SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended May 31, 1996, or
[ ] Transaction report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------ --------------------
Commission file number 0-15838
NEW JERSEY STEEL CORPORATION
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2137967
- -------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
NORTH CROSSMAN ROAD, SAYREVILLE, NEW JERSEY 08872
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code: (908) 721-6600
Not Applicable
- -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of May 31, 1996.
$.01 Par Value Common Stock 5,920,500
- -------------------------------------------------------------------------
(Title of Class) (Number of Shares
Outstanding)
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Data)
<TABLE>
May 31, November 30,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 118 $ 61
Receivables:
Trade, less allowance
for doubtful receivables
of $2,292 and $2,147
in 1996 and 1995,
respectively 23,444 22,164
Trade - affiliates 2,801 1,538
Other 300 293
------------ -------------
Net receivables 26,545 23,995
Inventories 14,735 15,276
Prepaid expenses and
other current assets 126 508
Deferred income taxes 837 837
------------ -------------
Total current assets 42,361 40,677
Property, plant
and equipment, net 88,053 82,365
Other assets 1,619 5,691
Deferred income taxes 4,063 4,063
Real estate held for
investment, net 13,194 13,447
------------ -------------
149,290 146,243
============ =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ---------------------
Current liabilities:
Current installment of
long-term debt 750 1,125
Accounts payable - trade 31,950 28,514
Due to parent 1,129 789
Accrued expenses 3,425 7,219
------------ -------------
Total current
liabilities 37,254 37,647
Note payable - bank 13,528 11,900
Long-term debt less
current installment 6,750 6,375
Long-term debt - due to parent 11,000 -
Stockholders' equity:
Preferred stock, $.01 par
value
Authorized 5,000,000 shares;
none issued - -
Common stock, $.01 par
value
Authorized 15,000,000 shares;
issued and outstanding
5,920,500 shares in 1996 and
5,893,370 shares in 1995 59 59
Additional paid-in capital 134,070 134,070
Accumulated deficit (53,371) (43,808)
------------ -------------
Total stockholders'
equity 80,758 90,321
Commitments and contingencies
------------ -------------
$ 149,290 $ 146,243
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statement of Operations
Three-Month and Six Month Periods ended
May 31, 1996 and May 31, 1995
(In thousands, except per share data)
<TABLE>
Three-Months Six-Months
ended May 31, ended May 31,
1996 1995 1996 1995
------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $38,690 $35,017 $63,273 $61,477
Net sales - affiliates 2,306 2,155 4,378 5,588
Cost of sales 41,419 33,777 72,408 61,711
------------------ ------------------
Gross (loss)profit (423) 3,395 (4,757) 5,354
Selling, general
and administrative
expenses 2,182 1,760 4,261 3,439
------------------ ------------------
Operating (loss) income (2,605) 1,635 (9,018) 1,915
Other:
Interest, net (expense) (279) (225) (456) (284)
Rental income 40 33 95 81
Other, income (expense) - 27 4 (68)
------------------ ------------------
(239) (165) (357) (271)
------------------ ------------------
(Loss) earnings before
provision for income
taxes and equity in
operations of investee (2,844) 1,470 (9,375) 1,644
Provision for income taxes - 179 - 223
------------------ ------------------
(Loss) earnings before
equity in operations
of investee (2,844) 1,291 (9,375) 1,421
Equity in operations of
investee (98) 163 (188) 405
------------------ ------------------
Net (loss) earnings (2,942) 1,454 (9,563) 1,826
================== ==================
Net (loss) earnings per
common share ($0.50) $0.25 ($1.62) $0.31
================== ==================
Weighted average number of
shares outstanding 5,921 5,893 5,921 5,893
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six-Month Periods Ended May 31, 1996 and 1995
(Dollars in Thousands)
<TABLE>
1996 1995
-------- ---------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $(9,563) $ 1,826
Adjustments to reconcile net
(loss) earnings to net cash (used in)
provided by operating activities:
Depreciation 3,943 3,522
Provision for losses on
trade receivables 145 211
Equity in operations of investee 188 (405)
Changes in assets and liabilities:
Increase in net receivables (2,695) (607)
Decrease (increase) in inventories 541 (6,832)
Decrease in prepaid expenses and
other current assets 382 863
Decrease (increase) in other assets 3,884 (388)
Increase in accounts payable - trade 3,436 1,723
(Decrease) in due to parent and
accrued expenses (3,454) (2,141)
-------- ---------
Net cash (used in)
operating activities (3,193) (2,228)
-------- ---------
Cash flows from investing activities:
Capital expenditures (9,378) (5,463)
-------- ---------
Cash flows from financing activities:
Bank borrowings - net 1,628 7,357
Borrowings from parent - net 11,000 -
-------- ---------
Cash flow provided by
financing activities 12,628 7,357
-------- ---------
Net increase (decrease) in
cash and cash equivalents 57 (334)
Cash and cash equivalents at beginning
of period 61 337
-------- ---------
Cash and cash equivalents at end of period $ 118 $ 3
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
New Jersey Steel Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1996 and November 30, 1995
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
(1) Basis of Presentation
The unaudited condensed consolidated financial statements of New
Jersey Steel Corporation and subsidiary (the Company), in the opinion of
management, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results of such periods.
The results of operations for the three- and six-month periods ended May
31, 1996 and 1995 are not necessarily indicative of the results to be
expected for the entire year. The accompanying interim financial
statements should be read in conjunction with the Company's audited 1995
consolidated financial statements.
(2) Capital Stock
During the six-month period ended May 31, 1995, no stock options were
granted or exercised.
During the six-month period ended May 31, 1996, subject to stockholder
approval of the Company's 1996 Stock Option Plan, options to purchase
100,000 and 50,000 shares of the Company common stock under the 1996 Stock
Option Plan were granted to the Company's President and Vice President,
Sales and Marketing, respectively, at an exercise price of $8.375 and
$8.00, respectively. The options vest in 20% increments beginning on the
first anniversary of the date of grant and expire ten years from the date of
grant. The 1996 Stock Option Plan was approved by stockholders of the
Company on June 21, 1996.
(3) Inventories
Inventories consist of the following:
May 31 Nov. 30
1996 1995
-------- --------
Finished goods $ 4,749 $ 5,709
Work-in-process 777 341
Raw materials, spare
parts and supplies 9,209 9,226
-------- --------
$14,735 $15,276
======== ========
(4) Per Common Share Amounts
Per common share amounts are based on the weighted average number of
shares of common stock outstanding during each period. The effect of stock
options for the three- and six-month periods ended May 31, 1996 was
antidilutive and for the three- and six-month periods ended May 31, 1995
was not material.
(5) Bank Borrowings
At May 31, 1996, the Company had substantially concluded negotiations
with its bank to amend the terms of its revolving credit facility and term
loan. On June 6, 1996, the Company entered into an Amended and Restated
Loan and Security Agreement (the "loan agreement") with its bank to
increase the maximum amount available under its revolving credit facility
from $17,500 to $20,000 and to extend the maturity date from April 30, 1997
to May 1, 1998. The maturity date on the Company's $7,500 term loan was
also extended from December 31, 2000 to May 1, 2001. The loan agreement
also amended certain financial covenants. Borrowings under the revolving
credit facility and term loan are secured by substantially all of the
Company's assets. Principal payments under the term loan are due in
monthly installments of $125 beginning December 1, 1996 with a final
payment of $875 due at maturity. Interest on the term loan and outstanding
amounts under the revolving credit facility are payable at the prime rate
plus one percent.
Concurrently with the execution and delivery of the loan agreement,
the Company entered into a Credit Agreement dated as of June 6, 1996 (the
"credit agreement") with Von Roll Holding AG, the Company's majority
stockholder. The credit agreement provides a $15,000 revolving credit
facility to the Company which matures May 1, 1998. Repayment of borrowings
under this credit facility is subordinated to the bank borrowing referred
to above and is secured by subordinate liens on substantially all of the
Company's assets. Interest on outstanding amounts under the credit
agreement is payable monthly at the prime rate plus one percent. There is
currently $11,000 outstanding under the credit agreement.
Total bank interest paid for the three- and six-month periods ended
May 31, 1996 total $450 and $912, respectively. Total interest capitalized
for the three- and six-month periods ended May 31, 1996 totaled $449 and
$890, respectively.
(6) Commitments and Contingencies
In September 1994, the New Jersey Department of Environmental
Protection (the "NJDEP") issued a "Permit to Construct, Install or Alter
Control Apparatus or Equipment", a "Prevention of Significant Deterioration
Permit" and a "Temporary Certificate to Operate" (all of the foregoing are
hereinafter referred to as the "Temporary Permit") to the Company. The
Temporary Permit authorized the Company to install the Consteel process at
its Sayreville, New Jersey steel mill and directed that there be a stack
test. The results of which were submitted to the NJDEP on March 8, 1996.
The numbers in the Temporary Permit were estimates based on
representations from the manufacturer of the Consteel system, certain
assumptions concerning how the Consteel process differed from conventional
electric arc furnaces, and a scaling up of the numbers to address the
increase in the size of the furnace. The assumptions underlying that
methodology were based upon certain projections in the absence of
historical data. These projections may have proven to be inaccurate. The
plant generates certain emissions -- including carbon monoxide (CO), oxides
of nitrogen (NOx) and volatile organic compounds (VOC) -- which exceed the
levels contained in the Temporary Permit. Based on their modeling, the
Company's consulting engineers have advised that the actual emission levels
do not have an adverse impact on ambient air quality. However, the NJDEP
issued a Notice of Violation in response to the stack test results.
In conjunction with the March 8, 1996 submission of the stack test
results, the Company applied for a modification of its Temporary Permit to
reflect the actual operation of the Consteel process. Until such time as a
new permit is issued, there is a question as to whether the Company is in
violation of the Temporary Permit and, as a consequence, is subject to
fines and penalties, the amounts of which are subject to the discretion of
the NJDEP. The Company is engaged in discussions with the NJDEP regarding
how to proceed in this matter. Based on the advice of its counsel, the
Company believes the ultimate outcome of this matter will not have a
material adverse effect on the Company's financial position.
In March 1996, the National Resources Defense Council and the Public
Interest Research Group of New Jersey, Inc. ("PIRG"), commenced a lawsuit
against the Company in the United States District Court for the District of
New Jersey (Civil Action No. 96-1060 (DRD)). The lawsuit is based on the
Company's Continuous Emissions Monitoring System reports submitted to the
NJDEP and claims that the exceedences since April 1995 constitute
violations of the Clean Air Act which are not being pursued by the NJDEP.
The complaint seeks fines and penalties for the alleged violations and an
injunction mandating operation of the Sayreville Mill in accordance with
the Temporary Permit. The Company intends to vigorously defend itself in
this action and filed an answer with the United States District Court on
April 10, 1996. Since that time, the State of New Jersey has announced its
intention to intervene in the litigation. Further, PIRG, the State of New
Jersey and the Company have placed discovery on hold until September 1996
in order to determine whether an acceptable interim plan can be agreed upon
among the parties.
The Company and Von Roll Holding AG ("Von Roll") are defendants in an
action entitled GARY LUTIN v. NEW JERSEY STEEL CORPORATION, VON ROLL LTD.
a/k/a VON ROLL AG, AND UNKNOWN PARTIES 1-10, currently pending in the
United States District Court for the Southern District of New York (Case
No. 93 CIV. 6612). The action was originally brought against Excel Mining
Systems, Inc., Bruce A. Cassidy and Frederick B. Munson and involved
allegations that the defendants had conspired to destroy the mine roof bolt
business of Advanced Mining Systems, Inc. The original complaint sought
damages in excess of $12,000. In 1992, the Company and Von Roll were added
as additional parties. The action was subsequently removed to federal
court and transferred to the Southern District of New York. A motion to
dismiss the Company and Von Roll has been pending, undecided, for several
years. In 1994, in connection with the settlement of an unrelated action,
the original defendants were dropped as defendants in this action. In June
1995, the plaintiff moved to serve an amended complaint which restated the
claims from the original action as claims under the federal RICO statute
and related state laws. This motion is currently pending. At the same
time, plaintiff filed a new action in the United States District Court for
the Southern District of New York against the Company, Von Roll and various
directors and officers of the Company, entitled GARY LUTIN v. NEW JERSEY
STEEL CORPORATION, VON ROLL LTD. a/k/a VON ROLL AG, WALTER H. BEEBE, HEINZ
FRECH, H. GEORG HAHNLOSER, HARVEY L. KARP, ROBERT PASQUARELLI, THOMAS W.
JACKSON, PAUL ROIK AND UNKNOWN PARTIES 10-19 (Case No. 95 CIV 4965). This
action is based on the same facts and seeks unspecified damages which
plaintiff claims to be in excess of $50,000. The Company has made a motion
for an order dismissing the complaint and for summary judgement in the new
action. Although pre-trial discovery has not commenced, based on the facts
known, the Company's legal counsel and management believes that plaintiff's
claims are without merit.
In March 1994, Novo-Plez SA ("Novo") and NASCO Brokers, Inc. ("NASCO")
(Novo and NASCO, collectively "the Claimants"), steel brokers, commenced an
arbitration against the Company in the International Court of Arbitration
of the International Chamber of Commerce (the "Swiss Arbitration"). The
Claimants sought a total of $9,421 in damages for steel purchased from the
Company which the Claimants assert was of inferior quality. Upon
conclusion of the arbitration hearings held in late 1995, the Arbitrator
issued an award dated March 29, 1996, in favor of the Company denying all of
Claimants' claims for losses and damages.
On June 28, 1996, the ICC approved the award of the arbitrator
allocating the costs of the arbitration among the parties. The arbitrator
has determined that Novo-Plez/NASCO should pay the Company a net figure of
$220 to reimburse the Company for the costs it incurred in defending itself
in the arbitration. Legal counsel is currently conducting discussions with
the ICC to determine whether a clerical error in the cost calculation may
have unintentionally understated the amount owed the Company under the
award by $20.
Egyptian Metals Company ("EMC"), the customer of the Claimants in the
Swiss Arbitration, is pursuing a related claim before the "Tribunal de
Commerce" in Paris, France (the "Paris Action"), alleging that a French
broker and the Company are liable to it for the sale of the defective
billets. EMC claimed damages of $2,121 and an additional claim for payment
of FF100,000 under the French Code of Civil Procedure. The Claim has since
been reduced to $1,281. Management believes that the Company is not liable
to EMC for any damages. The Company has not entered an appearance in the
Paris Action as, based upon the advice of legal counsel, management
believes that the French court is without jurisdiction over the Company and
that the litigation will ultimately be dismissed or, if judgement is in
fact entered, that it will be unenforceable against the Company in the
United States.
In February 1995, EMC commenced an action against the Company, Novo
and NASCO in the United States District Court for the District of New
Jersey (Case No. CIV. 95 823 (DRD)) based on the same transactions as the
Paris Action and the Swiss Arbitration seeking damages against the three
defendants individually in the amount of $5,050. Management believes,
based on the advice of legal counsel, the Company will ultimately prevail
in its defense of this action.
In November, 1993, AJ Ross Logistics, Inc. ("AJ Ross") filed a
petition under Chapter 11 of the U.S. Bankruptcy Code. AJ Ross was a
significant customer of the Company and the Company received in excess of
$5,600 in payments on trade receivables from AJ Ross in the year
immediately preceding the filing of the Chapter 11 petition. The AJ Ross
case has been converted to Chapter 7 and the Trustee was seeking $87 from
the Company on the grounds that such portion of the $5,600 in payments
constituted a voidable preference under the U.S. Bankruptcy Code. The
Trustee's claim has been contested and the Company has agreed to settlement
with the Trustee, subject only to the Bankruptcy Code Approval Process,
pursuant to which the Company will pay $30 in exchange for a dismissal of
the pending suit and release from the AJ Ross Chapter 7 estate.
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business.
Such claims against the Company are generally covered by insurance. There
can be no assurance that insurance, including product liability insurance,
will be available in the future at reasonable rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Periods Ended May 31, 1996 and 1995
- -----------------------------------------------
A summary of the period-to-period changes in the "Condensed Consolidated
Statements of Operations" for the three-month periods ended May 31, 1996
and 1995 is shown below:
<TABLE>
Percent of
Net Sales
---------------------------- ----------------
1996 1995 Inc(Dec) 1996 1995
---------------------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $40,996 $37,172 $ 3,824 100.0 100.0
Gross (loss) profit (423) 3,395 (3,818) (1.0) 9.1
Selling, general
and administrative
expenses 2,182 1,760 422 5.3 4.7
Other expense (239) (165) 74 (0.6) (0.4)
(Loss)earnings
before provision
for income taxes
and equity in
operations of
investee (2,844) 1,470 (4,314) (6.9) 4.0
Provision for
income taxes - 179 (179) - 0.5
(Loss) earnings
before equity in
operations of
investee (2,844) 1,291 (4,135) (6.9) 3.5
Equity in
operations of
investee (98) 163 (261) (0.2) 0.4
---------------------------- ---------------
Net (loss)
earnings $(2,942) $ 1,454 $(4,396) (7.1) 3.9
============================ ===============
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three Months Ended May 31, 1996
Net sales for the second quarter of 1996 increased 10% to $40,996,000
from $37,172,000 in the second quarter of 1995 primarily on the strength of
higher shipping levels. Total shipping levels in the second quarter of
1996 were up 28% to 147,000 tons from 115,000 tons in the second quarter of
1995 and were up 48% from 1996 first quarter shipping levels of 99,000 tons
reflecting stronger rebar demand and higher billet shipments. There were
no billet shipments in the second quarter of 1995. While finished goods
selling prices increased over 1996 first quarter levels of $272 per ton,
they were down sharply from 1995 second quarter levels. Finished goods
selling prices declined to $286 per ton in the second quarter of 1996 from
$325 per ton in the second quarter of 1995.
The Company reported a gross loss of $423,000 in the second quarter of
1996 as compared to a gross profit of $3,395,000 in the second quarter of
1995. Lower finished goods selling prices were primarily responsible for
this deterioration in gross profit. In the second quarter, scrap prices at
$113 per ton, were flat in comparison to both the first quarter of 1996 and
the second quarter of 1995. Billet costs and melt shop conversion costs
were down from 1996 first quarter levels. While down from first quarter
1996 levels, melt shop and rolling mill conversion costs in the second
quarter of 1996 were up in comparison to 1995 levels. Total melt shop
production levels in the second quarter increased over 1995 levels,
reflecting the benefit of higher operating hours which was offset by lower
melt shop productivity. As a result, melt shop conversion costs in the
second quarter of 1996 were up slightly over 1995. Rolling mill conversion
costs in the 1996 quarter were higher because of lower production and
productivity levels as well as higher energy costs.
Selling, general and administrative expenses increased $422,000 to
$2,182,000 during the three-month period ended May 31, 1996 from $1,760,000
during the three-month period ended May 31, 1995 as a result of higher
legal expenses related to various regulatory matters. Other expense during
the quarter ended May 31, 1996 increased primarily as a result of higher
interest expense.
New Jersey Steel's share in the equity in the operations of an
investee contributed a $98,000 loss to the Company for the quarter ended
May 31, 1996 as compared to $163,000 of income for the quarter ended May
31, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six-Month Periods Ended May 31, 1996 and 1995
- ---------------------------------------------
A summary of the period-to-period changes in the "Condensed Consolidated
Statements of Operations" for the six-month periods ended May 31, 1996 and
1995 is shown below:
<TABLE>
Percent of
Net Sales
---------------------------- ----------------
1996 1995 Inc(Dec) 1996 1995
---------------------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $67,651 $67,065 $ 586 100.0 100.0
Gross (loss) profit (4,757) 5,354 (10,111) (7.0) 7.9
Selling, general
and administrative
expenses 4,261 3,439 822 6.3 5.1
Other expense (357) (271) 86 (0.5) (0.4)
(Loss)earnings
before provision
for income taxes
and equity in
operations of
investee (9,375) 1,644 (11,019) (13.8) 2.4
Provision for
income taxes - 223 (223) - 0.3
(Loss) earnings
before equity in
operations of
investee (9,375) 1,421 (10,796) (13.8) 2.1
Equity in
operations of
investee (188) 405 (593) (0.3) .6
---------------------------- ---------------
Net (loss)
earnings $(9,563) $ 1,826 $(11,389) (14.1) 2.7
============================ ===============
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Six-Months Ended May 31, 1996
Net sales for the six-month period ended May 31, 1996 were $67,651,000
as compared to $67,065,000 in the six-month period ended May 31, 1995.
Shipments for the six-month period of 1996 increased to 246,000 tons
reflecting stronger rebar demand and higher billet shipments from 209,000
tons for the six-month period ended May 31, 1995. The combination of a more
competitive pricing environment and a severe winter in the first quarter of
1996, resulted in average finished goods selling prices declining to $281
per ton for the six-month period ended May 31, 1996 from $321 per ton for
the comparable 1995 period. As a result of the severe winter, the Company
had a high percentage of shipments out of its Northeast home market, where
it realized lower net selling prices because of freight considerations.
The Company reported a gross loss of $4,757,000 for the six-month
period ended May 31, 1996 as compared to a gross profit of $5,354,000 for
the comparable 1995 period. This decline in gross profit was primarily
caused by the decrease in average finished goods selling prices and higher
melt shop and rolling mill conversion costs. Scrap costs for the first six
months of 1996 increased to $113 per ton from $112 in the comparable 1995
period. Depreciation charges in 1996 increased over 1995 levels.
Selling, general and administrative expenses increased $822,000 in the
first half of 1996 to $4,261,000 from $3,439,000 for the six-month period
ended May 31, 1995 primarily as a result of severance to a former officer
of the Company and higher legal expenses due to regulatory matters. Other
expense increased $86,000 to $357,000 for the first half of 1996 from
$271,000 for the comparable 1995 period. This was primarily the result of
higher interest expense.
The Company's share of equity in operations of investee contributed a
loss of $188,000 for the six months ended May 31, 1996 as compared to an
income of $405,000 for the six months ended May 31, 1995.
Liquidity and Capital Resources
At May 31, 1996, the Company had substantially concluded negotiations
with its bank to amend the terms of its revolving credit facility and term
loan. On June 6, 1996, the Company entered into an Amended and Restated
Loan and Security Agreement (the "loan agreement") with its bank to
increase the maximum amount available under its revolving credit facility
from $17,500,000 to $20,000,000 and to extend the maturity date from April
30, 1997 to May 1, 1998. The maturity date on the Company's $7,500,000
term loan was also extended from December 31, 2000 to May 1, 2001. The
loan agreement also amended certain financial covenants. Borrowings under
the revolving credit facility and term loan are secured by substantially
all of the Company's assets. Principal payments under the term loan are
due in monthly installments of $125,000 beginning December 1, 1996 with a
final payment of $875,000 due at maturity. Interest on the term loan and
outstanding amounts under the revolving credit facility are payable monthly
at the prime rate plus one percent.
Concurrently with the execution and delivery of the loan agreement,
the Company entered into a Credit Agreement dated as of June 6, 1996 (the
"credit agreement") with Von Roll Holding AG, the Company's majority
stockholder. The credit agreement provides a $15,000,000 revolving credit
facility to the Company which matures May 1, 1998. Repayment of borrowings
under this credit facility is subordinated to the bank borrowing referred
to above and is secured by subordinate liens on substantially all of the
Company's assets. Interest on outstanding amounts under the credit
agreement is payable monthly at the prime rate plus one percent. There is
currently $11,000,000 outstanding under the credit agreement.
As of May 31, 1996 the Company had cash and cash equivalents of
$118,000 and total outstanding indebtedness of $13,528,000 under its
amended revolving credit facility.
For the six-month period ended May 31, 1996 working capital increased
$2,077,000. This was primarily the result of an increase in net
receivables.
Net cash used in operating activities was $3,193,000 for the six
months ended May 31, 1996 as compared to $2,228,000 of net cash used during
the comparable period of 1995. Net bank borrowings for the six month of
1996 increased $1,628,000 as compared to $7,357,000 for the comparable
period of 1995. Capital expenditures increased to $9,378,000 for the first
six months of 1996 as compared to $5,463,000 for the first six months of
1995 primarily as a result of increased spending due to the installation of
the new continuous casting machine. The Company currently expects to incur
capital expenditures of $13.2 million in fiscal 1996, primarily for the
installation of a new continuous casting machine and for new cost reduction
projects identified during the course of a review of melt shop operations
by technical consultants. As this review continues, there may be some
additional capital requirements.
PART II. Other Information
Item 1. Legal Proceedings
See "Note (6) - Commitments and Contingencies of the Notes to
Condensed Consolidated Financial Statements" for new developments in the
lawsuit instituted against the Company by the National Resources Defense
Council and the Public Interest Research Group of New Jersey, Inc.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Such
claims against the Company are generally covered by insurance. There can
be no assurance that insurance, including product liability insurance, will
be available in the future at reasonable rates.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3(a) - Restated Certificate of Incorporation as amended -- Incorporated
by reference to Exhibit 3(a) of the Company's Registration
Statement on Form S-1 (No. 33-13298).
3(b) - By-laws, as amended -- Incorporated by reference to Exhibit 3(b)
to the Company's Annual Report on Form 10-K for the year ended
November 30, 1993 (File No. 0-15838).
4(a) - Form of Certificate for shares of Common Stock of the Company --
Incorporated by reference to Exhibit 4(a) of the Company's
Registration Statement on Form S-1 (No. 33-13298).
10(a) - Electricity Supply Contract between Company and Central Jersey
Power & Light Company effective May 1985 -- Incorporated by
reference to Exhibit 10(d) of the Company's Registration
Statement on Form S-1 (No. 33-13298).
10(b) - Technical Services and Management Consulting Agreement between
the Company and Von Roll Ltd. dated as of April 1, 1987 --
Incorporated by reference to Exhibit 10(e) of the Company's
Registration Statement on Form S-1 (No. 33-13298).
10(c) - Incentive Stock Option Plan of Company adopted October 2, 1987
with amendments -- Incorporated by reference to Exhibit 10(f) of
the Company's Registration Statement on Form S-1 (No. 33-13298).
10(d) - Form of Stock Option Agreement -- Incorporated by reference to
Exhibit 4(b) of the Company's Registration Statement on Form S-8
(No. 33-17435).
10(e) - Indemnity Agreement between the Company and Von Roll Ltd. dated
as of April 1, 1987 -- Incorporated by reference to Exhibit 10(g)
of the Company's Registration Statement on Form S-1 (No.
33-13298).
10(f) - New Jersey Steel Corporation Thrift Savings Plan (as amended
1994) -- Incorporated by reference to Exhibit 10(g) of the
Company's Annual Report on Form 10-K for the year ended November
30, 1994 (File No. 0-15838).
