereof:
(a) shall be in the form of a document executed by the director and
filed with the Secretary of the Company; and
(b) shall continue until a director ceases to be a director of the Company
or until he or she terminates or modifies such election by written notice to the
Secretary of the Company, as described below.
5. Term of Plan. The Restated Plan shall become effective upon its approval by
the Board and shall apply to all Fees earned by Eligible Directors for services
rendered to the Company on and after January 1, 1999. The Restated Plan shall
remain in effect until all shares of Stock reserved for issuance under the
original Steel Technologies Inc. Non Employee Directors Stock Plan adopted by
the Board of Directors in 1996 ("Original Plan") have been issued, unless sooner
terminated by the Board.
6. Administration of the Plan. This Restated Plan shall be administered by the
Secretary of the Company, who shall have the authority to adopt rules and
regulations for carrying out the Restated Plan and to interpret, construe and
implement the provisions thereof.
7. Amendment and Termination. The Board may at any time and from time to time
alter, amend, suspend or terminate the Restated Plan in whole or in part. No
amendment, modification or termination of the Restated Plan shall in any manner
adversely affect the rights of any Eligible Director with respect to shares of
Stock to which he or she became entitled prior to such
<PAGE>
amendment, modification or termination or with respect to Deferred Shares (as
defined in the Original Plan) that have been credited to his or her account
pursuant to the Original Plan.
Except as provided in the Original Plan in the event the Restated Plan is
terminated, Deferred Shares and Dividend Equivalents (as each are defined in the
Original Plan) shall be distributed at such time and in such manner as the Board
shall determine, no later than they would have been distributed pursuant to the
election applicable thereto.
8. Compliance with Securities Laws. The Company may require any Eligible
Director to whom Stock is issued, as a condition of receiving such Stock, to
give written assurances in substance and form satisfactory to the Company and
its counsel to the effect that such person is acquiring the Stock for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with Federal and applicable state
securities laws.
9. Right to Continue as Director. Nothing in this Restated Plan shall be
construed as conferring any right upon any director to continuance as a member
of the Board.
10. No Shareholder Rights Conferred. Nothing in this Restated Plan shall be
deemed to confer on an Eligible Director any rights of a shareholder with regard
to shares of Stock until such shares are issued and delivered pursuant to the
terms of the Restated Plan.
11. Compliance with Rule 16b-3. This Restated Plan is intended to comply with
the applicable provisions of Rule 16b-3, as amended from time to time, under the
Exchange Act, and shall be construed to so comply.
12. Governing Law. This Restated Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Kentucky.
<PAGE>
EXHIBIT 13
1999 ANNUAL REPORT TO SHAREHOLDERS
Steel Technologies Inc.
Selected Financial Data
(In thousands, except per share results)
<TABLE>
Years ended September 30
----------------------------------------------------
INCOME STATEMENT DATA 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales ................................... $411,389 $383,907 $345,624 $294,161 $252,730
Cost of goods sold ...................... 353,782 339,811 308,448 253,845 222,121
Gross profit ............................ 57,607 44,096 37,176 40,316 30,609
Selling, general and administrative
expense ............................... 26,108 22,144 19,989 18,811 16,185
Equity in net income of unconsolidated
corporate joint venture ............... 1,095 537 1,609 1,672 1,414
Operating income ........................ 32,594 22,489 18,796 23,177 15,838
Income before income taxes .............. 25,233 16,410 13,123 18,169 11,298
Net income .............................. 15,572 9,803 8,502 11,686 7,423
Diluted earnings per common share ....... $ 1.38 $ 0.82 $ 0.71 $ 0.97 $ 0.61
Diluted weighted average number of common
shares outstanding .................... 11,256 11,989 12,057 12,064 12,227
Basic earnings per common share ......... $ 1.39 $ 0.82 $ 0.71 $ 0.98 $ 0.61
Basic weighted average number of common
shares outstanding .................... 11,230 11,942 11,976 11,980 12,147
Cash dividends per common share ......... $ 0.11 $ 0.10 $ 0.10 $ 0.09 $ 0.08
</TABLE>
<TABLE>
September 30
----------------------------------------------------
BALANCE SHEET DATA 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital ......................... $ 89,418 $ 80,319 $ 90,317 $ 65,265 $ 53,385
Total assets ............................ 289,105 266,481 257,510 217,141 194,730
Long-term debt .......................... 90,209 88,300 97,190 67,260 68,645
Shareholders' equity .................... 124,439 113,676 108,829 101,361 92,997
</TABLE>
<TABLE>
Years ended September 30
----------------------------------------------------
OTHER DATA 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital expenditures, including
acquisitions and investments in joint
ventures ............................... $ 18,304 $ 25,414 $ 25,341 $ 6,473 $ 37,914
Shareholders' equity per common share ... 11.17 9.81 9.07 8.47 7.67
Depreciation and amortization ........... 12,852 11,860 10,500 9,535 7,157
</TABLE>
<PAGE>
Steel Technologies Inc.
Selected Quarterly Financial Data
(In thousands, except per share results)
<TABLE>
Fiscal Year 1999 First Second Third Fourth
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 98,203 $106,891 $109,248 $ 97,047
Gross profit 12,954 14,524 16,112 14,017
Net income 2,991 3,893 4,482 4,206
Diluted earnings per common share $ 0.26 $ 0.35 $ 0.40 $ 0.38
Basic earnings per common share $ 0.26 $ 0.35 $ 0.40 $ 0.38
</TABLE>
<TABLE>
Fiscal Year 1998 First Second Third Fourth
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 96,449 $101,287 $ 96,389 $ 89,782
Gross profit 10,398 12,108 11,883 9,707
Net income 2,491 3,234 2,857 1,221
Diluted earnings per common share $ 0.21 $ 0.27 $ 0.24 $ 0.10
Basic earnings per common share $ 0.21 $ 0.27 $ 0.24 $ 0.10
</TABLE>
Market Price and Dividend Information:
The Company's common stock trades on The Nasdaq Stock Market under the symbol
STTX. At October 31, 1999, there were approximately 537 shareholders of record.
The Company's current dividend policy provides for semiannual payments of cash
dividends. The following table shows cash dividends and high and low prices for
the common stock for each quarter of fiscal 1999 and 1998. Nasdaq National
Market System quotations are based on actual transactions.
