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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT FILED PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER
1-9887
OREGON STEEL MILLS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-0506370
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1000 BROADWAY BUILDING
SUITE 2200
1000 S. W. BROADWAY
PORTLAND, OREGON 97205
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 223-9228
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
------------------- ------------------------------
registered
----------
Common Stock, $.01 par value
per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.[X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- ----
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
BASED ON LAST SALE, JANUARY 31, 1995: $310,037,488
Indicate the number of shares outstanding of each of the
registrant's classes of stock as of January 31, 1995:
COMMON STOCK, $.01 PAR VALUE 19,377,343
---------------------------- ----------
(Title of Class) (Number of shares outstanding)
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy statement for the Registrant's Annual Meeting of Stockholders
to be held April 28, 1995 is incorporated by reference into Part III
of this report.
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OREGON STEEL MILLS, INC.
TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. BUSINESS........................................ 1
General....................................... 1
Capital Expenditures.......................... 2
Business Strategy............................. 3
Products...................................... 5
Raw Materials................................. 7
Marketing and Customers....................... 8
Competition and Other Market Factors.......... 10
Environmental Matters......................... 11
Employees..................................... 13
ITEM 2. PROPERTIES...................................... 14
ITEM 3. LEGAL PROCEEDINGS............................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 15
Executive Officers of the Registrant.......... 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS................... 16
ITEM 6. SELECTED FINANCIAL DATA......................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..... 23
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.......................... 43
PART III
ITEMS 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
and 11. REGISTRANT AND EXECUTIVE COMPENSATION........... 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.. 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K........................... 43
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PART I
ITEM 1. BUSINESS
GENERAL
Oregon Steel Mills, Inc. (the "Company" or the "Registrant") was
founded in 1926 by William G. Gilmore and was incorporated in
California in 1928. The Company reincorporated in Delaware in 1974.
The Company changed its name in December 1987 from Gilmore Steel
Corporation to Oregon Steel Mills, Inc.
During 1994, the Company operated two steel mills and five
finishing facilities serving the United States, Canada and certain
international markets. The Company manufactures and markets one of the
broadest lines of specialty and commodity steel products of any
domestic minimill company. In 1993, the Company organized into two
business units known as the Oregon Steel Division and the CF&I Steel
Division.
The Oregon Steel Division is centered on the Company's Portland,
Oregon steel minimill (the "Portland Steel Mill"), which supplies
steel for the Company's steel plate and large diameter pipe finishing
facilities. The Portland Steel Mill operates under the name of Oregon
Steel Mills, Inc. The wholly-owned and majority-owned operating
divisions, which are included in the Oregon Steel Division, are:
Oregon Steel Mills - Fontana Division, Inc., a steel plate rolling
mill in Fontana, California (the "Fontana Plate Mill"); Napa Pipe
Corporation, a large diameter steel pipe mill and fabrication facility
in Napa, California (the "Napa Facility"); and Camrose Pipe
Corporation ("CPC") which owns a 60 percent interest in Camrose Pipe
Company ("Camrose"), a large diameter pipe and electric resistance
welded ("ERW") pipe facility in Camrose, Alberta, Canada (the "Camrose
Facility"). The Company ceased operating the Fontana Plate Mill during
the fourth quarter of 1994.
The CF&I Steel Division consists of the steelmaking and finishing
facilities of CF&I Steel, L.P. ("CF&I") located in Pueblo, Colorado
(the "Pueblo Steel Mill"). The Company owns 90 percent of New CF&I,
Inc., which owns a 95.2 percent general partnership interest in CF&I.
The Pueblo Steel Mill is a steel minimill which produces long-length
and standard steel rails, seamless oil country tubular goods ("OCTG"),
wire rod, wire and bar products.
In total, the Company produces eight steel products which include
most standard grades of steel plate, a wide range of higher margin
specialty steel plate, large diameter steel pipe, ERW pipe, long-
length and standard rails, OCTG, wire rod, wire and bar products. The
steel industry, including the steel products manufactured by the
Company, has been highly cyclical and is generally characterized by
overcapacity, both domestically and internationally.
The Portland Steel Mill is the only hot-rolled steel plate
minimill and one of two steel plate producers located in the eleven
western states. The Portland Steel Mill produces slab thicknesses of
6", 7" and 8" and has an annual rolling mill capacity, depending on
product mix, of up to 450,000 tons of finished steel plate in widths
of up to 102".
The Company's Napa Facility produces large diameter pipe of a
quality suitable for use in high pressure oil and gas transmission
pipelines. The Napa Facility can produce pipe with an outside diameter
ranging from 16" to 42", with wall thicknesses of up to 1-1/16" and in
lengths of up to 80 feet, and can process two different sizes of pipe
simultaneously in its two finishing sections. Depending on product
mix, the Napa Facility has an annual capacity in excess of 350,000
tons of pipe. Substantially all of the Napa Facility's requirements
for specialty steel plate, which is fabricated into steel pipe, are
currently supplied by the Portland Steel Mill and until December of
1994, the Fontana Plate Mill.
The Company expanded its plate rolling capacity by commencing
operations at the Fontana Plate Mill in December 1989. Depending on
product mix, the Fontana Plate Mill had an annual rolling mill
capacity of up to 750,000 tons of finished steel plate, bringing the
Company's total plate rolling capacity to approximately 1.2 million
tons per year. The Fontana Plate Mill can roll plate up to 136" wide,
which is sufficient for fabricating the Napa and Camrose Facilities'
largest diameter pipe products. The Company acquired the rolling mill
machinery used at the Fontana Plate Mill in November 1989 for
approximately $7.5 million. The land and buildings at the Fontana
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Plate Mill are leased by the Company. In the third quarter, the
Company announced the permanent closure of the Fontana Plate Mill and
it ceased plate production in the fourth quarter.
The Company acquired a 60 percent interest in the Camrose
Facility in June 1992 for approximately $18 million from Stelco, Inc.,
a large Canadian steel producer. The Camrose Facility has two pipe
manufacturing mills. One is a large diameter pipe mill similar to that
of the Napa Facility, and the other is an ERW pipe mill which produces
steel pipe used in the oil and gas industry for drilling and
distribution. The large diameter pipe mill produces pipe in lengths of
up to 80 feet with a diameter ranging from 20" to 42" with maximum
wall thickness limited to about 70 percent of the Napa Facility.
Depending upon the product mix, the annual capacity for large diameter
pipe is up to 184,000 tons. The ERW mill produces pipe in sizes
ranging from 4.5" to 16" in diameter and has an annual nominal
capacity of up to 142,000 tons depending upon product mix.
On March 3, 1993, New CF&I, Inc., a wholly-owned subsidiary of
the Company, acquired for $22.2 million a 95.2 percent interest in a
newly formed limited partnership, CF&I. The remaining 4.8 percent
interest is owned by the Pension Benefit Guaranty Corporation. CF&I
purchased substantially all of the steelmaking, fabricating, metals
and railroad business assets of CF&I Steel Corporation for $113.1
million. The Pueblo Steel Mill has melting capacity in excess of 1
million tons and a finished ton capacity of approximately 1.5 million
tons. In August of 1994, the Company sold a 10 percent equity interest
in New CF&I, Inc. to a wholly-owned subsidiary of Nippon Steel
Corporation ("Nippon"). In connection with that sale, Nippon agreed to
license to the Company a proprietary technology for producing deep
head-hardened ("DHH") rail products as well as to provide certain
production equipment to produce DHH rail. New CF&I, Inc. received a
cash payment of $16.8 million in connection with that transaction.
CAPITAL EXPENDITURES
As part of its strategy to be a low cost producer of steel
products, the Company has undertaken extensive capital expenditure
programs at its Portland and Pueblo Steel Mills. The purposes of the
programs are to (i) reduce the cost of plate rolling and other
finishing operations at the Portland Steel Mill while increasing
yields and capacities, (ii) improve the steelmaking capability at the
Pueblo Steel Mill, and (iii) reduce the cost of producing rail, rod
and bar, and other products at the Pueblo Steel Mill while improving
product quality and expanding the specialty grades that can be
manufactured there. The Company also expects to invest in alternate
metallic capability to help stabilize raw materials costs.
Construction of the Combination Mill at Portland. The Company
has begun construction of a new Steckel combination rolling mill (the
"Combination Mill") at its Portland Steel Mill which is expected to
cost approximately $190 million and to reduce average production costs
for commodity and specialty grades of plate, primarily as a result of
higher product yields as well as a reduction in transportation and
labor costs as all of the Company's plate production is shifted to the
Portland Steel Mill. The project is expected to include installation
of a new reheat furnace, a 4-high rolling mill with coiling furnaces
capable of producing plate up to 136" wide, a vertical edging mill, a
down coiler, on-line accelerated cooling, hot leveling, and plate
shearing equipment. Other additions are expected to include an
extension of the rolling line and the installation of a fully
automated hydraulic gauge control system designed to roll steel plate
to exacting standards. These anticipated additions will enable the
Company to roll coiled steel plate in lengths up to 2,100 feet and
decrease end crop, side trim and crown loss. The Company estimates
that these and other related improvements will increase average
finished steel plate yields by approximately 8 percent, and that upon
completion annual steel plate rolling capacity of the Portland Steel
Mill will increase to 1.2 million tons and approximate the current
combined capacity of the Portland and Fontana rolling mills.
The Combination Mill is expected to begin operation in the third
quarter of 1996. It is expected to provide considerable manufacturing
flexibility and supply substantially all the Company's plate
requirements for large diameter pipe as well as coiled plate for such
applications as the smaller diameter ERW pipe manufactured at the
Camrose Facility. The Portland Steel Mill currently produces discrete
steel plate in dimensions up to 102" wide and 3/16" to 6" thick. The
Combination Mill as currently planned would be capable of producing
widths from 48" to 136", in thicknesses
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from 3/16" to 8". In addition, the Combination Mill is being designed
to produce both discrete steel plate and coiled plate in units up to
approximately 40 tons, and to produce steel plate for all of the
Company's commodity and specialty markets, including heat treated
applications.
Capital Improvements at the Pueblo Steel Mill. The Company
anticipated making significant capital additions to the Pueblo Steel
Mill as part of its strategy in acquiring the facility in 1993. In
1993, work began on a series of capital improvements principally to
the steelmaking facility, rod and bar mills and rail production
facilities. The capital improvement program at the Pueblo Steel Mill
is expected to cost approximately $172 million from 1994 through 1996
and be substantially completed by the end of 1995. Certain major
improvements are expected to be completed by the first quarter of
1995, including upgrading from ingot to continuous casting for rail
production, enhancement of the Company's ability to produce specialty
grades of steel, and construction of a new rod/bar mill. These changes
are expected to increase yields, improve productivity and quality, and
expand the Company's ability to offer specialty rod and bar products.
The primary components of the capital improvements at the Pueblo Steel
Mill are outlined below.
The Company completed in 1994 various capital improvements to the
steelmaking facility, including installation of a ladle refining
furnace, a vacuum degassing facility and upgrades to the continuous
casters. The Company anticipates that after the capital improvements
are completed, the Pueblo Steel Mill will be capable of producing
approximately 1.2 million tons of hot metal annually. The Company
expects that these and other related improvements will reduce the cost
of production of molten steel, improve existing product quality and
enable the Pueblo Steel Mill to produce additional specialty grades of
steel including alloy, high carbon and super clean steels.
The current rod and bar mills at the Pueblo Steel Mill are
relatively older mills located in separate facilities and generate
significant costs as the Company shifts production between them in
response to market conditions. During January of 1995, the Company
completed a new combination rod and bar mill with a new reheat furnace
and a high speed rod train. The new facility will be capable of
producing commodity and specialty grades of rod and bar products.
Depending on product mix, the new combined facility is expected to
have a capacity of approximately 600,000 tons per year and reduce the
average cost per ton of rod and bar, principally as a result of
decreased labor and energy requirements and increased product yields.
In addition, these improvements will enable the Company to increase
production of higher margin specialty products, such as high carbon
rod, merchant bar and other specialty bar products, and produce larger
rod coil sizes, which the Company believes are preferred by many of
its customers.
Rails are currently produced by ingot casting using processes
which incur significant energy costs and yield losses as the ingots
are reheated, reduced to blooms and then rolled into rails. During the
first quarter of 1995, improvements in the melt shop are expected to
replace ingot casting with more efficient continuous casting methods
allowing the Company to cast directly into blooms. This is expected to
increase rail yields from approximately 79 percent to approximately 95
percent and decrease the average cost of rail produced. The capital
improvements are also expected to include installation of technology
capable of producing approximately 200,000 tons annually of in-line
head-hardened rail. As a result of these improvements, the Company
expects to provide a functionally superior higher margin product and
to be favorably positioned to increase its share of the domestic rail
market.
BUSINESS STRATEGY
The Company seeks to be a low cost producer of specialty and
commodity steel products and is implementing specific strategies to
achieve that goal. The Company's diversified product line and flexible
manufacturing operations allow it to manage its product mix and reduce
the impact of individual product cycles on the Company's overall
performance. The Company's manufacturing flexibility allows it, on
short notice, to allocate its production resources to products which
it believes will enhance profitability. Having completed the Camrose
and CF&I acquisitions, which expanded the Company's product offerings
from two to eight, the Company's efforts are focused on reducing
production costs and emphasizing the manufacture of higher margin,
high quality specialty products. The Company considers that
substantial opportunities exist to reduce costs significantly and
improve financial performance through execution of the following
strategies:
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Invest in Efficient and Flexible Manufacturing Technologies. As
part of its effort to reduce manufacturing costs significantly,
upgrade its steelmaking facilities and improve product quality, the
Company initiated an expanded capital expenditure program in 1993,
including approximately $385 million of planned expenditures from 1994
through 1996. Major components of the program yet to be completed
include (i) construction of the new Combination Mill at the Portland
Steel Mill and (ii) improvements to the rail production process at the
Pueblo Steel Mill designed to expand the product mix into higher
margin specialty products and increase manufacturing flexibility.
Manufacture Higher Margin Specialty Products. The Company has
been expanding the number of specialty steel products it produces. The
Company's emphasis on higher profit margin specialty steel products
will further enhance its ability to reduce the impact of individual
product cycles on the Company's overall performance. The Company
considers the market for these products to be less subject to
competitive pressures because of the significant capital requirements
necessary to produce products of the requisite quality. The Company's
current range of specialty steel products includes alloy plate, heat
treated plate, and large diameter and ERW pipe manufactured to
demanding specifications. The Company's capital expenditure program at
CF&I will enhance its ability to produce head-hardened and premium
rail and a variety of specialty rod and bar products.
Pursue Alternative Raw Material Sources. To reduce the effects
of scrap price volatility and to insure access to quality raw
materials, the Company is seeking to decrease its dependence on steel
scrap as an input for the production process. The Company has
successfully integrated directly reduced iron in briquetted form
("HBI") into the production process at both the Portland and Pueblo
Steel Mills as a low residual scrap substitute. Because HBI is
typically purchased on a contract basis (whereas scrap is typically
purchased on the spot market), it provides some insulation from the
price fluctuations experienced in the scrap market. In 1994, the
Company used approximately 107,000 tons of HBI as substitute for
approximately 13% of total scrap requirements at the Portland Steel
Mill. The Company intends to increase the amount and percentage of
HBI or other substitutes used in the production process.
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PRODUCTS
OVERVIEW
The following table sets forth for the periods indicated the
tonnage shipped and the Company's total shipments by product class.
TONS SHIPPED
----------------------------------
PRODUCT 1994 1993(2) 1992(1)
------- --------- --------- ---------
Oregon Steel Division:
Commodity Plate................ 261,400 292,500 241,200
Specialty Plate................ 162,700 143,700 138,500
Large Diameter Pipe............ 356,300 248,600 269,500
ERW Pipe....................... 94,900 75,100 16,100
Other.......................... 45,400 18,400 -
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Total Oregon Steel Division.. 920,700 778,300 665,300
CF&I Steel Division(2):
Rail........................... 246,600 185,600 -
Rod............................ 199,200 183,800 -
Bar Products................... 121,000 115,300 -
Wire........................... 65,000 53,300 -
Seamless Pipe.................. 121,400 81,500 -
Other.......................... 12,400 5,200 -
--------- --------- -------
Total CF&I Steel Division.... 765,600 624,700 -
--------- --------- -------
Total Company................ 1,686,300 1,403,000 665,300
========= ========= =======
- -------------
(1) Results for 1992 include the results of operations of the Camrose
Facility from the date of the Camrose acquisition on June 30,
1992.
(2) Results for 1993 include the results of operations of the Pueblo
Steel Mill from the date of the CF&I acquisition on March 3, 1993.
Oregon Steel Division
Steel Plate. The Company's commodity grade steel plate is
produced at the Portland Steel Mill, and at the Fontana Plate Mill
prior to its closure in December 1994. Commodity steel plate products
currently consist of hot-rolled carbon plate varying in widths from
48" to 136" and in thicknesses varying from 3/16" to 3". Following the
closure of the Fontana Plate Mill, the Company will only be able to
produce steel plate up to 102" wide until the Combination Mill is
completed. Commodity steel plate is used in a variety of applications,
such as the manufacture of storage tanks, machinery parts, barges and
ships.
In addition to commodity grades of steel plate, the Company
produces a wide range of specialty steel plate. Specialty steel plate
products consist of hot-rolled carbon, heat treated and alloy steel
plate currently produced in widths of 48" to 136" and in thicknesses
varying from 3/16" to 8". Specialty steel plate has superior strength
and performance characteristics for particular applications such as
the manufacture of construction, mining and logging equipment,
pressure vessels, oil and gas transmission pipe and the fabrication of
bridges and high-rise buildings. Specialty steel plate is typically
made to order for customers that wish to vary the properties of the
steel plate product, including the plate's formability, hardness or
abrasion resistance, impact resistance or toughness, strength and
ability to be machined or welded. These variations are achieved by
chemically altering the steel through the addition of elements such as
carbon, manganese, chromium, molybdenum, nickel, boron, aluminum and
titanium and through the removal of elements such as phosphorous and
sulfur; by vacuum degassing; by temperature control while rolling; or
by heat treating the plate.
The Company has committed considerable capital to its ability to
offer a wide range of specialty steel plate products to its customers.
The Company recently expanded its heat treating production capacity at
the Portland Steel Mill by approximately 50 percent to 90,000 tons
annually. The
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heat treating process of quenching and tempering improves the strength
and hardness of the steel plate. Quenched and tempered steel is used
extensively in the mining industry, the manufacture of heavy
transportation equipment and military armor. In 1994 the Company
installed a hot leveler at the Portland Steel Mill, which flattens the
steel plate following heat treatment and ensures that the steel plate
will retain its desired shape after cooling. These additions enable
the Company to manufacture a superior grade of hardened plate product.
The Company also offers customers the option of surface
processing steel plate, which includes descaling (the removal of
oxides from the surface of the plate) and painting. This process
provides a more efficient and economical means of cleaning and coating
steel products than the traditional sandblasting or hand cleaning
methods.
The Portland Steel Mill, on the basis of an audit conducted in
1992, has received registration under ISO-9002. This registration is
the emerging international designation for demonstrating that the
Company systems support the production of quality products. This was
one of the first ISO-9002 registrations of a steel mill in the United
States.
Large Diameter Steel Pipe. The Company manufactures large
diameter pipe at its Napa and Camrose Facilities. The Company has
manufactured large diameter pipe since 1988, after the Company
acquired the Napa Facility.
The Napa Facility pipe mill is one of the most versatile pipe
mills in the industry. The mill can produce large diameter steel pipe
ranging from 16" to 42" in diameter with wall thicknesses of up to
1-1/16" and lengths of up to 80 feet. In addition, the mill can
process two different sizes of pipe simultaneously in its two
finishing sections. Moreover, the Company can vary the pipe's
hardness, impact resistance, strength and ability to be welded to meet
the customers' specifications. The Company offers customers the option
of surface processing the steel pipe, which includes descaling and
internal and external coating on-site. The external coating facility
was acquired by Napa in 1993. During 1989, the Company completed the
construction of a full body ultrasonic inspection facility at the Napa
Facility. If requested by the customer, this facility inspects the
ends, long seam welds and entire body for all types of steelmaking and
pipemaking imperfections and records the results for a permanent
record.
The Camrose Facility produces large diameter steel pipe ranging
from 20" to 42" with maximum wall thickness limited to about 70
percent of that produced at the Napa Pipe Mill. The pipe can be
produced in lengths up to 80 feet. Unlike Napa, the mill has one
finishing section and can produce one size pipe at a time.
The Company's large diameter pipe is used primarily in
pressurized underground or underwater oil and gas pipelines where
quality is critical.
The Company's ability to produce high quality large diameter pipe
was recently enhanced by the installation of the vacuum degassing
facility at the Portland Steel Mill. The vacuum degassing process
reduces the hydrogen content of the final product and increases
resistance to hydrogen-induced cracking. The vacuum degassing facility
enables the Company to produce some of the highest quality steel plate
and line pipe steels, and has been key to the Company's ability to
produce large diameter steel pipe for the international pipe market.
The closure of the Fontana Plate Mill in the fourth quarter of 1994
will require the Company to seek outside sources of steel plate if it
chooses to produce steel pipe in diameters greater than 32" until the
Combination Mill is completed.
Electric Resistance Welded Pipe. The Company produces smaller
diameter ERW pipe at the Camrose Facility. ERW pipe is produced in
sizes ranging from approximately 4" to 16" outside diameter. The pipe
is manufactured using coiled steel rolled on a high frequency electric
resistance weld mill. The principal customers for this product are oil
and gas companies that use it for gathering lines to supply product to
feed larger pipeline systems.
Demand for ERW pipe produced at the Camrose Facility is largely
dependent on the level of exploration and drilling activity in the gas
fields of western Canada.
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CF&I Steel Division
Rail. The Company produces standard and premium head-hardened
rail at its Pueblo Steel Mill. The Pueblo Steel Mill is the sole
manufacturer of rail products west of the Mississippi River and one of
only two rail manufacturers in the United States. Rails are
manufactured in the five most popular rail weights (115 lb/yard
through 136 lb/yard), in 39 and 80 foot lengths as well as quarter
mile welded strings.
As part of the capital expenditure program the Company will
improve its rail manufacturing facilities to produce in-line head-
hardened rail instead of utilizing the current off-line process. The
Company has recently licensed technology (known as deep head-hardened
or DHH technology) from Nippon in connection with Nippon's investment
in New CF&I, Inc.
Rod Products. During 1994, the Company produced low carbon rod
products at the Pueblo Steel Mill in diameters ranging from 7/32" to
3/4", sold principally to wire drawers in the midwest and western
states. Typical end uses include a variety of construction and
agricultural applications such as nails, bailing wire, chain link and
woven wire fencing.
Construction of a new 600,000 ton rod/bar mill was completed by
the Company in early 1995 increasing rod production and adding a range
of high carbon product capabilities. With the rod/bar mill, the
Company is the first producer to make 6,000 pound coils in the U.S.
The new finishing facilities provide a range of rod products from
.197" to 1" in diameter.
Bar Products. Bar products are available in straight lengths
(rounds .625" to 2.5" in diameter; rebar nos. 4 to 11) and coils
(rounds .75" to 1.5"; rebar nos. 5 to 11). Products include
reinforcing bar, coiled rebar, merchant and specialty bar products.
Wire Products. The Company uses some of its own rod and draws
wire to produce various wire products at its Pueblo Steel Mill; and is
one of the few manufacturers which produce a wide variety of wire
products. Products include fencing, barbed wire, nails, staples,
bailor wire, welded wire fabric, rebar tie wire, and both high and low
carbon manufacturer's wire.
Seamless Pipe. Seamless pipe produced at the Pueblo Steel Mill
consists of seamless casing, coupling stock, and line pipe. Seamless
pipe casing is used as a structural retainer for the walls of oil or
gas wells. Line pipe is used to transport liquids and gasses above
ground. The Company's seamless mill produces pipe in standard lengths
(5" to 10-3/4" in diameter). The Company's production capability
includes both carbon and heat treated tubular products.
RAW MATERIALS
The Company's principal raw material for the Portland and Pueblo
Steel Mills is ferrous scrap metal derived from, among other sources,
junked automobiles, railroad cars and railroad track materials, and
demolition scrap from obsolete structures, containers and machines.
The purchase price for scrap is subject to market forces largely
beyond the control of the Company including demand by domestic and
foreign steel producers, freight costs, speculation by scrap brokers
and other conditions. The cost of scrap to the Company can vary
significantly, and product prices cannot always be adjusted,
especially in the short-term, to recover the costs of increases in
scrap prices.
The Company maintains a 30 to 45 day supply of scrap to insulate
itself to some extent against possible short-term price fluctuations.
The Company purchases scrap through many outside dealers and is not
dependent on any single supplier or group of suppliers at its Portland
Steel Mill. The Pueblo Steel Mill purchases most of its scrap through
a broker. The Company believes that adequate supplies of scrap are
readily available from a number of sources, but that current demand
will keep pricing relatively high.
The Company also purchases a quantity of "HBI" for use as a
substitute for steel scrap. The successful integration of this
material into the steelmaking process provides the Company with an
alternate source of low residual material. Because this material is
purchased on a contract basis it provides some insulation from the
price fluctuations experienced in the scrap market. During 1993 and
1994, the Company also purchased pig iron as a scrap substitute and
believes it can be used successfully in limited quantities. With the
shift in the Company's product mix from carbon grades
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to higher quality grades of steel, the need for higher quality scrap
must be assured. The availability of higher grades of scrap in
sufficient quantities may not be available in the Company's
traditional scrap markets, which will require the use of an alternate
source of metallics.
During the first quarter 1994, the Company signed a shareholders
agreement to purchase an approximately 13 percent equity interest in a
joint venture project (the "HBI Project") with several other entities
to design, construct and operate an industrial plant in Venezuela for
the processing of iron oxides into HBI. The Company believes that the
HBI Project has the potential to provide a long-term source of supply
of HBI. The plant is expected to have a rated design capacity of one
million metric tons per year and cost approximately $255 million. As
the HBI Project is currently structured, the Company will be required
to purchase 200,000 metric tons of HBI per year from the HBI Project.
The Company expects that its initial cash investment will be
approximately $15 million. Like other participants in the HBI Project,
however, the Company will be responsible for paying its share of cost
overruns or related financing shortfalls associated with the
construction or operation of the facility. The HBI Project is expected
to obtain non-recourse debt financing for approximately 60 percent of
its initially estimated capital needs. The shareholders agreement will
not become effective, and construction will not commence, until
agreements to provide debt financing to the HBI Project have been
obtained and certain other conditions satisfied. Plant construction is
expected to start in 1995 and plant operation is expected to commence
approximately 30 months thereafter, absent unforeseen delays or
difficulties.
In addition to the HBI Project, the Company is pursuing other
direct reduction technologies, such as iron carbide and direct
smelting. The Company may participate in one or more joint ventures
for these processes and is considering several possible projects.
However, the Company has not yet entered into any agreements or
letters of intent for any such projects except that, in August 1994,
the Company entered into an agreement to form a temporary joint
venture to explore the feasibility of constructing and operating an
iron carbide plant in the Caribbean. The agreement provides that,
following completion of the initial feasibility study, the parties
will decide whether to abandon or pursue the project. The Company is
unable to predict the outcome of this study or whether this project
will be pursued.
The Company purchases semi-finished steel slab from third parties
to supplement steel production capacity and enable it to produce steel
plate in thicknesses greater than three inches. Generally, the Company
has been able to adjust product prices in response to increases in
slab prices. The world demand for slab can, however, significantly
affect its purchase price and there can be no assurance that the
Company will be able to adjust product prices to offset increases in
slab prices in the future. The Company purchased significant
quantities of slab in the first six months of 1994, but was a net
seller of slab in the last half of 1994.
MARKETING AND CUSTOMERS
Steel products are sold by the Company principally through its
own sales organizations, which have sales offices at various locations
in the United States and Canada and, as appropriate, through foreign
sales agents. In addition to selling to customers who consume steel
products directly, the Company sells steel products to steel service
centers, distributors, processors and converters.
The sales force is organized both geographically and by product
line. The Company has separate sales people for plate, for tubular
products, and for rod and bar, rail and wire products. As of December
31, 1994, the Company employed 30 direct sales people and 20 customer
service representatives. Most of the Company's sales are initiated by
contacts between sales representatives and customers. Accordingly, the
Company does not incur substantial advertising or other promotional
expenses for the sale of its products. In 1994, the Company did not
derive more than 10 percent of its sales from any single customer.
Except for contracts entered into from time to time to supply large
diameter pipe to significant projects, the Company does not have any
significant ongoing contracts with customers to purchase steel
products, and orders placed with the Company generally are cancelable
by the customer.
The Company does not have a general policy permitting return of
purchased steel products except for product defects. The Company does
not routinely offer extended payment terms to its customers.
8
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The business is generally not subject to significant seasonal
trends. The Company does not have material contracts with the United
States Government and does not have any contracts subject to
renegotiation.
Oregon Steel Division
Customers for the Company's commodity steel plate are typically
located in the western United States, primarily in the Pacific
Northwest and California. The Company's commodity steel plate is
typically sold to service centers, fabricators and equipment
manufacturers. Service centers typically resell to other users with or
without additional processing such as cutting to a specific shape.
Frequent end uses of commodity grade steel plate include the
manufacture of rail cars, storage tanks, machinery parts, bridges,
barges and ships.
The Company believes the market for commodity steel plate is
mature and subject to overcapacity, and anticipates increased
competitive pressure on both volumes and prices. The Company believes
that its shipments of commodity plate will increase, however, as the
Combination Mill expands the Company's product offerings to include
coiled plate and lighter gauges.
Customers for specialty steel are located throughout the United
States, but the Company is most competitive in the west, southwest and
midwest where transportation costs are less of a factor. Typical
customers include service centers and equipment manufacturers. Typical
uses include pressure vessels, construction and mining equipment and
military armor.
Large diameter pipe is marketed on a global basis and sales
generally consist of a small number of large orders generated from
natural gas pipeline companies, public utilities and oil and gas
producing companies. During 1993, the Company began to market large
diameter pipe internationally, and the Company believes this will
continue to be an active market for its pipe products in the longer
term.
The Company believes that the quality of its pipe enables it to
compete effectively in this market. Domestically, the Company is most
competitive in the steel pipe market west of the Mississippi River.
The Camrose Facility is most competitive in western Canada. Sales of
large diameter pipe generally consist of a small number of large
orders and generally involve the Company responding to requests to
submit bids.
The principal customers for ERW pipe produced at the Camrose
Facility are in the provinces of Alberta and British Columbia, where
most of Canada's natural gas and oil is located, as well as the
northwestern United States. The primary customers for this product are
oil and natural gas companies who utilize ERW for gathering lines to
supply their product to feed the larger distribution pipelines.
CF&I Steel Division
The primary customers for the Pueblo Steel Mill's rail are the
major U.S. railroads. Rail is also sold directly to rail contractors,
transit districts and short-line railroads. The Company estimates that
the market for rail in the United States was approximately 650,000
tons in 1994 and that its share of the domestic rail market in 1994
was approximately 38 percent (with most of the Company's rail
shipments made to customers in the western United States). Imports
accounted for approximately 25 percent. The Company believes its
proximity to western rail markets benefits the Company's marketing
efforts in these markets and contributes to the Company's market
share.
Rail produced using the improved in-line technology is considered
by many rail customers to be more durable and higher quality rail than
that produced with existing off-line techniques and the Company
believes, based on discussions with its rail customers, that head-
hardened rail produced using DHH technology is preferred over head-
hardened rail manufactured with other technologies. The Company
believes that this capability, to be completed in the first quarter of
1996, will further enhance the Company's position in the domestic rail
market. The Company estimates, based on AISI data and internal
estimates, that premium rail represents approximately 40 percent of
the domestic rail market. The Company believes the domestic market for
premium rail will expand as in-line, head-hardened rail becomes more
available from domestic producers at competitive prices.
Seamless pipe is sold primarily through distributors to major and
independent oil exploration and production companies. Sales of line
pipe are made both through distributors and directly to oil
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and gas transmission and production companies. The market for the
Company's seamless pipe product is primarily domestic and focused in
the western and southwestern United States. The demand for this
product is determined in large part by the number and drilling depths
of the oil and gas drilling rigs working in the United States. The rig
count in the United States (and, consequently, the consumption of
seamless pipe) has been depressed in recent years.
During 1994 the Company sold its bar products (primarily
reinforcing bar) to fabricators and distributors. The majority of its
customers are regional, located within Colorado. Incremental costs for
transportation limit the Company's ability to ship the product out of
the region and surrounding states.
The Company's wire rod products are sold primarily to wire
drawers in the western United States. The demand for wire rod is
driven by wire demand and is dependent upon a wide variety of markets,
including agricultural, construction and the durable goods segments.
Sales of wire products are made to a large number and wide
variety of customers in the western United States. The customers are
primarily in the distribution of agricultural and construction
products. The agricultural market remains constant but the
construction market is cyclical.
COMPETITION AND OTHER MARKET FACTORS
The steel industry is cyclical in nature, and the domestic steel
industry has been adversely affected in recent years by high levels of
steel imports, worldwide production overcapacity and other factors.
The Company also is subject to industry trends and conditions, such as
the presence or absence of sustained economic growth and construction
activity, currency exchange rates and other factors. The Company is
particularly sensitive to trends in the oil and gas, gas transmission,
construction, capital equipment, rail transportation, agriculture and
durable goods segments, as these industries are significant markets
for the Company's products. Further, the Company has seen substantial
shrinkage in the domestic large diameter pipe market in recent years.
These trends have caused the Company to seek new overseas markets for
large diameter pipe, and to seek higher quality, niche markets for its
plate. In addition, one of the Company's competitors for steel plate
in the western United States has recently resumed production (at less
than full capacity) after having been shut down for capital
improvements; the Company expects increased competition as that
competitor increases production.
The Company competes in its product markets primarily on the
basis of product quality, price, and responsiveness to customer needs.
Competition within the steel industry is driven by overcapacity in
most products and is intense. Some of the Company's competitors are
larger, have greater capital resources than the Company and have more
modern technology and relatively low labor and raw material costs.
Domestic steel producers face significant competition from foreign
producers, although currency fluctuations have dampened this
competition in the U.S. in recent years.
Oregon Steel Division
Some of the Company's steel plate competitors are larger, have
greater capital resources than the Company and have modern technology
and relatively low labor and raw material costs. Principal competitors
in the commodity steel plate market include Geneva Steel Company,
located in Utah, IPSCO, located in Regina, Saskatchewan, and several
other foreign producers. Principal competitors in the market for
specialty steel plate include Lukens Steel Company, U.S. Steel
Corporation and several foreign producers.
Steel plate producers in the western United States have faced
competition in past years from foreign producers, including producers
in Japan, certain members of the European Economic Community, Korea,
Brazil and Canada. The effects of foreign competition were mitigated
in recent years by the decline and continued weakness of the U.S.
dollar relative to several foreign currencies. The Company believes
that its efforts in increasing productivity, reducing production costs
and shifting into higher margin product niches should enable the
Company to compete effectively with both foreign and domestic
producers even if the dollar strengthens relative to foreign
currencies.
The Company believes that competition in the market for large
diameter pipe is based primarily on quality, price and responsiveness
to customer needs. The Company competes on a global basis and believes
its ability to manufacture pipe of sufficiently high quality will
enable it to compete effectively.
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Principal domestic competitors in the large diameter pipe market
at this time are Berg Steel Pipe Corporation, located in Florida, and
Bethlehem Steel Corporation, located in Pennsylvania. International
competitors consist primarily of Japanese and European pipe producers.
The principal Canadian competitor is IPSCO, located in Regina,
Saskatchewan. Demand for the Company's pipe in recent years is
primarily a function of new construction of oil and gas transportation
pipelines and to a lesser extent maintenance and replacement of
existing pipelines. Construction of new pipelines domestically depends
to some degree on the level of oil and gas exploration and drilling
activity, which has declined in recent years.
The competition in the market for ERW pipe is based on price,
product quality and responsiveness to customers. The need for this
product has a direct correlation to the drilling rig count in the
United States and Canada. Principal competitors in the ERW product in
western Canada are IPSCO located in Regina, Saskatchewan and
Prudential located in Calgary, Alberta.
CF&I Steel Division
The majority of current rail requirements in the United States
revolves around replacement rail for existing rail lines.
Consequently, domestic rail demand is projected to be stable for the
next several years. Imports have been a significant factor in the
domestic premium rail market in recent years. Premium rail represents
approximately 25 percent of the domestic market and is expected to
increase over the next few years. The Company's capital expenditure
program at CF&I will give the rail production facilities the
continuous cast steel and in-line head hardening rail capabilities
necessary to compete with the level of cost and quality available from
other producers. Pennsylvania Steel Technologies is the only other
domestic rail producer.
The Company's primary competitors in OCTG include a number of
domestic and foreign manufacturers, some of which have significantly
greater resources than the Company. The Company enjoys a freight
advantage over eastern producers in shipping to some of the major oil
drilling areas. The Company also has the flexibility to produce
relatively small volumes of specified products on short notice in
response to customer requirements. Principal domestic competitors
include U.S. Steel Corporation, Lone Star Steel and North Star Steel.
The competition in bar products include a group of minimills that
have a geographical location close to the intermountain market. Some
of these mills utilize reinforcing bar as an incremental product to
keep mills operating at capacity. With the new rod/bar mill, market
expansion into other geographical locations is feasible because of the
addition of higher valued products, such as MBQ and SBQ products.
The Company's market area on wire and wire rod products is
considered to be west of the Mississippi River. The Company completed
construction of a new rod/bar mill which provides substantially larger
coils and reduced manufacturing costs. Domestic rod competitors
include GST, North Star Steel, Keystone Steel and Wire, and
Northwestern Steel & Wire. Major wire producers include Davis Wire and
Tree Island Steel.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental
laws and regulations concerning, among other things, wastewater, air
emissions, toxic use reduction and hazardous materials disposal. The
Portland and Pueblo Steel Mills are classified in the same manner as
other similar steel mills in the industry as generating hazardous
waste materials because the melting operation produces dust that
contains heavy metals ("EAF" dust). This dust, which constitutes the
largest waste stream generated at these facilities, is managed in
accordance with applicable laws and regulations.
In 1993, the Environmental Protection Agency ("EPA") concluded a
site assessment of the Portland Steel Mill. The review ranked the
facility as a medium/low corrective action priority for identified
Solid Waste Management Units. The Company is proceeding with an
internal corrective action schedule. This schedule will make portions
of the Company's property useable for future development and is
expected to be completed by September 1995. The cost of these
corrective action improvements is estimated at approximately $1.2
million.
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The property and building at which the Fontana Plate Mill is
located are leased to the Company. The Fontana Plate Mill was formerly
part of a larger integrated steel plant (the "Mill") operated on
property (the "Mill Property") surrounding the Fontana Plate Mill.
Prior to the termination of steel production at the Mill in 1983, the
Mill owner generated by-products that currently are defined as
hazardous by federal and California regulations. Hazardous substances
have been detected in the soil and groundwater at a number of specific
areas within the Mill Property on the basis of inspections done by the
prior owner and by the EPA. The testing program carried out by the
prior owner and the EPA at the Mill Property has not included sampling
at the Fontana Plate Mill site. The Company has conducted only limited
testing at the Fontana Plate Mill site, and there can be no assurance
that the levels of hazardous substances in the subsurface soils and
groundwater at the Fontana Plate Mill are within permissible limits.
The Fontana Plate Mill operation is being terminated in 1995 and the
Company signed a lease termination agreement with the lessor on
January 18, 1995. A $900,000 accrual has been established for
restoring the leased premises. (See Note 13 to the Consolidated
Financial Statements.)
Prior to the acquisition of the Napa Facility by the Company, the
prior owner of the Napa Facility disposed of certain waste materials,
including spent sandblast materials, mill scale and welding flux, on-
site. As a result of these matters and other actions prior to the
acquisition, certain metals were released into the ground, and certain
petroleum based compounds have seeped into the ground and groundwater
at the Napa Facility. The prior owner of the Napa Facility entered
into a stipulated judgment with the County of Napa which required a
site investigation of the Napa Facility and remediation (to the
satisfaction of local, regional and state environmental authorities)
of soil and groundwater contamination associated with activities
conducted at the site prior to its acquisition by the Company. As a
result of the acquisition of the Napa Facility, the Company's
subsidiary, Napa Pipe Corporation, is obligated by contract to comply
with the terms and requirements of the stipulated judgment. Proposed
plans for investigating and remediating the soil and water conditions
at the Napa Facility were submitted to local, regional and state
environmental authorities in February 1988. The Company is continuing
to negotiate certain terms of the remediation plans with such
environmental authorities.
In addition to local, regional and state environmental
authorities, the EPA conducted an investigation of the Napa Facility
and has taken soil and water samples at the Napa Facility. The
Company's proposed plans for investigating the soil and water
conditions at the Napa Facility were furnished to the EPA in March
1988. While awaiting possible further response from the EPA, the
Company is proceeding with its remediation plans as described in the
preceding paragraph. In April 1992, the State of California
Environmental Protection Agency, Department of Toxic Substances
Control completed a site screening and recommended a low priority
preliminary endangerment assessment for the Napa Facility.
The total cost of the remedial action that may be required to
correct existing environmental problems at the Napa Facility,
including remediation of contaminants in the soil and groundwater,
depends on the eventual requirements of the relevant regulatory
authorities. As of December 31, 1994, the Company had expended $6.7
million for remediation and had reserved an additional $2.8 million to
cover future costs arising from environmental issues relating to the
site.
The Company owns a 60 percent interest in Camrose Pipe Company
located in Camrose, Alberta, Canada. A preliminary assessment of the
property indicates the potential presence of subsurface petroleum
contamination as a result of previous operations. The assessment also
identifies the potential for waste waters to have impacted the site.
An internal investigation is scheduled for 1995 to determine the
extent of this impact, if any.
At December 31, 1994, the Company had accrued a reserve of $34.1
million for environmental remediation at the Pueblo Steel Mill site.
This reserve is based upon a range of estimated remediation costs of
$23.1 million to $43.6 million at that date. The Company's estimate of
this environmental reserve was based on two separate remediation
investigations conducted by independent environmental engineering
consultants. The estimated costs were based on then available
technologies and laws and regulations in effect at the time. The
reserve includes costs for Resource Conservation and Recovery Act
facility investigation, corrective measures study, remedial action,
and operation and maintenance of the remedial actions taken. The State
of Colorado has issued
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public notice for the post-closure permit of two historic hazardous
waste units at the CF&I facility. As part of the post-closure permit
requirements, CF&I must begin a corrective action program for the 82
solid waste management units at the facility. CF&I and the State of
Colorado Department of Public Health and Environmental are finalizing
a prioritized schedule of corrective actions to be completed which are
substantially reflective of a straight-line rate of expenditure over
30 years. The State of Colorado stated that the schedule for
corrective action could be accelerated if new data indicated a greater
threat to the environment than is currently known to exist. It is
currently anticipated that the reserve is adequate to cover the
remediation costs.
In November 1990 the President of the United States signed into
law the Clean Air Act Amendments of 1990. This law has imposed new
responsibilities on many industrial sources of air emissions,
including plants owned by the Company. The Company cannot determine at
this time the financial impact of the new law since Congress is
continuing to modify it. The impact will depend on a number of site-
specific factors, including the quality of the air in the geographical
area in which a plant is located, rules to be adopted by each state to
implement the law, and future EPA rules specifying the content of
state implementation plans. The Company anticipates that it will be
required to make additional expenditures, and will be required to pay
higher fees to governmental agencies, as a result of the new law and
future laws regulating air emissions. In addition, the monitoring and
reporting requirements of the new law have subjected and will subject
all air emissions to increased regulatory scrutiny. The Company will
be submitting Title V permits for the Portland and Pueblo in 1995.
The Company's future expenditures for installation of and
improvements to environmental control facilities, remediation of
environmental conditions existing at its properties and other similar
matters are difficult to predict. Environmental legislation and
regulations and related administrative policies have changed rapidly
in recent years. It is likely that the Company will be subject to
increasingly stringent environmental standards in the future
(including those under the Clean Air Act Amendments of 1990, the Clean
Water Act Amendments of 1990 stormwater permit program, and toxic use
reduction programs), and will be required to make additional
expenditures, which could be significant, relating to environmental
matters on an ongoing basis. Furthermore, although the Company has
established certain reserves for environmental remediation as
described above, there can be no assurance regarding the cost of
remedial measures that might eventually be required by environmental
authorities, or that additional environmental hazards, requiring
further remedial expenditures, might not be asserted by such
authorities or private parties. Accordingly, the costs of remedial
measures may exceed the amounts so reserved.
EMPLOYEES
As of December 31, 1994, the Company had 3,019 full-time
employees. The Company's 972 employees at the Portland Steel Mill,
Fontana Plate Mill, Napa Facility and corporate headquarters are not
represented by a union. At the Pueblo Steel Mill, 1,439 employees work
under collective bargaining agreements with several unions,
principally the United Steelworkers of America ("USWA"). The USWA
contract was negotiated in March 1993 and will expire in September
1997. The contract provides for scheduled annual cost of living pay
increases during the life of the contract. Approximately 95 employees
of the Camrose Facility are members of the Canadian Autoworkers Union.
A contract for these employees was renegotiated in January 1994 and
expires on January 31, 1997. The Company believes it has a good
relationship with its employees.
The domestic employees of the Oregon Steel Division participate
in the ESOP. As of December 31, 1994 the ESOP owned approximately 12
percent of the Company's common stock. Common stock is contributed to
the ESOP, as decided annually by the Board of Directors. The Company
also has a profit participation plan for its domestic employees of
both the Oregon Steel Division and the CF&I Steel Division which
permits eligible employees to share in the pre-tax profits of their
division unit.
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ITEM 2. PROPERTIES
Oregon Steel Division
The Portland Steel Mill is located on approximately 147 acres
owned by the Company in the Rivergate Industrial Park in Portland,
Oregon, near the confluence of the Columbia and Willamette rivers. The
operating facilities principally consist of one electric arc furnace,
ladle metallurgy stations, slab casting equipment and a plate rolling
mill. The Company's 24,500 square foot office building and its steel
mill facilities occupy approximately 84 acres of the site. The
remaining 63 acres consist of two waterfront sites totaling 59 acres
and a four-acre site. The adjacent water channel accommodates ocean-
going vessels. The Company's heat treating facilities are located near
its principal facilities on a five acre site owned by the Company. In
addition, the Company owns 74 acres of industrial property nearby, of
which 44 acres are leased.
The Company owns approximately 152 acres in Napa, California. The
Company's large diameter pipe mill occupies approximately 92 of these
acres. The Company also owns a steel fabricating facility located
adjacent to the pipe mill on this site. The fabricating facility is
not currently used by the Company and consists of approximately
325,000 square feet of industrial buildings containing equipment for
the production and assembly of large steel products or components and
is periodically leased on a short-term basis.
Camrose owns approximately 67 acres in Camrose, Alberta, Canada.
The large diameter pipe mill occupies approximately 4 acres and the
ERW pipe mill occupies approximately 3 acres of the site. In addition,
there is a 3,600 square foot office building on the site. The sales
staff is located in Calgary, Alberta in leased space. The assets of
Camrose, including all property, plant and equipment are collateral
for the Camrose $15 million revolving credit facility (see Note 6 to
the Consolidated Financial Statements).
The land and buildings at the Fontana Plate Mill were leased to
the Company under a net lease. In connection with the closure of the
Fontana Plate Mill, the Company signed a lease termination agreement
with the lessor on January 18, 1995 and has agreed to vacate the
premises by June 30, 1995.
CF&I STEEL DIVISION
The Pueblo Steel Mill is located in Pueblo, Colorado on
approximately 570 acres. The operating facilities principally consist
of two electric arc furnaces for production of all raw steel, a 6-
strand continuous billet caster and a 6-strand continuous round caster
for producing semi-finished steel, and five finishing mills for
conversion of semi-finished steel to a finished steel product. These
finishing mills consist of a rail mill, a seamless tube mill, an 11"
bar mill, a rod mill and a wire mill. During 1993 the Company began a
major capital improvement program of CF&I. This program includes the
installation of two new reheat furnaces, a new rod mill, a continuous
caster and the upgrading of the steelmaking facilities with a new
ladle furnace and vacuum degassing system.
At December 31, 1994, the Company had the following nominal
capacities which are affected by product mix:
PRODUCTION
CAPACITY 1994
(TONS) (TONS)
--------- ----------
Portland Steel Mill: Melting.......... 800,000 713,000
Rolling.......... 425,000 402,500
Fontana Plate Mill Rolling.......... 750,000 312,700
Napa Facility Steel Pipe....... 350,000 258,200
Camrose Steel Pipe....... 326,000 169,000
Pueblo Steel Mill: Melting.......... 1,000,000 902,900
Finishing Mills.. 1,500,000 787,300
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ITEM 3. LEGAL PROCEEDINGS
The Company is party to various claims, disputes, legal actions
and other proceedings involving contracts, employment and various
other matters. In the opinion of management, the outcome of these
matters should not have a material adverse effect on the consolidated
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were voted upon during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers are elected by the Board of Directors of the Company to
serve for a period ending with the next succeeding annual meeting of
the Board of Directors held immediately after the annual meeting of
stockholders.
The name of each executive officer of the Company, their age as
of February 28, 1995, and position(s) and office(s) and all other
positions and offices held by each executive officer are as follows:
ASSUMED
PRESENT
EXECUTIVE
NAME AGE POSITIONS POSITION
- ---- --- --------- ---------
Thomas B. Boklund 55 Chairman of the July 1985
Board of Directors
Chief Executive
Officer and President
L. Ray Adams 44 Vice President of Finance March 1991
and Chief Financial
Officer
Christopher D. Cassard 41 Treasurer January 1994
Joe E. Corvin 50 Senior Vice President of April 1994
Manufacturing
and Chief Operating
Officer
Edward J. Hepp, Jr. 49 Senior Vice President of January 1995
Commercial
Richard J. Kasten 50 Vice President of Quality February 1992
and Metallurgy
LaNelle F. Lee 57 Secretary April 1994
Jack C. Longbine 48 Vice President of Employee February 1992
Resources
Robert R. Mausshardt 62 Vice President of March 1984
Marketing, Tubular
Products
Steven M. Rowan 49 Vice President of February 1992
Materials and
Transportation
Each of the executive officers named above has been employed by
the Company in an executive or managerial role for at least five
years, except Edward J. Hepp, Jr. and Christopher D. Cassard. Mr. Hepp
joined the Company in September of 1991 and until January 1995 served
as Vice President of Commercial. In January 1995 he was elected Senior
Vice President of Commercial. From 1972 until 1991 he was with Lukens
Steel Company where his last position was Manager of Product Sales.
Mr. Cassard joined the Company in August of 1992 as Assistant
Treasurer. From 1990 to 1992 he was a consultant on various finance
projects for privately-held companies and from 1989 to 1990 was Chief
Financial Officer for Columbia Vista Corporation.