10(g) - New Jersey Steel Corporation Thrift Trust Savings Agreement (as
amended 1994) -- Incorporated by reference to Exhibit 10(h) of
the Company's Annual Report on Form 10-K for the year ended
November 30, 1994 (File No. 0-15838).
10(h) - Registration Agreement between the Company and Von Roll Ltd.
dated as of April 1, 1987 -- Incorporated by reference to Exhibit
10(h) of the Company's Registration Statement on Form S-1 (No.
33-13298).
10(i) - Amended and Restated Loan and Security Agreement dated as of June
6, 1996 between Midlantic Bank, National Association and the
Company -- Filed herewith.
10(j) - Credit Agreement dated as of June 6, 1996 between Von Roll
Holding AG and the Company -- Filed herewith.
10(k) - 1996 Stock Option Plan -- Incorporated by reference to Exhibit A
of the Company's Proxy Statement dated May 7, 1996 used in
connection with the meeting of stockholders held June 21, 1996.
10(l) - Form of Stock Option Agreement used in connection with the
Company's 1996 Stock Option Plan -- Filed herewith.
10(m) - Employment Agreement dated as of May 1, 1996 between the Company
and Kenneth J. Leonard -- Filed herewith.
27 - Financial Data Schedule
b. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NEW JERSEY STEEL CORPORATION
Registrant
Dated: July 15, 1996 /s/ Kenneth J. Leonard
______________________________________
Kenneth J. Leonard
President and Chief Executive Officer
Dated: July 15, 1996 /s/ Paul Roik
______________________________________
Paul Roik
Vice President - Finance and Treasurer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's consolidated financial statements for the year ended
May 31, 1996 and is qualified in it's entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 118
<SECURITIES> 0
<RECEIVABLES> 28837
<ALLOWANCES> (2292)
<INVENTORY> 14735
<CURRENT-ASSETS> 42361
<PP&E> 182441
<DEPRECIATION> (94388)
<TOTAL-ASSETS> 149290
<CURRENT-LIABILITIES> 37254
<BONDS> 31278
0
0
<COMMON> 59
<OTHER-SE> 80699
<TOTAL-LIABILITY-AND-EQUITY> 149290
<SALES> 67651
<TOTAL-REVENUES> 67651
<CGS> 72408
<TOTAL-COSTS> 72408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 145
<INTEREST-EXPENSE> 456
<INCOME-PRETAX> (9563)
<INCOME-TAX> (9563)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9563)
<EPS-PRIMARY> ($1.62)
<EPS-DILUTED> ($1.62)
</TABLE>
Exhibit 10(i)
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
between
MIDLANTIC BANK, NATIONAL ASSOCIATION
and
NEW JERSEY STEEL CORPORATION
June 6, 1996
TABLE OF CONTENTS
Section Page
1. DEFINITIONS 2
2A. REVOLVING LOANS; ACCOUNTS; INVENTORY 6
2A.1 Amount and Certain Definitions . . . . . . . . . . . 10
2A.2 Interest Rate. . . . . . . . . . . . . . . . . . . . 10
2A.3 Payment of Interest. . . . . . . . . . . . . . . . . 10
2A.4 Collection and Remittance. . . . . . . . . . . . . . 10
2A.5 Determination of Balance of Revolving Loans. . . . . 11
2A.6 Monthly and Interim Statements.. . . . . . . . . . . 11
2A.7 Overdrafts.. . . . . . . . . . . . . . . . . . . . . 11
2A.8 Unused Line Fee. . . . . . . . . . . . . . . . . . . 11
2B. TERM LOAN . . . . . . . . . . . . . . . . . . . . . . . . 12
2B.1 Amount . . . . . . . . . . . . . . . . . . . . . . . 12
2B.2 Principal Payments.. . . . . . . . . . . . . . . . . 12
2B.3 Interest Rate. . . . . . . . . . . . . . . . . . . . 12
2B.4 Payment of Interest. . . . . . . . . . . . . . . . . 12
2B.5 Termination. . . . . . . . . . . . . . . . . . . . . 12
2B.6 Charging Principal & Interest Payments . . . . . . . 12
2B.7 Prepayment . . . . . . . . . . . . . . . . . . . . . 12
2B.8 Excess Cash Flow Payments. . . . . . . . . . . . . . 13
2C. ADDITIONAL PROVISIONS RE: INTEREST AND PAYMENTS ON ALL
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2C.1 Interest Calculation; Lawful Rate. . . . . . . . . . 14
2C.2 Charge Against Borrower. . . . . . . . . . . . . . . 14
2C.3 Non-Banking Days.. . . . . . . . . . . . . . . . . . 14
2C.4 Reimbursement of Increased Cost to Lender. . . . . . 14
3. SECURITY INTEREST; ADDITIONAL DEFINITIONS . . . . . . . . 14
3.1 Grant of Security Interests. . . . . . . . . . . . . 15
3.2 Definitions of "Obligations," "Collateral" and
"Equipment". . . . . . . . . . . . . . . . . . . . . 15
3.3 Further Assurances.. . . . . . . . . . . . . . . . . 16
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 16
4.1 Organization and Qualification.. . . . . . . . . . . 16
4.2 Due Authorization; No Default. . . . . . . . . . . . 17
4.3 No Governmental Consent Necessary. . . . . . . . . . 17
4.4 No Proceedings.. . . . . . . . . . . . . . . . . . . 17
4.5 Financial Statements.. . . . . . . . . . . . . . . . 17
4.6 No Change in Financial Condition; Solvency.. . . . . 17
4.7 Compliance With Laws.. . . . . . . . . . . . . . . . 18
4.8 No Other Violations. . . . . . . . . . . . . . . . . 18
4.9 Taxes and Assessments. . . . . . . . . . . . . . . . 18
4.10 Accounts . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Inventory. . . . . . . . . . . . . . . . . . . . . . 18
4.12 Books and Records. . . . . . . . . . . . . . . . . . 19
4.13 Location of Collateral . . . . . . . . . . . . . . . 19
4.14 Places of Business . . . . . . . . . . . . . . . . . 19
4.15 Other Name or Entities . . . . . . . . . . . . . . . 19
4.16 Title and Liens. . . . . . . . . . . . . . . . . . . 19
4.17 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 19
4.18 O.S.H.A. . . . . . . . . . . . . . . . . . . . . . . 20
4.19 Environmental Matters. . . . . . . . . . . . . . . . 20
4.20 Margin Stock . . . . . . . . . . . . . . . . . . . . 20
4.21 Representations and Warranties True, Accurate and Complete;
Confirmation With Each Loan. . . . . . . . . . . . . 20
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 21
5.1 Maintenance of Existence and Qualifications. . . . . 21
5.2 Payment of Taxes and Other Obligations . . . . . . . 21
5.3 Maintenance of Properties. . . . . . . . . . . . . . 21
5.4 Notice of Adverse Events.. . . . . . . . . . . . . . 21
5.5 Information and Documents to be Furnished to Lender. 22
5.6 Access to Records and Property.. . . . . . . . . . . 24
5.7 Insurance At Borrower's Expense. . . . . . . . . . . 24
5.8 Condition of Collateral; No Liens. . . . . . . . . . 25
5.9 Proceeds of Collateral . . . . . . . . . . . . . . . 25
5.10 Records. . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Delivery of Documents. . . . . . . . . . . . . . . . 25
5.12 United States Contracts. . . . . . . . . . . . . . . 25
5.13 Further Assurances.. . . . . . . . . . . . . . . . . 26
5.14 Operating Accounts.. . . . . . . . . . . . . . . . . 26
5.15 Related Entities.. . . . . . . . . . . . . . . . . . 26
5.16 Keasbey Property . . . . . . . . . . . . . . . . . . 26
5.17 Sale of Fixed Assets . . . . . . . . . . . . . . . . 26
6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 27
6.1 No Consolidation, Merger, Acquisition,
Liquidation. . . . . . . . . . . . . . . . . . . . . 27
6.2 Disposition of Assets or Collateral. . . . . . . . . 27
6.3 Other Liens. . . . . . . . . . . . . . . . . . . . . 27
6.4 Other Liabilities. . . . . . . . . . . . . . . . . . 27
6.5 Loans. . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Guaranties; Contingent Liabilities.. . . . . . . . . 28
6.7 Dividends and Other Distributions. . . . . . . . . . 28
6.8 Transactions with Affiliates.. . . . . . . . . . . . 28
6.9 Sale of Inventory. . . . . . . . . . . . . . . . . . 28
6.10 Removal of Collateral. . . . . . . . . . . . . . . . 28
6.11 Transfer of Notes or Accounts. . . . . . . . . . . . 28
6.12 Settlements. . . . . . . . . . . . . . . . . . . . . 28
6.13 Modification of Governing Documents. . . . . . . . . 28
6.14 Change Business. . . . . . . . . . . . . . . . . . . 29
6.15 Change of Location or Name.. . . . . . . . . . . . . 29
6.16 Change of Accounting Practices.. . . . . . . . . . . 29
6.17 Inconsistent Agreement.. . . . . . . . . . . . . . . 29
6.18 Working Capital. . . . . . . . . . . . . . . . . . . 29
6.19 Tangible Net Worth.. . . . . . . . . . . . . . . . . 30
6.20 Capital Expenditures.. . . . . . . . . . . . . . . . 30
6.21 Cash Coverage Ratio. . . . . . . . . . . . . . . . . 31
6.22 Related Entities.. . . . . . . . . . . . . . . . . . 31
7. ADDITIONAL POWERS OF LENDER . . . . . . . . . . . . . . . 31
7.1 Powers of Attorney.. . . . . . . . . . . . . . . . . 31
7.2 Irrevocability; Lender's Discretion. . . . . . . . . 33
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 33
8.1 Failure to Pay.. . . . . . . . . . . . . . . . . . . 33
8.2 Failure to Perform.. . . . . . . . . . . . . . . . . 33
8.3 Cross Default; Default on Other Debt.. . . . . . . . 34
8.4 False Representation or Warranty.. . . . . . . . . . 34
8.5 Cessation of Business. . . . . . . . . . . . . . . . 34
8.6 Change in Condition. . . . . . . . . . . . . . . . . 34
8.7 Change in Ownership. . . . . . . . . . . . . . . . . 34
8.8 Intentionally Left Blank . . . . . . . . . . . . . . 34
8.9 Insecurity.. . . . . . . . . . . . . . . . . . . . . 34
8.10 Liquidation or Dissolution.. . . . . . . . . . . . . 34
8.11 Inability to Pay Debts.. . . . . . . . . . . . . . . 34
8.12 Bankruptcy; Insolvency.. . . . . . . . . . . . . . . 34
8.13 Judgments. . . . . . . . . . . . . . . . . . . . . . 34
8.14 Attachment.. . . . . . . . . . . . . . . . . . . . . 34
8.15 Condemnation.. . . . . . . . . . . . . . . . . . . . 35
8.16 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 35
8.17 Guaranty.. . . . . . . . . . . . . . . . . . . . . . 35
8.18 Von Roll Loan. . . . . . . . . . . . . . . . . . . . 35
9. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1 Rights in General. . . . . . . . . . . . . . . . . . 35
9.2 Specific Rights Regarding Collateral.. . . . . . . . 36
9.3 Set-Off. . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Cumulative Remedies; No Waiver by Lender.. . . . . . 38
9.5 Waivers and Consents Relating to Remedies. . . . . . 38
10. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER . . . . . . . 39
10.1 Waivers. . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Consents.. . . . . . . . . . . . . . . . . . . . . . 39
10.3 Applications of Payments.. . . . . . . . . . . . . . 39
11. TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . 39
11.1 Termination By Lender. . . . . . . . . . . . . . . . 39
11.2 Termination By Borrower. . . . . . . . . . . . . . . 40
11.3 Effect on Revolving Loan Limit.. . . . . . . . . . . 40
11.4 Mutual Release . . . . . . . . . . . . . . . . . . . 41
12. COSTS, EXPENSES AND TAXES . . . . . . . . . . . . . . . . 41
13. INDEMNIFICATION BY BORROWER . . . . . . . . . . . . . . . 41
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 42
14.1 Entire Agreement; Amendments; Lender's Consent . . . 43
14.2 Notices. . . . . . . . . . . . . . . . . . . . . . . 43
14.3 Gender.. . . . . . . . . . . . . . . . . . . . . . . 43
14.4 Joint Borrowers. . . . . . . . . . . . . . . . . . . 43
14.5 Cross Default; Cross Collateral. . . . . . . . . . . 44
14.6 Binding Effect; Governing Law. . . . . . . . . . . . 44
14.7 Execution in Counterparts. . . . . . . . . . . . . . 44
14.8 Severability of Provisions.. . . . . . . . . . . . . 44
14.9 Table of Contents; Headings. . . . . . . . . . . . . 44
14.10 Exhibits and Schedules. . . . . . . . . . . . . . . 44
14.11 Further Acknowledgments and Agreements
of Borrower and the Lender. . . . . . . . . . . . . 44
This is an AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") made as of June 6, 1996 between MIDLANTIC BANK, NATIONAL
ASSOCIATION ("Lender"), having offices at 100 Walnut Avenue, Clark, New
Jersey 07066 and NEW JERSEY STEEL CORPORATION, a corporation organized
under the laws of Delaware ("Borrower"), having its principal place of
business at North Crossman Road, Sayreville, New Jersey 08872.
WHEREAS, Borrower and Lender are parties to that certain Revolving
Loan and Security Agreement, dated March 31, 1993, as amended by (A) an
Amendment to Revolving Loan and Security Agreement and Revolving Loan Note
(Business) dated as of April 12, 1994, (B) a Second Amendment to Revolving
Loan and Security Agreement and Revolving Loan Note (Business) dated as of
May 31, 1994, (C) a letter amendment dated November 30, 1994 from Lender
to Borrower, (D) a Third Amendment to Revolving Loan and Security Agreement
and Revolving Loan Note (Business) dated as of December 31, 1994, (E) a
Fourth Amendment to Revolving Loan and Security Agreement and Revolving
Loan Note (Business) dated as of May 12, 1995, and (F) a Fifth Amendment
to Revolving Loan and Security Agreement and Revolving Loan Note
(Business) dated as of August 29, 1995 (as amended, hereinafter referred
to as the "Original Loan Agreement") and in connection therewith Borrower
executed and delivered to Lender a Revolving Loan Note (Business), dated
March 31, 1993 and executed and delivered to Lender an Endorsement, a Second
Endorsement, a Third Endorsement, a Fourth Endorsement and a Fifth
Endorsement to such note (collectively with all such Endorsements, being
referred to herein as the "Original Revolving Loan Note"); and
WHEREAS, Borrower and Lender are parties to that certain Term Loan
and Security Agreement, dated August 29, 1995 (the "Original Term Loan
Agreement") and in connection therewith Borrower executed and delivered
to Lender a Term Loan Note, dated August 29, 1995 (the "Original Term
Note", and collectively with the Original Loan Agreement, the Original
Revolving Loan Note and the Original Term Loan Agreement, referred to
herein as the "Original Loan Documents"); and
WHEREAS, Borrower has requested additional financing from Lender and
Lender has agreed, subject to the terms and conditions of this Agreement
and the other agreements executed and delivered simultaneously herewith,
to provide such additional financing; and
WHEREAS, Borrower and Lender desire to amend and restate the terms and
provisions of the Original Loan Documents;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto, intending
to be legally bound, hereby amend and restate the Original Revolving Loan
Agreement and the Original Term Loan Agreement and agree as follows:
1. DEFINITIONS
"Account" - as defined in Section 2A.1(c) (i).
"Banking Day" - any day other than a Saturday, Sunday or legal
holiday for banks under the laws of the State of New Jersey.
"Borrower" - shall have the meaning ascribed to such term in
the preamble of this Agreement and shall be used throughout this Agreement
as agreed in Section 14.4 of this Agreement.
"Cash Coverage Ratio" - as defined in Section 6.21.
"Cash Flow" or "Excess Cash Flow" - shall mean the consolidated
net income of Borrower plus depreciation/amortization, less current
principal debt service, less the unfinanced portion of permitted capital
expenditures, all as determined in accordance with generally accepted
accounting principles on a basis consistent with that employed by the
accountants in preparing the audited financial statements required by
Section 5.5(a), adjusted to exclude results from discontinued operations
(to the extent not accounted for as an extraordinary item) and accumulative
affects of any changes in accounting principles; provided that payments on
the Revolving Loan and the Von Roll Loan shall not, for purposes of
calculating "Cash Flow" or "Excess Cash Flow," be deemed part of Borrower's
"current principal debt service."
"Cash Flow Availability" - means, as of the date determined, the
Excess Cash Flow of the Company for the fiscal year to date, divided by two,
minus an amount if such amount is a positive number, equal to the difference
between (i) any amount previously paid to Von Roll during such fiscal year
with respect to the Von Roll Loan (other than amounts paid from the Net
Proceeds of the sale of the Keasbey Property) minus (ii) the amount of any
Loans made by Von Roll to Borrower under the Von Roll Loan during such fiscal
year.
"Collateral" - as defined in Section 3.2(b).
"Committed Cap" - as defined in Section 2A.1(b).
"Current" - a reference to Borrower's payables being "Current"
shall mean Borrower is paying all of its payables within the applicable
terms (the reference to "applicable terms" includes terms which are in
accordance with prior practices with which the given creditor has indicated
agreement or acceptance so long as such creditor has not indicated a change
in such agreement or acceptance).
"Default Rate" - a rate of interest two percent (2%) per annum
in excess of the rate otherwise applicable at the time to a Revolving Loan
or the Term Loan, as applicable.
"Equipment" - as defined in Section 3.2(c).
"ERISA" - as defined in Section 4.17.
"Event of Default" - as defined in Section 8.
"Excluded Property" - Borrower's interest as lessee in any item of
Equipment to the extent that and for so long as the grant by Borrower of a
security interest therein would be a violation of the lease of such
Equipment, but only if the existence of such lease has been disclosed to
Lender.
"Excel" - Excel Mining Systems, Inc., a corporation organized
under the laws of Ohio, and any successor corporation.
"Excel Qualified Accounts" - "accounts" as that term is defined
under the UCC, due from Excel to Borrower, and which meet all of the criteria
for Qualified Accounts other than 2A.1 (c)(ii)(I).
"Inventory" - as defined in Section 2A.1(c)(iii).
"ISRA" - as defined in Section 4.19.
"Keasbey Property" - the real property acquired by Borrower from
A. J. Ross, Logistics, Inc.
"Loans" - the Revolving Loans and the Term Loan, when not referred
to by their full titles.
"Mandatory Cash Flow Prepayment" - as defined in Section 2B.8.
"Maturity Date" - as defined in Section 2A.1(a).
"Net Proceeds" - all of the cash or other consideration paid or
otherwise received in connection with the sale, lease, assignment,
condemnation or other transfer or disposition of property (real or personal,
tangible or intangible) other than inventory minus only the reasonable and
customary transfer taxes, brokerage fees and other expenses actually incurred
by Borrower in connection with such sale, lease, assignment, condemnation or
other transfer or disposition.
"Net Value of Qualified Inventory" - as defined in Section 2A.1
(c)(v).
"Notes" - the Revolving Note (if any) and the Term Note, when not
referred to by their full titles.
"Obligations" - as defined in Section 3.2(a).
"Original Loan Agreement" - as defined in the preamble of this
Agreement.
"Original Loan Documents" - as defined in the preamble of the
Agreement.
"Original Revolving Loan Note" - as defined in the preamble of
this Agreement.
"Original Term Loan Agreement" - as defined in the preamble of
this Agreement.
"Original Term Note" - as defined in the preamble of this Agreement.
"Payment Date" - the first Banking Day of each calendar month.
"Permitted Liens" - any of the following encumbrances: (i) liens
in favor of Lender; (ii) the Von Roll Subordinated Lien; (iii) liens for
taxes or assessments or other governmental charges or levies, either not yet
due and payable, or, if due and payable, to the extent payment thereof is
being contested in good faith, by proper proceedings diligently pursued, if
adequate reserves therefor have been established on the books of the Borrower
in conformity with generally accepted accounting principles and payment
thereof is made before any of Borrower's assets shall be seized or sold with
respect thereto; (iv) pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public liability
laws or similar legislation; (v) pledges or deposits securing bids, tenders,
or contracts (other than contracts for the payment of money) to which
Borrower is a party made in the ordinary course of business; (vi) deposits
securing public or statutory obligations of Borrower; (vii) zoning
restrictions, easements, licenses, or other restrictions on the use of real
property or other minor irregularities in title thereto, so long as such
restrictions, easements, licenses, other restrictions or irregularities do
not individually or in the aggregate materially impair the use, value, or
marketability of such real property, leases or leasehold estates; (viii) as
to the capital stock of Excel, the rights of certain Shareholders of Excel
under the Shareholders Agreement and the rights of certain Shareholders of
Excel and of Excel under Section 9 of the Stock Purchase Agreement, and
(viii) liens identified on Schedule 5 annexed hereto.
"Prime Rate" - the rate of interest announced from time to time by
Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its
customers and is neither tied to any external rate of interest or index nor
necessarily reflects the lowest rate of interest actually charged by Lender
to any particular class or category of customers.
"Qualified Account" - as defined in Section 2A.1(c)(ii).
"Qualified Inventory" - as defined in Section 2A.1(c)(iv).
"Related Entity" - any corporate subsidiary of Borrower, and any
unincorporated association or other entity through which Borrower conducts
any part of its business.
"Relevant Documents" - any and all documents and instruments
delivered to Lender pursuant or incident to this Agreement or any of the
Loans (a) by Borrower or any Related Entity, (b) by any pledgor or grantor
of a lien, security interest or other right, or (c) by any guarantor of
any of the Obligations, including without limitation the guarantee, if any,
of the Obligations.
"Revolving Loan" or "Revolving Loans" - as defined in Section
2A.1(a).
"Revolving Loan Limit" - as defined in Section 2A.1(b).
"Revolving Note" - as defined in Section 2A.1(a).
"Shareholders Agreement" - that certain Shareholders' Agreement,
dated August 21, 1991, by and among Excel, Bruce Cassidy, Fred Munson and
(pursuant to a Waiver and Supplemental Stockholders' Agreement, dated
February 16, 1996) Borrower.
"SEC" - United States Securities and Exchange Commission.
"Stock Purchase Agreement" - that certain Stock Purchase Agreement,
dated August 21, 1991, among Borrower, Excel, Bruce Cassidy, and Fred Munson.
"Subordination Agreement" - the Subordination and Intercreditor
Agreement, dated the date hereof, among Lender, Von Roll and Borrower.
"Tangible Net Worth" - as defined in Section 6.19.
"Term Loan" - as defined in Section 2B.1.
"Term Note" - as defined in Section 2B.1.
"UCC" - the Uniform Commercial Code as in effect from time to time
in the State of New Jersey.
"Unmatured Event of Default" - any event or condition, which,
after notice or lapse of time, or both, would constitute an Event of Default.
"Von Roll" - Von Roll Holding AG, a corporation organized under
the laws of Switzerland.
"Von Roll Commitment" - the maximum principal amount which Von
Roll is obligated to lend to Borrower under the Von Roll Credit Agreement,
which on the date hereof is Fifteen Million Dollars ($15,000,000).
"Von Roll Credit Agreement" - The Credit Agreement, dated the date
hereof, between Borrower and Von Roll providing for a revolving Loan
Commitment, as defined therein, of up to Fifteen Million Dollars
($15,000,000).
"Von Roll Loan" - the Loan (as defined in the Von Roll Credit
Agreement) available to Borrower under the Von Roll Credit Agreement.
"Von Roll Subordinated Lien" - the liens and security interests
in favor of Von Roll which are subordinated, pursuant to the Subordination
Agreement, to the liens and security interests of Lender.
"Working Capital" - as defined in Section 6.18.
2A. REVOLVING LOANS; ACCOUNTS; INVENTORY
2A.1 Amount and Certain Definitions.
(a) Revolving Loan. Subject to the terms and conditions of this
Agreement and provided there has not occurred an Event of Default or an
Unmatured Event of Default, Lender, prior to May 1, 1998, will and
thereafter may at its discretion, upon the request of Borrower, make loans
hereunder to Borrower (a "Revolving Loan" or the "Revolving Loans") from
time to time on a revolving loan basis in an aggregate principal amount not
in excess at any time outstanding of the Borrower's Revolving Loan Limit;
provided that, if the outstanding amount of the Revolving Loans should exceed
the Revolving Loan Limit at any time, such excess (i) shall nevertheless be
secured by the Collateral and be subject to the terms of this Agreement,
and (ii) shall be payable immediately upon demand by Lender. The Revolving
Loans shall be payable (i) on the later of (A) May 1, 1998 or (B)
thereafter, within ninety (90) days after demand by Lender, or (ii) at such
other time as is provided in Section 9, Section 11 or elsewhere in this
Agreement, whichever of (i) or (ii) shall first occur (the first to occur of
(i) or (ii) being referred to as the "Maturity Date"). Simultaneous with the
execution and delivery of this Agreement, the Original Revolving Note shall
be restated in the form attached hereto as Exhibit A (the "Revolving Note")
and except as may be otherwise provided in the Revolving Note, the Revolving
Loans shall be payable in accordance with the terms of this Agreement.
(b) Definition of Revolving Loan Limit. Borrower's Revolving
Loan Limit shall be the lesser of Twenty-Million Dollars ($20,000,000.00)
("Committed Cap") or the sum of the following:
(i) 85% of the face amount of Qualified Accounts, not
including Excel Qualified Accounts, (less reserves determined by Lender for
advertising allowances, warranty claims and other contingencies), which
percentage Lender may increase or decrease from time to time as Lender in
its sole and absolute discretion may determine based on credit or collateral
considerations; plus
(ii) the lesser of (A) 50% of the face amount of Excel
Qualified Accounts (less the reserves determined by Lender for advertising
allowances, warranty claims, and other contingencies), or (B) Two Million
Five Hundred Thousand Dollars ($2,500,000.00) which percentage or amount
Lender may increase or decrease from time to time as Lender in its sole
and absolute discretion may determine based on credit or collateral
considerations; plus
(iii) the lesser of (A) 60% of the Net Value of Qualified
Inventory or (B) Ten Million Dollars ($10,000,000.00), which percentage or
amount Lender may increase or decrease from time to time as Lender in its
sole and absolute discretion may determine based on credit or collateral
considerations.