<TABLE>
Stock Price
------------------------------------
Fiscal Year 1999 High Low Dividends
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ 9.250 $ 6.063 $ 0.05
Second Quarter $ 8.688 $ 6.938
Third Quarter $10.188 $ 6.875 $ 0.06
Fourth Quarter $12.813 $ 9.188
</TABLE>
<TABLE>
Stock Price
------------------------------------
Fiscal Year 1998 High Low Dividends
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $13.000 $ 8.875 $ 0.05
Second Quarter $12.250 $10.625
Third Quarter $13.813 $ 9.563 $ 0.05
Fourth Quarter $11.000 $ 6.625
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
When used in the following discussion, the word "expects" and other similar
expressions are intended to identify forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected. Specific risks and uncertainties include, but are not limited
to, general business and economic conditions; cyclicality of demand in the steel
industry, specifically in the automotive market; work stoppages; risks of year
2000 noncompliance or other business interruptions affecting automotive
manufacturers; competitive factors such as pricing and availability of steel;
reliance on key customers; and potential equipment malfunctions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date thereof. The Company undertakes no obligation to
republish revised forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date hereof.
RESULTS OF OPERATIONS - FISCAL 1999 COMPARED TO FISCAL 1998
Steel Technologies posted sales of $ 411,389,000 in fiscal 1999, an increase of
7% from 1998 sales of $383,907,000. The Roberts Steel Company acquired on July
1, 1998 added $21,300,000 of sales for fiscal year 1999 compared to $5,000,000
for the three months of operations during fiscal 1998 following the date of
acquisition. Sales of existing Steel Technologies core steel processing
operations increased approximately $11,182,000 or 3% compared to the previous
year. Tons shipped in 1999 increased by 12% while the average selling price of
steel products declined approximately 5% from a year ago. The Company focuses
significant resources on the automotive industry and generates a major portion
of business from selling manufacturing component parts to the automotive
industry. The Company continues to increase market share and to develop a
substantial amount of new business with both existing and new customers.
The capital investments completed in recent years have added new capacity and
increased the products and services offered to customers, creating new business
opportunities and enhancing market share. In fiscal year 1999, the Company
completed the start-up of the Berkley, South Carolina plant and the expansion of
the Willoughby, Ohio plant.
The gross profit margin was 14.0% in 1999 compared to 11.5% in 1998 as a result
of product mix improvements, productivity increases, operating cost reductions
including a reduction in raw material prices. The Company expects an increase in
the price of raw materials in fiscal 2000, especially in hot rolled steel.
Strong demand for steel products and reduction in the amount of foreign steel
imports have resulted in firmer raw material prices. As a result of trade suits
initiated by U.S. steel producers against Japan, Russia and Brazil, the supply
of steel from foreign producers has declined in recent months, and may result in
domestic producers increasing raw material prices. Should raw material prices
increase, gross margins could be negatively impacted in the event that the
Company is unable to pass along corresponding sales price increases to its
customers. Production cost efficiencies and product mix improvements may
positively impact gross margins and somewhat offset rising raw materials costs.
Additionally, increased use of the Company's pickling facility and blanking
lines are expected to increase the amount of higher margin toll processing
revenue. Toll processing, primarily of customer-owned steel, generates higher
gross margin percentages than the traditional processing of company-owned steel.
Steel Technologies continues to actively manage the level at which selling,
general and administrative expenses are added to the cost structure. Sales,
general and administrative costs increased 18% in fiscal 1999, while sales
increased 7% for the current year. Sales, general and administrative expenses
were 6.4% and 5.8% of sales in 1999 and 1998, respectively. The increase was
primarily attributable to the additional expenses from the addition of Roberts
Steel Company, and additional marketing expenses to support sales growth of
Steel Technologies Carolinas and Steel Technologies de Mexico.
The Company's share of the income of Mi-Tech Steel, Inc., an unconsolidated
corporate joint venture, was $1,096,000 in 1999 and $537,000 in 1998.
Improvements in demand for Mi-Tech products and services positively impacted
Mi-Tech's profitability for fiscal 1999 as compared to fiscal 1998.
<PAGE>
Interest expense increased to $7,361,000 in 1999 from $6,079,000 in 1998. The
increase is the result of higher average borrowings used to finance capital
projects, the acquisition of Roberts Steel Company and the charges from an
interest rate swap valuation.
The effective income tax rate was approximately 38.2% in 1999 and 40.3% in 1998.
The net decrease arises from an increase in the benefit due to a higher
percentage of overall earnings from the Mi-Tech Steel joint venture, which are
not fully taxable to the Company, a reduction due to higher portion of income
generated in Mexico which is taxed at a lower rate, and partially offset by an
increase in the effective U.S. federal income tax rate as a result of more
income being taxed at the higher tax bracket.
RESULTS OF OPERATIONS - FISCAL 1998 COMPARED TO FISCAL 1997
Steel Technologies posted sales of $383,907,000 in fiscal 1998, an increase of
11% from 1997 sales of $345,624,000. Atlantic Coil Processing (ACP), acquired on
April 1, 1997 and now known as Steel Technologies Carolinas, generated
$50,000,000 in sales for fiscal 1998 compared to $25,500,000 for the six months
of operations during fiscal 1997 following the date of acquisition. Roberts
Steel Company added $5,000,000 of revenues for the fourth quarter of 1998. Sales
of existing core steel processing operations remained comparable to the previous
year. Tons shipped in 1998 increased by 18% while the average selling price of
steel products declined approximately 6% from a year ago. Revenues were
adversely affected, mostly during the last quarter of fiscal 1998, by
approximately $14,000,000 as a result of the General Motors Corporation strike.
The gross profit margin increased to 11.5% in 1998 compared to 10.8% in 1997 as
a result of customer and product mix improvements, increased productivity, a
slight reduction in raw materials prices and other operating cost reductions.
Sales, general and administrative costs increased 11% in fiscal 1998, about the
same rate as sales increases of 11% for the same period. Sales, general and
administrative expenses were 5.8% of sales in 1998 and 1997, respectively.
The Company's share of the income of Mi-Tech Steel, Inc., was $537,000 in 1998
and $1,609,000 in 1997. The slower than expected start up of the Mi-Tech Steel's
Decatur, Alabama operation and certain other factors affecting customer orders
impacted Mi-Tech Steel's profitability as compared to 1997.
Interest expense increased to $6,079,000 in 1998 from $5,673,000 in 1997. The
increase is the result of higher average borrowings used to finance capital
projects and the acquisition of Roberts Steel Company.
The effective income tax rate was approximately 40.3% in 1998 and 35.2% in 1997
comparatively. The increase is attributable to a lower percentage of overall
earnings from the Mi-Tech Steel joint venture, which are not fully taxable to
the Company.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, Steel Technologies had $89,418,000 of working capital,
maintained a current ratio of 2.5:1 and had total debt at 44% of total
capitalization. The Company continues to manage the levels of accounts
receivable, inventories and other working capital items in relation to the
trends in sales and overall market. In fiscal 1999, increased profits levels
contributed to the generation of $27,309,000 of cash flows from operations. The
Company expects sales trends to continue to remain strong in the 2000 fiscal
year based on order activities. Cash flows from operations and available
borrowing capabilities are expected to meet the working capital needs associated
with the expected higher sales levels.