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<TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange. At December 31, 1994, the number of common
stockholders of record was 846. Information on quarterly dividends and common stock prices is shown on page 23 and
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales...................................... $ 838,268 $ 679,823 $397,722 $489,357 $331,234
Cost of Sales.............................. 761,335 608,236 316,455 386,517 252,036
Provision for rolling mill closures........ 22,134 - - - -
Selling, general and administrative
expenses................................. 50,052 41,447 29,785 28,910 21,610
Contributions to employee stock
ownership plans........................... 738 753 3,501 5,002 4,001
Profit participation....................... 2,336 4,527 10,510 14,284 11,362
---------- ---------- -------- -------- --------
Operating income......................... 1,673 24,860 37,471 54,644 42,225
Other income (expense), net................ (1,579) (3,421) 955 1,591 (100)
Settlement of litigation................... - 2,750 (5,040) - -
Gain on sale of subsidiary's
common stock............................. 12,323 - - - -
Minority interests......................... (3,290) (1,996) 1,097 - -
Income tax benefit (expense)............... 2,941 (7,388) (14,506) (20,770) (15,990)
---------- ---------- -------- -------- --------
Net income $ 12,068 $ 14,805 $ 19,977 $ 35,465 $ 26,135
========== ========== ======== ======== ========
COMMON STOCK INFORMATION:
Per common share:
Primary and fully diluted net
income per common and
common equivalent share................ $.60 $.75 $1.04 $1.89 $1.64
Cash dividends declared.................... $.56 $.56 $.56 $.50 $.42
Weighted average common shares and
common equivalents outstanding........... 19,973 19,822 19,183 18,735 15,959
BALANCE SHEET DATA:
Working Capital............................ $ 141,480 $ 139,461 $ 99,444 $ 122,780 $ 38,946
Total assets............................... 665,733 549,670 354,252 323,529 246,749
Current liabilities........................ 117,986 116,322 55,522 43,298 86,008
Long-term debt............................. 187,935 76,487 - 3,417 5,204
Total stockholders' equity................. 275,883 275,242 257,515 245,006 137,078
OTHER DATA:
Total tonnage sold:
Oregon Steel Division (1):
Plate products......................... 424,100 436,200 379,700 344,100 336,600
Pipe products.......................... 451,200 323,700 285,600 418,600 212,900
Semi-finished products................. 45,400 18,400 - - -
---------- ---------- -------- -------- --------
920,700 778,300 665,300 762,700 549,500
CF&I Steel Division...................... 765,600 624,700 - - -
---------- ---------- -------- -------- --------
1,686,300 1,403,000 665,300 762,700 549,500
========== ========== ======== ======== ========
Operating margin (2)....................... 2.8% 3.7% 9.4% 11.2% 12.7%
Operating income per ton sold (2).......... $14.12 $17.72 $56.32 $71.65 $76.84
- ----------------
(1) The Oregon Steel Division consists primarily of the operations of Oregon Steel Mills, Inc., Napa Pipe
Corporation, Oregon Steel Mills - Fontana Division, Inc., and Camrose Pipe Company.
(2) Excluding provision for rolling mill closures in 1994.
16
</TABLE>
</PAGE>
<PAGE>
<PAGE>
<TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages of sales represented by selected
income statement items and information regarding selected balance sheet data:
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.......................................................... 100.0% 100.0% 100.0%
Cost of Sales.................................................. 90.8 89.4 79.6
Provision for rolling mill closures............................ 2.6 - -
Selling, general and administrative expenses................... 6.0 6.1 7.5
Contribution to employee stock ownership plans................. .1 .1 .9
Profit participation........................................... .3 .7 2.6
------ ------ ------
Operating income............................................. .2 3.7 9.4
Interest and dividend income................................... .2 .1 .2
Interest expense............................................... (.5) (.6) -
Other income (expense), net.................................... .1 - -
Settlement of litigation....................................... - .4 (1.3)
Gain on sale of subsidiary's common stock...................... 1.5 - -
Minority interests............................................. (.4) (.3) .3
------ ------ ------
Pretax income................................................ 1.1 3.3 8.6
Income tax benefit (expense)................................... .3 (1.1) (3.6)
------ ------ ------
Net income................................................... 1.4% 2.2% 5.0%
====== ====== ======
BALANCE SHEET DATA (AT DECEMBER 31):
Current ratio.................................................. 2.2:1 2.2:1 2.8:1
Long-term debt as a percent of capitalization.................. 40.5% 21.7% -
Net book value per share....................................... $14.24 $14.23 $13.41
The following table sets forth by division, for the periods indicated, tonnage sold, revenues and average
selling price per ton:
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1993 1992
--------- --------- -------
<S> <C> <C> <C>
TOTAL TONNAGE SOLD:
Oregon Steel Division
Plate products............................................... 424,100 436,200 379,700
Pipe products................................................ 451,200 323,700 285,600
Semi-finished products....................................... 45,400 18,400 -
--------- --------- -------
920,700 778,300 665,300
CF&I Steel Division............................................ 765,600 624,700 -
--------- --------- -------
Total........................................................ 1,686,300 1,403,000 665,300
========= ========= =======
REVENUES (IN THOUSANDS):
Oregon Steel Division.......................................... $498,794 $415,165 $397,722
CF&I Steel Division............................................ 339,474 264,658 -
-------- -------- --------
Total........................................................ $838,268 $679,823 $397,722
======== ======== ========
AVERAGE SELLING PRICE PER TON:
Oregon Steel Division.......................................... $542 $533 $598
CF&I Steel Division............................................ $443 $424 -
Average...................................................... $497 $485 $598
</TABLE>
The Company's long range strategic plan emphasizes providing
stability for its operations through expanding its product offerings
to minimize the impact of individual product cycles on the Company's
overall performance. In pursuing this goal, the Company has sought
alternatives to its recent reliance on the domestic market for large
diameter pipe, the demand for which declined significantly during 1993
and 1994. In an effort to decrease the Company's reliance on the
domestic
17
</PAGE>
<PAGE>
<PAGE>
large diameter pipe market and provide additional end use for its
steel plate, the Company purchased an interest in the Camrose Facility
in 1992. During 1993 and 1994 the Camrose Facility shipped 155,400 and
172,800 tons respectively of steel pipe. The Company believes there
will continue to be opportunities in Canada for steel pipe sales as
the large reserves of natural gas in western Canada continue to be
developed during the next several years. To expand the Company's steel
product lines and enter new geographic areas, a company subsidiary,
New CF&I, Inc., purchased a 95.2 percent interest in CF&I in March of
1993. CF&I shipped 624,700 tons and generated $264.7 million of
revenue in 1993 and shipped 765,600 tons and generated $339.5 million
of revenue in 1994.
During 1994, the Napa Facility shipped 278,400 tons of large
diameter pipe. Of this amount, approximately 148,000 tons were shipped
pursuant to contracts awarded from the Petroleum Authority of Thailand
and British Gas to provide large diameter pipe for international
pipeline projects. However, due to transportation and other costs and
price competition, margins on international large diameter pipe sales
in 1994 were significantly lower than on domestic large diameter pipe
sales in 1993. The Company believes that its ability to compete
effectively in the international large diameter pipe market will
depend in large part on efficiencies that it expects to realize
following the completion and operation of the Combination Mill.
A majority of the plate used by the Napa Facility to produce
large diameter pipe was rolled at the Fontana Plate Mill which is more
than 40 years old, costly to maintain and no longer cost competitive.
The high operating costs of the facility, the current depressed
pricing in the international large diameter pipe market and the lack
of domestic pipeline activity resulted in a decision to permanently
close the Fontana Plate Mill in the fourth quarter of 1994 (see Note
13 to the Consolidated Financial Statements).
Until the Combination Mill is operational, the Company is unable
to produce plate for pipe sizes larger than 32" in diameter but
believes if market conditions permit, it will be able to purchase
plate for pipe sizes larger than 32". The pricing for international
pipe began to erode in 1994 and the Company has temporarily withdrawn
from the international market for this product. However, the Company
believes the international market for large diameter oil and gas
transmission pipe could provide significant opportunities in the next
few years. The completion of the Combination Mill is expected to
provide the Company with manufacturing cost reductions and enhance its
global competitiveness as well as provide plate for all of the Napa
Facility's size requirements. The Company expects to utilize its
excess hot metal capacity at the Portland Steel Mill by selling slabs
during 1995 and 1996 subject to market demand.
The Company expects the cost of raw materials and alloys to
remain high during 1995. The Company implemented price increases
during 1994 on most of its products in an effort to offset the
increased raw material costs. Pricing of the Company's steel products
will continue to be affected by the competitive environment in the
respective product markets.
COMPARISON OF 1994 TO 1993
Sales. Sales in 1994 of $838.3 million increased 23.3 percent
from sales of $679.8 million in 1993. Tonnage shipments increased 20.2
percent to 1.7 million tons in 1994 from 1.4 million tons in 1993.
Selling prices in 1994 averaged $497 per ton versus $485 in 1993. Of
the $158.5 million sales increase, $137.4 million was the result of
volume increase and $21.1 million from higher average selling prices.
The increase in sales and shipments was primarily due to the
inclusion of a full year's operation of CF&I which was acquired on
March 3, 1993. Increased shipments of pipe from the Napa Facility
(278,400 tons in 1994 versus 168,300 tons in 1993) and Camrose
Facility (172,800 tons in 1994 versus 155,400 tons in 1993) also
contributed to the increase in shipments. The Company realized price
increases on substantially all products except large diameter pipe
shipped from the Napa Facility which declined by approximately 20
percent.
Gross Profits. Gross profits as a percentage of sales for 1994
were 9.2 percent compared to 10.6 percent for 1993. Gross profit
margins were negatively impacted by significantly lower selling prices
for large diameter pipe shipped from the Company's Napa Facility and
the associated higher costs of producing a higher quality grade of
steel slab at the Company's Portland Steel Mill for
18
</PAGE>
<PAGE>
<PAGE>
producing low carbon pipe grades for international shipments. Gross
profit margins were also negatively affected by costs and lower
volumes relating to the completion and start-up of a portion of the
equipment upgrades which are part of the capital improvement program
at CF&I.
Provision for Rolling Mill Closures. During 1994 the Company
recognized a loss associated with the closure of the Fontana Plate
Mill and the provision for loss on the shutdown of the existing
Portland Steel Mill plate rolling mill at completion of the
construction of the Combination Mill. Of the $13.7 million after-tax
charge, approximately $13 million is a non-cash charge relating to the
write-off of production supplies and property, plant and equipment.
The decision to permanently close the Fontana plate mill was based
upon the high operating costs of the facility, the current depressed
pricing in the international large diameter pipe market and the lack
of domestic pipeline activity.
Selling, General and Administrative. Selling, general and
administrative expenses for 1994 increased $8.6 million or 20.7
percent compared with 1993 but decreased as a percentage of sales from
6.1 percent in 1993 to 6.0 percent in 1994. The dollar amount increase
is primarily a result of the inclusion of CF&I costs (which increased
by $4.1 million) for 12 months in 1994, versus 10 months in 1993 and
increased shipping costs related to welded pipe shipments from the
Company's Oregon Steel Division ($2.8 million).
Contribution to ESOP and Profit Participation. The contribution
to the ESOP was $738,000 in 1994 compared with $753,000 in 1993.
Profit Participation Plan expense was $2.3 million for 1994 compared
with $4.5 million for 1993. These reductions are the result of the
decreased profitability of the Company in 1994 versus 1993.
Interest and Dividend Income. Interest and dividend income on
investments was $1.6 million in 1994 compared with $.9 million in
1993. This increase was primarily due to interest earned on the
property tax refunds (see Note 13 to the Consolidated Financial
Statements).
Interest Expense. Total interest cost for 1994 was $11.3
million, an increase of $5.6 million compared to 1993. This increase
was primarily related to interest cost incurred on debt issued to fund
the CF&I capital expenditure program. Of the $11.3 million of interest
cost, $7.4 million was capitalized as part of construction in
progress.
Gain on Sale of Subsidiary's Common Stock. The $12.3 million gain
on sale of subsidiary's common stock was realized from the sale of a
10 percent equity interest in New CF&I, Inc. to a subsidiary of Nippon
Steel Corporation (see Note 13 to the Consolidated Financial
Statements).
Income Tax Expense. The Company's effective income tax rate for
state and federal taxes was a benefit of 32.2 percent for 1994
compared to an expense of 33.3 percent for 1993. The effective income
tax rate for both periods varied from the combined state and federal
statutory rates due to earned state tax credits and deductible
dividends paid on stock held by the ESOP and paid to ESOP
participants. Income before income taxes in 1994 included a $12.3
million gain on the sale of a 10 percent equity interest in New CF&I,
Inc. which was treated as a nontaxable item (see Note 13 to the
Consolidated Financial Statements). Income before income taxes in 1993
included a $2.8 million insurance recovery related to a 1992
litigation settlement that was treated as a nontaxable item.
COMPARISON OF 1993 TO 1992
Sales. Sales in 1993 of $679.8 million increased 70.9 percent
from sales of $397.7 million in 1992. Tonnage shipments increased
110.9 percent to 1.4 million tons in 1993 from 665,300 tons in 1992.
Selling prices in 1993 averaged $485 per ton versus $598 in 1992. Of
the $282.1 million sales increase, $441 million was the result of
volume increase offset by $158.9 million of lower average selling
prices.
The increase in sales and shipments was primarily due to the
inclusion of the operations of CF&I and a full year contribution from
Camrose Pipe Company which was formed on June 30, 1992. The decrease
in selling price was primarily due to a decline in large diameter
steel pipe shipments from the Napa Facility (168,300 tons in 1993
versus 255,100 tons in 1992) and a larger percentage of CF&I's product
mix to total sales and shipments. On average CF&I's products have a
lower selling price than steel plate and large diameter pipe products.
19
</PAGE>
<PAGE>
<PAGE>
Gross Profits. Gross profits as a percentage of sales for 1993
were 10.6 percent compared to 20.4 percent for 1992. The gross profit
margin decline year to year is due to higher raw material costs,
principally scrap, which could not be completely recovered through
sales price increases. During 1993 the Company experienced an average
increase of $26 per ton in scrap cost over the average 1992 cost per
ton. This increase reversed the downward spiral in costs experienced
for certain raw materials during the previous two years. In addition,
the reduction of pipe production and pipe shipments in 1993 at the
Napa Facility negatively impacted the Company's ability to absorb
fixed costs at both the Napa Facility and the Fontana Plate Mill,
since a majority of the Fontana Plate Mill production was shipped to
the Napa Facility for conversion into steel pipe. Decreased Napa
Facility shipments also required the Company to increase its sales of
lower margin commodity steel plate products in order to sustain the
operating efficiency of the Portland Steel Mill. Production began on a
number of large pipe orders during the fourth quarter of 1993;
however, the revenues related to these orders was not recognized until
shipments began in the first quarter of 1994.
Selling, General and Administrative. Selling, general and
administrative expenses for 1993 increased $11.7 million or 39.2
percent compared with 1992 but decreased as a percentage of sales from
7.5 percent in 1992 to 6.1 percent in 1993. The dollar amount increase
is primarily a result of the Company's acquisitions of the Camrose
Facility and CF&I ($11.5 million), increased expenses related to
increased support required by the Company's growth and general
inflation ($2.3 million), offset by decreased shipping costs due to
reduced pipe shipments from the Napa Facility ($2.1 million). The
percentage decrease is due primarily to the increased sales volume in
1993.
Contribution to ESOP and Profit Participation. The contribution
to the ESOP was $753,000 in 1993 compared with $3.5 million in 1992.
Profit Participation Plan expense was $4.5 million for 1993 compared
with $10.5 million for 1992. These reductions are a result of the
decreased profitability of the Company in 1993 versus 1992.
Interest and Dividend Income. Interest and dividend income on
investments was $.9 million in 1993 compared with $.7 million in 1992.
This increase was primarily the result of an increase in average cash
and cash equivalent balances available for investment and an increase
in average interest rates during 1993 compared with 1992.
Interest Expense. Total interest cost for 1993 was $5.7 million,
an increase of $5.4 million compared to 1992. This increase was
primarily related to interest cost incurred on debt issued by CF&I for
its purchase of substantially all the assets of CF&I Steel
Corporation. Of the $5.7 million of interest cost, $1.7 million was
capitalized as part of construction in progress.
Settlement of Litigation. The $2.8 million recovery from
settlement of litigation was received from the Company's excess
liability insurance carrier in the second quarter of 1993 and related
to former employee lawsuits which were settled in the fourth quarter
of 1992.
Income Tax Expense. The Company's effective income tax rate for
state and federal taxes was 33.3 percent for 1993 compared to 42.1
percent for 1992. The effective income tax rate for both periods
varied from the combined state and federal statutory rates due to
utilization of carryforward tax credits against state income taxes and
deductible dividends paid on stock held by the ESOP and paid to ESOP
participants. In 1993 the insurance recovery of $2.8 million related
to the 1992 litigation settlement was treated as a nontaxable item.
The higher effective income tax rate in 1992 resulted primarily
because the litigation settlement expense of $5 million was treated as
a nondeductible item for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from 1994 operations was $20.5 million compared to
$44.5 million in the corresponding 1993 period. The major items
affecting this $24 million decrease were positive cash flows from the
non-cash charge for provision for rolling mill closures ($22.1
million), decreased inventories ($15.3 million) and decreased other
current assets ($3.8 million). The positive cash flows were offset by
reduced net income ($2.7 million), the non-cash gain on sale of
subsidiary's common stock ($12.3 million), decrease in deferred taxes
($8.1 million), decreased trade accounts payable and accrued expenses
($35.9 million) and decreased other taxes payable ($2.5 million).
20
</PAGE>
<PAGE>
<PAGE>
Net working capital at December 31, 1994 increased $2.0 million
due to a $3.7 million increase in current assets offset by a $1.7
million increase in current liabilities. The increase in current
liabilities is primarily a result of an increase in accounts payable
and accrued expense liabilities ($15.8 million) offset by the transfer
of short-term debt to the new long-term debt facilities ($14.2
million). The accounts payable and accrued expense liability increase
was due primarily to the capital spending programs, and increased
sales activity.
In December 1994, the Company entered into an agreement
establishing two credit facilities ("Senior Credit Facilities") which
provide for collateralized borrowing of up to $300 million from a
group of banks ("Lender Banks"). Use of the Senior Credit Facilities
is to fund capital expenditures, for general corporate purposes, and
for working capital. The Senior Credit Facilities are comprised of:
(1) a $200 million term loan facility ("Term Loan") which may be drawn
at any time through December 31, 1996; and (2) up to a $100 million
revolving loan facility ("Revolving Loan") which may be drawn and
repaid at any time through December 31, 1997 based upon the Company's
accounts receivable and inventory balances. Substantially all $100
million of the Revolving Loan is expected to be available throughout
its term. By mutual agreement of the Company and the Lender Banks, the
Revolving Loan may be extended for two additional one-year periods to
December 31, 1999.
Annual commitment fees are 3/8 of 1 percent or 1/2 of 1 percent
of the unused portions of the Senior Credit Facilities, depending on
the Company's quarterly consolidated ratio ("Leverage Ratio") of
funded debt to the most recent four quarters' earnings before
interest, taxes, depreciation and amortization. At the Company's
election, interest is based on the London Interbank Borrowing Rate
("LIBOR"), the prime rate or, for the Revolving Loan only, the federal
funds rate, plus a margin determined by the Company's Leverage Ratio.
The outstanding balance of the Term Loan on December 31, 1996
will be repaid in eleven quarterly installments commencing June 30,
1997. If the Term Loan is fully drawn at December 31, 1996, the
repayments will total $50 million in 1997, $70 million in 1998, and
$80 million in 1999. Such payments will be reduced pro-rata if less
than the full amount is drawn.
The Term and Revolving Loans are collateralized by substantially
all of the Company's inventory and accounts receivable, except those
of Camrose. In addition, the Company has pledged as collateral its
material loans receivable from its subsidiaries, and the stock of
certain material subsidiaries. The Senior Credit Facilities are
guaranteed by the material wholly-owned subsidiaries of the Company.
The Senior Credit Facilities agreement contains various
restrictive covenants including a minimum current asset to current
liability ratio; minimum interest coverage ratio; minimum ratio of
cash flow to scheduled maturities of long-term debt, interest and
taxes; minimum tangible net worth; a maximum ratio of long-term debt
to total capitalization; and restrictions of capital expenditures,
liens, investments and additional indebtedness.
At December 31, 1994, $120 million was outstanding under the Term
Loan and $10 million was outstanding under the Revolving Loan.
The Company has entered into interest rate swap agreements with
banks, as required by the Senior Credit Facilities, to reduce the
impact of unfavorable changes in interest rates on its debt. (See Note
6 to the Consolidated Financial Statements.)
Term debt of $67.5 million was incurred by CF&I as part of the
purchase price of certain assets of CF&I Steel Corporation on March 3,
1993. This debt is uncollateralized and is payable over ten years with
interest at 9.5 percent. The Company has guaranteed the payment of the
first 25 months installment cash payments (a total remaining of
approximately $3.5 million of principal and interest at December 31,
1994). As of December 31, 1994, the outstanding balance on the debt is
$60.1 million, of which $54.8 million is classified as noncurrent.
The Company has an uncollateralized and uncommitted revolving
line of credit with a bank which matures May 31, 1995 which may be
used to support issuance of letters of credit, foreign exchange
contracts and interest rate hedges. At December 31, 1994, $13.6
million was restricted under outstanding letters of credit. In
addition, the Company has a $5 million unsecured and uncommitted
revolving credit line with a bank which is restricted to use for
letters of credit. At December 31, 1994, $3.2 million was restricted
under outstanding letters of credit.
21
</PAGE>
<PAGE>
<PAGE>
Camrose maintains a $15 million revolving credit facility with a
bank, the proceeds of which may be used for working capital and
general corporate purposes. The facility is collateralized by the
assets of Camrose and expires on October 31, 1996. Depending on
Camrose's election at the time of borrowing, interest is payable based
on (1) the bank's Canadian dollar prime rate, (2) the bank's United
States dollar prime rate, or (3) LIBOR. As of December 31, 1994,
Camrose had $3.2 million outstanding under the facility.
During 1994 the Company expended approximately $120 million on
the capital program at CF&I and $10 million on the Combination Mill.
During 1995 the Company expects to expend $45 million on the capital
program at CF&I and $120 million on the Combination Mill.
In addition to the Combination Mill, the Company has budgeted
approximately $13 million for capital expenditures at its Oregon Steel
Division manufacturing facilities for recurring upgrade projects to
the present facilities and equipment. Approximately $10 million was
expended on various capital projects at these facilities in 1994. The
Company has also budgeted $15 million for an approximated 13 percent
equity interest in the planned Venezuelan HBI plant. Expenditures for
this project are expected to be $5 million in 1995.
The Company's total capitalization at December 31, 1994 of $463.8
million consists of $187.9 million in long-term debt and $275.9
million in stockholders' equity, for a long-term debt-to-
capitalization ration of .41 to 1. Net book value per share of common
stock at December 31, 1994 was $14.24 per share versus $14.23 per
share at December 31, 1993. The Company believes that anticipated
needs for working capital and capital expenditures through 1995 will
be met from existing cash balances, funds generated by operations and
borrowing pursuant to the Company's Senior credit facilities.
Impact of Inflation. Inflation can be expected to have an effect
on many of the Company's operating costs and expenses. Due to
worldwide competition in the steel industry, the Company may not be
able to pass through such increased costs to its customers. Property,
plant facilities and equipment purchased by the Company in prior years
have been subject to inflation; consequently, current charges to
depreciation are smaller than would be required if such assets were
valued at replacement cost.
22
</PAGE>
<PAGE>
<PAGE>
<TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA - UNAUDITED
<CAPTION>
1994 1993
--------------------------------------- ----------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
-------- ------- ------- -------- -------- ------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... $191.5 $193.1 $234.8 $218.9 $152.5 $174.2 $204.1 $149.0
Operating income (loss)........ 6.6(1) (19.6)(2) 7.2 7.5 (1.5) 1.91 12.1 12.3
Net income (loss).............. 5.5 (.5)(3) 3.4 3.7 (1.2) - 9.2 6.8
Net income (loss)
per share.................... $.27 $(.02) $.17 $.18 $(.06) - $.46 $.35
Dividends declared per
common share................. $.14 $.14 $.14 $.14 $.14 $.14 $.14 $.14
Common stock price range:
High......................... $18 1/4 $20 1/4 $23 $27 3/8 $25 1/4 $22 3/4 $25 5/8 $27 1/2
Low.......................... $14 1/8 $15 7/8 $18 7/8 $22 5/8 $20 7/8 $17 1/2 $20 1/8 $21 3/4
Average shares
outstanding.................. 20.0 20.0 20.0 20.0 19.8 19.7 19.7 19.4
(1) Includes property tax refunds totalling $3.5 million related to prior years. (See note 13 to the Consolidated
Financial Statements.)
(2) Includes provision for rolling mill closures of $22.1 million. (See Note 13 to the Consolidated Financial
Statements.)
(3) Includes gain of approximately $12.3 million on the sale of a 10 percent interest in the Company's subsidiary,
New CF&I, Inc. (See Note 13 to the Consolidated Financial Statements.)
23
</TABLE>
</PAGE>
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Oregon Steel Mills, Inc.
We have audited the consolidated financial statements and the
financial statement schedule of Oregon Steel Mills, Inc. and
Subsidiaries as listed in Item 14(a) of this Form 10-K. These
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Oregon Steel Mills, Inc. and Subsidiaries as of December
31, 1994, 1993 and 1992, and the consolidated results of their
operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Portland, Oregon
February 10, 1995
24
</PAGE>
<PAGE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 5,039 $ 9,623 $ 5,177
Trade accounts receivable, less allowance for
doubtful accounts of $2,063, $1,906, and $926...................... 80,203 71,649 23,900
Inventories.......................................................... 160,788 160,504 113,253
Other current assets................................................. 7,661 9,203 9,003
Deferred tax asset................................................... 5,775 4,804 3,633
-------- -------- --------
Total current assets 259,466 255,783 154,966
-------- -------- --------
Property, plant and equipment:
Land and improvements................................................ 28,319 24,466 21,652
Buildings............................................................ 36,943 35,821 32,180
Machinery and equipment.............................................. 230,019 240,833 197,492
Construction in progress............................................. 139,842 34,605 19,756
-------- -------- --------
435,123 335,725 271,080
Accumulated depreciation............................................. (97,027) (104,300) (84,287)
-------- -------- --------
338,096 231,425 186,793
-------- -------- --------
Excess of cost over net assets acquired................................ 42,569 39,474 -
Other assets........................................................... 25,602 22,988 12,493
-------- -------- --------
$665,733 $549,670 $354,252
======== ======== ========
LIABILITIES
Current liabilities:
Current portion of long-term debt.................................... $ 5,302 $ 4,680 $ -
Short-term debt...................................................... - 14,225 11,000
Accounts payable..................................................... 85,618 75,419 34,179
Accrued expenses..................................................... 24,692 19,091 9,306
Other taxes payable.................................................. 2,374 2,907 1,037
-------- --------- --------
Total current liabilities.......................................... 117,986 116,322 55,522
Long-term debt......................................................... 187,935 76,487 -
Deferred employee benefits............................................. 17,661 15,327 13,495
Other deferred liabilities............................................. 36,609 36,803 2,605
Deferred income taxes.................................................. 10,725 16,514 14,245
-------- --------- --------
370,916 261,453 85,867
-------- --------- --------
Minority interests..................................................... 18,934 12,975 10,870
-------- --------- --------
Commitments and contingencies (Note 11)
STOCKHOLDERS' EQUITY
Capital stock:
Preferred stock, par value $.01 per share; 1,000 shares
authorized; none issued
Common stock, par value $.01 per share; 30,000 shares
authorized; 19,377, 19,348, and 19,201 shares issued
and outstanding.................................................... 194 193 192
Additional paid-in capital............................................. 150,090 149,340 134,101
Retained earnings...................................................... 130,145 128,924 124,935
Minimum pension liability adjustment................................... - (297) -
-------- --------- --------
280,429 278,160 259,228
Cumulative foreign currency translation adjustment..................... (4,546) (2,918) (1,713)
-------- --------- --------
275,883 275,242 257,515
-------- --------- --------
$665,733 $ 549,670 $354,252
======== ========= ========
The accompanying notes are an integral part of the consolidated financial statements.
25
</TABLE>
</PAGE>
<PAGE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales......................................................... $838,268 $679,823 $397,722
-------- -------- --------
Costs and expenses:
Cost of sales............................................... 761,335 608,236 316,455
Provision for rolling mill closures......................... 22,134 - -
Selling, general and administrative expenses................ 50,052 41,447 29,785
Contribution to employee stock ownership plan............... 738 753 3,501
Profit participation........................................ 2,336 4,527 10,510
-------- -------- --------
836,595 654,963 360,251
-------- -------- --------
Operating income.......................................... 1,673 24,860 37,471
Other income (expense):
Interest and dividend income................................ 1,620 921 741
Interest expense............................................ (3,910) (3,988) -
Settlement of litigation.................................... - 2,750 (5,040)
Gain on sale of subsidiary's common stock................... 12,323 - -
Minority interests.......................................... (3,290) (1,996) 1,097
Other, net.................................................. 711 (354) 214
-------- -------- --------
Income before income taxes................................ 9,127 22,193 34,483
Income tax benefit (expense).................................. 2,941 (7,388) (14,506)
-------- -------- --------
Net income................................................ $ 12,068 $ 14,805 $ 19,977
======== ======== ========
Primary and fully diluted net income per
common and common equivalent share.......................... $ .60 $ .75 $1.04
======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
26
</TABLE>
</PAGE>
<PAGE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS)
<CAPTION>
CUMULATIVE
MINIMUM FOREIGN
COMMON STOCK ADDITIONAL PENSION CURRENCY
---------------- PAID-IN RETAINED LIABILITY TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT TOTAL
------- ------- ---------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Balances, December 31, 1991...... 18,986 $190 $129,136 $115,680 - - $245,006
Net income....................... 19,977 19,977
Issuance to employee stock
ownership plan................. 215 2 4,998 5,000
Adjust prior year common stock
issuance....................... (33) (33)
Foreign currency translation
adjustment..................... $(1,713) (1,713)
Dividends paid ($.56 per share).. (10,722) (10,722)
------- ---- -------- -------- ------ ------- --------
Balances, December 31, 1992...... 19,201 192 134,101 124,935 - (1,713) 257,515
Net income....................... 14,805 14,805
Issuance to employee stock
ownership plan................. 147 1 3,499 3,500
Common stock to be issued March
2003 (598,400 shares).......... 11,184 11,184
Warrants to purchase 100,000
shares of common stock for five
years, expiring March 3, 1998.. 556 556
Minimum pension liability
adjustment..................... $(297) (297)
Foreign currency translation
adjustment..................... (1,205) (1,205)
Dividends paid ($.56 per share).. (10,816) (10,816)
------- ---- -------- -------- ----- -------- --------
Balances, December 31, 1993 19,348 193 149,340 128,924 (297) (2,918) 275,242
Net income....................... 12,068 12,068
Issuance to employee stock
ownership plan................. 29 1 750 751
Minimum pension liability
adjustment..................... 297 297
Foreign currency translation
adjustment..................... (1,628) (1,628)
Dividends paid ($.56 per share).. (10,847) (10,847)
------- ---- -------- -------- ----- ------- --------
Balances, December 31, 1994 19,377 $194 $150,090 $130,145 $ - $(4,546) $275,883
======= ==== ======== ======== ===== ======= ========
The accompanying notes are an integral part of the consolidated financial statements.
27
</TABLE>
</PAGE>
<PAGE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 12,068 $ 14,805 $ 19,977
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation................................................ 20,642 20,769 16,253
Amortization................................................ 1,370 606 -
Provision for rolling mill closures......................... 22,134 - -
Deferred income taxes....................................... (5,789) 2,269 3,050
Accruals for contribution of common stock to
employee stock ownership plan............................. 736 750 3,500
Gain on sale of subsidiary's common stock................... (12,323)
Loss on disposal of property, plant and equipment........... 147 591 958
Minority interests' share of income (loss).................. 1,482 905 (1,068)
Other, net.................................................. 53 1,198 (941)
Changes in current assets and liabilities net
of effect of acquisitions:
Trade accounts receivable.............................. (9,161) (7,980) 26,226
Refundable income taxes................................ (152) 2,413 (3,349)
Inventories............................................ (3,786) (19,124) (6,762)
Other current assets................................... 1,690 (2,136) (1,618)
Deferred tax asset..................................... (971) (1,171) 114
Accounts payable....................................... (12,568) 21,559 (1,330)
Accrued expenses....................................... 5,530 7,221 (4,612)
Other taxes payable.................................... (582) 1,870 (2,013)
-------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES.......................................... 20,520 44,545 48,385
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment...................... (128,237) (40,905) (34,281)
Proceeds from disposal of property, plant and equipment......... 390 2,236 -
Investment in Camrose Pipe Company.............................. - - (17,972)
Investment in CF&I Steel, L.P................................... - (8,039) -
Other, net...................................................... (855) 565 (707)
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES........................... (128,702) (46,143) (52,960)
-------- -------- --------
Cash flows from financing activities:
Net borrowings under revolving loan agreements.................. 94,047 20,042 11,000
Proceeds from Senior Credit Facilities.......................... 137,600 - -
Payments on Senior Credit Facilities............................ (7,600) - -
Payment of existing debt with
proceeds from Senior Credit Facilities........................ (121,600) - -
Other reductions of debt........................................ (4,394) (3,033) (5,125)
Dividends paid.................................................. (10,847) (10,816) (10,722)
Proceeds from sale of subsidiary's common stock................. 16,800 - -
Other, net...................................................... 258 (42) (45)
--------- -------- --------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES.......................................... 104,264 6,151 (4,892)
--------- -------- --------
Effects of foreign currency exchange rate changes on cash......... (666) (107) (30)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents.............. (4,584) 4,446 (9,497)
Cash and cash equivalents at beginning of year.................... 9,623 5,177 14,674
--------- -------- --------
Cash and cash equivalents at end of year.......................... $ 5,039 $ 9,623 $ 5,177
========= ======== ========
See Note 4 for additional supplemental disclosures of cash flow information:
Cash paid for:
Interest...................................................... $ 10,500 $ 5,443 $ 547
Income taxes.................................................. $ 3,967 $ 4,017 $ 15,442
The accompanying notes are an integral part of the consolidated financial statements.
28
</TABLE>
/PAGE
<PAGE>
<PAGE>
OREGON STEEL MILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all
wholly-owned and majority-owned subsidiaries. Affiliates which are 20
percent to 50 percent owned are accounted for using the equity method.
Material wholly-owned and majority-owned subsidiaries of the Company
are Napa Pipe Corporation ("Napa"), Oregon Steel Mills - Fontana
Division, Inc. ("Fontana"), Camrose Pipe Corporation ("CPC") which
owns a 60 percent interest in Camrose Pipe Company ("Camrose"), and 90
percent owned New CF&I, Inc. which owns a 95.2 percent interest in
CF&I Steel, L.P. ("CF&I"). All material intercompany transactions and
account balances have been eliminated upon consolidation. Operations
of purchased businesses are included in the consolidated financial
statements from the date of acquisition.
CASH AND CASH EQUIVALENTS
The Company invests excess cash balances in short-term
securities, including corporate and municipal obligations, bank
repurchase agreements, commercial paper, remarketed preferred stock,
and similar liquid instruments which are readily converted to known
amounts of cash and are so near to maturity that they present
insignificant risk of changes in value because of changes in interest
rates. The carrying amounts approximate fair value because of the
short maturity of these instruments.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents, investments and trade receivables. The Company places its
cash and cash equivalents and investments with high-credit-quality
financial institutions and limits the amount of credit exposure at any
one financial institution. At times, temporary cash investments may be
in excess of the Federal Deposit Insurance Corporation insurance
limit. Management believes that risk of loss on the Company's trade
receivables is significantly reduced by ongoing credit evaluation of
customer financial condition and requirements for collateral, such as
letters of credit and bank guarantees.
INVENTORIES
Inventories are stated at the lower of average cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at historical cost,
including all costs directly related to the acquisition, construction,
and preparation for intended use, such as capitalized interest. Such
capitalized interest amounted to $7.4 million, $1.7 million, and
$318,000 in 1994, 1993 and 1992, respectively. Depreciation is
determined utilizing principally the straight-line method over the
estimated useful lives of the individual assets. Maintenance and
repairs are expensed as incurred and costs of improvements are
capitalized. Upon disposal, related costs and accumulated depreciation
are removed from the accounts and resulting gains or losses are
reflected in income.
EXCESS OF COST OVER NET ASSETS ACQUIRED
Excess of cost over net assets acquired relate to the
acquisitions of CF&I and Camrose. The excess is being amortized on a
straight-line basis over 40 years. Accumulated amortization was $1.8
million and $765,000 in 1994 and 1993, respectively.
INTEREST RATE SWAP AGREEMENTS
The differentials to be paid or received on interest rate swaps
are recognized as adjustments to interest expense during the term of
the swap agreements on an accrual basis. Cash flows from interest rate
hedging transactions are classified in the same category as the cash
flows from the related borrowing activity.
29
</PAGE>
<PAGE>
<PAGE>
TAXES ON INCOME
Deferred income taxes reflect the tax consequences in future
years of differences between the financial reporting and tax bases of
assets and liabilities at year end based on enacted tax laws and
statutory tax rates. Tax credits are recognized on the flow through
method as a reduction of income tax expense in the year the credit
arises. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at
the rate of exchange in effect as of the balance sheet date. The
related translation adjustments are reflected in the cumulative
foreign currency translation adjustment section of the consolidated
balance sheet. Income and expenses are translated at the average rates
of exchange prevailing during the year.
NET INCOME PER SHARE
The computation of net income per common and common equivalent
share is based upon the weighted average number of common shares
outstanding during each period plus (in periods in which they have a
dilutive effect) the effect of common shares contingently issuable.
The weighted average number of common shares and equivalents
outstanding was 20 million, 19.8 million and 19.2 million,
respectively, in 1994, 1993 and 1992. There were no dilutive common
share equivalents outstanding in any years presented.
REVENUE RECOGNITION
Revenue is recognized when the earnings process is complete and
an exchange has taken place. The earnings process is not considered
complete until collection of the sales price is reasonably assured.
RECLASSIFICATIONS
Certain amounts in the 1993 and 1992 financial statements have
been reclassified to conform with the current year's presentation. The
reclassifications do not affect previously reported net income.
30
</PAGE>
<PAGE>
<PAGE>
2. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one business segment in two geographical
locations, the United States and Canada.
Geographical area information is as follows:
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
SALES TO UNAFFILIATED CUSTOMERS
United States...................... $728,229 $587,247 $379,714
Canada............................. 110,039 92,576 18,008
-------- -------- --------
$838,268 $679,823 $397,722
======== ======== ========
OPERATING INCOME (LOSS) BY
GEOGRAPHIC LOCATION
United States...................... $ (7,186) $ 19,645 $ 39,917
Canada............................. 8,859 5,215 (2,446)
-------- -------- --------
$ 1,673 $ 24,860 $ 37,471
======== ======== ========
INCOME (LOSS) BEFORE INCOME TAXES
BY GEOGRAPHIC LOCATION
United States...................... $ 3,839 $ 19,192 $ 36,068
Canada............................. 5,288 3,001 (1,585)
-------- -------- --------
$ 9,127 $ 22,193 $ 34,483
======== ======== ========
IDENTIFIABLE ASSETS BY
GEOGRAPHIC AREAS
United States...................... $615,816 $508,084 $314,273
Canada............................. 49,917 41,586 39,979
-------- -------- --------
$665,733 $549,670 $354,252
======== ======== ========
The major industries to which the Company sells steel products
are fabricators, manufacturers, steel service centers, natural gas
pipeline companies and railroad companies. In 1993 and 1992, the
Company derived 11.8 percent and 44.9 percent, respectively, of its
sales from one customer. These sales were to the same customer in 1993
and 1992.
Operating income is total revenues less operating expenses
excluding investment income, interest expense, other nonoperating
income (expense), settlement of litigation, gain on sale of
subsidiary's common stock, equity in income or loss attributable to
minority interest and provision for income taxes.
3. INVENTORIES
Inventories at December 31 consist of:
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
Raw materials....................... $ 37,389 $ 26,242 $ 8,326
Semi-finished product............... 50,033 51,759 29,280
Finished product.................... 50,320 62,104 61,557
Stores and operating supplies....... 23,046 20,399 14,090
-------- -------- --------
$160,788 $160,504 $113,253
======== ======== ========
4. SUPPLEMENTAL CASH FLOW INFORMATION
During 1994 the Company (a) acquired property, plant and
equipment for $18.6 million which was included in accounts payable at
December 31, 1994, (b) incurred a non-cash charge of $22.1 million to
reduce the carrying value of various pieces of property, plant and
equipment, inventories, and other operating supplies relating to the
closure of the Company's Fontana, California plate mill and for those
assets unlikely to be used following the construction of the new
steckel combination mill ("Combination Mill") at the Company's
Portland, Oregon steel mill (see Note 13) and (c) accrued accounts
payable related to the annual performance purchase price adjustment at
Camrose for $3.6 million (see Note 11).
31
</PAGE>
<PAGE>
<PAGE>
During 1993 the Company's purchase of certain of the CF&I Steel
Corporation's net assets was accomplished by remitting $8 million,
along with other non-cash items to the seller.
During 1992 the Company's purchase of Camrose net assets was
accomplished by remitting $18 million to the seller representing the
Company's net 60 percent acquisition cost. As a result, no funds were
paid to, or received from, the seller for its 40 percent interest in
the facility.
5. ACCRUED EXPENSES
Accrued expenses at December 31 are as follows:
1994 1993 1992
-------- -------- ------
(IN THOUSANDS)
Accrued vacation.................... $ 6,254 $ 5,391 $2,606
Other............................... 18,438 13,700 6,700
------- ------- ------
$24,692 $19,091 $9,306
======= ======= ======
6. DEBT AND FINANCING ARRANGEMENTS
LONG-TERM DEBT:
Long-term debt at December 31 is summarized as follows:
1994 1993
-------- -------
(IN THOUSANDS)
Term Loan...................................... $120,000 $ -
Revolving Loan................................. 10,000 16,700
CF&I term loan................................. 60,073 64,467
Other term loans............................... 3,164 -
-------- -------
193,237 81,167
Less current maturities........................ 5,302 4,680
-------- -------
$187,935 $76,487
======== =======
In December 1994 the Company entered into an agreement
establishing two credit facilities ("Senior Credit Facilities") which
provide for collateralized borrowing of up to $300 million from a
group of banks ("Lender Banks"). Use of the Senior Credit Facilities
is to fund capital expenditures, for general corporate purposes, and
for working capital. The Senior Credit Facilities are comprised of:
(1) a $200 million term loan facility ("Term Loan") which may be drawn
at any time through December 31, 1996; and (2) up to a $100 million
revolving loan facility ("Revolving Loan") which may be drawn and
repaid at any time through December 31, 1997 based upon the Company's
accounts receivable and inventory balances. By mutual agreement of the
Company and the Lender Banks, the Revolving Loan may be extended for
two additional one-year periods to December 31, 1999.
Annual commitment fees are .375 percent or .5 percent of the
unused portions of the Senior Credit Facilities, depending on the
Company's quarterly consolidated ratio ("Leverage Ratio") of funded
debt to the most recent four quarters' earnings before interest,
taxes, depreciation and amortization. At the Company's election,
interest is based on the London Interbank Borrowing Rate ("LIBOR"),
the prime rate or, for the Revolving Loan only, the federal funds
rate, plus a margin determined by the Company's Leverage Ratio. As of
December 31, 1994, interest on the Senior Credit Facilities was 8.13
percent.
The outstanding balance of the Term Loan on December 31, 1996
will be repaid in eleven quarterly installments commencing June 30,
1997. If the Term Loan is fully drawn at December 31, 1996, the
repayments will total $50 million in 1997, $70 million in 1998, and
$80 million in 1999. Such payments will be reduced pro-rata if less
than the full amount is drawn.
The Senior Credit Facilities are collateralized by substantially
all of the Company's inventory and accounts receivable, except those
of Camrose. In addition, the Company has pledged as collateral its
material loan receivables from its subsidiaries, and the stock of
certain material subsidiaries. The Senior Credit Facilities are
guaranteed by the material wholly-owned subsidiaries of the Company.
32
</PAGE>
<PAGE>
<PAGE>
The Senior Credit Facilities agreement contains various
restrictive covenants including a minimum current asset to current
liability ratio; a minimum interest coverage ratio; a minimum ratio of
cash flow to scheduled maturities of long-term debt, interest and
taxes; and a minimum tangible net worth; a maximum ratio of long-term
debt to total capitalization; and restrictions on capital
expenditures, liens, investments and additional indebtedness.
The Company has entered into interest rate swap agreements with
banks, as required by the Senior Credit Facilities, to reduce the
impact of unfavorable changes in interest rates on its debt. At
December 31, 1994, the Company had outstanding four interest rate swap
agreements with commercial banks, having a notional principal amount
of $30 million. These agreements effectively change the Company's
interest rate costs on a portion of its Senior Credit Facilities to
9.34 percent on $10 million maturing on November 9, 1997, 9.35 percent
on $10 million maturing on November 9, 1997 and 9.64 percent on a
remaining $10 million maturing on December 22, 1997. These rates are
fixed over the indicated terms of the swap agreements except for the
effect of changes in the Company's leverage ratio, which could reduce
the interest by up to 1 percent, or increase interest by up to .5
percent. The Company is exposed to credit loss in the event of
nonperformance by the other parties in the interest rate swap
agreements. However, the Company does not anticipate nonperformance by
the counterparties.
Term debt of $67.5 million was incurred by CF&I as part of the
purchase price of certain assets of CF&I Steel Corporation on March 3,
1993. This debt is without stated collateral and is payable over ten
years with interest at 9.5 percent. The Company has guaranteed the
payment of the first 25 months installment cash payments on the $67.5
million note (a total remaining of approximately $3.5 million of
principal and interest at December 31, 1994). As of December 31, 1994,
the outstanding balance on this debt is $60.1 million, of which $54.8
million is classified as noncurrent.
Camrose maintains a $15 million revolving credit facility with a
bank, the proceeds of which may be used for working capital and
general corporate purposes. The facility is collateralized by the
assets of Camrose and expires on October 31, 1996. Depending on
Camrose's election at the time of borrowing, interest is payable based
on (1) the bank's Canadian dollar prime rate, (2) the bank's United
States dollar prime rate, or (3) LIBOR. As of December 31, 1994,
Camrose had $3.2 million outstanding under the facility with interest
at 8.13 percent.
As of December 31, 1994, principal payments on long-term debt are
payable in annual installments of:
1995...................................................... $ 5,302
1996...................................................... 7,269
1997...................................................... 38,678
1998...................................................... 60,165
1999...................................................... 50,800
Balance due in installments through 2003.................. 31,023
--------
$193,237
========
SHORT-TERM DEBT:
The Company has an uncollateralized and uncommitted revolving
line of credit with a bank which matures May 31, 1995 and may be used
to support issuance of letters of credit, foreign exchange contracts
and interest rate hedges. At December 31, 1994, $13.6 million was
restricted under outstanding letters of credit. In addition, the
Company has a $5 million uncollateralized and uncommitted revolving
credit line with a bank which is restricted to use for letters of
credit. At December 31, 1994, $3.2 million was restricted under
outstanding letters of credit. The weighted average interest rates on
short-term borrowings were 5.1 percent and 3.5 percent at December 31,
1993 and 1992, respectively.
33
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<PAGE>
<PAGE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures
about Fair Value of Financial Instruments, defines the fair value of a
financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale.
Based on quotations from counterparties, the fair value of the
Company's interest rate swap agreements (see Note 6) at December 31,
1994 was $192,000 which represents the estimated unrealized gain that
would result if the Company terminated the agreements. However, the
Company has no intention to exit these agreements. The interest rate
swap agreements are a part of an interest rate management strategy
that is required by the Senior Credit Facilities.
The carrying value of the Company's borrowings under its Senior
Credit Facilities and other revolving loan agreements (see Note 6) at
December 31, 1994 approximates fair value since the Senior Credit
Facilities and other revolving loan agreements carry a variable
interest rate.
The carrying value and fair value of the CF&I term loan at
December 31, 1994 is $60.1 million and $57.9 million, respectively. At
December 31, 1993 the carrying value of the CF&I term loan of $64.5
million approximated its fair value because there was only minor
variance in interest rates from the March 1993 acquisition of the debt
to the end of 1993. The lower fair value of the CF&I term loan at
December 31, 1994 reflects the benefit to the Company of having a
fixed interest rate while market rates have increased. The fair value
is estimated by discounting the future payments with an interest rate
which approximates the market rate as of December 31, 1994 for
obligations of similar size, term and security.
34
</PAGE>
<PAGE>
<PAGE>
8. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
No. 109 (FAS No. 109), "Accounting for Income Taxes," as of January 1,
1992. The accounting change had no effect on 1992 or previously
reported net income. The income tax benefit (expense) consists of the
following:
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
Current:
Federal........................... $ (3,325) $ (5,287) $ (9,162)
State............................. (479) (984) (2,082)
Foreign........................... (14) (19) -
-------- -------- --------
(3,818) (6,290) (11,244)
-------- -------- --------
Deferred:
Federal........................... 5,856 (124) (3,932)
State............................. 2,148 (163) 670
Foreign........................... (1,245) (811) -
-------- -------- --------
6,759 (1,098) (3,262)
-------- -------- --------
Income tax benefit (expense)........ $ 2,941 $ (7,388) $(14,506)
======== ======== ========
The components of the deferred income tax benefit (expense) are
as follows:
1994 1993 1992
------- -------- ---------
(IN THOUSANDS)
Difference between tax and financial
statement accounting for:
Depreciation and amortization........ $ (4,722) $ (4,707) $ (2,673)
Inventories.......................... (368) 239 (447)
Unfunded pension liability........... 896 100 (126)
Accrued vacation liability........... 568 1,091 -
Alternative minimum tax.............. 2,599 1,665 -
Provision for rolling mill closures.. 5,450 - -
Federal and state tax credits........ 1,670 - -
Foreign tax credit................... 1,296 - -
Other................................ (630) 514 (16)
-------- -------- --------
$ 6,759 $ (1,098) $ (3,262)
======== ======== ========
35
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<PAGE>
<PAGE>
<TABLE>
The components of deferred tax assets and liabilities as of December 31 are as follows:
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net current deferred tax asset:
Assets
Inventories........................................................ $ 1,904 $ 2,268 $ 2,029
Accrued vacation liability......................................... 2,488 1,920 829
Accounts receivable................................................ 697 597 384
State tax credits.................................................. 135 196 196
Provision for rolling mill closures................................ 1,906 - -
Other.............................................................. 1,717 920 366
-------- ------- --------
8,847 5,901 3,804
Liabilities
Other.............................................................. 3,072 1,097 171
-------- ------- --------
Net current deferred tax asset......................................... $ 5,775 $ 4,804 $ 3,633
======== ======= ========
Net noncurrent deferred income tax liability:
Assets
Post retirement benefits other than pensions....................... $ 1,182 $ 2,009 $ 1,124
State tax credits.................................................. 6,996 207 403
Alternative minimum tax credit..................................... 4,264 1,665 -
Excess of cost over net assets acquired............................ 12,673 13,282 -
Water rights....................................................... 4,052 4,247 -
Provision for rolling mill closures................................ 3,543 - -
Foreign tax credit................................................. 1,296 - -
Other.............................................................. 4,284 1,076 488
------- ------- --------
38,290 22,486 2,015
------- ------- --------
Valuation allowances............................................... 5,408 - -
------- ------- --------
32,882 22,486 2,015
------- ------- --------
Liabilities
Property, plant and equipment...................................... 23,655 19,015 14,308
Environmental liability............................................ 13,070 13,282 -
Other.............................................................. 6,882 6,703 1,952
------- ------- --------
43,607 39,000 16,260
------- ------- --------
Net non-current deferred tax liability................................. $10,725 $16,514 $ 14,245
======= ======= ========
A reconciliation of the statutory tax rate to the effective tax rate on income before income taxes is as
follows:
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
U.S. statutory income tax rate......................................... (35.0%) (35.0%) (34.0%)
Tax credits............................................................ 20.3 1.4 1.8
Deduction for dividends to ESOP participants........................... 5.6 2.6 2.1
State income taxes..................................................... (5.0) (6.6) (5.2)
Settlement of litigation............................................... - 4.3 (6.1)
Rate changes on beginning deferred taxes............................... - (1.8) -
Gain on sale of subsidiary's common stock.............................. 47.3 - -
Foreign tax in excess of U.S. rate..................................... (5.5) - -
Other.................................................................. 4.5 1.8 (.7)
------- ------- -------
32.2% (33.3%) (42.1%)
======= ======= =======
A valuation allowance of $5.4 million has been established in 1994 to reflect the uncertainty of realizing
certain state tax credits.
At December 31, 1994, the Company has state tax credits of $7.1 million expiring 1997 through 2006 and a
federal tax credit of $546,000 expiring 2005 through 2009 which are available to reduce future income taxes payable.