Lender shall have the right to increase or decrease the Revolving Loan
Limit from time to time based on credit or collateral considerations. The
Revolving Loan Limit shall be subject to the limitation stated in Section
11.3 in the event of notice of termination of this Agreement.
(c) Definitions of Account; Qualified Account; Inventory;
Qualified Inventory; Net Value of Qualified Inventory.
(i) The term "Account" shall mean all items described in
the UCC definition thereof and all of the following, whether or not so
described (in all cases whether now existing or hereafter created): all
obligations of any kind at any time due or owing to Borrower and all rights
of Borrower to receive payment or any other consideration (whether classified
under the UCC or the law of any other state as accounts, accounts receivable,
contract rights, chattel paper, general intangibles, or otherwise) including
without limitation invoices, contract rights, accounts receivable, general
intangibles, choses-in-action, notes, drafts, acceptances, instruments and
all other debts, obligations and liabilities in whatever form owing to
Borrower from any person, firm, corporation, governmental authority or other
entity, together with all security for any thereof, and all of Borrower's
rights to goods sold (whether delivered, undelivered, in transit or
returns), represented by any thereof, together with all proceeds and products
of any of the foregoing.
(ii) The term "Qualified Account" shall mean an Account which
has been identified and described to Lender's satisfaction, is represented
by Borrower (by its acceptance of Revolving Loans thereon) as meeting all
of the following criteria on its origination date and thereafter until
collected, and is in all other respects acceptable to Lender based on credit
or collateral considerations.
(A) Borrower is the sole owner of the Account and has
not sold, assigned or otherwise transferred it, and the Account is not
subject to any claim, lien or security interest other than the liens in
favor of Lender and the Von Roll Subordinated Lien;
(B) The Account is bona fide and legally enforceable
and owing to Borrower for the sale of goods or performance of services in
the United States and in the ordinary course of business and the Account
does not require any further act on the part of Borrower to make it owing
by the Account debtor, and Borrower has delivered to Lender (or, at the
time of origination of the Account, if required by Lender, will deliver
to Lender) invoices, billings, shipping documents and other documents
evidencing the obligation to pay the Account;
(C) The Account does not represent a conditional sale,
consignment or other sale on a basis other than that of absolute sale, is
not evidenced by any note, instrument, chattel paper or like document, and
does not arise out of a contract with the United States or any of its
departments, agencies or instrumentalities;
(D) The Account is invoiced, for payment, on the date
no more than five (5) days after the Inventory or other goods represented
thereby are shipped to the Account debtor, and the invoice has not been
outstanding for more than ninety (90) days;
(E) The Account is not due from an Account debtor which
has more than fifty percent (50%) in dollar value of its Accounts due to
Borrower which do not qualify under Subsection 2A.1(c)(ii)(D) above;
(F) The amount of the Account included in calculating
the Revolving Loan Limit does not exceed twenty percent (20%) of Borrower's
total Qualified Accounts at the time outstanding or in the case of Re-Steel
Supply Company, Inc., Brocker Rebar Company, Inc. and Barker Steel
Company, Inc. does not exceed twenty-five percent (25%) of Borrower's
total Qualified Accounts at the time outstanding, but as to any Account,
the amount of which is in excess of the aforesaid percentage of Qualified
Accounts applicable thereto, if such Account meets all other requirements of
a Qualified Account, the portion of such Account which is not in excess of
said applicable percentage shall not be disqualified as a Qualified Account
by this subsection (F);
(G) The Account is not subject to any defense, offset,
counterclaim, credit, allowance or adjustment except usual and customary
prompt payment discounts, nor has the Account debtor returned the goods or
indicated any dispute or complaint concerning them; provided, however, if
the Account debtor has returned any goods, or indicated a dispute or
complaint with respect thereto or with respect to the Account, the Account
will be disqualified under this Subsection (G) only to the extent of the
goods returned or the amount of the dispute or the complaint if the Account
debtor can reasonably be expected to pay the remainder of the Account;
(H) No other Account of the Account debtor is overdue in
payment and Borrower has not received any notice, nor has it any
knowledge, of any facts which adversely affect the credit of the Account
debtor;
(I) The Account debtor is not a Related Entity or other
affiliate of Borrower nor a director or officer of Borrower or an affiliate
of any director or officer;
(J) Borrower has observed and complied with all laws and
governmental rules and regulations of the state in which the Account debtor
is located or the Account is payable, which laws, if not observed and
complied with, would deny to Borrower access to the courts of such state;
and
(K) Such Account is not otherwise deemed unsatisfactory
by Lender, as determined by Lender in its sole and absolute discretion based
on credit and/or collateral considerations. Lender will notify Borrower,
orally or in writing, when Lender deems any Account debtor or Account to be
unsatisfactory under this Subsection (K).
(iii) The term "Inventory" shall mean all items described in
the UCC definition thereof and all of the following, whether or not so
described (in all cases whether now owned or hereafter acquired by Borrower
and wherever located): all goods, merchandise or other personal property
held by Borrower for sale or lease or to be furnished under labels and other
devices, names or marks affixed thereto for purposes of selling or
identifying the same or the seller or manufacturer thereof, and all right,
title and interest of Borrower therein and thereto; all raw materials, work
or goods in process; and all materials and supplies of any kind or
description used or usable in connection with the manufacture, packaging,
shipping, advertisement, sale or finishing of any of the foregoing, together
with all proceeds and products of any of the foregoing.
(iv) The term "Qualified Inventory" shall mean the Inventory
which has been identified and described to Lender's satisfaction, is
represented by Borrower (by its acceptance of Revolving Loans thereon) as
meeting all of the following criteria on the date of any Revolving Loan
based thereon and thereafter while any of the Obligations are outstanding,
and is in all other respects acceptable to Lender based on credit or
collateral considerations:
(A) Borrower is the sole owner of the Inventory; none
of the Inventory is being held by Borrower or any other person or entity on
a consignment basis; Borrower has not sold, assigned or otherwise transferred
all or any portion thereof; and none thereof is subject to any claim, lien or
security interest other than the liens in favor of Lender and the Von Roll
Subordinated Lien; and
(B) If any of the Inventory is represented or covered by
any document of title, instrument or chattel paper, Borrower is the sole
owner of all such documents, instruments and paper, all thereof are in the
possession of Lender, none thereof has been sold, assigned or otherwise
transferred, and none thereof is subject to any claim, lien or security
interest, other than the liens in favor of Lender and the Von Roll
Subordinated Lien.
(v) The term "Net Value of Qualified Inventory" shall mean
the value, as determined by Lender in its sole and absolute discretion based
on credit or collateral considerations, of the Qualified Inventory in the
actual or constructive possession of Borrower at any time, exclusive of any
transportation, processing or handling charges affecting the value thereof,
and exclusive of work-in-process (it being understood that billets are not
work-in-process but either raw materials or finished goods) and such other
value as Lender in its sole and absolute discretion determines to exclude
based on credit and/or collateral considerations.
2A.2 Interest Rate. The Revolving Loans shall bear interest at a
fluctuating interest rate per annum equal at all times to one percent (1%)
above Lender's Prime Rate in effect from time to time, each change in such
fluctuating rate to take effect simultaneously with the corresponding change
in the Prime Rate, without notice to Borrower.
2A.3 Payment of Interest. Interest on the Revolving Loans will be
invoiced at the end of each calendar month. Interest shall be payable
monthly on the first Banking Day in each calendar month commencing July 1,
1996 and on the final day when the principal is paid in full. Any failure
or delay by Lender in presenting invoices for interest payments shall not
discharge or relieve Borrower of the obligation to make such interest
payments. At Lender's option, Lender may charge any loan or deposit account
of Borrower for the interest payments due and any other charges payable
by Borrower to Lender including without limitation interest, fees and
expenses. Borrower hereby consents to such automatic charge by Lender.
2A.4 Collection and Remittance. Borrower covenants and agrees (a) to
receive in trust for Lender all payments on Accounts for the sale of
goods or performance of services and all payments on Inventory, in each
case whether cash, checks, drafts, notes, acceptances or other forms of
payment, and (b) to deliver such payments to Lender forthwith in the
identical form in which received.
2A.5 Determination of Balance of Revolving Loans.
(a) In determining the outstanding balance of the Revolving Loans,
(i) domestic checks received by Lender before Noon of a Banking Day will be
credited on that Banking Day, and thereafter on the following Banking Day;
(ii) any other form of funds received by Lender will be credited on the
Banking Day when Lender has received notification of collection if before
Noon, and thereafter on the following Banking Day; and (iii) all credits
shall be conditional upon final payment to Lender in cash or solvent credits
of the items giving rise to them and, if any item is not so paid, the amount
of any credit given for it shall be charged to the balance of the Revolving
Loans whether or not the item is returned.
(b) For the purpose of computing interest on the Revolving Loans
and other Obligations, interest shall continue to accrue on the amount of
any payment received by Lender for a period of two (2) Banking Days after
it is credited.
2A.6 Monthly and Interim Statements. Once each month Lender shall
render a statement of account to Borrower showing the current status of
principal, interest and service charges with respect to the Revolving Loans.
If these statements or any interim statements indicate that the outstanding
balance of the Revolving Loans exceeds the Revolving Loan Limit, Borrower,
at Lender's option, forthwith shall either furnish additional Collateral
satisfactory to Lender or pay the difference in cash. The statement of
account rendered by Lender shall be considered correct,
accepted by Borrower and conclusively binding upon Borrower, unless
Borrower gives Lender written notice to the contrary within ten (10)
Banking Days after the sending of the statement by Lender. If Borrower
disputes the correctness of Lender's statement, Borrower's notice shall
specify in detail the particulars of its basis for contending that Lender's
statement is incorrect.
2A.7 Overdrafts. In the event Lender honors a check of Borrower
resulting in Borrower's checking account being overdrawn, then Lender
shall be deemed to have loaned the amount of such overdraft to Borrower,
pursuant to the terms of this Section 2A, on the Lender's Banking Day
immediately preceding the day on which the Borrower's check is tendered
to Lender for collection. Lender shall not be obliged to honor any
overdraft of Borrower, whether or not it has done so in the past.
2A.8 Unused Line Fee. In addition to interest and other fees and
expenses described in this Agreement, Borrower agrees to pay Lender, on
the 1st day of each calendar month, an amount equal to one-quarter of
one percent (1/4%) per annum multiplied by the difference between (a) the
Committed Cap and (b) the average principal balance of the Revolving Loans
outstanding in the preceding calendar month, calculated in accordance with
Section 2A.5(a) hereof.
2B. TERM LOAN.
2B.1 Amount. Simultaneous with the execution and delivery of this
Agreement, the principal amount outstanding under the Original Term Note,
which on the date hereof is Seven Million Five Hundred Thousand Dollars
$7,500,000.00, shall be restated as a term loan (the "Term
Loan") to be evidenced by Borrower's promissory note in the form of
Exhibit B to this Agreement (the "Term Note").
2B.2 Principal Payments. The principal of the Term Loan shall be
repaid in fifty-three (53) consecutive equal monthly installments of
$125,000.00 on the first day in each calendar month, commencing December 1,
1996, and in a final installment of $875,000.00 on May 1, 2001, when
the unpaid balance of principal and any accrued interest shall be due
and payable.
2B.3 Interest Rate. The Term Loan shall bear interest at a fluctuating
interest rate per annum equal at all times to one percent (1%) above
Lender's Prime Rate in effect from time to time, each change in such
fluctuating rate to take effect simultaneously with the corresponding change
in the Prime Rate, without notice to Borrower.
2B.4 Payment of Interest. Interest on the Term Loan shall be due and
payable on the first Banking Day in each calendar month, commencing July 1,
1996, until the principal balance has been paid in full. Lender shall
present a monthly invoice to Borrower reflecting the interest payment due,
but any failure or delay by Lender in submitting invoices for interest
payments shall not discharge or relieve Borrower of the obligation to make
such interest payments.
2B.5 Termination. Notwithstanding the provisions of Section 2B.2, the
Term Loan shall terminate and be due and payable, with accrued interest,
upon the termination date of this Agreement pursuant to Section 11.2.
2B.6 Charging Principal & Interest Payments. At Lender's option,
Lender may charge any loan or deposit account of Borrower for any principal
or interest payments due and any other charges payable by Borrower to
Lender, including without limitation interest, fees and expenses. Borrower
hereby consents to such automatic charge by Lender.
2B.7 Prepayment. (a) Borrower may prepay all, or any part of, the
outstanding principal of the Term Loan only upon paying to Lender, as a
prepayment charge, the applicable amount stated below:
(i) If the date the prepayment is made is prior to the first
anniversary of the date stated at the beginning of this Agreement, an
amount equal to five percent (5%) of the amount prepaid;
(ii) If the date the prepayment is made is after such first
anniversary but prior to the second such anniversary, an amount equal to
four percent (4%) of the amount prepaid; or
(iii) If the date the prepayment is made is after such second
anniversary but prior to the third such anniversary, an amount equal to
three percent (3%) of the amount prepaid; or
(iv) If the date the prepayment is made is after such third
anniversary but prior to the fourth such anniversary, an amount equal to
two percent (2%) of the amount prepaid; or
(v) If the date the prepayment is made is after the fourth such
anniversary but prior to the fifth such anniversary, an amount equal to
one percent (1%) of the amount prepaid;
provided, however, that the terms of this Subsection 2B.7(a) do not apply
to a prepayment if simultaneously with such prepayment this Agreement is
terminated pursuant to Subsection 11.2(a) or (b) of this Agreement and the
amount, if any, as computed under Subsection 11.2(b)(iii) is paid to Lender
as provided therein. Payments made to Lender from the Net Proceeds of the
sale of Borrower's property located in Bowie, Maryland or as required under
Section 5.16 in connection with the sale of the Keasbey Property or under
Section 5.17 in connection with the retirement of assets in the normal
course of Borrower's operations shall not be deemed prepayments for purposes
of this Subsection 2B.7(a).
(b) All prepayments on the Term Loan, including, without limitation,
prepayments from the Net Proceeds of the sale of the Borrower's property
located in Bowie, Maryland, the Keasbey Property or sales under Section
5.17, shall be applied firstly to interest accrued but unpaid on the Term
Loan and secondly to the principal installments of the Term Loan in the
inverse order of their maturities.
2B.8 Excess Cash Flow Payments. In addition to the scheduled principal
installments due on the Term Loan as provided for under Section 2B.2 and the
Term Note, Borrower, on the first Payment Date following each delivery of the
financial statements pursuant to Section 5.5(a) of this Agreement, shall,
upon the request of Lender, prepay the Term Loan by an amount (to be
determined by reference to the annual audited financial statements provided
pursuant to Section 5.5(a)) equal to 50% of Excess Cash Flow (each such
payment being referred to herein as a "Mandatory Cash Flow Prepayment").
Each Mandatory Cash Flow Prepayment shall be applied firstly to the interest
accrued but unpaid on the Term Loan and secondly to the principal installments
of the Term Note in the inverse order of their maturities. Mandatory Cash
Flow Prepayments shall not be deemed prepayments for the purposes of Section
2B.7 or Section 11.2 of this Agreement (unless this Agreement is terminated
in connection with such prepayment).
2C. ADDITIONAL PROVISIONS RE: INTEREST AND PAYMENTS ON ALL LOANS
2C.1 Interest Calculation; Lawful Rate. Interest on the Revolving Loans
and the Term Loan shall be calculated on a daily basis upon the unpaid
principal balance, with each day representing 1/360th of a year. If the
interest rate calculated in accordance with any provision of this Agreement
for any of the Loans would at any time exceed the maximum permitted by any
law then applicable to such Loans, then for such period as such rate would
exceed the maximum permitted by such law (and no longer) the rate of interest
payable on such Loans shall be reduced to the maximum permitted by such law.
2C.2 Charge Against Borrower. Lender may, at its discretion, charge the
amount of any payment of principal and/or interest on any of the Loans and
any other charges payable by Borrower to Lender, including without limitation
interest, fees and expenses, to any checking, loan or deposit account of
Borrower, deduct such amount from any future Revolving Loan to Borrower, or
apply any Collateral proceeds or other funds received by Lender against
payment of any such amount.
2C.3 Non-Banking Days. If any payment pursuant to this Agreement or any
of the Relevant Documents shall be stated to be due on a day other than a
Banking Day, such payment may be made on the next succeeding Banking Day
and such extension of time shall be included in computation of the
interest or other payment due.
2C.4 Reimbursement of Increased Cost to Lender. If any law, regulation
or guideline, or change in any law, regulation or guideline or in the
interpretation thereof, or any order or ruling by any regulatory body, court
or other governmental authority, or compliance by Lender with any request
or directive (whether or not having the force of law) of any such regulatory
body, court or authority, shall impose, modify, or deem applicable to Lender
any reserve, capital, special deposit or other requirement or condition in
respect of this Agreement or any of the Loans, which results in an increased
cost or reduced benefit to Lender in maintaining any of the Loans (as
determined by reasonable allocation of the aggregate of such increased costs
or reduced benefits to Lender resulting from such event), then Borrower
shall pay to Lender from time to time upon demand additional amounts
sufficient to compensate Lender for such increased costs or reduced benefits,
together with interest on each such amount from a date ten (10) days after
the date of such demand until payment in full thereof at the highest rate
then applicable to any of the Loans. A certificate setting forth in
reasonable detail such increased cost incurred or reduced benefit realized
by Lender as a result of any such event shall be conclusive as to the amount
thereof, absent manifest error.
3. SECURITY INTEREST; ADDITIONAL DEFINITIONS
3.1 Grant of Security Interests. As security for the due and punctual
payment and performance of all of the Obligations, whether pursuant to
this Agreement or otherwise, Borrower hereby pledges, transfers and assigns
to Lender, and grants to Lender security interests in, (a) all of the
Collateral wherever located and whether now existing or hereafter created
and whether now owned or hereafter acquired by Borrower, and (b) all
accessions and additions thereto, replacements and substitutions therefor,
and proceeds and products thereof. The security interests granted hereby,
and all remedies and other rights stated or referred to in this Agreement
or any of the Relevant Documents, shall continue in full force and effect
until full and final payment and performance of the Loans and all other
Obligations under this Agreement and the Relevant Documents.
3.2 Definitions of "Obligations," "Collateral" and "Equipment".
(a) The term "Obligations" shall mean
(i) all principal of and interest on the Revolving Loans
and the Term Loan, and all other sums payable by Borrower or
any Related Entity under the terms of this Agreement or any of
the Relevant Documents,
(ii) all other indebtedness, liabilities, obligations and
agreements of every kind and nature of Borrower or any Related
Entity to or with Lender or any affiliate of Lender, and
(iii) any participation or interest of Lender or any affiliate
of Lender in any indebtedness, liabilities, obligations or
agreements of Borrower, any Related Entity or any such guarantor
to or with others, in each case whether now existing or hereafter
created, whether now or hereafter contemplated, whether pursuant
to this Agreement, any of the Relevant Documents or otherwise,
whether in the form of refinancing, letters of credit, bankers
acceptances, guaranties, loans, interest, charges, fees, expenses
or otherwise, whether direct or indirect, whether acquired
outright, conditionally or as collateral security from another,
whether absolute or contingent, joint or several, liquidated or
unliquidated, secured or unsecured, and whether arising by
operation of law or otherwise, and including without limitation any
future advances, renewals, extensions, modifications or changes
in form of, or substitutions for, any of the items described in the
preceding clauses (i) through (ii) or this clause (iii).
(b) The term "Collateral" shall mean the following, wherever
located and whether now existing or hereafter created and whether now owned
or hereafter acquired by Borrower: (i) the Accounts; (ii) the Inventory;
(iii) the Equipment; (iv) the premises commonly known as North Crossman Road,
Sayreville, New Jersey and owned by Borrower; (v) the pledge of the stock of
Excel now or hereafter owned by Borrower (vi) all guarantees, security and
liens for payment of any Accounts, and all documents of title, policies or
certificates of insurance, insurance proceeds, proceeds of condemnation or
other seizure, securities, chattel paper and other documents and instruments
evidencing or pertaining to any thereof; all claims of Borrower against
third parties for loss of or damage to, or otherwise relating to, any of
the Collateral; and all files, correspondence, customer lists, computer
programs, tapes, discs and related data processing software, owned by
Borrower or in which Borrower has an interest, which contains information
identifying any of the Collateral or identifying any Account debtor or the
amount owed by same, or which would otherwise be necessary or helpful
in the realization on any of the Collateral; (vii) all moneys, securities,
drafts, notes, items, contract rights, leases, licenses and general
intangibles, and all general or special deposits, balances, sums, proceeds
and credits of Borrower; (viii) all trade names, trademarks, trademark
registrations, copyrights, patents, patent applications and licenses, and
other franchises and licenses in which Borrower has an interest, and all
other intangible personal property similar to any of the foregoing; (ix)
all other property (other than real property) of Borrower (x) all
rights and remedies which Borrower might exercise with respect to any
of the foregoing but for the execution of this Agreement; and (xi) all
accessions and additions to, replacements and substitutions for, and
proceeds and products of, the items described in the preceding clauses
(i) through (x) and this clause (xi); but in each case not including
Excluded Property.
(c) The term "Equipment" shall mean all items described in the
UCC definition thereof and all of the following, whether or not so described
(in all cases whether now owned or hereafter acquired by Borrower and
wherever located): all of Borrower's equipment, machinery, furniture,
fixtures, motor vehicles, parts, supplies and tools, and all other tangible
personal property similar to any of the foregoing, and all repairs,
modifications, alterations, replacements, additions, controls and operating
accessories therefor.
3.3 Further Assurances. Borrower shall execute and deliver such
financing statements and other documents (in form and substance satisfactory
to Lender) and take such other actions as Lender may request from time to
time in order to create, perfect or continue the security interests and other
liens provided for by this Agreement under the UCC or other laws of the State
of New Jersey or under any other state or federal law.
4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, knowing and intending
that Lender will rely thereon in making the Loans contemplated hereby, that
the following statements are true and accurate.
4.1 Organization and Qualification.
(a) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction stated at the
beginning of this Agreement.
(b) Borrower has the power and authority, and all necessary
licenses or other authorizations, to own its properties and to carry on
its business as now conducted, and is duly qualified and in good standing
in each jurisdiction wherein the nature of the property owned or used or of
the business conducted requires such qualification and where the failure
to qualify could have a material adverse effect on Borrower or on Lender's
ability to collect Accounts.
4.2 Due Authorization; No Default.
(a) The execution, delivery and performance by Borrower of this
Agreement, the Notes and the Relevant Documents are within Borrower's
powers, have been duly authorized by all necessary action on the part of
Borrower, and do not and will not (i) violate Borrower's Certificate of
Incorporation or Bylaws, or any applicable law or regulation, or any
judgment, order or decree of any judicial or other governmental body,
(ii) constitute a breach of, or default under, any agreement, undertaking
or instrument to which Borrower is a party or by which it may be affected,
or (iii) result in the imposition of any lien, encumbrance or restriction
on any assets of Borrower, except the security interests and liens in favor
of Lender.
(b) Borrower has delivered to Lender true and complete copies
of Borrower's resolutions necessary to authorize the transactions
contemplated by this Agreement, and of Borrower's Certificate of
Incorporation and Bylaws, all as in effect on the date hereof and
certified by a duly authorized officer of the Borrower.
(c) This Agreement and the Relevant Documents upon their
execution and delivery, and the Notes upon their issuance, will be legal,
valid and binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms.
4.3 No Governmental Consent Necessary. No authorization, approval or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and
performance by Borrower of this Agreement, any of the Notes or any of the
Relevant Documents.
4.4 No Proceedings. Except as set forth on Schedule 4.4, there are no
pending or threatened claims, actions, proceedings or investigations before
any court, arbitrator, or governmental body or agency that may, singly or
in the aggregate, have a material adverse effect on (a) the validity or
enforceability of this Agreement, any of the Notes or any of the Relevant
Documents, or the ability of Borrower to perform any of its Obligations, or
(b) the financial condition or the properties or operations of Borrower.
4.5 Financial Statements.
(a) Subject to any limitation stated therein, all balance sheets,
income statements and other financial data which have been or shall hereafter
be furnished to Lender do and will truly and fairly present the financial
condition of Borrower as at the respective dates thereof and the results of
its operations for the periods ended on such dates, in accordance with
generally accepted accounting principles consistently applied during all
periods. All other information, reports and other papers and data
concerning Borrower's operations or condition (financial or otherwise)
furnished to Lender by, or (with Borrower's knowledge) on behalf of, Borrower
are, or will be at the time the same are so furnished, true, accurate and
complete in all material respects.
(b) Except as shown on the most recent financial statements set
forth on Schedule 1 to this Agreement, Borrower has no liabilities as of the
date hereof which would have an adverse effect on the Collateral or on the
financial condition, operations or other properties of Borrower.
4.6 No Change in Financial Condition; Solvency.
(a) There has been no material adverse change in Borrower's
financial condition since the date of its last financial statements set
forth on Schedule 1 to this Agreement.
(b) Borrower's assets, at a fair valuation, exceed Borrower's
liabilities (including, without limitation, contingent liabilities), Borrower
is paying its debts as they become due, and Borrower has capital and assets
sufficient to carry on its business.
4.7 Compliance With Laws. Except as set forth on Schedule 4.7, Borrower
is in compliance in all material respects with all federal, state and local
statutes, rules, regulations, orders and other provisions of law applicable
to its ownership or use of properties or the conduct of its business;
Borrower has not received any notice of violation of any of the foregoing;
and Borrower is not in violation of any judgment, order or decree of any
judicial or other governmental body.
4.8 No Other Violations. Borrower is not in violation of any term of
its Certificate of Incorporation or Bylaws, and no event or condition has
occurred and is continuing which constitutes or results in (or would
constitute or result in, with the giving of notice, lapse of time or other
condition) (a) breach of, or a default under, any material agreement,
undertaking or instrument to which Borrower is a party or by which it or
any of its property may be affected, or (b) the imposition of any lien,
encumbrance or restriction on any property of Borrower other than Permitted
Liens.
4.9 Taxes and Assessments. Borrower has filed all federal, state and
local tax returns and other reports it is required to file to the date
hereof (or has obtained valid, written extensions as to any not so filed),
has paid all taxes, assessments and other governmental charges due and
payable to the date hereof, and has made adequate provision for the payment
of such taxes, assessments and charges accrued but not yet payable.
Borrower has no knowledge of any deficiency or additional assessment in a
materially important amount in connection with any taxes, assessments or
other governmental charges not provided for or disclosed in the financial
statements set forth on Schedule 1 to this Agreement. Borrower's federal
income tax returns for the period through the year ended November 30, 1988
have been audited by the Internal Revenue Service, and the tax liability
of Borrower for such periods has been finally determined by the Internal
Revenue Service and satisfied.