Capital expenditures for 1999 totaled $17,704,000, excluding investments in
joint ventures. The major expenditures were for the construction of the new
Berkley, South Carolina processing facility, the Roberts Steel Company
processing facility expansion, the purchase of the building for Roberts Steel
Company, the purchase of property and building for the North Carolina operation,
and initial expenditures for the new Matamoros, Mexico facility. Cash flows from
operations and proceeds from long-term debt financed the 1999 capital
expenditures. Steel Technologies continues to expand production capacity and
processing facilities to serve the growing needs of customers. For fiscal 2000,
the capital additions for all facilities, including the completion of the
construction of the Matamoras, Mexico facility and expansion of Steel
Technologies processing capabilities are expected to approximate $14,000,000.
<PAGE>
Investing activities in 1998 reflects the purchase of 100% of the common stock
of Roberts Steel Company for approximately $14,800,000 in cash, notes and
assumption of liabilities. The Company funded the transaction by borrowing
approximately $11,300,000 on the line of credit, issuing a $1,200,000 note
payable to a former shareholder and assuming $2,300,000 in liabilities of
Roberts.
Steel Technologies maintains an equity investment of approximately $8,739,000 in
its Mexican subsidiary. In fiscal 1998, the Company increased the ownership from
80% to 90%. In fiscal 1999, the Company invested approximately $4,900,000 for
additional production equipment and the start up of the new Matamoras, Mexico
facility.
As of January 1, 1999, the Mexican subsidiary uses the peso as the functional
currency and the assets and liabilities of the Mexican subsidiary are translated
into U.S. dollars at the year-end rate of exchange, and revenues and expenses
are translated at average rates of exchange in effect during the period.
Resulting translation adjustments are reported as a component of comprehensive
income. Foreign currency translation gains and losses are included in net income
when incurred. Prior to January 1, 1999, the Mexican economy was considered
hyper-inflationary. Accordingly, the Company used the monetary/non-monetary
method of accounting for foreign currency translation. Under the
monetary/non-monetary method, non-monetary assets and liabilities were
translated at historical rates of exchange and the functional currency was the
U.S. dollars.
The Company maintains an investment of approximately $1,000,000, principally in
the preferred stock of Processing Technology, Inc., a corporate joint venture
accounted for using the cost method.
Pursuant to a joint venture agreement, Steel Technologies has guaranteed
$8,250,000 of the bank financing required for working capital purposes of
Mi-Tech Steel, Inc. In October 1998, the Company contributed an additional
$600,000 in equity to Mi-Tech Steel for the start-up of a steel processing
facility in San Diego, California. Additional equity contributions to the joint
venture are not expected for the foreseeable future, but if required would be
financed with available funds from the Company's bank line of credit.
Steel Technologies has a $100,000,000 line of credit agreement expiring on
December 1, 2001, with various variable options on the interest rate, none of
which are greater than the bank's prime. At September 30, 1999, there was
$57,000,000 outstanding on the credit facility.
The line of credit and funds generated from operations are expected to be
sufficient to finance the capital expenditure plans as well as the working
capital needs for fiscal 2000. At this time the Company has no known material
obligations, commitments or demands that must be met beyond the next twelve
months other than the ten-year private placement notes and the unsecured bank
line of credit. The ten-year notes require principal payments through March 2005
and the line of credit is expected to be renewed at the end of the term. Any
additional funds will be used for growth, including strategic acquisitions,
investment in joint ventures, construction of new plant capacity and investment
in production and processing facilities. The form of such financing may vary
depending upon the prevailing market and related conditions, and may include
short or long-term borrowings or the issuance of debt or equity securities.
At September 30, 1999, Steel Technologies had $90,209,000 in long-term debt
outstanding. Under various debt agreements, the Company agreed to maintain
specified levels of working capital and net worth, maintain certain ratios and
limit the addition of substantial debt. The Company is in compliance with all of
its loan covenants, and none of these covenants would restrict the completion of
currently planned capital expenditures or acquisitions.
<PAGE>
On June 30, 1999 Steel Technologies terminated its long-term interest rate swap
agreement, which was entered into to reduce the risk of interest rate
variability. Under the contract, the Company agreed with another party to
exchange quarterly the difference between variable-rate and fixed-rate amounts
calculated on a notional principal amount of $30,000,000. The termination
generated a deferred gain of $958,000, which is being amortized over a period of
30 months as a reduction of interest expense beginning in July 1999 and ending
December 2001.
On January 22, 1998, the Board of Directors approved a plan under which Steel
Technologies may repurchase up to 500,000 shares of its common stock through
January 2001. Subsequently, on September 30, 1998, the Company increased the
number of shares authorized to be repurchased under the stock repurchase program
from 500,000 to 1,500,000. Shares may be purchased from time to time at
prevailing prices in open market transactions, subject to market conditions,
share price and other considerations. During fiscal 1999 and 1998, the Company
repurchased approximately 459,000 and 421,000 shares of common stock,
respectively. As of October 27, 1999, the Company repurchased a total of
approximately 926,000 shares of common stock at prevailing market prices.
Steel Technologies believes all manufacturing facilities are in compliance with
applicable federal and state environmental regulations. The Company is not
presently aware of any facts or circumstances which would require the
expenditure of material amounts for environmental compliance.
YEAR 2000 COMPLIANCE
Steel Technologies' Year 2000 project (The Project) addresses the issue of using
two digits, rather than four, to define the century. Any programs with a time
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations or systems failures.
The Project focuses primarily in the following areas: infrastructure,
applications, manufacturing, third- party suppliers and customers. Steel
Technologies has contracted with Electronic Data Systems (EDS) to manage the
Project and make the necessary remediations. The Project addresses six phases:
inventorying of Year 2000 compliance items; assessing priorities to identified
items; determining the materiality of the Year 2000 compliance items; repairing
or replacing material items not Year 2000 compliant; testing material items; and
implementing contingency and business continuation plans for each Company
location.
The infrastructure section consists of hardware and systems software other than
application software. The Company completed all of the testing, remediating,
upgrading or replacing of hardware and systems as of September 30, 1999. The
application software section includes both the conversion of application
software that is not Year 2000 compliant and, where applicable, the replacement
of software. As of September 30, 1999, all of the application software was
remedied and tested. The manufacturing section of the Project relates to the
hardware, software and associated embedded computer chips that are used in the
operation of all facilities. The Company estimates that 10 percent of the
manufacturing equipment is dependent on date sensitive software and that all of
the manufacturing equipment is Year 2000 compliant at September 30, 1999. The
third-party suppliers and customers section includes the process of identifying
and prioritizing critical suppliers and customers and communicating with them
about their plans and progress in addressing the Year 2000 problem. Detailed
evaluations of the most critical third-parties have been completed as of
September 30, 1999 and communications with third-parties are continuing.