36
</TABLE>
</PAGE>
<PAGE>
<PAGE>
9. EMPLOYEE BENEFIT PLANS
U.S. PENSION PLANS
The Company has noncontributory defined benefit retirement plans
covering all of its eligible domestic employees. The plans provide
benefits based on participants' years of service and compensation. The
Company funds at least the minimum annual contribution required by
ERISA. Pension cost included the following components:
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Service cost.......................... $ 5,076 $ 3,857 $ 1,703
Interest cost......................... 2,014 1,714 1,528
Actual (return) loss on plan assets .. 398 (4,002) (2,256)
Net amortization and deferral......... (2,401) 2,423 1,002
------- ------- -------
$ 5,087 $ 3,992 $ 1,977
======= ======= =======
The following table sets forth the funded status of the plans and
amount recognized in the Company's consolidated balance sheet at
December 31:
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Accumulated benefit obligation,
including vested benefits of
$25,017 in 1994, $23,589 in 1993,
and $17,781 in 1992................. $26,451 $26,543 $19,918
======= ======= =======
Projected benefit obligation.......... $28,110 $28,413 $21,987
Plan assets at fair value............. 26,790 27,380 20,464
------- ------- -------
Projected benefit obligation in
excess of plan assets............... (1,320) (1,033) (1,523)
Unrecognized net loss (gain).......... (2,296) 428 2,165
Unrecognized prior service cost....... 1,032 1,156 413
Unrecognized net obligation at
January 1, 1987 being recognized
over 15 years....................... 529 1,271 681
Adjustment required to recognize
minimum liability................... - (297) -
------- ------- -------
Pension asset (liability) recognized
in consolidated balance sheet....... $(2,055) $ 1,525 $ 1,736
======= ======= =======
The following table sets forth the significant actuarial
assumptions as of December 31:
1994 1993 1992
------- ------- -------
Discount rate......................... 8.5% 7.3% 8.0%
Rate of increase in future
compensation levels................. 4.5% 4.5% 4.5%
Expected long-term rate of return
on plan assets...................... 8.8% 8.0% 8.0%
Plan assets are invested in common stock and bond funds (85
percent), marketable fixed income securities (2 percent) and insurance
company contracts (12 percent) at December 31, 1994. The plans do not
invest in the stock of the Company.
SUPPLEMENTAL U.S. PENSION PLAN
The amounts of benefits which can be covered by the funded
domestic plans are limited by the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code. Therefore, in 1994, the
Company established an unfunded supplemental retirement plan designed
to maintain benefits for all non-union domestic employees at the plan
formula level. The amount expensed for this plan in 1994 was $160,000.
The accumulated benefit obligation recognized in the consolidated
balance sheet at December 31, 1994 was $857,000.
37
</PAGE>
<PAGE>
<PAGE>
CANADIAN PENSION PLANS
The Company has noncontributory defined benefit retirement plans
covering all of its eligible Camrose employees. The plans provide
benefits based on participants' years of service and compensation.
The Canadian pension plan assets acquired with the Company's 60
percent interest in Camrose are still held by Stelco, Inc. until such
time as the transfer is approved by Canadian regulatory authorities.
Pension cost included the following components:
1994 1993 1992
------- ------- ------
(IN THOUSANDS)
Service cost.......................... $ 297 $ 303 $ 149
Interest cost......................... 408 8 -
Actual (return) loss on plan assets... (447) (13) -
Gains................................. (16) (3) -
------- ------ ------
$ 242 $ 295 $ 149
======= ====== ======
The following table sets forth the funded status of the plans and
amount recognized in the Company's consolidated balance sheet at
December 31:
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Accumulated benefit obligation,
including vested benefits of
$4,045 in 1994, $4,212 in 1993,
and $3,979 in 1992.................. $ 4,596 $ 4,893 $ 4,787
------- ------- -------
Projected benefit obligation.......... $ 5,488 $5,870 $ 5,700
Plan assets at fair value............. 6,415 6,337 5,253
------- ------ -------
Projected benefit obligation
under (over) plan assets............ 927 467 (447)
Unrecognized net gain................. (627) (535) (71)
------- ------ -------
Pension asset (liability) recognized
in consolidated balance sheet....... $ 300 $ (68) $ (518)
======= ====== =======
The following table sets forth the significant actuarial
assumptions as of December 31:
1994 1993 1992
------- ------- -------
Discount rate......................... 8.5% 7.3% 8.0%
Rate of increase in future
compensation levels................. 5.0% 5.0% 5.0%
Expected long-term rate of return
on plan assets...................... 8.8% 8.0% 8.0%
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
The Company has an ESOP for eligible domestic employees which
enables an employee to own stock in the Company. This plan is a
noncontributory qualified stock bonus plan. Contributions to the plan
are made at the discretion of the Board of Directors. Company
contributions in 1994, 1993 and 1992 were $736,000, $753,000, and $3.5
million, respectively. Shares are allocated to eligible employees'
accounts based on annual compensation. At December 31, 1994, the ESOP
held 2.4 million shares of Company common stock which had been
allocated to employees.
PROFIT PARTICIPATION PLANS
The Company has discretionary profit participation plans under
which it distributes quarterly 12 percent to 20 percent, depending on
the operating division, of its pre-tax profits to its eligible
employees. The plans define profits as pre-tax earnings from
divisional operations after adjustments for certain non-operating
items. Each eligible employee receives a share of the distribution
based upon the level of the eligible employee's base compensation
compared with the total base compensation of all eligible employees of
the division.
THRIFT PLAN
The Company has a qualified thrift plan (401-k) for all of its
eligible domestic employees that is designed to receive and invest
their deferred compensation as provided by current laws. The Company
currently matches 25 percent of the first 4 percent of the
participant's deferred compensation. The Company's contribution
expense in 1994, 1993 and 1992 was $778,000, $461,000, and $424,000,
respectively.
38
</PAGE>
<PAGE>
<PAGE>
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company provides certain health care and life insurance
benefits for substantially all of its retired employees. Employees are
generally eligible for benefits upon retirement and completion of a
specified number of years of service. The benefit plans are unfunded.
The following table sets forth the plans' status at December 31:
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Accumulated postretirement benefit
obligation:
Retirees............................. $ 4,557 $ 8,240 $ 7,155
Fully eligible plan participants..... 2,037 1,294 786
Other active plan participants....... 6,387 5,050 1,728
------- ------- -------
$12,981 $14,584 $ 9,669
======= ======= =======
Accumulated postretirement benefit
obligation in excess of plan
assets............................... $(12,981) $(14,584) $(9,669)
Unrecognized net (gain) loss........... (2,379) 34 (450)
Accrued postretirement benefit cost.... 8,777 7,557 2,716
-------- -------- -------
Postretirement asset recognized in
consolidated balance sheet........... $ 6,583 $ 6,993 $ 7,403
======== ======== =======
Net periodic postretirement benefit
costs include the following
components:
Service cost....................... $ 457 $ 395 $ 196
Interest cost...................... 1,033 1,017 733
Transition obligation at March 31,
1991 being amortized over 20
years............................ 410 410 410
Gains.............................. (3) - -
-------- -------- -------
Net periodic postretirement
benefit cost....................... $ 1,897 $ 1,822 $ 1,339
======== ======== =======
For measurement purposes, a long-term inflation rate of 4 percent
is assumed for health care cost trend rates. However, a lower
inflation rate (negative 6 percent in 1995 and 3.5 percent in 1996)
has been assumed over the next two years, based on negotiated health
care costs. A one percentage point increase in the assumed health care
cost trend rate for 1995 would increase the accumulated postretirement
benefit obligation by $473,000; the aggregate service and interest
cost would increase $98,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 8.5 percent.
10. RELATED PARTY TRANSACTIONS
CAMROSE PIPE COMPANY
Camrose purchases steel coil, plate, and pipe under a steel
supply agreement from Stelco, Inc. (and its subsidiaries) whose
wholly-owned subsidiary, Stelcam Holdings Inc., owns 40 percent of
Camrose. Transactions under the agreement are at negotiated market
prices. The following table summarizes the transactions among Camrose,
Stelco Inc., and Stelcam Holdings Inc.:
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
Sales to Stelco....................... $ 2,189 $ - $ -
Purchases from Stelco................. 72,642 59,019 17,000
Accounts payable to Stelco
at December 31...................... 9,053 6,755 7,100
Note payable to Stelcam at December 31
(interest at Canadian prime rate
plus 2 percent)..................... - - 2,200
NEW CF&I, INC.
In 1994 the Company's 90 percent owned New CF&I, Inc. paid a $1.7
million deposit on an equipment contract supply agreement for purchase
of deep head-hardened ("DHH") rail equipment to Nippon Steel
Corporation (together with its subsidiaries, "Nippon") which owns 10
percent of New CF&I, Inc.
39
</PAGE>
<PAGE>
<PAGE>
11. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
All material environmental remediation liabilities which are
probable and estimatable are recorded in the financial statements
based on current technologies and current environmental standards.
Adjustments are made when additional information is available that may
require different remediation methods or periods, and ultimately
affect the total cost. The best estimate of the probable loss within a
range is recorded. If there is no best estimate, the low end of the
range is recorded, and the range is disclosed.
The Company's Napa Pipe Corporation subsidiary has a reserve of
$2.8 million at December 31, 1994 for environmental remediation
relating to the Napa pipe mill. The Company's estimate of this
environmental reserve was based on several remedial investigations and
feasibility studies performed by an independent engineering
consultant. The reserve includes costs for remedial action which is
scheduled to be completed in 1998 with sampling, monitoring and
maintenance costs continuing through 2024.
In connection with the 1993 acquisition of CF&I, the Company
established a reserve of $36.7 million for environmental remediation
at CF&I's Pueblo steel mill. CF&I believed $36.7 million was the best
estimate from a range of $23.1 to $43.6 million. CF&I's estimate of
this environmental reserve was based on two separate remediation
investigations and feasibility studies conducted by independent
environmental engineering consultants. The reserve includes costs for
the Resource Conservation and Recovery Act facility investigation, a
corrective measures study, remedial action, and operation and
maintenance associated with the proposed remedial actions. CF&I and
the State of Colorado Department of Public Health and Environmental
are finalizing a prioritized schedule of corrective actions to be
completed which are substantially reflective of a straight-line rate
of expenditure over 30 years. The State of Colorado stated that the
schedule for corrective action could be accelerated if new data
indicated a greater threat to the environment than is currently known
to exist. At December 31, 1994, the reserve is $34.1 million and is
included in other deferred liabilities in the consolidated balance
sheet.
CONTRACTS WITH KEY EMPLOYEES
The Company has employment agreements with certain of its
officers which provide for severance compensation in the event their
employment with the Company is terminated subsequent to a change in
control (as defined) of the Company under the circumstances set forth
in the agreements. Each agreement has automatic annual extensions
until the employee reaches the age of 65, unless either the Company or
the employee gives notice that the agreement shall not be extended. In
the event of a change in control while the agreements are in effect,
the agreements are automatically extended for 36 months from the date
the change in control occurs. The agreements will generally terminate
upon termination of employment prior to a change in control of the
Company.
If, within 36 months following a change in control, the
employee's employment with the Company is terminated by the Company
without cause (as defined) or by the employee with good reason (as
defined), then the Company will pay the employee his full base salary
through the date of termination at the rate in effect on the date the
change in control occurred, plus three times his annual base salary at
the above specified rate, the four most recent quarterly cash
distributions from the Company's profit participation plan and certain
post retirement benefits as specified in the agreement. The employee
is also entitled to be reimbursed for any reasonable legal fees and
expenses he may incur in enforcing his rights under the agreement.
CAMROSE ACQUISITION
On June 30, 1992 Camrose Pipe Corporation acquired a 60 percent
interest in a newly formed Canadian general partnership, Camrose Pipe
Company. Concurrent with the formation of Camrose and the purchase of
the partnership interest by Camrose Pipe Corporation, Camrose
purchased from Stelco, Stelco's steel pipemaking facility in Camrose,
Alberta, Canada and related receivables, inventories and other current
assets. Under the terms of the asset purchase agreement the purchase
price for the Camrose assets may be increased or decreased based upon
an annual performance adjustment over a five-year period as described
in the asset purchase agreement. The purchase price was increased by
$3.6 million and $485,000, respectively, in 1994 and 1993.
40
</PAGE>
<PAGE>
<PAGE>
CAPITAL EXPENDITURES
During 1994 the Company began construction of various capital
improvement projects at both its Portland, Oregon and Pueblo, Colorado
steel mills. At December 31, 1994, the Company had commitments for
expenditures of approximately $73.8 million related to the completion
of these projects.
12. CAPITAL STOCK
The Board of Directors has the authority to issue shares of
preferred stock from time to time in one or more series and to fix the
number of shares to be included in such a series, the designation,
powers, preferences and rights of the shares of each such series and
any qualifications, limitations or restrictions of such series,
including but not limited to dividend rights, dividend rates,
conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions) and liquidation preferences, all
without any vote or action by the stockholders.
In connection with the acquisition of certain assets of CF&I
Steel Corporation, the Company, through its ownership interest in
CF&I, agreed to issue 598,400 shares of its common stock in March 2003
to specified creditors of CF&I Steel Corporation. The stock was valued
at $11.2 million using the Black-Scholes valuation method. The common
stock has no voting rights or rights to receive dividends until it is
issued. In connection with the acquisition, the Company also issued
five year warrants expiring March 3, 1998 to purchase 100,000 shares
of the Company's common stock at $35 per share to CF&I Steel
Corporation. The warrants were valued at $556,000 using the Black-
Scholes method.
13. UNUSUAL AND NONRECURRING ITEMS
GAIN ON SALE OF SUBSIDIARY'S COMMON STOCK
In August 1994 the Company sold a 10 percent equity interest in
its subsidiary, New CF&I, Inc., to a wholly-owned subsidiary of
Nippon. In connection with that sale, Nippon agreed to license to the
Company its proprietary technology for producing DHH rail products, as
well as to sell the Company certain production equipment to produce
DHH rail under a separate equipment supply agreement. New CF&I, Inc.
received a cash payment of $16.8 million in connection with the
transaction. The sale resulted in a gain of approximately $12.3
million for the Company. The gain is not subject to federal or state
income taxes.
PROVISION FOR ROLLING MILL CLOSURES
During the fourth quarter of 1994, the Company began construction
on the Combination Mill at its Portland, Oregon steel mill. When
completed in 1996 this mill will replace the Company's existing plate
rolling mill at the Portland steel mill. Accordingly, in the third
quarter of 1994 the Company recorded a non-cash charge of $8.9
million, before income taxes of $3.4 million, to reduce the carrying
value of various pieces of plant and equipment and inventories located
at the Portland steel mill which are unlikely to be used following the
completion of the Combination Mill.
The Company's Fontana, California plate mill ceased plate
production in the fourth quarter of 1994 and will close permanently in
the first quarter of 1995. As a result of the closure, the Company
recognized a loss for the disposal and exit costs of $13.2 million,
before income taxes of $5 million. Of this net amount, approximately
$7.4 million is a non-cash charge relating to the write-off of
production supplies and property, plant and equipment. The Fontana
plate mill is on leased property. The lease was terminated on January
18, 1995. The agreement provided for, among other stipulations, the
termination of the lease and vacating the premises by March 31, 1995.
The Company agreed to specific actions to restore the premises to a
condition acceptable to the lessor by June 30, 1995, or within 60 days
following receipt of all requirements for closure of the premises from
the local county environmental authorities. The lessor agreed to
indemnify the Company against environmental claims upon written
notification by this local authority that the Company has
satisfactorily performed all of the authority's requirements for
closure of the premises. The Company has established a $900,000
reserve at December 31, 1994 for probable and estimatable remediation
costs.
41
</PAGE>
<PAGE>
<PAGE>
PROPERTY TAX REFUND
During the fourth quarter of 1994, the Company received property
tax refunds totaling $4.6 million related to prior years for the over
assessment of its Portland, Oregon and Pueblo, Colorado steel mills.
The refunds reduced cost of sales by $3.5 million and increased
interest income by $1.1 million.
42
</PAGE>
<PAGE>
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEMS 10 and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT AND EXECUTIVE COMPENSATION
A definitive proxy statement of Oregon Steel Mills, Inc. will be
filed not later than 120 days after the end of the fiscal year with
the Securities and Exchange Commission. The information set forth
therein under "Election of Directors" and "Executive Compensation" is
incorporated herein by reference. Executive Officers of Oregon Steel
Mills, Inc. and principal subsidiaries are listed on page 15 of this
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required is set forth under the caption "Principal
Stockholders" in the Proxy Statement for the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required is set forth under the caption "Executive
Compensation" in the Proxy Statement for the 1995 Annual Meeting of
Stockholders and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
PAGE
(A) (i) FINANCIAL STATEMENTS:
Report of Independent Accountants.................. 24
Consolidated Financial Statements:
Balance Sheets at December 31, 1994, 1993
and 1992....................................... 25
Statements of Income for each of the three years
in the period ended December 31, 1994.......... 26
Statements of Changes in Stockholders' Equity
for each of the three years in the period
ended December 31, 1994........................ 27
Statements of Cash Flows for each of the three
years in the period ended December 31, 1994.... 28
Notes to Consolidated Financial Statements....... 29
(ii) Financial Statement Schedules for each of
the three years in the period ended
December 31, 1994:
Schedule II - Valuation and Qualifying Accounts.... 44
(iii) Exhibits: References made to the list on page 45
of the exhibits filed with this report.
(B) No reports on Form 8-K were required to be filed by
the Registrant during the fourth quarter of the
year ended December 31, 1994.
43
</PAGE>
<PAGE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS)
<CAPTION>
COLUMN C
------------------------
COLUMN B COLUMN E
---------- ADDITIONS COLUMN D ----------
COLUMN A BALANCE AT CHARGED TO CHARGED ---------- BALANCE AT
- ---------------- BEGINNING COSTS AND TO OTHER DEDUCTIONS END OF
CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS (1) PERIOD
- ---------------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994
----
Allowance for doubtful accounts....... $1,906 $ 488 - $ (331) $ 2,063
Provision for rolling mill closures:
Inventories......................... - $ 2,792 - - $ 2,792
Property, plant and equipment, net.. - $17,994 - - $ 17,994
Other assets........................ - $ 78 - - $ 78
Deferred tax assets valuation
allowance........................... - $ 5,408 - - $ 5,408
1993
----
Allowance for doubtful accounts....... $ 926 $ 764 $ 463(2) $ (247) $ 1,906
1992
----
Allowance for doubtful accounts....... $ 770 $ 360 - $ (204) $ 926
- -------------
(1) Results from write-offs of accounts receivable.
(2) Additions from purchase of assets of CF&I Steel Corporation.
44
</TABLE>
</PAGE>
<PAGE>
<PAGE>
LIST OF EXHIBITS*
2.0 Asset Purchase Agreement dated as of January 2, 1992, by and
between Camrose Pipe Company (a partnership) and Stelco Inc.
(Filed as exhibit 2.0 to Form 8-K dated June 30, 1992 and
incorporated by reference herein.)
2.1 Asset Purchase Agreement dated as of March 3, 1993, among CF&I
Steel Corporation, Denver Metals Company, Albuquerque Metals
Company, CF&I Fabricators of Colorado, Inc., CF&I Fabricators
of Utah, Inc., Pueblo Railroad Service Company, Pueblo Metals
Company, Colorado & Utah Land Company, the Colorado and
Wyoming Railway Company, William J. Westmark as trustee for
the estate of The Colorado and Wyoming Railway Company, CF&I
Steel, L.P., New CF&I, Inc. and Oregon Steel Mills, Inc.
(Filed as exhibit 2.1 to Form 8-K dated March 3, 1993, and
incorporated by reference herein.)
3.1 Restated Certificate of Incorporation of the Company. (Filed
as exhibit 3.1 to Form 10-K for the year ended December 31,
1992, and incorporated by reference herein.)
3.2 Bylaws of the Company. (Filed as exhibit 3.2 to Form 10-Q
dated March 31, 1993, and incorporated by reference herein.)
4.1 Specimen Common Stock Certificate. (Filed as exhibit 4.1 to
Form S-1 Registration Statement 33-38379 and incorporated by
reference herein.)
4.2 Form of Oregon Steel Mills, Inc. - Five-Year Common Stock
Purchase Warrant. (Filed as exhibit 4.2 to Form 8-K dated
March 3, 1993, and incorporated by reference herein.)
10.1 Employee Stock Ownership Plan, as amended. (Filed as exhibit
10.1 to Form S-1 Registration Statement 33-38379 and
incorporated by reference herein.)
10.2 Employee Stock Ownership Plan Trust Agreements. (Filed as
exhibit 10.2 to Form 10-K for the year ended December 31, 1990
and incorporated by reference herein.)
10.3 Profit Participation Plan. (Filed as exhibit 10.5 to Form S-1
Registration Statement 33-20407 and incorporated by reference
herein.)
10.4 Form of Indemnification Agreement between the Company and its
directors. (Filed as exhibit 10.6 to Form S-1 Registration
Statement 33-20407 and incorporated by reference herein.)
10.5 Form of Indemnification Agreement between the Company and its
executive officers. (Filed as exhibit 10.7 to Form S-1
Registration Statement 33-20407 and incorporated by reference
herein.)
10.6 Agreement for Electric Power Service between registrant and
Portland General Electric Company. (Filed as exhibit 10.20 to
Form S-1 Registration Statement 33-20407 and incorporated by
reference herein.)
10.7 Agreement dated February 21, 1994 between Oregon Steel Mills,
Inc. and Robert J. Sikora.
10.8 Key employee contracts for Thomas B. Boklund and Robert R.
Mausshardt. (Filed as exhibit 10.11 to Form 10-K for the year
ended December 31, 1988, and incorporated by reference
herein.)
10.9 Key employee contracts for L. Ray Adams and James R.
McCaughey. (Filed as exhibit 10.10 to Form 10-K for the year
ended December 31, 1990 and incorporated by reference herein.)
10.10 Key employee contract for Edward J. Hepp. (Filed as exhibit
10.11 to Form 10-K for the year ended December 31, 1991, and
incorporated by reference herein.)
10.12 Credit Agreement dated December 14, 1994 among Oregon Steel
Mills, Inc., as the Borrower, Certain Commercial Lending
Institutions, as the Lenders, First Interstate Bank of Oregon,
N.A., as the Administrative Agent for the Lenders, The Bank of
Nova Scotia, as the Syndication Agent for the Lenders, and
First Interstate Bank of Oregon, N.A. and The Bank of Nova
Scotia, as the Managing Agents for the Lenders.
- ------------
* The Company will furnish to stockholders a copy of the exhibit upon
payment of $.25 per page to cover the expense of furnishing such
copies. Requests should be directed to Vicki A. Tagliafico, Investor
Relations Contact, Oregon Steel Mills, Inc., PO Box 5368, Portland,
Oregon 97228.
45
</PAGE>
<PAGE>
<PAGE>
11.0 Statement re computation of per share earnings.
21.0 Subsidiaries of registrant. (Filed as exhibit 22.1 to Form 10-K
for the year ended December 31, 1992, and incorporated by
reference herein.)
23.0 Independent Auditor's Consent
99.0 Partnership Agreement dated as of January 2, 1992, by and
between Camrose Pipe Corporation and Stelcam Holding, Inc.
(Filed as exhibit 28.0 to Form 8-K dated June 30, 1992, and
incorporated by reference herein.)
99.1 Amended and Restated Agreement of Limited Partnership of CF&I
Steel, L.P. dated as of March 3, 1993 by and between New CF&I,
Inc. and the Pension Benefit Guaranty Corporation. (Filed as
exhibit 28.1 to Form 8-K dated March 3, 1993, and incorporated
by reference herein.)
99.2 Oregon Steel Mills, Inc. Pension Plan, as amended. (Filed as
99.0 to Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein.)
46
</PAGE>
<PAGE>
<PAGE>
<TABLE>
SIGNATURES REQUIRED FOR FORM 10-K
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Oregon Steel Mills,
Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OREGON STEEL MILLS, INC.
(Registrant)
By /s/ Thomas B. Boklund
----------------------------------
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Oregon Steel Mills, Inc. and in the capacities and on the dated indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Boklund Chairman of the Board,
- -------------------------- Chief Executive Officer and President
(Thomas B. Boklund) (Principal Executive Officer) March 1, 1995
/s/ L. Ray Adams Vice President of Finance
- -------------------------- and Chief Financial Officer
(L. Ray Adams) (Principal Financial Officer) March 1, 1995
/s/ Jackie L. Williams Controller
- --------------------------
(Jackie L. Williams) (Principal Accounting Officer) March 1, 1995
/s/ C. Lee Emerson Director March 1, 1995
- --------------------------
(C. Lee Emerson)
/s/ V. Neil Fulton Director March 1, 1995
- --------------------------
(V. Neil Fulton)
/s/ Edward C. Gendron Director March 1, 1995
- --------------------------
(Edward C. Gendron)
/s/ Robert W. Keener Director March 1, 1995
- --------------------------
(Robert W. Keener)
/s/ Richard G. Landis Director March 1, 1995
- --------------------------
(Richard G. Landis)
/s/ James A. Maggetti Director March 1, 1995
- --------------------------
(James A. Maggetti)
/s/ John A. Sproul Director March 1, 1995
- --------------------------
(John A. Sproul)
/s/ William Swindells Director March 1, 1995
- --------------------------
(William Swindells)
47
</TABLE>
</PAGE>
<PAGE>
AGREEMENT
This Agreement is made and entered into by and between
Oregon Steel Mills, Inc., its subsidiaries and affiliates ("OSM"), and
Robert J. Sikora ("Sikora") on this 21 day of Feb.
---- ----------------,
1994.
Sikora is an employee, officer and director of Oregon
Steel Mills, Inc. and serves in various capacities in connection with
the management of one or more of its subsidiaries and affiliates.
This Agreement is to acknowledge the early retirement of
Sikora, his resignation as an officer, director, committee member or a
management participant of OSM and the date of the termination of his
employment.
This Agreement is also to acknowledge certain payments
made or to be made to Sikora by OSM in consideration of such early
retirement and all rights of Sikora arising out of or related to his
employment.
OSM has advised Sikora to confer with financial and legal
counsel in connection with his early retirement and the terms and
conditions of this Agreement; has further advised Sikora that he has
twenty-one (21) days to consider this Agreement prior to execution;
and that if Sikora signs this Agreement, he will have seven (7) days
thereafter within which to repudiate this Agreement.
1
</PAGE>
<PAGE>
The parties agree as follows:
1. OSM agrees:
----------
A. To pay to Sikora his regular salary and
related employee benefits through April 27, 1994.
B. On and after April 28, 1994, to pay to Sikora
Two Hundred Forty Thousand Dollars ($240,000.00), the first payment in
the amount of $160,000.00 on May 1, 1994, and the second and last
payment in the amount of $80,000.00 on January 1, 1995.
C. At OSM's expense, less the co-payment that
Sikora would have had to pay if Sikora were an active employee of the
Company, to provide Sikora with health care benefits similar to those
he would receive under the OSM, Inc.Health Plan, as modified from time
to time, if he were an active OSM employee until he reaches the age of
fifty-five (55) or is eligible to actively draw his regular company
pension. Upon reaching age fifty-five (55) or, if later, beginning to
actively draw his regular OSM pension, Sikora shall receive retiree
health care benefits similar to those he would receive under the OSM,
Inc. Health Plan had he retired from OSM employment at age fifty-five
(55), subject to such changes, amendment or termination as may affect
retiree health care benefits provided by OSM generally. Cost of such
benefits to be borne by OSM, less the amount that would have been paid
by Sikora for such benefits had Sikora been a retiree under the OSM,
Inc. Health Plan.
2
</PAGE>
<PAGE>
D. To the extent that OSM is the owner of any
golf club or social club memberships utilized by Sikora, which OSM may
transfer to Sikora under the terms of such membership, OSM will
transfer such membership to Sikora upon Sikora's request.
E. To supplement Sikora's retirement benefits,
OSM shall pay to Sikora:
(i) The total sum of One Hundred Thirteen
Thousand Nine Hundred Thirty Five
Dollars and Fifty-Eight Cents
($113,935.58), payable $33,347.00 per
year (and pro rated for any portion of
any calendar year) beginning on May 1,
1995, payable through September 30,
1998; and
(ii) If during 1994 the Oregon Steel Mills,
Inc. Pension Plan is amended to provide
a Supplemental Executive Retirement
Plan, the amount of Nine Thousand Three
Hundred Seventy Seven Dollars
($9,377.00) per year (pro rated for any
portion of a calendar year) beginning
May 1, 1995, through November 30, 2000;
and the payments of Thirty Three
Thousand Three Hundred Forty Seven
Dollars ($33,347.00) per year provided
by paragraph E(i) above shall be
3
</PAGE>
<PAGE>
continued from October 1, 1998, through
November 30, 2000.
F. OSM hereby waives any notice of termination of
employment otherwise required of Sikora.
G. On and after April 28, 1994, Sikora shall
retain all vested rights of a former employee of OSM under the Oregon
Steel Mills, Inc. Employee Stock Ownership Plan, Thrift Plan, Pension
Plan, and any other fringe benefits which may apply generally to
former employees or any changes or amendments that are so applicable,
as well as any duties or obligations thereunder.
H. OSM, on behalf of itself, its predecessor and
successor companies, its directors, officers, employees, agents and
representatives, hereby releases Sikora from any and all claims,
actions, causes of action, demands, rights, damages, costs, or
liabilities, which it now has or which may hereafter accrue on account
of or in any way growing out of Sikora's employment as an officer and
director of OSM, or out of his service in connection with the
management of one or more of OSM's subsidiaries and affiliates.
I. In the event of a sale of substantially all of
the assets of OSM or the merger, consolidation or other reorganization
of OSM, OSM shall require that, as a condition to any such
transaction, such purchaser or successor entity shall assume and agree
to be responsible for the obligations of OSM under the terms of this
Agreement.
4
</PAGE>
<PAGE>
J. OSM warrants that Thomas B. Boklund is
authorized to enter into this Agreement on behalf of the corporation.
K. OSM agrees that all payments due to Sikora as
provided by this Agreement shall be payable to Sikora's Estate in the
event of Sikora's death.
2. Sikora Agrees:
-------------
A. Sikora's employment by OSM shall terminate
effective 12:01 A.M. April 28, 1994, and Sikora hereby resigns as an
officer, director, committee member, and management participant or
advisor of Oregon Steel Mills, Inc. and all subsidiaries, affiliates
and any benefit plans or trusts of OSM effective 12:01 A.M. April 28,
1994.
B. Sikora, for himself, his heirs, successors and
assigns, hereby releases OSM, their benefit plans or trusts (and the
administrators or trustees thereof), their officers, directors,
employees and agents of and from all claims, causes of actions, or
rights, arising out of or in any fashion related to his employment as
an employee, officer, director or agent of OSM, including, without
limitation, any and all express or implied contractual or statutory
rights to employment or reemployment; any and all expressed or implied
contractual or statutory rights to salary, wages, fringes or side
benefits, tort claims, discrimination claims, or claims for the
violation of civil rights, including the ADEA, whether at common law
or by statute; provided, however, that the foregoing has no
application to the
5
</PAGE>
<PAGE>
payments or benefits to be received by Sikora pursuant to the terms
and provisions hereof.
C. To assume and pay any and all tax liabilities
resulting from this Agreement.
3. Terms and conditions of this Agreement shall be
deemed confidential and shall not be disclosed to third parties except
upon the mutual agreement of the parties or as required by law.
4. Sikora acknowledges that he has had access to the
confidential records, customer lists, data, drawings, writings and
other materials of OSM. Sikora agrees that for a period of two (2)
years from the date hereof, he will not directly or indirectly
disclose to others or use for his own benefit or the benefit of others
any of the foregoing information. Notwithstanding the foregoing, the
parties acknowledge that the foregoing prohibition on disclosure of
confidential information is not intended to preclude Sikora from
engaging in business activities which may directly or indirectly
compete with the business activities of OSM.
5. This Agreement is intended to include the entire
agreement of the parties and does supersede all other agreements,
including the existing Employment Agreement between Sikora and OSM
dated the 9 day of Jan. , 19 , which agreement is hereby
---- ---------- ---
terminated.
6. This Agreement will be construed and enforced in
accordance with the laws of the state of Oregon. Venue for any
6
</PAGE>
<PAGE>
action arising hereunder shall lie exclusively in the Circuit Court of
Multnomah County, Oregon. In any action, arbitration hearing or other
proceeding arising out of or relating to this Agreement, or the breach
thereof, the prevailing party shall be entitled to recover their
reasonable attorney's fees, including attorney fees on appeal.
7. Any controversy or claim arising out of or relating
to this Agreement,or the breach thereof, shall be settled by
arbitration in accordance with ORS 36.300 et seq. The parties shall
attempt to mutually agree upon a single individual to serve as the
arbitrator. In the event that the parties cannot agree on the
arbitrator, either party shall have the right, after notice to the
other, to ask the Multnomah County Circuit Court to appoint an
arbitrator. Costs of the arbitration, including the arbitrator's fee,
shall be shared equally by the parties.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first hereinabove written.
OREGON STEEL MILLS, INC.
By /s/ Thomas B. Boklund
-------------------------
Thomas B. Boklund, Chairman
/s/ Robert J. Sikora
---------------------------
Robert J. Sikora
7
</PAGE>
<PAGE>
U.S. $300,000,000
CREDIT AGREEMENT,
dated as of December 14, 1994
among
OREGON STEEL MILLS, INC.,
as the Borrower,
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
FIRST INTERSTATE BANK OF OREGON, N.A.,
as the Administrative Agent for the Lenders,
THE BANK OF NOVA SCOTIA,
as the Syndication Agent for the Lenders,
and
FIRST INTERSTATE BANK OF OREGON, N.A. and
THE BANK OF NOVA SCOTIA,
as the Managing Agents for the Lenders.
</PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
----
I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . .2
1.1. Defined Terms. . . . . . . . . . . . . . . . . .2
1.2. Use of Defined Terms . . . . . . . . . . . . . 23
1.3. Cross-References . . . . . . . . . . . . . . . 23
1.4. Accounting and Financial Determinations. . . . 23
II COMMITMENTS, BORROWING PROCEDURES AND NOTES. . . . . . . 24
2.1. Commitments. . . . . . . . . . . . . . . . . . 24
2.1.1. Term Loan Commitment . . . . . . . . . . . . . 24
2.1.2. Revolving Loan Commitment. . . . . . . . . . . 24
2.1.3. Swingline Commitment . . . . . . . . . . . . . 24
2.1.4. Lenders Not Permitted or Required To Make
Loans. . . . . . . . . . . . . . . . . . . . . 25
2.1.5. Extension of Revolving Loan Termination
Date . . . . . . . . . . . . . . . . . . . . . 26
2.2. Optional Reduction of Commitment Amounts . . . 27
2.3. Borrowing Procedure. . . . . . . . . . . . . . 27
2.3.1. Term Loans and Revolving Loans . . . . . . . . 27
2.3.2. Swingline Loans. . . . . . . . . . . . . . . . 28
2.4. Continuation and Conversion Elections. . . . . 28
2.5. Funding. . . . . . . . . . . . . . . . . . . . 28
2.6. Notes. . . . . . . . . . . . . . . . . . . . . 29
III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES . . . . . . . 29
3.1. Repayments and Prepayments . . . . . . . . . . 29
3.1.1. Voluntary Prepayments. . . . . . . . . . . . . 29
3.1.2. Exceeding the Revolving Loan Commitment. . . . 30
3.1.3. Scheduled Term Loan Repayments . . . . . . . . 30
3.1.4. Excess Cash Flow Repayments. . . . . . . . . . 30
3.1.5. Net Equity Proceeds. . . . . . . . . . . . . . 31
3.1.6. Net Disposition Proceeds . . . . . . . . . . . 31
3.1.7. Net Receivables Proceeds . . . . . . . . . . . 31
3.1.8. Acceleration . . . . . . . . . . . . . . . . . 32
3.2. Application of Payments and Prepayments. . . . 32
3.2.1. Voluntary Prepayments. . . . . . . . . . . . . 32
3.2.2. Mandatory Prepayments. . . . . . . . . . . . . 32
3.3. Interest Provisions. . . . . . . . . . . . . . 32
3.3.1. Rates. . . . . . . . . . . . . . . . . . . . . 32
3.3.2. Post-Maturity Rates. . . . . . . . . . . . . . 34
3.3.3. Payment Dates. . . . . . . . . . . . . . . . . 34
3.3.4. Interest Rate Determination. . . . . . . . . . 34
3.4. Fees . . . . . . . . . . . . . . . . . . . . . 35
3.4.1. Commitment Fee . . . . . . . . . . . . . . . . 35
3.4.2. Upfront Fee. . . . . . . . . . . . . . . . . . 35
3.4.3. Agents' Fees . . . . . . . . . . . . . . . . . 35
IV CERTAIN LIBO RATE AND OTHER PROVISIONS . . . . . . . . . 35
i
</PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
-----------
PAGE
----
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . 35
4.2. Deposits Unavailable . . . . . . . . . . . . . 36
4.3. Increased LIBO Rate Loan Costs, etc. . . . . . 36
4.4. Funding Losses . . . . . . . . . . . . . . . . 36
4.5. Increased Capital Costs. . . . . . . . . . . . 37
4.6. Taxes. . . . . . . . . . . . . . . . . . . . . 37
4.7. Payments, Computations, etc. . . . . . . . . . 39
4.8. Sharing of Payments. . . . . . . . . . . . . . 39
4.9. Setoff . . . . . . . . . . . . . . . . . . . . 40
4.10. Use of Proceeds. . . . . . . . . . . . . . . . 40
4.11. Actions of Affected Lenders. . . . . . . . . . 40
V CONDITIONS TO BORROWING. . . . . . . . . . . . . . . . . 41
5.1. Initial Borrowing. . . . . . . . . . . . . . . 41
5.1.1. Resolutions, etc.. . . . . . . . . . . . . . . 41
5.1.2. Delivery of Notes. . . . . . . . . . . . . . . 42
5.1.3. Payment of Outstanding Indebtedness, etc.. . . 42
5.1.4. Guaranties . . . . . . . . . . . . . . . . . . 42
5.1.5. Pledge Agreement . . . . . . . . . . . . . . . 42
5.1.6. Security Agreements. . . . . . . . . . . . . . 42
5.1.7. Opinion of Counsel . . . . . . . . . . . . . . 43
5.1.8. Organization Documents . . . . . . . . . . . . 43
5.1.9. Closing Fees, Expenses, etc. . . . . . . . . . 44
5.2. All Borrowings . . . . . . . . . . . . . . . . 44
5.2.1. Compliance with Warranties, No Default,
etc. . . . . . . . . . . . . . . . . . . . . . 44
5.2.2. Borrowing Request. . . . . . . . . . . . . . . 44
5.2.3. Satisfactory Legal Form. . . . . . . . . . . . 45
VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 45
6.1. Organization, etc. . . . . . . . . . . . . . . 45
6.2. Due Authorization, Non-Contravention, etc. . . 45
6.3. Government Approval, Regulation, etc.. . . . . 46
6.4. Validity, etc. . . . . . . . . . . . . . . . . 46
6.5. Financial Information. . . . . . . . . . . . . 46
6.6. No Material Adverse Change . . . . . . . . . . 46
6.7. Litigation, Labor Controversies, etc.. . . . . 47
6.8. Subsidiaries . . . . . . . . . . . . . . . . . 47
6.9. Ownership of Properties. . . . . . . . . . . . 47
6.10. Taxes. . . . . . . . . . . . . . . . . . . . . 47
6.11. Pension and Welfare Plans. . . . . . . . . . . 47
6.12. Environmental Warranties . . . . . . . . . . . 48
6.13. Regulations G, U and X . . . . . . . . . . . . 49
6.14. Accuracy of Information. . . . . . . . . . . . 49
VII COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 49
7.1. Affirmative Covenants. . . . . . . . . . . . . 49
ii
</PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
-----------
PAGE
----
7.1.1. Financial Information, Reports, Notices,
etc. . . . . . . . . . . . . . . . . . . . . .50
7.1.2. Compliance with Laws, etc. . . . . . . . . . .52
7.1.3. Maintenance of Properties. . . . . . . . . . .52
7.1.4. Insurance. . . . . . . . . . . . . . . . . . .52
7.1.5. Books and Records. . . . . . . . . . . . . . .53
7.1.6. Environmental Covenant . . . . . . . . . . . .53
7.1.7. Interest Rate Protection . . . . . . . . . . .53
7.1.8. Future Significant Subsidiaries; Further
Assurances . . . . . . . . . . . . . . . . . .54
7.1.9. Opinion of New Guarantors. . . . . . . . . . .54
7.2. Negative Covenants . . . . . . . . . . . . . .54
7.2.1. Business Activities. . . . . . . . . . . . . .54
7.2.2. Indebtedness . . . . . . . . . . . . . . . . .54
7.2.3. Liens. . . . . . . . . . . . . . . . . . . . .55
7.2.4. Financial Condition. . . . . . . . . . . . . .56
7.2.5. Investments. . . . . . . . . . . . . . . . . .59
7.2.6. Restricted Payments, etc.. . . . . . . . . . .60
7.2.7. Capital Expenditures, etc. . . . . . . . . . .60
7.2.8. Rental Obligations . . . . . . . . . . . . . .61
7.2.9. Sale and Leasebacks. . . . . . . . . . . . . .61
7.2.10. Consolidation, Merger, etc.. . . . . . . . . .61
7.2.11. Asset Dispositions, etc. . . . . . . . . . . .62
7.2.12. Transactions with Affiliates . . . . . . . . .63
7.2.13. Negative Pledges, Restrictive Agreements,
etc. . . . . . . . . . . . . . . . . . . . . .63
VIII EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 63
8.1. Listing of Events of Default . . . . . . . . .63
8.1.1. Non-Payment of Obligations . . . . . . . . . .63
8.1.2. Breach of Warranty . . . . . . . . . . . . . .64
8.1.3. Non-Performance of Certain Covenants and
Obligations. . . . . . . . . . . . . . . . . .64
8.1.4. Non-Performance of Other Covenants and
Obligations. . . . . . . . . . . . . . . . . .64
8.1.5. Default on Other Indebtedness. . . . . . . . .64
8.1.6. Judgments. . . . . . . . . . . . . . . . . . .64
8.1.7. Pension Plans. . . . . . . . . . . . . . . . .65
8.1.8. Control of the Borrower. . . . . . . . . . . .65
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . .65
8.1.10. Impairment of Security, etc. . . . . . . . . .66
8.1.11. Environmental Matters. . . . . . . . . . . . .66
8.2. Action if Bankruptcy . . . . . . . . . . . . .66
8.3. Action if Other Event of Default . . . . . . .66
IX THE AGENTS . . . . . . . . . . . . . . . . . . . . . . .67
9.1. Actions. . . . . . . . . . . . . . . . . . . .67
iii
</PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
-----------
PAGE
----
9.2. Funding Reliance, etc. . . . . . . . . . . . .68
9.3. Exculpation. . . . . . . . . . . . . . . . . .68
9.4. Successor. . . . . . . . . . . . . . . . . . .68
9.5. Loans by First Interstate and Scotiabank . . .69
9.6. Credit Decisions . . . . . . . . . . . . . . .69
9.7. Copies, etc. . . . . . . . . . . . . . . . . .70
X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . .70
10.1. Waivers, Amendments, etc.. . . . . . . . . . .70
10.2. Notices. . . . . . . . . . . . . . . . . . . .71
10.3. Payment of Costs and Expenses. . . . . . . . .71
10.4. Indemnification. . . . . . . . . . . . . . . .72
10.5. Survival . . . . . . . . . . . . . . . . . . .73
10.6. Severability . . . . . . . . . . . . . . . . .73
10.7. Headings . . . . . . . . . . . . . . . . . . .74
10.8. Execution in Counterparts, Effectiveness,
etc. . . . . . . . . . . . . . . . . . . . . .74
10.9. Governing Law; Entire Agreement. . . . . . . .74
10.10. Successors and Assigns . . . . . . . . . . . .74
10.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes. . . . . . .74
10.11.1. Assignments. . . . . . . . . . . . . . . . . .74
10.11.2. Participations . . . . . . . . . . . . . . . .76
10.12. Confidentiality. . . . . . . . . . . . . . . .77
10.13. Other Transactions . . . . . . . . . . . . . .78
10.14. Forum Selection and Consent to
Jurisdiction . . . . . . . . . . . . . . . . .78
10.15. Waiver of Jury Trial . . . . . . . . . . . . .78
SCHEDULE 1 - Disclosure Schedule
EXHIBIT A - Form of Revolving Note
EXHIBIT B - Form of Term Note
EXHIBIT C - Form of Swingline Note
EXHIBIT D - Form of Borrowing Request
EXHIBIT E - Form of Continuation/Conversion Notice
EXHIBIT F - Form of Lender Assignment Agreement
EXHIBIT G - Form of Guaranty
EXHIBIT H - Form of Pledge Agreement
EXHIBIT I - Form of Security Agreement
EXHIBIT J - Form of Opinion of Counsel to the Obligors
EXHIBIT K - Form of Borrowing Base Certificate
EXHIBIT L - Form of Compliance Certificate
iv
</PAGE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 14, 1994, among
OREGON STEEL MILLS, INC., a Delaware corporation (the "Borrower"), the
--------
various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), FIRST INTERSTATE BANK OF OREGON, N.A.
-------
("First Interstate"), as administrative agent (the "Administrative
---------------- --------------
Agent") for the Lenders, THE BANK OF NOVA SCOTIA ("Scotiabank"), as
- ----- ----------
syndication agent for the Lenders (the "Syndication Agent") and First
-----------------
Interstate and Scotiabank as managing agents (the "Managing Agents")
---------------
for the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower is engaged directly and through its various
Subsidiaries in the business of manufacturing and marketing specialty
and commodity steel products; and
WHEREAS, the Borrower desires to obtain Commitments from the
Lenders pursuant to which Loans, in a maximum aggregate principal
amount at any one time outstanding not to exceed $300,000,000, will be
made to the Borrower from time to time prior to the applicable
Commitment Termination Dates for such Commitments; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
---------
Commitments and make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used
(a) to make payment in full, concurrently with the
initial Borrowing hereunder, of all Indebtedness identified in
Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure
-------------
Schedule;
(b) to finance the Borrower's planned capital
expenditure program; and
(c) for general corporate purposes and working capital
purposes of the Borrower and its Subsidiaries other than
Camrose Pipe Corporation, a Delaware corporation and wholly-
owned Subsidiary of the Borrower ("Camrose") and Camrose Pipe
-------
Company, a Canadian general partnership which is 60% owned by
Camrose (the "Camrose Partnership");
-------------------
NOW, THEREFORE, the parties hereto agree as follows:
1
</PAGE>
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
-------------
underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the
singular and plural forms thereof):
"Account Debtor" means any Person who is or who may become
--------------
obligated under or on account of an Account.
"Accounts" means all accounts, as such term is defined in the
--------
Uniform Commercial Code in effect in the State of New York as of the
Effective Date.
"Administrative Agent" is defined in the preamble and includes
-------------------- --------
each other Person as shall have subsequently been appointed as the
successor Administrative Agent pursuant to Section 9.4.
-----------
"Affiliate" of any Person means any other Person which, directly
---------
or indirectly, controls, is controlled by or is under common control
with such Person (excluding the ESOP or any trustee under, or any
committee with responsibility for administering, the ESOP or any
Plan). A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or indirectly, power
(a) to vote 15% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election
of directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Agent(s)" means, as the context may require, any (or all) of the
--------
Administrative Agent, the Syndication Agent or either Managing Agent.
"Agreement" means, on any date, this Credit Agreement as
---------
originally in effect on the Effective Date and as thereafter from time
to time amended, supplemented, amended and restated, or otherwise
modified and in effect on such date.
"Alternate Base Rate" means, on any date and with respect to all
-------------------
Base Rate Loans, a fluctuating rate of interest per annum equal to the
higher of
(a) the rate of interest most recently announced by
First Interstate at its Domestic Office as its prime rate; and
2
</PAGE>
<PAGE>
(b) the Federal Funds Rate most recently determined by
the Administrative Agent plus one-half of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest
rate of interest determined by First Interstate in connection with
extensions of credit. Changes in the rate of interest on that portion
of any Loans maintained as Base Rate Loans will take effect
simultaneously with each change in the Alternate Base Rate. The
Administrative Agent will give notice promptly to the Borrower and the
Lenders of changes in the Alternate Base Rate.
"Applicable Margin" means, in the case of any Loan, a rate per
-----------------
annum determined by reference to the Leverage Ratio as of the last day
of the most recently ended Fiscal Quarter, as follows:
Reserve
Adjusted Base Swingline
Leverage LIBO Rate Rate
Ratio Margin Margin Margin
-------- -------- ------ ---------
less than 2.0 to 1.0 .75% .0% .75%
2.0 to 1.0 or more but 1.25% .25% 1.25%
less than 3.0 to 1.0
3.0 to 1.0 or more but 1.50% .50% 1.50%
less than 3.5 to 1.0
3.5 to 1.0 or more but 1.75% .75% 1.75%
less than 3.75 to 1.0
3.75 to 1.0 or more 2.25% 1.25% 2.25%
The Applicable Margin shall be based on the Leverage Ratio as set
forth in the most recent Compliance Certificate, and shall be
effective from and including the date the Administrative Agent
receives such Compliance Certificate to but excluding the date on
which the Administrative Agent receives the next Compliance
Certificate; provided, however, that if Administrative Agent does not
-------- -------
receive a Compliance Certificate by the date required by Section
-------
7.1.1(c), the Applicable Margin shall, effective as of such date,
- --------
increase by one level to but excluding the date the Administrative
Agent receives such Compliance Certificate. Subject to the foregoing
proviso, from the Effective Date until the date on which the
Administrative Agent has received a Compliance Certificate for the
quarter ended December 31, 1994, the Borrower's Reserve Adjusted LIBO
Margin, Base Rate Margin and Swingline Rate Margin will be 1.75%, .75%
and 1.75%, respectively.
"Assignee Lender" is defined in Section 10.11.1.
--------------- ---------------
3
</PAGE>
<PAGE>
"Authorized Officer" means, relative to any Obligor, those of its
------------------
officers (or in the case of a Borrowing Request, any other employee)
whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1 or from
-------------
time to time after the Effective Date.
"Base Rate Loan" means a Loan bearing interest at a
--------------
fluctuating rate determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
-------- --------
"Borrowing" means the Loans of the same type and, in the case of
---------
LIBO Rate Loans, having the same Interest Period made by all Lenders
on the same Business Day and pursuant to the same Borrowing Request.
"Borrowing Base" means, as of any date of determination thereof,
--------------
an amount equal to the sum of (x) 70% of the value of all Eligible
Accounts outstanding at such date, plus (y) 50% of the value of all
----
Eligible Inventory at such date.
"Borrowing Base Certificate" means a certificate duly executed by
--------------------------
an Authorized Officer of the Borrower, substantially in the form of
Exhibit K hereto.
- ---------
"Borrowing Request" means a loan request and certificate duly
-----------------
executed by an Authorized Officer of the Borrower, substantially in
the form of Exhibit D hereto.
---------
"Business Day" means
------------
(a) any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be
closed in New York, New York and Portland, Oregon; and
(b) relative to the making, continuing, prepaying or
repaying of any LIBO Rate Loans, any day which is a Business
Day for purposes of clause (a) above and which is also a day
on which dealings in Dollars are carried on in the interbank
eurodollar markets of the Reference Lenders' LIBO Offices.
"Camrose" is defined in the fourth recital.
------- --------------
"Camrose Partnership" is defined in the fourth recital.
------------------- --------------
"Capital Expenditures" means, for any period, the sum of
--------------------
(a) the aggregate amount of all expenditures of the
Borrower and its Subsidiaries for fixed or capital assets made
during such period which, in accordance with GAAP, would be
4
</PAGE>
<PAGE>
classified as capital expenditures (including, without
limitation, any expenditures made by the Borrower with asset
sale proceeds retained by the Borrower pursuant to
Section 7.2.11, but excluding, in any event, expenditures made
--------------
with insurance proceeds);
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period; and
(c) the aggregate amount of the Borrower's Investments
in joint ventures for alternate metalics projects, including,
without limitation, Comsigua and Cliffs & Associates.
"Capitalized Lease Liabilities" means all monetary obligations of
-----------------------------
the Borrower or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other
Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalent Investment" means, at any time:
--------------------------
(a) any obligation, maturing not more than one year
after such time, issued or guaranteed by the United States or
Canadian Government;
(b) municipal notes or note funds rated at the time of
purchase, SP-1/A-1 or SP-2/A-2 by Standard & Poor's
Corporation or VM1G1 or VM1G2 by Moody's Investors Services,
Inc.; municipal bonds or bond funds rated at the time of
purchase, AAA or AA by Standard & Poor's Corporation or Aaa or
Aa by Moody's Investors Service, Inc.; or money market
preferred stock rated at the time of purchase, AAA or AA by
Standard & Poor's Corporation or aaa or aa by Moody's
Investors Service, Inc.;
(c) commercial paper, maturing not more than nine months
from the date of issue, which is issued by (i) a corporation
(other than an Affiliate of any Obligor) organized under the
laws of any state of the United States or of the District of
Columbia and rated at least A-2 by Standard & Poor's
Corporation or at least P-2 by Moody's Investors Service,
Inc., or (ii) any Lender (or its holding company); or
(d) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is
issued by either (i) a commercial banking institution that is
5
</PAGE>
<PAGE>
a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$500,000,000, or (ii) any Lender.