4.10 Accounts. The list of Accounts dated June 6, 1996, delivered to
Lender is complete and contains an accurate aging thereof and, except as
otherwise specified by Borrower to Lender in writing, each of said Accounts
meets the criteria for a Qualified Account stated in Subsection 2A.1(c)(ii)
of this Agreement.
4.11 Inventory. Borrower's Inventory, as reflected by its most recent
balance sheet included on Schedule 1 to this Agreement, consists of items
of a quality and quantity usable or salable in the ordinary course of its
business; the values of obsolete items, items below standard quality and
items in the process of repair have been written down to realizable market
value, or adequate reserves have been provided therefor; and the values
carried on said balance sheet are set at the lower of cost or market, in
accordance with generally accepted accounting principles consistently
applied.
4.12 Books and Records. Borrower maintains its books and records
relative to its Accounts and its Inventory at the address listed in
Schedule 2 to this Agreement.
4.13 Location of Collateral. None of the Inventory, Equipment or other
tangible property constituting part of the Collateral is or will be, or has
been during the six months preceding execution of this Agreement, located
in or on any premises other than those identified in Schedule 2 to this
Agreement. Schedule 2 contains an accurate record of all landlords of
premises leased by Borrower and of all mortgagees of premises owned by
Borrower.
4.14 Places of Business. The principal place of business and chief
executive office of Borrower is located at North Crossman Road, Sayreville,
New Jersey 08872. The correct and accurate mailing address of Borrower
is North Crossman Road, Sayreville, New Jersey 08872. Schedule 3 to this
Agreement lists all of the other offices or locations in or from which
Borrower conducts any of its business or operations.
4.15 Other Name or Entities. Except as disclosed on Schedule 4 to this
Agreement, none of Borrower's business is conducted through any corporate
subsidiary, unincorporated association or other entity and Borrower has not,
within the seven years preceding the date of this Agreement (a) changed its
name, (b) used any name other than the name stated at the beginning of this
Agreement, or (c) merged or consolidated with, or acquired the assets of,
any other corporation or business.
4.16 Title and Liens. Borrower has good and marketable title to all of
the Collateral as sole owner thereof, free and clear of any mortgage,
security interest, assignment, pledge, hypothecation, or other lien or
encumbrance, except Permitted Liens. None of the Collateral is subject to
any prohibition against encumbering, pledging, hypothecating or assigning
the same or requires notice or consent in connection therewith.
4.17 ERISA. Borrower is in compliance in all material respects with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the related provisions of the Internal Revenue Code,
and with all regulations and published interpretations issued thereunder by
the United States Treasury Department, the United States Department of
Labor and the Pension Benefit Guaranty Corporation ("PBGC"). Neither a
reportable event as defined in Section 4043 of ERISA, nor a prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code, has occurred and is continuing with respect to any
employee benefit plan subject to ERISA established or maintained, or to
which contributions have been or may be made, by Borrower or by any trade
or business (whether or not incorporated) which together with Borrower would
be treated as a single employer under Section 4001 of ERISA (any such trade
or business being referred to hereinafter as an "ERISA Affiliate," and any
such employee benefit plan being referred to hereinafter as a "Plan").
No notice of intention to terminate a Plan has been filed nor has any Plan
been terminated; the PBGC has not instituted proceedings to terminate, or
to appoint a trustee to administer, any Plan, nor do circumstances exist
that constitute grounds for any such proceedings; and neither Borrower nor
any ERISA Affiliate has completely or partially withdrawn from any
multiemployer Plan described in Section 4001(a) (3) of ERISA. Borrower and
each ERISA Affiliate has met the minimum funding standards under ERISA
with respect to each of its Plans; no Plan of Borrower or of any ERISA
Affiliate has an accumulated funding deficiency or waived funding deficiency
within the meaning of ERISA; and no material liability to the PBGC under
ERISA has been incurred by Borrower or any ERISA Affiliate.
4.18 O.S.H.A. Borrower has duly complied with, and its facilities,
business, leaseholds, equipment and other property are in compliance in
all material respects with, the provisions of the federal Occupational
Safety and Health Act and all rules and regulations thereunder and all
similar state and local laws, rules and regulations; and there are no
outstanding citations, notices or orders of non-compliance issued to
Borrower or relating to its facilities, business, leaseholds, equipment
or other property under any such law, rule or regulation.
4.19 Environmental Matters.
(a) Except as disclosed in Schedule 6 to this Agreement, no
property owned or used by Borrower and located in the State of New Jersey
is an "industrial establishment" within the meaning of the New Jersey
Industrial Site Recovery Act ("ISRA") or is or has been used for the
generation, manufacture, refining, transportation, treatment, storage,
handling or disposal of any "hazardous substances" or "hazardous wastes"
within the meaning of ISRA. The following is the only four digit Standard
Industrial Classification Code applicable to the properties and operations
of Borrower: 3312.
(b) Except as disclosed in Schedule 6 to this Agreement,
Borrower is in compliance in all material respects with all applicable
federal, state and local statues, rules, regulations, orders and other
provisions of law relating to air emissions, water discharge, noise
emissions, solid and liquid disposal, hazardous waste and substances,
and other environmental, health and safety matters.
4.20 Margin Stock. No part of the proceeds of any Revolving Loan
or the Term Loan will be used, directly or indirectly, to purchase or
carry any "margin stock" (as defined in Regulation U issued by the
Board of Governors of the Federal Reserve System), to extend credit to
others for the purpose of purchasing or carrying any such margin stock,
or for any purpose that violates any provision of Regulations G, T,
U or X issued by the Board of Governors of the Federal Reserve System.
4.21 Representations and Warranties True, Accurate and Complete;
Confirmation With Each Loan.
(a) None of the representations, warranties or statements to
Lender contained in this Agreement, in any of the Relevant Documents or
in any other writing delivered to Lender in connection with the Collateral,
this Agreement or any of the transactions contemplated thereby,
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make such
representation, warranty or statement not misleading in light of the
circumstances under which it is made. All of such representations,
warranties and statements shall survive until full and final payment
and performance of the Loans and all other Obligations under this Agreement
and the Relevant Documents.
(b) Borrower's acceptance of each Revolving Loan under this
Agreement shall constitute a confirmation of the matters set forth in the
preceding Sections 4.1 through 4.21(a) as of the date of such Loan. If
requested by Lender, Borrower shall further confirm such matters by delivery
of a certificate dated the day of the Revolving Loan and signed by a duly
authorized officer of Borrower satisfactory to Lender.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and
performance of the Loans and all other Obligations under this Agreement
and the Relevant Documents, Borrower shall, unless Lender shall otherwise
consent in writing:
5.1 Maintenance of Existence and Qualifications. Maintain and
preserve in full force and effect its existence and good standing and all
other rights, powers, franchises, licenses and qualifications necessary or
desirable for its ownership or use of properties or the conduct of its
business.
5.2 Payment of Taxes and Other Obligations. Pay (a) before they
become delinquent, all taxes, assessments and governmental charges imposed
upon it or any of its property or required to be collected by it, and
(b) when due, all other indebtedness and liabilities of any kind now or
hereafter owing by it; provided, however, that Borrower shall not be
required to pay and discharge or cause to be paid and discharged any such
tax, assessment, charge, trade indebtedness (other than indebtedness for
borrowed money) or liability so long as the validity thereof is being
contested in good faith by appropriate legal proceedings diligently pursued
and Borrower shall have set aside on its books adequate reserves with
respect to such tax, assessment, charge, indebtedness or liability so
contested; and provided further that, in any event, payment of any such
tax, assessment, charge, indebtedness, or liability shall be made before
any of Borrower's assets shall be seized or sold with respect thereto.
5.3 Maintenance of Properties. Maintain its properties in good
working order and condition.
5.4 Notice of Adverse Events. Promptly notify Lender in writing of
the occurrence or existence of any of the following: (a) any Event of
Default or any Unmatured Event of Default as defined in this Agreement;
(b) any matter or event which has resulted in, or may result in, a material
adverse change in the financial condition or any property or operations of
Borrower; (c) any material claim, action, proceeding or investigation filed
or instituted against Borrower, or any adverse determination in any material
pending action, proceeding or investigation affecting it; (d) any loss
from casualty or theft in excess of Two Hundred Fifty Thousand Dollars
($250,000.00), whether or not insured, affecting property of Borrower;
(e) whether or not otherwise reportable under this Section 5.4, any
complaint, citation, order or other notice of a violation or a claim
involving any of the following, if the liability or penalty therefor may
exceed Two Hundred Fifty Thousand Dollars ($250,000.00), singly or in the
aggregate: any applicable federal, state or local statute, rule, regulation,
order or other provision of law relating to air emissions, water discharge,
noise emissions, solid or liquid disposal, hazardous waste or substances,
or other environmental, health or safety matters (the notice to Lender to
include, along with other relevant information, the name of the complainant
or claimant and the nature and potential amount of the claim); (f) any
event or condition described in Section 8.16 of this Agreement relating to
ERISA; or (g) if any of the representations and warranties contained in
this Agreement, or in any of the Relevant Documents or any other writing
delivered to Lender by Borrower in connection with this Agreement or any of
the transactions contemplated thereby, ceases to be true, correct and
complete.
5.5 Information and Documents to be Furnished to Lender. Furnish
to Lender in form and substance satisfactory to it:
(a) Annual Financial Statements. As soon as available but in
no event later than ninety (90) days after the end of each fiscal year of
Borrower, a consolidated and consolidating balance sheet of Borrower as
of the end of such year and consolidated and consolidating statements
of income, cash flows and changes in stockholders' equity for such year
(all in reasonable detail and with all notes and supporting schedules),
audited and certified by an independent certified public accountant
satisfactory to Lender, as presenting fairly the financial condition
of Borrower as of the dates and for the periods indicated and as having
been prepared in accordance with generally accepted accounting principles
consistently applied, except as may be otherwise disclosed in such
financial statements or the notes thereto, accompanied by a certificate
from the chief financial officer of Borrower setting forth and
showing the calculation of the Excess Cash Flow of Borrower for such fiscal
year.
(b) Accountants' Letter. Simultaneous with the delivery of the
financial statements under subsection 5.5(a) above and the delivery of such
other financial statements and reports as may be audited, certified,
reviewed or compiled by the accountants and delivered to Lender, from time
to time as may reasonably be requested by Lender, Borrower shall cause its
certified public accountants to deliver to Lender a letter substantially
in the form attached hereto as Exhibit C.
(c) Quarterly Financial Statements. As soon as available but
in no event later than forty-five (45) days after the end of each of the
first, second and third quarters of each fiscal year of Borrower, either
(i) a balance sheet of Borrower as of the end of such quarter and statements
of income, cash flows and changes in stockholders' equity for such quarter
and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter (all in reasonable detail and with
all notes and supporting schedules), certified by the chief financial
officer of Borrower as presenting fairly the financial condition of
Borrower as of the dates and for the periods indicated and as having been
prepared in accordance with generally accepted accounting principles
consistently applied, except as may be otherwise disclosed in such financial
statements or the notes thereto, and all reviewed by an independent
certified public accountant satisfactory to Lender or (ii) if available,
a copy of Borrower's Form 10-Q for such fiscal quarter filed with the SEC,
including all schedules and exhibits filed therewith other than schedules
or exhibits which were previously provided to Lender. Each quarterly
financial statement or Form 10-Q provided under this Section 5.5(c) shall
be accompanied by a certificate setting forth the amount, and in reasonable
detail, the calculation of the Excess Cash Flow of Borrower for the fiscal
year to date as of the end of the fiscal quarter of Borrower reported on in
such financial statement or Form 10-Q.
(d) Monthly Financial Statements. As soon as available but in
no event later than thirty (30) days after the end of each month, a condensed
balance sheet of Borrower as of the end of such month and condensed
statements of income and cash flows for such month and for the period
commencing at the end of the previous fiscal year and ending with the end
of such month (all in consistent form and format as historically produced
by Borrower and all in reasonable detail and with all notes and supporting
schedules as shall have been customarily provided for such condensed
financial statements consistent with such historical form and format),
certified by the chief financial officer of Borrower as presenting fairly
the financial condition of Borrower as of the dates and for the periods
indicated and as having been prepared in accordance with generally accepted
accounting principles consistently applied, except as may be otherwise
disclosed in such financial statements or the notes thereto.
(e) SEC Filings. Immediately upon filing, copies of each filing
made (including those items which are not deemed officially "filed") with
the Securities and Exchange Commission, including without limitation, a copy
of each registration statement, Form 10-K, Form 10-Q, Form 8-K, Form 8 and
each proxy statement and annual report, in each case with a copy of the
exhibits thereto other than exhibit copies which were previously delivered
to Lender.
(f) Accounts, Inventory and Accounts Payable Reports. On or
before the 15th day of each month as at the close of the preceding month,
and from time to time as Lender may require: certificates and assignment
schedules describing the Qualified Accounts and Inventory in detail and
total, aging reports of Accounts, Accounts Payable aging reports, and
collateral and loan reconciliation reports, all in such form as Lender
may require.
(g) Change in Status. Immediately, notice identifying any
Inventory or Account that has ceased to be Qualified.
(h) Rejection, Delay, Claims. Immediately, notice of the
rejection of goods, delay in performance, or claims made in regard to
Accounts.
(i) ERISA Documents. As soon as filed or distributed, all ERISA
reports, notices, returns and other documents filed as required by or in
compliance with ERISA, whether to the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or any other
appropriate agency.
(j) Violations. Immediately, a copy of any complaint, citation,
order or other notice of a violation or claim required to be reported
pursuant to Subsection 5.4(e) of this Agreement.
(k) Von Roll Credit Agreement. Immediately, a copy of any notice,
request or any other communication sent or received by Borrower in connection
with the Von Roll Credit Agreement.
(l) Other Documents. Upon demand:
(i) Immediately, a certificate executed by an officer of
Borrower satisfactory to Lender stating that there then exists no Event of
Default or Unmatured Event of Default, or, if any such Event of Default or
Unmatured Event of Default exists, a certificate executed by the chief
executive officer of Borrower explaining such Event of Default or Unmatured
Event of Default in detail and describing in detail the action or actions
Borrower has taken and intends to take with respect thereto.
(ii) Immediately, all original and other documents evidencing
Borrower's right to payment, including but not limited to invoices, original
orders, and shipping and delivery receipts; and
(iii) Promptly, such other documents or information as Lender
may reasonably request, including financial projections and cash flow
analyses.
5.6 Access to Records and Property. At any time and from time to
time, upon request by Lender, give any representative of Lender access
during normal business hours to inspect any of Borrower's properties and to
examine, copy and make extracts from any and all books, records and
documents in the possession of Borrower or any independent contractor
relating to Borrower's affairs or the Collateral (including without
limitation returns for federal income tax and other taxes).
5.7 Insurance At Borrower's Expense.
(a) Liability and Property Insurance. Maintain at Borrower's
expense (with such insurers, in such amounts and with such deductibles as
is satisfactory to Lender) public liability and third party property damage
insurance and insurance on the Collateral (including without limitation
insurance against fire, explosion, boiler damage, theft, burglary, spoilage,
pilferage, loss in transit and all other hazards and risks ordinarily
insured against by other owners or users of such properties in similar
businesses), which insurance shall be evidenced by policies (i) in form
and substance satisfactory to Lender, (ii) designating Lender and its
assigns as additional co-insureds or loss payees as their interests may
appear from time to time, (iii) containing a "breach of warranty
clause" whereby the insurer agrees that a breach of the insuring conditions
or any negligence of Borrower or any other person shall not invalidate the
insurance as to Lender and its assigns, and (iv) requiring at least thirty
(30) days' prior written notice to Lender and its assigns before cancellation
or any material change shall be effective.
(b) [Intentionally Left Blank]
(c) Copies of Policies. Upon demand, deliver to Lender the
original of each policy evidencing insurance required by this Section 5.7,
together with evidence of payment of all premiums therefor.
(d) Notice and Proof of Loss. In the event of loss or damage,
forthwith notify Lender and file proofs of loss satisfactory to Lender with
the appropriate insurer, but without limiting the rights of Lender pursuant
to Subsection 7.1(k).
(e) Proceeds. Forthwith upon receipt, endorse and deliver
insurance proceeds to Lender, but without limiting the rights of Lender
pursuant to Subsection 7.1(k).
In no event shall Lender be required either to (i) ascertain the
existence of or examine any insurance policy, or (ii) advise Borrower in the
event such insurance coverage shall not comply with the requirements of this
Agreement.
5.8 Condition of Collateral; No Liens. Maintain the Collateral in
good condition and repair at all times, preserve the Collateral from loss,
damage, or destruction of any nature whatsoever, and keep the Collateral free
and clear of any mortgage, security interest, assignment, pledge,
hypothecation, or other lien or encumbrance, except Permitted Liens.
5.9 Proceeds of Collateral. Forthwith upon receipt, pay to Lender
all proceeds of Collateral, whereupon such proceeds shall become Lender's
sole property.
5.10 Records. Maintain complete and accurate books and records of all
its operations and properties, including records of the Collateral and the
status of each of the Accounts.
5.11 Delivery of Documents. If any proceeds of Accounts shall include,
or any of the Accounts shall be evidenced by, notes, trade acceptances or
instruments or documents, or if any Inventory is covered by documents of
title or chattel paper, whether or not negotiable, immediately deliver them
to Lender appropriately endorsed. Borrower waives protest regardless of
the form of the endorsement. If Borrower fails to endorse any instrument
or document, Lender is authorized to endorse it on Borrower's behalf.
5.12 United States Contracts. If any of the Accounts arises out of
a contract with the United States or any of its departments, agencies or
instrumentalities, immediately notify Lender and execute any necessary
instruments in order that all money due or to become due under such contract
shall be assigned to Lender and proper notice of the assignment given under
the Federal Assignment of Claims Act.
5.13 Further Assurances. From time to time, execute and deliver such
further documents and take such further actions as Lender may reasonably
request in order to carry out the purposes of this Agreement, the Relevant
Documents and any other instruments, documents and agreements which shall be
executed concurrently herewith or thereafter with regard to the transactions
contemplated by this Agreement.
5.14 Operating Accounts. Borrower shall maintain its operating accounts
with Lender continuously until the Obligations are finally and fully paid
and performed.
5.15 Related Entities. Cause each Related Entity to comply with the
covenants stated in this Section 5, to the extent relevant to such Entity,
as if stated with reference to such Entity.
5.16 Keasbey Property. Upon any sale, lease, assignment, condemnation
or other transfer or disposition of the Keasbey Property or Borrower's
interest in the Keasbey Property, pay the Net Proceeds thereof as follows:
(a) If no Event of Default or Unmatured Event of Default has
occurred and is continuing, and no Event of Default or Unmatured Event of
Default is caused by such sale, lease, assignment, condemnation or other
transfer or disposition, twenty-five percent (25%) of such Net Proceeds to
Lender to be applied against the Obligations, firstly against accrued
but unpaid interest on the Term Loan, secondly, against the outstanding
installments of principal due on the Term Loan in the inverse order of
maturity and thirdly against all other Obligations in the order and the
manner as determined in the sole and absolute discretion of Lender, and the
remainder of such twenty-five percent (25%) of the Net Proceeds, if any,
and the other seventy-five percent (75%) of the Net Proceeds of the Keasbey
Property may be retained by Borrower.
(b) If an Event of Default or an Unmatured Event of Default has
occurred and is continuing or is caused or results from such sale, lease,
assignment, condemnation or other transfer or disposition of the Keasbey
Property, the Net Proceeds thereof shall be paid:
(i) to Lender in full up to the amount of the Obligations to
be applied against the Obligations, firstly against accrued but unpaid
interest, secondly against the outstanding installments of principal due on
balance of the Term Loan in the inverse order of maturity and thirdly
against all other Obligations in the order and the manner as determined in
the sole and absolute discretion of Lender; and
(ii) the remainder, if any, to Borrower.
5.17 Sales of Fixed Assets. Pay to Lender the Net Proceeds from the
sale, assignment, transfer or other disposition of any property of Borrower
(real or personal, tangible or intangible) other than inventory, and such
Net Proceeds shall be applied firstly against the accrued but unpaid
interest on the Term Loan, secondly against the outstanding installments of
principal on the Term Loan in the inverse order of their maturity and thirdly
against all other Obligations in the order and the manner as determined in
the sole and absolute discretion of Lender, and the remainder if any to
Borrower; provided, however, Borrower may retain the Net Proceeds from
any sale of the real property owned by Borrower in Bowie, Maryland and the
Net Proceeds of any fixed assets comprising a portion of Borrower's plant in
Bowie, Maryland (collectively, the "Bowie Net Proceeds") so long as (i) no
Event of Default or Unmatured Event of Default has occurred and is continuing,
and (ii) no portion of the Bowie Net Proceeds are used, directly or
indirectly, to make any payment against the Von Roll Loan. This Section 5.17
shall not apply to the Net Proceeds of the Keasbey Property which are
governed by Section 5.16 above.
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and
performance of the Loans and all other Obligations under this Agreement and
the Relevant Documents, Borrower shall not, unless Lender shall otherwise
consent in writing:
6.1 No Consolidation, Merger, Acquisition, Liquidation. Enter into
any merger, consolidation, reorganization or recapitalization; take any
steps in contemplation of dissolution or liquidation; conduct any part of
Borrower's business through any corporate subsidiary, unincorporated
association or other entity not disclosed on Schedule 4 to this Agreement;
or acquire the stock or assets of any person, firm, joint venture,
partnership, corporation or other entity, whether by merger, consolidation,
purchase of stock or otherwise.
6.2 Disposition of Assets or Collateral. Sell, lease, or otherwise
transfer or dispose of any or all of the Collateral or other assets of
Borrower, other than the sale of Inventory in the ordinary course of
business, the retirement of other assets in the normal course of
operations or the sale of the Keasbey Property or the property located
in Bowie, Maryland.
6.3 Other Liens. (a) Incur, create or permit to exist, in an aggregate
amount at any time any mortgage, security interest, assignment, pledge,
hypothecation, lien, encumbrance, conditional sale or other title
retention agreement, financing lease having substantially the same
effect as any of the foregoing, or other preferential arrangement of any
type, in each case upon or with respect to any assets of Borrower, whether
now owned or hereafter acquired, except Permitted Liens.
(b) Incur, create or permit to exist (i) any restriction or
limitation on its right or ability to grant any mortgage, security interest,
hypothecation, assignment or other lien in favor of Lender, or (ii) any
obligation on its part to any third party, or any rights in favor of
any third party, if it grants any mortgage, security interests,
hypothecation, assignment or other lien or encumbrance on any of its
property in favor of Lender other than to expand the Von Roll Subordinated
Lien to cover the same property.
6.4 Other Liabilities. Incur, create, assume or permit to exist any
indebtedness or liability on account of either borrowed money or the deferred
purchase price of property or services, except (a) the Obligations, (b)
indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing, (c) payables which are Current, or (d) those liabilities
existing on the date of this Agreement and shown by the financial statements
attached as Schedule 1 to this Agreement.
6.5 Loans. Make loans to any person or entity except for loans to
new employees for relocation expenses.
6.6 Guaranties; Contingent Liabilities. (a) Assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any person or entity, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business, or (b) agree to maintain the working capital
or net worth of any person or entity or to make investments in any person
or entity (except for short-term investment of excess cash).
6.7 Dividends and Other Distributions. Declare or pay any cash
dividend or make any distribution on, or redeem, retire or otherwise
acquire directly or indirectly, any share of its stock, or make any
distribution of assets to its stockholders.
6.8 Transactions with Affiliates. Enter into any transaction with
a person or entity directly or indirectly controlling, controlled by or
under the direct or indirect common control of Borrower, on a basis less
favorable in a material respect to Borrower than if such transactions were
not with such a person or entity, except as set forth in Schedule 6.8.
6.9 Sale of Inventory. Sell any of the Inventory on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis,
or any other basis subject to a repurchase obligation or return right, other
than inventory which, consistent with historical trends, in the
ordinary and normal course of Borrower's business is shipped to and held
at the Keasbey Property for scheduled further shipment by water
transportation to Borrower's customer.
6.10 Removal of Collateral. Remove, or cause or permit to be removed,
any of the Collateral or other assets from the premises identified on
Schedule 2 to this Agreement, except for sales of Inventory in the ordinary
course of business, and removals in connection with the retirement of assets
in the normal course of operations.
6.11 Transfer of Notes or Accounts. Sell, assign, transfer, discount
or otherwise dispose of any Accounts or any promissory note or other
instrument payable to it with or without recourse, except for collection
without recourse in the ordinary course of business.
6.12 Settlements. Compromise, settle or adjust any claim in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00) relating to any of the
Collateral.
6.13 Modification of Governing Documents. Change, alter or modify, or
permit any change, alteration or modification of, its Certificate of
Incorporation or Bylaws or other governing documents in any way that could
have a material adverse effect upon Borrower's performance of
its obligations under this Agreement or any of the Relevant Documents or
upon Lender's rights or remedies under or in connection with this Agreement
or any of the Relevant Documents (it being expressly agreed that the
inclusion of any provisions similar to those set forth in Section 102(b)(2)
of Title 8 of the Delaware Code is prohibited under this Section) or make or
permit any change, alteration or modification without first providing Lender
with the written opinion of Borrower's counsel that such change, alteration
or modification complies with the requirements of this Section 6.13.
6.14 Change Business. Cause or permit a material change in the nature
of its business as conducted on the date of this Agreement.
6.15 Change of Location or Name. Change any of the following:
(a) the location stated in Section 4.12 of this Agreement for the maintenance
of the books and records relative to the Accounts and Inventory, (b) the
location of the principal place of business or chief executive office of
Borrower as stated in Section 4.14 of this Agreement, or (c) except after
forty-five (45) days' prior written notice to Lender and the execution,
delivery and filing and recording of all financing statements and other
documents as may be necessary to perfect or maintain the perfection of the
security interests and liens in favor of Lender, the name under which
Borrower conducts any of its business or operations.
6.16 Change of Accounting Practices. Change its present accounting
principles or practices in any material respect, except as may be required
by changes in generally accepted accounting principles.
6.17 Inconsistent Agreement. Enter into any agreement containing any
provision that would be violated by the performance of the Obligations or
Borrower's obligations under any of the Relevant Documents or under any
document delivered or to be delivered by it in connection therewith.