Contingency planning for all areas is substantially complete. Alternative
suppliers have been defined and additional inventories of raw and finished goods
will be added. In some areas, manual methods have been defined for possible use.
The total cost related to Year 2000 compliance is not expected to be material to
the Company's financial position. The acquisition of a mid-range computer in
1995 minimized the exposure to Year 2000 problems. The estimated cost of the
Project is approximately $250,000 of which approximately $200,000 was expensed
in the year ended September 30, 1999 and $50,000 was expensed in the year ended
September 30, 1998.
<PAGE>
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting mostly from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Project is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material external agents. The Company believes that, with the completion of the
Project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). In general, SFAS No. 133 requires that
all derivatives be recognized as either assets or liabilities in the balance
sheet at their fair value, and set forth the manner in which gains and losses
thereon are to be recorded. The treatment of such gains or losses is dependent
upon the type of exposure, it any, for which the derivative is designated as a
hedge. As amended by Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
effective date for FASB Statement No 133," this standard is effective for the
Company's financial statements beginning October 1, 2001, with early adoption
permitted. Management of the Company anticipates that the adoption of SFAS No.
133 will not have a material impact on the Company's results of operations or
its financial position.
<PAGE>
STEEL TECHNOLOGIES INC.
Consolidated Balance Sheets
(In thousands, except shares)
<TABLE>
September 30
--------------------------
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 12,578 $ 4,778
Trade accounts receivable, less
allowance for doubtful accounts:
$1,047 in 1999; $939 in 1998............... 54,389 47,907
Inventories.................................. 80,625 76,523
Deferred income taxes........................ 2,426 1,621
Prepaid expenses and other assets............ 474 748
--------- ---------
Total current assets .................... 150,492 131,577
--------- ---------
Property, plant and equipment, at cost:
Land and improvements ....................... 5,829 5,632
Buildings and improvements .................. 50,418 44,796
Machinery and equipment ..................... 119,148 113,354
Construction in progress .................... 4,553 4,224
--------- ---------
179,948 168,006
Less accumulated depreciation and amortization 71,995 61,375
--------- ---------
107,953 106,631
--------- ---------
Investments in corporate joint ventures 19,858 18,163
Goodwill, net of amortization ................. 9,664 9,060
Other assets .................................. 1,138 1,050
--------- ---------
$ 289,105 $ 266,481
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $ 44,649 $ 35,925
Accrued liabilities ........................ 9,139 6,231
Income taxes payable ....................... 595 --
Long-term debt due within one year ......... 6,691 9,102
--------- ---------
Total current liabilities ............... 61,074 51,258
Long-term debt ................................ 90,209 88,300
Deferred income taxes ......................... 12,904 13,247
Other long term liabilities ................... 479 --
--------- ---------
Total liabilities ........................ 164,666 152,805
--------- ---------
Commitments and contingencies ................. -- --
Shareholders' equity:
Preferred stock, no par value;
authorized shares: 500,000 shares;
none issued or outstanding ............... -- --
Common stock, no par value;
authorized shares: 20,000,000; issued and.
outstanding shares: 11,137,421 in 1999 and
11,582,293 in 1998 ...................... 17,140 16,928
Treasury stock at cost: 880,000 shares in...
1999 and 421,000 shares in 1998 .......... (7,123) (3,792)
Additional paid-in capital ................. 4,909 4,909
Retained earnings .......................... 111,311 97,071
Accumulated other comprehensive loss ....... (1,798) (1,440)
--------- ---------
Total stockholders' equity ............... 124,439 113,676
--------- ---------
$ 289,105 $ 266,481
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STEEL TECHNOLOGIES INC.
Consolidated Statements of Income
(In thousands, except per share results)
<TABLE>
For the Years Ended September 30
--------------------------------
1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Sales .................................. $411,389 $383,907 $345,624
Cost of goods sold ..................... 353,782 339,811 308,448
-------- -------- --------
Gross profit ......................... 57,607 44,096 37,176
Selling, general and administrative
expenses ............................. 26,108 22,144 19,989
Equity in net income of unconsolidated
corporate joint venture .............. 1,095 537 1,609
-------- -------- --------
Operating income ..................... 32,594 22,489 18,796
Interest expense ....................... 7,361 6,079 5,673
-------- -------- --------
Income before income taxes ........... 25,233 16,410 13,123
Provision for income taxes ............. 9,661 6,607 4,621
-------- -------- --------
Net income ........................... $ 15,572 $ 9,803 $ 8,502
======== ======== ========
Weighted average number of common shares
outstanding-diluted .................. 11,256 11,989 12,057
-------- -------- --------
Diluted earnings per common share ...... $ 1.38 $ 0.82 $ 0.71
-------- -------- --------
Weighted average number of common shares
outstanding-basic .................... 11,230 11,942 11,976
-------- -------- --------
Basic earnings per common share ........ $ 1.39 $ 0.82 $ 0.71
-------- -------- --------
</TABLE>
Consolidated Statements of Comprehensive Income
(In thousands)
<TABLE>
For the Years Ended September 30
--------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net income ............................. $ 15,572 $ 9,803 $ 8,502
Foreign currency translation
adjustment ........................... (358) -- (69)
-------- -------- --------
Comprehensive income ................... $ 15,214 $ 9,803 $ 8,433
======== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STEEL TECHNOLOGIES INC.