"Cash Flow Coverage Ratio" means, for any period of four Fiscal
------------------------
Quarters, the ratio of (x) the sum of the Borrower and its
Subsidiaries' (i) Net Income (including minority share portion) during
such period, plus (ii) depreciation, plus (iii) amortization, plus
---- ---- ----
(iv) ESOP accrual, plus (v) deferred employee benefits, plus (vi)
---- ----
other non-cash items, including such items that relate to the
Borrower's closure of its Fontana facility, plus (vii) total taxes
----
(including cash and deferred portion) and plus (viii) total interest
----
expense during such period to (y) the sum of (i) the scheduled
principal payments of consolidated Funded Debt (including, but not
limited to, principal payments of the Term Loans pursuant to
Section 3.1) during such period, plus (ii) total interest charges
- ----------- ----
incurred (including capitalized interest) during such period, plus
----
(iii) the cash portion of taxes paid during such period.
"CERCLA" means the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response
-------
Compensation Liability Information System List.
"CF&I Steel, L.P." means CF&I Steel, L.P., a Delaware limited
----------------
partnership which is 95.2% owned by New CF&I.
"Change in Control" means the acquisition by any Person (other
-----------------
than the ESOP), or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act
of 1934) of 20% or more of the outstanding shares of voting stock of
the Borrower.
"Cliffs & Associates" means Cliffs and Associates Iron Carbide
-------------------
Limited, a corporation to be formed under the laws of Trinidad and
Tobago, in which Oregon Steel de Guayana, Inc., a Delaware
corporation and wholly owned Subsidiary of the Borrower, contemplates
investment in stock, and which will be organized for the purposes of
acquiring, designing, constructing, developing and operating an
industrial facility in Trinidad to produce, load and ship iron
carbide.
"Code" means the Internal Revenue Code of 1986, as amended,
----
reformed or otherwise modified from time to time.
"Commitment" means, as the context may require, a Lender's
----------
Revolving Loan Commitment or Term Loan Commitment or the Swingline
Lender's Swingline Loan Commitment.
6
</PAGE>
<PAGE>
"Commitment Amount" means, as the context may require, either the
-----------------
Revolving Loan Commitment Amount, the Term Loan Commitment Amount or
the Swingline Loan Commitment Amount.
"Commitment Fee Rate" means the percentage determined by
-------------------
reference to the Leverage Ratio as of the last day of its most
recently ended Fiscal Quarter, as follows:
Leverage Ratio Commitment Fee Rate
-------------- -------------------
less than 2.0 to 1.0 .375%
2.0 to 1.0 or more .50%
"Commitment Termination Date" means, as the context may require,
---------------------------
the Revolving Loan Commitment Termination Date, the Term Loan
Commitment Termination Date or the Swingline Loan Commitment
Termination Date.
"Commitment Termination Event" means
----------------------------
(a) the occurrence of any Default described in clauses
-------
(a) through (d) of Section 8.1.9; or
--- --- -------------
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
-----------
(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the
direction of the Required Lenders, to the Borrower that
the Commitments have been terminated.
"Compliance Certificate" means a certificate duly executed by an
----------------------
Authorized Officer of the Borrower, substantially in the form of
Exhibit L hereto.
- ---------
"Comsigua" means Complejo Siderurgico de Guayana C.A., a
--------
corporation organized and existing under the laws of the Republic of
Venezuela, in which Borrower has invested and may further invest
pursuant to that certain Comsigua Project Shareholders Agreement,
dated March 18, 1994, and which was organized for the purpose of
designing, constructing and operating an industrial facility in
Venezuela for the processing of iron oxides into hot briquetted iron.
"Consolidated Tangible Net Worth" means (i) the book value of the
-------------------------------
Borrower and its Subsidiaries' equity plus (ii) the book value of the
----
Borrower and its Subsidiaries' minority interests minus
-----
7
</PAGE>
<PAGE>
(iii) the aggregate amount of any intangible assets of the Borrower
and its Subsidiaries, including goodwill, franchises, licenses,
patents, trademarks, tradenames, copyrights, servicemarks and
brandnames.
"Contingent Liability" means any agreement, undertaking or
--------------------
arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to
supply funds to, or otherwise to invest in, a debtor, or otherwise to
assure a creditor against loss) the indebtedness, obligation or any
other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be calculated in
accordance with GAAP.
"Continuation/Conversion Notice" means a notice of continuation
------------------------------
or conversion and certificate duly executed by an Authorized Officer
of the Borrower, substantially in the form of Exhibit E hereto.
---------
"Controlled Group" means all members of a controlled group of
----------------
corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under
Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
"Current Assets" means the consolidated current assets of the
--------------
Borrower and its Subsidiaries, determined in accordance with GAAP.
"Current Liabilities" means the consolidated current liabilities
-------------------
of the Borrower and its Subsidiaries, determined in accordance with
GAAP.
"Current Ratio" means the ratio of (a) Current Assets to (b)
------------- --
Current Liabilities.
"Default" means any Event of Default or any condition, occurrence
-------
or event which, after notice or lapse of time or both, would
constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule attached
-------------------
hereto as Schedule 1, as it may be amended, supplemented or otherwise
----------
modified from time to time by the Borrower with the written consent of
the Managing Agents and the Required Lenders.
"Dollar" and the sign "$" mean lawful money of the United States.
------ -
8
</PAGE>
<PAGE>
"Domestic Office" means, relative to any Lender, the office of
---------------
such Lender designated as such below its signature hereto or
designated in the Lender Assignment Agreement or such other office of
a Lender (or any successor or assign of such Lender) within the United
States as may be designated from time to time by notice from such
Lender, as the case may be, to each other Person party hereto.
"EBITDA" means, for any period of four Fiscal Quarters, the
------
Borrower and its Subsidiaries' earnings before interest expense,
taxes, depreciation and amortization, calculated on a rolling four
Fiscal Quarter basis; provided, that for the Fiscal Quarter ending
--------
December 31, 1994, EBITDA shall be the product of EBITDA for such
Fiscal Quarter times 4, that for the two Fiscal Quarters ending March
31, 1995, EBITDA shall be the product of EBITDA for such two Fiscal
Quarters times 2, and that for the three Fiscal Quarters ending June
30, 1995, EBITDA shall be the product of EBITDA for such three Fiscal
Quarters times 1.33.
"Effective Date" means the date this Agreement becomes effective
--------------
pursuant to Section 10.8.
------------
"Eligible Account" means, at the time of any determination
----------------
thereof, any Account of the Borrower or any of its Subsidiaries (other
than the Camrose Partnership) as to which each of the following
requirements has been fulfilled to the reasonable satisfaction of the
Administrative Agent:
(a) the Borrower or such Subsidiary has lawful and
absolute title to such Account and such Account is, in the
Borrower's or such Subsidiary's reasonable judgment,
collectible in the ordinary course of business;
(b) such Account is not subject to a bona fide dispute,
---------
setoff, counterclaim or other claim or defense on the part of
any person (including such Account Debtor) denying liability
under such Account;
(c) such Account is not subject to any Lien in favor of
any Person, except Liens permitted by clause (a), (e), (f),
---------- --- ---
(g), or (h) of Section 7.2.3;
--- --- -------------
(d) such Account is a bona fide Account (which, with
---------
respect to an Account arising from a sale of goods, was
created as a result of a sale on an absolute basis and not on
a consignment, approval or sale-and-return basis) of the
Borrower or such Subsidiary arising in the ordinary course of
the Borrower's or such Subsidiary's business, and which,
(i) in the case of Accounts arising from the sale
of goods, such goods have been shipped or delivered and
all other actions have been taken necessary to create a
9
</PAGE>
<PAGE>
binding obligation on the part of the Account Debtor for
such Account;
(ii) in the case of Accounts relating to the
rendering of services, such services have been performed
or completed and all other actions have been taken
necessary to create a binding obligation on the part of
the Account Debtor for such Account;
(e) with respect to such Account, the Account Debtor is
not
(i) an Affiliate of the Borrower, or
(ii) the subject of any reorganization, bankruptcy,
receivership, custodianship, insolvency or other
condition analogous to those described in clauses (a)
-----------
through (d) of Section 8.1.9;
--- -------------
(f) such Account is not outstanding more than 90 days
past the original billing date therefor;
(g) such Account is the subject of a first priority
perfected security interest in favor of the Administrative
Agent;
(h) such Account is not owing from any Account Debtor
from whom more than 25% of the Accounts owed to the Borrower
and its Subsidiaries are more than 90 days past the original
billing date therefor;
(i) the Account Debtor thereunder is not the United
States or any department, agency or instrumentality thereof
unless the Borrower assigns its rights to payment of such
account to the Administrative Agent, in form and substance
satisfactory to the Administrative Agent, so as to comply with
the Assignment of Claims Act of 1940, as amended; and
(j) the Account Debtor thereunder is not located outside
of the United States unless payment thereunder is secured by
a letter of credit in form and substance satisfactory to the
Administrative Agent.
"Eligible Inventory" means, at the time of any determination
------------------
thereof, all Inventory of the Borrower or any of its Subsidiaries
(other than the Camrose Partnership) arising in the ordinary course of
business and as to which each of the following requirements has been
fulfilled to the reasonable satisfaction of the Administrative Agent:
10
</PAGE>
<PAGE>
(a) all of such Inventory is located in the United
States;
(b) none of such Inventory shall consist of (i) items in
the custody of third parties (other than the Borrower and its
Subsidiaries) for processing or manufacture, (ii) items in the
Borrower's or such Subsidiary's possession but intended by the
Borrower or such Subsidiary for return to the suppliers
thereof, (iii) items belonging to third parties (other than
the Borrower and its Subsidiaries) that have been consigned to
the Borrower or such Subsidiary or are otherwise in the
Borrower's or such Subsidiary's custody or possession, (iv) items
in the Borrower's or such Subsidiary's custody and possession on
a sale-on-approval or sale-or-return basis or subject to any
other repurchase or return agreement or (v) miscellaneous
operating items which are generally categorized by the Borrower
as "stores inventory";
(c) none of such Inventory shall be unsalable, obsolete,
damaged or otherwise unfit for sale or consumption in the
normal course of the business of the Borrower or such
Subsidiary;
(d) none of such Inventory shall be subject to any Lien
in favor of any Person, except Liens permitted by clause (a),
----------
(e), (f), (g) or (h) of Section 7.2.3; and
--- --- --- --- -------------
(e) all of such Inventory is the subject of a first
priority perfected security interest in favor of the
Administrative Agent.
"Environmental Laws" means all applicable federal, state or local
------------------
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA also refer to any
successor sections.
"ESOP" means the employee stock ownership plan for the employees
----
of the Borrower and certain of its Subsidiaries in effect as of the
Effective Date and any successor to such plan.
"Event of Default" is defined in Section 8.1.
---------------- -----------
"Excess Cash Flow" means for any Fiscal Year, the excess of
----------------
(x) the EBITDA for such period over (y) the sum of (i) the scheduled
----
principal payments of consolidated Funded Debt
11
</PAGE>
<PAGE>
(including, but not limited to, principal payments of the Term Loans
pursuant to Section 3.1) during such period, plus (ii) cash interest
----------- ----
payments made during such period, plus (iii) taxes paid during such
----
period, plus (iv) Capital Expenditures made during such period, plus
---- ----
(v) any net increase, if positive, in Working Capital during such
period.
"Federal Funds Rate" means, for any period, a fluctuating
------------------
interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New
York; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day
on such transactions received by First Interstate from three
federal funds brokers of recognized standing selected by it.
"First Interstate" is defined in the preamble.
---------------- --------
"Fiscal Quarter" means any quarter of a Fiscal Year.
--------------
"Fiscal Year" means any period of twelve consecutive calendar
-----------
months ending on December 31; references to a Fiscal Year with a
number corresponding to any calendar year (e.g., the "1993 Fiscal
----
Year") refer to the Fiscal Year ending on the December 31 occurring
during such calendar year.
"Fontana" means Oregon Steel Mills - Fontana Division, Inc., a
-------
Delaware corporation and wholly-owned Subsidiary of the Borrower.
"F.R.S. Board" means the Board of Governors of the Federal
------------
Reserve System or any successor thereto.
"Funded Debt" means the outstanding principal amount of all
-----------
Indebtedness of the Borrower and its Subsidiaries of the nature
referred to in clauses (a) and (b) of the definition of
----------- ---
"Indebtedness".
------------
"Funded Debt to Capitalization Ratio" means the ratio of
-----------------------------------
(x) Funded Debt to (y) the sum of (i) Funded Debt plus
----
(ii) Consolidated Tangible Net Worth.
"GAAP" is defined in Section 1.4.
---- -----------
"Guaranties" means the Guaranties executed and delivered pursuant
----------
to Section 5.1.4, substantially in the form of Exhibit G
------------- ---------
12
</PAGE>
<PAGE>
hereto, as amended, supplemented, restated or otherwise modified from
time to time.
"Guarantors" means all direct and indirect Significant
----------
Subsidiaries of the Borrower, whether presently existing or hereafter
created, including, without limitation, Napa, Fontana, Camrose and New
CF&I, but excluding the Camrose Partnership and CF&I Steel, L.P.;
provided, that if Fontana shall cease to be a Significant Subsidiary
- --------
of the Borrower, it shall thereupon cease to be a Guarantor hereunder
and shall be released from its obligations under its Security
Agreement.
"Hazardous Material" means
------------------
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended; or
(c) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of
any other applicable federal, state or local law, regulation,
ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, all as amended or
hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
-------------------
liabilities of such Person under interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and
all other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, currency exchange rates or
commodity prices.
"herein", "hereof", "hereto", "hereunder" and similar terms
------ ------ ------ ---------
contained in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole
and not to any particular Section, paragraph or provision of this
Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
---------------------------
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such
opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
13
</PAGE>
<PAGE>
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition
to its removal, would require an adjustment to such item the
effect of which would be to cause such Obligor to be in
default of any of its obligations under Section 7.2.4.
-------------
"including" means including without limiting the generality of
---------
any description preceding such term.
"Indebtedness" of any Person means, without duplication:
------------
(a) all obligations of such Person for borrowed money
and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP,
recorded as Capitalized Lease Liabilities;
(c) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of such
Person;
(d) all other items which, in accordance with GAAP,
would be included as liabilities on the liability side of the
balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) whether or not so included as liabilities in
accordance with GAAP, all indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by
such Person or is limited in recourse; provided, however, that
-------- -------
the indebtedness secured by the Lien on the Borrower's shares
of Comsigua and Cliffs & Associates permitted by the terms of
Section 7.2.3(i) hereof shall not be considered Indebtedness;
----------------
and
(f) all Contingent Liabilities of such Person in respect
of any of the foregoing.
For all purposes of this Agreement, (i) Permitted Intercompany Loans
shall not be considered Indebtedness and (ii) the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner or a joint venturer
to the extent that either (x) such Person is directly obligated for
such Indebtedness or (y) that such Indebtedness is a Contingent
Liability of such Person.
14
</PAGE>
<PAGE>
"Indemnified Liabilities" is defined in Section 10.4.
----------------------- ------------
"Indemnified Parties" is defined in Section 10.4.
------------------- ------------
"Interest Coverage Ratio" means, for any period of four Fiscal
-----------------------
Quarters, the ratio of (x) the sum of the Borrower and its
Subsidiaries' (i) Net Income during such period, plus (ii) total taxes
----
(including cash and deferred portion) accrued during such period, plus
----
(iii) cash interest expense during such period plus (iv) noncash
----
extraordinary losses during such period minus (v) noncash
extraordinary gains during such period to (y) the Borrower and its
Subsidiaries' total interest expense (including capitalized interest)
during such period.
"Interest Period" means, relative to any LIBO Rate Loans, the
---------------
period beginning on (and including) the date on which such LIBO Rate
Loan is made or continued as, or converted into, a LIBO Rate Loan
pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day
----------- ---
which numerically corresponds to such date one, two, three or six
months thereafter (or, if such month has no numerically corresponding
day, on the last Business Day of such month), as the Borrower may
select in its relevant notice pursuant to Section 2.3 or 2.4;
----------- ---
provided, however, that
- -------- -------
(a) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the
same duration;
(b) if such Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on
the next following Business Day (unless such next following
Business Day is the first Business Day of a calendar month, in
which case such Interest Period shall end on the Business Day
next preceding such numerically corresponding day); and
(c) no Interest Period for any Loan may end later than
the Stated Maturity Date for such Loan.
"Inventory" means all inventory, as such term is defined in the
---------
Uniform Commercial Code in effect in the state of New York as of the
Effective Date.
"Investment" means, relative to any Person,
----------
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business)
other than Permitted Intercompany Loans;
(b) any Contingent Liability of such Person; and
15
</PAGE>
<PAGE>
(c) any ownership or similar interest held by such
Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof less all returns of principal or equity thereon
(and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the transfer or
exchange of property other than cash, be deemed to have been made in
an original principal or capital amount equal to the fair market value
of such property at the time of such Investment.
"Lender Assignment Agreement" means a Lender Assignment Agreement
---------------------------
substantially in the form of Exhibit F hereto.
---------
"Lenders" is defined in the preamble.
------- --------
"Leverage Ratio" means, as of the end of any Fiscal Quarter of
--------------
the Borrower, the ratio of the Borrower and its Subsidiaries' (x)
Funded Debt to (y) EBITDA.
"LIBO Rate" is defined in Section 3.3.1.
--------- -------------
"LIBO Rate Loan" means a Loan bearing interest, at all times
--------------
during an Interest Period applicable to such Loan, at a fixed rate of
interest determined by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.3.1.
--------- -------------
"LIBOR Office" means, relative to any Lender, the office of such
------------
Lender designated as such below its signature hereto or designated in
the Lender Assignment Agreement or such other office of a Lender as
designated from time to time by notice from such Lender to the
Borrower and the Administrative Agent, whether or not outside the
United States, which shall be making or maintaining LIBO Rate Loans of
such Lender hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.3.1.
------------------------ -------------
"Lien" means any security interest, mortgage, pledge,
----
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property to
secure payment of a debt or performance of an obligation or other
priority or preferential arrangement of any kind or nature
whatsoever.
"Loan" means, as the context may require, a Revolving Loan, a
----
Term Loan or a Swingline Loan of any type.
"Loan Document" means this Agreement, the Notes, the Guaranties,
-------------
the Pledge Agreement, the Security Agreements, each
16
</PAGE>
<PAGE>
agreement relating to Hedging Obligations to which a Lender is a party
(unless otherwise agreed by such Lender) and each other agreement,
document or instrument delivered in connection with this Agreement.
"Managing Agents" is defined in the preamble and includes each
--------------- --------
other Person as shall have subsequently been appointed as a successor
Managing Agent pursuant to Section 9.4.
-----------
"Material Adverse Effect" means any circumstance or event which
-----------------------
is reasonably likely to (i) have a material adverse effect on the
validity or enforceability of this Agreement, the Notes or any other
Loan Document, (ii) have a material adverse effect on the financial
condition, operations, assets, business or properties of Borrower and
its Subsidiaries, taken as a whole, or (iii) materially impair the
ability of the Borrower or any Guarantor to fulfill its respective
obligations under this Agreement or any other Loan Document.
"Material Partnership" means each of the Camrose Partnership,
--------------------
CF&I Steel, L.P. and any other partnership in which Borrower or any
Subsidiary has an Investment in excess of $10,000,000.
"Monthly Payment Date" means the last day of each calendar month
--------------------
or, if any such day is not a Business Day, the next succeeding
Business Day.
"Napa" means Napa Pipe Corporation, a Delaware corporation and
----
wholly-owned Subsidiary of the Borrower.
"Net Disposition Proceeds" means, with respect to any Restricted
------------------------
Disposition, the gross consideration received by or for the account of
its seller minus (i) transfer taxes paid or payable as a result of
-----
such sale, (ii) broker's commissions, professional fees and other
expenses relating to such sale that are payable by seller and (iii)
any promissory notes received by the seller in connection with such
sale.
"Net Equity Proceeds" means, with respect to any issuance by the
-------------------
Borrower or any Subsidiary of any equity securities, the gross
consideration received by or for the issuer minus underwriting and
-----
brokerage commissions, discounts and fees and other professional fees
and expenses relating to such issuance that are payable by the issuer.
"Net Income" means the consolidated net income of the Borrower
----------
and its Subsidiaries, determined in accordance with GAAP.
"Net Receivables Proceeds" means, with respect to any Permitted
------------------------
Receivables Financing, the gross consideration received
17
</PAGE>
<PAGE>
by such seller minus professional fees and expenses relating to such
-----
financing payable by the seller.
"New CF&I" means New CF&I, Inc., a Delaware corporation and
--------
90%-owned Subsidiary of the Borrower.
"Note" means, as the context may require, a Revolving Note, a
----
Term Note or the Swingline Note.
"Obligations" means all obligations (monetary or otherwise) of
-----------
the Borrower and each other Obligor arising under or in connection
with this Agreement, the Notes and each other Loan Document.
"Obligor" means, as the context may require, the Borrower, any
-------
Guarantor or any other Person (other than an Agent or any Lender)
obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, its
----------------
certificate of incorporation, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any
of its authorized shares of capital stock.
"Participant" is defined in Section 10.11.2.
----------- ---------------
"PBGC" means the Pension Benefit Guaranty Corporation and any
----
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined
------------
in section 3(2) of ERISA, which is subject to Title IV of ERISA (other
than a multiemployer plan as defined in section 4001(a)(3) of ERISA),
and to which the Borrower or any corporation, trade or business that
is, along with the Borrower, a member of a Controlled Group, may have
liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at
any time during the preceding five years, or by reason of being deemed
to be a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage set
----------
forth on Schedule 2 hereto or set forth in the Lender Assignment
Agreement, as such percentage may be adjusted from time to time
pursuant to Lender Assignment Agreement(s) executed by such Lender and
its Assignee Lender(s) and delivered pursuant to Section 10.11.1.
---------------
"Permitted Dispositions" means (x) any sale, transfer, lease or
----------------------
conveyance by the Borrower or any of its Subsidiaries of any assets
that is made in the ordinary course of its business or (y) any sale,
transfer, lease or conveyance of any of the properties and assets more
particularly described on Item 1.1 ("Permitted Dispositions") of the
--------
Disclosure Schedule, but only to the extent
18
</PAGE>
<PAGE>
that the net proceeds therefrom do not exceed the amount set forth on
the Disclosure Schedule. If the proceeds from any such sale,
transfer, lease or conveyance shall exceed the amount set forth on the
Disclosure Schedule, all such excess proceeds shall be treated as Net
Disposition Proceeds from a Restricted Disposition.
"Permitted Intercompany Loans" means (i) any loans from the
----------------------------
Borrower to any of its Subsidiaries to the extent that such loans are
evidenced by promissory notes that have been pledged to the
Administrative Agent pursuant to the Pledge Agreement, (ii) the
existing intercompany loan from New CF&I to CF&I Steel, L.P., (iii)
any loans from the Borrower to CF&I Steel, L.P. to the extent that
such loans are evidenced by promissory notes that have been pledged to
the Administrative Agent or (iv) any loans from any of the Borrower's
Subsidiaries to the Borrower to the extent that such loans are
subordinated on terms and conditions satisfactory to Administrative
Agent.
"Permitted Receivables Financing" means any sale (or financing)
-------------------------------
by the Borrower or its Subsidiaries of Accounts to a receivables
purchaser, on terms satisfactory to the Managing Agents.
"Person" means any natural person, corporation, partnership,
------
firm, association, trust, government, governmental agency or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
----
"Pledge Agreement" means the Pledge Agreement executed and
----------------
delivered pursuant to Section 5.1.5, substantially in the form of
-------------
Exhibit H hereto, as amended, supplemented, restated or otherwise
- ---------
modified from time to time.
"Quarterly Payment Date" means the last day of each March, June,
----------------------
September, and December or, if any such day is not a Business Day, the
next succeeding Business Day.
"Reference Lenders" means First Interstate, Scotiabank and United
-----------------
States National Bank of Oregon.
"Release" means a "release", as such term is defined in CERCLA.
-------
"Required Lenders" means, at any time, Lenders holding at least
----------------
51% of the then aggregate outstanding principal amount of the
Revolving Notes (including, for such purposes, any participations of
the Lenders under Swingline Loans) and Term Notes, or, if no such
principal amount is then outstanding, Lenders having at least
19
</PAGE>
<PAGE>
51% of the aggregate Revolving Loan Commitments and Term Loan
Commitments.
"Resource Conservation and Recovery Act" means the Resource
--------------------------------------
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in
effect from time to time.
"Restricted Disposition" means any sale, transfer, lease,
----------------------
contribution or conveyance by the Borrower or any Subsidiary of its
assets that is not a Permitted Disposition.
"Revolving Loan" is defined in Section 2.1.2.
-------------- -------------
"Revolving Loan Commitment" means, relative to any Lender, such
-------------------------
Lender's obligation to make Revolving Loans pursuant to Section 2.1.2.
-------------
"Revolving Loan Commitment Amount" means, on any date,
--------------------------------
$100,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
-----------
"Revolving Loan Commitment Termination Date" means the earliest
------------------------------------------
of
(a) December 31, 1997, as such date may be extended
pursuant to Section 2.1.5;
-------------
(b) the date on which the Revolving Loan Commitment
Amount is terminated in full or reduced to zero pursuant to
Section 2.2; and
-----------
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described above, the Revolving Loan
Commitments shall terminate automatically and without any further
action.
"Revolving Note" means a promissory note of the Borrower payable
--------------
to any Lender, in the form of Exhibit A hereto (as such promissory
---------
note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to such
Lender resulting from outstanding Revolving Loans, and also means all
other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Scotiabank" is defined in the preamble.
---------- --------
"Security Agreements" means the Security Agreements executed and
-------------------
delivered pursuant to Section 5.1.6, substantially in the form
-------------
20
</PAGE>
<PAGE>
of Exhibit I hereto, as amended, supplemented, restated or otherwise
---------
modified from time to time.
"Significant Subsidiary" means each Subsidiary of the Borrower
----------------------
that
(a) as of the Effective Date, is designated with an
asterisk in Item 2 ("Subsidiaries") of the Disclosure
------
Schedule;
(b) accounted for at least 5% of consolidated revenues
of the Borrower and its Subsidiaries or 5% of consolidated
earnings of the Borrower and its Subsidiaries before interest
and taxes, in each case for the four Fiscal Quarters of the
Borrower ending on the last day of the last Fiscal Quarter of
the Borrower immediately preceding the date as of which any
such determination is made; or
(c) has assets which represent at least 5% of the
consolidated assets of the Borrower and its Subsidiaries as of
the last day of the last Fiscal Quarter of the Borrower
immediately preceding the date as of which any such
determination is made,
all of which, with respect to clauses (b) and (c), shall be as
----------- ---
reflected on the financial statements of the Borrower for the period,
or as of the date, in question.
"Stated Maturity Date" means
--------------------
(a) in the case of any Revolving Loan, December 31,
1997, as such date may be extended pursuant to Section 2.1.5;
-------------
(b) in the case of any Swingline Loan, December 31,
1997, as such date may be extended pursuant to Section 2.1.5;
-------------
and
(c) in the case of any Term Loan, December 31, 1999.
"Subsidiary" means, with respect to any Person, any corporation
----------
of which more than 50% of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person; provided, however, that in the case of
-------- -------
the Borrower, such term also includes, without limitation, Camrose
Partnership and CF&I Steel, L.P.
21
</PAGE>
<PAGE>
"Swingline Lender" means First Interstate.
----------------
"Swingline Loan" is defined in Section 2.1.3.
-------------- -------------
"Swingline Loan Commitment" means the Swingline Lender's
-------------------------
obligation to make Swingline Loans pursuant to Section 2.1.3.
-------------
"Swingline Loan Commitment Amount" means, on any date
--------------------------------
$15,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
-----------
"Swingline Loan Commitment Termination Date" means the earlier of
------------------------------------------
(a) the Revolving Loan Commitment Termination Date; or
(b) the date on which the Swingline Loan Commitment
Amount is terminated in full or reduced to zero pursuant to
Section 2.2.
-----------
Upon the occurrence of any event described above, the Swingline Loan
Commitment shall terminate automatically and without any further
action.
"Swingline Note" means the promissory note of the Borrower
--------------
payable to the Swingline Lender, in the form of Exhibit C hereto (as
---------
such promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the
Borrower to the Swingline Lender resulting from outstanding Swingline
Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble and includes each
----------------- --------
other Person as shall have subsequently been appointed as the
successor Syndication Agent pursuant to Section 9.4.
-----------
"Taxes" is defined in Section 4.6.
----- -----------
"Term Loan" is defined in Section 2.1.1.
--------- -------------
"Term Loan Commitment" means, relative to any Lender, such
--------------------
Lender's obligation to make Term Loans pursuant to Section 2.1.1.
-------------
"Term Loan Commitment Amount" means, on any date,
---------------------------
$200,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
-----------
"Term Loan Commitment Termination Date" means the earliest of
-------------------------------------
(a) December 31, 1996;
22
</PAGE>
<PAGE>
(b) the date on which the Term Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2;
and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described above, the Term Loan
Commitments shall terminate automatically and without any further
action.
"Term Note" means a promissory note of the Borrower payable to
---------
any Lender, in the form of Exhibit B hereto (as such promissory note
---------
may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Lender
resulting from outstanding Term Loans, and also means all other
promissory notes accepted from time to time in substitution therefor
or renewal thereof.
"type" means, relative to any Loan, the portion thereof, if any,
----
being maintained as a Base Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of America, its
-------------
fifty States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is defined in
------------
section 3(1) of ERISA.
"Working Capital" means the excess of (a) Current Assets over (b)
--------------- ----
Current Liabilities.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or
--------------------
the context otherwise requires, terms for which meanings are provided
in this Agreement shall have such meanings when used in the Disclosure
Schedule and in each Note, Borrowing Request, Continuation/Conversion
Notice, Loan Document, notice and other communication delivered from
time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
----------------
references in this Agreement and in each other Loan Document to any
Article or Section are references to such Article or Section of this
Agreement or such other Loan Document, as the case may be, and, unless
otherwise specified, references in any Article, Section or definition
to any clause are references to such clause of such Article, Section
or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
---------------------------------------
otherwise specified, all accounting terms used herein or in any other
Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder (including
23
</PAGE>
<PAGE>
under Section 7.2.4) shall be made, and all financial statements
-------------
required to be delivered hereunder or thereunder shall be prepared in
accordance with, those generally accepted accounting principles
("GAAP") applied in the preparation of the audited financial
statements referred to in Section 6.5.
-----------
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the
-----------
conditions of this Agreement (including Article V), each Lender
---------
severally agrees to make Loans pursuant to the Commitments
described in this Section 2.1.
-----------
SECTION 2.1.1. Term Loan Commitment. From time to time on any
--------------------
Business Day occurring prior to the Term Loan Commitment Termination
Date, each Lender will make Loans (relative to such Lender, its "Term
----
Loans") to the Borrower equal to such Lender's Percentage of the
- -----
aggregate amount of the Borrowing of Term Loans requested by the
Borrower to be made on such day. The Commitment of each Lender
described in this Section 2.1.1 is herein referred to as its "Term
------------- ----
Loan Commitment". No amounts paid or prepaid with respect to Term
- ---------------
Loans may be reborrowed.
SECTION 2.1.2. Revolving Loan Commitment. From time to time on
-------------------------
any Business Day occurring prior to the Revolving Loan Commitment
Termination Date, each Lender will make Loans (relative to such
Lender, its "Revolving Loans") to the Borrower equal to such Lender's
---------------
Percentage of the aggregate amount of the Borrowing of Revolving Loans
requested by the Borrower to be made on such day. The Commitment of
each Lender described in this Section 2.1.2 is herein referred to as
-------------
its "Revolving Loan Commitment". On the terms and subject to the
-------------------------
conditions hereof, the Borrower may from time to time borrow, prepay
and reborrow Revolving Loans.
SECTION 2.1.3. Swingline Commitment. From time to time on any
--------------------
Business Day occurring prior to the Swingline Loan Commitment
Termination Date, the Swingline Lender will make Swingline Loans to
the Borrower in the aggregate amount of Swingline Loans requested by
the Borrower to be made on such date. The Commitment of the Swingline
Lender described in this Section 2.1.3 is herein referred to as the
-------------
"Swingline Loan Commitment". On the terms and subject to the
-------------------------
conditions hereof, the Borrower may from time to time, borrow, prepay
and reborrow Swingline Loans. All Swingline Loans shall bear interest
at a fluctuating rate determined by reference to the Federal Funds
Rate plus the Applicable Margin for Swingline Loans. On the date a
----
Swingline Loan is made hereunder, each Lender absolutely and
unconditionally agrees to and does purchase a participation in an
amount equal to its respective Percentage of
24
</PAGE>
<PAGE>
Revolving Loans in such Swingline Loan. At the request of the
Swingline Lender, made through the Administrative Agent at any time
and from time to time, including, without limitation, following the
occurrence of Event of Default, each Lender (including the Swingline
Lender) absolutely and unconditionally agrees to fund the Swingline
Loans then outstanding by advancing such Lender's Percentage of the
outstanding Swingline Loans to the Administrative Agent for
disbursement to the Swingline Lender. Such advances shall be made no
later than 10:00 a.m. (Portland time) on the next following Business
Day after a request therefor is made. Advances made by the Lenders
hereunder for purposes of funding Swingline Loans shall constitute
Revolving Loans (and be advanced as Base Rate Loans) for all purposes
hereof. In consideration of the Lenders' agreement to advance funds
for purposes of repaying Swingline Loans and purchasing participations
in Swingline Loans, the Swingline Lender agrees to pay to each Lender,
such Lender's Percentage of the Applicable Margin for Swingline Loans
collected by the Swingline Lender on all outstanding Swingline Loans.
Such payment shall be made by the Swingline Lender to the
Administrative Agent, for the account of the Lenders, monthly in
arrears on each Monthly Payment Date.
SECTION 2.1.4. Lenders Not Permitted or Required To Make Loans.
-----------------------------------------------
No Lender shall be permitted or required to make
(a) any Term Loan if, after giving effect thereto, the
aggregate original principal amount of all Term Loans
(i) of all Lenders made since the Effective Date
would exceed the Term Loan Commitment Amount, or
(ii) of such Lender made since the Effective Date
would exceed such Lender's Percentage of the Term Loan
Commitment Amount; or
(b) any Revolving Loan if, after giving effect thereto,
(i) the sum of (x) the aggregate outstanding
Swingline Loans plus (y) the aggregate outstanding
----
principal amount of all Revolving Loans of all Lenders
would exceed the Revolving Loan Commitment Amount,
(ii) the sum of (x) the aggregate outstanding
Swingline Loans plus (y) the aggregate outstanding
----
principal amount of all Revolving Loans of all Lenders
would exceed the then-current Borrowing Base, or
(iii) the aggregate outstanding principal amount of
all Revolving Loans of such Lender would exceed such
Lender's Percentage of the Revolving Loan Commitment
Amount.
25
</PAGE>
<PAGE>
The Swingline Lender shall not be permitted or required to make any
Swingline Loan, if, after giving effect thereto, the aggregate
outstanding principal amount of:
(i) the sum of (x) the aggregate outstanding
principal amount of all Revolving Loans of all Lenders
plus (y) the aggregate outstanding Swingline Loans would
----
exceed the Revolving Loan Commitment Amount,
(ii) the sum of (x) the aggregate outstanding
principal amount of all Revolving Loans of all Lenders
plus (y) the aggregate outstanding Swingline Loans would
----
exceed the Borrowing Base, or
(iii) all Swingline Loans would exceed the
Swingline Loan Commitment Amount.
SECTION 2.1.5. Extension of Revolving Loan Termination Date.
--------------------------------------------
(a) Not less than 90 days nor more than 135 days before the
first and the second anniversary of the Effective Date, the Borrower
may, by written request delivered to the Administrative Agent, request
that the Revolving Loan Commitment Termination Date be extended by all
of the Lenders for a period of one year from the then-current
Revolving Loan Commitment Termination Date. The Administrative Agent
shall promptly notify the Lenders of any such request. Such extension
shall only be effective upon approval thereof in writing by each
Managing Agent and all of the Lenders holding Revolving Loan
Commitments, and the execution and delivery of such amendments to the
Loan Documents and other documents as the Managing Agents may require
in connection with such extension. Each Managing Agent and Lender may
accept or reject any request for an extension in its sole and absolute
discretion. Each Managing Agent and Lender shall use reasonable
efforts to accept or reject any such request within 30 days after
receiving notice thereof, provided that any failure by a Managing
--------
Agent or Lender to respond to such a request shall be deemed to be a
rejection thereof. Each request for the extension of the Revolving
Loan Commitment Termination Date that is approved by the Lenders
holding Revolving Credit Loans shall automatically extend the
Swingline Loan Commitment Termination Date by an identical time
period.
(b) If on or before the 30th day after the Administrative
Agent's receipt of an extension request, the Administrative Agent
shall have received written consents for the extension of the
Revolving Loan Commitment Termination Date from Lenders then holding
75% or more of the aggregate Revolving Loan Commitments and one or
more Lenders shall have rejected the Borrower's request for such
extension hereunder, the Borrower may by notice to but without consent
of any such rejecting Lender: (i) request one or more of the other
Lenders to acquire and assume (in such Lender's sole
26
</PAGE>
<PAGE>
discretion) all or part of any such rejecting Lender's Revolving Loans
and Revolving Loan Commitment; or (ii) with the written consent of the
Managing Agents, designate a replacement bank or financial institution
to acquire and assume all or part of any such rejecting Lender's
Revolving Loans and Revolving Loan Commitment; or (iii) with the
written consent of Lenders holding 75% or more of the aggregate
Revolving Loan Commitments, terminate any such rejecting Lender's
Revolving Loan Commitment and either (x) prepay any such rejecting
Lender's Revolving Loans in full, without premium or penalty but
subject to Section 4.4, or (y) repay any such rejecting Lender's
-----------
Revolving Loans in full at the end of the then-outstanding Interest
Periods, without premium or penalty, whereupon the aggregate Revolving
Loan Commitments shall be reduced by an amount equal to such rejecting
Lender's Revolving Loan Commitment.
SECTION 2.2. Optional Reduction of Commitment Amounts. The
----------------------------------------
Borrower may, from time to time on any Business Day occurring after
the time of the initial Borrowing hereunder, voluntarily reduce the
amount of any Commitment Amount; provided, however, that all such
-------- -------
reductions shall require at least one Business Day's prior notice to
the Administrative Agent and be permanent, and any partial reduction
of the Swingline Loan Commitment Amount shall be in a minimum amount
of $1,000,000 and in an integral multiple of $1,000,000 and any
partial reduction of any other Commitment Amount shall be in a minimum
amount of $10,000,000 and in an integral multiple of $1,000,000.
SECTION 2.3. Borrowing Procedure. The Borrower may request
-------------------
Loans to be made pursuant to this Section 2.3.
-----------
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a
------------------------------
Borrowing Request to the Administrative Agent on or before 9:00 a.m.,
Portland time, on a Business Day, the Borrower may from time to time
irrevocably request, (i) on not less than three Business Days' notice
in the case of LIBO Rate Loans and on not less than one Business Day's
notice in the case of Base Rate Loans, that a Borrowing of Term Loans
be made in a minimum amount of $10,000,000 and an integral multiple of
$1,000,000, or in the unused amount of the Term Loan Commitment and
(ii) on not less than three Business Days' notice in the case of LIBO
Rate Loans and on not less than one Business Day's notice in the case
of Base Rate Loans, that a Borrowing of Revolving Loans be made in a
minimum amount of $5,000,000 and an integral multiple of $1,000,000 or
in the unused amount of the Revolving Loan Commitment. Not later than
10:00 a.m., Portland time, on the date of receipt, the Administrative
Agent shall give notice to each Lender of the terms of each Borrowing
Request for Revolving Loans and Term Loans submitted by the Borrower.
On the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the type of Loans, and shall be made
on the Business Day, specified in such Borrowing Request. On or
before 11:00 a.m. (Portland time) on the Business Day specified in the
Borrowering Request each Lender shall deposit with the Administrative
Agent same day funds in an amount equal to such Lender's Percentage
27
</PAGE>
<PAGE>
of the requested Borrowing. Such deposit will be made to an account
which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the
Lenders, the Administrative Agent shall make such funds available to
the Borrower by deposit to the accounts the Borrower shall have
specified in its Borrowing Request. No Lender's obligation to make
any Loan shall be affected by any other Lender's failure to make any
Loan.
SECTION 2.3.2. Swingline Loans. By delivering a Borrowing
---------------
Request to the Swingline Lender on or before 3:00 p.m., Portland Time,
on a Business Day, the Borrower may from time to time irrevocably
request that a Borrowing of Swingline Loans be made on such date in a
minimum amount of $100,000 and an integral multiple of $100,000 or in
the unused amount of the Swingline Loan Commitment. On the terms and
subject to the conditions of this Agreement, each Borrowing of
Swingline Loans shall be made on the Business Day specified in such
Borrowing Request. The Swingline Lender shall make the Swingline Loan
available to the Borrower by deposit to the accounts the Borrower
shall have specified in its Borrowing Request.
SECTION 2.4. Continuation and Conversion Elections. By
-------------------------------------
delivering a Continuation/Conversion Notice to the Administrative
Agent on or before 9:00 a.m., Portland time, on a Business Day, the
Borrower may from time to time irrevocably elect, on not less than
three nor more than five Business Days' notice that all, or any
portion in an aggregate minimum amount of $1,000,000 and an integral
multiple of $100,000, of any Term Loans or Revolving Loans be, in the
case of Base Rate Loans, converted into LIBO Rate Loans or, in the
case of LIBO Rate Loans, be converted into a Base Rate Loan or
continued as a LIBO Rate Loan (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at
least three Business Days before the last day of the then current
Interest Period with respect thereto, such LIBO Rate Loan shall, on
such last day, automatically convert to a Base Rate Loan); provided,
--------
however, that (i) each such conversion or continuation shall be pro
- -------
rated among the applicable outstanding Loans of all Lenders, and (ii)
no portion of the outstanding principal amount of any Term Loans or
Revolving Loans may be continued as, or be converted into, LIBO Rate
Loans when any Default has occurred and is continuing. Not later than
10:00 a.m., Portland time, on the date of receipt, the Administrative
Agent shall give notice to each Lender of the terms of each
Continuation/Conversion Notice delivered to it by the Borrower.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill
-------
its obligation to make, continue or convert LIBO Rate Loans hereunder
by causing one of its foreign branches or Affiliates (or an
international banking facility created by such Lender) to make or
maintain such LIBO Rate Loan; provided, however, that such LIBO Rate
-------- -------
28
</PAGE>
<PAGE>
Loan shall nonetheless be deemed to have been made and to be held by
such Lender, and the obligation of the Borrower to repay such LIBO
Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In
addition, the Borrower hereby consents and agrees that, for purposes
of any determination to be made for purposes of Sections 4.1, 4.2, 4.3
------------ --- ---
or 4.4, it shall be conclusively assumed that each Lender elected to
---
fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR
Office's interbank eurodollar market.
SECTION 2.6. Notes. Each Lender's Loans under a Commitment
-----
shall be evidenced by a Note payable to the order of such Lender in a
maximum principal amount equal to such Lender's Percentage of the
original applicable Commitment Amount. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Notes (or
on any continuation of such grid), which notations, if made, shall
evidence, inter alia, the date of, the outstanding principal of, and
----- ----
the interest rate and Interest Period applicable to the Loans
evidenced thereby. Such notations shall be conclusive and binding on
the Borrower absent manifest error; provided, however, that the
-------- -------
failure of any Lender to make any such notations shall not limit or
otherwise affect any Obligations of the Borrower or any other Obligor.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall
--------------------------
repay in full the unpaid principal amount of each Loan upon the Stated
Maturity Date therefor. Prior thereto, payments and prepayments of
Loans shall be made as set forth below:
SECTION 3.1.1. Voluntary Prepayments. From time to time on any
---------------------
Business Day, the Borrower may make a voluntary prepayment, in whole
or in part, of the outstanding principal amount of any Loans;
provided, however, that
- -------- -------
(i) any such prepayment shall be applied to such Loans
as shall be specified by the Borrower in a written notice to
the Administrative Agent, or in the absence of such notice, as
the Administrative Agent shall specify;
(ii) no such prepayment of any LIBO Rate Loan may be
made on any day other than the last day of the Interest Period
for such Loan;
(iii) voluntary prepayments of Swingline Loans may be
made with notice from an Authorized Officer of the Borrower to
29
</PAGE>
<PAGE>
the Swingline Lender prior to 3:00 p.m. on the date of such
payment, and all voluntary prepayments of Revolving Loans and
Term Loans shall require at least one Business Day's prior
written notice to the Administrative Agent; and
(iv) all voluntary partial prepayments of Swingline
Loans shall be in an aggregate minimum amount of $100,000 and
an integral multiple of $100,000; all voluntary partial
prepayments of Revolving Loans shall be in an aggregate
minimum amount of $5,000,000 and an integral multiple of
$1,000,000; and all voluntary prepayments of Term Loans shall
be in an aggregate minimum amount of $10,000,000 and an
integral multiple of $1,000,000.
SECTION 3.1.2. Exceeding the Revolving Loan Commitment. On each
---------------------------------------
date when the sum of the aggregate outstanding principal amount of all
Revolving Loans and Swingline Loans exceeds the lesser of (x) the
Revolving Loan Commitment Amount (as it may be reduced from time to
time) and (y) the then effective Borrowing Base amount, the Borrower
shall make a mandatory prepayment of the Revolving Loans or Swingline
Loans (or both) in an aggregate amount equal to such excess.
SECTION 3.1.3. Scheduled Term Loan Repayments. On the Stated
------------------------------
Maturity Date and on each Quarterly Payment Date set forth below, the
Borrower shall make a scheduled repayment of the Term Loans in an
amount shown below opposite such Quarterly Payment Date:
Date Amount
---- ------
June 30, 1997 16,666,666.00
September 30, 1997 16,666,667.00
December 31, 1997 16,666,667.00
March 31, 1998 17,500,000.00
June 30, 1998 17,500,000.00
September 30, 1998 17,500,000.00
December 31, 1998 17,500,000.00
March 31, 1999 20,000,000.00
June 30, 1999 20,000,000.00
September 30, 1999 20,000,000.00
December 31, 1999 20,000,000.00
If less than $200,000,000 of Term Loans are outstanding on the
Term Facility Commitment Termination Date, then all scheduled
payments shall be reduced pro rata.
--- ----
SECTION 3.1.4. Excess Cash Flow Repayments. Within 90 days
---------------------------
after the close of each Fiscal Year, commencing with the Fiscal Year
ending December 31, 1997, the Borrower shall make a mandatory
prepayment of the Loans in an amount equal to 50% of Excess Cash
30
</PAGE>
<PAGE>
Flow (if any) for such period to be applied as set forth in Section
-------
3.2.2.
- -----
SECTION 3.1.5. Net Equity Proceeds. Within five Business Days
-------------------
of the receipt by the Borrower of any Net Equity Proceeds, the
Borrower shall make a mandatory prepayment of the Loans in an amount
equal to 75% of such Net Equity Proceeds to be applied as set forth in
Section 3.2.2 or, if such prepayment would cause the Borrower to be
- -------------
liable for losses or expenses pursuant to the terms of Section 4.4(a)
--------------
hereof, the Borrower shall deliver such Net Equity Proceeds to the
Administrative Agent to be held as cash collateral pursuant to the
terms of the Security Agreement and to be applied by the
Administrative Agent as set forth in Section 3.2.2 to the payments of
-------------
the Loans on the earliest dates such payment may be made without
incurring losses or expenses pursuant to Section 4.4(a).
--------------
SECTION 3.1.6. Net Disposition Proceeds. Within five Business
------------------------
Days of receipt by the Borrower or any Subsidiary of Net Disposition
Proceeds in excess of $10,000,000 in any Fiscal Year or $40,000,000 in
the aggregate since the Effective Date, the Borrower shall make a
mandatory prepayment of the Loans in an amount equal to such excess to
be applied as set forth in Section 3.2.2, and immediately upon the
-------------
expiration of any time period for the reinvestment of net proceeds of
a Restricted Disposition pursuant to Section 7.2.11(b)(ii), the
-------------
Borrower shall make a mandatory prepayment of the Loans in an amount
equal to 100% of any such unreinvested net proceeds to be applied as
set forth in Section 3.2.2 or, if such prepayment would cause the
-------------
Borrower to be liable for losses or expenses pursuant to the terms of
Section 4.4(a) hereof, the Borrower shall deliver such Net Disposition
- --------------
Proceeds to the Administrative Agent to be held as cash collateral
pursuant to the terms of the Security Agreement and to be applied by
the Administrative Agent as set forth in Section 3.2.2 to the payments
-------------
of the Loans on the earliest dates such payment may be made without
incurring losses or expenses pursuant to Section 4.4(a).
--------------
SECTION 3.1.7. Net Receivables Proceeds. Within five Business
------------------------
Days of receipt of Net Receivables Proceeds, the Borrower shall make a
mandatory prepayment of the Revolving Loans and permanently reduce the
Revolving Loan Commitment Amount in an amount equal to 100% of such
Net Receivables Proceeds as set forth in Section 3.2.2 or, if such
-------------
prepayment would cause the Borrower to be liable for losses or
expenses pursuant to the terms of Section 4.4(a) hereof, the Borrower
--------------
shall deliver such Net Receivables Proceeds to the Administrative
Agent to be held as cash collateral pursuant to the terms of the
Security Agreement and to be applied by the Administrative Agent as
set forth in Section 3.2.2 to the payments of the Loans on the
-------------
earliest dates such payment may be made without incurring losses or
expenses pursuant to Section 4.4(a).
--------------
31
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<PAGE>
SECTION 3.1.8. Acceleration. The Borrower shall, immediately
------------
upon any acceleration of the Stated Maturity Date of any Loans
pursuant to Section 8.2 or Section 8.3, repay all Loans, unless,
----------- -----------
pursuant to Section 8.3, only a portion of all Loans is so
-----------
accelerated.
SECTION 3.2. Application of Payments and Prepayments.
---------------------------------------
SECTION 3.2.1. Voluntary Prepayments. Each voluntary prepayment
---------------------
of Term Loans made pursuant to Section 3.1.1 shall be applied, to the
-------------
extent of such prepayment, to the pro rata reduction of all scheduled
--- ----
repayments of Term Loans set forth in Section 3.1.3. Each prepayment
-------------
of any Loans made pursuant to this Section shall be without premium or
penalty, except as may be required by Section 4.4. No voluntary
-----------
prepayment of principal of any Revolving Loans shall cause a reduction
in the Revolving Loan Commitment Amount, and no voluntary prepayment
of principal of any Swingline Loans shall cause a reduction in the
Swingline Loan Commitment Amount.
SECTION 3.2.2. Mandatory Prepayments. Each prepayment of the
---------------------
Loans made pursuant to Sections 3.1.4, 3.1.5, and 3.1.6 shall be
-------------- ----- -----
applied, to the scheduled Term Loan repayments set forth in Section
-------
3.1.3 in inverse order of their maturity. After all outstanding Term
- -----
Loans have been repaid in full, if any proceeds from prepayments made
pursuant to Sections 3.1.4, 3.1.5, and 3.1.6 remain, and in the case
-------------- ----- -----
of 100% of the proceeds pursuant to Section 3.1.7, the Revolving Loan
-------------
Commitment Amount shall be reduced by the aggregate amount of such
proceeds (and the Borrower shall make a prepayment of Revolving Loans
in an amount equal to the excess, if any, of the then outstanding
Revolving Loans over the Revolving Loan Commitment Amount, as so
reduced).
SECTION 3.3. Interest Provisions. Interest on the outstanding
-------------------
principal amount of Loans shall accrue and be payable in accordance
with this Section 3.3.