6.18 Working Capital. Cause or permit Working Capital as at the last
day of each fiscal quarter or fiscal year of Borrower identified below to be
less than the amount specified below opposite such quarter or fiscal year:
Fiscal Quarter/Year Minimum
Of Borrower Ending Working Capital
May 31, 1996 ($12,000,000)
Aug. 31, 1996 ($7,800,000)
Nov. 30, 1996 ($4,100,000)
Feb. 28, 1997 ($5,500,000)
May 31, 1997 ($3,000,000)
Aug. 31, 1997 ($3,500,000)
Nov. 30, 1997 ($6,100,000)
and each fiscal
year-end thereafter increasing by $750,000.
The term Working Capital meaning, as of the time of any determination thereof,
the amount determined in accordance with generally accepted accounting
principles, applied on a consistent basis, by which the current assets of
Borrower exceed its current liabilities, which calculation shall,
at all times, include the principal amount outstanding under the Revolving
Loan and exclude the principal amount outstanding under the Von Roll Loan
and the current installments due under the Term Loan at the time of such
calculation.
6.19 Tangible Net Worth. Cause or permit Tangible Net Worth as at the
last day of each fiscal quarter or fiscal year of Borrower identified below
and as of each day of the immediately subsequent fiscal quarter of Borrower
to be less than the amount specified below opposite such fiscal quarter or
fiscal year:
Fiscal Quarter/Year Minimum
Of Borrower Ending Tangible Net Worth
May 31, 1996 $80,400,000
Aug. 31, 1996 $81,700,000
Nov. 30, 1996 $83,500,000
Feb. 28, 1997 $81,400,000
May 31, 1997 $82,500,000
Aug. 31, 1997 $84,000,000
Nov. 30, 1997 $85,300,000
and each fiscal year-end
thereafter not less than 110% of the actual
Tangible Net Worth as at the immediately
preceding fiscal year end.
The term Tangible Net Worth meaning, as of the time of any determination
thereof, the difference between (a) the sum of (i) the par value (or value
stated on the books of Borrower) of the capital stock of all classes of
Borrower, plus (or minus in the case of a deficit) (ii) the amount of
Borrower's surplus, whether capital or earned, less (b) the sum of treasury
stock, unamortized debt discount and expense, good will, trademarks, trade
names, patents, deferred charges, leasehold improvements and other intangible
assets, and any write-up of the value of any assets, all determined in
accordance with generally accepted accounting principles, applied on a
consistent basis.
6.20 Capital Expenditures. Enter into any agreement to purchase or
pay for, or become obligated to pay for, Capital Expenditures including
capitalized interest payments, long term leases, capital leases or sale
lease-backs, in an amount, determined without duplication, aggregating
during any fiscal year of the Borrower listed below in excess of the amount
specified below opposite such fiscal year:
Fiscal Year Maximum
Of Borrower Ending Capital Expenditures
1996 $13,000,000
1997 $ 4,500,000
During each fiscal year
thereafter $ 5,000,000
The term Capital Expenditures meaning all unfinanced expenditures (including
capitalized lease payments) for any fixed assets or improvements which have
a useful life of more than one (1) year, or for replacements thereof,
substitutions therefor or additions thereto.
6.21 Cash Coverage Ratio. Cause or permit Borrower's Cash Ratio
Coverage as at the last day of each fiscal quarter of Borrower identified
below to be less than the amount specified below opposite such fiscal
quarter:
Fiscal Quarter Minimum
Of Borrower Ending Cash Coverage Ratio
May 31, 1997 5.0
Aug. 31, 1997 6.5
Nov. 30, 1997 7.0
Each fiscal quarter thereafter 7.0
The term Cash Coverage Ratio means the ratio of (i) the difference between
(A) Borrower's net income plus depreciation for the fiscal quarter, minus
(B) capitalized interest and unfinanced capital expenditures for such fiscal
quarter, to (ii) Borrower's debt service requirement for such fiscal quarter,
all as determined in accordance with generally accepted accounting
principles, applied on a consistent basis. Regular payments on the
Revolving Loan and the Von Roll Loan and mandatory prepayments from the
permitted sale of assets shall not, for purposes of this Section 6.21, be
deemed part of "Borrower's debt service requirement."
6.22 Related Entities. Cause, suffer or permit any Related Entity to
fail to observe any covenant stated in this Section 6. as if stated with
reference to such Entity.
7. ADDITIONAL POWERS OF LENDER
7.1 Powers of Attorney. Borrower hereby constitutes and appoints
Lender (and any employee or agent of Lender, with full power of substitution)
its true and lawful attorney and agent in fact to take any or all of the
actions described below in Lender's or Borrower's name and at Borrower's
expense:
(a) Charges Against Credit Balances. Lender, without demand,
may charge and withdraw from any credit balance that Borrower may then have
with Lender, or with any affiliate of Lender, any amount that shall become
due from Borrower to Lender under this Agreement or any of the Relevant
Documents.
(b) Evidence of Liens. Lender may execute such financing
statements and other documents and take such other actions as Lender deems
necessary or proper in order to create, perfect or continue the security
interests and other liens provided for by this Agreement or any of the
Relevant Documents, and Lender may file the same (or a photocopy of this
Agreement or of any financing statement signed by Borrower) in any
appropriate governmental office.
(c) Preservation of Collateral. Lender may take any and all
action that it deems necessary or proper to preserve its interest in the
Collateral, including without limitation the payment of debts of Borrower
that might impair the Collateral or Lender's security interest therein, the
purchase of insurance on Collateral, the repair or safeguarding of
Collateral, or the payment of taxes, assessments or other liens thereon.
All sums so expended by Lender shall be added to the Obligations, shall be
secured by the Collateral, and shall be payable on demand with interest at
the Default Rate from the respective dates such sums are expended.
(d) Lender's Right to Cure. In the event Borrower fails to
perform any of its Obligations, then Lender may perform the same but shall
not be obligated to do so. All sums so expended by Lender shall be added to
the Obligations, shall be secured by the Collateral, and shall be payable on
demand with interest at the Default Rate from the respective dates such sums
are expended.
(e) Verification of Accounts. Lender may make test verifications
of any and all Accounts in any manner and through any medium Lender considers
advisable, and Borrower shall render any necessary assistance.
(f) Collections; Modification of Terms. Upon the occurrence and
continuance of any Event of Default, Lender may demand, sue for, collect
and give receipts for any money, instruments or property payable or receivable
on account of or in exchange for any of the Collateral, or make any
compromises it deems necessary or proper, including without limitation
extending the time of payment, permitting payment in installments, or
otherwise modifying the terms or rights relating to any of the Collateral,
all of which may be effected without notice to or consent by Borrower and
without otherwise discharging or affecting the Obligations, the Collateral
or the security interest granted under this Agreement or any of the Relevant
Documents.
(g) Notification of Account Debtors. Borrower, at the request of
Lender, shall notify the Account debtors of Lender's security interest in
its Accounts. Upon the occurrence and continuance of any Event of Default,
Lender may notify the Account debtors on any of the Accounts to make payment
directly to Lender, and Lender may endorse all items of payment received by
it that are payable to Borrower; until such time as Lender elects to
exercise such right of notification, Borrower is authorized to collect and
enforce the Accounts in accordance with Section 2A.4.
(h) Notification as to Inventory. Lender may notify the bailee
of any Inventory of Lender's security interest therein.
(i) Endorsements. Lender may endorse Borrower's name on checks,
notes, acceptances, drafts, invoices, bills of lading and any other documents
or instruments requiring Borrower's endorsement.
(j) Mails. Upon the occurrence and continuance of any Event of
Default, Lender may notify the postal authorities to deliver all mail,
parcels, and other material addressed to Borrower to Lender at such address
as Lender may direct, and Lender may open and deal with same as it deems
necessary or proper.
(k) Insurance. Lender may file proofs of loss and claim with
respect to any of the Collateral with the appropriate insurer, and may
endorse in its own and Borrower's name any checks or drafts constituting
insurance proceeds.
7.2 Irrevocability; Lender's Discretion. Borrower covenants and agrees
that any action described in Section 7.1 may be taken at Lender's sole and
absolute discretion, at any time and from time to time, and (unless stated
specifically to the contrary in Section 7.1 with respect to any power)
whether prior or subsequent to an Event of Default, and Borrower hereby
ratifies and confirms all actions so taken. Borrower further covenants and
agrees that the powers of attorney granted by Section 7.1 are coupled with
an interest and shall be irrevocable until full and final payment and
performance of the Loans and all other Obligations under this Agreement
and the Relevant Documents; that said powers are granted solely for the
protection of Lender's interest and Lender shall have no duty to exercise
any thereof; that the decision whether to exercise any of such powers, and
the manner of exercise, shall be solely within Lender's discretion; and that
neither Lender nor any of its directors, officers, employees or agents shall
be liable for any act of omission or commission, or for any mistake or error
of judgment, in connection with any such powers.
8. EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
8.1 Failure to Pay. Borrower fails to pay when due any principal of
or interest on any Revolving Loan or Term Loan or any other sum owing to
Lender, including without limitation any of the Obligations arising under
this Agreement or any of the Relevant Documents or under any other agreement
with Lender;
8.2 Failure to Perform. Borrower fails to perform or observe (a) any
covenant, term or condition of this Agreement or any of the Relevant
Documents, or (b) any of the other Obligations;
8.3 Cross Default; Default on Other Debt. (a) Any other default on any
of the Obligations or under any of the Relevant Documents occurs, or (b)
default occurs under any indebtedness or other obligation of Borrower, or of
any guarantor of any of the Obligations, to any third party that entitles
such third party to declare such indebtedness or other obligation due prior
to its date of maturity;
8.4 False Representation or Warranty. Any representation, warranty
or statement contained in this Agreement, in any of the Relevant Documents
or in any other writing delivered to Lender in connection with the Collateral,
this Agreement or any of the transactions contemplated hereby or thereby,
proves to have been incorrect in any material respect when made;
8.5 Cessation of Business. Borrower ceases to do business as a going
concern;
8.6 Change in Condition. There occurs any change in the condition or
affairs, financial or otherwise, of Borrower or of any endorser, guarantor
or surety for any of the Obligations, which in the reasonable opinion of
Lender impairs Lender's security or increases its risks;
8.7 Change in Ownership. At any time less than fifty-seven percent
(57%) of the issued and outstanding voting stock of Borrower is owned by Von
Roll;
8.8 [Intentionally Left Blank].
8.9 Insecurity. At any time Lender believes that the prospect of
payment or performance of any of the Obligations is impaired;
8.10 Liquidation or Dissolution. Borrower takes any action to
authorize its liquidation or dissolution;
8.11 Inability to Pay Debts. Borrower (a) becomes unable or fails to
pay its debts generally as they become due, (b) admits in writing its
inability to pay its debts, or (c) proposes or makes a composition agreement
with creditors, a general assignment for the benefit of creditors, or a
bulk sale;
8.12 Bankruptcy; Insolvency. Any proceeding is instituted by or against
Borrower (a) seeking to adjudicate it bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or (b) seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property, or
Borrower takes any action to authorize or consent to any action described
in this Section 8.12;
8.13 Judgments. One or more judgments or orders for the payment of
money exceeding $100,000 in the aggregate are rendered against Borrower,
and any such judgment or order continues unsatisfied and not effectively
stayed for a period of thirty (30) consecutive days;
8.14 Attachment. Any substantial part of the assets of Borrower
becomes subject to attachment, execution, levy or like process which shall
not have been effectively stayed;
8.15 Condemnation. Any governmental agency, or other entity with
power to do so, commences proceedings to condemn, seizes or expropriates
assets of Borrower necessary for the conduct of Borrower's business as
conducted on the date of this Agreement, without material change, or
Borrower abandons such assets or suspends operation thereof for a period
of thirty (30) consecutive days;
8.16 ERISA. With respect to any Plan (as defined in Section 4.17 of
this Agreement), there occurs or exists any of the events or conditions
described in the following clauses (a) through (h) and such event or
condition, together with all like events or conditions, could in the
opinion of Lender subject Borrower to any tax, penalty or other liability
that might, singly or in the aggregate, have a material adverse effect on
the financial condition or the properties or operations of Borrower:
(a) a reportable event as defined in Section 4043 of ERISA, (b) a
prohibited transaction as defined in Section 406 of ERISA or Section 4975
of the Internal Revenue Code, (c) termination of the Plan or filing of
notice of intention to terminate, (d) institution by the Pension Benefit
Guaranty Corporation of proceedings to terminate, or to appoint a trustee
to administer, the Plan, or circumstances that constitute grounds for any
such proceedings, (e) complete or partial withdrawal from a multiemployer
Plan, or the reorganization, insolvency or termination of a multiemployer
Plan, (f) an accumulated funding deficiency within the meaning of ERISA,
(g) violation of the reporting, disclosure or fiduciary responsibility
requirements of ERISA or the Internal Revenue Code, or (h) any act or
condition which could result in direct, indirect or contingent liability
to any Plan or the Pension Benefit Guaranty Corporation;
8.17 Guaranty. Any guaranty of any of the Obligations ceases to be
effective or any guarantor denies liability thereunder; or
8.18 Von Roll Loan. (a) An event of default occurs under or with
respect to the Von Roll Loan, (b) Von Roll fails to advance any funds under
the Von Roll Loan as provided for under the Von Roll Credit Agreement or
(c) Von Roll fails to comply with any other material term or condition of
the Von Roll Credit Agreement.
9. REMEDIES
9.1 Rights in General. Automatically upon the occurrence of an Event
of Default described in Section 8.12, and at the option of Lender upon the
occurrence of any other Event of Default, (a) all provisions for additional
Loans under this Agreement shall terminate, (b) the principal and interest
of the Revolving Loans and the Term Loan, all other amounts payable under
this Agreement and all other Obligations shall become and be immediately
due and payable, without presentment, demand, protest, or further notice
of any kind, all of which are hereby expressly waived by Borrower, and
(c) Lender shall be entitled to exercise forthwith (to the extent and in
such order as Lender may elect, in its sole and absolute discretion) any
or all rights and remedies provided for in this Agreement, the Revolving
Note, the Term Note or any of the other Relevant Documents, all rights and
remedies of a secured party under the UCC, and all other rights and
remedies that may otherwise be available to Lender by agreement or at law
or in equity.
9.2 Specific Rights Regarding Collateral. In addition to the rights
as stated generally in Section 9.1, Borrower agrees that, upon the occurrence
of an Event of Default, Lender shall be entitled to the rights and remedies,
and Borrower shall have the obligations, set forth below:
(a) Lender may enter upon the premises where any of the Collateral
is located and take possession thereof and, at Lender's option, remove or
sell in place any or all thereof.
(b) Upon notice from Lender, Borrower shall promptly at its
expense assemble any or all of the Collateral and make it available at a
reasonably convenient place designated by Lender.
(c) Lender may, with or without judicial process, sell, lease or
otherwise dispose of any or all of the Collateral at public or private sale
or proceedings, by one or more contracts, in one or more parcels, at the
same or different times and places, with or without having the Collateral
at the place of sale or other disposition, to such persons or entities,
for cash or credit or for future delivery and upon such other terms, as
Lender may in its discretion deem best in each such matter.
The purchaser of any of the Collateral at any such sale shall hold the
same free of any equity of redemption or other right or claim of Borrower,
all of which -- together with all rights of stay, exemption or appraisal
under any statute or other law now or hereafter in effect -- Borrower hereby
unconditionally waives to the fullest extent permitted by law. If any of
the Collateral is sold on credit or for future delivery, Lender shall not be
liable for the failure of the purchaser to pay for same and, in the event
of such failure, Lender may resell such Collateral.
(d) Borrower hereby further agrees that notice of the time and
place of any public sale, or of the time after which any private sale or
other intended disposition or action relating to any of the Collateral is
to be made or taken, shall be deemed commercially reasonable notice
thereof, and shall satisfy the requirements of any applicable statute or
other law, if such notice (i) is delivered not less than three (3) business
days prior to the date of the sale, disposition or other action to which
the notice relates, or (ii) is mailed (by ordinary first class mail,
postage prepaid) not less than five (5) business days prior thereto.
Lender shall not be obligated to make any sale or other disposition or
take other action pursuant to such notice and may, without other notice or
publication, adjourn or postpone any public or private sale or other
disposition or action by announcement at the time and place previously
fixed therefor, and such sale, disposition or action may be held or
accomplished at any times or places to which the same may be so adjourned
or postponed.
(e) Lender may purchase any or all of the Collateral at any
public sale and may purchase at private sale any of the Collateral that
is of a type customarily sold in a recognized market or the subject of
widely distributed price quotations or as may be further permitted by law.
Lender may make payment of the purchase price for any Collateral by credit
against the then outstanding amount of the Obligations.
(f) Lender may, to the extent permitted by law, at its discretion
retain any or all of the Collateral and apply the same in satisfaction of
part or all of the Obligations.
(g) Any cash proceeds of sale, lease or other disposition of
Collateral shall be applied as follows:
First: To the expenses of collecting, enforcing, safeguarding,
holding and disposing of Collateral, and to other expenses of Lender in
connection with the enforcement of this Agreement, any of the Notes, any
of the Relevant Documents, or any other agreement relating to any of the
Obligations (including without limitation court costs and the fees and
expenses of attorneys, accountants and appraisers), together with interest
at the Default Rate from the respective dates such sums are expended;
Second: Any surplus then remaining to the payment of interest
and principal of the Loans and other sums payable as part of the Obligations,
in such order as Lender elects; and
Third: Any surplus then remaining to Borrower or whoever
may be lawfully entitled thereto.
9.3 Set-Off. Borrower further agrees that:
(a) Upon the occurrence of an Event of Default, Lender is
hereby authorized at any time and from time to time, without notice to
Borrower (any such notice being expressly waived by Borrower), to set off
and apply (or cause any affiliate of Lender to set off and apply) any
and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by Lender or
such affiliate to or for the credit or the account of Borrower, against any
or all of the Obligations of Borrower now or hereafter existing under this
Agreement, any of the Notes or otherwise, irrespective of whether or not
Lender shall have made any demand and although such Obligations may be
unmatured.
(b) If any other lender has participated with Lender with
respect to any of the Loans, Borrower hereby authorizes such participating
lender, upon the occurrence of any Event of Default, immediately and
without notice or other action, at request of Lender, to set off against any
of Borrower's Obligations to Lender any deposits held or money owed by such
participating lender in any capacity to Borrower, whether or not due, and
to remit the money set off to Lender.
(c) The rights stated in this Section 9.3 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off or lien) that Lender or any participating lender may have.
9.4 Cumulative Remedies; No Waiver by Lender. No remedy referred to
in this Agreement is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to in this Agreement or
otherwise available to Lender by agreement or at law or in equity, and
Lender may exercise its remedies concurrently, independently, or successively.
No express or implied waiver by Lender of any default or Event of Default
shall in any way be, or be construed to be, a waiver of any future or
subsequent default or Event of Default. The failure or delay of Lender in
exercising any rights granted it hereunder upon any occurrence of any of
the contingencies set forth herein shall not constitute a waiver of any
such right upon the continuation or recurrence of any such contingency or
similar contingencies, and any single or partial exercise of any particular
right by Lender shall not exhaust the same or constitute a waiver of any
other right.
9.5 Waivers and Consents Relating to Remedies. In connection with
any action or proceeding arising out of or relating in any way to this
Agreement, any of the Notes, any of the Loans, any of the Relevant Documents,
any other agreement relating to any of the Obligations, any of the
Collateral, or any act or omission relating to any of the foregoing:
(a) BORROWER AND LENDER WAIVE THE RIGHT TO TRIAL BY JURY;
(b) Borrower and Lender consent to the jurisdiction of any
court of the State of New Jersey and of any federal court located in New
Jersey, and waive any right to object to such court as an inconvenient
forum;
(c) Borrower waives personal service of any summons, complaint
or other process in connection with any such action or proceeding and
agrees that service thereof may be made, as Lender may elect, by certified
mail directed to Borrower at the location provided for notices to Borrower
under this Agreement or, in the alternative, in any other form or manner
permitted by law;
(d) Borrower agrees that all of the Collateral constitutes
equal security for all of the Obligations, and agrees that Lender shall
be entitled to sell, retain or otherwise deal with any or all of the
Collateral, in any order or simultaneously as Lender shall determine in
its sole and absolute discretion, free of any requirement for the marshalling
of assets or other restriction upon Lender in dealing with the Collateral;
and
(e) Borrower agrees that Lender may proceed directly against
Borrower for collection of any or all of the Obligations without first
selling, retaining or otherwise dealing with any of the Collateral.
10. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER
10.1 Waivers. Borrower waives demand, presentment, notice of dishonor
or protest of any instruments either of Borrower or others which may be
included in the Collateral.
10.2 Consents. Borrower consents to (a) any extension, postponement
of time of payment or other indulgence, (b) any substitution, exchange or
release of Collateral, (c) any addition to, or release of, any party or
person primarily or secondarily liable, and (d) any acceptance of partial
payments on any Accounts or instruments and the settlement, compromising
or adjustment thereof.
10.3 Applications of Payments. Borrower consents and agrees that,
whether or not an Event of Default shall have occurred, Lender shall be
entitled to apply the proceeds of any payment made to Lender by or on
behalf of Borrower, including, without limitation, any and all proceeds
arising from any of the Collateral securing the Obligations of Borrower
to Lender, in the manner and against the Obligation or Obligations as
determined in the sole and absolute discretion of Lender.
11. TERMINATION OF AGREEMENT
11.1 Termination By Lender. Lender shall have the right, at any time
and in its sole and absolute discretion and without the necessity for an
Event of Default hereunder, to terminate this Agreement, insofar as it
relates to Revolving Loans, as of May 1, 1998 or any day thereafter, upon
ninety (90) days' written notice to Borrower. Upon the termination date
stated in such notice: (a) all provisions for additional Revolving Loans
under this Agreement shall terminate, (b) the principal and interest of the
Revolving Loans, and all other Obligations under this Agreement and the
Relevant Documents related to the Revolving Loans, shall become and be
immediately due and payable, without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by
Borrower, and (c) Lender shall be entitled to exercise forthwith (to the
extent and in such order as Lender may elect, in its sole and absolute
discretion) any or all of the rights and remedies referred to in Section
9 of this Agreement for the collection of such amounts.
11.2 Termination By Borrower.
(a) Borrower may terminate this Agreement, without termination
charge, as of the fifth or any subsequent anniversary of the date stated
at the beginning of this Agreement, by giving Lender ninety (90) days'
prior written notice, provided that on such anniversary date the principal
and interest of the Loans, and all other Obligations under this Agreement
and the Relevant Documents have been paid in full.
(b) Except as stated in Subsection 11.2(a), Borrower may terminate
this Agreement only upon:
(i) giving not less than ninety (90) days' and not more
than one-hundred and twenty (120) days' prior written notice to Lender
of the intended termination date;
(ii) paying to Lender in full the principal and interest
of the Loans, and all other Obligations under this Agreement and the
Relevant Documents; and
(iii) paying to Lender, as liquidated damages, the
applicable amount stated below:
(A) If the termination date is prior to the first
anniversary of the date stated at the beginning of this Agreement, a sum
equal to (i) 5% of the average unpaid principal balance of the Term Loan
from the date hereof until the date immediately prior to the date of
termination, plus (ii) 5% of the Committed Cap; or
(B) If the termination date is after such first
anniversary but prior to the second such anniversary, a sum equal to
(i) 4% of the average unpaid principal balance of the Term Loan during
the immediately preceding twelve (12) calendar months, plus (ii) 1-1/2%
of the Committed Cap; or
(C) If the termination date is after such second
anniversary but prior to the third such anniversary, a sum equal to 3%
of the average unpaid principal balance of the Term Loan during the
immediately preceding twelve (12) calendar months; or
(D) If the termination date is after the third
such anniversary but prior to the fourth such anniversary, a sum equal
to 2% of the average unpaid principal balance of the Term Loan during
the immediately preceding twelve (12) calendar months; or
(E) If the termination date is after the fourth
such anniversary but not as provided for in Subsection 11.2(a), a sum
equal to 1% of the average unpaid principal balance of the Term Loan
during the immediately preceding twelve (12) calendar months.
(c) If at any time after the Maturity Date Lender does not
make the Revolving Loan facility available to Borrower and requires
the repayment thereof other than as a result of an Event of Default or
an Unmatured Event of Default, then Borrower may prepay and terminate the
Term Loan without the payment of the fee under Section 2B.7 or this
Section 11.2(b)(iii).
11.3 Effect on Revolving Loan Limit. Upon the giving of notice of
termination pursuant to Section 11.1 or 11.2, the Revolving Loan Limit
thereafter shall not exceed the average principal balance of the Revolving
Loans outstanding during the thirty-day period preceding the notice. All
other requirements for Loans shall remain unchanged.
11.4 Mutual Release. Upon full and final payment and performance of
the Loans and all other Obligations under this Agreement and the Relevant
Documents, Borrower and Lender shall thereupon automatically each be fully,
finally and forever released and discharged from any and all claims,
liabilities and obligations, whether in contract or tort, arising out of
or relating in any way to this Agreement, any of the Notes or Loans, or
any act or omission relating to any of the foregoing or to any of the
Collateral or Relevant Documents.
12. COSTS, EXPENSES AND TAXES
Borrower agrees to pay on demand:
(a) all reasonable costs and expenses in connection with the
preparation, execution, delivery and administration of this Agreement,
the Notes, the Relevant Documents, and the other documents to be delivered
in connection with this Agreement, or any amendments to any of the
foregoing (including, without limitation, the fees and out-of-pocket
expenses of counsel for Lender and the cost of appraisals and reappraisals
of Collateral);
(b) all losses, reasonable costs and expenses incurred by
Lender in connection with the enforcement of this Agreement, any of the
Notes, any of the Relevant Documents, or any other agreement relating to
any of the Obligations, or in the preservation of any rights of Lender
under any thereof, or in connection with legal advice relating to the
rights or responsibilities of Lender under any thereof (including without
limitation court costs and the fees and expenses of attorneys, accountants
and appraisers), and any expenditure made by Lender in accordance with
Subsection 7.1(b) or (c) of this Agreement; and
(c) any and all stamp and other taxes payable or determined to
be payable in connection with the execution, and delivery and performance
of this Agreement, any of the Notes, or any of the Relevant Documents, and
all liabilities to which Lender may become subject as the result of delay
in paying or omission to pay such taxes.
With respect to any amount advanced by Lender and required to
be reimbursed by Borrower pursuant to the foregoing provisions of this
Section 12, Borrower shall also pay Lender interest on such amount at the
Default Rate. Borrower's obligations under this Section 12 shall survive
termination of the other provisions of this Agreement.