Consolidated Statements of Shareholders' Equity
(In thousands, except per share amounts)
<TABLE>
For the Years Ended September 30, 1999, 1998 and 1997
-----------------------------------------------------------------------------------------------
Common Stock Treasury Stock Accumulated
------------------ -------------------- Additional Other
Paid-In Retained Comprehensive
Shares Amount Shares Amount Capital Earnings Loss Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1996 ...... 11,962 $ 16,662 $ 4,909 $ 81,161 $ (1,371) $101,361
Net income ........................ 8,502 8,502
Net issuance of common stock under
incentive stock option plan ..... 33 231 231
Cash dividends on common stock
($.10 per share)................. (1,196) (1,196)
Foreign currency translation
adjustment ...................... (69) (69)
------- -------- ----- ------- -------- -------- --------- --------
Balances, September 30, 1997 ...... 11,995 16,893 -- -- 4,909 88,467 (1,440) 108,829
Net income ........................ 9,803 9,803
Net issuance of common stock under
incentive stock option plan..... 8 35 35
Repurchase of common stock under
stock repurchase program........ (421) 421 $(3,792) (3,792)
Cash dividends on common stock
($.10 per share)................. (1,199) (1,199)
------- -------- ----- ------- -------- --------- -------- --------
Balances, September 30, 1998 ...... 11,582 16,928 421 (3,792) 4,909 97,071 (1,440) 113,676
Net income ........................ 15,572 15,572
Net issuance of common stock under
incentive stock option plan .... 14 212 -- 2 (92) 122
Repurchase of common stock under
stock repurchase program ....... (459) 459 (3,333) (3,333)
Cash dividends on common stock
($.11 per share) ................ (1,240) (1,240)
Foreign currency translation
adjustment ...................... (358) (358)
------- -------- ----- ------- -------- -------- -------- --------
Balances, September 30, 1999 ...... 11,137 $ 17,140 880 $(7,123) $ 4,909 $111,311 $ (1,798) $124,439
======= ======== ===== ======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STEEL TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
For the Years ended September 30
--------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 15,572 $ 9,803 $ 8,502
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................................. 12,468 11,573 10,364
Amortization ................................................. 384 287 136
Deferred income taxes ........................................ (1,148) 1,805 1,637
Equity in net income of corporate joint venture .............. (1,095) (537) (1,609)
Loss (gain) on sale of property plant and equipment .......... (276) 5 4
Increase (decrease) in cash resulting
from changes in:
Trade accounts receivable ................................ (6,127) (2,175) 610
Inventories .............................................. (4,481) 10,571 (15,123)
Prepaid expenses and other assets ........................ (404) 288 (1,141)
Accounts payable ......................................... 8,513 1,514 (5,816)
Accrued liabilities ...................................... 3,903 1,502 (125)
-------- -------- --------
Net cash provided by (used in) operating activities ................ 27,309 34,636 (2,561)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ....................... (17,704) (14,186) (9,481)
Proceeds from sale of property, plant and equipment .............. 3,626 -- 7
Acquisition, net of cash acquired ................................ -- (11,228) (10,860)
Investment in unconsolidated corporate joint ventures ............ (600) -- (5,000)
-------- -------- --------
Net cash used in investing activities .............................. (14,678) (25,414) (25,334)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ..................................... 24,800 12,000 28,500
Principal payments on long-term debt ............................. (25,303) (15,183) (385)
Cash dividends on common stock ................................... (1,240) (1,199) (1,196)
Repurchase of common stock ....................................... (3,331) (3,792) --
Net issuance of common stock under
stock option plans ............................................. 122 35 231
-------- -------- --------
Net cash (used in) provided by financing activities ................ (4,952) (8,139) 27,150
-------- -------- --------
Effect of exchange rate changes on cash ............................ 121 228 (6)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ............... 7,800 1,310 (751)
Cash and cash equivalents, beginning of year ....................... 4,778 3,467 4,218
-------- -------- --------
Cash and cash equivalents, end of year ............................. $ 12,578 $ 4,777 $ 3,467
======== ======== ========
Supplemental Cash Flow Disclosures:
Cash payments for interest ....................................... $ 7,005 $ 6,294 $ 5,652
Cash payments for taxes .......................................... $ 9,752 $ 4,532 $ 3,693
Supplemental Schedule of Noncash Investing and Financing Activities:
acquired of $457 and $8, respectively ............................ $ 14,810 $ 19,600
Liabilities assumed ................................................ 3,582 8,740
-------- --------
Net cash paid ...................................................... $ 11,228 $ 10,860
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Notes to Consolidated
Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of the Business: Steel Technologies Inc. is an intermediate steel
processor engaged in the business of processing flat rolled steel to specified
thickness, width, temper and finish requirements for customers' manufacturing
processes. A majority of its sales are to industrial customers in North America,
manufacturing component parts for use in the automotive industry.
Principles of Consolidation: The consolidated financial statements include the
accounts of Steel Technologies Inc. and its majority-owned subsidiaries (the
Company). The Company's investments in corporate joint ventures are accounted
for by the cost or equity method based on the percentage of common ownership and
control. All significant intercompany transactions have been eliminated.
Cash and Cash Equivalents: Cash and cash equivalents include highly liquid
investments with an original maturity of three months or less. The carrying
value of cash equivalents approximates fair value due to the short-term maturity
of the securities.
Inventories: Inventories are valued at the lower of cost or market. Cost is
determined using the specific identification method for all inventories.
Depreciation and Amortization: Depreciation is computed using the
straight-line method with the following estimated useful lives:
Buildings and improvements 20-45 years
Machinery and equipment 3-12 years
When properties are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts with any resulting gain
or loss reflected in results of operations. Maintenance and repairs are expensed
in the year incurred. The Company capitalizes interest costs as part of the cost
of constructing major facilities. Interest costs of $162,000, $328,000 and
$202,000 were capitalized in 1999, 1998 and 1997, respectively.
Goodwill represents the excess of the purchase price over the value of net
assets acquired through acquisitions accounted for using the purchase method of
accounting. Goodwill is being amortized on a straight-line basis over a
weighted-average life of 30 years. Accumulated amortization approximated
$287,000 and $384,000 at September 30, 1999 and 1998, respectively. In the event
that facts and circumstances indicate that the carrying value of long-lived
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with an asset would be compared to the asset's carrying value to
determine if a write-down to market value or discounted cash flow value is
required.
Revenue Recognition: The Company recognizes revenue when goods are shipped.
Earnings Per Common Share: Earnings per share for all periods presented have
been calculated and presented in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". Basic earnings per
share excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company.
Foreign Currency Translation: As of January 1, 1999, the Mexican subsidiary use
the peso as the functional currency and the assets and liabilities of the
Mexican subsidiary are translated into U.S. dollars at the year-end rate of
exchange, and revenues and expenses are translated at average rates of exchange
in effect during the period. Resulting translation adjustments are reported as a
component of comprehensive income. Foreign currency transaction gains and losses
are included in net income when incurred. Prior to January 1, 1999, the Mexican
economy was considered hyper-inflationary. Accordingly, the Company used the
monetary/non-monetary method of accounting for foreign currency translation.
Under the monetary/non-monetary method, non-monetary assets and liabilities were
translated at historical rates of exchange and the functional currency was the
U.S. dollars.
<PAGE>
Impact of New Accounting Standards: Beginning with the first quarter of fiscal
1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS
No. 130 establishes new standards for the reporting and display of comprehensive
income and its components. The disclosures required by SFAS No. 130 are
presented in the Consolidated Statement of Stockholders' Equity and in the
Consolidated Statement of Comprehensive Income. The Company does not provide for
U.S. income taxes on foreign currency translation adjustments because it does
not provide for such taxes on undistributed earnings of foreign subsidiaries. In
addition, SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" became effective for the year ended September 30, 1999. SFAS No.