-----------
SECTION 3.3.1. Rates. Pursuant to an appropriately delivered
-----
Borrowing Request or Continuation/Conversion Notice, the Borrower may
elect that Base Rate Loans and LIBO Rate Loans comprising a Borrowing
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a
Base Rate Loan, equal to the sum of the Alternate Base Rate
from time to time in effect plus the Applicable Margin; and
(b) on that portion maintained as a LIBO Rate Loan,
during each Interest Period applicable thereto, equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Interest
Period plus the Applicable Margin.
32
</PAGE>
<PAGE>
All Swingline Loans shall accrue interest at a rate per annum equal to
the sum of Federal Funds Rate from time to time in effect plus the
Applicable Margin for Swingline Loans.
The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to
---------------------------
be made, continued or maintained as, or converted into, a LIBO Rate
Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the
following formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO
Rate Loans will be determined by the Administrative Agent on the basis
of the LIBOR Reserve Percentage in effect on, and the applicable rates
furnished to and received by the Administrative Agent from the
Reference Lenders, two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 3.3.4.
------- ------- -------------
"LIBO Rate" means, relative to any Interest Period for LIBO Rate
---------
Loans, the rate of interest equal to the average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rates per annum at which
Dollar deposits in immediately available funds are offered to each
Reference Lender's LIBOR Office in the interbank eurodollar market as
at or about 12:00 noon New York time two Business Days prior to the
beginning of such Interest Period for delivery on the first day of
such Interest Period, and in an amount approximately equal to the
amount of each such Reference Lender's LIBO Rate Loan and for a period
approximately equal to such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest Period
------------------------
for LIBO Rate Loans, the reserve percentage (expressed as a decimal)
equal to the maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other scheduled changes
in reserve requirements) specified under regulations issued from time
to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as
currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the
last day of such Interest Period at the interest rate determined as
applicable to such LIBO Rate Loan.
33
</PAGE>
<PAGE>
SECTION 3.3.2. Post-Maturity Rates. After the date any
-------------------
principal amount of any Loan is due and payable (whether on the Stated
Maturity Date, upon acceleration or otherwise), or after any other
monetary Obligation of the Borrower shall have become due and payable,
the Borrower shall pay, but only to the extent permitted by law,
interest (after as well as before judgment) on such amounts at a rate
per annum equal to the sum of the Alternate Base Rate plus 2% plus the
Applicable Margin for Base Rate Loans then in effect.
SECTION 3.3.3. Payment Dates. Interest accrued on each Loan
-------------
shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole
or in part, of principal outstanding on such Loan;
(c) with respect to Revolving Loans and Term Loans made
as Base Rate Loans, on each Quarterly Payment Date occurring
after the Effective Date, and with respect to Swingline Loans
made as Base Rate Loans, on each Monthly Payment Date
occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, the last day of
each applicable Interest Period (and, if such Interest Period
shall exceed 90 days, on the 90th day of such Interest
Period); and
(e) on that portion of any Loans the Stated Maturity
Date of which is accelerated pursuant to Section 8.2 or
-----------
Section 8.3, immediately upon such acceleration.
-----------
Interest accrued on Loans or other monetary Obligations arising under
this Agreement or any other Loan Document after the date such amount
is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3.4. Interest Rate Determination. Each Reference
---------------------------
Lender agrees to furnish to the Administrative Agent timely
information for the purpose of determining each LIBO Rate. If any one
or more of the Reference Lenders shall fail timely to furnish such
information to the Administrative Agent for any such interest rate,
the Administrative Agent shall determine such interest rate on the
basis of the information furnished by the remaining Reference Lenders.
SECTION 3.4. Fees. The Borrower agrees to pay the fees set
----
forth in this Section 3.4. All such fees shall be non-refundable.
-----------
34
</PAGE>
<PAGE>
SECTION 3.4.1. Commitment Fee. The Borrower agrees to pay to
--------------
the Administrative Agent for the account of each Lender, for the
period (including any portion thereof when any of its Commitments are
suspended by reason of the Borrower's inability to satisfy any
condition of Article V) commencing on the Effective Date and
---------
continuing through the final Commitment Termination Date, a commitment
fee at the Commitment Fee Rate per annum on such Lender's Percentage
of the sum of the average daily unused portion of the Revolving
Commitment Amount and the Term Loan Commitment Amount; provided,
--------
however, that for purposes of determining usage under the Revolving
- -------
Commitment, all outstanding Swingline Loans shall be deemed to be
Revolving Loans. Such commitment fees shall be payable by the
Borrower in arrears on each Quarterly Payment Date, commencing with
the first such day following the Effective Date, and on each
Commitment Termination Date.
SECTION 3.4.2. Upfront Fee. The Borrower agrees to pay to the
-----------
Administrative Agent for the account of each Lender on the Effective
Date, an upfront fee based on such Lender's initial Commitment and
based on such Lender's final allocated Commitment in such amounts as
previously agreed by the Borrower and the Managing Agents.
SECTION 3.4.3. Agents' Fees. The Borrower agrees to pay to the
------------
Agents for their own account, in addition to all other amounts payable
by the Borrower under Sections 3.4.1 and 3.4.2, such other fees as
-------------- -----
were described in the fee letter dated October 19, 1994 among the
Borrower, First Interstate and Scotiabank.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall
--------------------------
determine (which determination shall, upon notice thereof to the
Borrower and the Lenders, be conclusive and binding on the Borrower)
that the introduction of or any change in or in the interpretation of
any law makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO
Rate Loan, the obligations of such Lender to make, continue, maintain
or convert any such Loans shall, upon such determination, forthwith be
suspended until such Lender shall notify the Administrative Agent that
the circumstances causing such suspension no longer exist, and all
LIBO Rate Loans of such Lender shall automatically convert into Base
Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
35
</PAGE>
<PAGE>
SECTION 4.2. Deposits Unavailable. If the Administrative Agent
--------------------
shall have determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Reference
Lenders in their relevant markets; or
(b) by reason of circumstances affecting the Reference
Lenders' relevant markets, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO
Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and
the Lenders, the obligations of all Lenders under Section 2.3 and
-----------
Section 2.4 to make or continue any Loans as, or to convert any Loans
- -----------
into, LIBO Rate Loans shall forthwith be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that
the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower
-----------------------------------
agrees to reimburse each Lender for any increase in the cost to such
Lender of, or any reduction in the amount of any sum receivable by
such Lender in respect of, making, continuing or maintaining (or of
its obligation to make, continue or maintain) any Loans as, or of
converting (or of its obligation to convert) any Loans into, LIBO Rate
Loans which results from the introduction of or any change since the
date of this Agreement in any applicable law, governmental rule,
regulation, guideline, order or request (whether or not having the
force of law), or in the interpretation or administration thereof
(including, by way of example, but not limited to, a change in
official reserve requirements). Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of
any such event, such notice to state, in reasonable detail, the
reasons therefor and the additional amount required fully to
compensate such Lender for such increased cost or reduced amount.
Such additional amounts shall be payable by the Borrower directly to
such Lender within five days of its receipt of such notice, and such
notice shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall
--------------
incur any loss or expense (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to make, continue or maintain any portion of
the principal amount of any Loan as, or to convert any portion of the
principal amount of any Loan into, a LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than
36
</PAGE>
<PAGE>
the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1 or otherwise;
-----------
(b) any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor, except as a
result of a Lender's breach of its Commitments hereunder; or
(c) any Loans not being continued as, or converted into,
LIBO Rate Loans in accordance with the Continuation/Conversion
Notice therefor, except as a result of a Lender's breach of
its Commitments hereunder,
then, upon the written notice of such Lender to the Borrower (with a
copy to the Administrative Agent), the Borrower shall, within five
days of its receipt thereof, pay directly to such Lender such amount
as will (in the reasonable determination of such Lender) reimburse
such Lender for such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the absence
of manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
-----------------------
introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive,
guideline, decision or request (whether or not having the force of
law) of any court, central bank, regulator or other governmental
authority affects or would affect the amount of capital required or
expected to be maintained by any Lender or any Person controlling such
Lender, and such Lender determines (in its sole and absolute
discretion) that the rate of return on its or such controlling
Person's capital as a consequence of its Commitments or the Loans made
by such Lender is reduced to a level below that which such Lender or
such controlling Person could have achieved but for the occurrence of
any such circumstance, then, in any such case upon notice from time to
time by such Lender to the Borrower and the Administrative Agent, the
Borrower shall immediately pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling
Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower. In
determining such amount, such Lender may use any method of averaging
and attribution that it (in its sole and absolute discretion) shall
deem applicable.
SECTION 4.6. Taxes. All payments by the Borrower of principal
-----
of, and interest on, the Loans and all other amounts payable hereunder
shall be made free and clear of and without deduction for any present
or future income, excise, stamp or franchise taxes and other taxes,
fees, duties, withholdings or other charges of any nature whatsoever
imposed by any taxing
37
</PAGE>
<PAGE>
authority, but excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts (such non-excluded
items being called "Taxes"). In the event that any withholding or
-----
deduction from any payment to be made by the Borrower hereunder is
required in respect of any Taxes pursuant to any applicable law, rule
or regulation, then the Borrower will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an
official receipt or other documentation satisfactory to the
Administrative Agent evidencing such payment to such
authority; and
(c) pay to the Administrative Agent for the account of
the Lenders such additional amount or amounts as is necessary
to ensure that the net amount actually received by each Lender
will equal the full amount such Lender would have received had
no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the
Administrative Agent or any Lender with respect to any payment
received by the Administrative Agent or such Lender hereunder, the
Administrative Agent or such Lender may pay such Taxes and the
Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net
amount received by such person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount
such person would have received had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative
Agent, for the account of the respective Lenders, the required
receipts or other required documentary evidence, the Borrower shall
indemnify the Lenders for any incremental Taxes, interest or penalties
that may become payable by any Lender as a result of any such failure.
For purposes of this Section 4.6, a distribution hereunder by the
-----------
Administrative Agent or any Lender to or for the account of any Lender
shall be deemed a payment by the Borrower.
Upon the request of the Administrative Agent, each Lender that is
organized under the laws of a jurisdiction other than the United
States shall, prior to the due date of any payments under the Notes,
execute and deliver to the Borrower and the Administrative Agent, on
or about the first scheduled payment date in each Fiscal Year, one or
more (as the Administrative Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such other
forms or documents (or successor forms or
38
</PAGE>
<PAGE>
documents), appropriately completed, as may be applicable to establish
the extent, if any, to which a payment to such Lender is exempt from
withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. All payments by the
---------------------------
Borrower pursuant to Swingline Loans shall be made by the Borrower
directly to the Swingline Lender. Unless otherwise expressly
provided, all other payments by the Borrower pursuant to this
Agreement, the Notes or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of the
Lenders entitled to receive such payment. All such payments required
to be made to the Administrative Agent or Swingline Lender shall be
made, without setoff, deduction or counterclaim, not later than 10:00
a.m., Portland time, on the date due, in same day or immediately
available funds, to such account as the Administrative Agent or
Swingline Lender shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been
received by the Administrative Agent or Swingline Lender on the next
succeeding Business Day. The Administrative Agent shall promptly
remit in same day funds to each Lender its share, if any, of such
payments received by the Administrative Agent for the account of such
Lender. All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last
day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days (or, in the case of interest
on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever
any payment to be made shall otherwise be due on a day which is not a
Business Day, such payment shall (except as otherwise required by
clause (c) of the definition of the term "Interest Period" with
- ---------- ---------------
respect to LIBO Rate Loans) be made on the next succeeding Business
Day and such extension of time shall be included in computing interest
and fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain
-------------------
any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of any Loan (other than
pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its
------------ --- ---
pro rata share of payments then or therewith obtained by all Lenders,
- --- ----
such Lender shall purchase from the other Lenders such participations
in Loans made by them as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each
of them; provided, however, that if all or any portion of the excess
-------- -------
payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and each Lender which has sold
a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share
(according to the proportion of (a) the amount of such selling
Lender's required repayment to the purchasing Lender to (b) the total
--
amount
39
</PAGE>
<PAGE>
so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including pursuant to Section 4.9) with respect to
-----------
such participation as fully as if such Lender were the direct creditor
of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section
applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section to share in the
benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of
------
any Default described in clauses (a) through (d) of Section 8.1.9 or
----------- --- -------------
any other Event of Default, have the right to appropriate and apply to
the payment of the Obligations owing to it (whether or not then due),
and (as security for such Obligations) the Borrower hereby grants to
each Lender a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with such Lender; provided, however, that any
-------- -------
such appropriation and application shall be subject to the provisions
of Section 4.8. Each Lender agrees promptly to notify the Borrower
-----------
and the Administrative Agent after any such setoff and application
made by such Lender; provided, however, that the failure to give such
-------- -------
notice shall not affect the validity of such setoff and application.
The rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds. The Borrower shall apply the
---------------
proceeds of each Borrowing in accordance with the fourth recital;
--------------
without limiting the foregoing, no proceeds of any Loan will be used
to acquire any equity security of a class which is registered pursuant
to Section 12 of the Securities Exchange Act of 1934 or any "margin
stock", as defined in F.R.S. Board Regulation U.
SECTION 4.11. Actions of Affected Lenders. Each Lender agrees
---------------------------
to use reasonable efforts (including reasonable efforts to change the
booking office for its Loans) to avoid or minimize any illegality
pursuant to Section 4.1 or any amounts which might otherwise be
-----------
payable pursuant to Sections 4.3, 4.5 or 4.6; provided, however, that
------------ --- --- -------- -------
such efforts shall not cause the imposition on such Lender of any
additional costs or legal or regulatory burdens deemed by such Lender
to be material. In the event that such reasonable efforts are
insufficient to avoid all such illegality pursuant to Section 4.1 or
-----------
all amounts that might be
40
</PAGE>
<PAGE>
payable pursuant to Sections 4.3, 4.5 or 4.6, then the Borrower shall
------------ --- ---
have the right, but not the obligation, at its own expense, to request
such Lender (the "Affected Lender") to transfer its Commitments
---------------
hereunder to any other Lender (which itself is not then an Affected
Lender) or financial institution designated by the Borrower and
approved by the Managing Agents (which approval shall not be
unreasonably withheld), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the
restrictions contained in this Agreement) all its interests, rights
and obligations under this Agreement to such assignee; provided,
--------
however, that no Lender shall be obligated to make any such assignment
- -------
unless (i) such assignment shall not conflict with any law or any
rule, regulation or order of any governmental authority, (ii) such
assignee shall pay to the Affected Lender in immediately available
funds on the date of such assignment the principal of the Loans made
by such Lender hereunder, and (iii) the Borrower shall pay to the
Affected Lender in immediately available funds on the date of such
assignment the interest accrued to the date of such assignment
hereunder and all other amounts accrued for such Lender's account or
owed to it hereunder.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1. Initial Borrowing. The obligations of the Lenders
-----------------
to fund the initial Borrowing shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth
in this Section 5.1.
-----------
SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall
----------------
have received from each Obligor a certificate, dated the date of the
initial Borrowing, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and
performance of this Agreement, the Notes and each other Loan
Document to be executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement, the
Notes and each other Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it
shall have received a further certificate of the Secretary of such
Obligor canceling or amending such prior certificate.
41
</PAGE>
<PAGE>
SECTION 5.1.2. Delivery of Notes. The Administrative Agent
-----------------
shall have received, for the account of each Lender, its Notes duly
executed and delivered by the Borrower.
SECTION 5.1.3. Payment of Outstanding Indebtedness, etc. All
----------------------------------------
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid")
-------------
of the Disclosure Schedule, together with all interest, all prepayment
premiums and other amounts due and payable with respect thereto, shall
have been paid in full (including, to the extent necessary, from
proceeds of the initial Borrowing); all commitments for such
Indebtedness shall have been terminated; and all Liens securing
payment of any such Indebtedness have been released and the
Administrative Agent shall have received all Uniform Commercial Code
Form UCC-3 termination statements or other instruments as may be
suitable or appropriate in connection therewith.
SECTION 5.1.4. Guaranties. The Administrative Agent shall have
----------
received the Guaranties, dated the date hereof, duly executed by the
Guarantors.
SECTION 5.1.5. Pledge Agreement. The Administrative Agent shall
----------------
have received executed counterparts of the Pledge Agreement, dated as
of the date hereof, duly executed by the Borrower, together with (i)
the certificates, evidencing all of the issued and outstanding shares
of all corporate Significant Subsidiaries, which capital stock is not
margin stock for purposes of F.R.S. Board Regulation U, which
certificates shall in each case be accompanied by undated stock powers
duly executed in blank and (ii) the original promissory notes
evidencing the Indebtedness of the Borrower's Subsidiaries to the
Borrower pursuant to the definition of "Permitted Intercompany
----------------------
Indebtedness", which notes shall have been duly endorsed in blank.
- ------------
SECTION 5.1.6. Security Agreements. The Administrative Agent
-------------------
shall have received executed counterparts of the Security
Agreements, dated as of the date hereof, duly executed by the
Borrower, the Guarantors, CF&I Steel, L.P. and any other Subsidiary
designated by the Borrower, together with
(a) acknowledgment copies of properly filed Uniform
Commercial Code financing statements (Form UCC-1), dated a
date reasonably near to the date of the initial Borrowing, or
such other evidence of filing as may be acceptable to the
Managing Agents, naming the Borrower, each Guarantor, CF&I
Steel, L.P. and such Subsidiaries, as the debtors and the
Administrative Agent as the secured party, or other similar
instruments or documents, filed under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the
opinion of the Managing Agents, desirable to perfect the
security interest of the Administrative Agent pursuant to the
Security Agreement;
42
</PAGE>
<PAGE>
(b) executed copies of proper Uniform Commercial Code
Form UCC-3 termination statements, if any, necessary to
release all Liens and other rights of any Person
(i) in any collateral described in the Security
Agreement previously granted by any Person, and
(ii) securing any of the Indebtedness identified in
Item 7.2.2(b) ("Indebtedness to be Paid") of the
-------------
Disclosure Schedule,
together with such other Uniform Commercial Code Form UCC-3
termination statements as the Managing Agents may reasonably
request from such Obligors; and
(c) certified copies of Uniform Commercial Code Requests
for Information or Copies (Form UCC-11), or a similar search
report certified by a party acceptable to the Managing Agents,
dated a date reasonably near to the date of the initial
Borrowing, listing all effective financing statements which
name the Borrower, each Guarantor, CF&I Steel, L.P. and such
Subsidiary (under their present names and any previous names)
as the debtor and which are filed in the jurisdictions in
which filings were made pursuant to clause (a) above, together
----------
with copies of such financing statements (none of which (other
than those described in clause (a), if such Form UCC-11 or
----------
search report, as the case may be, is current enough to list
such financing statements described in clause (a)) shall cover
----------
any collateral described in the Security Agreement).
SECTION 5.1.7. Opinion of Counsel. The Administrative Agent
------------------
shall have received opinions, dated as of the Effective Date and
addressed to the Administrative Agent and all Lenders, from Schwabe
Williamson & Wyatt, counsel to the Obligors, substantially in the form
of Exhibit J hereto.
---------
SECTION 5.1.8. Organization Documents. The Administrative Agent
----------------------
shall have received from the Borrower and each Guarantor a
certificate, dated the date of the initial Borrowing, of its Secretary
or Assistant Secretary as to
(a) the articles or certificate of incorporation of such
Person as in effect on such date, certified by the Secretary
of State of the state of its incorporation as of a recent date
(to the extent such certification is available), and the
bylaws of such Person as in effect on such date, certified by
the Secretary or an Assistant Secretary as of such date; and
(b) a good standing certificate for such Person from the
Secretary of State of the state of its incorporation as of a
recent date (to the extent such certification is available).
43
</PAGE>
<PAGE>
SECTION 5.1.9. Closing Fees, Expenses, etc. The Administrative
---------------------------
Agent shall have received for its own account, or for the account of
the Syndication Agent, the Managing Agents and each Lender, as the
case may be, all fees, costs and expenses due and payable pursuant to
Sections 3.4 and 10.3, if then invoiced.
- ------------ ----
SECTION 5.2. All Borrowings. The obligation of each Lender to
--------------
fund any Loan on the occasion of any Borrowing (including the initial
Borrowing) shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc.
-------------------------------------------
Both before and after giving effect to any Borrowing (but, if any
Default of the nature referred to in Section 8.1.5 shall have occurred
-------------
with respect to any other Indebtedness, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the
following statements shall be true and correct
(a) the representations and warranties set forth in
Article VI (excluding, however, those contained in Section
---------- -------
6.7) shall be true and correct with the same effect as if then
---
made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true
and correct as of such earlier date);
(b) except as disclosed by the Borrower to the
Administrative Agent and the Lenders pursuant to Section 6.7
-----------
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be
pending or, to the knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries which
might have a Material Adverse Effect; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or
governmental investigation or proceeding disclosed
pursuant to Section 6.7 which might have a Material
-----------
Adverse Effect; and
(c) no Default shall have then occurred and be
continuing, and neither the Borrower, any other Obligor, nor
any of its Subsidiaries are in material violation of any law
or governmental regulation or court order or decree.
SECTION 5.2.2. Borrowing Request. For all Borrowings of
-----------------
Revolving Loans and Term Loans, the Administrative Agent shall have
received a Borrowing Request for such Borrowing, and for all
Borrowings of Swingline Loans, the Swingline Lender shall have
received a Borrowing Request for such Borrowing. Each of the delivery
of a Borrowing Request and the acceptance by the Borrower
44
</PAGE>
<PAGE>
of the proceeds of such Borrowing shall constitute a representation
and warranty by the Borrower that on the date of such Borrowing (both
immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section
-------
5.2.1 are true and correct.
- -----
SECTION 5.2.3. Satisfactory Legal Form. All documents executed
-----------------------
or submitted pursuant hereto by or on behalf of the Borrower or any of
its Subsidiaries or any other Obligors shall be satisfactory in form
and substance to the Managing Agents and their counsel; and the
Managing Agents and their counsel shall have received all information,
approvals, opinions, documents or instruments as the Managing Agents
or their counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agents to enter into this
Agreement and to make Loans hereunder, the Borrower represents and
warrants unto the Agents and each Lender as set forth in this Article
-------
VI.
- --
SECTION 6.1. Organization, etc. The Borrower and each of its
-----------------
Subsidiaries is a corporation validly organized and existing and in
good standing under the laws of the state of its incorporation, is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its business
requires such qualification (except where the failure to so qualify
shall not have a Material Adverse Effect), and has full power and
authority and holds all requisite governmental licenses, permits and
other approvals to enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document to which it is a
party and to own and hold under lease its property and to conduct its
business substantially as currently conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
-----------------------------------------
execution, delivery and performance by the Borrower of this Agreement,
the Notes and each other Loan Document executed or to be executed by
it, and the execution, delivery and performance by each other Obligor
of each Loan Document executed or to be executed by it are within the
Borrower's and each such Obligor's corporate powers, have been duly
authorized by all necessary corporate action, and do not
(a) contravene the Borrower's or any such Obligor's
Organic Documents;
45
</PAGE>
<PAGE>
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor; or
(c) result in, or require the creation or imposition of,
any Lien on any of any Obligor's properties, except for the
Liens created pursuant to the Loan Documents.
SECTION 6.3. Government Approval, Regulation, etc. No
------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or other
Person is required for the due execution, delivery or performance by
the Borrower or any other Obligor of this Agreement, the Notes or any
other Loan Document to which it is a party. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the
-------------
Notes and each other Loan Document executed by the Borrower will, on
the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrower enforceable in accordance with
their respective terms, and each Loan Document executed pursuant
hereto by each other Obligor will, on the due execution and delivery
thereof by such Obligor, be the legal, valid and binding obligation of
such Obligor enforceable in accordance with its terms, all subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, and general principles of equity.
SECTION 6.5. Financial Information. The audited balance sheets
---------------------
of the Borrower and its Subsidiaries as at December 31, 1993, and the
related statements of earnings and cash flow of the Borrower and its
Subsidiaries, and the unaudited financial statements of the Borrower
and its Subsidiaries as at September 30, 1994, copies of which have
been furnished to the Administrative Agent and each Lender, have been
prepared in accordance with GAAP consistently applied, and present
fairly the consolidated financial condition of the corporations
covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
SECTION 6.6. No Material Adverse Change. Since the date of the
--------------------------
audited financial statements described in Section 6.5, except as
-----------
otherwise disclosed in Item 6.6 ("Material Developments") of the
--------
Disclosure Schedule, there has been no Material Adverse Effect.
46
</PAGE>
<PAGE>
SECTION 6.7. Litigation, Labor Controversies, etc. There is no
------------------------------------
pending or, to the knowledge of the Borrower, threatened litigation,
action, proceeding, or labor controversy affecting the Borrower or any
of its Subsidiaries, or any of their respective properties,
businesses, assets or revenues, which may have a Material Adverse
Effect, except as disclosed in Item 6.7 ("Litigation") of the
--------
Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries,
------------
except those Subsidiaries
(a) which are identified in Item 6.8 ("Existing
--------
Subsidiaries") of the Disclosure Schedule; or
(b) which are permitted to have been acquired in
accordance with Section 7.2.5 or 7.2.10.
------------- ------
SECTION 6.9. Ownership of Properties. The Borrower and each of
-----------------------
its Subsidiaries owns good and marketable title to all of its
properties and assets, real and personal, tangible and intangible, of
any nature whatsoever (including patents, trademarks, trade names,
service marks and copyrights), free and clear of all Liens, charges or
claims (including infringement claims with respect to patents,
trademarks, copyrights and the like) except as permitted pursuant to
Section 7.2.3.
- -------------
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries
-----
has filed all tax returns and reports required by law to have been
filed by it and has paid all taxes and governmental charges thereby
shown to be owing, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set
aside on its books.
SECTION 6.11. Pension and Welfare Plans. During the
-------------------------
twelve-consecutive-month period prior to the date of the execution and
delivery of this Agreement and prior to the date of any Borrowing
hereunder, no steps have been taken to terminate any Pension Plan, and
no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect to
any Pension Plan which might result in the incurrence by the Borrower
or any member of the Controlled Group of any material liability, fine
or penalty. Except as disclosed in Item 6.11 ("Employee Benefit
---------
Plans") of the Disclosure Schedule, neither the Borrower nor any
member of the Controlled Group has any contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other
than liability for continuation coverage described in Part 6 of Title
I of ERISA.
47
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<PAGE>
SECTION 6.12. Environmental Warranties. Except as set forth in
------------------------
Item 6.12 ("Environmental Matters") of the Disclosure Schedule:
- ---------
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by
the Borrower and its Subsidiaries in material compliance with
all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law that, singly or in the aggregate, have,
or may reasonably be expected to have, a Material Adverse
Effect, or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
material liability under any Environmental Law that,
singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or leased
by the Borrower or any of its Subsidiaries that, singly or in
the aggregate, have, or may reasonably be expected to have, a
Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been issued
and are in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to
environmental matters and necessary or desirable for their
businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for
listing (with respect to owned property only) on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-
up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by the Borrower or
any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material
Adverse Effect;
48
</PAGE>
<PAGE>
(g) neither Borrower nor any Subsidiary of the Borrower
has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which
is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar
state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to
material claims against the Borrower or such Subsidiary
thereof for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or
leased by the Borrower or any Subsidiary of the Borrower that,
singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now
or previously owned or leased by the Borrower which, with the
passage of time, or the giving of notice or both, would give
rise to material liability under any Environmental Law.
SECTION 6.13. Regulations G, U and X. The Borrower is not
----------------------
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans will
be used for a purpose which violates, or would be inconsistent with,
F.R.S. Board Regulation G, U or X. Terms for which meanings are
provided in F.R.S. Board Regulation G, U or X or any regulations
substituted therefor, as from time to time in effect, are used in this
Section with such meanings.
SECTION 6.14. Accuracy of Information. All factual information
-----------------------
heretofore or contemporaneously furnished by or on behalf of the
Borrower in writing to the Agents or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by or
on behalf of the Borrower to the Agents or any Lender will be, true
and accurate in every material respect on the date as of which such
information is dated or certified and as of the date of execution and
delivery of this Agreement by the Agents and such Lender, and such
information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information
not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with
---------------------
the Agents and each Lender that, until all Commitments have
49
</PAGE>
<PAGE>
terminated and all Obligations have been paid and performed in full,
the Borrower will perform the obligations set forth in this Section
-------
7.1.
- ---
SECTION 7.1.1. Financial Information, Reports, Notices, etc.
--------------------------------------------
The Borrower will furnish, or will cause to be furnished, to the
Administrative Agent for the further distribution to each of the
Lenders copies of the following financial statements, reports, notices
and information:
(a) as soon as available and in any event within 50 days
after the end of each of the first three Fiscal Quarters of
each Fiscal Year of the Borrower, consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end
of such Fiscal Quarter and consolidated and consolidating
statements of earnings and consolidated statements of cash flow
of the Borrower and its Subsidiaries for such Fiscal Quarter and
for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter, certified by an
Authorized Officer of the Borrower;
(b) as soon as available and in any event within 100
days after the end of each Fiscal Year of the Borrower, a copy
of the annual audit report for such Fiscal Year for the
Borrower and its Subsidiaries, including therein audited
consolidated and unaudited consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal
Year and audited consolidated and unaudited consolidating
statements of earnings and audited consolidated statements of
cash flow of the Borrower and its Subsidiaries for such Fiscal
Year, in each case certified (without any Impermissible
Qualification) in a manner acceptable to the Managing Agents
by Coopers & Lybrand or other independent public accountants
acceptable to the Managing Agents, together with a certificate
from such accountants to the effect that, in making the
examination necessary for the signing of such annual report by
such accountants, they have not become aware of any Default or
Event of Default under Article VIII that has occurred and is
------------
continuing, or, if they have become aware of such Default or
Event of Default, describing such Default or Event of Default
and the steps, if any, being taken to cure it;
(c) as soon as available and in any event within 50 days
after the end of each Fiscal Quarter and 100 days after the
end of each Fiscal Year, a Compliance Certificate, executed by
an Authorized Officer of the Borrower, showing (in reasonable
detail and with appropriate calculations and computations in
all respects satisfactory to the Managing Agents) compliance
with the financial covenants set forth in Section 7.2.4;
-------------
50
</PAGE>
<PAGE>
(d) as soon as available and in any event within 15 days
after the end of each month, a Borrowing Base Certificate as
of the end of such month;
(e) as soon as possible and in any event within five
Business Days after the occurrence of each Default, a
statement of an Authorized Officer of the Borrower setting
forth details of such Default and the action which the
Borrower has taken and proposes to take with respect thereto;
(f) as soon as possible and in any event within five
Business Days after (x) the occurrence of any material adverse
development with respect to any litigation, action, proceeding,
or labor controversy described in Section 6.7 or (y) the
-----------
commencement of any material labor controversy, litigation,
action, proceeding of the type described in Section 6.7, notice
-----------
thereof and copies of all documentation relating thereto;
(g) promptly after the same become publicly available,
copies of all reports which the Borrower sends to any of its
securityholders, and all registration statements, Forms 10K,
Forms 10Q, Forms 8K and similar reports which the Borrower or
any of its Subsidiaries files with the Securities and Exchange
Commission, any other national securities exchange or any
foreign securities commission or exchange relating to issuance
and sale of securities;
(h) immediately upon becoming aware of the institution
of any steps by the Borrower or any other Person to terminate
any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient
to give rise to a Lien under section 302(f) of ERISA, or the
taking of any action with respect to a Pension Plan which
could result in the requirement that the Borrower furnish a
bond or other security to the PBGC or such Pension Plan, or
the occurrence of any event with respect to any Pension Plan
which could result in the incurrence by the Borrower of any
material liability, fine or penalty, or any material increase
in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, notice thereof and
copies of all documentation relating thereto;
(i) as soon as possible and in any event within 15 days
after the receipt by the Borrower or any Subsidiary thereof,
copies of all final, written environmental audits prepared by,
or at the request of, the Borrower or its Subsidiaries or
affecting any properties of the Borrower or any of its
Subsidiaries;
51
</PAGE>
<PAGE>
(j) as soon as available and in any event within 60 days
after the commencement of each Fiscal Year, a consolidated
financial forecast for the Borrower and its Subsidiaries for
such Fiscal Year; and
(k) such other information concerning the condition or
operations, financial or otherwise, of the Borrower or any of
its Subsidiaries as any Lender through the Administrative
Agent may from time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will,
-------------------------
and will cause each of its Significant Subsidiaries to, comply in all
material respects with all applicable laws, rules, regulations and
orders, such compliance to include (without limitation):
(a) except in the case of Fontana, the maintenance and
preservation of its corporate existence and, except to the
extent that such failure will have a Material Adverse Effect,
qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of
all taxes, assessments and governmental charges imposed upon
it or upon its property except to the extent being diligently
contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower will,
-------------------------
and will cause each of its Subsidiaries to, maintain, preserve,
protect and keep its properties in good repair, working order and
condition, and make necessary and proper repairs, renewals and
replacements so that its business carried on in connection
therewith may be properly conducted at all times unless the Borrower
determines in good faith that the continued maintenance of any of its
properties is no longer economically desirable and except for
properties that may be the subject of Permitted Dispositions.
SECTION 7.1.4. Insurance. The Borrower will, and will cause
---------
each of its Subsidiaries to, maintain or cause to be maintained with
responsible insurance companies insurance with respect to its
properties and business (including business interruption insurance)
against such casualties and contingencies and of such types and in
such amounts as is customary in the case of similar businesses and
will, upon request of the Administrative Agent, furnish to the
Administrative Agent at reasonable intervals a certificate of an
Authorized Officer of the Borrower setting forth the nature and extent
of all insurance maintained by the Borrower and its Subsidiaries in
accordance with this Section.
52
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<PAGE>
SECTION 7.1.5. Books and Records. The Borrower will, and will
-----------------
cause each of its Subsidiaries to, keep books and records which
accurately reflect all of its business affairs and transactions and
permit the Managing Agents or any of their respective representatives,
at reasonable times and intervals and upon reasonable notice, to visit
all of its offices, to discuss its financial matters with its officers
and independent public accountant (and the Borrower hereby authorizes
such independent public accountant to discuss the Borrower's financial
matters with each Managing Agent or its representatives whether or not
any representative of the Borrower is present) and to examine (and, at
the expense of the Borrower, photocopy extracts from) any of its books
or other corporate records. The Borrower shall pay any fees of such
independent public accountant incurred in connection with any Managing
Agent's exercise of its rights pursuant to this Section.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and
----------------------
will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all
necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect
(except for permits associated with properties that have been
the subject of a Permitted Disposition) and remain in material
compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws;
(b) immediately notify the Administrative Agent and
provide copies upon receipt of all material adverse written
claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws, and shall promptly cure and have dismissed
with prejudice to the satisfaction of the Administrative Agent
any actions and proceedings relating to compliance with
Environmental Laws, except for those being diligently
contested in good faith and by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been set aside on its books; and
(c) provide such information and certifications which
the Administrative Agent may reasonably request from time to
time to evidence compliance with this Section 7.1.6.
-------------
SECTION 7.1.7. Interest Rate Protection. The Borrower will
------------------------
arrange and continue in effect interest rate protection on terms
satisfactory to the Managing Agents (i) covering not less than 50% of
the Term Loans made pursuant to the initial Borrowing of Term Loans
within 180 days after the making of such Term Loans and (ii) covering
not less than 50% of the outstanding Term Loans as of
53
</PAGE>
<PAGE>
the Term Loan Commitment Termination Date within 180 days after such
date; provided, however, that interest rate protection on terms
-------- -------
satisfactory to the Managing Agents in total of not less than
$75,000,000 (or in such other amounts as may be satisfactory to the
Managing Agents and the Borrower) shall be executed within 180 days of
the Term Loan Commitment Termination Date.
SECTION 7.1.8. Future Significant Subsidiaries; Further
----------------------------------------
Assurances. The Borrower shall cause each of its Subsidiaries (as
- ----------
soon as any such Subsidiary becomes a Significant Subsidiary) that is
not already a Guarantor to execute and deliver (within 30 days after
delivery of the financial statements indicating that such Subsidiary
has become a Significant Subsidiary) a Guaranty and Security Agreement
and to provide opinions and documentation of the type set forth in
Section 5.1.1 and Section 7.1.9 as to such Guarantor. In addition,
- ------------- -------------
the Borrower shall deliver to the Administrative Agent the stock (and
accompanying stock powers executed in blank) of each of its
Subsidiaries that is not already a Guarantor within 30 days after the
delivery of the financial statements indicating that such Subsidiary
has become a Significant Subsidiary, which stock shall be held subject
to the terms and conditions of the Pledge Agreement.
SECTION 7.1.9. Opinion of New Guarantors. The Borrower shall
-------------------------
cause to be delivered within 30 days after a Subsidiary becomes a
Significant Subsidiary favorable opinions of counsel confirming, among
other things, that (i) such Guarantor's obligations under its Guaranty
and Security Agreement are legal, valid, binding and enforceable
against such Guarantor and (ii) no government approvals, consents,
registrations or filings are required by such Guarantor except as have
been obtained.
SECTION 7.2. Negative Covenants. The Borrower agrees with the
------------------
Agents and each Lender that, until all Commitments have terminated and
all Obligations have been paid and performed in full, the Borrower
will perform the obligations set forth in this Section 7.2.
-----------
SECTION 7.2.1. Business Activities. The Borrower will not, and
-------------------
will not permit any of its Subsidiaries to, engage in any business
activity, except those described in the first recital and such
-------------
activities as may be incidental or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will
------------
not permit any of its Subsidiaries to, create, incur, assume or suffer
to exist or otherwise become or be liable in respect of any
Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Loans and other
Obligations;
54
</PAGE>
<PAGE>
(b) until the date of the initial Borrowing,
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be
-------------
Paid") of the Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which
is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the
-------------
Disclosure Schedule;
(d) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by
suppliers on normal trade terms in connection with purchases
of goods and services, but excluding Indebtedness incurred
through the borrowing of money or Contingent Liabilities)
including, without limitation, accrued expenses, taxes
payable, accrued environmental liabilities, deferred
employment benefits and deferred income taxes, to the extent
incurred in the ordinary course of business;
(e) Indebtedness in respect of Capitalized Lease
Liabilities to the extent permitted by Section 7.2.7;
-------------
(f) Indebtedness in an aggregate principal amount not to
exceed $30,000,000, relative to letters of credit issued for
the account of the Borrower and its Subsidiaries;
(g) Indebtedness of the Borrower and its Subsidiaries in
an aggregate principal amount not to exceed $5,000,000 in
respect of the deferred purchase price of capital assets
acquired by the Borrower and its Subsidiaries exclusive of all
Capital Expenditures and Investments projected to be made by
the Borrower in its financial plan dated October 19, 1994 for
the years ended December 31, 1994 through December 31, 1999;
(h) the obligations of the Borrower and its Subsidiaries
in connection with a Permitted Receivables Financing in
accordance with clause (c) of Section 7.2.11; and
--------------
(i) other Indebtedness of the Borrower and its
Subsidiaries in an aggregate amount not to exceed $25,000,000;
of which not greater than $5,000,000 may be debt secured by
any assets of the Borrower or its Subsidiaries;
provided, however, that no Indebtedness otherwise permitted by clauses
- -------- ------- -------
(d), (e), (f), (g), (h) or (i) shall be permitted if, after giving
- --- --- --- --- --- ---
effect to the incurrence thereof, any Default shall have occurred and
be continuing.
SECTION 7.2.3. Liens. The Borrower will not, and will not
-----
permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
55
</PAGE>
<PAGE>
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Liens securing payment of Indebtedness of the type
permitted and described in clause (b) of Section 7.2.2;
---------- -------------
(c) Liens granted prior to the Effective Date to secure
payment of Indebtedness of the type permitted and described in
clause (c) of Section 7.2.2;
---------- -------------
(d) Liens granted to secure payment of Indebtedness of
the type permitted and described in clause (i) of Section
---------- -------
7.2.2;
-----
(e) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter
payable without penalty or being diligently contested in good
faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on
its books;
(f) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of
business for sums not overdue or being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on
its books;
(g) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to
secure performance of tenders, statutory obligations, leases
and contracts (other than for borrowed money) entered into in
the ordinary course of business or to secure obligations on
surety or appeal bonds;
(h) judgment Liens in existence less than 30 days after
the entry thereof or with respect to which execution has been
stayed or the payment of which is covered in full (subject to
a customary deductible) by insurance maintained with
responsible insurance companies; and
(i) Liens on the Borrower's shares of Comsigua and
Cliffs & Associates in favor of those entities or the lenders
to such parties and securing such parties' obligations to
those entities or such lender.
56
</PAGE>
<PAGE>
SECTION 7.2.4. Financial Condition. The Borrower will not
-------------------
permit to occur any of the events set forth below:
(a) Its Consolidated Tangible Net Worth at any time to
be less than (i) $225,000,000 plus (ii) 50% of Net Income
----
(without giving effect to any losses) for each Fiscal Quarter
beginning on or after January 1, 1995 plus (iii) 100% of the
----
net proceeds from any equity offering by the Borrower or any
of its Subsidiaries after the Effective Date.
(b) Its Interest Coverage Ratio, tested on a rolling
four quarter basis, to be less than the specified ratio as of
the end of any of the following Fiscal Quarters:
Fiscal Quarter Minimum Interest Coverage Ratio
-------------- -------------------------------
December 31, 1994 2.25 to 1.0
March 31, 1995 2.25 to 1.0
June 30, 1995 2.25 to 1.0
September 30, 1995 2.25 to 1.0
December 31, 1995 2.25 to 1.0
March 31, 1996 2.0 to 1.0
June 30, 1996 2.0 to 1.0
September 30, 1996 2.0 to 1.0
December 31, 1996 2.0 to 1.0
March 31, 1997 2.25 to 1.0
June 30, 1997 2.50 to 1.0
September 30, 1997 2.75 to 1.0
December 31, 1997 3.0 to 1.0
March 31, 1998 3.0 to 1.0
June 30, 1998 3.25 to 1.0
September 30, 1998 3.25 to 1.0
December 31, 1998 3.5 to 1.0
March 31, 1999 3.5 to 1.0
June 30, 1999 3.75 to 1.0
September 30, 1999 3.75 to 1.0
December 31, 1999 4.0 to 1.0
(c) Its Current Ratio at any time to be less than the
specified ratio in any of the following Fiscal Quarters:
Fiscal Quarter Minimum Current Ratio
-------------- ---------------------
December 31, 1994 1.5 to 1.0
March 31, 1995 1.5 to 1.0
June 30, 1995 1.5 to 1.0
September 30, 1995 1.5 to 1.0
December 31, 1995 1.5 to 1.0
March 31, 1996 1.1 to 1.0
June 30, 1996 1.1 to 1.0
September 30, 1996 1.1 to 1.0
57
</PAGE>
<PAGE>
December 31, 1996 1.1 to 1.0
March 31, 1997 1.1 to 1.0
June 30, 1997 1.1 to 1.0
September 30, 1997 1.1 to 1.0
December 31, 1997 1.1 to 1.0
March 31, 1998 1.1 to 1.0
June 30, 1998 1.1 to 1.0
September 30, 1998 1.1 to 1.0
December 31, 1998 1.1 to 1.0
March 31, 1999 1.5 to 1.0
June 30, 1999 1.5 to 1.0
September 30, 1999 1.5 to 1.0
December 31, 1999 1.5 to 1.0
(d) Its Cash Flow Coverage Ratio, tested on a rolling
four quarter basis, to be less than the specified ratio as of
the end of any of the following Fiscal Quarters:
Fiscal Quarter Minimum Cash Flow Coverage Ratio
-------------- --------------------------------
December 31, 1994 1.5 to 1.0
March 31, 1995 1.5 to 1.0
June 30, 1995 1.5 to 1.0
September 30, 1995 1.5 to 1.0
December 31, 1995 1.5 to 1.0
March 31, 1996 1.5 to 1.0
June 30, 1996 1.5 to 1.0
September 30, 1996 1.5 to 1.0
December 31, 1996 1.5 to 1.0
March 31, 1997 1.4 to 1.0
June 30, 1997 1.3 to 1.0
September 30, 1997 1.3 to 1.0
December 31, 1997 1.25 to 1.0
March 31, 1998 1.20 to 1.0
June 30, 1998 1.15 to 1.0
September 30, 1998 1.15 to 1.0
December 31, 1998 1.1 to 1.0
thereafter 1.1 to 1.0
(e) Its Funded Debt to Capitalization Ratio at any time
to exceed the specified ratio in any of the following Fiscal
Quarters:
Maximum Funded Debt to
Quarter Ending Capitalization Ratio
-------------- ----------------------
December 31, 1994 .50 to 1.0
March 31, 1995 .55 to 1.0
June 30, 1995 .55 to 1.0
September 30, 1995 .55 to 1.0
December 31, 1995 .55 to 1.0
58
</PAGE>
<PAGE>
March 31, 1996 .55 to 1.0
June 30, 1996 .55 to 1.0
September 30, 1996 .55 to 1.0
December 31, 1996 .55 to 1.0
March 31, 1997 .50 to 1.0
June 30, 1997 .50 to 1.0
September 30, 1997 .50 to 1.0
December 31, 1997 .50 to 1.0
March 31, 1998 .40 to 1.0
June 30, 1998 .40 to 1.0
September 30, 1998 .40 to 1.0
December 31, 1998 .40 to 1.0
March 31, 1999 .35 to 1.0
June 30, 1999 .35 to 1.0
September 30, 1999 .35 to 1.0
December 31, 1999 .35 to 1.0
SECTION 7.2.5. Investments. The Borrower will not, and will not
-----------
permit any of its Subsidiaries to, make, incur, assume or suffer to
exist any Investment in any other Person, except:
(a) Investments identified in Item 7.2.5(a) ("Ongoing
-------------
Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 7.2.2 or Investments
-------------
permitted as Capital Expenditures pursuant to Section 7.2.7;
-------------
provided that no such Investments may be made in Camrose or
the Camrose Partnership;
(d) Investments in Camrose or the Camrose Partnership in
an aggregate amount at any time not to exceed $5,000,000;
(e) in the ordinary course of business, Investments by
the Borrower in any of its Subsidiaries other than Camrose or
the Camrose Partnership, or by any such Subsidiary in any of
its Subsidiaries or any other Subsidiary other than Camrose or
the Camrose Partnership, by way of contributions to capital or
loans or advances; and
(f) other Investments in an aggregate amount at any time
not to exceed $15,000,000 minus any losses on such Investments;
-----
provided, however, that
- -------- -------
(g) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
---------------
Investment" may continue to be held notwithstanding that such
----------
59
</PAGE>
<PAGE>
Investment if made thereafter would not comply with such
requirements;
(h) no Investment otherwise permitted by clause (e) or
----------
(f) shall be permitted to be made if, immediately before or
---
after giving effect thereto, any Default shall have occurred
and be continuing; and
(i) after the Effective Date, all Investments by the
Borrower in CF&I Steel, L.P. shall be made through Permitted
Intercompany Loans and not by way of contributions to capital.
SECTION 7.2.6. Restricted Payments, etc. On and at all times
------------------------
after the Effective Date the Borrower will not declare, pay or make
any dividend or distribution (in cash, property or obligations) on any
shares of any class of capital stock (now or hereafter outstanding) of
the Borrower or on any warrants, options or other rights with respect
to any shares of any class of capital stock (now or hereafter
outstanding) of the Borrower (other than dividends or distributions
payable in its common stock or warrants to purchase its common stock
or splitups or reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of
any class of capital stock (now or hereafter outstanding) of the
Borrower, or warrants, options or other rights with respect to any
shares of any class of capital stock (now or hereafter outstanding) of
the Borrower, if either before or after giving effect to any of such
actions, there shall exist a Default or an Event of Default.
SECTION 7.2.7. Capital Expenditures, etc. The Borrower will
-------------------------
not, and will not permit any of its Subsidiaries to, make or commit to
make Capital Expenditures in any Fiscal Year, except Capital
Expenditures substantially as contemplated by the Borrower's five year
financial plan dated October 1994 and which do not aggregate in excess
of the amount set forth below opposite such Fiscal Year:
Year Maximum Capital Expenditures
---- ----------------------------
1994 $180,000,000
1995 $187,500,000
1996 $ 86,250,000
1997 $ 65,000,000
1998 $ 30,000,000
1999 $ 25,000,000
provided, however, that
- -------- -------
60
</PAGE>
<PAGE>
(i) to the extent Capital Expenditures are made or
committed to be made in any Fiscal Year in an amount less than
the maximum amount permitted for such Fiscal Year as provided
above, the Capital Expenditures which the Borrower or its
Subsidiaries may make or commit to make in the next following
Fiscal Year shall be increased by 100% of the amount of the
permitted Capital Expenditures not so made or committed to be
made in the immediately preceding Fiscal Year (the "Carry-
------
Forward Amount");
--------------
(ii) if all or a part of the Carry-Forward Amount is not
used in full in the immediately succeeding Fiscal Year, up to
50% of such original Carry-Forward Amount may be carried
forward to the second immediately succeeding Fiscal Year, but
no further carry forward of such Carry-Forward Amount to any
other succeeding Fiscal Year shall be permitted; and
(iii) no portion of any Carry-Forward Amount shall be
used in any Fiscal Year until the entire amount of the Capital
Expenditures permitted to be made or committed to be made in
such Fiscal Year as provided in the preceding clauses (a) and
-----------
(b) shall have been used.
---
SECTION 7.2.8. Rental Obligations. The Borrower will not, and
------------------
will not permit any of its Subsidiaries to, enter into at any time any
arrangement which does not create a Capitalized Lease Liability and
which involves the leasing by the Borrower or any of its Subsidiaries
from any lessor of any real or personal property (or any interest
therein), except arrangements which, together with all other such
arrangements which shall then be in effect, will not require the
payment of an aggregate amount of rentals by the Borrower and its
Subsidiaries in excess of (excluding escalations resulting from a rise
in the consumer price or similar index) $4,000,000 for any Fiscal Year
or $15,000,000 during the full remaining term of such arrangements;
provided, however, that any calculation made for purposes of this
- -------- -------
Section shall exclude any amounts required to be expended for
maintenance and repairs, insurance, taxes, assessments, and other
similar charges.
SECTION 7.2.9. Sale and Leasebacks. The Borrower will not, and
-------------------
will not permit any of its Subsidiaries to, enter into any transaction
by which the Borrower or any of its Subsidiaries, directly or
indirectly, becomes liable as a lessee or as a guarantor or other
surety with respect to any lease, whether an operating lease or a
capital lease of any property (whether real or personal or mixed)
whether now owned or hereafter acquired (i) which the Borrower or any
of its Subsidiaries has sold or transferred or is to sell or transfer
to any other Person, or (ii) which the Borrower or any of its
Subsidiaries intends to use for substantially the same purpose as any
other property which has been
61
</PAGE>
<PAGE>
or is to be sold or transferred by the Borrower or any such Subsidiary
to any person in connection with such lease.
SECTION 7.2.10. Consolidation, Merger, etc. The Borrower will
--------------------------
not, and will not permit any of its Subsidiaries to, liquidate or
dissolve, consolidate with, or merge into or with, any other
corporation, or purchase or otherwise acquire all or substantially all
of the assets of any Person (or of any division thereof) except
(a) the Borrower or any Subsidiary may make Permitted
Dispositions;
(b) any Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower or any other
Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Borrower or any other
Subsidiary; and
(c) so long as no Default has occurred and is continuing
or would occur after giving effect thereto, the Borrower or
any of its Subsidiaries may purchase all or substantially all
of the assets of any Person, or acquire such Person by merger,
if permitted (without duplication) by Section 7.2.7 to be made
-------------
as a Capital Expenditure in connection with alternative
metalics ventures contemplated by the Borrower's five year
financial plan dated October 1994 or if permitted (without
duplication) by Section 7.2.5(f).