13. INDEMNIFICATION BY BORROWER; LIMITATION OF LIABILITY
(a) Borrower hereby covenants and agrees to indemnify, defend
and hold harmless Lender and its officers, directors, employees and agents
from and against any and all claims, damages, liabilities, costs and
expenses (including without limitation, the reasonable fees and out-of-
pocket expenses of counsel) which may be incurred by or asserted against
Lender or any such other individual or entity in connection with:
(i) any investigation, action or proceeding arising out
of or in any way relating to this Agreement, any of the Notes, any of the
Loans, any of the Relevant Documents, any other agreement relating to any
of the Obligations, any of the Collateral, or any act or omission relating
to any of the foregoing; or
(ii) any taxes, liabilities, claims or damages relating
to the Collateral or Lender's liens thereon; or
(iii) the correctness, validity or genuineness of any
instruments or documents that may be released or endorsed to Borrower
by Lender (which shall automatically be deemed to be without recourse
to Lender in any event), or the existence, character, quantity, quality,
condition, value or delivery of any goods purporting to be represented
by any such documents; or
(iv) any broker's commission, finder's fee or similar
charge or fee in connection with the Loans and the transactions contemplated
in this Agreement;
except such as result solely from the gross negligence or willful misconduct
of Lender.
To the extent that the undertaking to indemnify, pay and hold harmless set
forth in this paragraph 13(a) may be unenforceable because it is violative
of any law or public policy or for any other reason, Borrower shall
contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all matters
referred to under this paragraph 13(a).
(b) To the extent permitted by applicable law, no claim may be
made by Borrower or any other person against Lender or any of its affiliates,
directors, officers, employees, agents, attorneys or consultants for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of contract, tort or any other theory of liability arising out
of or related to the transactions contemplated by this Agreement or any
act, omission or event occurring in connection therewith; and Borrower
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to
exist in its favor. Neither Lender nor any of its affiliates, directors,
officers, employees, agents, attorneys or consultants shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the transactions contemplated hereby, except for its
or their own gross negligence or willful misconduct.
14. MISCELLANEOUS
14.1 Entire Agreement; Amendments; Lender's Consent. This Agreement
(including the Exhibits and Schedules thereto), the Revolving Note, the Term
Note and the other Relevant Documents supersede, with respect to their
subject matter, all prior and contemporaneous agreements, understandings,
inducements or conditions between the respective parties, whether express or
implied, oral or written. No amendment or waiver of any provision of this
Agreement, any of the Notes or any of the Relevant Documents, nor consent
to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by Lender, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
14.2 Notices. All notices and other communications relating to this
Agreement or any of the Notes (or to any of the other Relevant Documents,
unless otherwise specified therein) shall be in writing (including by
telecopier) and mailed certified, return receipt requested, or telecopied,
personally served or sent by courier service to the applicable party at
the addresses as follows:
If to Lender: Midlantic Bank, National Association
100 Walnut Avenue
Clark, New Jersey 07066
Attention: Commercial Finance Department
Fax: 908-396-2050
If to Borrower: New Jersey Steel Corporation
North Crossman Road
Sayreville, New Jersey 08872
Attn: Vice President, Finance
Fax: 908-721-8933
or to such other address as the respective party or its successors or
assigns may subsequently designate by proper notice. All such notices
and other communications shall be deemed given when delivered in person
or by courier service, upon receipt of a telecopy or 3 Banking Days after
deposited, postage prepaid, for domestic United States mail or 5 Banking
Days after deposited, postage prepaid, for international mail.
14.3 Gender. Throughout this Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and
vice versa, unless the context of this Agreement indicates otherwise.
14.4 Joint Borrowers. If more than one party executes this Agreement
as Borrower, then for the purpose of this Agreement the term Borrower
shall be read to mean each such party and each party shall be jointly and
severally liable as Borrower for the Obligations as defined herein without
regard to which party receives the proceeds of any of the Loans. Each
such party hereby acknowledges that it expects to derive economic advantage
from each of the Loans.
14.5 Cross Default; Cross Collateral. Borrower hereby agrees that
(a) all other agreements between Borrower and Lender or any of its
affiliates is hereby amended so that a default under this Agreement is a
default under all other agreements and a default under any one of the
other agreements is a default under this Agreement, and (b) the Collateral
under this Agreement secures the Obligations now or hereafter outstanding
under all other agreements between Borrower and Lender or any of its
affiliates and the collateral pledged under any other agreement with Lender
or any of its affiliates secures the Obligations under this Agreement.
14.6 Binding Effect; Governing Law. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Lender. This Agreement, the Notes, the other Relevant Documents
and the other documents delivered in connection with this Agreement shall
be governed by, and construed in accordance with, the laws of the State of
New Jersey.
14.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute but one
and the same agreement.
14.8 Severability of Provisions. Any provision of this Agreement, any
of the Notes or any of the other Relevant Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, such Note or such
Documents or affecting the validity or enforceability of such provision in
any other jurisdiction.
14.9 Table of Contents; Headings. The table of contents and headings
preceding the text of this Agreement are inserted solely for convenience
of reference and shall not constitute a part of this Agreement nor affect
its meaning, construction or effect.
14.10 Exhibits and Schedules. All of the Exhibits and Schedules
to this Agreement are hereby incorporated by reference herein and made a
part hereof.
14.11 Further Acknowledgments and Agreements of Borrower and the
Lender.
(a) General Acknowledgments.
(1) Borrower and the Lender acknowledge and agree that
they (i) have independently reviewed and approved each and every provision
of this Agreement, including the Exhibits attached hereto and any and all
other documents and items as they or their counsel have deemed appropriate,
and (ii) have entered into this Agreement and have executed the closing
documents voluntarily, without duress or coercion, and have done all of the
above with the advice of their legal counsel.
(2) Borrower and the Lender acknowledge and agree that, to
the extent deemed necessary by them or their counsel, they and their counsel
have independently reviewed, investigated and/or have full knowledge of
all aspects of the transaction and the basis for the transaction contemplated
by this Agreement and/or have chosen not to so review and investigate (in
which case, Borrower acknowledges and agrees that it has knowingly and upon
the advice of counsel waived any claim or defense based on any fact or any
aspect of the transaction that any investigation would have disclosed),
including without limitation:
(i) the risks and benefits of the various waivers of
rights contained in this Agreement, including but not limited to, the waiver
of the right to a jury trial;
(ii) the adequacy of the consideration being transferred
under this Agreement, including the adequacy of the consideration for the
Mutual Release as set forth in Section 11.4 hereof;
(3) Borrower has made its own investigation or elected not
to make such investigation as to all matters it deems material to this
transaction and has not relied on any statement of fact or opinion,
disclosure or non-disclosure of the Lender, and has not been induced by the
Lender in any way, except for the consideration recited herein, in entering
into this Agreement and executing the closing documents contemplated hereby,
and further acknowledges that the Lender has not made any warranties or
representations of any kind in connection with this transaction except as
specifically set forth herein or in the documents executed in conjunction
with this Agreement, and Borrower is not relying on any such representations
or warranties.
(4) Borrower acknowledges and agrees that, after careful
consideration, it does not deem any matter not reviewed or investigated by
it to be material to this Agreement and the transaction contemplated hereby.
[Remainder of this Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned have set their hands and seals
or caused these presents to be executed by their proper corporate officers
and sealed with their seal the day and year first above written.
(Corporate Seal) NEW JERSEY STEEL CORPORATION
Borrower
Attest:
By:
, Secretary Kenneth J. Leonard, President
Paul Roik, Vice President Finance
MIDLANTIC BANK, NATIONAL
ASSOCIATION
Lender
By:
Name: Susan M. Graham
Title: Vice President
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS AGREEMENT made as of June 6, 1996 (this "Agreement"), by and
among VON ROLL HOLDING AG, a corporation, organized under the laws of
Switzerland, having a place of business at Gerlafingen, Switzerland
("Subordinated Creditor"), NEW JERSEY STEEL CORPORATION, a corporation
organized under the laws of the State of Delaware, having its principal
place of business at North Crossman Road, Sayreville, New Jersey 08872
("Company"), and MIDLANTIC BANK, NATIONAL ASSOCIATION, a national banking
association, having an office located at 100 Walnut Avenue, Clark, New Jersey
07066 ("Senior Lender").
W I T N E S S E T H :
In order to induce the Senior Lender to make financial accommodations
to the Company, and for other good and valuable consideration, the receipt
and adequacy of which are each hereby acknowledged, the Subordinated Creditor
and the Company hereby agree with the Senior Lender that, so long as any
Senior Indebtedness (as hereinafter defined) is outstanding or committed to
be advanced, it will comply with such of the following provisions of this
Agreement as are applicable to it:
Certain Definitions.
Senior Indebtedness. The term "Senior Indebtedness" shall mean
any and all loans, advances, extensions of credit, indebtedness, obligations
and liabilities, now existing or hereafter arising, direct or contingent, of
the Company to the Senior Lender outstanding from time to time, including,
without limitation those arising under (a) that certain Amended and Restated
Loan and Security Agreement dated as of the date hereof, as the same may be
amended, modified, supplemented or replaced from time to time (the "Loan
Agreement") by and between the Company and the Senior Lender, (b) those
certain notes issued by the Company to the order of the Senior Lender listed
on Schedule A attached hereto, as such notes may be amended, modified,
supplemented or replaced from time to time (collectively referred to as
the "Note"), and (c) any future loans, advances or extensions of credit in
connection with the Loan Agreement or the Note from time to time made to
the Company by the Senior Lender, including any such future loans or advances
or extensions of credit made prior to, during, or following any proceeding in
respect of any Reorganization, as defined in Section 3.2 hereof (regardless
of the extent to which the foregoing of this Section 1.1 is enforceable
against the Company and regardless of the extent to which such amounts are
allowed as claims against the Company in any Reorganization, and including
any interest thereon accruing after the commencement of any Reorganization
and any other interest that would have accrued thereon but for the
commencement of such Reorganization). For purposes hereof, the term Senior
Lender shall mean Midlantic Bank, National Association and its successors
and assigns. All Senior Indebtedness shall be entitled to the benefits of
this Agreement without notice thereof being given to the Subordinated
Creditor.
Subordinated Indebtedness. The term "Subordinated Indebtedness"
shall mean all existing and hereafter arising indebtedness, obligations and
liabilities of the Company to the Subordinated Creditor or any Affiliate
(as hereinafter defined), whether direct or contingent, and all claims,
rights, causes of action, judgments and decrees in respect of the foregoing,
including, without limitation, all indebtedness and obligations under the
agreement(s) and/or note(s) listed on Schedule B attached hereto
(collectively referred to as the "Subordinated Note" and any other agreements,
documents or instruments evidencing or relating to any Subordinated
Indebtedness being hereinafter collectively referred to as the "Subordinated
Agreements") except that amounts payable by Company to Subordinated Creditor
for technical services and management consulting and operational services
actually rendered under the Technical Services and Management Consulting
Agreement dated April 1, 1987, between Subordinated Creditor and Company,
shall not be Subordinated Indebtedness to the extent such amounts payable
are no less favorable to Company than those that could be obtained from
unaffiliated third parties for similar services.
Other Terms. Capitalized terms not expressly defined herein shall
have the meanings given to such terms in the Loan Agreement.
Subordinated Creditor and Company Representations and Warranties.
The Subordinated Creditor and the Company each hereby represents and warrants
to the Senior Lender that, (i) at the date hereof, the total outstanding and
unpaid Subordinated Indebtedness owing by the Company to the Subordinated
Creditor pursuant to the Subordinated Agreements is $11,131,298.77; (ii)
there is no existing default, and no event has occurred which, with the mere
passage of time or notice or both, would result in a default, in respect of
any of the Subordinated Indebtedness; (iii) the Subordinated Creditor is
the holder of the Subordinated Agreements free and clear of all liens, claims
and encumbrances, and the Subordinated Creditor is not subject to any
contractual limitation or restriction which would impair in any way its
ability to execute or perform its obligations under this Agreement; (iv)
true, accurate and complete copies of the Subordinated Agreements is
attached hereto as Exhibit A, and (v) this Agreement is the legal, valid and
binding obligation of Subordinated Creditor and the Company.
Terms of Subordination.
No Transfer. The Subordinated Creditor will not sell, transfer,
assign or otherwise dispose of any of the Subordinated Indebtedness except
(i) with the prior written consent of the Senior Lender and (ii) to a person
who agrees in advance in writing, pursuant to an agreement in form and
substance acceptable to the Senior Lender, to become a party hereto. The
Subordinated Creditor shall give the Senior Lender at least thirty (30) days'
prior written notice of any such proposed transfer stating the identity of
the transferee and providing such other information as the Senior Lender
shall reasonably require. Without limiting the obligations and liabilities
of the Subordinated Creditor under this Section 3.1, upon any sale, transfer
or other disposition of any of the Subordinated Indebtedness at any time,
the transferee thereof shall, automatically and without further action,
become bound by all of the terms and obligations of this Agreement as if
it were the Subordinated Creditor and for all purposes of this Agreement the
term "Subordinated Creditor" shall include any such transferees of any
Subordinated Indebtedness.
Pledge: Payment Subordinated and Assignment.
The Subordinated Creditor hereby pledges and assigns to the
Senior Lender all Subordinated Indebtedness and covenants and agrees to
deliver to Senior Lender as and when executed all instruments evidencing the
Subordinated Indebtedness.
Anything in the Subordinated Agreements to the contrary
notwithstanding, the payment of the Subordinated Indebtedness is and shall be
expressly subordinate and junior in right of payment and exercise of remedies
to the prior payment in full in cash of the Senior Indebtedness. The
Subordinated Indebtedness is hereby subordinated as a claim against the
Company or any of the assets of, or ownership interests in, the Company
whether such claim be (a) in the event of any distribution of the assets of
the Company upon any voluntary or involuntary dissolution, winding-up, total
or partial liquidation or reorganization, or bankruptcy, insolvency,
receivership or other statutory or common law proceedings or arrangements
involving the Company or the readjustment of the liabilities of the Company
or any assignment for the benefit of creditors or any marshalling of the
assets or liabilities of the Company (collectively called a "Reorganization"),
or (b) other than in connection with a Reorganization, to the prior payment
in full in cash of the Senior Indebtedness.
In furtherance of the foregoing of this Section 3.2, the
Company will not make, and no holder of any Subordinated Indebtedness
will accept or receive, any payment or transfer of or in respect of any
Subordinated Indebtedness until all the Senior Indebtedness has been paid
and satisfied in full in cash, except so long as at the time of the payment
(A) no Event of Default or Unmatured Event of Default exists under any Senior
Indebtedness and no default exists under any Subordinated Indebtedness, and
no event exists or occurs that upon notice or lapse of time or both would
constitute a default under any Subordinated Indebtedness, (B) the principal
amount outstanding under the Revolving Loan immediately before and after the
payment on the Subordinated Indebtedness and reasonably expected to be
outstanding on the Revolving Loan for the ninety (90) day period following
such payment shall not exceed the Revolving Loan Limit on such date and the
Revolving Loan Limit reasonably expected during such ninety (90) day period,
and (C) the Company's Payables are Current and it is reasonably expected that
the Company's payables will remain Current for the next ninety (90) days,
then (a) the Company may pay and the Subordinated Creditor may receive (I)
the scheduled quarterly payments of interest due on the Subordinated
Indebtedness in the amount due or so much thereof as may be paid and still
be in compliance with the conditions precedent set forth in Subsections (A),
(B) and (C) above, and (II) up to fifty percent (50%) of the Net Proceeds of
the sale of the Keasbey Property as a payment against the Subordinated
Indebtedness, and (b) after December 1, 1996, the Company may make and the
Subordinated Creditor may receive one payment in each fiscal quarter of the
Borrower; so long as in addition to the conditions precedent set forth in
Subsections (A), (B) and (C) above, (X) Senior Lender has been in receipt
for at least 10 days of the most recent financial statements required to be
delivered by the Company under Sections 5.5(a) and 5.5(c) of the Loan
Agreement and such financial statements evidence Cash Flow Availability,
(Y) the quarterly payment is made within 15 days after Senior Lender has
received the most recent financial statements referred to in Subsection
(X) above, and (Z) the payment is not in an amount greater than the Cash
Flow Availability as evidenced by the most recent financial statements
referred to in Subsection (X) above.
Without limiting any of the respective rights or obligations of
the parties under this Agreement, no holder of any Subordinated Indebtedness
shall or shall cause, suffer or permit any entity, controlling, controlled
by, or under common control with the Subordinated Creditor (an "Affiliate")
to, set off against, or otherwise reduce, with or without the consent of the
Company or any other person, any Subordinated Indebtedness by reason of any
amount owed by or other obligation of such holder of Subordinated
Indebtedness or Affiliate, and for all purposes of this Agreement any such
set off or reduction shall be deemed and constitute a payment on the
Subordinated Indebtedness.
Distributions in Reorganization. In the event of any
Reorganization relative to the Company or its property, all of the Senior
Indebtedness shall first be paid in full in cash before any payment on
account of or in respect of the Subordinated Indebtedness is made, and
in any such proceedings any payment or distribution of any kind or character,
whether in cash or property or securities which may be payable or deliverable
in respect of the Subordinated Indebtedness shall be paid or delivered
directly to the Senior Lender for application in payment of the Senior
Indebtedness, unless and until all such Senior Indebtedness shall have
been paid and satisfied in full in cash. The holder of the Subordinated
Indebtedness does hereby irrevocably authorize the Senior Lender to prove
and vote any and all claims in such proceedings on the Subordinated
Indebtedness, and to accept and receive any payment or distribution, and to
do any and all things and to execute all instruments necessary to effectuate
the foregoing. In the event that, notwithstanding the foregoing, upon any
such Reorganization, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, shall be
received by the holder of the Subordinated Indebtedness before all Senior
Indebtedness is paid in full in cash, such payment or distribution shall be
immediately paid over to the holder of the Senior Indebtedness, for
application to the payment of all Senior Indebtedness remaining unpaid
until all such Senior Indebtedness shall have been paid in full in cash,
after giving effect to any concurrent payment or distribution to the holder
of such Senior Indebtedness.
Effect of Provisions. The provisions hereof as to subordination
are solely for the purpose of defining the relative rights of the holder of
Senior Indebtedness on the one hand and the holder of the Subordinated
Indebtedness on the other hand, and none of such provisions shall impair, as
between the Company and the holder of the Subordinated Indebtedness, the
obligations of the Company, which are unconditional and absolute, to pay
to such holder all of the Subordinated Indebtedness in accordance with the
terms thereof, nor, except as provided in Section 8 below, shall any such
provisions prevent the holder of Subordinated Indebtedness from exercising
all remedies otherwise permitted by applicable law or under the terms of such
Subordinated Agreements upon a default thereunder, subject to the rights, if
any, of the holder of Senior Indebtedness under the provisions of this
Agreement.
Subrogation, Etc. The holder of the Subordinated Indebtedness
shall not be subrogated to the rights of the holder of the Senior
Indebtedness in respect of payments or distributions of assets of, or
ownership interests in, the Company made on the Senior Indebtedness until the
Senior Indebtedness shall have been paid in full in cash.
Agreement to Hold in Trust. If the holder of Subordinated
Indebtedness shall receive any payment on account of the Subordinated
Indebtedness in violation of this Agreement, it shall hold such payment in
trust for the benefit of the holder of the Senior Indebtedness and, promptly
upon discovery or notice of such violation, pay it over to such holder for
application in payment of the Senior Indebtedness.
Amendments to Subordinated Agreements/Additional Liens on
Collateral. The Subordinated Creditor covenants and agrees that, unless the
Senior Lender otherwise consents thereto in writing, it will not amend or
modify any provision of any of the Subordinated Agreements or obtain
additional liens or security interests on any property or assets of the
Company unless there have been granted liens or security interests in favor
of the Senior Lender as security for any of the Senior Indebtedness and then
the liens or security interests granted to the Subordinated Creditor shall
not exceed those granted to the Senior Lender and shall be fully subject to
this Agreement.
Requirement of Notice. The Subordinated Creditor agrees to notify
the Senior Lender immediately upon the happening of any of the following:
(i) the occurrence of any payment default under any of the Subordinated
Agreements; or (ii) the Subordinated Creditor having knowledge of the
occurrence of any other material default under any of the Subordinated
Agreements, or any event which upon notice or lapse of time or both would
constitute such a default; or (iii) the granting of any waiver by the
Subordinated Creditor of any default under any of the Subordinated
Agreements; or (iv) any acceleration or notice of acceleration of any
of the Subordinated Indebtedness.
Legend. The Subordinated Creditor, for itself and its successors
and assigns as holders of any of the Subordinated Indebtedness, and the
Company, each covenant to cause each agreement and instrument representing or
evidencing any of the Subordinated Indebtedness to have affixed upon it a
legend noting that such agreement or instrument is subject to the terms and
conditions of this Subordination Agreement and that any holder of such
agreement or instrument agrees to be bound by the provisions of this
Subordination Agreement.
Limit on Right of Action. The Subordinated Creditor, for itself
and its successors and assigns, agrees for the benefit of the holders of the
Senior Indebtedness that so long as the Senior Indebtedness remains
outstanding or committed to be advanced, the Subordinated Creditor will not,
directly or indirectly, take any action to accelerate or demand payment by
the Company of the Subordinated Indebtedness, to exercise any of its remedies
in respect of the Subordinated Indebtedness, to initiate any Reorganization
of, or litigation against, the Company in connection with any of the
Subordinated Indebtedness, or to foreclose or otherwise realize on, or
exercise any remedies with respect to, any security given by the Company or
any other person to secure the Subordinated Indebtedness prior to the
acceleration of the Senior Indebtedness, and then any such action or exercise
shall be subject to this Agreement and to the Senior Lender's right, as the
assignee of the Subordinated Indebtedness, to control the same. The
foregoing provisions of this Section 8 are solely for the purpose of defining
the relative rights of the holder of Senior Indebtedness on the one hand and
the holder of the Subordinated Indebtedness on the other and shall not
otherwise limit or affect any rights which the holder of the Subordinated
Indebtedness may have against the Company under the terms of the Subordinated
Agreements.
The Subordinated Creditor's Junior Security; Waiver of Marshalling
and Similar Rights. The Subordinated Creditor hereby confirms that,
regardless of the relative times and method of attachment or perfection
thereof or the order of filing or recording of financing statements,
mortgages or other security agreements or documents, or anything in the
Subordinated Agreements, this Agreement or any other document or any court
order to the contrary, the security interests and liens granted or to be
granted from time to time to secure the Senior Indebtedness, shall in all
respects be prior and senior security interests and liens, superior to any
security interests and liens granted or to be granted to the Subordinated
Creditor in any assets of, or ownership interests in, the Company or any
other person, it being the express intention of the parties that,
notwithstanding anything in this Agreement or any other document or court
order to the contrary, all liens and security interests granted to the Senior
Lender from time to time shall be prior and superior to any liens or security
interests granted to the Subordinated Creditor from time to time. Until the
Senior Indebtedness shall have been paid in full in cash, no holder of any
such Subordinated Indebtedness shall foreclose on or otherwise realize on or
attempt to foreclose or realize on any collateral in which any holder of
Senior Indebtedness has been granted a lien or security interest as security
for such Senior Indebtedness prior to the acceleration of the Senior
Indebtedness, and then any such foreclosure or action shall be subject to
this Agreement and to the Senior Lender's right, as assignee of the
Subordinated Indebtedness, to control the same. Subordinated Creditor waives,
to the full extent permitted by applicable law, any requirement regarding,
and agrees not to demand, request, plead or otherwise claim the benefit of,
any marshalling, appraisement, valuation, or other similar rights that may
otherwise be available under applicable law or any other similar rights a
junior creditor or junior secured creditor may have under applicable law.
In foreclosing on any of the Senior Lender's security interests and liens
in any collateral securing any of the Senior Indebtedness in (the
"Collateral"), so long as the Senior Lender proceeds in a commercially
reasonable manner, the Senior Lender may proceed to foreclose on the Senior
Lender's security interests and liens in any manner which the Senior Lender,
in its sole discretion, chooses, even though a higher price might have been
realized if the Senior Lender had proceeded to foreclose on the Senior
Lender's security interests and liens in another manner.
Release of Collateral. Without limiting any of the rights
(including any of the foreclosure rights) of the Senior Lender under the
Loan Agreement, the Note, or any documents delivered to secure the
obligations of the Company to the Senior Lender in connection therewith or
under the provisions of any applicable law, in the event that the Senior
Lender releases or discharges its security interests in, or liens upon, any
Collateral which is subject to a lien or security interest in favor of the
Subordinated Creditor, such Collateral shall thereupon be deemed to have
been released from all such liens and security interests, provided that the
Senior Lender believes in good faith that any such released or discharged
Collateral is being sold or transferred either (a) in the ordinary course of
the Company's business or (b) following the occurrence of a default under
the Senior Indebtedness and the giving of ten (10) days' prior written
notice of any such proposed release to the Subordinated Creditor and under
circumstances in which the seller of the Collateral shall have agreed that
the proceeds of such sale under this clause (b) shall be applied to the
payment of the Senior Indebtedness and the Subordinated Indebtedness in the
order of priority provided in this Agreement. The Subordinated Creditor
agrees that within ten (10) days following the Senior Lender's written
request therefor, it will execute, deliver and file any and all such
termination statements, lien releases and other agreements and instruments
as the Senior Lender reasonably deems necessary or appropriate in order to
give effect to the preceding sentence. The Subordinated Creditor hereby
irrevocably appoints the holders of the Senior Indebtedness the true and
lawful attorneys of the Subordinated Creditor for the purpose of effecting
any such executions, deliveries and filings.
Additional Rights of Senior Lender. If the Subordinated Creditor,
in violation of this Agreement, shall commence, prosecute or participate in
any suit, action or proceeding against the Company, the Company may interpose
as a defense or plea the making of this Agreement and the Senior Lender may
intervene and interpose such defense or plea in the Senior Lender's name or
in the name of the Company. If the Subordinated Creditor shall attempt to
enforce any security agreement, real estate mortgage, deed of trust or any
lien instrument or other encumbrance in violation of the terms of this
Agreement, the Senior Lender may by virtue of this Agreement restrain the
enforcement thereof in the Senior Lender's name or in the name of the
Company. If the Subordinated Creditor obtains any assets of the Company as
a result of any administrative, legal or equitable action, or otherwise, the
Subordinated Creditor agrees forthwith to pay, deliver and assign to the
Senior Lender any such assets for the application to the Senior Indebtedness.