131 requires disclosure of certain information regarding operating segments,
products and services, geographic areas of operation and major customers. This
statement does not have an impact on the Company's disclosures, as the Company
operates in only one reportable segment. Use of Estimates: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. ACQUISITIONS:
On July 1, 1998, the Company completed the purchase of 100% of the common stock
of Roberts Steel Company (Roberts) for approximately $14,800,000 in cash, notes
and assumption of liabilities. The Company funded the transaction by borrowing
approximately $11,300,000 on the line of credit, issuing a $1,200,000 note
payable to a former Roberts shareholder and assuming $2,300,000 in liabilities
of Roberts. During 1999, the Company paid the previous shareholders of Roberts
$500,000 in additional consideration recorded as additional goodwill in
accordance with Emerging Issue Task Force Issue No. 95-8, "Accounting for
Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a
Purchase Business Combination".
On April 1, 1997, the Company completed the purchase of 100% of the common stock
of Atlantic Coil Processing, Inc. (ACP) for approximately $19,625,000 in cash,
notes and assumption of liabilities. The Company funded the transaction by
borrowing approximately $10,900,000 on the line of credit, issuing a $3,625,000
note payable to the former ACP shareholders and assuming $5,100,000 in
liabilities of ACP.
The excess of the purchase price over the acquired net assets has been recorded
as goodwill and is being amortized over 30 years. The acquisitions have been
recorded under the purchase method of accounting, with the operating results of
Roberts and ACP being included in the Company's consolidated financial
statements since the date of acquisition.
The pro forma impact of the acquisitions was not material during the three years
ended September 30, 1999, 1998 and 1997.
3. INVENTORIES:
Inventories consist of:
<TABLE>
September 30
------------------
(In thousands) 1999 1998
- -------------------------------------------------------
<S> <C> <C>
Raw materials .................... $64,139 $66,033
Finished goods and work in process 16,485 10,490
-------- -------
$80,624 $76,523
======== =======
</TABLE>
4. INVESTMENTS IN UNCONSOLIDATED CORPORATE JOINT VENTURES: Mi-Tech Steel, Inc.
owns and operates two high-volume steel slitting facilities and one high volume
pickling and steel slitting facility to serve Japanese and domestic automotive
<PAGE>
and appliance parts manufacturers in the United States. Summarized condensed
financial information of Mi-Tech Steel, Inc., a fifty percent owned corporate
joint venture accounted for by the equity method follows:
<TABLE>
September 30
------------------
BALANCE SHEET (In thousands) 1999 1998
- -------------------------------------------------------
<S> <C> <C>
Assets :
Current assets ................. $54,675 $45,803
Other assets ................... 51,481 49,644
Liabilities:
Current liabilities ............ $42,941 $35,345
Long-term liabilities .......... 25,605 25,883
</TABLE>
<TABLE>
For the Years Ended September 30
----------------------------------
INCOME STATEMENT (In thousands) 1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net Sales ................. $143,728 $131,795 $109,482
Net Income ................ $ 2,191 $ 1,074 $ 3,219
</TABLE>
The Company has various transactions with Mi-Tech Steel, Inc. Included in
operating income of the Company are management, construction and other fees,
interest earned on advances and equity from the joint venture earnings totaling
$2,102,000, $1,463,000, and $2,970,000 in 1999, 1998 and 1997, respectively. The
Company is a guarantor of up to $8,250,000 of Mi-Tech Steel, Inc. bank
borrowings. The borrowings consist of a term note payable due on September 15,
2003, and a revolving line of credit due December 31, 1999. The term note bears
variable rates of interest, which at September 30, 1999 were 7.28% and 6.25%.
The lender has the ability to call the debt if debt covenants are violated. The
Company's equity in undistributed net income of Mi-Tech Steel, Inc. was
$9,205,000 and $8,110,000 at September 30, 1999 and 1998, respectively.
The Company maintains an investment of approximately $1,000,000, principally in
preferred stock of Processing Technology, Inc., a corporate joint venture
accounted for by the cost method.
5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
September 30
-----------------
(In thousands) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Notes payable, unsecured, interest due monthly at 8.52% $34,280 $40,000
Notes payable to bank, unsecured under current line of
credit; interest rates at September 30, 1999 and 1998
ranged from 6.15% to 6.19% and from 6.70% to 6.98%,
respectively ......................................... 57,000 49,000
Variable rate industrial development revenue bonds
payable in annual installments through November 1,
2014; interest rate at September 30, 1999 and 1998 was
3.95% and 4.20%, respectively.......................... 4,200 4,300
Notes payable at 7.00%, unsecured ...................... -- 1,812
Mortgage notes payable in installments through 2003;
interest rates averaging 8.15% at September 30, 1999
and 1998 .............................................. 800 1,067
Note payable at 6.50%, unsecured, payable on April 1,
2000................................................... 600 1,200
Other .................................................. 20 23
------- -------
96,900 97,402
------- -------
Less amount due within one year ........................ 6,691 9,102
------- -------
$90,209 $88,300
======= =======
</TABLE>
<PAGE>
In April 1995, the Company entered into a $40,000,000 private placement note.
Annual principal payments of $5,720,000 began March 1, 1999 and continue through
March 1, 2005.
Steel Technologies has a $100,000,000 line of credit agreement expiring on
December 31, 2001 with various variable options on the interest rate, none of
which are greater than the bank's prime. At September 30, 1999, there was
$57,000,000 outstanding on the credit facility.
The aggregate amounts of all long-term debt to be repaid for the five years
following September 30, 1999, are: 2000, $6,691,000; 2001, $6,091,000; 2002,
$63,092,000; 2003, $5,826,000; and thereafter $15,200,000. Provisions contained
in the Company's various debt agreements require the Company to maintain
specified levels of net worth, maintain certain financial ratios and limit the
addition of substantial debt. The Company estimates that the fair value of fixed
interest debt instruments approximate $36,643,000 at September 30, 1999. The
fair value of the Company's debt is estimated based on quoted market rates or
current rates offered to the Company on comparable remaining maturities.
On June 30, 1999, the Company terminated its long-term interest rate swap
agreement, which was entered into to reduce the risk of interest rate
variability. Under the contract, the Company agreed with another party to
exchange quarterly the difference between variable-rate and fixed-rate amounts
calculated on a notional principal amount of $30,000,000. The termination
generated a deferred gain of $958,000, which is being amortized over a period of
30 months as a reduction of interest expense beginning in July 1999 and ending
December 2001.