----------------
SECTION 7.2.11. Asset Dispositions, etc. The Borrower will not,
-----------------------
and will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other
rights with respect to, any or all of its assets (including the
capital stock of Subsidiaries) to any Person, unless
(a) such sale, transfer, lease, contribution or
conveyance is a Permitted Disposition;
(b) if such sale is a Restricted Disposition, the net
proceeds from such sale, together with the net proceeds of all
other Restricted Dispositions does not exceed (x) $10,000,000
in any Fiscal Year or (y) $40,000,000 since the Effective
Date, unless (i) all net proceeds in excess of either such
amount are used to prepay the Loans in accordance with Section
-------
3.1.6 and (ii) all net proceeds less than $10,000,000 in any
-----
Fiscal Year or $40,000,000 since the Effective Date are used
to prepay the Loans in accordance with Section 3.1.6 unless,
-------------
within 180 days after the Borrower's receipt of such proceeds,
such proceeds are used by the Borrower to fund Capital
Expenditures; or
62
</PAGE>
<PAGE>
(c) so long as no Default or Event of Default shall have
occurred and be continuing at the time of or after giving
effect to such transaction, the Borrower and its Subsidiaries
may sell (or finance) Accounts as part of a Permitted
Receivables Financing on terms satisfactory to the Managing
Agents, provided that the Net Receivables Proceeds therefrom
are applied as provided in Section 3.1.8 and the Required
-------------
Lenders consent to the release of their security interest in
such Accounts as provided in Section 10.1.
------------
SECTION 7.2.12. Transactions with Affiliates. The Borrower will
----------------------------
not, and will not permit any of its Subsidiaries to, enter into, or
cause, suffer or permit to exist any arrangement or contract with any
of its other Affiliates unless such arrangement or contract is fair
and equitable to the Borrower or such Subsidiary and is an arrangement
or contract of the kind which would be entered into by a prudent
Person in the position of the Borrower or such Subsidiary with a
Person which is not one of its Affiliates.
SECTION 7.2.13. Negative Pledges, Restrictive Agreements, etc.
---------------------------------------------
The Borrower will not, and will not permit any of its Subsidiaries to,
enter into any agreement (excluding this Agreement, any other Loan
Document and any agreement governing any Indebtedness permitted either
by clause (b) of Section 7.2.2 as in effect on the Effective Date or
---------- -------------
by clause (d) of Section 7.2.2 as to the assets financed with the
---------- -------------
proceeds of such Indebtedness) prohibiting
(a) the creation or assumption of any Lien in favor of
the Administrative Agent upon its properties, revenues or
assets, whether now owned or hereafter acquired or the ability
of the Borrower or any other Obligor to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends,
advances, repayments of loans or advances, reimbursements of
management and other intercompany charges, expenses and
accruals or other returns on investments, or any other
agreement or arrangement which restricts the ability of any
such Subsidiary to make any payment, directly or indirectly,
to the Borrower.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the
----------------------------
following events or occurrences described in this Section 8.1 shall
-----------
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constitute an "Event of Default" (unless waived pursuant to the
----------------
provisions of Section 10.1).
------------
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall
--------------------------
default in the payment or mandatory prepayment when due of any
principal of or interest on any Loan, or the Borrower shall default
(and such default shall continue unremedied for a period of five days)
in the payment when due of any commitment fee or of any other
Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or
------------------
warranty of the Borrower or any other Obligor made or deemed to be
made hereunder or in any other Loan Document executed by it or any
other writing or certificate furnished by or on behalf of the Borrower
or any other Obligor to any Agent or any Lender for the purposes of or
in connection with this Agreement or any such other Loan Document
(including any certificates delivered pursuant to Article V) is or
---------
shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and
----------------------------------------
Obligations. The Borrower shall default in the due performance and
- -----------
observance of any of its obligations under Section 7.2.
-----------
SECTION 8.1.4. Non-Performance of Other Covenants and
--------------------------------------
Obligations. Any Obligor shall default in the due performance and
- -----------
observance of any other agreement contained herein or in any other
Loan Document executed by it, and such default shall continue
unremedied for a period of 30 days after notice thereof shall have
been given to the Borrower by the Administrative Agent or any Lender.
SECTION 8.1.5. Default on Other Indebtedness. A default shall
-----------------------------
occur in the payment when due (subject to any applicable grace
period), whether by acceleration or otherwise, of any Indebtedness
(other than Indebtedness described in Section 8.1.1) of the Borrower
-------------
or any of its Subsidiaries having a principal amount, individually or
in the aggregate, in excess of $5,000,000, or a default shall occur in
the performance or observance of any obligation or condition with
respect to such Indebtedness if the effect of such default is to
accelerate the maturity of any such Indebtedness or such default shall
continue unremedied for any applicable period of time sufficient to
permit the holder or holders of such Indebtedness, or any trustee or
agent for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment
---------
of money in excess of $5,000,000 shall be rendered against the
Borrower or any of its Subsidiaries and either
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(a) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order; or
(b) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in
effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall
-------------
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any
member of its Controlled Group or any other Person to
terminate a Pension Plan if, as a result of such termination,
the Borrower or any such member could be required to make a
contribution to such Pension Plan, or could reasonably expect
to incur a liability or obligation to such Pension Plan, in
excess of $5,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA.
SECTION 8.1.8. Control of the Borrower. Any Change in Control
-----------------------
shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower, any
---------------------------
of its Subsidiaries or any Material Partnership shall
(a) become insolvent or generally fail to pay, or admit
in writing its inability or unwillingness to pay, debts as
they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower, any of its Subsidiaries or any
Material Partnership or any property of any thereof, or make
a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the
Borrower, any of its Subsidiaries or any Material Partnership
or for a substantial part of the property of any thereof, and
such trustee, receiver, sequestrator or other custodian shall
not be discharged within 60 days, provided that the Borrower,
each Subsidiary and each Material Partnership hereby expressly
authorizes the Administrative Agent and each Lender to appear
in any court conducting any relevant proceeding during such
60-day period to preserve, protect and defend their rights
under the Loan Documents;
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(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect
of the Borrower, any of its Subsidiaries or any Material
Partnership, and, if any such case or proceeding is not
commenced by the Borrower, such Subsidiary or such Material
Partnership, such case or proceeding shall be consented to or
acquiesced in by the Borrower, such Subsidiary or such
Material Partnership or shall result in the entry of an order
for relief or shall remain for 60 days undismissed, provided
that the Borrower, each Subsidiary and each Material
Partnership hereby expressly authorizes the Administrative
Agent and each Lender to appear in any court conducting any
such case or proceeding during such 60-day period to preserve,
protect and defend their rights under the Loan Documents; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document,
---------------------------
or any Lien granted thereunder, shall (except in accordance with its
terms), in whole or in part, terminate, cease to be effective or cease
to be the legally valid, binding and enforceable obligation of any
Obligor party thereto; the Borrower, any other Obligor or any other
party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any Lien
securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien.
SECTION 8.1.11. Environmental Matters. Any claims shall be made
---------------------
under any Environmental Laws that, singly or in the aggregate, have,
or may reasonably be expected to have, upon the final resolution
thereof a Material Adverse Effect, net of any reserves.
SECTION 8.2. Action if Bankruptcy. If any Event of Default
--------------------
described in clauses (a) through (d) of Section 8.1.9 shall occur, the
----------- --- -------------
Commitments (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any Event of
--------------------------------
Default (other than any Event of Default described in clauses (a)
-----------
through (d) of Section 8.1.9 shall occur for any reason, whether
--- -------------
voluntary or involuntary, and be continuing, the Administrative Agent,
upon the direction of the Required Lenders, shall by notice to the
Borrower declare all or any portion of the outstanding principal
amount of the Loans and other Obligations to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of
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such Loans and other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without
further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints First
-------
Interstate as its Administrative Agent under and for purposes of this
Agreement, the Notes and each other Loan Document; each Lender hereby
appoints Scotiabank as the Syndication Agent for the purposes of
syndicating the credit facilities provided hereunder; and each Lender
hereby appoints First Interstate and Scotiabank as its Managing Agents
under and for purposes of this Agreement. Each Lender authorizes the
Administrative Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Loan Document and, in the absence
of other written instructions from the Required Lenders received from
time to time by the Administrative Agent (with respect to which the
Administrative Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms
hereof and thereof, together with such powers as may be reasonably
incidental thereto. Notwith-standing any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document,
the Agents shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agents have or be deemed to
have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Agents. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this
Agreement) each Agent, pro rata according to such Lender's Percentage,
--- ----
from and against any and all liabilities, obligations, losses,
damages, claims, costs or expenses of any kind or nature whatsoever
which may at any time be imposed on, incurred by, or asserted against,
such Agent in any way relating to or arising out of this Agreement,
the Notes and any other Loan Document, including reasonable attorneys'
fees, and as to which such Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of
- -------- -------
any portion of such liabilities, obligations, losses, damages, claims,
costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from an
Agent's gross negligence or wilful misconduct. No Agent shall be
required to take any action hereunder, under the Notes or under any
other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the
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Notes or any other Loan Document, unless it is indemnified hereunder
to its satisfaction. If any indemnity in favor of an Agent shall be
or become, in such Agent's determination, inadequate, such Agent may
call for additional indemnification from the Lenders and cease to do
the acts indemnified against hereunder until such additional indemnity
is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative
---------------------
Agent shall have been notified by telephone, confirmed in writing, by
any Lender by 5:00 p.m., Portland time, on the day prior to a
Borrowing that such Lender will not make available the amount which
would constitute its Percentage of such Borrowing on the date
specified therefor, the Administrative Agent may assume that such
Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender shall not
have made such amount available to the Administrative Agent, such
Lender shall repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from
the date the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative
Agent, at the interest rate applicable at the time to Loans comprising
such Borrowing. If a Lender shall fail to repay the Administrative
Agent all amounts owing under the preceding sentence, the Borrower
shall forthwith on demand repay all such amounts together with
interest thereon through the date such amount is repaid to the
Administrative Agent.
SECTION Exculpation. Neither any Agent nor any of its
-----------
respective directors, officers, employees or agents shall be liable to
any Lender for any action taken or omitted to be taken by it under
this Agreement or any other Loan Document, or in connection herewith
or therewith, except for its own wilful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the
creation, perfection or priority of any Liens purported to be created
by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral
security, nor to make any inquiry respecting the performance by the
Borrower of its obligations hereunder or under any other Loan
Document. Any such inquiry which may be made by any Agent shall not
obligate it to make any further inquiry or to take any action. Each
Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or
writing which such Agent believes to be genuine and to have been
presented by a proper Person.
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<PAGE>
SECTION 9.4. Successor. If any Agent shall be guilty of gross
---------
negligence or willful misconduct, the Required Lenders may, upon 10
days' prior written notice to the Borrower and such Agent, remove such
Agent. Any Agent may resign as such at any time upon at least 30
days' prior written notice to the Borrower and all Lenders. If any
Agent at any time shall resign or be removed, the Required Lenders may
appoint another Lender as a successor Agent which shall thereupon
become an Agent hereunder. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving written
notice of resignation or within 10 days after the Required Lenders
shall have delivered a removal notice, then the retiring or removed
Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be one of the Lenders or a commercial banking institution
organized under the laws of the U.S. (or any State thereof) or a U.S.
branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as an Agent hereunder by a successor
Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such
successor Agent may reasonably request, and shall thereupon succeed to
and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring
Agent's resignation hereunder as an Agent, the provisions of
(a) this Article IX shall inure to its benefit as to any
----------
actions taken or omitted to be taken by it while it was an
Agent under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to
------------ ------------
inure to its benefit.
SECTION 9.5. Loans by First Interstate and Scotiabank. First
----------------------------------------
Interstate and Scotiabank shall each have the same rights and powers
with respect to (x) the Loans made by each of them or any of their
Affiliates, and (y) the Notes held by each of them or any of their
Affiliates as any other Lender and may exercise the same as if they
were not an Agent. First Interstate and Scotiabank and their
Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if First Interstate and Scotiabank were
not Agents hereunder.
SECTION Credit Decisions. Each Lender acknowledges that it
----------------
has, independently of the Agents and each other Lender, and based on
such Lender's review of the financial information of the Borrower,
this Agreement, the other Loan Documents (the terms and provisions of
which being satisfactory to such Lender) and such other documents,
information and investigations as such Lender has
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<PAGE>
deemed appropriate, made its own credit decision to extend its
Commitments. Each Lender also acknowledges that it will,
independently of the Agents and each other Lender, and based on such
other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as
to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan
Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give
-----------
prompt notice to each Lender of each notice or request required or
permitted to be given to the Administrative Agent by the Borrower
pursuant to the terms of this Agreement (unless concurrently delivered
to the Lenders by the Borrower). The Administrative Agent will
distribute to each Lender each document or instrument received for its
account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders
by the Administrative Agent in accordance with the terms of this
Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
------------------------
Agreement and of each other Loan Document (other than agreements
relating to the Hedging Obligations which may be amended, modified or
waived solely with the consent of the Borrower and Lender party
thereto) may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to by
the Borrower and the Required Lenders; provided, however, that no such
-------- -------
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders
shall be effective unless consented to by each Lender;
(b) modify this Section 10.1, change the definition of
------------
"Required Lenders", increase any Commitment Amount or (except
----------------
as contemplated in connection with the termination of the
Commitment of a non-consenting Lender under Section 2.1.5) the
-------------
Percentage of any Lender, reduce any fees described in Article
-------
III or extend the date for any such fees, change the schedule
---
of reductions to the Commitments provided for in Sections 3.1.3
--------------
through and including 3.1.7, release all or substantially all
-----
collateral security, release any Guarantor (except as hereinafter
provided in this Section), or extend any Commitment Termination
Date shall be made without the consent of each Lender and each
holder of a Note; provided,
--------
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however that the release by the Lenders of their security
-------
interest in the Borrower's and Guarantor's Accounts in
connection with a Permitted Receivables Financing will require
the approval of only the Required Lenders;
(c) extend the due date for, or reduce the amount of,
any scheduled repayment or prepayment of principal of or
interest on any Loan (or reduce the principal amount of or
rate of interest on any Loan) shall be made without the
consent of the holder of that Note evidencing such Loan; or
(d) affect adversely the interests, rights or
obligations of any Agent qua an Agent shall be made without
consent of such Agent.
Notwithstanding the foregoing, the Administrative Agent shall not
release any collateral security unless it has received the prior
written consent of the Required Lenders except (i) for releases in
connection with the sale or transfer of collateral by an Obligor in
the ordinary course of its business or (ii) as provided in the
following sentence. The Lenders acknowledge and agree that unless an
Event of Default shall have occurred and be continuing, upon the
request of the Borrower, (i) the stock of a Subsidiary shall be
released from the lien of the Pledge Agreement if such Subsidiary is
no longer a Significant Subsidiary and (ii) a Subsidiary that is not a
Significant Subsidiary shall be released from its obligations under
any Guaranty or Security Agreement delivered by it. No failure or
delay on the part of any Agent, any Lender or the holder of any Note
in exercising any power or right under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or
approval by any Agent, any Lender or the holder of any Note under this
Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2. Notices. All notices and other communications
-------
provided to any party hereto under this Agreement or any other Loan
Document shall be in writing or by facsimile and addressed, delivered
or transmitted to such party at its address, facsimile number set
forth below its signature hereto or set forth in the Lender Assignment
Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier
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service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when received.
SECTION 10.3. Payment of Costs and Expenses. The Borrower
-----------------------------
agrees to pay on demand all expenses of the Agents (including the fees
and out-of-pocket expenses of counsel to the Agents and of local
counsel, if any, who may be retained by counsel to the Agents) in
connection with
(a) the negotiation, preparation, execution and delivery
of this Agreement and of each other Loan Document, including
schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to this Agreement or any
other Loan Document as may from time to time hereafter be
required, whether or not the transactions contemplated hereby
are consummated, and
(b) the filing, recording, refiling or rerecording of
the Pledge Agreement and the Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto
and all amendments, supplements and modifications to any
thereof and any and all other documents or instruments of
further assurance required to be filed or recorded or refiled
or rerecorded by the terms hereof or of the Pledge Agreement
or the Security Agreement, and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any other
Loan Document.
The Borrower further agrees to pay, and to save the Agents and the
Lenders harmless from all liability for, any stamp or other taxes
which may be payable in connection with the execution or delivery of
this Agreement, the borrowings hereunder, or the issuance of the Notes
or any other Loan Documents. The Borrower also agrees to reimburse
the Agents and each Lender upon demand for all reasonable out-of-
pocket expenses (including attorneys' fees and legal expenses
(including all allocated costs of any Lender's in-house counsel))
incurred by the Agents or such Lender in connection with (x) the
negotiation of any restructuring or "work-out", whether or not
consummated, of any Obligations and (y) the enforcement of any
Obligations.
SECTION 10.4. Indemnification. In consideration of the
---------------
execution and delivery of this Agreement by each Lender and the
extension of the Commitments, the Borrower hereby indemnifies,
exonerates and holds the Agents and each Lender and each of their
respective officers, directors, employees, agents and Affiliates
(collectively, the "Indemnified Parties") free and harmless from and
-------------------
against any and all actions, causes of action, suits, losses, costs,
liabilities and damages, and expenses incurred in connection
72
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<PAGE>
therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively,
the "Indemnified Liabilities"), incurred by the Indemnified Parties or
-----------------------
any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any
Loan;
(b) the entering into and performance of this Agreement
and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower
as the result of any determination by the Required Lenders
pursuant to Article V not to fund any Borrowing);
---------
(c) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other
matter relating to the protection of the environment or the
Release by the Borrower or any of its Subsidiaries of any
Hazardous Material; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the
Borrower or any Subsidiary thereof of any Hazardous Material
(including any losses, liabilities, damages, injuries, costs,
expenses or claims asserted or arising under any Environmental
Law), regardless of whether caused by, or within the control
of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of
a particular Indemnified Party by reason of the relevant Indemnified
Party's gross negligence or wilful misconduct. If and to the extent
that the foregoing undertaking may be unenforceable for any reason,
the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under
--------
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the
- ------------ --- --- --- ---- ----
Lenders under Section 9.1, shall in each case survive any termination
-----------
of this Agreement, the payment in full of all Obligations and the
termination of all Commitments. The representations and warranties
made by each Obligor in this Agreement and in each other Loan Document
shall survive the execution and delivery of this Agreement and each
such other Loan Document.
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SECTION 10.6. Severability. Any provision of this Agreement or
------------
any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement or
such Loan Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement
--------
and of each other Loan Document are inserted for convenience only and
shall not affect the meaning or interpretation of this Agreement or
such other Loan Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc.
---------------------------------------------
This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be executed by the Borrower and the
Agents and be deemed to be an original and all of which shall
constitute together but one and the same agreement. This Agreement
shall become effective when counterparts hereof executed on behalf of
the Borrower and each Lender (or notice thereof satisfactory to the
Administrative Agent) shall have been received by the Administrative
Agent and notice thereof shall have been given by the Administrative
Agent to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS
-------------------------------
AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties hereto
with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. Except as herein
----------------------
provided, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and
assigns; provided, however, that:
-------- -------
(a) the Borrower may not assign or transfer its rights
or obligations hereunder without the prior written consent of
the Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 10.11.
-------------
SECTION 10.11. Sale and Transfer of Loans and Notes;
-------------------------------------
Participations in Loans and Notes. Each Lender may assign, or sell
- ---------------------------------
participations in, its Loans and Commitments to one or more other
Persons in accordance with this Section 10.11.
-------------
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SECTION 10.11.1. Assignments. Any Lender,
-----------
(a) with the written consents of the Borrower and the
Administrative Agent (which consents shall not be unreasonably
delayed or withheld and which consent, in the case of the
Borrower, shall be deemed to have been given in the absence of
a written notice delivered by the Borrower to the Administrative
Agent, on or before the fifth Business Day after receipt by the
Borrower of such Lender's request for consent, stating, in
reasonable detail, the reasons why the Borrower proposes to
withhold such consent) may at any time assign and delegate to one
or more commercial banks or other financial institutions, and
(b) with notice to the Borrower and the Administrative
Agent, but without the consent of the Borrower or the
Administrative Agent, may assign and delegate to any of its
Affiliates or to any other Lender
(each Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "Assignee Lender"), all or any fraction
---------------
of such Lender's total Loans and Commitments (which assignment and
delegation shall be of a constant, and not a varying, percentage of
all the assigning Lender's Loans and Commitments) in a minimum
aggregate amount of $10,000,000; provided, however, that after giving
-------- -------
effect to such assignment, the assignor Lender's remaining aggregate
Commitment shall be at least $10,000,000; and provided, further, that,
-------- -------
the Borrower, each other Obligor and the Agents shall be entitled to
continue to deal solely and directly with such Lender in connection
with the interests so assigned and delegated to an Assignee Lender
until
(c) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have
been given to the Borrower and the Administrative Agent by
such Lender and such Assignee Lender,
(d) such Assignee Lender shall have executed and
delivered to the Borrower and the Administrative Agent a
Lender Assignment Agreement, accepted by the Administrative
Agent, and
(e) the processing fees described below shall have been
paid.
From and after the date that the Administrative Agent accepts such
Lender Assignment Agreement, (x) the Assignee Lender thereunder shall
be deemed automatically to have become a party hereto and to the
extent that rights and obligations hereunder have been assigned
75
</PAGE>
<PAGE>
and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a
Lender hereunder and under the other Loan Documents, and (y) the
assignor Lender, to the extent that rights and obligations hereunder
have been assigned and delegated by it in connection with such Lender
Assignment Agreement, shall be released from its obligations hereunder
and under the other Loan Documents. Within five Business Days after
its receipt of notice that the Administrative Agent has received an
executed Lender Assignment Agreement, the Borrower shall execute and
deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's assigned
Loans and Commitments and, if the assignor Lender has retained Loans
and Commitments hereunder, replacement Notes in the principal amount
of the Loans and Commitments retained by the assignor Lender hereunder
(such Notes to be in exchange for, but not in payment of, those Notes
then held by such assignor Lender). Each such Note shall be dated the
date of the predecessor Notes. The assignor Lender shall mark the
predecessor Notes "exchanged" and deliver them to the Borrower.
Accrued interest on that part of the predecessor Notes evidenced by
the new Notes, and accrued fees, shall be paid as provided in the
Lender Assignment Agreement. Accrued interest on that part of the
predecessor Notes evidenced by the replacement Notes shall be paid to
the assignor Lender. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Notes and in
this Agreement. Such assignor Lender or such Assignee Lender must
also pay a processing fee to the Administrative Agent upon delivery of
any Lender Assignment Agreement in the amount of $2,500. Any
attempted assignment and delegation not made in accordance with this
Section 10.11.1 shall be null and void. In addition to the foregoing,
- ---------------
and notwithstanding any other provision hereof, any Lender may at any
time assign any or all of its rights hereunder or its Notes to any
Federal Reserve Bank.
SECTION 10.11.2. Participations. Any Lender may at any time
--------------
sell to one or more commercial banks or other Persons (each of such
commercial banks and other Persons being herein called a
"Participant") participating interests in any of the Loans,
-----------
Commitments, or other interests of such Lender hereunder; provided,
--------
however, that
- -------
(a) no participation contemplated in this Section 10.11
-------------
shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document,
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Borrower and each other Obligor and the Agents
shall continue to deal solely and directly with such Lender in
76
</PAGE>
<PAGE>
connection with such Lender's rights and obligations under
this Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an
Affiliate of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking
any action hereunder or under any other Loan Document, except
that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any
actions of the type described in clause (b) or (c) of Section
---------- --- -------
10.1, and
----
(e) the Borrower shall not be required to pay any amount
under Section 4.6 that is greater than the amount which it
-----------
would have been required to pay had no participating interest
been sold.
The Borrower acknowledges and agrees that each Participant, for
purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4,
------------ --- --- --- --- --- ---- ----
shall be considered a Lender.
SECTION 10.12. Confidentiality. The Lenders shall hold all
---------------
non-public information (which has been identified as such by the
Borrower) obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential
information of this nature and in accordance with safe and sound
banking practices and in any event may make disclosure to any of their
employees, examiners, Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or as
reasonably required by any bona fide transferee, participant or
---- ----
assignee or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided,
--------
however, that
- -------
(a) unless prohibited by applicable law or court order,
each Lender shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any
such request in connection with an examination of the
financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information
prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this
Section 10.12, each Lender shall require any such bona fide
-------------
transferee, participant and assignee receiving a disclosure of
non-public information to agree in writing
(i) to be bound by this Section 10.12;
-------------
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
77
</PAGE>
<PAGE>
information to be similarly bound by this Section 10.12;
and
(c) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no
Lender shall be obligated or required to return any materials
furnished by the Borrower or any Subsidiary.
SECTION 10.13. Other Transactions. Nothing contained herein
------------------
shall preclude any Agent or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or
any other Loan Document, with the Borrower or any of its Affiliates in
which the Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
-------------------------------------------
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR
ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE AGENTS, THE LENDERS
--------------------
AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
78
</PAGE>
<PAGE>
WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
OREGON STEEL MILLS, INC.
By:
-----------------------------------
Title:
-----------------------------
Address: P.O. Box 5368
Portland, Oregon 97228
Facsimile No.: (503) 240-5232
Attention: Mr. Christopher Cassard
Treasurer
79
</PAGE>
<PAGE>
FIRST INTERSTATE BANK OF OREGON,
N.A., as Administrative Agent and
Managing Agent
By:
------------------------------------
Title:
------------------------------
Address: 1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Facsimile No.: (503) 220-4896
Attention: Mr. Jim Kennedy
THE BANK OF NOVA SCOTIA, as
Syndication Agent and Managing Agent
By:
------------------------------------
Title:
------------------------------
Address: 888 S.W. Fifth Avenue
Suite 750
Portland, Oregon 97204
Facsimile No.: (503) 222-5502
Attention: Mr. Errett Hummel
80
</PAGE>
<PAGE>
PERCENTAGE LENDERS
---------- -------
20.00% FIRST INTERSTATE BANK OF OREGON,
N.A.
By:
------------------------------
Title:
-----------------------
Domestic
Office: 1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Facsimile No.: (503) 220-4896
Attention: Mr. Jim Kennedy
LIBOR
Office: 1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Facsimile No.: (503) 220-4896
Attention: Mr. Jim Kennedy
81
</PAGE>
<PAGE>
16.67% THE BANK OF NOVA SCOTIA
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 888 S.W. Fifth Avenue,
Suite 750
Portland, Oregon 97204
Facsimile No.: (503) 222-5502
Attention: Mr. Errett Hummel
LIBOR
Office: 888 S. W. Fifth Avenue
Suite 750
Portland, Oregon 97204
Facsimile No.: (503) 222-5502
Attention: Mr. Errett Hummel
82
</PAGE>
<PAGE>
10.00% TORONTO DOMINION (TEXAS), INC.
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 909 Fannin Street
17th Floor
Houston, Texas 77010
Facsimile No.: (713) 951-9921
Attention: Manager, Credit
Administration
LIBOR
Office: 909 Fannin Street
17th Floor
Houston, Texas 77010
Facsimile No.: (713) 951-9921
Attention: Manager, Credit
Administration
83
</PAGE>
<PAGE>
10.00% UNITED STATES NATIONAL BANK OF
OREGON
By:
-------------------------------
Title:
------------------------
Office: 111 S.W. 5th Ave., T-29
Portland, OR 97204
Facsimile No.: (503) 275-5428
Attention: Paricipation Specialist
LIBOR
Office: 111 S.W. 5th Ave., T-29
Portland, OR 97204
Facsimile No.: (503) 275-5428
Attention: Participation Specialist
84
</PAGE>
<PAGE>
10.00% KEY BANK OF WASHINGTON
By:
-------------------------------
Title:
------------------------
Domestic
Office: 1325 Fourth Avenue
Seattle, Washington 98101
Facsimile No.: (206) 684-6035
Attention: John Brock
LIBOR
Office: 1325 Fourth Avenue
Seattle, Washington 98101
Facsimile No.: (206) 689-5743
Attention: Sue Titus
85
</PAGE>
<PAGE>
6.67% NBD BANK, NA.
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 611 Woodward
Detroit, Michigan 48226
Facsimile No.: (313) 225-2649
Attention: Commercial Loans
LIBOR
Office: 611 Woodward
Detroit, Michigan 48226
Facsimile No.: (313) 225-2649
Attention: Commercial Loans
86
</PAGE>
<PAGE>
6.67% THE BANK OF TOKYO, LTD., PORTLAND
BRANCH
By:
--------------------------------
Title:
--------------------------
Domestic
Office: 2300 Pacwest Center
1211 S.W. Fifth Avenue
Portland, Oregon 97204
Facsimile No.: (503) 227-5372
Attention: Mr. M.W. Kringlen
LIBOR
Office: 2300 Pacwest Center
1211 S.W. Fifth Avenue
Portland, Oregon 97204
Facsimile No.: (503) 227-5372
Attention: Mr. M.W. Kringlen
87
</PAGE>
<PAGE>
4.17% PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Title:
--------------------------
Domestic
Office: 55 South Lake Avenue
Suite 650
Pasadena, CA 91101
Facsimile No.: (818) 568-0653
Attention: Commercial Loan
Questions
LIBOR
Office: 55 South Lake Avenue
Suite 650
Pasadena, CA 91101
Facsimile No.: (818) 568-0653
Attention: Commercial Loan
Questions
88
</PAGE>
<PAGE>
4.17% THE BANK OF CALIFORNIA, N.A.
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 400 California Street
17th Floor
San Francisco, CA 94104
Facsimile No.: (415) 765-3146
Attention: Regina Abdulgedir
LIBOR
Office: 400 California Street
17th Floor
San Francisco, CA 94104
Facsimile No.: (415) 765-3146
Attention: Regina Abdulgedir
89
</PAGE>
<PAGE>
4.17% NATIONSBANK OF TEXAS, N.A.
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 444 South Flower
Suite 1500
Los Angeles, CA 90071
Facsimile No.: (213) 626-5815
Attention: Kay Hibbe
LIBOR
Office: 444 South Flower
Suite 1500
Los Angeles, CA 90071
Facsimile No.: (213) 626-5815
Attention: Kay Hibbe
90
</PAGE>
<PAGE>
4.17% FUJI BANK, LIMITED
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 601 California Street
San Francisco, CA 94108
Facsimile No.: (415) 362-4613
Attention: Marketing Department
LIBOR
Office: 601 California Street
San Francisco, CA 94108
Facsimile No.: (415) 362-4613
Attention: Marketing Department
91
</PAGE>
<PAGE>
3.33% BANK OF AMERICA NT & SA
By:
-------------------------------
Title:
-------------------------
Domestic
Office: 555 California Street
41st Floor
San Francisco, CA 94104
Facsimile No.: (415) 362-4613
Attention: Cheryl Colombo
LIBOR
Office: 555 California Street
41st Floor
San Francisco, CA 94104
Facsimile No.: (415) 362-4613
Attention: Cheryl Colombo
92
</PAGE>
<PAGE>
SCHEDULE 1
----------
DISCLOSURE SCHEDULE
Item 1.1: Permitted Dispositions
- --------- ----------------------
1 - All properties of Oregon Steel Mills - Fontana Division, Inc.
2 - Certain rolling mill and shipping assets and a reheat furnace
at the Portland steelworks which are expected to be replaced by
the new Combination Mill equipment as it is fabricated and
installed.
3 - Certain real property not part of the core production
facilities in Portland and Colorado.
4 - Certain water rights and related assets in Colorado.
5 - Certain mill machinery and related production assets of CF&I
Steel, L.P. which are expected to be replaced in accordance
with the capital improvement plan.
6 - Certain machinery and equipment at Napa Pipe Corporation and
Camrose Pipe Company to the extent they are replaced by new
assets in accordance with the capital improvement plan.
</PAGE>
<PAGE>
Item 2 and Item 6.8: Existing Subsidiaries and Significant
-------------------------------------
Subsidiaries
------------
SUBSIDIARIES OF OREGON STEEL MILLS, INC.
SUBSIDIARY OWNERSHIP COMMENTS
---------- --------- ------------------
* Napa Pipe Corporation 100%
1025 Kaiser Road
Napa California 94559
* Oregon Steel Mills - Fontana 100%
Division, Inc.
14000 San Bernardino Avenue
Fontana CA 92335
* Camrose Pipe Corporation 100% Owns 60% partnership
1000 SW Broadway #2200 interest of Camrose
Portland OR 97205 Pipe Company and is
a general partner
* Camrose Pipe Company 60%
5302 - 39th Street
Camrose Alberta T4V 2N8
CANADA
* New CF&I, Inc. 90% Owns 95.2% partnership
1000 SW Broadway #2200 interest in CF&I Steel,
Portland OR 97205 L.P. and is the sole
general partner. 10%
owned by Nippon Steel
* CF&I Steel, L.P. 95.2% 4.8% owned by Pension
1612 E Abriendo Benefit Guarantee Corp.
Pueblo CO 81004
Oregon Steel Mills International, 100%
Inc.
1000 SW Broadway #2200
Portland OR 97205
Oregon Steel de Guayana, Inc. 100% Expected to be owner
1000 SW Broadway #2200 of stock of Cliffs
Portland OR 97205 and Associates
OSM Glassificationtm, Inc. 100% Owns 51% partnership
1000 SW Broadway #2200 interest in
Portland OR 97205 Glassificationtm
International Ltd.
and is a general
partner
Glassificationtm 51%
International, Ltd
1500 - 19th Avenue NW
Issaquah WA 98027
NW Container Services, Inc. 50%
11920 N Burgard Road
Portland OR 97203
Colorado & Wyoming Railway Co. 100% Owned by New
1612 E Abriendo CF&I, Inc.
Pueblo CO 81004
Union Ditch & Water Company 69% Owned by New
113 W 5th Street CF&I, Inc.
Florence CO 81226
* Significant subsidiaries
</PAGE>
<PAGE>
Item 6.6: Material Developments
- --------- ---------------------
None
Item 6.7: Litigation
- --------- ----------
1 - Samsung America, Inc. v. Napa Pipe Corporation. In 1994 Samsung
----------------------------------------------
America, Inc., a Korean trading company ("Samsung") filed a
complaint in the US District Court for the Southern District of
Texas against Napa Pipe Corporation ("Napa Pipe"), Ferrostaal
Metals Corporation ("Ferrostaal") and John K. Holman alleging
breach of an exclusive contract arrangement with Napa Pipe
relating to development of a pipeline in Colombia, South
America. The complaint alleges that Napa Pipe breached the
contract by designating Ferrostaal as its agent rather than
Samsung and also seeks recovery under the quantum meruit theory.
Samsung is also suing Ferrostaal for tortious interference with
a contract and unfair competition and John K. Holman for breach
of fiduciary duty. The complaint alleges damages against all
defendants totalling $3 million. Samsung sought a preliminary
injunction prohibiting Napa from submitting any bid on the
project unless it was submitted through Samsung. The injunction
was denied and the court indicated that damages was an adequate
remedy. A bid was submitted through Ferrostaal and the outcome
of the bid proposal is pending. By informal agreement of the
parties, all discovery has been held in abeyance pending the
outcome of the bid proposal. The case is set to be called for
trial in November 1995. The Company is unable to estimate the
ultimate outcome of this matter, but such outcome would not have
a material adverse effect on the consolidated financial
condition of the Company.
2 - Marvin R. Clark and Janet Clark v. Raybestos-Manhattan, Inc., et
----------------------------------------------------------------
al. In 1994, a complaint was filed in San Francisco County
---
Superior Court against many defendants, including the Company
and Napa Pipe which alleges wrongful death resulting from
asbestos exposure. The amount of damages is unspecified and the
case is in the discovery phase. The plaintiff was not an
employee of the Company or Napa Pipe. It is alleged that the
plaintiff was indirectly exposed by a predecessor to the Napa
Pipe property. The Company believes the case is without merit,
and that the ultimate outcome of the litigation will not have a
material adverse effect on the consolidated financial condition
of the Company.
3 - See also, Item 6.12 of this Disclosure Schedule for
environmental matters.
4 - In addition to the foregoing matters, the Company and its
subsidiaries are party to various claims, disputes, legal
actions and other proceedings involving contracts, employment
and various other matters. The company believes that the
outcome of such matters will not have a material adverse effect
on the consolidated financial condition of the Company.
</PAGE>
<PAGE>
Item 6.11: Employee Benefits Plans
- ---------- -----------------------
Oregon Steel Mills, Inc. Pension Plan
Oregon Steel Mills, Inc. Thrift Plan
Oregon Steel Mills, Inc. Employee Stock Ownership Plan
Oregon Steel Mills, Inc. Supplemental Retirement Plan
CF&I Steel, L.P. Pension Plan
CF&I Steel, L.P. Thrift Plan
Camrose Pipe Company Pension Plan
Item 6.12: Environmental Matters
- ---------- ---------------------
The Company is subject to federal, state and local environmental laws
and regulations concerning, among other things, wastewater, air
emissions, toxic use reduction and hazardous material disposal. The
Portland and Pueblo Steel Mills are classified in the same manner as
other similar steel mills in the industry, as generating hazardous
waste materials because the melting operation produces dust that
contains heavy metals ("EAF" dust). This dust, which constitutes the
largest waste stream generated at these facilities, has been disposed
of at substantial expense in order to comply with applicable laws and
regulations.
In 1993 the Company began processing EAF dust in its Glassificationtm
facility at the Portland Steel Mill. It is anticipated that the
Company will be recycling 100 percent of the EAF dust produced at the
Portland Steel Mill.
In 1993 the Environmental Protection Agency (EPA) concluded a site
assessment of the Portland Steel Mill. The review ranked the facility
as a medium/low corrective action priority for identified Solid Waste
Management Units. The Company intends to proceed with an internal
corrective action schedule. This schedule will include making
portions of the Company's property useable for future development.
Cost of these corrective action improvements is estimated at $1.5
million. The Portland Steel Mill received a renewed air discharge
permit in 1993 which will require additional monitoring and reporting
obligations.
The Company is currently conducting engineering studies to address
site drainage issues and the quality of storm water runoff at the
Portland Steel Mill. In addition, management of waste waters and
sludges at the site are undergoing improvement and are planned capital
expenditures. Historical operations have included the onsite
management of solid wastes. The Company has undertaken measures to
recycle and manage these wastes offsite.
The property and building at which the Fontana Plate Mill is located
are leased to the Company. The Fontana Plate Mill was formerly part
of a larger integrated steel plant (the "Mill") operated on property
(the "Mill Property") surrounding the Fontana Plate Mill. Prior to
the termination of steel production at the Mill in 1983, the Mill
operator produced substances that currently are defined as hazardous
by federal and California regulations. Hazardous substances have been
detected in the soil and groundwater at a number of specific areas
within the Mill Property on the basis of inspections done by the prior
operator and by the EPA. The testing program carried out by the prior
operator and the EPA at the Mill Property has not included sampling at
the
</PAGE>
<PAGE>
Fontana Plate Mill site. On the basis of limited testing on behalf of
the Company at the Fontana Plate Mill site, the levels of hazardous
substances in the subsurface soils and groundwater at the Fontana
Plate Mill site appear to be within permissible limits, although there
can be no assurance that this is the case. The successor to the
former operator of the Mill currently is carrying out site
investigations at the Mill Property that may lead to the
identification of needed remedial action. The successor is taking
these actions pursuant to a consent order with the State of California
Department of Health Services as required by corrective action
provisions of the federal Resource Conservation and Recovery Act. The
lessor of the land and building at the Fontana Plate Mill has agreed
to indemnify the Company for certain expenses (excluding consequential
damages, but including cost of clean-up and remediation required by
governmental agencies) resulting from the presence of hazardous
substances at the Fontana Plate Mill site other than as a result of
the actions or negligence of the Company; and the Company has agreed
to indemnify such lessor for similar expenses resulting from the
presence of hazardous substances at the Fontana Plate Mill site as a
result of actions or negligence of the Company. Operations at the
Fontana Plate Mill will be discontinued by March 1995. Therefore, the
Company is implementing a closure plan to address certain
environmental issues and has accrued $625,000 for that purpose.
In 1983 the Company purchased an 84-acre parcel of land which was
formerly a metals production facility. The prior owner's activities
included the onsite management of wastes, wastewater treatment
facilities and air pollution control equipment. The 84 acres included
10 acres which the Company sold in 1987. The Company is conducting a
preliminary internal investigation into the environmental issues
related to the remaining 74 acres. The results of this study are
pending. Management is unable to determine the full magnitude of the
issues at this site.
Prior to the acquisition of the Napa Facility by the Company, the
prior owner of the Napa Facility disposed of certain waste materials,
including spent sandblast materials, mill scale and welding flux, on-
site. As a result of these matters and other actions prior to the
acquisition, certain metals were released into the ground, and certain
petroleum based compounds have seeped into the ground and groundwater
at the Napa Facility.
The prior owner of the Napa Facility entered into a stipulated
judgment with the County of Napa which required a site investigation
of the Napa Facility and remediation (to the satisfaction of local,
regional and state environmental authorities) of soil and groundwater
contamination associated with activities conducted at the site prior
to its acquisition by the Company. As a result of the acquisition of
the Napa Facility, the Company's subsidiary, Napa Pipe Corporation, is
obligated by contract to comply with the terms and requirements of the
stipulated judgment. Proposed plans for investigating the soil and
water conditions at the Napa Facility were submitted to local,
regional and state environmental authorities in February 1988. The
Company is continuing to negotiate certain terms of these proposed
plans with such environmental authorities.
In addition to local, regional and state environmental authorities,
the EPA conducted an investigation of the Napa Facility and has taken
soil and water samples at the Napa Facility. The Company's proposed
plans for investigating the soil and water conditions at the Napa
Facility were furnished to the EPA in March 1988. While awaiting
possible further response from the EPA, the Company is proceeding with
its remediation plans as described in the preceding paragraph. In
April 1992, the State of California Environmental Protection Agency,
</PAGE>
<PAGE>
Department of Toxic Substances Control completed a Site Screening and
recommended a low priority preliminary endangerment assessment for the
Napa Facility.
The total cost of the remedial action that may be required to correct
existing environmental problems at the Napa Facility, including
remediation of contaminants in the soil and groundwater, depends on
the eventual requirements of the relevant regulatory authorities. As
of December 31, 1993, the Company has expended $6.4 million and has
reserved an additional $3.1 million to cover future costs arising from
environmental issues relating to the site.
CF&I Steel, L.P. has accrued a reserve of $36.7 million as of December
31, 1993 for environmental remediation at the Pueblo Steel Mill site.
CF&I's estimate of this environmental reserve was based on two
separate remediation investigations and feasibility studies conducted
by independent environmental engineering consultants. The estimated
costs were based on current technologies and presently enacted laws
and regulations. The reserve includes costs for RCRA (Resource
Conservation and Recovery Act) facility investigation, corrective
measures study, remedial action, and operation and maintenance of the
remedial actions taken. CF&I has an agreement with the State of
Colorado for the remediation of environmental issues. The agreement
specifies a schedule for corrective action and a yearly expenditure
amount. The State of Colorado anticipated that the schedule would be
reflective of a straight line rate of expenditures over 30 years. The
State of Colorado stated the schedule for corrective action could be
accelerated if new data indicated a greater threat to the environment
than is currently known to exist.
The Company owns a 60% interest in Camrose Pipe Company located in
Camrose, Alberta Canada. A preliminary assessment of the property
indicates the potential presence of subsurface petroleum contamination
as a result of previous operations. The assessment also identifies the
potential for waste waters to have impacted the site. An internal
investigation is scheduled for 1995 to determine the extent of this
impact, if any. Management is unable to determine the magnitude of
these issues.
In November 1990 the President signed into law the Clean Air Act
Amendments of 1990. This law has imposed new responsibilities on many
industrial sources of air emissions, including plants owned by the
Company. The Company cannot determine at this time the financial
impact of the new law. The impact will depend on a number of site-
specific factors, including the quality of the air in the geographical
area in which a plant is located, rules to be adopted by each state to
implement the law, and future EPA rules specifying the content of
state implementation plans. The Company anticipates that it will be
required to make additional expenditures, and will be required to pay
higher fees to governmental agencies, as a result of the new law and
future state laws regulating air emissions. In addition, the
monitoring and reporting requirements of the new law will subject all
air emissions to increased regulatory scrutiny.
The Company's future expenditures for installation of environmental
control facilities, remediation of environmental conditions existing
at its properties and other similar matters are difficult to predict.
Environmental legislation and regulations and related administrative
policies, have changed rapidly in recent years. It is likely that the
Company will be subject to increasingly stringent environmental
standards in the future and will be required to make additional
expenditures, which could be significant, relating to environmental
matters on an ongoing basis.
</PAGE>
<PAGE>
Item 7.2.2(b): Indebtedness to be Paid
- -------------- -----------------------
1 - All outstanding balances under the $40 million unsecured
revolving operating line from First Interstate Bank.
Approximately $30 million of credit availability permitted by
Section 7.2.2(f) of the Credit Agreement will be continued for
support of letters of credit and other capital markets
transactions.
2 - All outstanding balances under the $75 million unsecured
revolving credit facility from First Interstate Bank and Bank of
Nova Scotia.
3 - All outstanding balances under the $20 million uncommitted and
unsecured credit line from ABN AMRO Bank.
4 - All outstanding balances under the $30 million secured revolving
operating line from Bank of Nova Scotia.
Item 7.2.2(c): Ongoing Indebtedness
- -------------- --------------------
1 - $18 million secured operating line of Camrose Pipe Company with
Bank of Nova Scotia, plus any renewals thereof.
2 - $61 million term note payable by CF&I Steel, L.P. to a VEBA
benefiting former USW members.
3 - $1.3 million capital lease obligation of CF&I Steel, L.P.
Item 7.2.5(a): Ongoing Investments
- -------------- -------------------
1 - Investments in subsidiary companies, and by subsidiary companies
in their subsidiaries as disclosed in the Senior Credit Facility
syndication book dated October 1994 and in this Disclosure
Schedule.
2 - Investments in machinery and equipment pursuant to the capital
expenditure plan discussed in the Senior Credit Facility
syndication book dated October 1994 and the financial projections
included therein.
3 - Potential investment of approximately $15 million in Comsigua
pursuant to the Comsigua Project Shareholders Agreement.
4 - Potential investment of approximately $20 million in Cliffs &
Associates pursuant to the proposed Shareholder Agreement for
Cliffs and Associates Iron Carbide Limited.
5 - Other potential investments in HBI, iron carbide, romelt, scrap
processing or other projects for development of alternative raw
materials sources substantially as contemplated in the capital
improvement plan.
</PAGE>
<PAGE>
SCHEDULE 2
----------
REVOLVING LOAN TERM LOAN
BANK COMMITMENT COMMITMENT PERCENTAGE
---- -------------- ---------- ----------
First Interstate Bank 20,000,000.00 40,000,000.00 20.0000000%
of Oregon, N.A.
The Bank of Nova Scotia 16,666,666.65 33,333,333.35 16.6666667%
Key Bank of Washington 10,000,000.00 20,000,000.00 10.0000000%
Toronto Dominion 10,000,000.00 20,000,000.00 10.0000000%
(Texas), Inc.
United States National 10,000,000.00 20,000,000.00 10.0000000%
Bank of Oregon
The Bank of Tokyo, Ltd., 6,666,666.67 13,333,333.33 6.6666667%
Portland Branch
NBD Bank, N.A. 6,666,666.67 13,333,333.33 6.6666667%
The Bank of California, 4,166,666.67 8,333,333.33 4.1666667%
N.A.
PNC Bank, National 4,166,666.67 8,333,333.33 4.1666667%
Association
Fuji Bank, Limited 4,166,666.67 8,333,333.33 4.1666667%
NationsBank of Texas, 4,166,666.67 8,333,333.33 4.1666667%
N.A.
Bank of America NT & SA 3,333,333.33 6,666,666.67 3.3333333%
------------ ------------- ---------
Total 100,000,000 200,000,000 100%
=========== =========== ===
</PAGE>
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT A - Form of Revolving Note
EXHIBIT B - Form of Term Note
EXHIBIT C - Form of Swingline Note
EXHIBIT D - Form of Borrowing Request
EXHIBIT E - Form of Continuation/Conversion Notice
EXHIBIT F - Form of Lender Assignment Agreement
EXHIBIT G - Form of Guaranty
EXHIBIT H - Form of Pledge Agreement
EXHIBIT I - Form of Security Agreement
EXHIBIT J - Form of Opinion of Counsel to the Obligors
EXHIBIT K - Form of Borrowing Base Certificate
EXHIBIT L - Form of Compliance Certificate
</PAGE>
<PAGE>
EXHIBIT A
REVOLVING NOTE
$ December 14, 1994
-------------------
FOR VALUE RECEIVED, the undersigned, OREGON STEEL MILLS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the order of
--------
(the "Lender") on the Revolving Loan
- ----------------------- ------
Commitment Termination Date (as such term is defined in the
hereinafter-described Credit Agreement) the principal sum of
DOLLARS ($ ) or, if less, the aggregate
- ------------------ -----------
unpaid principal amount of all Revolving Loans shown on the schedule
attached hereto (and any continuation thereof) or in the records of
the Lender made by the Lender pursuant to that certain Credit
------
Agreement, dated as of even date herewith (together with all
- ---------
amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among the Borrower,
FIRST INTERSTATE BANK OF OREGON, N.A. ("First Interstate"), as
----------------
Administrative Agent, THE BANK OF NOVA SCOTIA ("Scotiabank"), as
----------
Syndication Agent, First Interstate and Scotiabank, as Managing
Agents, and the various financial institutions (including the Lender)
as are, or may from time to time become, parties thereto.
The Borrower also promises to pay interest on the unpaid
principal amount hereof from time to time outstanding from the date
hereof until maturity (whether by acceleration or otherwise) and,
after maturity, until paid, at the rates per annum and on the dates
specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful
money of the United States of America in same day or immediately
available funds to the account designated by the Administrative Agent
pursuant to the Credit Agreement.
This Note is one of the Revolving Notes referred to in, and
evidences Indebtedness incurred under, the Credit Agreement, to which
reference is made for a description of the security for this Note and
for a statement of the terms and conditions on which the Borrower is
permitted and required to make prepayments and repayments of principal
of the Indebtedness evidenced by this Note and on which such
Indebtedness may be declared to be immediately due and payable.
Unless otherwise defined, terms used herein have the meanings provided
in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of
dishonor.
</PAGE>
<PAGE>
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
OREGON STEEL MILLS, INC.
By
------------------------------
Title:
2
</PAGE>
<PAGE>
<TABLE>
REVOLVING LOANS AND PRINCIPAL PAYMENTS
- ----------------------------------------------------------------------------------------------
<CAPTION>
Amount of Amount of Unpaid
Revolving Principal Principal
Loan Made Repaid Balance
--------------- Interest -------------- ---------------
Base LIBO Period (if Base LIBO Base LIBO Notation
Date Rate Rate applicable) Rate Rate Rate Rate Total Made By
- ---- ---- ---- ----------- ---- ---- ---- ---- ----- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
3
</TABLE>
</PAGE>
<PAGE>
EXHIBIT B
TERM NOTE
$ December 14, 1994
--------------------------
FOR VALUE RECEIVED, the undersigned, OREGON STEEL MILLS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the order of
--------
(the "Lender") the principal sum of
- ----------------------- ------
DOLLARS ($ ) or, if less, the
- --------------------- ------------
aggregate unpaid principal amount of all Term Loans shown on the
schedule attached hereto (and any continuation thereof) or in the
records of the Lender made by the Lender pursuant to that certain
Credit Agreement, dated as of even date herewith (together with all
amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among the Borrower,
----------------
FIRST INTERSTATE BANK OF OREGON, N.A. ("First Interstate") as
----------------
Administrative Agent, THE BANK OF NOVA SCOTIA ("Scotiabank"), as
----------
Syndication Agent, First Interstate and Scotiabank, as Managing
Agents, the various financial institutions (including the Lender) as
are, or may from time to time become, parties thereto, payable in
installments as set forth in the Credit Agreement, with a final
installment (in the amount necessary to pay in full this Note) due and
payable on December 31, 1999.
The Borrower also promises to pay interest on the unpaid
principal amount hereof from time to time outstanding from the date
hereof until maturity (whether by acceleration or otherwise) and,
after maturity, until paid, at the rates per annum and on the dates
specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful
money of the United States of America in same day or immediately
available funds to the account designated by the Administrative Agent
pursuant to the Credit Agreement.
This Note is one of the Term Notes referred to in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference
is made for a description of the security for this Note and for a
statement of the terms and conditions on which the Borrower is
permitted and required to make prepayments and repayments of principal
of the Indebtedness evidenced by this Note and on which such
Indebtedness maybe declared to be immediately due and payable. Unless
otherwise defined, terms used herein have the meanings provided in the
Credit Agreement.
</PAGE>
<PAGE>
All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest
and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
OREGON STEEL MILLS, INC.