Company's Additional Agreement. The Company agrees with the
Senior Lender that it will not, without the Senior Lender's prior written
consent, execute or deliver any negotiable instrument as evidence of the
Subordinated Indebtedness or any part thereof, except as otherwise permitted
by this Agreement.
Rights of Senior Lender to Amend Loan Documents and Discontinue
Senior Indebtedness. As between the Senior Lender and the Subordinated
Creditor, the Senior Lender hereby reserves the right, and Subordinated
Creditor agrees Senior Lender shall have the right , in Senior Lender's sole
discretion, to modify, amend, waive or release any of the terms of the Loan
Agreement, the Note, or any other document or agreement at any time executed
by the Company or any other person securing or evidencing any of the Senior
Indebtedness or any other document executed in connection with or relating
to any of the Senior Indebtedness and to exercise or refrain from exercising
any powers or rights which the Senior Lender may have thereunder, and such
modification, amendment, waiver, release, exercise or failure to exercise
shall not affect any of the Senior Lender's rights under this Agreement.
The Subordinated Creditor hereby agrees that the Senior Lender may from
time to time in the Senior Lender's sole discretion amend any of the
instruments and agreements evidencing or securing the Senior Indebtedness,
grant extensions of time of payment or performance and make compromises and
settlements with the Company or other creditors of the Company, without
affecting the agreements of the Subordinated Creditor or Company hereunder.
If at any time hereafter, the Senior Lender shall, in its own judgment,
determine to discontinue the extension of credit to the Company, it may do
so. This Agreement shall continue in full force and effect until the Senior
Indebtedness shall have been paid in full in cash.
Obligations Not Affected. All rights and interests of the Senior
Lender, and all agreements and obligations of the Subordinated Creditor
under this Agreement, shall remain in full force and effect irrespective of
(i) any lack of validity or enforceability of the Loan Agreement, the Note,
or any other Relevant Document; (ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Senior Indebtedness,
or any other amendment or waiver of or any consent to departure from the Loan
Agreement, the Note, or any other Relevant Document; (iii) any exchange,
release or nonperfection of the Collateral or any other collateral, or any
release or amendment for waiver of or consent to departure from Loan
Agreement, the Note, or any other Relevant Document; or (iv) any impairment
of Collateral or any other circumstance that might otherwise constitute a
defense available to, or in discharge of, the Company or the Subordinated
Creditor.
Further Assurances. Each of the Company and the Subordinated
Creditor (for itself and its successors and assigns as holders of
Subordinated Indebtedness) covenant to execute and deliver to the Senior
Lender such further instruments and documents and take such further actions
as the Senior Lender may from time to time reasonably request for the purpose
of carrying out the provisions and intent of this Agreement.
Von Roll Loan. (a) Subordinated Creditor represents and warrants
to Senior Lender that the Von Roll Loan Agreement is the legal, valid and
binding obligation of Subordinated Creditor, enforceable against Subordinated
Creditor in accordance with its terms; (b) In order to induce Senior Lender
to enter into the Loan Agreement, Subordinated Creditor agrees with Senior
Lender and for the benefit of Senior Lender, that Subordinated Creditor shall
make available to the Company the funding provided for under the Von Roll
Credit Agreement upon the terms and conditions, and at the times and in the
manner, as set forth in the Von Roll Credit Agreement, and that Senior Lender
may, at its option, in its own name or the name of the Company enforce such
obligations, including, without limitation, the obligation to lend funds to
keep the Company's payables Current; (c) Subordinated Creditor agrees not
to amend, modify, terminate, supplement or replace the Von Roll Credit
Agreement without the prior written consent of Senior Lender. 1. Notices.
All notices and other communications relating to this Agreement shall be in
writing (including by telecopier) and shall be mailed certified, return
receipt requested, or telecopied or personally served or sent by courier
service to the applicable party at the addresses
as provided below:
If to the Company, to the following address:
New Jersey Steel Corporation
North Crossman Road
Sayreville, New Jersey 08872
Fax: 908-721-8933
If to the Senior Lender, to the following address:
Midlantic Bank, National Association
Commercial Finance Department
100 Walnut Avenue
Clark, New Jersey 07066
Fax: 908-396-2050
If to the Subordinated Creditor, to the following address:
Von Roll Holding AG
CH4563 Gerlafingen
Switzerland
Fax: 011-41-65-34-2208
or to such other address or addresses as the party to whom such notice is
directed may have designated in writing to the other parties hereto. All
such notices and other communications shall be deemed given when delivered
in person or by courier service, upon receipt of a telecopy or three (3)
Banking Days after deposited, postage prepaid, for domestic United States
mail or five (5) Banking Days after deposited, postage prepaid, for
international mail.
Successors; Continuing Effect, Etc. This Agreement is being
entered into for the benefit of and shall be binding upon the holders of the
Senior Indebtedness and the Subordinated Indebtedness, and their respective
successors and assigns. This Agreement shall be a continuing agreement and
shall be irrevocable and shall remain in full force and effect so long as
there are both Senior Indebtedness and Subordinated Indebtedness outstanding
or committed to be advanced. The liability of the Subordinated Creditor
hereunder shall be reinstated and revived, and the rights of the holders of
the Senior Indebtedness shall continue, with respect to any amount at any
time paid on account of the Senior Indebtedness which shall thereafter be
required to be restored or returned by the holders of the Senior Indebtedness
in any Reorganization (including without limitation, any repayment made
pursuant to any provision of Chapter 5 of Title 11, United States Code),
all as though such amount had not been paid.
Entire Agreement; Amendment. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof,
and no modification or waiver of any provision of this Agreement shall in
any event be effective unless the same shall be in writing signed by the
Senior Lender and the Subordinated Creditor (unless such amendment or
modification shall impose any additional obligations upon the Company, in
which case such amendment or modification shall also require execution by
the Company).
CERTAIN WAIVERS. SUBORDINATED CREDITOR, SENIOR LENDER AND
THE COMPANY EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON,
ARISING OUT OF, OR IN ANY MANNER CONNECTED WITH THIS AGREEMENT, ANY OTHER
AGREEMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SUBORDINATED CREDITOR, SENIOR
LENDER AND THE COMPANY EACH AGREE THAT THEY SHALL NOT SEEK A JURY TRIAL IN
ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE
BASED ON, ARISING OUT OF, OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR
ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF THEM. NO PARTY
HERETO WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS
BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION 20 HAVE BEEN FULLY DISCUSSED
BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 20 WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
Consent to Jurisdiction, Service or Process. Subordinated
Creditor, to the extent it may lawfully do so, hereby consents to the
jurisdiction of the courts of the State of New Jersey and of the United
States District Courts for the District of New Jersey, as well as to the
jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out
of any of, or in any way connected with, its obligations arising hereunder
or with respect to, or in any way connected with, the transactions
contemplated hereby, and expressly waives any and all objections it may
have (including, without limitation, any rights or privileges under any
treaty or international convention to which the United States may be a
party) as to venue, jurisdiction, or service of process in any of the
said courts. In addition, to the extent it may lawfully do so, Subordinated
Creditor hereby consents to the service or process by U.S. certified or
registered mail, return receipt requested, addressed to the Subordinated
Creditor at the address to which notices are to be given hereunder.
Miscellaneous. This Agreement, which may be executed in any
number of counterparts, shall take effect as a sealed instrument and shall
be governed by and construed in accordance with the laws of the State of
New Jersey. The headings in this Agreement are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof. In the
event of any conflict between the provisions of this Agreement and the
provisions of any of the Subordinated Agreements, the provisions of this
Agreement shall control. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective as to
the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
[Remainder of this Page Intentionally left Blank]
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be executed by its duly authorized representative as of the day
and year first above written.
ATTEST: VON ROLL HOLDING AG
By:
H. Georg Hahnloser
Chief Operating Officer
By:
Name: Rainer Rathje
Title: Vice Director Treasury
ATTEST: NEW JERSEY STEEL CORPORATION
By:
Name: Kenneth J. Leonard
Title: President
By:
Name: Paul Roik
Title: Vice President, Finance
MIDLANTIC BANK, NATIONAL
ASSOCIATION
By:
Name: Susan M. Graham
Title Vice President
SCHEDULE A
(Section 1.1)
List of Senior Notes
1. $20,000,000.00 Restated Secured Revolving Loan Note, dated the date
hereof, from Company to Senior Creditor.
2. $7,500,000.00 Restated Term Loan Note, dated the date hereof, from
Company to Senior Creditor.
SCHEDULE B
(Section 1.2)
List of Subordinated Note(s) and Agreement(s)
1. Credit Agreement, dated the date hereof, between the Company and
Subordinated Creditor.
2. Subordinated Revolving Credit Note, dated the date hereof, from the
Company payable to the order of Subordinated Creditor.
3. Security Agreement, dated the date hereof, between Subordinated
Creditor and the Company.
EXHIBIT A
Copies of Subordinated Note(s)
Exhibit 10(j)
CREDIT AGREEMENT
AGREEMENT dated as of June 6, 1996 between NEW JERSEY
STEEL CORPORATION, a Delaware corporation ("Borrower") and VON
ROLL HOLDING AG, a Swiss corporation ("Lender").
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms which are defined in
the Loan Agreement (as defined below) when used, but not
defined, herein have the meanings assigned in the Loan
Agreement. The following additional terms, as used herein, have
the following meanings:
"Assignment of Leases" means the Assignment of Leases
dated June 6, 1996 from the Borrower to the Lender.
"Bank" means Midlantic Bank, National Association in
its capacity as lender under the Loan Agreement, and any
successors thereto or assignees thereof in such capacity.
"Business Day" means any day on which the Bank and
banks in Switzerland are open for business generally.
"Collateral Documents" means the Security Agreement,
the Mortgage and the Assignment of Leases.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"Event of Default" has the meaning set forth in Section
5.01.
"Intercreditor Agreement" means the Subordination and
Intercreditor Agreement dated as of June 6, 1996 by and among
the Lender, the Borrower and the Bank.
"Loan" means any loan made pursuant to Section 2.01.
"Loan Agreement" means the Amended and Restated Loan
and Security Agreement dated as of June 6, 1996 between the Bank
and the Borrower.
"Loan Commitment" means initially $15,000,000, which
amount is subject to reduction as provided in Section 2.06.
"Mortgage" means the mortgage dated June 6, 1996 from
the Borrower to the Lender.
"Note" means the subordinated promissory note of the
Borrower, substantially in the form of Exhibit A hereto,
evidencing the obligation of the Borrower to repay the Loans.
"Payment Date" means so long as the Intercreditor
Agreement is in effect, the eleventh day of each 15-day period
referred to in Subsection (X) of clause (b) of Section 3.2(iii)
of the Intercreditor Agreement, and if the Intercreditor
Agreement shall not be in effect, the last day of November,
February, May and August.
"Security Agreement" means the Security Agreement of
even date herewith between the Borrower and the Lender.
"Termination Date" means May 1, 1998.
ARTICLE II
THE CREDITS
SECTION 2.01. The Loans. From time to time prior to
the Termination Date, the Lender agrees, on the terms and
conditions set forth in this Agreement, to lend to the Borrower
from time to time amounts not to exceed in the aggregate at any
one time outstanding the amount of the Loan Commitment. Each
borrowing under this Section shall be in an aggregate principal
amount of $500,000 or any integral multiple of $500,000 (except
that any such borrowing may be in the aggregate amount of the
unused Loan Commitment). Within the foregoing limits, the
Borrower may borrow and reborrow under this Section at any time
prior to the Termination Date, and, to the extent not prohibited
by Section 2.08(b), prepay any Loan.
SECTION 2.02. Method of Borrowing. (a) The Borrower
shall give the Lender a notice of the date of each borrowing
proposed to be made hereunder, specifying the amount of such
borrowing and the date on which such borrowing is to be made,
which date shall be a Business Day and shall be at least three
and no more than seven days following the giving of such notice.
(b) Unless the Lender determines that any
applicable condition specified in Article III has not been
satisfied, the Lender shall make the amount of the Loan
<PAGE>
specified in Borrower's aforesaid notice available for Borrower
at its account maintained at the Bank.
SECTION 2.03. Note. (a) The Loans shall be evidenced
by a single Note payable to the order of the Lender.
(b) The Lender shall record in its records the
date and amount of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect
thereto, and may, if it so elects in connection with any
transfer or enforcement of the Note, endorse on the schedule
forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then
outstanding; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Note. The Lender is
hereby irrevocably authorized by the Borrower so to endorse the
Note and to attach to and make a part of the Note a continuation
of any such schedule as and when required.
SECTION 2.04. Maturity of Loans. All outstanding
Loans hereunder shall mature, and the principal amount thereof
shall, subject to the terms and conditions of the Intercreditor
Agreement, be due and payable, on the Termination Date.
SECTION 2.05. Interest Rates. Each Loan shall bear
interest on the outstanding principal amount thereof, for each
day from the date such Loan is made until it becomes due, at a
fluctuating interest rate per annum equal at all times to one
percent (1%) above the Bank's Prime Rate in effect from time to
time, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in the Prime Rate,
without notice to the Borrower. Any overdue principal of or
interest on any Loan shall bear daily interest at a rate per
annum equal to the sum of 2% plus the daily rate otherwise
applicable to the Loans. Subject to the terms and conditions of
the Intercreditor Agreement, all such interest shall be payable
quarterly on the last day of August, November, February and May
commencing August 31, 1996 and on each other date on which
payment shall be required by any other provision of this
Agreement.
SECTION 2.06. Mandatory Termination or Reduction of
Commitment, Mandatory Prepayment of Loans. (a) The Loan
Commitment shall terminate on the Termination Date, and any
Loans then outstanding (together with accrued interest thereon)
shall be due and payable on such date.
(b) The Loan Commitment shall be permanently and
automatically reduced upon any sale, lease, assignment or other
transfer of the Keasbey Property by an amount equal to 50% of
the Net Proceeds of such transfer.
(c) On any day on which the Loan Commitment is
reduced pursuant to this Section, the Borrower shall, subject to
the terms and conditions of the Intercreditor Agreement, repay
such principal amount of the outstanding Loans as may be
necessary so that after such repayment the aggregate unpaid
principal amount of the Loans does not exceed the amount of the
Loan Commitment after giving effect to such reduction. In the
event that by reason of Section 3.2(iii) of the Intercreditor
Agreement, payment of the entire amount called for by this
Section 2.06(b) is restricted, the Borrower shall pay such of
the amount as is not restricted by Section 3.2(iii) of the
Intercreditor Agreement and shall pay the balance, or so much
thereof as is not restricted by Section 3.2(iii) of the
Intercreditor Agreement on each successive Payment Date until
the entire principal amount of Loans required to be paid by this
Section 2.06(c) shall be paid in full. Any payment of principal
pursuant to this Section 2.06(c) shall be accompanied by payment
of accrued interest on the principal so paid and any payment
pursuant to this Section 2.06(c) shall be applied first to such
interest and then to principal.
(d) On each Payment Date the Borrower shall repay
such principal amount (together with accrued interest thereon)
of Loans as shall be permitted by Section 3.2(iii) of the
Intercreditor Agreement.
SECTION 2.07. Optional Prepayments. The Borrower may,
on any Business Day, prepay on such Business Day any Loan in
whole at any time, or from time to time in part in an amount of
not less than $500,000 or any integral multiple thereof by
paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment.
SECTION 2.08. General Provisions as to Payments.
(a) The Borrower shall, subject to the terms and conditions of
the Intercreditor Agreement, make each payment of principal of,
and interest on, the Loans on the date when due, to the Lender
at its address for such purpose furnished to the Borrower from
time to time. Whenever any payment of principal of, or interest
on, any Loan shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Any other provision of this Agreement to the
contrary notwithstanding, the Borrower shall not make and shall
not be required to make any payment of principal or interest on
any Loan hereunder if the making of the same would violate
Section 3.2(iii) of the Intercreditor Agreement, and the
<PAGE>
failure of the Borrower to make any such payment so long as the
making of the same would constitute such a violation of the
Intercreditor Agreement shall not constitute a Default or Event
of Default hereunder. Any payment required to be made hereunder
but for this Section 2.08(b) shall be made to the fullest extent
possible without violating Section 3.2(iii) of the Intercreditor
Agreement on each succeeding Payment Date following the original
due date of such payment.
SECTION 2.09. Computation of Interest and Fees.
Interest based shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number
of days elapsed (including the first day but excluding the last
day).
SECTION 2.10. Maximum Interest Rate. (a) Nothing
contained in this Agreement or the Note shall require the
Borrower to pay interest at a rate exceeding the maximum rate
permitted by applicable law.
(b) If the amount of interest payable for the
account of the Lender on any interest payment date in respect of
the immediately preceding interest computation period, computed
pursuant to Section 2.05, would exceed the maximum amount
permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum
permissible amount.
(c) If the amount of interest payable for the
account of the Lender in respect of any interest computation
period is reduced pursuant to clause (b) of this Section and the
amount of interest payable for its account in respect of any
subsequent interest computation period, computed pursuant to
Section 2.05, would be less than the maximum amount permitted by
applicable law to be charged by the Lender, then the amount of
interest payable for its account in respect of such subsequent
interest computation period shall be automatically increased to
such maximum permissible amount; provided that at no time shall
the aggregate amount by which interest paid for the account of
the Lender has been increased pursuant to this clause (c) exceed
the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to clause (b) of this Section.
SECTION 2.11. Prior Advances. The Borrower
acknowledges receipt from the Lender on April 10, 1996 of
$8,000,000, on May 17, 1996 of $2,000,000 and on May 22, 1996 of
$1,000,000 advanced by the Lender to the Borrower in
<PAGE>
anticipation of this Agreement. It is agreed between the Lender
and the Borrower that such advances constitute Loans hereunder
bearing interest at the rate provided herein from the respective
dates of said advances and entitled to all of the benefits of
this Agreement and the agreements of the Borrower entered into
pursuant to this Agreement.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall
become effective on the date that each of the following
conditions shall have been satisfied (or waived in accordance
with Section 7.04):
(a) execution and delivery of this Agreement by
the Lender and the Borrower;
(b) receipt by the Lender of (i) a counterpart of
the Security Agreement dated the date hereof and duly
executed by the Borrower, and (ii) all other documents
and certificates to be delivered pursuant to the
foregoing on the Effective Date (including
appropriately completed and duly executed Uniform
Commercial Code financing statements required thereby);
(c) receipt by the Lender of counterparts
executed by the Borrower of the Mortgage and the
Assignment of Leases and of evidence satisfactory to
the Lender that arrangements satisfactory to it shall
have been made for recording the Mortgage and the
Assignment of Leases and filing the Uniform Commercial
Code financing statements referred to in paragraph (b)
above on or promptly after the Effective Date;
(d) receipt by the Lender of evidence
satisfactory to the Lender that the Loan Agreement and
the other agreements between the Borrower and the Bank
contemplated thereby are in effect.
SECTION 3.02. Loan Events. The obligation of the
Lender to make any Loan is subject to the satisfaction of
the following conditions:
(a) receipt by the Lender of a notice as required
by Section 2.02;
(b) the fact that, after giving effect to such
Loan the aggregate principal amount of all outstanding
Loans shall not exceed the Loan Commitment;
(c) the fact that, at the time of the making of
such Loan and immediately thereafter, no Default shall
have occurred and be continuing;
(d) the fact that the Loan Agreement shall not
have been terminated by the Bank in any respect;
(e) the receipt by the Lender of a certificate of
the chief financial officer of the Borrower dated the
date the notice of borrowing is given stating that (i)
all of the foregoing conditions to the making of the
requested borrowing are satisfied, (ii) in the best
judgment of such officer he does not foresee the
occurrence of any Default or Event of Default, and
(iii) in the best judgment of such officer the amount
of the requested borrowing is not more than $500,000 in
excess of the Borrower's projected requirements for
cash to be used in the conduct of its business in the
ordinary course over the 90 days following the date as
of which the requested borrowing is to be made after
giving effect to the projected availability of cash to
the Borrower for the conduct of its business over such
period under the Loan Agreement and from all other
sources.
SECTION 3.03. Obligation to Lend to Meet Certain
Needs. The Lender agrees that provided there has been no
acceleration of the loans under the Loan Agreement (x) if the
Borrower's payables are not Current or (y) if the Borrower had a
negative Cash Flow for the period in any fiscal year of the
Borrower from the start of such fiscal year (or May 1, 1996 in
the case of the fiscal year ending November 30, 1996) through
the end of the most recent fiscal quarter of such fiscal year as
shown on the most recent financial statements required to be
delivered to the Bank under Section 5.5(a) or (c) of the Loan
Agreement, then in each such instance, and notwithstanding the
fact that the Lender may not have received the notice or
certificate required under Section 3.02 or that any other
condition under this Agreement may not have been met or complied
with, the Lender shall forthwith make a Loan to the Borrower of
an amount equal to the lesser of:
(i) the greater of (A) the amount necessary for
Borrower to bring its payables Current, or (B) if
Borrower had a negative Cash Flow for the period from
the start of any fiscal year (or May 1, 1996 in the
case of the fiscal year ending November 30, 1996)
through the end of the most recent fiscal quarter, an
amount equal to the amount of Borrower's Cash Flow for
such period (treated as a positive number) reduced, but
not below zero, by an amount equal to the excess, if
any, of (1) the aggregate principal amount of the Loans
outstanding immediately prior to the making of the Loan
then required to be made by this Section 3.03 over (2)
the aggregate principal amount of the Loans outstanding
as of the start of such fiscal year (or a zero
principal amount outstanding in the case of the fiscal
year ending November 30, 1996); provided, however, if
the computation of (1) over (2) results in a zero or a
negative number there will be no reduction and (B)
shall be the amount equal to the amount of the
Borrower's Cash Flow for such period (treated as a
positive number); or
(ii) the amount which when aggregated with the
then outstanding principal amount of the Loans equals
the Loan Commitment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Confirmation of Loan Agreement
Representations. The representations and warranties of the
Borrower in the Loan Agreement are true and correct in all
material respects.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. (a) The execution, delivery
and performance by the Borrower of this Agreement, the Note and
the Collateral Documents are within its corporate powers, have
been duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or
of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower.
SECTION 4.03. Binding Effect; Liens of Collateral
Documents. (a) This Agreement constitutes a valid and binding
agreement of the Borrower and the Note, when executed and
delivered in accordance with this Agreement, will constitute a
<PAGE>
valid and binding obligation of the Borrower in each case
enforceable in accordance with their respective terms. The
Collateral Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding
agreements of the Borrower enforceable against the Borrower in
accordance with their respective terms.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as the Loan
Commitment is in effect or any amount payable under the Note
remains unpaid:
SECTION 5.01. Information. The Borrower shall furnish
to the Lender all financial statements and other information it
is required to furnish to the Bank under Sections 5.5(a), (c)
and (d) of the Loan Agreement and upon the request of the
Lender, Borrower will furnish to it any other information
furnished to the Bank pursuant to the Loan Agreement. All such
financial statements and other information will be furnished to
the Lender not later than the time such financial statements and
information are furnished to the Bank and in no event later than
the time for the furnishing of the same called for by the Loan
Agreement.
SECTION 5.02. Distributions. The Borrower will not
declare or pay any dividend on its capital stock or make any
other distribution in respect of its capital stock or purchase
or otherwise acquire any of its capital stock.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. (a) Subject to
Section 6.01(b), if one or more of the following events ("Events
of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to pay when due any
principal of any Loan;
(ii) the Borrower shall fail to pay when due or
within five Business Days thereof any interest on any
Loan;
(iii) the Borrower shall fail to observe or perform
any covenant or agreement contained herein or in the
Collateral Documents (other than those covered
by clauses (a) and (b) above) for 10 days after written
notice thereof has been given to the Borrower by the
Lender;
(iv) an event or condition constituting an Event
of Default or Unmatured Event of Default under any
provision of Article 8 of the Loan Agreement
(determined without regard to any waiver thereof or
consent thereto from the Bank) other than Sections 8.11
and 8.12 of the Loan Agreement shall occur and be
continuing;
(v) the Borrower shall commence a voluntary case
or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
property, or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the
foregoing;
(vi) an involuntary case or other proceeding shall
be commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower under the
federal bankruptcy laws as now or hereafter in effect;
(vii) any of the Collateral Documents shall cease
to be in full force and effect or shall be declared
null and void, or the validity or enforceability
thereof shall be contested by the Borrower;
then, and in every such event, the Lender may (i) by notice to
the Borrower terminate the Loan Commitment and it shall
thereupon terminate, and (ii) by notice to the Borrower declare
<PAGE>
the Note (together with accrued interest thereon) to be, and the
Note shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower; provided that in the
case of any of the Events of Default specified in clause (e) or
(f) above, without any notice to the Borrower or any other act
by the Lender, the Loan Commitment shall thereupon terminate and
the Note (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by
the Borrower.
(b) Notwithstanding anything contained in Section
6.01(a), so long as any amount remains outstanding under the
Loan Agreement, no Event of Default shall occur or be deemed to
have occurred under this Agreement unless and until the
Revolving Loan and the Term Loan or both such loans are
accelerated or the Bank terminates the Loan Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices. All notices, requests and
other communications to either party hereunder shall be in
writing (including wire, telex, facsimile transmission or
similar writing) and shall be given to such party at its address
or telex or facsimile number set forth on the signature page
hereof, or such other address or telex or facsimile number as
the party may hereafter specify for the purpose by notice to the
other party. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is
transmitted to the telex number, if any, specified pursuant to
this Section and the appropriate answerback is received, (ii) if
given by facsimile transmission, when such facsimile is
transmitted to the facsimile number specified pursuant to this
Section and receipt of such facsimile is confirmed, either
orally or in writing, by the party receiving such transmission,
(iii) if given by certified mail, 72 hours after such
communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iv) if given by any other
means, when delivered at the address specified pursuant to this
Section.
SECTION 7.02. No Waivers. No failure or delay by the
Lender in exercising any right, power or privilege under this
Agreement or any agreement made pursuant hereto shall operate as
a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights
<PAGE>
and remedies herein and therein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 7.03. Expenses; Indemnification. (a) The
Borrower shall pay (i) all out-of-pocket expenses of the Lender,
including fees and disbursements of counsel in connection with
the preparation of this Agreement and all other agreements and
instruments provided for herein, any waiver or consent under any
thereof, or any amendment of any thereof or any Default or
alleged Default and (ii) if an Event of Default occurs, all out-
of-pocket expenses incurred by the Lender including fees and
disbursements of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Lender,
its affiliates and its directors, officers, agents and employees
of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel,
which may be incurred by any Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or
not such Indemnitee shall be designated a party thereto) brought
or threatened relating to or arising out of this Agreement or
any other agreement or document provided for herein or the
making of any Loans or the receipt or dealing with the
collateral therefor or any actual or proposed use of proceeds of
Loans hereunder; provided that no Indemnitee shall have the
right to be indemnified hereunder for such Indemnitee's own
gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
SECTION 7.04. Amendments and Waivers. Any provision
of this Agreement or the Note may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by
the Borrower and the Lender.