6. SHAREHOLDERS' EQUITY:
In April 1998, the Company adopted a shareholder rights plan by declaring a
dividend of one right for each share of Common Stock outstanding payable to
shareholders of record on May 14, 1998. Each right entitles shareholders to buy
one one-hundredth of a share of series A junior participating preferred stock
for $50 per share. The rights may be exercised only if a person or group
acquires 20% or more of the outstanding shares of common stock or announces a
tender offer or exchange offer that would result in ownership of 20% or more of
the common stock. The rights currently trade with the Company's common stock and
may be redeemed by the Board of Directors for one cent per right until they
become exercisable, and thereafter under certain circumstances. The rights
expire in 2008.
The Company's Articles of Incorporation authorized 500,000 shares of no par
value preferred stock, of which 200,000 shares have been reserved and designated
Series A 1998 junior participating preferred stock for possible issuance under
the Company's shareholder rights plan. As of September 30, 1999, no preferred
shares have been issued.
During 1998, the Board of Directors authorized the repurchase, at management's
discretion, of up to 1,500,000 shares of the Company's stock. The Company's
repurchase of shares of common stock are recorded as treasury stock and result
in a reduction of shareholder's equity. The Company has purchased to date
880,000 shares for an aggregate of $7,123,000 as of September 30, 1999. During
fiscal 1999 and 1998, the Company repurchased 459,000 and 421,000 shares for
$3,331,000 and $3,792,000, respectively.
7. RETIREMENT PLAN:
The Company maintains a 401(k) defined contribution pension plan. Annual expense
provisions are based upon the level of employee participation, as the plan
requires the Company to match a certain portion of the employees' contributions.
Total retirement plan expense was $696,000 in 1999, $513,000 in 1998 and
$513,000 in 1997. The Company follows the policy of funding retirement plan
contributions as accrued.
<PAGE>
8. INCOME TAXES:
The following table represents the components of the provision for income taxes:
<TABLE>
For the Years Ended September 30
--------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal .............................. $ 7,691 $ 3,775 $ 2,289
State, local and foreign ............. 3,155 1,027 695
-------- -------- --------
10,846 4,802 2,984
-------- -------- --------
Deferred:
Federal .............................. (555) 649 875
State, local and foreign ............. (630) 1,156 762
-------- -------- --------
(1,185) 1,805 1,637
-------- -------- --------
$ 9,661 $ 6,607 $ 4,621
======== ======== ========
</TABLE>
Deferred income taxes are recorded at currently enacted rates and result from
temporary differences in the recognition of revenues and expenses for tax and
financial statement purposes. The primary temporary differences giving rise to
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
September 30
-----------------
(In thousands) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Inventory capitalization ............................. $ 1,492 $ 928
Provision for doubtful accounts ...................... 408 354
Non deductible liabilities ........................... 526 339
------- -------
Total deferred tax assets .......................... 2,426 1,621
------- -------
Deferred tax liabilities:
Accelerated depreciation ............................. 10,744 10,986
Other, net ........................................... 2,160 2,261
------- -------
Total deferred tax liabilities ..................... 12,904 13,247
------- -------
Net deferred tax liabilities ........................... $10,478 $11,626
======= =======
</TABLE>
A reconciliation of the provision for income taxes with amounts computed by
applying the federal statutory rate to income before income taxes follows:
<TABLE>
For the Years Ended
September 30
----------------------
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate ..... 35.0% 34.0% 34.0%
State and local income taxes, net of
U.S. federal tax benefit ............... 4.6 4.8 4.7
Equity in net income of unconsolidated
corporate joint venture ................ (1.4) (1.1) (3.7)
Other, net ............................. -- 2.6 .2
---- ---- ----
38.2% 40.3% 35.2%
==== ==== ====
</TABLE>
<PAGE>
9. STOCK OPTION PLANS:
Under its employee stock option plans, the Company may grant employees incentive
stock options to purchase shares at not less than 100% of market value at date
of grant or non-qualified stock options at a price determined by the
Compensation Committee of the Company's Board of Directors. Generally, options
are exercisable at the rate of 20% a year beginning one year from date of grant
and expire ten years from the date of grant.
The Company applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for its stock option plans. Generally, the exercise price of options
awarded under these plans has been equal to the fair market value of the
underlying common stock on the date of grant. Accordingly, no compensation
expense has been recognized for its stock-based compensation plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under SFAS No. 123, "Accounting
for Stock-Based Compensation", net income and earnings per share would have been
reduced to the pro forma amounts indicated in the table below.
<TABLE>
For the Years Ended
September 30
------------------------
(In thousands, except per shareresults) 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net income - as reported...................... $15,572 $ 9,803 $ 8,502
Net income - pro forma $15,216 $ 9,533 $ 8,397
Diluted net income per share - as reported.. $ 1.38 $ 0.82 $ 0.71
Diluted net income per share - pro forma.... $ 1.35 $ 0.80 $ 0.70
Basic net income per share - as reported..... $ 1.39 $ 0.82 $ 0.71
Basic net income per share - pro forma........ $ 1.35 $ 0.80 $ 0.70
</TABLE>
The pro forma effects on net income are not necessarily representative of the
pro forma effect on net income in future years. The fair value of options
granted during 1999, 1998 and 1997 are $6.57, $5.37 and $5.90 per share,
respectively.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
<TABLE>
For the Years Ended September 30
----------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Expected dividend yield ........... 1.3% 0.8% 0.8%
Expected stock price
volatility ........................ 44.0% 42.9% 42.2%
Weighted average risk-free
interest rate ..................... 4.8% 5.7% 6.5%
Expected life of options
(years) ........................... 7.0 7.0 7.0
</TABLE>
<PAGE>
The summary of the status of all of the Company's stock incentive plans as of
September 30, 1999, 1998 and 1997 and changes during the years then ended is
presented below:
<TABLE>
September 30
---------------------------------------------
Range of Weighted
Shares Option Average
Under Prices Per Exercise
Plans Share Price
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, September 30, 1996.. 627,625 $ 6.67 - $12.79 $10.37
Granted...................... 5,000 $ 11.63 $11.63
Exercised.................... (103,725) $ 6.67 - $10.67 $ 9.88
Canceled..................... (14,650) $10.00 - $11.00 $10.21
------- --------------- ------
Balance, September 30, 1997.. 514,250 $ 6.67 - $12.79 $10.49
Granted...................... 205,000 $11.25 - $12.00 $11.94
Exercised.................... (22,500) $ 6.67 - $11.63 $ 8.49
Canceled..................... (73,750) $10.67 - $11.70 $11.60
------- --------------- ------
Balance, September 30, 1998.. 623,000 $ 6.67 - $12.79 $10.81
Granted...................... 78,000 $ 7.25 - $ 8.73 $ 7.95
Exercised.................... (19,500) $ 6.67 $ 6.67
Canceled..................... (48,000) $10.08 $10.08
------- --------------- ------
Balance, September 30, 1999.. 633,500 $ 6.67 - $12.7 $10.64
======= =============== ======
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable:
<TABLE>
1999
---------------------------------------------------------------------------------
Options Outstanding: Options Exercisable:
------------------------------------------------- ----------------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted
Exercise Prices at 9/30/99 Contracted Life Exercise Price at 9/30/99 Exercise Price
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6.67 - $10.00 115,500 6.5 years $ 7.53 37,500 $ 6.67
$10.01 - $12.79 518,000 6.0 years $11.33 308,100 $11.13
- ---------------- ------- --------- ------ ------- -------
$ 6.67 - $12.79 633,500 6.1 years $10.64 345,600 $10.64
</TABLE>
At September 30, 1999, 10,000 shares were available for granting of stock
options under the Company's stock option plans. All unexercised options expire
not later than the year 2008.