By
---------------------------
Title:
2
</PAGE>
<PAGE>
<TABLE>
TERM LOANS AND PRINCIPAL PAYMENTS
- ----------------------------------------------------------------------------------------------
<CAPTION>
Amount of Amount of Unpaid
Term Principal Principal
Loan Made Repaid Balance
--------------- Interest -------------- ---------------
Base LIBO Period (if Base LIBO Base LIBO Notation
Date Rate Rate applicable) Rate Rate Rate Rate Total Made By
- ---- ---- ---- ----------- ---- ---- ---- ---- ----- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
3
</TABLE>
</PAGE>
<PAGE>
EXHIBIT C
SWINGLINE NOTE
$15,000,000 December 14, 1994
FOR VALUE RECEIVED, the undersigned, OREGON STEEL MILLS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the order of
--------
FIRST INTERSTATE BANK OF OREGON, N.A., ("First Interstate") on the
----------------
Swingline Loan Commitment Termination Date (as such term is defined in
the hereinafter-described Credit Agreement) the principal sum of
FIFTEEN MILLION DOLLARS ($15,000,000) or, if less, the aggregate
unpaid principal amount of all Swingline Loans shown on the schedule
attached hereto (and any continuation thereof) or in the records of
First Interstate made by First Interstate as Swingline Lender pursuant
to that certain Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among
----------------
the Borrower, First Interstate, as Administrative Agent, The Bank of
Nova Scotia ("Scotiabank"), as Syndication Agent, First Interstate and
----------
Scotiabank, as Managing Agents, and the various financial institutions
as are, or may from time to time become, parties thereto.
The Borrower also promises to pay interest on the unpaid
principal amount hereof from time to time outstanding from the date
hereof until maturity (whether by acceleration or otherwise) and,
after maturity, until paid, at the rates per annum and on the dates
specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful
money of the United States of America in same day or immediately
available funds to the account designated by the Administrative Agent
pursuant to the Credit Agreement.
This Note is the Swingline Note referred to in, and
evidences Indebtedness incurred under, the Credit Agreement, to which
reference is made for a description of the security for this Note and
for a statement of the terms and conditions on which the Borrower is
permitted and required to make prepayments and repayments of principal
of the Indebtedness evidenced by this Note and on which such
Indebtedness may be declared to be immediately due and payable.
Unless otherwise defined, terms used herein have the meanings provided
in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest
and notice of dishonor.
</PAGE>
<PAGE>
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
OREGON STEEL MILLS, INC.
By
------------------------------
Title:
2
</PAGE>
<PAGE>
<TABLE>
SWINGLINE LOANS AND PRINCIPAL PAYMENTS
- ----------------------------------------------------------------------------------------------
<CAPTION>
Amount of Interest Amount of Unpaid
Swingline Period (if Principal Principal Notation
Date Loan Made applicable) Repaid Balance Total Made By
- ---- --------- ----------- --------- --------- ----- --------
<C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3
</TABLE>
</PAGE>
<PAGE>
EXHIBIT D
BORROWING REQUEST
First Interstate Bank of Oregon, N.A.,
as Administrative Agent
1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Attention: [Name]
[Title]
Re: Oregon Steel Mills, Inc.
------------------------
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section
-------
2.3 of the Credit Agreement, dated as of December 14, 1994 (together
- ---
with all amendments, if any, from time to time made thereto, the
"Credit Agreement"), among Oregon Steel Mills, Inc., a Delaware
----------------
corporation (the "Borrower"), certain financial institutions, First
--------
Interstate Bank of Oregon, N.A. ("First Interstate"), as
----------------
administrative agent (the "Administrative Agent"), The Bank of Nova
--------------------
Scotia ("Scotiabank"), as syndication agent, and First Interstate and
----------
Scotiabank, as managing agents. Unless otherwise defined herein or
the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.
The Borrower hereby requests that a [Revolving Loan] [Term Loan]
be made in the aggregate principal amount of $
-------------- on
, 19 as a [LIBO Rate Loan having an Interest Period of
- --- ---
months] [Base Rate Loan].
- --------
The Borrower hereby acknowledges that, pursuant to Section 5.2.2
-------------
of the Credit Agreement, each of the delivery of this Borrowing
Request and the acceptance by the Borrower of the proceeds of the
Loans requested hereby constitute a representation and warranty by the
Borrower that, on the date of such Loans, and before and after giving
effect thereto and to the application of the proceeds therefrom, all
statements set forth in Section 5.2.1 are true and correct in all
-------------
material respects.
The Borrower agrees that if prior to the time of the Borrowing
requested hereby any matter certified to herein by it will not be true
and correct at such time as if then made, it will immediately so
notify the Administrative Agent. Except to
</PAGE>
<PAGE>
the extent, if any, that prior to the time of the Borrowing requested
hereby the Administrative Agent shall receive written notice to the
contrary from the Borrower, each matter certified to herein shall be
deemed once again to be certified as true and correct at the date of
such Borrowing as if then made.
Please deposit the proceeds of the Borrowing in our account
number maintained with you or wire transfer
---------------------------
the proceeds of the Borrowing to the accounts of the following persons
at the financial institutions indicated respectively:
Amount to be Person to be Paid Name, Address, etc.
------------------------------
Transferred Name Account No. of Transferee
- ----------- ---- ----------- -------------------
$
---------- ---------------- ----------- -------------------
-------------------
Attention:
--------
$
---------- ---------------- ----------- ------------------
------------------
Attention:
--------
Balance of The Borrower
such proceeds ---------- ------------------
------------------
Attention:
--------
The Borrower has caused this Borrowing Request to be
executed and delivered, and the certification and warranties contained
herein to be made, by its duly Authorized Officer this day of
----
, 19 .
- ------- ---
OREGON STEEL MILLS, INC.
By
---------------------------
Title:
2
</PAGE>
<PAGE>
EXHIBIT E
CONTINUATION/CONVERSION NOTICE
First Interstate Bank of Oregon, N.A.,
as Administrative Agent
1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Attention: [Name]
[Title]
Re: Oregon Steel Mills, Inc.
------------------------
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant
to Section 2.4 of the Credit Agreement, dated as of December 14, 1994
(together with all amendments, if any, from time to time made thereto,
the "Credit Agreement"), among Oregon Steel Mills, Inc., a Delaware
----------------
corporation (the "Borrower"), certain financial institutions, First
--------
Interstate Bank of Oregon, N.A. ("First Interstate"), as
----------------
administrative agent (the "Administrative Agent"), The Bank of Nova
--------------------
Scotia ("Scotiabank"), as syndication agent, and First Interstate and
----------
Scotiabank, as managing agents. Unless otherwise defined herein or
the context otherwise requires, terms used herein have the meanings
provided in the Credit Agreement.
The Borrower hereby requests that on , 19 ,
------------ ---
(1) $ of the presently outstanding
-----------
principal amount of the [Term Loans] [Revolving Loans]
originally made on , 19 [and $ of the
---------- --- ----------
presently outstanding principal amount of the [Term Loans]
[Revolving Loans] originally made on , 19 ],
---------- ---
(2) and all presently being maintained as * [Base Rate
Loans] [LIBO Rate Loans],
(3) be [converted into] [continued as],
- -------------------------
* Select appropriate interest rate option.
</PAGE>
<PAGE>
(4) *[LIBO Rate Loans having an Interest Period of
months] [Base Rate Loans].
------
The Borrower hereby:
(a) certifies and warrants that no Default has
occurred and is continuing; and
(b) agrees that if prior to the time of such
continuation or conversion any matter certified to herein by
it will not be true and correct at such time as if then made,
it will immediately so notify the Administrative Agent.
Except to the extent, if any, that prior to the time of the
continuation or conversion requested hereby the Administrative Agent
shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed to be certified at the date
of such continuation or conversion as if then made.
The Borrower has caused this Continuation/Conversion Notice to
be executed and delivered, and the certification and warranties
contained herein to be made, by its Authorized Officer this day of
---
, 19 .
- ---------- ---
OREGON STEEL MILLS, INC.
By
--------------------------
Title:
- ---------------------------------
* Insert appropriate interest rate option.
</PAGE>
<PAGE>
EXHIBIT F
LENDER ASSIGNMENT AGREEMENT
To: Oregon Steel Mills, Inc.
P.O. Box 5368
Portland, Oregon 97228
To: First Interstate Bank of Oregon, N.A.,
as Administrative Agent
1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Re: Oregon Steel Mills, Inc.
Gentlemen and Ladies:
We refer to clause (d) of Section 10.11.1 of the Credit
---------- ---------------
Agreement, dated as of December 14, 1994 (together with all amendments
and other modifications, if any, from time to time thereafter made
thereto, the "Credit Agreement"), among Oregon Steel Mills, Inc., a
----------------
Delaware corporation (the "Borrower"), the various financial
--------
institutions (the "Lenders") as are, or shall from time to time
-------
become, parties thereto, First Interstate Bank of Oregon, N.A. ("First
-----
Interstate"), as administrative agent (the "Administrative Agent"),
- ---------- --------------------
The Bank of Nova Scotia ("Scotiabank"), as syndication agent and First
----------
Interstate and Scotiabank, as managing agents for the Lenders. Unless
otherwise defined herein or the context otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.
This agreement is delivered to you pursuant to clause (d) of
----------
Section 10.11.1 of the Credit Agreement and also constitutes notice to
- ---------------
each of you, pursuant to clause (c) of Section 10.11.1 of the Credit
---------- ---------------
Agreement, of the assignment and delegation to (the
---------------
"Assignee") of % of the Loans and Commitments of (the
-------- --- -------------
"Assignor") outstanding under the Credit Agreement on the date hereof.
--------
After giving effect to the foregoing assignment and delegation, the
Assignor's and the Assignee's Percentages for the purposes of the
Credit Agreement are set forth opposite such Person's name on the
signature pages hereof.
[Add paragraph dealing with accrued interest and fees with
respect to Loans assigned.]
The Assignee hereby acknowledges and confirms that it has
received a copy of the Credit Agreement and the exhibits related
thereto, together with copies of the documents which were
</PAGE>
<PAGE>
required to be delivered under the Credit Agreement as a condition to
the making of the Loans thereunder. The Assignee further confirms and
agrees that in becoming a Lender and in making its Commitments and
Loans under the Credit Agreement, such actions have and will be made
without recourse to, or representation or warranty by any Agent.
Except as otherwise provided in the Credit Agreement, effective
as of the date of acceptance hereof by the Administrative Agent
(a) the Assignee
(i) shall be deemed automatically to have become
a party to the Credit Agreement, have all the rights
and obligations of a "Lender" under the Credit
Agreement and the other Loan Documents as if it were an
original signatory thereto to the extent specified in
the second paragraph hereof; and
(ii) agrees to be bound by the terms and conditions
set forth in the Credit Agreement and the other Loan
Documents as if it were an original signatory thereto; and
(b) the Assignor shall be released from its
obligations under the Credit Agreement and the other Loan
Documents to the extent specified in the second paragraph
hereof.
The Assignor and the Assignee hereby agree that the
[Assignor] [Assignee] will pay to the Administrative Agent the
processing fee referred to in Section 10.11.1 of the Credit Agreement
---------------
upon the delivery hereof.
The Assignee hereby advises each of you of the following
administrative details with respect to the assigned Loans and
Commitments and requests the Administrative Agent to acknowledge
receipt of this document:
(A) Address for Notices:
Institution Name:
Attention:
Domestic Office:
Telephone:
Facsimile:
LIBOR Office:
2
</PAGE>
<PAGE>
Telephone:
Facsimile:
(B) Payment Instructions:
This Agreement may be executed by the Assignor and Assignee in
separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Adjusted Percentage [ASSIGNOR]
- -------------------
Term Loan Commitment
and
Term Loans: %
--
Revolving Loan
Commitment
and
Revolving Loans: %
--
By:
--------------------
Title:
Percentage [ASSIGNEE]
- ----------
Term Loan Commitment
and
Term Loans: %
--
Revolving Loan
Commitment
and
Revolving Loans: %
--
By:
--------------------
Title:
3
</PAGE>
<PAGE>
Accepted and Acknowledged
this day of , 19
----- --------- --
First Interstate Bank of Oregon, N.A.,
as Administrative Agent
By:
---------------------------
Title:
Accepted and Acknowledged
this day of , 19
---- ---------- --
Oregon Steel Mills, Inc.
By:
---------------------------
Title:
4
</PAGE>
<PAGE>
EXHIBIT G
GUARANTY
--------
THIS GUARANTY (this "Guaranty"), dated as of December 14,
--------
1994, is made by , a [Delaware corporation] (the
-------------
"Guarantor"), in favor of each of the Lender Parties (as defined
below).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of December
14, 1994 (together with all amendments and other modifications, if
any, from time to time thereafter made thereto, the "Credit
------
Agreement"), among Oregon Steel Mills, Inc., a Delaware corporation
- ---------
(the "Borrower"), the various commercial banking institutions
--------
(individually a "Lender" and collectively the "Lenders") as are, or
------ -------
may from time to time become, parties thereto, First Interstate Bank
of Oregon, N.A. ("First Interstate"), as administrative agent (the
----------------
"Administrative Agent"), The Bank of Nova Scotia ("Scotiabank"), as
-------------------- ----------
syndication agent (the "Syndication Agent") and First Interstate and
-----------------
Scotiabank, as managing agents for the Lenders ("Managing Agents"),
---------------
the Lenders have extended Commitments to make Loans to the Borrower;
and
WHEREAS, as a condition precedent to the making of the initial
Loans under the Credit Agreement, the Guarantor is required to execute
and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution,
delivery and performance of this Guaranty;
WHEREAS, it is in the best interests of the Guarantor to
execute this Guaranty inasmuch as the Guarantor will derive
substantial direct and indirect benefits from the Loans made from time
to time to the Borrower by the Lenders pursuant to the Credit
Agreement;
NOW THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, and in order to induce the Lenders to
make Loans (including the initial Loans) to the Borrower pursuant to
the Credit Agreement, the Guarantor agrees, for the benefit of each
Lender Party, as follows:
</PAGE>
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or
-------------
not underscored) when used in this Guaranty, including its preamble
and recitals, shall have the following meanings (such definitions to
be equally applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
-------------------- -------------
"Agent" means, as the context may require, any of the
-----
Administrative Agent, the Syndication Agent or either Managing Agent.
"Agents" means, collectively, the Administrative Agent, the
------
Syndication Agent and the Managing Agents.
"Borrower" is defined in the first recital.
-------- -------------
"Credit Agreement" is defined in the first recital.
---------------- -------------
"Guarantor" is defined in the preamble.
--------- --------
"Guaranty" is defined in the preamble.
-------- --------
"Lender" is defined in the first recital.
------ -------------
"Lender Party" means, as the context may require, any Lender
------------
or Agent and each of their respective successors,
transferees and assigns.
"Lenders" is defined in the first recital.
------- -------------
"Managing Agents" is defined in the first recital.
--------------- -------------
"Syndication Agent" is defined in the first recital.
----------------- -------------
"Termination Date" means the earlier to occur of (i) the date
----------------
upon which all Obligations of the Borrower have been paid in full, all
Obligations of the Guarantor hereunder shall have been paid in full
and all Commitments shall have been terminated or (ii) the date upon
which the Guarantor shall have ceased to be a Significant Subsidiary
of the Borrower.
"U.C.C." means the Uniform Commercial Code as in effect in the
------
State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
----------------------------
defined herein or the context otherwise requires, terms used in
2
</PAGE>
<PAGE>
this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Guaranty, including its
preamble and recitals, with such meanings.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely,
--------
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, of all
Obligations of the Borrower, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which
would become due but for the operation of the automatic stay
under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. Section 362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Lender Party
and each holder of a Note for any and all costs and expenses
(including reasonable attorney's fees and expenses) incurred
by such Lender Party or such holder, as the case may be, in
enforcing any rights under this Guaranty.
provided, however, that the Guarantor shall be liable under this
- -------- -------
Guaranty for the maximum amount of such liability that can be hereby
incurred without rendering this Guaranty, as it relates to the
Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount.
This Guaranty constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be
necessary or required that any Lender Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy
whatsoever against the Borrower or any other Obligor (or any other
Person) before or as a condition to the obligations of the Guarantor
hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees
------------------------
that, in the event of the dissolution or insolvency of the Borrower,
any other Obligor which is a Significant Subsidiary or the Guarantor,
or the inability or failure of the Borrower, any other Obligor which
is a Significant Subsidiary or the Guarantor to
3
</PAGE>
<PAGE>
pay debts as they become due, or an assignment by the Borrower, any
other Obligor which is a Significant Subsidiary or the Guarantor for
the benefit of creditors, or the commencement of any case or
proceeding in respect of the Borrower, any other Obligor which is a
Significant Subsidiary or the Guarantor under any bankruptcy,
insolvency or similar laws, and if such event shall occur at a time
when any of the Obligations of the Borrower and each other Obligor may
not then be due and payable, the Guarantor will pay to the Lenders
forthwith the full amount which would be payable hereunder by the
Borrower if all such Obligations were then due and payable.
SECTION 2.3. Guaranty absolute, etc. This Guaranty shall in
-----------------------
all respects be a continuing, absolute, unconditional and irrevocable
guaranty of payment, and shall remain in full force and effect until
the Termination Date. The Guarantor guarantees that the Obligations
of the Borrower will be paid strictly in accordance with the terms of
the Credit Agreement and each other Loan Document under which they
arise, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights
of any Lender Party or any holder of any Note with respect thereto.
The liability of the Guarantor under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability
of the Credit Agreement, any Note or any other Loan Document;
(b) the failure of any Lender Party or any holder of
any Note
(i) to assert any claim or demand or to
enforce any right or remedy against the Borrower, any
other Obligor or any other Person (including any
other guarantor) under the provisions of the Credit
Agreement, any Note, any other Loan Document or
otherwise, or
(ii) to exercise any right or remedy against
any other guarantor of, or collateral securing, any
Obligations of the Borrower or any other Obligor;
(c) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations of
the Borrower or any other Obligor, or any other extension,
compromise or renewal of any Obligation of the Borrower or any
other Obligor;
(d) any reduction, limitation, impairment or
termination of the Obligations of the Borrower or any other
Obligor for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or
claim of) any defense
4
</PAGE>
<PAGE>
or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, the Obligations of the
Borrower, any other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the
terms of the Credit Agreement, any Note or any other Loan
Document;
(f) any addition, exchange, release, surrender or non-
perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any
other guaranty, held by any Lender Party or any holder of any
Note securing any of the Obligations of the Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, the Borrower, any other Obligor, any surety or
any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that
------------------
this Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment (in whole or in part) of any
of the Obligations is rescinded or must otherwise be restored by any
Lender Party or any holder of any Note, upon the insolvency,
bankruptcy or reorganization of the Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives
-----------
promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations of the Borrower or any other Obligor
and this Guaranty and any requirement that any Agent, any other Lender
Party or any holder of any Note protect, secure, perfect or insure any
security interest or Lien, or any property subject thereto, or exhaust
any right or take any action against the Borrower, any other Obligor
or any other Person (including any other guarantor) or entity or any
collateral securing the Obligations of the Borrower or any other
Obligor, as the case may be.
SECTION 2.6. Postponement of Subrogation, etc. The Guarantor
--------------------------------
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or
otherwise as a result of payment, until the prior payment, in full and
in cash, of all Obligations of the Borrower. Any amount paid to the
Guarantor on account of any such subrogation rights prior to the
payment in full of all Obligations of the Borrower shall be held in
trust for the benefit of the Lender Parties and
5
</PAGE>
<PAGE>
each holder of a Note and shall immediately be paid to the
Administrative Agent and credited and applied against the Obligations
of the Borrower, whether matured or unmatured, in accordance with the
terms of the Credit Agreement; provided, however, that if
-------- -------
(a) the Guarantor has made payment to the Lender
Parties and each holder of a Note of all or any part of the
Obligations of the Borrower, and
(b) all Obligations of the Borrower have been paid in
full and all Commitments have been permanently terminated,
each Lender Party and each holder of a Note agrees that, at the
Guarantor's request, the Administrative Agent, on behalf of the Lender
Parties and the holders of the Notes, will execute and deliver to the
Guarantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by
subrogation to the Guarantor of an interest in the Obligations of the
Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any
Obligations or Commitments remain outstanding, the Guarantor shall
refrain from taking any action or commencing any proceeding against
the Borrower or any other Obligor (or its successors or assigns,
whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under this
Guaranty to any Lender Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns;
------------------------------------
Transfers of Notes, etc. This Guaranty shall:
- -----------------------
(a) be binding upon the Guarantor, and its successors
and assigns; and
(b) inure to the benefit of and be enforceable by any
Agent and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign
----------
or otherwise transfer (in whole or in part) any Note or Loan held by
it to any other Person or entity, and such other Person or entity
shall thereupon become vested with all rights and benefits in respect
thereof granted to such Lender under any Loan Document (including this
Guaranty) or otherwise, subject, however, to the provisions of Section
10.11 and Article IX of the Credit Agreement.
SECTION 2.8. Termination of Guaranty. Subject to the
-----------------------
6
</PAGE>
<PAGE>
provisions of Section 2.4 hereof, the obligations of the Guarantor
under this Guaranty shall terminate on the Termination Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Guarantor
------------------------------
hereby represents and warrants unto each Lender Party as set forth in
this Article III.
-----------
SECTION 3.1.1. Organization, etc. The Guarantor is a
-----------------
corporation validly organized and existing and in good standing under
the laws of the State of its incorporation, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such
qualification (except where the failure to so qualify shall not have a
Material Adverse Effect), and has full power and authority and holds
all requisite governmental licenses, permits and other approvals to
enter into and perform its Obligations under this Guaranty and each
other Loan Document to which it is a party and to own and hold under
lease its property and to conduct its business substantially as
currently conducted by it.
SECTION 3.1.2. Due Authorization, Non-Contravention, etc.
-----------------------------------------
The execution, delivery and performance by the Guarantor of this
Guaranty and each other Loan Document executed or to be executed by it
are within the Guarantor's corporate powers, have been duly authorized
by all necessary corporate action, and do not
(a) contravene the Guarantor's Organic Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Guarantor;
(c) result in, or require the creation or imposition
of, any Lien on any of any Guarantor's properties, except for
the Liens created pursuant to the Loan Documents.
SECTION 3.1.3. Government Approval, Regulation, etc. No
------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or other
Person is required for the due execution, delivery or performance by
the Guarantor of this Guaranty or any other Loan Document to which it
is a party. The Guarantor is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or a
"holding company", or a "subsidiary company" of a "holding company",
or an "affiliate" of a "holding company" or of
7
</PAGE>
<PAGE>
a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.1.4. Validity, etc. This Guaranty constitutes and
-------------
each other Loan Document executed by the Guarantor will, on the due
execution and delivery thereof, constitute, the legal, valid and
binding obligations of the Guarantor enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and general principles
of equity.
SECTION 3.1.5. Accuracy of Information. All factual
-----------------------
information heretofore or contemporaneously furnished by or on behalf
of the Guarantor in writing to the Agents or any Lender for purposes
of or in connection with this Guaranty and the Loan Documents or any
transaction contemplated hereby, or thereby, is, and all other such
factual information hereafter furnished by or on behalf of the
Guarantor to the Agents or any Lender will be, true and accurate in
every material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery of
this Guaranty, and such information is not, or shall not be, as the
case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Loan Document. This Guaranty is a Loan Document
-------------
executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article X thereof.
SECTION 4.2. Binding on Successors, Transferees and Assigns;
----------------------------------------------
Assignment. In addition to, and not in limitation of, Section 2.7,
- ---------- -----------
this Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of and be enforceable by
each Lender Party and each holder of a Note and their respective
successors, and assigns (to the full extent provided pursuant to
Section 2.7); provided, however, that the Guarantor may not assign any
- ----------- -------- -------
of its obligations hereunder without the prior written consent of all
Lenders.
SECTION 4.3. Amendments, etc. No amendment to or waiver of
---------------
any provision of this Guaranty, nor consent to any departure by the
Guarantor herefrom, shall in any event be effective unless the same
shall be in writing and signed by the Agent, and then such waiver
8
</PAGE>
<PAGE>
or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 4.4. Notices. All notices and other communications
-------
provided to the Guarantor under this Guaranty shall be in writing or
by facsimile and addressed, delivered or transmitted to the Guarantor
at its address or facsimile number set forth below its signature
hereto or at such other address or facsimile number as may be
designated by the Guarantor in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when received.
SECTION 4.5. No Waiver; Remedies. In addition to, and not in
-------------------
limitation of, Section 2.3 and Section 2.5, no failure on the part of
----------- -----------
any Lender Party or any holder of a Note to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 4.6. Captions. Section captions used in this
--------
Guaranty are for convenience of reference only, and shall not affect
the construction of this Guaranty.
SECTION 4.7. Setoff. In addition to, and not in limitation
------
of, any rights of any Lender Party or any holder of a Note under
applicable law, each Lender Party and each such holder shall, upon the
occurrence and during the continuance of any Default described in any
of clauses (a) through (d) of Section 8.1.9 of the Credit Agreement or
----------- ---
upon the occurrence and during the continuance of any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of the Guarantor owing to it hereunder, whether or not
then due, and the Guarantor hereby grants to each Lender Party and
each such holder a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Guarantor then
or thereafter maintained with such Lender Party or such holder;
provided, however, that any such appropriation and application shall
- -------- -------
be subject to the provisions of Section 4.8 of the Credit Agreement.
-----------
Each Lender agrees promptly to notify the Guarantor and the
Administrative Agent after any such setoff and application made by
such Lender; provided, however, that the failure to give such notice
-------- -------
shall not affect the validity of such setoff and application. The
rights of each Lender under this Section are in addition to other
rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
9
</PAGE>
<PAGE>
SECTION 4.8. Severability. Wherever possible each provision
------------
of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Guaranty.
SECTION 4.9. Governing Law. THIS GUARANTY SHALL BE GOVERNED
-------------
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK. FOR PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING THIS
GUARANTY, THE GUARANTOR HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION
OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW YORK AND
CONSENTS THAT IT MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED
MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK
SECTION 4.10. Waiver of Jury Trial. THE GUARANTOR HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY. THE
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
[Name of Guarantor]
By
------------------------------
Title:
------------------------
Address:
-------------------------
-------------------------
Attention:
----------------------
Telecopy:
----------------------
10
</PAGE>
<PAGE>
EXHIBIT H
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of
----------------
December 14, 1994, made by Oregon Steel Mills, Inc., a Delaware
corporation (the "Pledgor"), in favor of First Interstate Bank of
-------
Oregon, N.A. ("First Interstate"), as administrative agent (together
----------------
with any successor(s) thereto in such capacity, the "Administrative
--------------
Agent") for each of the Lender Parties (as defined below).
- -----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of even date
herewith (together with all amendments and other modifications, if
any, from time to time thereafter made thereto, the "Credit
------
Agreement"), among the Pledgor, the various commercial lending
- ---------
institutions (individually a "Lender" and collectively the "Lenders")
------ -------
as are, or may from time to time become, parties thereto, the
Administrative Agent, The Bank of Nova Scotia ("Scotiabank"), as
----------
syndication agent (the "Syndication Agent") and First Interstate and
-----------------
Scotiabank as the managing agents (the "Managing Agents"), the Lenders
---------------
have extended Commitments to make Loans to the Pledgor; and
WHEREAS, as a condition precedent to the making of the initial
Loans under the Credit Agreement, the Pledgor is required to execute
and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution,
delivery and performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt
of which is hereby acknowledged, and in order to induce the Lenders to
make Loans (including the initial Loans) to the Pledgor pursuant to
the Credit Agreement, the Pledgor agrees, for the benefit of each
Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or
-------------
not underscored) when used in this Pledge Agreement, including its
preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms
thereof):
</PAGE>
<PAGE>
"Administrative Agent" is defined in the preamble.
-------------------- --------
"Agent" means, as the context may require, any of the
-----
Administrative Agent, the Syndication Agent or either Managing Agent.
"Agents" means, collectively, the Administrative Agent, the
------
Syndication Agent and the Managing Agents.
"Collateral" is defined in Section 2.1.
---------- -----------
"Credit Agreement" is defined in the first recital.
---------------- -------------
"Distributions" means all stock dividends, liquidating
-------------
dividends, shares of stock resulting from (or in connection with the
exercise of) stock splits, reclassifications, warrants, options, non-
cash dividends, mergers, consolidations, and all other distributions
(whether similar or dissimilar to the foregoing) on or with respect to
any Pledged Shares, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with
---------
respect to any Pledged Shares or other Pledged Property made in the
ordinary course of business and not a liquidating dividend.
"Lender" is defined in the first recital.
------ -------------
"Lender Party" means, as the context may require, any Lender
------------
or the Administrative Agent and each of its respective successors,
transferees and assigns.
"Lenders" is defined in the first recital.
------- -------------
"Managing Agents" is defined in the preamble.
--------------- --------
"Pledge Agreement" is defined in the preamble.
---------------- --------
"Pledged Note Issuer" means each Person identified in Item A
------------------- ------
of Attachment 1 hereto as the issuer of the Pledged Note identified
------------
opposite the name of such Person.
"Pledged Notes" means all promissory notes of any Pledged Note
-------------
Issuer in the form or substantially the form of Exhibit A hereto which
---------
are delivered by the Pledgor to the Agent as Pledged Property
hereunder, as such promissory notes, in accordance with Section 4.5,
-----------
are amended, modified or supplemented from time to time and together
with any promissory note of any Pledged Note Issuer taken in extension
or renewal thereof or substitution therefor.
"Pledged Property" means all Pledged Shares, Pledged Notes,
----------------
and all other property which may from time to time hereafter be
2
</PAGE>
<PAGE>
delivered by the Pledgor to the Administrative Agent for the purpose
of pledge under this Pledge Agreement or any other Loan Document, and
all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B
--------------------
of Attachment 1 hereto as the issuer of the Pledged Shares identified
------------
opposite the name of such Person.
"Pledged Shares" means all shares of capital stock of any
--------------
Pledged Share Issuer which are delivered by the Pledgor to the
Administrative Agent as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
------- --------
"Obligations" is defined in Section 2.2.
----------- -----------
"Syndication Agent" is defined in the preamble.
----------------- --------
"U.C.C." means the Uniform Commercial Code as in effect in the
------
State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
----------------------------
defined herein or the context otherwise requires, terms used in this
Pledge Agreement, including its preamble and recitals, have the
meanings provided in the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
------------------
herein or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are used in this Pledge Agreement,
including its preamble and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby
--------------------------
pledges, hypothecates, assigns, charges, mortgages, delivers, and
transfers to the Administrative Agent, for its benefit and the ratable
benefit of each of the Lender Parties, and hereby grants to the
Administrative Agent, for its benefit and the ratable benefit of the
Lender Parties, a continuing security interest in, all of the
following property (the "Collateral"):
----------
(a) all promissory notes of each Pledged Note Issuer
identified in Item A of Attachment 1 hereto;
------ ------------
(b) all other Pledged Notes issued from time to time;
3
</PAGE>
<PAGE>
(c) all issued and outstanding shares of capital stock
of each Pledged Share Issuer identified in Item B of
------
Attachment 1 hereto;
------------
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or
hereafter delivered to the Agent in connection with
this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement
------------------------
secures the payment in full of all Obligations now or hereafter
existing under the Credit Agreement, the Notes and each other Loan
Document to which the Pledgor is or may become a party, whether for
principal, interest, costs, fees, expenses, or otherwise (all such
obligations of the Pledgor being the "Obligations").
-----------
SECTION 2.3. Delivery of Pledged Property. All certificates
----------------------------
or instruments representing or evidencing any Collateral, including
all Pledged Shares and all Pledged Notes, shall be delivered to and
held by or on behalf of (and in the case of the Pledged Notes,
endorsed to the order of) the Administrative Agent pursuant hereto,
shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment,
duly executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on
-------------------------------------------
Pledged Notes. In the event that any Dividend is to be paid on any
- -------------
Pledged Share or any payment of principal or interest is to be made on
any Pledged Note at a time when (x) no Default of the nature referred
to in Section 8.1.9 of the Credit Agreement has occurred and is
continuing and (y) no Event of Default has occurred and is continuing,
such Dividend or payment shall be paid directly to the Pledgor. If
any such Default or Event of Default has occurred and is continuing,
then any such Dividend or payment shall be paid directly to the
Administrative Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note.
----------------------------------------------
This Pledge Agreement shall create a continuing security interest in
the Collateral and shall
(a) remain in full force and effect until payment in
full of all Obligations and the termination of all
Commitments,
4
</PAGE>
<PAGE>
(b) be binding upon the Pledgor and its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the
Administrative Agent and each other Lender Party.
Without limiting the foregoing clause (c), any Lender may assign or
----------
otherwise transfer (in whole or in part) any Note or Loan held by it
to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect
thereof granted to such Lender under any Loan Document (including this
Pledge Agreement) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of
Section 10.11 and Article IX of the Credit Agreement. Upon the
payment in full of all Obligations and the termination of all
Commitments, the security interest granted herein shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any
such termination, the Administrative Agent will, at the Pledgor's sole
expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and
instruments representing or evidencing all Pledged Shares and all
Pledged Notes, together with all other Collateral held by the
Administrative Agent hereunder, and execute and deliver to the Pledgor
such documents as the Pledgor shall reasonably request to evidence
such termination.
SECTION 2.6. Termination of Pledge Agreement. This Pledge
-------------------------------
Agreement shall create a continuing security interest in the
Collateral and shall remain in full force and effect until payment in
full of all Obligations and the termination of all Commitments.
Notwithstanding the foregoing, the Pledged Shares of any Pledged Share
Issuer that ceases to be a Significant Subsidiary of the Borrower
shall be released from the Lien of this Pledge Agreement on the date
upon which such Pledged Share Issuer ceases to be a Significant
Subsidiary.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, etc. The Pledgor represents and
---------------
warrants unto the Administrative Agent and each Lender Party, as at
the date of each pledge and delivery hereunder (including each pledge
and delivery of Pledged Shares and each pledge and delivery of a
Pledged Note) by the Pledgor to the Administrative Agent of any
Collateral, as set forth in this Article.
5
</PAGE>
<PAGE>
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the
------------------------
legal and beneficial owner of, and has good and marketable title to
(and has full right and authority to pledge and assign) such
Collateral, free and clear of all liens, security interests, options,
or other charges or encumbrances, except any lien or security interest
granted pursuant hereto in favor of the Administrative Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such
-----------------------
Collateral to the Administrative Agent is effective to create a valid,
perfected, first priority security interest in such Collateral and all
proceeds thereof, securing the Obligations. No filing or other action
will be necessary to perfect or protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any
--------------------
Pledged Shares constituting such Collateral, all of such Pledged
Shares are duly authorized and validly issued, fully paid, and non-
assessable, and, except in the case of New CF&I, Inc., constitute all
of the issued and outstanding shares of capital stock of each Pledged
Share Issuer.
SECTION 3.1.4. As to Pledged Notes. In the case of each
-------------------
Pledged Note, all of such Pledged Notes have been duly authorized,
executed, endorsed, issued and delivered, and are the legal, valid and
binding obligation of the issuers thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No
----------------------------
authorization, approval, or other action by, and no notice to or
filing with, any governmental authority, regulatory body or any other
Person is required either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution,
delivery, and performance of this Pledge Agreement by the
Pledgor, or
(b) for the exercise by the Administrative Agent of the
voting or other rights provided for in this Pledge Agreement,
or, except with respect to any Pledged Shares, as may be
required in connection with a disposition of such Pledged
Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral
pursuant to this Pledge Agreement.
6
</PAGE>
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc.
-------------------------------------------
The Pledgor will not sell, assign, transfer, pledge, or encumber in
any other manner the Collateral (except in favor of the
Administrative Agent hereunder). The Pledgor will warrant and defend
the right and title herein granted unto the Administrative Agent in
and to the Collateral (and all right, title, and interest represented
by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to
time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver all further instruments, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may
reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all
-----------------
Pledged Shares (and all other shares of capital stock constituting
Collateral) delivered by the Pledgor pursuant to this Pledge Agreement
will be accompanied by duly executed undated blank stock powers, or
other equivalent instruments of transfer acceptable to the
Administrative Agent. The Pledgor will, from time to time upon the
request of the Administrative Agent, promptly deliver to the
Administrative Agent such stock powers, instruments, and similar
documents, satisfactory in form and substance to the Administrative
Agent, with respect to the Collateral as the Administrative Agent may
reasonably request and will, from time to time upon the request of the
Administrative Agent after the occurrence and during the continuance
of any Event of Default (but not before), promptly transfer any
Pledged Shares or other shares of common stock constituting Collateral
into the name of any nominee designated by the Administrative Agent.
SECTION 4.3. Continuous Pledge. Subject to Section 2.4, the
-----------------
Pledgor will, at all times, keep pledged to the Administrative Agent
pursuant hereto all Pledged Shares and all other shares of capital
stock constituting Collateral, all Dividends and Distributions with
respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and
rights from time to time received by or distributable to the Pledgor
in respect of any Collateral.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor
-----------------------------
agrees:
7
</PAGE>
<PAGE>
(a) after any Default of the nature referred to in
Section 8.1.9 of the Credit Agreement or an Event of Default
shall have occurred and be continuing, promptly upon receipt
thereof by the Pledgor and without any request therefor by the
Administrative Agent, to deliver (properly endorsed where
required hereby or requested by the Administrative Agent) to
the Administrative Agent all Dividends, Distributions, all
interest, all principal, all other cash payments, and all
proceeds of the Collateral, all of which shall be held by the
Administrative Agent as additional Collateral for use in
accordance with Section 6.3; and
-----------
(b) after any Event of Default shall have occurred and
be continuing and the Administrative Agent has notified the
Pledgor of the Administrative Agent's intention to exercise
its voting power under this Section 4.4(b)
--------------
(i) the Administrative Agent may exercise (to the
exclusion of the Pledgor) the voting power and all other
incidental rights of ownership with respect to any
Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants
the Administrative Agent an irrevocable proxy,
exercisable under such circumstances, to vote the
Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Administrative
Agent such additional proxies and other documents as
may be necessary to allow the Administrative Agent to
exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and
proceeds which may at any time and from time to time be held by the
Pledgor but which the Pledgor is then obligated to deliver to the
Administrative Agent, shall, until delivery to the Administrative
Agent, be held by the Pledgor separate and apart from its other
property in trust for the Administrative Agent. The Administrative
Agent agrees that unless an Event of Default shall have occurred and
be continuing and the Administrative Agent shall have given the notice
referred to in Section 4.4(b), the Pledgor shall have the exclusive
--------------
voting power with respect to any shares of capital stock (including
any of the Pledged Shares) constituting Collateral and the
Administrative Agent shall, upon the written request of the Pledgor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the
Pledgor to exercise voting power with respect to any such share of
capital stock (including any of the Pledged Shares) constituting
Collateral; provided, however, that no vote shall be cast, or consent,
-------- -------
waiver, or ratification given, or action taken by the Pledgor that
would impair any Collateral or be inconsistent with or violate any
provision of the
8
</PAGE>
<PAGE>
Credit Agreement or any other Loan Document (including this Pledge
Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not,
-----------------------
without the prior written consent of the Administrative Agent:
(a) enter into any agreement amending, supplementing,
or waiving any provision of any Pledged Note (including any
underlying instrument pursuant to which such Pledged Note is
issued) or compromising or releasing or extending the time for
payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the
omission of which would result in any impairment or alteration
of any obligation of the maker of any Pledged Note or other
instrument constituting Collateral.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact.
-----------------------------------------------
The Pledgor hereby irrevocably appoints the Administrative Agent the
Pledgor's attorney-in-fact, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Administrative Agent's discretion, to take any action
and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Pledge
Agreement, including without limitation, after (but not before) the
occurrence and continuance of an Event of Default:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any of the
Collateral;
(b) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper, in connection
with clause (a) above; and
----------
(c) to file any claims or take any action or institute
any proceedings which the Administrative Agent may deem
necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the
Administrative Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled
with an interest and shall continue in effect until payment
9
</PAGE>
<PAGE>
in full of all Obligations and the termination of all Commitments.
Upon payment in full of all Obligations and the termination of all
Commitments, the power of attorney granted pursuant to this Section
shall terminate.
SECTION 5.2. Administrative Agent May Perform. If the
--------------------------------
Pledgor fails to perform any agreement contained herein, the
Administrative Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
- -----------
SECTION 5.3. Administrative Agent Has No Duty. The powers
--------------------------------
conferred on the Administrative Agent hereunder are solely to protect
its interest (on behalf of the Lender Parties) in the Collateral and
shall not impose any duty on it to exercise any such powers. Except
for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or
responsibility for
(a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Property, whether or not the
Administrative Agent has or is deemed to have knowledge of
such matters, or
(b) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any
Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is
---------------
required to exercise reasonable care in the custody and preservation
of any of the Collateral in its possession; provided, however, the
-------- -------
Administrative Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral, if it takes
such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Administrative
Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall
----------------
have occurred and be continuing:
10
</PAGE>
<PAGE>
(a) The Administrative Agent may exercise in respect of
the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, with ten days' prior notice to the
Pledgor, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as
the Administrative Agent may deem commercially reasonable.
The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' prior notice to the
Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not
be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Administrative Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) The Administrative Agent may
(i) transfer all or any part of the Collateral
into the name of the Administrative Agent or its
nominee, with or without disclosing that such
Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Administrative Agent
of any amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange
all or any part thereof, or compromise or extend or
renew for any period (whether or not longer than the
original period) any obligations of any nature of any
party with respect thereto,
(iv) endorse any checks, drafts, or other writings
in the Pledgor's name to allow collection of the
Collateral,
(v) take control of any proceeds of the
Collateral, and
(vi) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and
11
</PAGE>
<PAGE>
other instruments of conveyance or transfer with
respect to all or any of the Collateral.
SECTION 6.2. Compliance with Restrictions. The Pledgor
----------------------------
agrees that in any sale of any of the Collateral whenever an Event of
Default shall have occurred and be continuing, the Administrative
Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number
of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to persons who will represent and
agree that they are purchasing for their own account for investment
and not with a view to the distribution or resale of such Collateral),
or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and
the Pledgor further agrees that such compliance shall not result in
such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Administrative Agent be
liable nor accountable to the Pledgor for any discount allowed by the
reason of the fact that such Collateral is sold in compliance with any
such limitation or restriction.
SECTION 6.3. Application of Proceeds. All cash proceeds
-----------------------
received by the Administrative Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the
Collateral may, in the discretion of the Administrative Agent, be held
by the Administrative Agent as additional collateral security for, or
then or at any time thereafter be applied (after payment of any
amounts payable to the Administrative Agent pursuant to Section 10.3
------------
of the Credit Agreement and Section 6.4) in whole or in part by the
-----------
Administrative Agent against, all or any part of the Obligations in
such order as the Administrative Agent shall elect.
Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all the
Obligations, and the termination of all Commitments, shall be paid
over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 6.4. Indemnity and Expenses. The Pledgor hereby
----------------------
indemnifies and holds harmless the Administrative Agent from and
against any and all claims, losses, and liabilities arising out of or
resulting from this Pledge Agreement (including enforcement of this
Pledge Agreement), except claims, losses, or liabilities resulting
from the Administrative Agent's gross negligence or wilful misconduct.
Upon demand, the Pledgor will pay to the Administrative Agent the
amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and
12
</PAGE>
<PAGE>
of any experts and agents, which the Administrative Agent may incur in
connection with:
(a) the administration of this Pledge Agreement, the
Credit Agreement and each other Loan Document;
(b) the custody, preservation, use, or operation of, or
the sale of, collection from, or other realization upon, any
of the Collateral;
(c) the exercise or enforcement of any of the rights of
the Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe
any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan
-------------
Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and
applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of
---------------
any provision of this Pledge Agreement nor consent to any departure by
the Pledgor herefrom shall in any event be effective unless the same
shall be in writing and signed by the Administrative Agent, and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Administrative
------------------------
Agent may from time to time, at its option, perform any act which the
Pledgor agrees hereunder to perform and which the Pledgor shall fail
to perform after being requested in writing so to perform (it being
understood that no such request need be given after the occurrence and
during the continuance of an Event of Default) and the Administrative
Agent may from time to time take any other action which the
Administrative Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security
interest therein.
SECTION 7.4. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing and, if to
the Pledgor, mailed, telecopied or delivered to it at the address set
forth below its signature hereto, if to the Administrative Agent,
mailed, telecopied or delivered to it,
13
</PAGE>
<PAGE>
addressed to it at the address of the Administrative Agent specified
in the Credit Agreement or, as to either party, at such other address
as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. All
such notices and other communications shall, when mailed or
telecopied, respectively, be effective when received.
SECTION 7.5. Section Captions. Section captions used in this
----------------
Pledge Agreement are for convenience of reference only, and shall not
affect the construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision
------------
of this Pledge Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Pledge Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Pledge Agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS
------------------------------------
PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE
THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR
ORAL, WITH RESPECT THERETO.
14
</PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the day and year first above
written.
OREGON STEEL MILLS, INC.
By
--------------------------------------
Title:
Address: 1000 S.W. Broadway
Suite 2200
Portland, Oregon 97205
Attention: Mr. Christopher Cassard
Treasurer
FIRST INTERSTATE BANK OF OREGON, N.A.,
as Administrative Agent (for purposes
of accepting its appointment under
Article V hereof)
By
--------------------------------------
Title:
Address: 1300 S.W. Fifth Avenue, T19
Portland, Oregon 97201
Attention: Mr. James Kennedy
15
</PAGE>
<PAGE>
EXHIBIT A
to
Pledge Agreement
OPTIONAL ADVANCE NOTE
---------------------
On demand, or if, no demand, on December 31, 2004,
-------------
("Borrower") promises to pay in lawful money of the United States of
America, to the order of Oregon Steel Mills, Inc. ("Lender") at its
Portland, Oregon Corporate Office, the principal sum of
--------------
Dollars ($ ), or so much thereof as shall have been
------------
advanced by Lender to Borrower and not repaid, together with interest
thereon from the date of such advance.
This Note is given to avoid the execution by Borrower of an
individual note for each advance by Lender to Borrower. In
consideration thereof, Borrower agrees that Lender's record entries of
transactions pursuant to this Note, together with Lender's written
advice of interest charges, shall be conclusive evidence of
borrowings, payments and charges made pursuant hereto.
Interest shall be payable on demand, or if no demand, on the
last business day of each month, based on the daily outstanding unpaid
principal balances during the preceding month. The Borrower interest
rate will be the First Interstate Bank of Oregon, N.A. ("Bank") Prime
Rate of interest as published and changed from time to time. Each
change in said rate is to become effective on the effective date of
each change announced by the Bank. Interest shall be computed on the
basis of a 360-day year. Interest accrued and payable will be
aggregated with the unpaid principal amount outstanding.
Advances hereunder will be made in the sole and unrestricted
discretion of the Lender and the refusal of the Lender to make any
requested advance shall constitute a demand for payment of all sums
due hereunder, including accrued and unpaid interest. In no event
shall advances exceed the principal sum set forth above. Advances
hereunder are for sole purpose of funding working cash requirements
and capital equipment purchases of the Borrower, and advances for any
other purpose shall require the written consent of the Lender.
Payment of interest hereunder shall be made when due. Payment
of principal and interest by Borrower will be by wire transfer to
Oregon Steel Mills, Inc., First Interstate Bank, ABA 123000123,
Account Number 552-000059-0. Borrower concurrently will send Lender
an advice of such payments by phone or fax.
Borrowings hereunder may be made by Lender at the oral or
written request three days in advance by [Insert Names and Titles of
Authorized Officers], who are each authorized to request Borrowings
until written notice of the revocation of such authority
1
</PAGE>
<PAGE>
EXHIBIT A
to
Pledge Agreement
is received by Lender. Any such Borrowings shall be conclusively
presumed to have been made to or for the benefit of undersigned when
made in accordance with such requests and when such amounts are
deposited to the credit of Account Number of Borrower's
--------------
bank, [name of address of bank], regardless of the fact that persons
other than those authorized hereunder may have authority to draw
against such account.
Borrower shall pay upon demand any and all expenses,
including reasonable attorneys' fees, incurred or paid by the holder
of this Note without suit or action in attempting to collect funds due
under this Note. In any suit or action instituted for the collection
of any sums due hereunder, the prevailing party shall be entitled to
recover such sums as the court may adjudge reasonable for its
attorneys' fees, both in the trial court and any appellate court.
Dated this day of , 1994.
--- -------------
BORROWER: LENDER:
- -------------------------------- OREGON STEEL MILLS, INC.
By: By:
------------------------------ -----------------------------
Title:
--------------------------- Title:--------------------------
2
</PAGE>
<PAGE>
ATTACHMENT 1
to
Pledge Agreement
Item A. Pledged Notes
-------------
Pledged Note Issuer Amount Description
- ------------------- ------ -----------
Napa Pipe Corporation $50,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated
---------------
Oregon Steel Mills - Fontana
Division, Inc. $35,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated
---------------
Camrose Pipe Corporation $30,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated
---------------
CF&I Steel, L.P. $30,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated 2/11/94
CF&I Steel, L.P. $30,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated 5/17/94
CF&I Steel, L.P. $30,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated 10/20/94
CF&I Steel, L.P. $35,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated
----------------
OSM Glassificationtm, Inc. $5,000,000 Optional Advance Note
payable to Oregon
Steel Mills, Inc.,
dated
---------------
Item B. Pledged Shares
--------------
Pledged Share Issuer Common Stock
- -------------------- ---------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
Napa Pipe Corporation 100 100 100%
Oregon Steel Mills -
Fontana Division, Inc. 100 100 100%
Camrose Pipe Corporation 5,000 5,000 100%
New CF&I, Inc. 200 200 90%
3
</PAGE>
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of
------------------
December 14, 1994, made by Oregon Steel Mills, Inc., a Delaware
corporation (the "Grantor"), in favor of First Interstate Bank of
-------
Oregon, N.A. ("First Interstate"), as administrative agent (together
----------------
with any successor(s) thereto in such capacity, the "Administrative
--------------
Agent") for each of the Lender Parties (as defined below).
- -----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of December 14,
1994 (together with all amendments and other modifications, if any,
from time to time thereafter made thereto, the "Credit Agreement"),
----------------
among the Grantor, the various commercial lending institutions
(individually a "Lender" and collectively the "Lenders") as are, or
------ -------
may from time to time become, parties thereto, the Administrative
Agent, The Bank of Nova Scotia ("Scotiabank"), as syndication agent
----------
(the "Syndication Agent") and the First Interstate and Scotiabank, as
-----------------
managing agents (the "Managing Agents"), the Lenders have extended
---------------
Commitments to make Loans to the Grantor; and
WHEREAS, as a condition precedent to the making of the initial
Loans under the Credit Agreement, the Grantor is required to execute
and deliver this Security Agreement; and
WHEREAS, the Grantor has duly authorized the execution, delivery
and performance of this Security Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in order to
induce the Lenders to make Loans (including the initial Loans) to the
Grantor pursuant to the Credit Agreement, the Grantor agrees, for the
benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or
-------------
not underscored) when used in this Security Agreement, including its
preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms
thereof):
1
</PAGE>
<PAGE>
"Administrative Agent" is defined in the preamble.
-------------------- --------
"Agent" means, as the context may require, any of the
-----
Administrative Agent, the Syndication Agent or either Managing Agent.
"Agents" means, collectively, the Administrative Agent, the
------
Syndication Agent and the Managing Agents.
"Collateral" is defined in Section 2.1.
---------- -----------
"Collateral Account" is defined in Section 4.1.2(c).
------------------ ----------------
"Credit Agreement" is defined in the first recital.
---------------- -------------
"Grantor" is defined in the preamble.
------- --------
"Inventory" is defined in clause (a) of Section 2.1
--------- --------- -----------
"Lender" is defined in the first recital.
------ -------------
"Lender Party" means, as the context may require, any Lender
------------
or any Agent and each of their respective successors, transferees and
assigns.
"Lenders" is defined in the first recital.
-------
"Managing Agents" is defined in the preamble.
--------------- --------
"Receivables" is defined in clause (b) of Section 2.1.
----------- ---------- -----------
"Related Contracts" is defined in clause (b) of Section 2.1.
----------------- -----------
"Security Agreement" is defined in the preamble.
------------------ --------
"Syndication Agent" is defined in the preamble.
----------------- --------
"U.C.C." means the Uniform Commercial Code, as in effect in the
------
State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
----------------------------
defined herein or the context otherwise requires, terms used in this
Security Agreement, including its preamble and recitals, have the
meanings provided in the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
------------------
herein or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including
its preamble and recitals, with such meanings.