SECTION 7.05. Successors and Assigns. The provisions
of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise
transfer any of its rights under this Agreement without the
prior written consent of the Lender. Nothing herein, express or
implied, is to confer upon any person other than (i) the parties
hereto, and (ii) to the extent specifically provided in Section
7.03(b), the Indemnitees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 7.06. No Offsets or Counterclaims. The due
payment and performance of the Loans and all other obligations
of the Borrower hereunder shall be made without regard to any
counterclaim, right of offset or any other claim whatsoever
which the Borrower may have against the Lender or any other
holder of the Note (or any participation or other interest
therein) and without regard to any other obligation of any
nature whatsoever which the Lender or any such holder may have
to the Borrower, and no such counterclaim (other than a
compulsory counterclaim) or offset shall be asserted by the
Borrower in any action, suit or proceeding instituted by the
Lender or any such holder for any such payment or performance.
SECTION 7.07. CERTAIN WAIVERS. THE BORROWER AND THE
LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT
ON, ARISING OUT OF, OR IN ANY MANNER CONNECTED WITH THIS
AGREEMENT, ANY OTHER AGREEMENTS OR DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. THE BORROWER AND THE LENDER EACH AGREES THAT
IT WILL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED ON,
ARISING OUT OF, OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR
ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE DEALINGS
OR THE RELATIONSHIP BETWEEN THE PARTIES HERETO. NEITHER PARTY
HERETO WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY
TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
SECTION 7.07 HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO,
AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
PARTY HERETO HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE
OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 7.07 WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.
SECTION 7.08. Governing Law. This Agreement and the
Note shall be construed in accordance with and governed by the
law of the State of New Jersey.
SECTION 7.09. Counterparts; Integration. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and
<PAGE>
all prior agreements and understandings, oral or written,
relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
NEW JERSEY STEEL CORPORATION
By s/ Kenneth J. Leonard
Name: Kenneth J. Leonard
Title: President
By s/ P. Roik
Name: Paul Roik
Title: Vice President, Finance
North Crossman Road
Sayreville, NJ 08872
Facsimile No.: (908) 721-0823
Attention: Vice President,
Finance
VON ROLL HOLDING AG
By s/ H. Georg Hahnloser
Name: H. Georg Hahnloser
Title: Chief Operating Officer
By s/ R. Rathje
Name: Rainer Rathje
Title: Vice Director-Treasury
CH-4563
Gerlafingen, Switzerland
Facsimile No.: 011-41-65-34-2208
Attention: Chief Operating
Officer
EXHIBIT A
SUBORDINATED REVOLVING CREDIT NOTE
Sayreville, New Jersey
June , 1996
For value received, New Jersey Steel Corporation, a
Delaware corporation (the "Borrower"), promises to pay to the
order of Von Roll Holding AG (the "Lender"), the unpaid
principal amount of each Loan made by the Lender to the Borrower
pursuant to the Credit Agreement referred to below on the dates
provided for in the Credit Agreement. The Borrower promises to
pay interest on the unpaid principal amount of each such Loan on
the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be
made in lawful money of the United States at the place of
payment provided for in the Credit Agreement.
All Loans made by the Lender, and all repayments of the
principal thereof shall be recorded by the Lender and, if the
Lender so elects in connection with any transfer or enforcement
of this note, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding may
be endorsed by the Lender on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Credit Agreement.
This note is the Note referred to in the Credit
Agreement dated as of June 6, 1996 between the Borrower and the
Lender (as the same may be amended from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and
the acceleration of the maturity hereof. This note is secured
by certain collateral as specified in the Security Agreement,
the Mortgage and the Assignment of Leases.
The indebtedness evidenced by this note constitutes
Subordinated Indebtedness under the Subordination and
Intercreditor Agreement dated as of June 6, 1996 among the
Lender, the Borrower and Midlantic Bank, National Association,
and payment of principal and interest on this note is subject to
the provisions of said Agreement.
NEW JERSEY STEEL CORPORATION
By
Name:
Title:
By
Name:
Title:
SUBORDINATED REVOLVING CREDIT NOTE (Cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Principal Notation
Date Loan Amount Repaid Made by
$ $
Exhibit 10(l)
STOCK OPTION AGREEMENT
AGREEMENT, made as of the day of , 19
by and between NEW JERSEY STEEL CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), with
its principal place of business at North Crossman Road, Sayreville, New
Jersey 08872, and , an individual residing at
("Optionee").
W I T N E S S E T H :
WHEREAS, Optionee is presently employed by the Corporation or one of
its subsidiaries; and
WHEREAS, the Corporation considers it desirable and in its best
interest that Optionee be given an inducement to acquire a proprietary
interest in the Corporation as an added incentive to advance the interests of
the Corporation in the form of an option to purchase common stock of the
Corporation; and
WHEREAS, the Board of Directors of the Corporation (the "Committee")
resolved to grant the Optionee the option described herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. This Agreement recites all the terms and conditions of the
option granted to Optionee by the Corporation pursuant to the Corporation's
1996 Stock Option Plan (the "Plan").
2. Subject to approval of the Plan by the stockholders of the
Corporation and pursuant to the terms and conditions of the Plan, the
Corporation hereby grants Optionee an option (the "Option") to purchase
shares of its common stock, par value $0.01 per share ("Common Stock"), at
a price of $ per share, being at least 100% of the fair market value
per share of the Common Stock on , 19 , in the manner and
subject to the provisions provided hereinafter and in the Plan.
3. Subject to the provisions of Paragraph 5 hereof, the Option
shall terminate in all respects on, and no exercise as to any shares covered
by the Option shall be honored after , 20 (the "Expiration
Date").
4. (a) The Option is exercisable during the lifetime of the
Optionee only by the Optionee, provided that, subject to the provisions of
Paragraph 5 hereof, from the date of the grant of the Option to the date of
any and every exercise of the Option, Optionee shall have been in the
continuous employ of the Corporation, or of a "Subsidiary Corporation", as
that term is defined in Section 2(p) of the Plan (any of the foregoing
corporations being sometimes called herein an "Employer Corporation").
(b) The Option shall be exercisable in accordance with the
following schedule:
Maximum Number of Shares
in Respect of Which
Exercise Date Option is Exercisable
--------------- --------------------------
If any such shares are not exercised to the extent they are exercisable in
any period provided in this Paragraph 4(b), the Optionee may exercise the
Option as to the unexercised portion at any time or times during the
remaining term of this Option.
5. Notwithstanding anything to the contrary herein contained:
(a) if the Optionee shall cease to be employed by an Employer
Corporation for any reason other than his death or disability within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1954, as amended
(the "Code") ("Disability"), as determined by the Committee, the Option shall
expire coincident with the date of termination;
(b) if the Optionee shall die while in the employ of an
Employer Corporation, the Option held by the Optionee shall be exercisable by
his legal representative, to the extent that the Optionee would have been
entitled to exercise the Option on the date of his death, but only within
one year following the death of the Optionee;
(c) if the Optionee shall die following the termination of his
employment while any portion of the Option remains exercisable, the Committee
in its discretion may provide for an extension of the exercise period up to
one year after the Optionee's death; and
(d) in the event of the Disability of the Optionee while in the
employ of an Employer Corporation, the Option held by the Optionee shall be
exercisable by him, his duly appointed guardian or other legal representative,
to the extent that he would have been entitled to exercise the Option on the
date of his Disability, only within one year following the termination of
employment of the Optionee due to such disability.
Notwithstanding the foregoing, in no event shall the Option held by the
Optionee be exercisable after the Expiration Date.
6. For purposes of this Agreement, it shall not be considered a
termination of employment when the Optionee is placed by an Employer
Corporation on military or sick leave or such other type of leave of
absence which is considered as continuing intact the employment relationship
of the Optionee. In case of such leave of absence the employment
relationship shall be continued until the later of the date when such leave
equals 90 days or the date when the Optionee's right to reemployment with
an Employer Corporation shall no longer be guaranteed either by statute
or contract.
7. Optionee hereby acknowledges his understanding that certain
exercises of the Option held hereunder later than 90 days following
Optionee's termination of employment in Paragraphs 5(a), 5(b) and 5(c) may
disqualify such Option from treatment as an Incentive Stock Option.
8. (a) Any exercise of the Option, or portion thereof, shall be
made by the delivery by the Optionee (or his personal representative) of
written notice of such exercise to the Corporation at its principal office
at North Crossman Road, Sayreville, New Jersey 08872, or such other place
as the Corporation may designate, by registered mail, stating the number of
shares with respect to which the Option is being exercised and specifying
the date, not less than five (5) nor more than fifteen (15) days after the
date of the mailing of such notice, on which the shares will be taken and
payment made thereof.
(b) On the date specified in the notice of exercise, or as soon
thereafter as practicable, the Corporation shall deliver, or cause to be
delivered, to the Optionee (or his personal representative) a stock
certificate for the number of shares with respect to which the Option is
being exercised, against (i) receipt of payment of the purchase price
therefor, in full, in cash or certified check or shares of Common Stock (as
provided in Paragraph 8(e)), or partially in cash or certified check and
partially by delivery of Common Stock, and (ii) delivery of (A) a written
certificate by the Optionee (or his personal representative) to the effect
that he is acquiring such shares for his own account and will not dispose of
such
shares in violation of the Securities Act of 1933, and (B) such other
certificates, representations and agreements by the Optionee (or his personal
representative) as the Committee shall require in order that the Corporation
be reasonably assured that the issuance, delivery and disposition of such
shares are being and will be effected in compliance with the Securities Act
of 1933 and the Rules and Regulations promulgated thereunder, other
applicable law, and the rules of each stock exchange upon which the stock is
listed; provided, however, that if the Plan and the options granted
thereunder and the issuance of shares upon exercise of options granted
thereunder and the issuance of shares upon exercise of options are registered
under the Securities Act of 1933, the Optionee (or his personal
representative) need not furnish the certification described in clause (A)
of this sentence; further, provided, however, that the Corporation shall
have no obligation to so register the Plan and the options granted thereunder
and the issuance of shares upon exercise of options or to keep any such
registration effective. Certificates evidencing shares issued upon exercise
of the Option may contain such legend reflecting any restrictions upon
transfer of the shares evidenced thereby as in the opinion of counsel to the
Corporation may be necessary for the lawful and proper issuance of such
certificates.
(c) In the event of any failure by the Optionee to take and pay
in full for the number of shares specified in the notice of election on the
date stated therein, in accordance with the terms hereof, the Option shall
become inoperative as to such number of shares but shall continue with
respect to any remaining shares subject to the Option as to which exercise
has not yet been made.
(d) Notwithstanding anything to the contrary herein contained,
the Committee, in its discretion, may postpone the issuance and delivery of
a certificate for the shares of Common Stock upon exercise of the Option, by
any period required for the Corporation's compliance, in reasonable diligence,
with any registration or other qualification thereof under any state or
federal law, rule or regulation as the Committee may deem appropriate; and
may require the person exercising the option to make such further
representations and furnish such information as the Committee may deem
appropriate in connection with the issuance of the shares of Common Stock
in compliance with applicable law or sound corporate practice. Delivery of
a certificate for the shares of Common Stock issuable upon exercise of the
Option may be made at the office of the Corporation or at the office of a
transfer agent appointed for the transfer of shares of the Corporation.
(e) Optionee may, if agreed to by the Committee, deliver,
together with his written notice of election to exercise his Option, whole
shares of Common Stock owned by the Optionee in full or partial payment of
the purchase price of the shares of Common Stock as to which the Option is
being exercised. The Optionee will receive a credit against the purchase
price of the shares of Common Stock as to which the Option is being exercised
equal to the fair market value of the Common Stock delivered by Optionee as
of the first business day immediately preceding the date of delivery of the
notice of intention to exercise the Option. For purposes of this
subparagraph (e), the fair market value of the Common Stock so delivered
shall be the mean average of the high and low sale price on the NASDAQ
National Market System. Any shares of Common Stock being delivered by
Optionee must be accompanied by a duly executed assignment to the Corporation
in blank or with stock power attached, together with a written representation
that such shares of Common Stock are owned by him free and clear of all liens,
claims and encumbrances. The Optionee shall thereafter provide such further
representations as the Committee may determine. Only whole shares of Common
Stock with a fair market value up to, but not exceeding, the purchase price
of the shares as to which the Option is being exercised will be accepted.
9. Neither the Optionee nor his legal representative shall be, nor
have any of the rights or privileges of, a stockholder of the Corporation in
respect of any of the shares issuable upon the exercise of the Option, unless
and until certificates representing such shares shall have been issued and
delivered.
10. The Option shall not be assigned, pledged or hypothecated in any
way, shall not be subject to execution, is not transferable by the Optionee
otherwise than by will or the laws of descent and distribution, and is
exercisable during his lifetime only by him. Any attempt at assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary
to the provisions hereof, and the levy of any attachment or similar
proceeding upon the Option, shall be null and void.
11. In the event the Optionee disposes of shares of Common Stock
acquired on the exercise of the Option by sale or exchange either (i) within
two years after the date of grant hereof, or (ii) within one year after the
acquisition of such shares, the Optionee shall thereupon promptly deliver a
written notice of such disposition to the Corporation at its principal office
set forth in Paragraph 6 hereof, or at such other place as the Corporation
may designate, by registered mail, stating the number of shares disposed of,
to whom such shares were delivered, the amount realized upon such disposition
and the date of such disposition.
12. In the event of a stock dividend, stock split or other
subdivision, consolidation or other change in the shares of Common Stock,
the number of shares of Common Stock available for Options and subject to
outstanding Options and the option price per share shall be proportionately
or otherwise appropriately adjusted by the Committee whose determination
shall be conclusive and binding.
13. If the Corporation shall be a party to any merger, consolidation
or reorganization, or shall sell substantially all its assets, each
outstanding Option shall pertain and apply to the securities and/or property
which a holder of the number of shares of Common Stock subject to the Option
would be entitled to receive pursuant to such merger, consolidation or
reorganization or sale of assets, and the option price per share shall be
proportionately or otherwise appropriately adjusted by the Committee whose
determination shall be conclusive and binding.
14. Except as otherwise provided herein, in the event of a proposed
distribution of all or substantially all of the Corporation's property or
assets, the Corporation shall mail written notice thereof to the Optionee
not less than ten days prior to the record date for such distribution and
(i) notwithstanding anything contained herein to the contrary, the Option
shall thereupon be exercisable in full, (ii) the Optionee shall be entitled
to equal treatment with other stockholders of the Corporation as of the
record date for such distribution with respect to all shares of Common Stock
purchased pursuant to the exercise of this Option on or before the close of
business on the last business day immediately preceding such record date,
and (iii) the Option shall be deemed cancelled to the extent not so
exercised.
15. The Option is intended to be an Incentive Stock Option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
to the extent it meets and complies with the requirements for an incentive
stock option under said Section 422.
16. Any exercise of this Option shall be subject to any applicable
withholding taxes.
17. This Option shall be construed and shall take effect in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above set forth.
NEW JERSEY STEEL CORPORATION
By:
Name:
Title:
ATTEST:
Name:
, Optionee
Exhibit 10(m)
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 1st day of May, 1996 by and between NEW
JERSEY STEEL CORPORATION (the "Company"), a Delaware corporation with offices
at North Crossman Road, Sayreville, New Jersey 08872 and KENNETH J. LEONARD
("Executive"), an individual residing at 221 Persimmon Drive, Swansea,
Illinois 62221.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereby agree as follows:
1. Employment. The Company agrees to employ, and does hereby employ,
Executive, and Executive hereby accepts such employment, for the term, with
the duties and compensation and upon the terms and conditions contained in
this Agreement.
2. Term. The term of Executive's employment hereunder (the "Term")
shall be two (2) years beginning on the date of this Agreement and ending two
years thereafter, i.e., April 30, 1998, unless earlier terminated as
hereinafter provided.
3. Duties and Offices.
(a) Executive shall have the duties of the President provided in
the By-Laws of the Company and the title of President and Chief Executive
Officer. Executive will perform his services subject only to the direction
and control of the Company's Board of Directors and will report only to the
Board of Directors. Executive shall not be required to perform any duties
other than those consistent with his status as President and Chief Executive
Officer.
(b) During the Term, Executive shall devote his full working time
and energies to the business and affairs of the Company. Executive agrees
during the Term to use his best efforts, skill and abilities to promote the
Company's interests; to serve as a director of the Company; to serve as a
director and officer of any corporation which is a subsidiary of the Company
if elected by the stockholders or Board of Directors of such subsidiary
corporation; and, subject to the provisions of paragraph (a) of this Section
3, to perform such duties as may be assigned to him by the Board of Directors
of the Company.
(c) Unless Executive otherwise agrees in writing, the
headquarters for the performance of his services shall be the principal
executive offices of the Company in Sayreville, New Jersey subject to such
reasonable travel as the performance of his duties in the business of the
Company may require.
4. Compensation.
(a) For his services during the Term, and except as otherwise
provided in this Agreement, the Company shall pay Executive an annual salary
(the "Salary") plus an incentive bonus (the "Bonus").
(b) The initial Salary shall be at the rate of Two Hundred and
Fifty Thousand ($250,000) Dollars per annum. The Salary shall be reviewed by
the Board of Directors prior to the second year of the Term hereof. The
Board of Directors, in its sole discretion, may increase such Salary. In no
event shall the Salary be reduced. The Salary shall be payable in equal
installments not less frequently than monthly.
(c) Executive shall receive a Bonus with respect to the seven
month period ending November 30, 1996 in an amount equal to the greater of
(i) one percent (1%) of Pre-tax Profits for such period or (ii) $43,750.
(d) Executive shall receive a Bonus with respect to the five
month period ending April 30, 1997 in an amount equal to the greater of (i)
one percent (1%) of Pre-tax Profits for such period or (ii) $32,250.
Such Bonus amount shall be calculated and paid promptly following May 1,
1997.
(e) Executive shall receive a Bonus with respect to the seven
month period ending November 30, 1997 in an amount equal to one percent (1%)
of Pre-tax Profits for such period.
(f) For the duration of the Term, Executive shall be paid a Bonus
with respect to each fiscal year of the Company (other than Years ending
November 30, 1996 and 1997) in an amount equal to one percent (1%) of Pre-tax
Profits for a Year, except that the Bonus for the Year during which the Term
ends shall be a pro rata portion of 1% of Pre-tax Profits for such Year in
the ratio that the number of months of the Term included in such Year bears
to 12.
(g) As used herein the following terms shall have the meanings
set forth:
"Pre-tax Profits" for a Year means the consolidated net
income of the Company and its subsidiaries (before provision
or credit for income taxes or utilization of net operating
loss carryforwards, but after provision for equity in operations
of investees) for such Year determined in accordance with
generally accepted accounting principles consistently applied.
"Year" means the fiscal year of the Company.
5. Expenses, Benefits and Perquisites.
(a) The Company will pay or reimburse Executive for all travel
and other expenses reasonably incurred by Executive during the Term in
connection with the performance of his duties hereunder.
(b) During the Term, Executive shall receive the benefits from
all retirement, group insurance, life insurance, medical and similar programs,
executive thrift, and stock option and other benefit plans which are
currently available to executives of the Company generally.
(c) Executive shall be entitled to the use of a Company
automobile during the Term of this Agreement. The type and cost of such
automobile shall be subject to the approval of the Board of Directors, but
shall be generally consistent with a $30-$40,000 luxury automobile.
(d) The Company shall pay the reasonable expenses actually
incurred by Executive in relocating his family to the northern New Jersey
area.
(e) The Company will pay the initiation fee and the annual
membership fee for one county club membership for Executive. Any bond or
other returnable security arrangement shall be returned to the Company upon
termination of such membership and return of any such amount to Executive.
6. Stock Options.
(a) Effective upon entering into this Agreement, the Board of
Directors has granted Executive Options to purchase 100,000 shares of common
stock under the terms of the New Jersey Steel Corporation 1996 Stock Option
Plan.
7. Death of Executive. In the event Executive should die during
the Term, this Agreement and all benefits hereunder shall terminate, except
that the Company shall pay Executive's estate the following: (a) Executive's
Salary until the earlier of the last day of the sixth month next following
the month in which Executive's death occurs or the Second Anniversary and
(b) an amount equal to a fraction of the Bonus which would have been paid
Executive for the Year in which death occurs had Executive not died, the
numerator of which fraction is the number of months from December 1 of the
Year in question to the end of the month in which Executive died and the
denominator of which is 12. Such termination shall not affect any rights
which Executive may have at the time of his death pursuant to any insurance
or other death benefit, bonus retirement or stock award plans or
arrangements of the Company or any subsidiary, or any stock option plan or
any options granted thereunder, which rights shall continue to be governed
by the provisions of such plans and arrangements.
8. Discharge for Cause. The Board of Directors of the Company may
discharge Executive for cause at any time. Such discharge shall be effected
by written notice (the "Discharge Notice") to Executive which shall specify
the reasons for Executive's discharge and the effective date thereof. As
used herein, the term "for cause" shall mean only criminal dishonesty,
chronic alcoholism, drug addiction or willful violation of specific written
directions from the Board of Directors of the Company, which directions are
lawful and are consistent with the provisions of this Agreement; provided,
however, that if (a) such discharge is effected because of Executive's
willful violation of such specific written directions from the Board of
Directors of the Company, and (b) within seven (7) days following the date
of receipt by the Executive of the Discharge Notice, Executive shall cease
his refusal and shall use his best efforts to carry out such written
directions, the termination shall not be effective. Upon termination
pursuant to this Section 8, this Agreement and all benefits hereunder shall
terminate, except that such termination shall not affect any rights which
Executive may have at the time of termination pursuant to any insurance or
other death benefit, bonus, retirement or stock award plans or arrangements
of the Company or any subsidiary, or any stock option plan or any options
granted thereunder, which rights shall continue to be governed by the
provisions of such plans and arrangements.
9. Disability. If Executive is unable to substantially perform his
services by reason of illness or incapacity for a period of more than three
(3) consecutive months, the Salary and Bonus thereafter payable to him
during the continued period of such illness or incapacity shall be reduced
by the amount of any disability benefits payable to Executive under any
disability program provided by the Company. Executive's full Salary and
Bonus shall be reinstated upon his return to full employment and discharge of
his duties. Notwithstanding anything to the contrary, the Company may
terminate this Agreement at any time after the Executive is absent or unable
to substantially perform his duties by reason of such illness or incapacity
for six (6) months in any twelve (12) month period. Upon termination
pursuant to this Section 9, this Agreement and all benefits hereunder shall
terminate, except that such termination shall not affect any rights which
Executive may have at the time of termination pursuant to any insurance or
other death benefit, bonus, retirement or stock award plans or arrangements
of the Company or any subsidiary, or any stock option plan or any options
granted thereunder, which rights shall continue to be governed by the
provisions of such plans and arrangements.
10. Discharge Without Cause.
(a) The Company retains the right to discharge Executive without
cause at any time during the Term by written notice of termination given to
Executive.
(b) If the Company discharges Executive without cause, the
Company shall pay, as severance compensation and liquidated damages, the
Salary and Bonus which Executive would have received, and the benefits which
he would have been entitled to receive under Section 5(b) hereof, had
Executive not been so discharged, and the following provisions shall apply:
(i) Payment shall be made at the times and in the manner
such Salary and Bonus would have been paid to Executive had he not been
discharged hereunder; and
(ii) In determining the other benefits which Executive would
have received under Section 5(b) during the Term had such discharge not
occurred, it shall be conclusively presumed that Executive would have
received benefits (excluding stock awards) equal to those which he received
with respect to the last Year prior to the Year in which the discharge
occurs.
11. Indemnification and Legal Fees. The Company shall indemnify
Executive to the fullest extent permitted by law and the Certificate of
Incorporation and By-Laws of the Company from and against any loss, claim,
liability and/or expense incurred for, or by reason of, or arising out of,
acts of Executive as an officer and/or director of the Company or any
subsidiary.
12. Noncompetition and Confidentiality Agreement.
(a) During the Term, Executive will not, without the prior
written consent of the Company, directly or indirectly own, manage, operate,
control or participate in the ownership, management, operation or control
of, or be connected as a stockholder, partner, joint venturer or otherwise
with, or accept employment of any kind with, any business which, or any
business or organization any part of which, competes with the businesses of
the Company or any of its subsidiaries as such businesses are now conducted,
in any geographical area in which such businesses are conducted. However,
nothing herein contained shall prevent Executive from investing solely as
a passive investor in any securities of a corporation, partnership, trust,
or other entity. For the purposes of this Agreement, Executive shall be
deemed to be a "passive investor" if he does not control, or does not
become part of any control group of, the issuer of securities acquired by
Executive.
(b) Executive acknowledges that during his employment with the
Company or any of its subsidiaries, he may have had, or may have, access to
secret and confidential information with respect to some or all of the
following: (i) product and business plans, budgets, sales forecasts,
design plans, research and engineering data, inventions, methods, systems
and processes, (ii) customers and (iii) trade secrets (all such information
is hereinafter referred to as "Confidential Information"). Executive agrees
that (except as authorized in writing by the Company or required pursuant to
legal or administrative process) he will not reveal, divulge or make known
to any person, firm or corporation any Confidential Information. Executive
further agrees that if after the cessation of his employment by the Company,
he discovers any Confidential Information in his possession, he shall
forthwith deliver the same to the Company. The provisions of this Section
12(b) shall survive the end of the Term of this Agreement.
13. Fiscal Year. If the Company shall change its fiscal year,
appropriate adjustments shall be made in the provisions of this Agreement
to reflect such change.
14. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
15. Miscellaneous.
(a) This Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof. This Agreement
may only be amended by an instrument in writing executed by the party to
be bound.
(b) This Agreement and the rights and obligations of the parties
hereto shall bind and inure to the benefit of the successor or successors of
the Company, whether by merger, consolidation or otherwise.
(c) Any notice to be given pursuant to the terms of this
Agreement shall be in writing and delivered by hand or sent by registered or
certified mail, if to the Company, to the Secretary of the Company, c/o
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005, and if
to Executive, to his address set forth above or to such other address or to
the attention of such other person as either party has specified by prior
written notice to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
NEW JERSEY STEEL CORPORATION
By:
Title;
Kenneth J. Leonard