<PAGE>
10. NET INCOME PER SHARE COMPUTATIONS:
The following is a reconciliation of the numerator of the basic and diluted per
share computations:
<TABLE>
For the Years Ended
September 30
--------------------------
(In thousands, except for share results) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income ................................... $15,572 $ 9,803 $ 8,502
------- ------- -------
Shares (denominator) used for diluted share
computations:
Weighted average shares of common stock
outstanding ................................... 11,230 11,942 11,976
Plus: dilutive effect of stock options ........ 26 47 81
------- ------- -------
Adjusted weighted average shares .......... 11,256 11,989 12,057
------- ------- -------
Shares (denominator) used for basic per share
computations:
Weighted average shares of common stock
outstanding ................................... 11,230 11,942 11,976
------- ------- -------
Net income per share data:
Basic ..................................... $ 1.38 $ 0.82 $ 0.71
Diluted ................................... $ 1.39 $ 0.82 $ 0.71
</TABLE>
Options to purchase 310,000, 363,500, and 76,250 shares for the years ended
September 30, 1999, 1998, and 1997, respectively were excluded from the
calculations above because the exercise prices of the options were greater than
the average market price of the Company's stock during the periods.
11. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). In general, SFAS No. 133 requires that
all derivatives be recognized as either assets or liabilities in the balance
sheet at their fair value, and set forth the manner in which gains and losses
thereon are to be recorded. The treatment of such gains or losses is dependent
upon the type of exposure, it any, for which the derivative is designated as a
hedge. As amended by Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
effective date for FASB Statement No 133," This standard is effective for the
Company's financial statements beginning October 1, 2001, with early adoption
permitted. Management of the Company anticipates that the adoption of SFAS No.
133 will not have a material impact on the Company's results of operations or
its financial position.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Steel Technologies Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, shareholders' equity
and cash flows present fairly, in all material respects, the financial position
of Steel Technologies Inc. and its subsidiaries at September 30, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Louisville, Kentucky
November 19, 1999
<PAGE>
EXHIBIT 21.1
STEEL TECHNOLOGIES INC.
SUBSIDIARIES AND AFFILIATES
BEFORE SEPTEMBER 30, 1999
<TABLE>
Percentage of
Names Under Voting Secur-
Jurisdiction of Which Business ities Owned By
Name Incorporation Transacted Registrant
<S> <C> <C> <C>
Wabash Steel Corporation Indiana Wabash Steel Corporation 100%
(Formerly Southern Strip Steel-
Peru, Inc.)
Steel Technologies Carolinas, Inc. North Carolina Steel Technologies Carolinas 100%
Steel Technologies Ohio, Inc. Ohio Steel Technologies Ohio 100%
(formerly Southern Strip Steel-
Columbus, Inc)
Roberts Steel Company Ohio Roberts Steel 100%
Steel Technologies de Mexico Mexico Steel Technologies de 90%
(formerly Transformadora y Mexico
Commercializadora de
Metales, S.A. de C.V.)
Mi-Tech Steel, Inc. Delaware Mi-Tech Steel, Inc. 50%
Processing Technology, Inc. * Delaware Processing Technology, Inc. 5%
</TABLE>
* Steel Technologies Inc. also owns shares of Processing Technology, Inc.,
non-voting preferred stock. The Company continues to evaluate the possible
conversion of its preferred shares into common shares of Processing Technology,
Inc. If converted, Steel Technologies Inc., including the 5% interest currently
held, would own 33% of the outstanding common shares of Processing Technology,
Inc.
<PAGE>
STEEL TECHNOLOGIES INC.
SUBSIDIARIES AND AFFILIATES
AFTER SEPTEMBER 30, 1999
<TABLE>
Percentage of
Names Under Voting Secur-
Jurisdiction of Which Business ities Owned By
Name Incorporation Transacted Registrant
<S> <C> <C> <C>
Steel Technologies, LLC South Carolina Steel Technologies Carolinas 100%
(Formerly Steel Technologies
Carolinas, Inc.)
Steel Technologies, L.P. Delaware Steel Technologies General Partner
Limited Partner is
Steel Technologies, LLC (SC)
Steel Technologies Corp. Ohio Steel Technologies Ohio 100%
(Formerly Roberts Steel Company)
Steel Technologies, LLC Ohio Steel Technologies 100% owned by
Steel Technologies Corp.
Wabash Steel Corporation Indiana Wabash Steel Corporation 100%
(Formerly Southern Strip Steel-
Peru, Inc.)
Steel Technologies Ohio, Inc. Ohio Steel Technologies Ohio 100%
(formerly Southern Strip Steel-
Columbus, Inc)
Steel Technologies de Mexico Mexico Steel Technologies de 90%
(formerly Transformadora y Mexico
Commercializadora de
Metales, S.A. de C.V.)
Mi-Tech Steel, Inc. Delaware Mi-Tech Steel, Inc. 50%
Processing Technology, Inc. * Delaware Processing Technology, Inc. 5%
</TABLE>
* Steel Technologies Inc. also owns shares of Processing Technology, Inc.,
non-voting preferred stock. The Company continues to evaluate the possible
conversion of its preferred shares into common shares of Processing Technology,
Inc. If converted, Steel Technologies Inc., including the 5% interest currently
held, would own 33% of the outstanding common shares of Processing Technology,
Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Steel Technologies Inc. on Form S-8 (File Nos. 333-66318, 333-21279 and
333-21359) of our reports dated November 19, 1999, relating to the financial
statements, which appears in the 1999 Annual Report to shareholders of Steel
Technologies Inc., which is incorporated by reference in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report dated
November 19, 1999 relating to the financial statement schedule, which appears in
this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Louisville, Kentucky
December 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet at September 30, 1999 and condensed
consolidated statement of income for the fiscal year ended September 30, 1999
and related footnotes and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000771790
<NAME> Steel Technologies Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
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0
0
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</TABLE>