2
</PAGE>
<PAGE>
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns
-----------------
and pledges to the Administrative Agent for its benefit and the
ratable benefit of each of the Lender Parties, and hereby grants to
the Administrative Agent for its benefit and the ratable benefit of
each of the Lender Parties a security interest in, all of the
following, whether now or hereafter existing or acquired (the
"Collateral"):
----------
(a) all inventory as defined in the Uniform Commercial Code
in effect in the state of New York on the Effective Date of the
Grantor, wherever located, including all goods which are returned
to or repossessed by the Grantor, and all accessions thereto,
products thereof and documents therefor (any and all such
inventory, goods, accessions, products and documents being the
"Inventory");
---------
(b) all accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles of
the Grantor, arising out of or in connection with the sale
of goods or the rendering of services, and all rights of
the Grantor now or hereafter existing in and to all security
agreements, guaranties and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles
(any and all such accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles being the
"Receivables", and any and all such security agreements,
-----------
guaranties and other contracts being the "Related Contracts";
-----------------
(c) all books, records, writings, data bases, information
and other property relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any
of the foregoing in this Section 2.1;
-----------
(d) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of
the foregoing Collateral (including proceeds which
constitute property of the types described in clauses (a),
-----------
(b) and (c), proceeds deposited from time to time in the
--- ---
Collateral Account and in any lock boxes of the Grantor,and, to
the extent not otherwise included, all payments under insurance
with respect to any of the foregoing Collateral (whether or not
the Administrative Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
Collateral).
3
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<PAGE>
SECTION 2.2. Security for Obligations. This Security
------------------------
Agreement secures the payment of all Obligations now or hereafter
existing under the Credit Agreement, the Notes and each other Loan
Document to which the Grantor is or may become a party, whether for
principal, interest, costs, fees, expenses or otherwise.
SECTION 2.3. Continuing Security Interest; Transfer of Notes.
-----------------------------------------------
This Security Agreement shall create a continuing security interest in
the Collateral and shall
(a) remain in full force and effect until payment in
full of all Obligations and the termination of all Commitments,
(b) be binding upon the Grantor, its successors and assigns,
and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the
Administrative Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any
----------
Lender may assign or otherwise transfer (in whole or in part) any Note
or Loan held by it to any other Person or entity, and such other
Person or entity shall thereupon become vested with all the rights and
benefits in respect thereof granted to such Lender under any Loan
Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer,
and to the provisions of Section 10.11 and Article IX of the Credit
Agreement. Upon the payment in full of all Obligations and the
termination of all Commitments, the security interest granted herein
shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination, the Administrative Agent will, at
the Grantor's sole expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination.
SECTION 2.4. Grantor Remains Liable. Anything herein to the
----------------------
contrary notwithstanding
(a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth
therein, and shall perform all of its duties and obligations
under such contracts and agreements to the same extent as if this
Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release the Grantor from any of its
duties or obligations under any such contracts or agreements
included in the Collateral, and
4
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<PAGE>
(c) neither the Administrative Agent nor any other Lender
Party shall have any obligation or liability under any such
contracts or agreements included in the Collateral by reason of
this Security Agreement, nor shall the Administrative Agent or
any other Lender Party be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned
hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor
------------------------------
represents and warrants unto each Lender Party as set forth in this
Article.
SECTION 3.1.1. Location of Collateral, etc. All of the
---------------------------
Inventory and lock boxes of the Grantor are located at the places
specified in Item A and Item B, respectively, of Schedule I hereto.
------ ------ ----------
None of the Inventory has, within the four months preceding the date
of this Security Agreement, been located at any place other than the
places specified in Item A of Schedule I hereto. The place(s) of
------ ----------
business and chief executive office of the Grantor and the office(s)
where the Grantor keeps its records concerning the Receivables, and
all originals of all chattel paper which evidence Receivables, are
located at the address set forth below the name of the Grantor on the
signature page hereof. The Grantor has no trade names. In the last
five years, the Grantor has not been known by any legal name different
from the one set forth on the signature page hereto, nor has the
Grantor been the subject of any merger or other corporate
reorganization. If the Collateral includes any Inventory located in
the State of California, the Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code -Secured
Transactions of the State of California. None of the Receivables is
evidenced by a promissory note or other instrument. The Grantor is
not a party to any material Federal, state or local government
contract.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns the
------------------------
Collateral free and clear of any Lien, security interest, charge or
encumbrance except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement. No
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the
Administrative Agent relating to this Security Agreement.
5
</PAGE>
<PAGE>
SECTION 3.1.3. Possession and Control. The Grantor has
----------------------
exclusive possession and control of the Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel
---------------------------------------------
Paper. The Grantor has, contemporaneously herewith, delivered to the
- -----
Administrative Agent possession of all originals of all negotiable
documents, instruments and chattel paper (if any) currently owned or
held by the Grantor (duly endorsed in blank, if requested by the
Administrative Agent).
SECTION 3.1.5. Validity, etc. This Security Agreement
-------------
creates a valid first priority security interest in the Collateral,
securing the payment of the Obligations and all filings and other
actions necessary or desirable to perfect and protect such security
interest have been duly taken.
SECTION 3.1.6. Authorization, Approval, etc. No authorization,
----------------------------
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either
(a) for the grant by the Grantor of the security interest
granted hereby or for the execution, delivery and performance of
this Security Agreement by the Grantor, or
(b) for the perfection of or the exercise by the
Administrative Agent of its rights and remedies hereunder.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and
-----------------
agrees that, so long as any portion of the Obligations shall remain
unpaid or any Lender shall have any outstanding Commitment, the
Grantor will, unless the Required Lenders shall otherwise consent in
writing, perform the obligations set forth in this Section.
SECTION 4.1.1. As to Inventory. The Grantor hereby agrees
---------------
that it shall
(a) keep all the Inventory (other than Inventory sold in the
ordinary course of business) at the places therefor specified in
Section 3.1.1 or, upon 30 days' prior written notice to the
-------------
Administrative Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
-----------
(including Section 3.1.5) shall be true and correct, and all
-------------
action required pursuant to the first sentence of Section 4.1.6
-------------- -------------
shall have been taken with respect to the Inventory; and
6
</PAGE>
<PAGE>
(b) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies)
against, the Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP have been set
aside.
SECTION 4.1.2. As to Receivables.
-----------------
(a) The Grantor shall keep its place(s) of business and
chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all
chattel paper which evidenced Receivables, located at the address
set forth below its name on the signature page hereof, or, upon
30 days' prior written notice to the Administrative Agent, at
such other locations in a jurisdiction where all actions required
by the first sentence of Section 4.1.6 shall have been taken
-------------- -------------
with respect to the Receivables; not change its name except upon
30 days' prior written notice to the Administrative Agent; hold
and preserve such records and chattel paper; and permit
representatives of the Administrative Agent at any time during
normal business hours to inspect and, at Grantor's expense, make
copies and abstracts from such records and chattel paper.
(b) The Grantor will direct all obligors under any
Receivables to make all payments to one or more lock boxes,
except for obligors that have delivered letters of credit to the
Grantor or that have customarily delivered checks directly to the
Grantor. Each lock box will be maintained only pursuant to a
lock box agreement which is in all respects among other things,
that (i) until the lock box bank shall have received written
notice from the Administrative Agent pursuant to this Section
-------
4.1.2(b), the lock box bank will make all payments from the lock
--------
box to those accounts of the Grantor designated by the Grantor,
and, after any such notice, the lock box bank will make all
payments from the lock box to the Administrative Agent for credit
to the Collateral Account, (ii) the lock box bank (if other than
the Administrative Agent or a Lender) waives all set off rights
(except for returned items and normal account charges), and (iii)
such lock box arrangement may not be amended without the written
consent of the Administrative Agent. The Administrative Agent
will not give the notice referred to in the preceding clause (i)
----------
unless it has given, or is contemporaneously giving, notice
pursuant to Section 4.1.2(c). No funds, other than proceeds of
----------------
Collateral, will be paid to the lock boxes. The Grantor will not
open any new lock box, or terminate any existing lock box,
7
</PAGE>
<PAGE>
except upon 10 days' prior written notice to the Administrative
Agent.
(c) Upon written notice by the Administrative Agent to the
Grantor pursuant to this Section 4.1.2(c), all proceeds of
----------------
Collateral received by the Grantor shall be delivered in kind to
the Administrative Agent for deposit to a deposit account (the
"Collateral Account") of the Grantor maintained with the
------------------
Administrative Agent, and the Grantor shall not commingle any
such proceeds, and shall hold separate and apart from all other
property, all such proceeds in express trust for the benefit of
the Administrative Agent until delivery thereof is made to the
Administrative Agent. The Administrative Agent will not give the
notice referred to in the preceding sentence unless there shall
have occurred and be continuing a Default. No funds, other than
proceeds of Collateral, will be deposited in the Collateral
Account.
(d) The Administrative Agent shall have the right to apply
any amount in the Collateral Account to the payment of any
Obligations which are due and payable or payable upon demand, or
to the payment of any Obligations at any time that an Event of
Default shall have occurred and be continuing. Subject to the
rights of the Administrative Agent, the Grantor shall have the
right, with respect to and to the extent of collected funds in
the Collateral Account, (i) as long as there shall be no Default,
to require the Administrative Agent to transfer to the Grantor's
general demand deposit account at the Administrative Agent any or
all of such collected funds and (ii) as long as there shall be a
Default and after giving effect to any exercise by the
Administrative Agent of its rights, (A) to require the
Administrative Agent to transfer to the Grantor's general demand
deposit account at the Administrative Agent amounts required to
cover checks drawn against that account which shall have been
presented for payment at the Administrative Agent as of the
preceding business day and all wire transfers which the Grantor
has directed to be made on the current business day, to the
extent such checks and wire transfers are for any purpose which
does not violate any provision of any Loan Document and (B) to
require the Administrative Agent to purchase any Cash Equivalent
Investment, provided that, in the case of certificated
securities, the Administrative Agent will retain possession
thereof as Collateral and, in the case of uncertificated
securities, the Administrative Agent will take such actions,
including registration of such securities in its name, as it
shall determine is necessary to perfect its security interest
therein. The Administrative Agent may at any time transfer to
the Grantor's general demand deposit account at the
Administrative Agent any or all of the collected funds in the
Collateral Account; provided, however,
-------- -------
8
</PAGE>
<PAGE>
that any such transfer shall not be deemed to be a waiver or
modification of any of the Administrative Agent's rights under
this Section 4.1.2(d).
----------------
SECTION 4.1.3. As to Collateral.
----------------
(a) Until such time as the Administrative Agent shall notify
notify the Grantor of the revocation of such power and authority
the Grantor (i) may in the ordinary course of its business, at
its own expense, sell, lease or furnish under the contracts of
service any of the Inventory normally held by the Grantor for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials
normally held by the Grantor for such purpose, (ii) will, at its
own expense, endeavor to collect, as and when due, all amounts
due with respect to any of the Collateral, including the taking
of such action with respect to such collection as the
Administrative Agent may reasonably request or, in the absence of
such request, as the Grantor may deem advisable, and (iii) may
grant, in the ordinary course of business, to any party obligated
on any of the Collateral, any rebate, refund or allowance to
which such party may be lawfully entitled, and may accept, in
connection therewith, the return of goods, the sale or lease of
which shall have given rise to such Collateral. The at any
time, after (but not before) the occurrence and during the
continuance of an Event of Default, notify any parties obligated
on any of the Collateral to make payment to the Administrative
Agent of any amounts due or to become due thereunder and enforce
collection of any of the Collateral by suit or otherwise and
surrender, release, or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or
evidenced thereby. Upon request of the Administrative Agent, the
Grantor will, at its own expense, notify any parties obligated on
any of the Collateral to make payment to the Administrative Agent
of any amounts due or to become due thereunder.
(b) The Administrative Agent is authorized to endorse, in
the name of the Grantor, any item, howsoever received by the
Administrative Agent, representing any payment on or other
proceeds of any of the Collateral.
SECTION 4.1.4. Insurance. The Grantor will maintain or cause
---------
to be maintained with responsible insurance companies insurance with
respect to the Inventory as required by the terms of the Credit
Agreement and will, upon the request of the Administrative Agent,
furnish to the Administrative Agent at reasonable intervals a
certificate of an Authorized Officer of the Grantor setting forth
9
</PAGE>
<PAGE>
the nature and extent of all insurance maintained by the Grantor in
accordance with this Section.
SECTION 4.1.5. Transfers and Other Liens. The Grantor
-------------------------
shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in
the ordinary course of business or as permitted by the Credit
Agreement; or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to
secure Indebtedness of any Person or entity, except for the
security interest created by this Security Agreement and except
as permitted by the Credit Agreement.
SECTION 4.1.6. Further Assurances, etc. The Grantor agrees
-----------------------
that, from time to time at its own expense, the Grantor will promptly
execute and deliver all further instruments and documents, and take
all further action, that may be necessary or desirable, or that the
Administrative Agent may request in writing, in order to perfect,
preserve and protect any security interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and
enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the
Grantor will, upon request of the Administrative Agent,
(a) mark conspicuously each document included in the
Inventory, each chattel paper included in the Receivables and
each Related Contract and, at the request of the Administrative
Agent, each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Administrative
Agent, indicating that such document, chattel paper, Related
Contract or Collateral is subject to the security interest
granted hereby;
(b) if any Receivable shall be evidenced by a promissory
note or other instrument, negotiable document or chattel paper,
deliver and pledge to the Administrative Agent hereunder such
promissory note, instrument, negotiable document or chattel paper
duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to
the Administrative Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim
form under or pursuant to the federal assignment of claims
statute, 31 U.S.C. Section 3726, any successor or amended
10
</PAGE>
<PAGE>
version thereof or any regulation promulgated under or pursuant
to any version thereof), as may be necessary or desirable, or as
the Administrative Agent may request, in order to perfect and
preserve the security interests and other rights granted or
purported to be granted to the Administrative Agent hereby; and
(d) furnish to the Administrative Agent, from time to
time at the Administrative Agent's request, statements and
schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in reasonable
detail.
With respect to the foregoing and the grant of the security interest
hereunder, the Grantor hereby authorizes the Administrative Agent to
file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the
signature of the Grantor where permitted by law. A carbon,
photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall
be sufficient as a financing statement where permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-
----------------------------------------
in-Fact. The Grantor hereby irrevocably appoints the Administrative
- -------
Agent the Grantor's attorney-in-fact, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise,
from time to time in the Administrative Agent's discretion, to take
any action and to execute any instrument which the Administrative
Agent may deem necessary or advisable to accomplish the purposes of
this Security Agreement, including, without limitation, after (but not
before) the occurrence and during the continuance of an Event of
Default,
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with
clause (a) above;
----------
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem
11
</PAGE>
<PAGE>
necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the
Administrative Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor
hereunder (including all obligations of the Grantor pursuant to
Section 4.1.6).
-------------
The Grantor hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled
with an interest. Upon the payment in full of all Obligations and the
termination of all Commitments, the power of attorney granted pursuant
to this Section shall terminate.
SECTION 5.2. Administrative Agent May Perform. If the Grantor
--------------------------------
fails to perform any agreement contained herein, the Administrative
Agent may itself perform, or cause performance of, such agreement, and
the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Grantor pursuant to Section 6.2.
-----------
SECTION 5.3. Administrative Agent Has No Duty. In addition
--------------------------------
to, and not in limitation of, Section 2.4, the powers conferred on
-----------
the Administrative Agent hereunder are solely to protect its interest
(on behalf of the Lender Parties) in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for
reasonable care of any Collateral in its possession and the accounting
for moneys actually received by it hereunder, the Administrative Agent
shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is
---------------
required to exercise reasonable care in the custody and preservation
of any of the Collateral in its possession; provided, however, the
Administrative Agent shall be deemed to have exercised reasonable care
in the custody and preservation of any of the Collateral, if it takes
such action for that purpose as the Grantor reasonably requests in
writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Administrative
Agent to comply with any such request at any time shall not in itself
be deemed a failure to exercise reasonable care.
12
</PAGE>
<PAGE>
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall
----------------
have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies
of a secured party on default under the U.C.C. (whether or not
the U.C.C. applies to the affected Collateral) and also may
(i) require the Grantor to, and the Grantor hereby
agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the
Collateral as directed by the Administrative Agent and make
it available to the Administrative Agent at a place to be
designated by the Administrative Agent which is reasonably
convenient to both parties and
(ii) with ten days prior notice to the Grantor, sell
the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Administrative Agent's
offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative
Agent may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale shall be required by law,
at least ten days' prior notice to the Grantor of the time
and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of
notice of sale having been given. The Administrative Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by the Administrative Agent
in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent as
collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Administrative Agent
pursuant to Section 6.2) in whole or in part by the
-----------
Administrative Agent for the ratable benefit of the Lender
Parties against, all or any part of the Obligations in such order
as the Administrative Agent shall
13
</PAGE>
<PAGE>
elect. Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all
the Obligations shall be paid over to the Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.2. Indemnity and Expenses.
----------------------
(a) The Grantor agrees to indemnify the Administrative
Agent from and against any and all claims, losses and
liabilities arising out of or resulting from this Security
Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities
resulting from the Administrative Agent's gross negligence or
wilful misconduct.
(b) The Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any
experts and agents, which the Administrative Agent may incur in
connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon,
any of the Collateral,
(iii) the exercise or enforcement of any of the rights
of the Administrative Agent or the Lender Parties hereunder,
or (iv) the failure by the Grantor to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan
-------------
Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and
applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any
---------------
provision of this Security Agreement nor consent to any departure by
the Grantor herefrom, shall in any event be effective unless the same
shall be in writing and signed by the Administrative Agent, and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
14
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<PAGE>
SECTION 7.3. Addresses for Notices. All notices and
---------------------
other communications provided for hereunder shall be in writing and,
if to the Grantor, mailed or telecopied or delivered to it, addressed
to it at the address set forth below its signature hereto, if to the
Administrative Agent, mailed or delivered to it, addressed to it at
the address of the Administrative Agent specified in the Credit
Agreement, or as to either party at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. All such
notices and other communications shall, when mailed or telecopied,
respectively, be effective when received.
SECTION 7.4. Section Captions. Section captions used in
----------------
this Security Agreement are for convenience of reference only, and
shall not affect the construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of
------------
this Security Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Security Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS
------------------------------------
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK. THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE
THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR
ORAL, WITH RESPECT THERETO.
IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
OREGON STEEL MILLS, INC.
By:
--------------------------------
Title:
Address: 1000 S.W. Broadway
Suite 2200
Portland, Oregon 97205
15
</PAGE>
<PAGE>
Attention: Mr. Christopher Cassard
Treasurer
Telecopier: (503) 240-5232
16
</PAGE>
<PAGE>
SCHEDULE I
to
Security Agreement
Item A. Location of Inventory
---------------------
Description Location
----------- --------
1.
2.
3.
4.
5.
Item B. Location of Lock Boxes
----------------------
Contact
Bank Name and Address Account Number Person
--------------------- -------------- -------
1.
2.
3.
17
</PAGE>
<PAGE>
EXHIBIT J
December 14, 1994
To each of the Lenders parties to the Credit
Agreement referred to below, First Interstate
Bank of Oregon, N.A. ("First Interstate"), as
----------------
Administrative Agent, The Bank of Nova Scotia
("Scotiabank"), as Syndication Agent and First
----------
Interstate and Scotiabank, as Managing Agents
Re: Oregon Steel Mills, Inc.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.1.7 of
the Credit Agreement, dated as of December 14, 1994, (the "Credit
------
Agreement"), among Oregon Steel Mills, Inc. (the "Borrower"), the
- --------- --------
financial institutions from time to time parties thereto (the
"Lenders"), First Interstate, as Administrative Agent, Scotiabank as
-------
Syndication Agent, and First Interstate and Scotiabank, as Managing
Agents. Capitalized terms not herein defined have the meanings
assigned in the Credit Agreement.
We have acted as counsel for the Borrower and the Guarantors in
connection with the preparation, execution and delivery of the Credit
Agreement and the other Loan Documents.
In that connection, we have examined:
(a) the Credit Agreement;
(b) the Notes;
(c) the Guaranties;
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
-----
Page 2
(d) the Pledge Agreement;
(e) the Security Agreements;
(f) financing statements naming the Borrower, the Guarantors
and CF&I Steel, L.P. ("CF&I Steel"), as debtor, and the
----------
Administrative Agent, as secured party, that have been
filed with the Secretaries of State of Colorado,
California and Oregon (the "Financing Statements");
--------------------
(g) the documents furnished by the Borrower pursuant to
Sections 5.1.1 and 5.1.6 of the Credit Agreement;
(h) the Certificate of Incorporation of the Borrower and each
Guarantor and all amendments thereto (the "Charters");
--------
(i) the bylaws of the Borrower and each Guarantor and all
amendments thereto (the "Bylaws");
------
(j) the Certificate of Limited Partnership of CF&I Steel
and the Amended and Restated Agreement of Limited
Partnership of CF&I Steel dated March 3, 1993 and
all amendments thereto (the "CF&I Documents"); and
--------------
(k) certificates of the Secretary of State of Delaware,
dated December , 1994, attesting to the continued
--
corporate existence and good standing of the Borrower and
the Guarantors in Delaware; certificates of the Secretary
of State of Oregon, dated December , 1994, attesting to
--
the status of the Borrower and New CF&I, Inc. in Oregon;
certificates of the Secretary of State of California,
dated December , 1994, attesting to the continued
--
corporate existence and good standing of the Borrower,
Napa Pipe Corporation, and Oregon Steel Mills-Fontana
Division, Inc. in California; certificates of the
Secretary of State of Texas, dated December , 1994,
--
attesting to the continued corporate existence and good
standing of the Borrower and Napa Pipe Corporation in
Texas; certificate of the Secretary of State of Illinois,
dated December , 1994, attesting to the continued
--
corporate existence and good standing of the Borrower in
Illinois; certificate of the Secretary of State of
Washington, dated December , 1994, attesting to the
--
continued corporate
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 3
existence and good standing of the Borrower in
Washington; certificate of the Secretary of State of
Utah, dated December , 1994, attesting to the continued
--
corporate existence and good standing of Napa Pipe
Corporation and New CF&I, Inc. in Utah; certificate of
the Secretary of State of Nevada, dated December ,
--
1994, attesting to the continued corporate existence and
good standing of Napa Pipe Corporation in Nevada;
certificate of the Secretary of State of Colorado, dated
December , 1994, attesting to the continued corporate
--
existence and good standing of New CF&I, Inc. in
Colorado; certificates of the Secretary of State of
Delaware, California, Colorado, Missouri, Texas and Utah,
dated December , 1994, attesting to the continued
--
existence and good standing of CF&I Steel in such states.
We have also examined the originals, or copies certified to our
satisfaction, of the documents listed in a certificate of the chief
financial officer of the Borrower, dated the date hereof (the
"Certificate"), certifying that the documents listed in such
-----------
certificate are all of the indentures, loan or credit agreements,
leases, guarantees, mortgages, security agreements, bonds, notes and
other agreements or instruments, and all of the orders, writs,
judgments, awards, injunctions and decrees, which affect or purport to
affect the Borrower's right to borrow money, the Borrower's
obligations under the Credit Agreement or the Notes, each Guarantor's
obligations under the Guaranties and Security Agreements and CF&I
Steel's obligations under its Security Agreement. In addition, we
have examined the originals, or copies certified to our satisfaction,
of such other corporate records of the Borrower, each Guarantor and
CF&I Steel, certificates of public officials and of officers of the
Borrower, each Guarantor and CF&I Steel, and agreements, instruments
and other documents, as we have deemed necessary as a basis for the
opinions expressed below. As to questions of fact material to such
opinions, we have relied upon certificates and other communications
from the Borrower, each Guarantor or CF&I Steel or their officers or
from public officials. With respect to the certificates issued by
public officials, we disclaim any responsibility for any changes that
may have occurred with respect to the status of the Borrower, the
Guarantors or CF&I Steel from and after the respective dates of the
certificates. We also assume that the certificates of the public
officials and the public records upon which they are based are
accurate and complete.
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 4
In rendering this opinion, we have assumed without inquiry or
investigation: (i) that the Lenders and Agents have all necessary
legal, corporate and regulatory power and authority to enter into,
execute, deliver and perform the Loan Documents and to consummate the
transaction; (ii) the authenticity and completeness of all documents
submitted to us as originals; (iii) the legal competence and capacity
of all natural persons, other than officers of the Borrowers, the
Guarantors and CF&I Steel, who are signatories to the Loan Documents;
(iv) the conformity to original documents of all documents submitted
to us as copies; (v) that all signatures on all documents submitted to
us are genuine; (vi) the funding of the Loans by the Lenders to the
Borrower; (vii) that the Lenders and Agents will enforce their rights
and remedies under the Loan Documents and applicable law in good
faith, in a commercially reasonable manner, and in all respects
observing standards of fair dealing; (viii) that the Lenders and
Agents have given value in accordance with the Loan Documents; (ix)
the truthfulness, accuracy and completeness of all warranties and
representations of the Borrower, Guarantors and CF&I Steel set forth
in the Loan Documents and the Certificate; (x) the certificates of the
public officials are in all respects correct, accurate and complete,
and, since the date thereof, have not been modified or rescinded; (xi)
the Borrower, Guarantors and CF&I Steel own and have rights in the
Collateral as defined in the Security Agreements and the Pledge
Agreements, they have good and sufficient title to the Collateral,
value has been given and the security interest has attached; (xii) the
Guaranties are necessary or convenient to the conduct, promotion or
attainment of the business of each Guarantor and (xiii) the Loan
Documents are the legal, valid and binding obligations of the Lenders
and the Agents.
Our opinions expressed below are limited to the laws of the
State of Oregon, the General Corporation Law of the State of Delaware
and the Federal laws of the United States and we do not express any
opinion herein concerning any other law.
Based upon the foregoing and subject to the qualifications,
assumptions and limitations set forth herein, we are of the following
opinion:
1. The Borrower and each Guarantor is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware. CF&I Steel is a limited
partnership formed under the laws of the State of Delaware,
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 5
legally existing and authorized to transact business under the
laws of the State of Delaware.
2. The execution, delivery and performance by the Borrower
of the Credit Agreement, the Notes, the Pledge Agreement and
its Security Agreement (collectively, the "Borrower
--------
Agreements") are within the Borrower's corporate powers, have
----------
been duly authorized by all necessary corporate action, and do
not contravene (i) its Charter or Bylaws or (ii) any law, rule
or regulation applicable to the Borrower (including, without
limitation, Regulation U of the Board of Governors of the
Federal Reserve System) the violation of which is reasonably
likely to have a Material Adverse Effect or (iii) any
contractual or legal restriction contained in any document
listed in the Certificate. The Borrower Agreements have been
duly executed and delivered by the Borrower.
3. The execution, delivery and performance by each
Guarantor of its Guaranty and Security Agreement are within
such Guarantor's corporate powers, have been duly authorized by
all necessary corporate action, and do not contravene (i) such
Guarantor's Charter or Bylaws or (ii) any law, rule or
regulation applicable to such Guarantor the violation of which
is reasonably likely to have a Material Adverse Effect or (iii)
any contractual or legal restriction contained in any document
listed in the Certificate. Each Guaranty and Security
Agreement has been duly executed and delivered by the Guarantor
party thereto.
4. The execution, delivery and performance by CF&I Steel of
its Security Agreement are within its powers, have been duly
authorized by all necessary action, and do not contravene (i)
the CF&I Documents (ii) any law, rule or regulation applicable
to it the violation of which is reasonably likely to have a
Material Adverse Effect or (iii) any contractual or legal
restriction contained in any document listed in the
Certificate. The CF&I Steel Security Agreement has been duly
executed and delivered by CF&I Steel.
5. 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 the Borrower of the Borrower Agreements, except
for the filing of any continuation statements to the
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 6
Financing Statements [and filings with the United States Patent
and Trademark Office and the United States Copyright Office] to
perfect the security interests that can be perfected by such
filings and such authorizations, approvals, actions, notices
and filings as have been made or obtained and are in full force
and effect.
6. 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 each Guarantor of its Guaranty and Security
Agreement or CF&I Steel of its Security Agreement, except for
the filing of any continuation statements to the Financing
Statements [and filings with the United States Patent and
Trademark Office and the United States Copyright Office] to
perfect the security interests that can be perfected by such
filings and such authorizations, approvals, actions, notices
and filings as have been made or obtained and are in full force
and effect.
7. Each Borrower Agreement is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
8. Each Guaranty and Security Agreement is the legal, valid
and binding obligation of the Guarantor party thereto,
enforceable against such Guarantor in accordance with its
terms. The CF&I Steel Security Agreement is the legal, valid
and binding obligation of CF&I Steel, enforceable against it in
accordance with its terms.
9. To the best of our knowledge after due inquiry, there
are no pending or overtly threatened actions or proceedings
against the Borrower or any of its Subsidiaries before any
court, governmental agency or arbitrator which purport to
affect the legality, validity, binding effect or enforceability
of the Credit Agreement or any of the Notes or, except as
described in Item 6.7 of the Disclosure Schedule, which are
reasonably likely to have a Material Adverse Effect.
10. The provisions of the Security Agreements are sufficient
to create in favor of the Administrative Agent as secured
party, a security interest in all right, title and interest of
the Guarantor thereto, in those items and types of Collateral
described in the Security Agreements in which
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 7
a security interest may be created under Article 9 of the
Uniform Commercial Code ("UCC") as in effect in the State of
---
New York (the "Article 9 Collateral"). The filing of the
--------------------
Financing Statements with the Secretaries of State of Colorado,
Oregon and California are sufficient to perfect the security
interest in the Article 9 Collateral in which a security
interest may be perfected by the filing of a financing
statement under the UCC in such states, except that we express
no opinion as to personal property affixed to real property in
such a manner as to become a fixture under the laws of any
state in which the Article 9 Collateral may be located and we
call your attention to the fact that the security interest in
certain of such Article 9 Collateral may not be perfected by
filing a financing statement under the UCC. We call your
attention to the fact that:
A. ORS chapter 79 of the UCC requires the filing of
continuation statements within the period of six
months prior to the expiration of five years from
the date of the original filings or the previous
continuation statements, in order to maintain the
effectiveness of the filings referred to in this
paragraph.
B. In the case of instruments (as such term is defined
in ORS chapter 79) and money not constituting party
of chattel paper (as such term is defined in ORS
chapter 79 of the UCC), the security interests
cannot be perfected by the filing of the Financing
Statements but will be perfected if possession
thereof is obtained.
C. Under certain circumstances described in ORS
79,3060, the rights of a secured party to enforce a
perfected security interest in proceeds of
collateral may be limited.
D. In the case of property which becomes collateral
after the date hereof, section 552 of the Federal
Bankruptcy Code limits the extent to which property
acquired by a debtor after the commencement of a
case under the Federal Bankruptcy Code may be
subject to a security interest arising from a
security agreement entered
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 8
into by the debtor before the commencement of such
case.
E. ORS 79.4020(7) of the UCC provides that if the
Grantor so changes its name, identity or corporate
structure that a filed financing statement becomes
seriously misleading, the filing is not effective
to perfect a security interest in collateral
acquired by the Grantor more than four months after
the changes unless new appropriate financing
statements are properly filed before the expiration
of that period.
F. If certain tangible Article 9 Collateral is moved
to a state in which a financing statement has not
been filed or if the Grantor's location changes to
a state in which a financing statement has not been
filed, a new appropriate financing statement must
be filed in such new state within four months after
such move to continue perfection of the security
interest (or, earlier, when perfection under the
laws of the State of Oregon would have ceased as
set forth in subparagraph A, above).
G. Under certain circumstances described in ORS
79.3070 and 79.3080 of the UCC, purchasers of
collateral may take the same free of a perfected
security interest.
11. The provisions of the Pledge Agreement are sufficient to
create in favor of the Administrative Agent as secured party, a
security interest in all of the Pledged Shares pledged to the
Administrative Agent thereunder. The delivery of the endorsed
Pledged Shares and the possession of the Pledged Shares by the
Administrative Agent in accordance with the Pledge Agreement is
sufficient to perfect the security interest in the Pledged
Shares created by the Pledge Agreement. We call your attention
to the fact that a security interest in the proceeds from the
Pledged Shares may not be perfected unless a financing
statement relating to such proceeds is filed in the State of
Oregon.
12. Neither the Borrower nor any of its Subsidiaries is an
"investment company" or a company controlled by an "investment
company", within the meaning of the Investment Company Act of
1940, as amended.
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 9
13. Neither the Borrower nor any of its Subsidiaries is a
"holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or
"subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
The opinions rendered in paragraphs 7, 8, 10 and 11 above are
in all respects subject to the following limitations and
qualifications:
A. The effect of applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent transfer, or other
similar laws now or hereafter in effect affecting the
rights of the creditors generally;
B. General principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity
or at law) and public policy under applicable laws,
including among other things, implied obligations or
materiality, reasonableness, good faith and fair dealing,
and principles that may limit or prohibit the specific
enforceability of some remedies, covenants or other
provisions of the Loan Documents or that may limit or
prohibit the availability of specific performance,
injunctive relief or other equitable remedies regardless
of whether such enforceability is considered in a
proceeding in equity or at law;
C. Oregon and federal laws or judicial decisions that
may limit or render ineffective certain rights, remedies
or waivers contained in the Loan Documents, but which do
not render the Loan Documents invalid as a whole;
D. The availability or non-availability of such
general contractual defenses as mistake, fraud, duress or
unconscionability;
E. Procedural prerequisites to realizing upon
remedies, not otherwise reflected in the Loan Documents,
which may restrict rights and remedies otherwise therein
stated to be available; and
F. The availability of equitable remedies other than
the remedies created by the Loan Documents in accordance
with applicable law.
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 10
In giving the opinions set forth in paragraphs 7 and 8 above,
we advise you that an Oregon court may not strictly enforce certain
provisions contained in the Loan Documents or allow acceleration of
the maturity of the indebtedness evidenced thereby if a court
concludes that such enforcement or acceleration would be unreasonable
under the then-existing circumstances. We do believer, however, that,
subject to the limitations elsewhere expressed in this opinion,
enforcement against the Borrower or the Guarantors would be available
if an event of default occurred as a result of a material breach of a
material provision contained in the Loan Documents.
The following list is not a complete recitation of matters as
to which no opinion is expressed, but we specifically emphasize that
we express no opinion as to:
(a) Self help; rights of set-off; or the right to
possession of the personal property or collection of income or
rent without appointment of a receiver; and the rights,
procedural requirements for or powers of a receiver;
(b) Provisions purporting to establish evidentiary
standards;
(c) Provisions relating to the waiver of rights,
remedies and defenses, including without limitation, any
provisions purporting to affect rights to notice or to waiver
venue, jurisdiction, jury trials or other benefits conferred by
statute or by law;
(d) Provisions which permit the Lenders to collect
increased interest after default or maturity, insofar as such
provisions may be interpreted by a court to be unenforceable as
a penalty which has no relation to the actual damages suffered
by the Lender;
(e) Any reservation of the right to pursue inconsistent
or cumulative remedies;
(f) Provisions for payment or reimbursement of costs and
expenses or indemnification for claims, losses, or liabilities
(including, without limitation, attorneys fees) in excess of
statutory limits or an amount determined to be reasonable by
any court or other tribunal, and any provisions for attorneys
fees other than to the prevailing parties;
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 11
(g) Provisions pertaining to choice of law;
(h) Provisions purporting to appoint the Administrative
Agent as attorney in fact for Borrower or each Grantor;
(i) Limitations on the liability of Lender or the
Agents, or for their indemnification for their own negligence
or misconduct;
(j) The applicability of usury laws, or provisions for
charging interest on interest;
(k) Provisions permitting modification of a document
only if it is writing;
(l) The effect or enforceability of severability
clauses;
(m) The right of the Lender or the Agents to declare a
default based upon, or otherwise to pursue any rights or
remedies on account of, a breach of warranty or representation
in any circumstance where the Lender or Agents knew, or should
have known, or had reason to know, of the inaccuracy or
incompleteness of the warranty or representation at the time it
was or was deemed to be given;
(n) The applicability of federal and state securities
laws and regulations (specifically including, without
limitation, whether any aspect of the Loans are a "security");
pension and employee benefit laws and regulations; the federal
anti-trust and unfair competition laws and regulations;
compliance with fiduciary duty requirements; fraudulent
transfer laws; federal and state environmental laws and
regulations; federal and state zoning, land use, subdivision,
building, and health and safety laws and regulations; and
federal laws, regulations and policies concerning (i) national
and local emergency, (ii) possible judicial deference to acts
of sovereign states, and (iii) criminal and civil forfeiture
laws; and other federal status of general application to the
extent they provide for criminal prosecution (e.g. mail fraud
and wire fraud statutes);
</PAGE>
<PAGE>
Lenders parties to Credit Agreement
December , 1994
----
Page 12
(o) Any provisions which attempt to recharacterize, re-
apply or re-allocate payments made in the event the applicable
rate of interest is determined to be usurious;
(p) The negotiability of the Notes;
(q) The enforceability or illusory character of
obligations that may arise or be varied by the Lender's
exercise of discretion which is subject to no or vague
standards;
(r) Provisions which purport to create, perfect or
maintain priority of, a lien or a security interest or pledge
(except as expressly provided in these paragraphs 10 and 11);
and
(s) The effect on enforceability of each Guaranty of
modifications or any document evidencing the guaranteed
obligations without consent of the Guarantors.
The opinions expressed herein are subject to and qualified by
the following disclaimers:
1. Regardless of the states in which members of
this firm are licensed to practice, we express no opinion
as to the laws of any jurisdiction other than the laws of
the State of Oregon, the General Corporate Law of the
State of Delaware and applicable federal laws.
Specifically, we express no opinion as to New York law.
2. This opinion letter is provided to you as a
legal opinion only and not as a guarantee of the matters
discussed herein. Our opinion is limited to the matters
expressly stated herein, and no other opinions may be
implied or inferred.
3. We express no opinion as to any matter
relating to: (a) the adequacy of the consideration for the
Loans or the Guaranties; (b) the accuracy or completeness
of any financial, accounting, or statistical information
furnished to the Lenders; (c) the financial status of the
Borrower or the Subsidiaries; (d) the ability of the
Borrower to meet its obligations under the Loan Documents;
(e) the existence of, or as to the title of the Borrower
or any
</PAGE>
<PAGE>
Lenders parties to the Credit Agreement
December , 1994
----
Page 13
Subsidiary to, any item of Collateral or as to the
priority or the perfection (except as expressly provided
in opinions 10 and 11 above) of any security interests
referred to above.
4. We specifically disclaim any responsibility to
advise you now or at any time in the future of any changes
(or the need for changes) in this opinion resulting from
changes in the relevant law or facts occurring subsequent
to the date of this opinion.
This opinion is rendered as of the date set forth above, and we
disclaim any obligation to advise you of any changes in the
circumstances, laws or events that may occur after this date or
otherwise to update this opinion.
This opinion has been rendered to you in connection with the
transaction described herein solely for your benefit and is not to be
quoted in whole or in part or otherwise referred to, used, or relied
upon by any person or entity other than you, your legal counsel, any
governmental or quasi-governmental bodies with jurisdiction over you,
or participants or assigns (if any) in the Loans.
Very truly yours,
SCHWABE WILLIAMSON & WYATT, P.C.
--------------------------------
cc: Oregon Steel Mills, Inc.
</PAGE>
<PAGE>
EXHIBIT K
[Letterhead of Oregon Steel Mills, Inc.]
BORROWING BASE CERTIFICATE
--------------------------
Certificate No. Dated as of
--- ------------
This Borrowing Base Certificate (this "Certificate") is made by
-----------
Oregon Steel Mills, Inc. ("OSM") as of the date set forth above
---
pursuant to the Credit Agreement dated as of December 14, 1994
("Credit Agreement"), by and among First Interstate Bank of Oregon,
----------------
N.A. ("First Interstate"), as administrative agent, the Bank of Nova
----------------
Scotia ("Scotiabank"), as syndication agent, First Interstate and
----------
Scotiabank, as managing agents, the commercial lending institutions as
are or may become parties thereto ("Lenders") and OSM.
-------
Capitalized words and expressions used in this Certificate and
not otherwise defined herein shall have the meanings ascribed to them
in the Credit Agreement.
1. Consolidated accounts receivable $
----------
Less: Accounts of Camrose Pipe
Company
Accounts subject to $
----------
reorganization, bankruptcy,
receivership, etc.
Accounts subject to bona fide $
----------
dispute, setoff or
counterclaim
Accounts subject to a lien $
----------
Accounts outstanding more $
----------
than 90 days
Accounts not subject to Lien $
----------
in favor of Administrative
Agent
Accounts from party with more $
----------
than 25% of its Accounts
outstanding more than 90
days
U.S. Government Receivables $
----------
(unless assignment of
claims has been made)
Foreign Receivables (unless $
----------
secured by letter of
credit)
</PAGE>
<PAGE>
Value of Eligible Accounts $
----------
of OSM and its Subsidiaries
("Eligible Accounts Base") $
--------------------- --------
2. 70% of Eligible Accounts Base $
--------
(70% of Item 1)
3. Consolidated inventory $
----------
Less: Inventory of Camrose Pipe $
----------
Company
Inventory located outside the $
----------
United States
Inventory in the custody of $
----------
3rd parties, inventory not
owned by OSM, subject to a
lien or intended to be
returned
Stores Inventory $
----------
Inventory that is obsolete, $
----------
damaged or otherwise unfit
for sale
Value of Eligible Inventory of OSM $
----------
and its Subsidiaries
("Eligible Inventory Base") $
----------------------- --------
4. 50% of Eligible Inventory Base $
--------
(50% of Item 3)
5. Sum of Items 2 and 4 ("Borrowing $
--------- --------
Base")
----
6. Principal amount of Revolving $
--------
Loans and Swingline Loans of OSM
at date of this Report
7. Available Borrowing Base (Item 5 $
--------
minus Item 6) or Amount Borrowed
-----
in Excess of Borrowing Base
The undersigned Authorized Officer of OSM hereby certifies to
First Interstate and Scotiabank, in each and all of their capacities,
and the Lenders that:
(a) each item of Eligible Accounts included in the
calculation of Borrowing Base set forth herein is at the date of
this Certificate an Account of OSM or any of its Subsidiaries
(other than the Camrose Partnership) as to which each of the
requirements set forth in the definition
2
</PAGE>
<PAGE>
of the term "Eligible Account" has been fulfilled to the
reasonable satisfaction of the Administrative Agent.
(b) each item of Eligible Inventory included in the
calculation of Borrowing Base set forth herein is at the date of
this Certificate Inventory of OSM or any of its Subsidiaries
(other than the Camrose Partnership) arising in the ordinary
course of business and as to which each of the requirements set
forth in the definition of the term "Eligible Inventory" has been
fulfilled to the reasonable satisfaction of the Administrative
Agent.
(c) no Default or Event of Default has occurred and is
continuing as at the date of this Certificate.
(d) attached hereto are the receivable aging reports
from the Borrower and its applicable Subsidiaries.
OREGON STEEL MILLS, INC.
By
-----------------------
Title:
3
</PAGE>
<PAGE>
EXHIBIT L
OREGON STEEL MILLS, INC.
------------------------
COMPLIANCE CERTIFICATE FOR , 199
-------------------------------------------
This Compliance Certificate (this "Certificate") is made by
-----------
Oregon Steel Mills, Inc. ("OSM") as of the date set forth above and
---
furnished to each of the Lenders and the Agents, pursuant to the
Credit Agreement, made as of December 14, 1994 (the "Credit
------
Agreement"), by and among First Interstate Bank of Oregon, N.A.
- ---------
("First Interstate"), as Administrative Agent, The Bank of Nova Scotia
----------------
("Scotiabank"), as Syndication Agent, First Interstate and Scotiabank,
----------
as Managing Agents, the commercial lending institutions as are or may
become parties thereto ("Lenders") and OSM, and as required by Section
------- -------
7.1.1(c) of the Credit Agreement.
- --------
Capitalized words and expressions used in this Certificate and
not otherwise defined herein shall have the meanings ascribed to them
in the Credit Agreement.
The officer whose signature appears below certifies that (A) the
consolidated and consolidating financial statements of OSM and its
Subsidiaries delivered pursuant to Sections 7.1.1(a) and 7.1.1(b) of
----------------- --------
the Credit Agreement are materially accurate and complete and present
fairly the financial position and results from operations of OSM and
its Subsidiaries on a consolidated basis as of the dates thereof and
for the periods referred to therein (subject, where applicable, to
year end audit adjustments) and have been prepared in accordance with
generally accepted accounting principles (as contemplated in the
Credit Agreement) on a basis consistently applied, and (B) under the
supervision of the Authorized Officer whose signature appears below,
OSM has made a review of the activities of OSM and its Subsidiaries
during the period covered by the financial statements accompanying
this Certificate to make the determinations and calculations set forth
below, and on the basis of such review, to the best of the knowledge
of such Authorized Officer, OSM and its Subsidiaries have performed
and observed all of the covenants and conditions contained in the
Credit Agreement and in each other Loan Document and no Default or
Event of Default exists.
Set forth below are calculations of the amounts, as at the date
set forth above, of Consolidated Tangible Net Worth, the Interest
Coverage Ratio, the Current Ratio, the Cash Flow Ratio and the Funded
Debt to Capitalization Ratio of OSM and its Subsidiaries, as at that
date.
All amounts shown herein are expressed in Dollars (thousands).
</PAGE>
<PAGE>
Part I. CONSOLIDATED TANGIBLE NET WORTH
-------------------------------
(subsection 7.2.4(a))
For Period Ending , 19
--------------- --
(1) Consolidated Tangible Net Worth:
-------------------------------
(a) Book Value of OSM and it Subsidiaries'
----------
Equity
(b) Book Value of OSM and it Subsidiaries'
----------
minority interests
(c) Aggregate amount of any intangible assets
----------
of OSM and its Subsidiaries, including
goodwill, franchises, licenses, patents,
trademarks, tradenames, copyrights,
servicemarks and brandnames.
(d) Consolidated Tangible Net Worth (sum of
----------
Lines (a) and (b) minus Line (c))
-----
(2) Required Consolidated Tangible Net Worth:
----------------------------------------
(a) $225,000,000
----------
(b) 50% of OSM's Net Income (the consolidated
----------
net income for OSM and its Subsidiaries)
for all Fiscal Quarters beginning on or
after January 1, 1995 (without giving
effect to any losses)
(c) 100% of net proceeds from any equity
----------
offering by OSM or any of its Subsidiaries
after the Effective Date of the Credit
Agreement
(d) Required Consolidated Tangible Net Worth
----------
(sum of Lines (a), (b) and (c))
(3) Surplus (Deficit): Line (1)(d) minus
----------
Line (2)(d)
Part II. INTEREST COVERAGE RATIO
-----------------------
(subsection 7.2.4(b))
Four Fiscal Quarter period ending , 19
----------- --
2
</PAGE>
<PAGE>
(1) OSM and it Subsidiaries' Net Income for such
----------
period
(2) OSM and it Subsidiaries' total taxes (including
----------
cash and deferred portion) accrued during such
period
(3) OSM and it Subsidiaries' cash interest expense
----------
during such period
(4) OSM and it Subsidiaries' extraordinary items
----------
during such period
(5) Sum of Lines (1), (2), (3) and (4)
----------
(6) OSM and it Subsidiaries' total interest expense
----------
(including capitalized interest) during such
period
(7) Ratio of Line (5) to Line (6) :
----------
(8) Minimum Interest Coverage Ratio permitted for :
----------
such period
Part III. CURRENT RATIO
-------------
(subsection 7.2.4(c))
For Period Ending _______________, 19__
(1) Current Assets (consolidated current assets of
----------
OSM and its Subsidiaries, determined in
accordance with GAAP)
(2) Current Liabilities (consolidated current
----------
liabilities of OSM and its Subsidiaries,
determined in accordance with GAAP)
(3) Ratio of Line (1) to Line (2) :
----------
(4) Minimum Current Ratio permitted for such period :
----------
Part 1V. CASH FLOW COVERAGE RATIO
------------------------
(subsection 7.2.4(d))
Four Fiscal Quarter period ending , 19
----------- --
(1) Net Income for OSM and its Subsidiaries ----------
(including minority share portion) for such
period
3
</PAGE>
<PAGE>
(2) OSM and its Subsidiaries' depreciation and
----------
amortization for such period
(3) OSM and its Subsidiaries' ESOP accrual
----------
(4) OSM and it Subsidiaries' deferred employee
----------
benefits<PAGE>
(5) OSM and its Subsidiaries' other non-cash items,
----------
including such items that relate to OSM's
closure of its Fontana facility
(6) OSM and its Subsidiaries' total taxes (including
----------
cash and deferred portion)
(7) OSM and its Subsidiaries' total interest expense
----------
during such period
(8) Sum of Lines (1) through (7)
----------
(9) Scheduled principal payments of consolidated
Funded Debt (including, but not limited to,
principal payments of the Term Loans pursuant to
Section 3.1 of the Credit Agreement) during such
period
----------
(10) Total interest charges incurred (including
----------
capitalized interest) during such period
(11) Cash portion of taxes paid during such period
----------
(12) Sum of Lines (9) through (11)
----------
(13) Ratio of Line 8 to Line 12 :
----------
(14) Minimum Cash Flow Coverage Ratio permitted for :
----------
such period
4
</PAGE>
<PAGE>
Part V. FUNDED DEBT TO CAPITALIZATION RATIO
-----------------------------------
(subsection 7.2.4(e))
For Period ending , 19
------------ --
(1) Outstanding principal amount of all obligations
----------
of OSM and its Subsidiaries for borrowed money
and all obligations of OSM and its Subsidiaries
evidenced by bonds, debentures, notes or other
similar instruments
(2) Outstanding principal amount of all obligations
----------
of OSM and its Subsidiaries as lessee under
leases which have been or should be, in
accordance with GAAP, recorded as Capitalized
Lease Liabilities
(3) Funded Debt (Sum of Lines (1) and (2))
----------
(4) OSM's Consolidated Tangible Net Worth
----------
(5) OSM's Consolidated Tangible Net Worth and Funded
----------
Debt (Sum of Lines (3) and (4))
(6) Funded Debt to Capitalization Ratio: Ratio of :
----------
Line 3 to Line 5
(7) Maximum Permitted Funded Debt to Capitalization :
----------
Ratio for such period
OREGON STEEL MILLS, INC.
By:
--------------------------
Its:
--------------------------
Date:
--------------------------
5
</PAGE>
OREGON STEEL MILLS, INC.
EXHIBIT 11.0
STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA AMOUNTS)
Years ended December 31,
-------------------------------
1994 1993 1992
------- ------- -------
Weighted average number of common
shares outstanding 19,375 19,224 19,183
Common stock equivalents arising
from 598 shares of stock to be
issued March 2003. 598 598 -
------- ------- -------
19,973 19,822 19,183
======= ======= =======
Net income $12,068 $14,805 $19,977
======= ======= =======
Primary and fully diluted
net income per common and
common equivalent shares $.60 $.75 $1.04
==== ==== =====
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of the Oregon Steel Mills, Inc. Employees Stock Ownership
plan on Form S-8 (File No. 33-26739) of our report dated
February 10, 1995, on our audits of the consolidated financial
statements and financial statement schedule of Oregon Steel Mills,
Inc. as of December 31, 1994, 1993, and 1992, and for the years
then ended, which report is included in this Annual Report of Form
10-K.
Coopers & Lybrand L.L.P.
Portland, Oregon
March 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5039
<SECURITIES> 0
<RECEIVABLES> 82266
<ALLOWANCES> 2063
<INVENTORY> 160788
<CURRENT-ASSETS> 259466
<PP&E> 435123
<DEPRECIATION> 97027
<TOTAL-ASSETS> 665733
<CURRENT-LIABILITIES> 117986
<BONDS> 0
<COMMON> 194
0
0
<OTHER-SE> 275689
<TOTAL-LIABILITY-AND-EQUITY> 665733
<SALES> 838268
<TOTAL-REVENUES> 838268
<CGS> 761335
<TOTAL-COSTS> 761335
<OTHER-EXPENSES> 22134
<LOSS-PROVISION> 331
<INTEREST-EXPENSE> 3910
<INCOME-PRETAX> 9127
<INCOME-TAX> (2941)
<INCOME-CONTINUING> 12068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12068
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
